Sitting of 12 November 1981

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
Oral Answers to Questions
  AGRICULTURE, FISHERIES AND FOOD

    Butter (Intervention Stocks)
    Mr. Farrasked the Minister of Agriculture, Fisheries and Food how much butter is now in intervention stores; and how many days' supply this represents.
    The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Alick Buchanan-Smith): On 29 October the quantity of butter in public intervention stores in the Community as a whole totalled 8,593 tonnes. This is equivalent to approximately two days' supply.
    Mr. Farr: Does my right hon. Friend agree that that is a very low level? Indeed, a week or two earlier there were only 24½ tonnes in intervention store in Britain. As this stock is running at such a low level, will he now consider the possibility of suspending the co-responsibility levy for milk producers?
    Mr. Buchanan-Smith: It should be appreciated that the intervention stock is not a true indication of the actual stocks of butter held, because stocks are held privately as well as in the normal course of trade. Currently, in the United Kingdom trade stocks, for example, amount to about 34,000 tonnes and private stocks to about 30,000 tonnes. So there is no question of any shortage of butter.
    Mr. Jay: How much subsidised butter was sold to the Soviet Union during the past 12 months?
    Mr. Buchanan-Smith: If the right hon. Gentleman wishes to put down a question on the matter, I shall answer it. But I point out that since 1 January this year there have been no export refunds on butter sold to the Soviet Union.
    Mr. Peter Mills: Does that not destroy the misleading propaganda of the anti-Community folk who say that there are always butter mountains, and so on? Is it not important to have more than a week's supply in stock for British consumers? Will my right hon. Friend bear in mind that at present there is not enough milk for manufacturing purposes in this country? Will he do all that he can to see that milk production is stimulated and continued so that we can produce these products?
    Mr. Buchanan-Smith: My hon. Friend is right. The way in which intervention stocks of butter have fluctuated from a high level to virtually nothing demonstrates that agricultural produce is a highly volatile commodity, and
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    that it is in the interests of security of supply to the consumer both in this country and in the Community at large that adequate stocks are kept. I note what my hon. Friend said about milk for manufacturing, and I pay tribute to the work of the milk marketing boards and others in this country in improving the outlets for milk for manufacturing purposes.

    Sea Defences
    Mr. Moateasked the Minister of Agriculture, Fisheries and Food what is his estimate for expenditure by his Department on sea defences in the current year.
    The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mrs. Peggy Fenner): My Department's estimates for the current year include the sum of about £13 million for grant-aid towards expenditure on sea defences by water authorities, excluding the Thames tidal defences. My Department also expects to pay grants totalling just under £.1 million to local authorities for other sea defence works.
    Mr. Moate: Does my hon. Friend accept that this is a matter of the utmost importance to all those whose homes or lives have been threatened or have suffered severe damage as a result of sea flooding? Does she accept that we are grateful for the high priority that the Government have attached to the maintenance of this programme? Will she assure the House that this special priority will. be maintained, particularly for all areas where lives are threatened and where property could be severely damaged?
    Mrs. Fenner: My hon. Friend will be aware that my Department's role is to judge whether sufficient resources can be made available through the public expenditure programme to allow water authorities to carry out the sea defence work which they properly consider to be essential. I am glad to say that, since the Government took office, we have met all their demands, and no cuts have been imposed on the sea defences budget. I trust that I have reassured my hon. Friend about our priorities.
    Mr. Beith: Will the hon. Lady discuss with her right hon. Friend the Minister of State, who knows the case full well, the two-year delay in providing help for Amble harbour, which has resulted from a bar that has been put down by the Department of the Environment? Does she not realise the importance of such help to the town's sea defences, to which the council is fully committed, which should receive appropriate grant-aid from the Department?
    Mrs. Fenner: The hon. Gentleman will be aware that this is primarily a matter for the Department of the Environment and for the local council. However, we shall watch the situation carefully in so far as it affects the responsibilities of the Ministry of Agriculture, Fisheries and Food.
    Mr. John Townend: Is my hon. Friend aware of the amount of good agricultural land that is lost every year due to erosion on the Holderness coast? Is she aware that where the land immediately behind the coastline is below sea level, there is a danger of flooding? Will she discuss with her colleagues in the Department of the Environment how the problem in rural areas can be solved, as no grants are available?
    Mrs. Fenner: I shall certainly raise the matters to which my hon. Friend has referred with my right hon. and hon. Friends in the Department of the Environment.
    Mr. Marks: Do the funds that the Minister mentioned include emergency funds to meet the possibility of sea defences being breached and of extensive flooding taking place on parts of the coast for which the Ministry of Agriculture, Fisheries and Food is responsible? Will assistance be given to local authorities? If local authorities need to levy a supplementary rate to cover such damage, will they have to hold referendums?
    Mrs. Fenner: The last question is, again, a matter for the Department of the Environment. My information is that those funds represent the amount allocated during this year. Any other sums would be subject to special consideration.

    Badger Gassing
    Mr. Andrew F. Bennettasked the Minister of Agriculture, Fisheries and Food if he will make a statement on his policy towards the gassing of badgers.
    The Minister of Agriculture, Fisheries and Food (Mr. Peter Walker): My Department will continue to deal with the difficult task of controlling bovine tuberculosis in badgers and the transmission of the disease to cattle by all means at its disposal. In certain circumstances, this will require the gassing of setts. We shall continue to operate in full consultation with the Nature Conservancy Council and the other leading bodies in the field of conservation, animal welfare, veterinary science and agriculture. To abandon the policy would be an act of total irresponsibility.
    Superficial and misleading accounts of that policy have appeared in the press and on television. I deplore their inaccuracies. The attacks on the integrity of Lord Zuckerman and Ministry officials were gravely irresponsible.
    Mr. Bennett: I thank the Minister for that reply. How frequently has the advisory committee met in the last two years? Has it put forward any specific recommendations? If so, have those recommendations been carried out? What research has been carried out to try to stop the gassing of badgers?
    Mr. Walker: The previous Labour Government set up an advisory body, whose composition includes representatives of all the main conservation and animal welfare groups. That body has reported annually on its views and attitudes and, of course, its advice has been fully taken into account. I appointed Lord Zuckerman, who is distinguished in this sphere, and he consulted whoever he wished and produced a report which the majority of those of distinction and scientific knowledge have accepted as a very fine report. I object to so-called television experts suggesting that such a man has been appointed for a whitewashing exercise.
    Mr. Peter Mills: Will my right hon. Friend bear in mind that laymen, including politicians, are not qualified to know whether such action is right or wrong? We need proper scientific evidence, which exists. Will my right hon. Friend point out to those who take the opposite view, that it is in the interests of badgers and of their
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    continuation—I declare an interest, as I have a badger sett opposite my front door—that badgers with tuberculosis should be destroyed?
    Mr. Walker: One of the important factors in Lord Zuckerman's report is that if no action were taken in the South-West, the badger population throughout the country would be placed in jeopardy. I congratulate the previous Government on setting up a consultative panel. However, as it includes not only the British Veterinary Association, but the Royal Society for the Protection of Animals, the University Federation for Animal Welfare and the Royal Society for Nature Conservation, it is absurd to suggest that any Ministry would desire to gas badgers for the love of it.
    Mr. Dalyell: During the passage of the Wildlife and Countryside Bill we discovered that this subject was complex and that the scientific evidence was difficult to evaluate. Nevertheless, is not the Minister persuaded that there is at least some unnecessary and, perhaps, panic-stricken gassing of badgers, which is not called for?
    Mr. Walker: On taking office I discovered that there was considerable public anxiety about this subject. I was aware of the consultative panel that the previous Labour Government had set up and of its distinguished members. Given the atmosphere and criticism at that time, I thought it important to appoint as distinguished a person as possible to have the freedom to look into and publicly report on the issue. Anyone who reads that report will be satisfied that the work of both the previous Government and this Government is responsible. The idea that anyone in my Ministry delights in unnecessarily gassing badgers is absurd.

    Growers (Gas Subsidies)
    Mr. Lathamasked the Minister of Agriculture, Fisheries and Food whether he is now in a position to identify the specific action that he intends to take to deal with Dutch gas subsidies for growers, in view of the serious difficulties caused to British producers; and whether he will make a statement.
    Mr. Stephen Rossasked the Minister of Agriculture, Fisheries and Food when he intends to take action in aid of the United Kingdom glasshouse industry.
    Mrs. Fenner: We recognise the seriousness to our glasshouse growers of the continued artificially low prices being paid by Dutch growers for gas for glasshouse heating. We deplore the delay by the Commission and the Dutch Government in removing the distortion of competition.
    We shall continue to maintain the greatest possible pressure on the Commission to settle the matter urgently.
    Mr. Latham: Will my hon. Friend return to her office at 3.30 pm this afternoon, ring the Commissioner and say that the United Kingdom Parliament is not prepared to put up with such snail's pace progress any longer? Will she tell him that if nothing has been done by the end of the month she will dredge up some health regulation to stop the goods coming in to Britain?
    Mrs. Fenner: I assure my hon. Friend that my right hon. Friends have made that point again and again. We hope to see some response very shortly.
    Mr. Ross: Is the hon. Lady aware that the two largest glasshouses in my constituency have closed, with a fair number of redundancies? Help is almost too late. Now that we have the Chair in Brussels, can we not impose a tariff on Dutch tomatoes? I congratulate the Minister on introducing the welcome oil subsidy, but will it continue after December? It is important to know now, because it is time for planting.
    Mrs. Fenner: It is for the Commission, not individual States, to decide to take tariff measures. My right hon. Friend has placed the matter fairly and squarely before the Commission. However, it does not feel able to take such action because of the circumstances. We have recently heard that the Commission is willing to extend the guidelines to enable the payment of an adaptation aid for another year. The Government are urgently considering the Commission's recent communication. I cannot at present anticipate the outcome.
    Mr. John Wells: My right hon. Friend was seen to nod his head when the hon. Member for Isle of Wight (Mr. Ross) asked whether the subsidy would continue after 1 January. Unfortunately, such nods do not appear in Hansard. On the assumption that the Europeans will drag their feet for ever, will the Minister give us a straight "Yes" or "No" about the continuation of that subsidy after 1 January?
    Mrs. Fenner: I am sorry, but my hon. Friend will have to accept that I am not in a court of law. I assure my hon. Friend—and I trust that he will note the example of £5·5 million during the past year—that my right hon. Friends are determined to protect our glasshouse industry.
    Mr. Newens: Is the hon. Lady aware that that is not good enough? In present circumstances, growers are refusing to prepare for next year. While we are waiting for a decision from the Government, growers are going out of business. We are giving the Dutch the means to take a larger share of the market than they have already taken. Is the hon. Lady aware that in 1977 the Dutch promised equalisation of fuel costs by 1979, and that from 1979 onwards the disparity in fuel prices has increased? Will the hon. Lady confirm that the subsidy will be continued and that countervailing tariffs will be imposed, if necessary, to protect our industry from destruction?
    Mrs. Fenner: I have heard the hon. Gentleman speak in the House on this point many times and I know of his concern. I share his concern about the intolerable delay. He accurately set out a short history of the situation. I assure him that my right hon. Friends are determined to protect our glasshouse growers. The hon. Gentleman will know that the present adaptation aid continues to the end of the year. I know that growers are concerned about making plans for next year, and my right hon. Friend is fully aware of the need for urgent action.
    Mr. Hastings: Has my hon. Friend been informed that the net loss per acre to tomato growers in the last season has been estimated—I believe accurately—at £19,000 and that in the same period imports of Dutch trays of tomatoes increased by over £30,000? Decisions in the industry must be taken now, at this hour. How can the Government expect any confidence to remain in that sector of the industry unless action is taken soon or some earnest of intention to do something is given? Does the Minister agree that no longer can we wait for the Commission?
    Mrs. Fenner: I thought that my hon. Friend would take as an example of our earnest to do something the securing by my right hon. Friend of the £5·5 million adaptation this year to defend our glasshouse growers. I trust that my hon. Friend will regard that as a good example.
    Mr. Mark Hughes: Does the hon. Lady accept the feelings of the whole House that her unwillingness to give a clear-cut commitment in mid-November that the subsidy will continue after 1 January is unacceptable? Is she aware that glasshouse growers in Britain cannot retain their confidence, nor can they have a bankable assurance for next season, as long as the Government delay giving that firm undertaking and making such a statement?
    Mrs. Fenner: We have made it clear that we shall take any legal action that can be taken. The period for adaptation aids has only recently been extended by the Commission. We are urgently considering the extension.

    Agricultural Land Loss
    Mr. Stevensasked the Minister of Agriculture, Fisheries and Food what is his estimate for the last five years for which figures are available of the average annual loss of agricultural land for urban development.
    Mr. Steenasked the Minister of Agriculture, Fisheries and Food what is his estimate for the last five years for which figures are available of the average annual loss of agricultural land for urban development.
    Mr. Peter Walker: With permission, Mr. Speaker, I will answer this question and question No. 9 together.
    Mr. Mason: On a point of order, Mr. Speaker. I do not wish to delay Question Time too long, but you will remember your ruling on 9 November when, in c. 307, you drew the attention of the House to questions appearing on the Order Paper in identical language. I therefore draw your attention to questions Nos. 6, 9, 10, 16 and 31, which are in identical language. The Order Paper is obviously being used blatantly for some reason by 'some" organisation. I hope, Mr. Speaker, that you will rule on the matter.
    Mr. Speaker: Order. I understand that the questions to which the right hon. Gentleman correctly draws attention were tabled before my ruling on Monday. Otherwise, I should have stood up, because it is wrong for anyone to try to corner our Order Paper or, indeed, to change its character from what it has been.
    Mr. Steen: Further to that point of order, Mr. Speaker. The point of order by the right hon. Member for Barnsley (Mr. Mason) is not correct, because questions Nos. 10 and 16 are not the same as questions Nos. 9 and 31.
    Mr. Speaker: Order. I was referring to questions Nos. 6 and 9, which are identical, as the hon. Gentleman will discover. We can all read.
    Mr. Walker: The average annual loss of agricultural land to urban development in England during the five-year period June 1975 to June 1980 was estimated at 8,400 hectares.
    Mr. Stevens: I thank my right hon. Friend for giving two answers for the price of one. Does he agree that one of the best ways of stopping the loss of agricultural land is to halt green field site development in favour of using inner city vacant land?
    Mr. Walker: Yes, I agree with that. The Secretary of State for the Environment also agrees with that. The Local Government, Planning and Land Act 1980 provides for local authorities to establish the extent of under-used and derelict land in their urban areas. I hope that that will result in a greater use of that land.
    Mr. Steen: What steps is my right hon. Friend taking to stop the use of good agricultural land beyond city boundaries and to encourage developers to use some of the 250,000 acres of vacant, dormant and derelict land which, according to the Civic Trust, is lying idle in the city areas?
    Mr. Walker: Planning permissions are the ultimate responsibility of the Department of the Environment. The working relationship between my Department and the Department of the Environment is close and good. Indeed, the Department of the Environment has recently taken note of our objections to the use of good agricultural land.
    Mr. Spearing: Does the Minister, by chance, have the comparable figures for land lost to motorways in the same period?
    Mr. Walker: No, Sir.
    Mr. Nicholas Winterton: When my right hon. Friend's inspectors are conducting public inquiries into the designation of land for industrial purposes, do they take into account the question that lies behind the observations from this side of the House, namely, that when there is adequate land for development within town and borough boundaries, good agricultural land should not be designated for industrial development, however convenient that land might be for such development?
    Mr. Walker: The inspectors to whom my hon. Friend refers are responsible for planning. My right hon. Friend the Secretary of State, by the creation of the register and his attitude to planning permissions, has done more than any recent Secretary of State for the Environment to ensure that good agricultural land is not lost.
    Mr. Steen: On a point of order, Mr. Speaker. During Question Time the right hon. Member for Barnsley (Mr. Mason) alleged that five identical questions were on the Order Paper. This is not true. There were only three identical questions on the Order Paper and only two were answered orally. There were a further two questions, Nos. 5 and 12 on the glasshouse industry, which the Minister chose to answer together. Will you be good enough, Mr. Speaker, to give a ruling that no question in identical language to another should appear on the Order Paper or that the same subject should not appear twice on the Order Paper?
    Mr. Speaker: I thought that I had made my position perfectly clear earlier this week. I believe that there was a move which, if not checked, would have changed the Order Paper of the House. I am considered to be the guardian of the Order Paper, to the best of my ability. If a new system creeps in whereby a whole string of questions are tabled in identical language, there is nothing to stop an hon. Member from putting down 100 such questions. As we have changed the character of Prime Minister's Question Time, so we could also change the character of Question Time, which is very precious to the House. I am doing my utmost to preserve the rights of Back Benchers in the matter.

    Fish (Dumping at Sea)
    Mr. Skinnerasked the Minister of Agriculture, Fisheries and Food whether there has been an increase in the amount of fish dumped at sea during the last 12 months; and what is the size of the increase.
    Mr. Buchanan-Smith: Fish is returned to the sea for a number of reasons. It is not possible to give the figures requested.
    Mr. Skinner: Is it not a scandal that, according to recent newspaper reports, as much as 1,300 tonnes of fish were dumped at sea in the past 12 months because of Common Market rules? Is that not in conflict with the generalities that the Prime Minister trotted out when she came back from the Mexico summit about looking after the starving millions in the Third world? What about that grandiose Common Market aid through which cheap food, including fish, would be used to help schools, hospitals and charities in Common Market countries?
    Mr. Buchanan-Smith: I have previously welcomed the hon. Gentleman's interest in fishing matters, but I should be better pleased if he put his interests in the fishing industry into perspective. The known amount of fish that has had to be dumped at sea is less than 0·2 per cent. of total landings. If the hon. Gentleman knew a little about the organisation of the fishing industry, in which fishermen have to work under natural conditions and where there can be no certainty of what is to be caught or when, I should have more respect for his criticisms.
    Mr. Maxwell-Hyslop: Will my right hon. Friend reread the section of the Select Committee report on the British fishing industry in which the practice of dumping is condemned, because it makes it impossible to have accurate records of the attrition rate of the fish breeding stock?
    Does my right hon. Friend agree that unless fish are landed no records are kept? Does he further agree that dumping seriously pollutes the seabed and that therefore fish are not fit for human consumption when they are landed mixed up with rotten fish which have been dumped on the seabed?
    Mr. Buchanan-Smith: I take the point, which my hon. Friend made forcefully in a Select Committee report, that where dumping takes place and causes pollution, measures must be taken—and, indeed, have been—it is difficult to obtain accurate figures, because there are many different reasons why fishermen have to discard fish. Some are not solely related to intervention. One would put an impossible bureaucratic burden on fishermen if a record had to be kept of every fish dumped.
    Mr. Maclennan: I recognise that the hon. Member for Bolsover (Mr. Skinner) has betrayed his ignorance of the fishing industry and that any proper conservation policy based upon—
    Mr. Skinner: I have not betrayed the electorate, as the hon. Gentleman has.
    Mr. Speaker: Order. I wonder whether the hon. Member for Bolsover (Mr. Skinner) will do me a favour and just shake his head when he disagrees. It would be just as effective and would be very helpful to us all.
    Mr. Skinner: On a point of order, Mr. Speaker. The hon. Member for Caithness and Sutherland (Mr. Maclennan) in the brief introduction to his question talked about betrayal. I wish to put it on record once again—
    Mr. Speaker: Order. That cannot be a point of order. I acted as kindly as I could to the hon. Member for Bolsover (Mr. Skinner).
    Mr. Arthur Lewis: On a point of order, Mr. Speaker. Has it not been the case for a long time that a question should refer either to the question on the Order Supplementary Paper or to the ministerial reply? The hon. Member for Caithness and Sutherland (Mr. Maclennan), who represents some organisation or other, began his question with a subject that had nothing to do with the question or the reply by the Minister. Therefore, it must have been out of order.
    Mr. Speaker: I am deeply grateful to the hon. Member for Newham, North-West (Mr. Lewis). As usual, he is absolutely right. His observations would apply to 99 per cent. of the questions.
    Mr. Maclennan: Does the Minister recognise, even if the hon. Member for Bolsover does not, that the fishing industry is concerned about the by-catch regulations and that there is some need for the Minister to take a further look at that matter with a view to more flexible rules being made to allow by-catches to be landed and used for human consumption?
    Mr. Buchanan-Smith: The hon. Gentleman raises a fair point, which has been debated at length both inside and outside the industry. The general view of the industry—and it has been the view of successive Governments both before and since we entered Europe—is that, in the interests of the enforcement of conservation measures—conservation measures are worthless unless they are enforced—the returning of excessive by-catches at sea is probably one of the best methods of ensuring enforcement.
    Mr. Foulkes: How is the Minister unable to answer the question by my hon. Friend the Member for Bolsover (Mr. Skinner), but is able to give a percentage of the fish that are actually dumped? Is not that gross duplicity? Is he not aware that, whatever the percentage, hon. Members and fishermen are concerned about dumping? From his information, will he tell us the nationality of the fishermen who dump that fish, dividing it between Scots and English?
    Mr. Buchanan-Smith: If the hon. Gentleman had more interest in and knowledge of the fishing industry, perhaps he would have listened to my reply. While I said that it was not possible to know the totality of the fish dumped at sea, I was able to say, in reply to the supplementary question by the hon. Member for Bolsover (Mr. Skinner), what percentage of fish landed that had gone into intervention was dumped at sea. Those are two different questions. I cannot help if the hon. Gentleman fails to wash his ears.
    Mr. Myles: Is my right hon. Friend concerned, as I am, at the reports of the dumping of fish on board East European vessels for cash outside the official quotas? Will he take steps to ensure that that is stopped?
    Mr. Buchanan-Smith: My hon. Friend raises a real problem. As he knows, new measures have been taken to
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    control mackerel fishing off the West Coast of Scotland. Policing and enforcement have been much more effective. If my hon. Friend knows of any instances of breaches, I am sure that my right hon. Friend the Secretary of State for Scotland will be delighted to know about them.
    Later—
    Mr. Wellbeloved: On a point of order, Mr. Speaker. I seek your guidance on points of order being raised during Question Time. Is it not a well-established practice that points of order unnecessarily raised during Question Time have the effect of denying hon. Members the opportunity of asking a question and receiving an answer? Would you care, Mr. Speaker, to make your statement afresh on this point, referring particularly to the point of order raised by the hon. Member for Bolsover (Mr. Skinner) and your excellent suggestion that the hon. Gentleman might indicate dissent by shaking his head? Has not long experience taught all hon. Members that the hon. Member for Bolsover is unable to move his head in any direction—
    Mr. Speaker: Order. As the House knows, I have repeatedly said that if hon. Members feel agitated during Question Time and wish to raise a point of order, it helps if they leave it to the end of Question Time.

    Fish Quotas
    Mr. Strangasked the Minister of Agriculture, Fisheries and Food if he will take action regarding the legality of the European Commission's claims to impose fish quotas on member States; and if he will make a statement.
    Mr. Buchanan-Smith: Her Majesty's Government reject the claims of the European Commission.
    Mr.Strang: I accept that, but will the Minister of State secure a declaration from the Commission at the earliest opportunity that never again will it seek to impose quotas on member States in the way in which it attempted to do so at the July Council?
    Mr. Buchanan-Smith: The hon. Gentleman should be clear about that matter. I have endeavoured to explain to him by letter and in the House that all that the Commission made was a claim. It has not attempted to impose it. We have rejected it and other Governments have also rejected it. As to doing anything more than that, the situation has been made absolutely plain.
    Mr. James Johnson: Leaving aside the question of whether the claims made by either side are legal, does the Minister believe that as a result of the long, continuing close-knit connections with other Ministers in the EEC over the past few months, there is any chance of coming to a settlement, not only on this item, but on others connected with the common fisheries policy?
    Mr. Buchanan-Smith: I hope that the hon. Gentleman has been encouraged—I am sure that he has—by the fact that in a number of major areas, such as conservation, marketing and certain third country agreements, considerable progress has been made. There has been a willingness to make progress in those areas. I do not for one moment belittle the problems before us, such as those concerning quotas and access, but the fact that we have managed to narrow them down to a number of crucial issues is an element of progress, and I hope that we are supported in that.
    Mr. Strang: Surely the point is that the Commission must desist from making that claim, otherwise the threat will hang over other negotiations.
    Mr. Buchanan-Smith: The hon. Gentleman might look at progress made in meetings since that time. The Commission made that claim and that was rejected not only by us but by other Governments at the July Council. It has made no attempt to repeat it either at the September or October Councils. In those circumstances, the hon. Gentleman is trying to make a mountain out of a molehill.

    Agricultural Land Loss
    Mr. Wheelerasked the Minister of Agriculture, Fisheries and Food if he is satisfied with the accuracy of estimates of annual losses of agricultural land to urban development and other uses; and if he will make a statement.
    Mr. Doverasked the Minister of Agriculture, Fisheries and Food if he is satisfied with the accuracy of estimates of annual losses of agricultural land to urban development and other uses; and if he will make a statement.
    Mr. Peter Walker: The estimates of annual losses of agricultural land to urban development and other uses are derived as a by-product of the agricultural census and within the resources available for statistical inquiries they are the most accurate that can be obtained.
    Mr. Wheeler: I thank my right hon. Friend for his reply. However, is he aware that the Department of the Environment estimates that in the five years to 1979 about 100,000 acres were lost as against what I believe to be 45,000 acres estimated by the Ministry of Agriculture, Fisheries and Food?
    Mr. Walker: My hon. Friend will find that there are some discrepancies in those figures involving the inclusion of Scotland and Wales in one set of figures and not in the other.
    Mr. Dover: Will my right hon. Friend consider the introduction of statutory requirements to register change of land use from agricultural to other uses? Does he agree that that would slow down the loss of agricultural land and improve the statistics as between his Department and the Department of the Environment?
    Mr. Walker: I am sure that it would improve them, but at the cost of a substantial increase in bureaucracy, numbers of staff involved, the number of forms to be filled in and applications to be made. There must be a balance between the statistical information that we would like to see and the cost of obtaining it.
    Mr. Ashton: Is it not a fact that the Conservative Party was elected on a platform of freedom of choice and the market economy? Why should it now change its policy of allowing builders to build on meadows and chop down trees? Surely the right hon. Gentleman is denying everything that the Conservative Party stands for.
    Mr. Walker: All the best planning decisions have been taken by Tory Governments.
    Mr. Dickens: Would my right hon. Friend be surprised to learn that 90 per cent. of our residential dwellings are built on 10 per cent. of the land? Will he accept that?
    Mr. Walker: I accept it with gratitude.
    Mr. Newens: Has the Minister given any consideration to the loss of land that would be occasioned by the development proposed by his Government of the airport at Stansted? Is his Department making any representations about that on the ground that good agricultural land would be lost?
    Mr. Walker: On all major planning decisions, and many of the minor ones, where good agricultural land is concerned my Department always makes representations and puts its case for agricultural land.

    Land Letting
    Mr. Heddleasked the Minister of Agriculture, Fisheries and Food what is his policy towards increasing the supply of agricultural land available to let; and what proposals he is considering in this respect.
    Mrs. Fenner: We are at present considering the package of proposals for amending the agricultural holdings legislation put to us by the presidents of the National Farmers Union and the Country Landowners Association, which was designed, among other things, to encourage new lettings.
    Mr. Heddle: I thank my hon. Friend for her reply. Does she agree that, despite the ostensible agreement by the Labour Party that much more land should be available to let and that there should be a fairer system of arbitration for fixing farm rents, its posture is entirely contradictory in that respect? Does my hon. Friend agree that now is the time for her Department to take the bull by the horns and introduce primary legislation without delay?
    Mrs. Fenner: I agree with my hon. Friend's first comments, but I assure him that now that we have finished our detailed examination of the amendments we expect the two presidents to request an early meeting so that progress can be made, which will be welcome.
    Mr. Home Robertson: Does the hon. Lady accept that the agreement between the CLA and NFU does not make sense, as it would give rise to two different classes of agricultural tenant in England and Wales? Will she look at the agreement reached between the Scottish Landowners Federation and the NFU in Scotland, which does not include an attack on tenants' security of tenure? Would it not make sense to introduce legislation on those lines for England, Wales and Scotland?
    Mrs. Fenner: No doubt my right hon. Friend the Secretary of State for Scotland will consider that suggestion for Scotland. I regret that I do not know as much about landowning as does the hon. Gentleman.

    Aujeszky's Disease
    Mr. Iain Millsasked the Minister of Agriculture, Fisheries and Food whether, following the response to the questionnaire seeking the views of pig producers on the eradication policy for Aujeszky's disease in pigs, he will make a statement on what further measures will be undertaken on this matter.
    Mrs. Fenner: In its announcement of the detailed results of the poll my Department indicated that further action would be discussed with the industry. We expect to hold a meeting shortly.
    Mr. Mills: Will my hon. Friend recognise the concern among farmers in my constituency and in Warwickshire

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    and the West Midlands generally that in Germany and Denmark greater progress has been made on this issue? Will she consider further whether we are doing enough with our veterinary services?
    Mrs. Fenner: We agreed with the NFU about the value of its questionnaire. Our policy on the disease remains as announced on 24 June. This year to date there have been only 11 outbreaks, but we are considering with the interested bodies what further action could be taken.

    Fat Sheep
    Mr. Delwyn Williamsasked the Minister of Agriculture, Fisheries and Food what representations he has received over the grading regulations and seasonal scale for fat sheep.
    Mr. Buchanan-Smith: The only specific representation on grading I have received recently is in the question tabled for answer today by my hon. Friend the Member for Richmond, Yorks (Sir T. Kitson). I have received no representations on the seasonal scale.
    Mr. Williams: Will my right hon. Friend accept that I am surprised at the lack of representation, when so many farmers in Mid-Wales—an important sheep farming area—are concerned about the inequalities of the system? Will he take on board the concern over the injustice of a system that shows a lower return than the guaranteed price?
    Mr. Buchanan-Smith: My right hon. Friend and I will be happy to receive representations on behalf of my hon. Friend's farmers. I appreciate that the grading regulations and seasonal scale can have different effects on different areas in accordance with particular circumstances.
    Sir Timothy Kitson: Will my right hon. Friend bear in mind that there is a great deal of disquiet about the grading systems? Will he consider half-and-half grading, which would be a much fairer system for our sheep farmers?
    Mr. Buchanan-Smith: I ask my hon. Friend to await the answer that I shall be giving to him later, but I shall take account of his point. However, experience of grading demonstrates that his claim is not necessarily borne out by the facts. I assure him that we review the gradings from time to time.

    Stubble Burning
    Mr. Bendallasked the Minister of Agriculture, Fisheries and Food whether, in view of the smoke hazard to motorway transport, he will consider introducing legislation to make it illegal to burn stubble in fields after harvesting.
    Mrs. Fenner: No, Sir.
    Mr. Bendall: Can my hon. Friend assure us that she will have words with the Department of Transport with a view to introducing fog lights when stubble is burnt, to minimise serious accidents?
    Mrs. Fenner: That is an interesting suggestion, but it is already an offence under highways Acts to light a fire within 50 ft of the centre line of a highway so as to cause damage to it or a user. Furthermore, local authorities can and do introduce byelaws with financial penalties.
    Mr. Stoddart: Is the hon. Lady aware that in the vicinity of my constituency accidents involving damage and injury have been caused by smoke from burning stubble drifting across motorways, and that it is not good enough to continue to make excuses? Will she reconsider this matter and inquire into the claims made for stubble burning as against ploughing-in?
    Mrs. Fenner: Cultivating straw into the soil has many disadvantages, but I recognise the concern about stubble burning. Each year my Department publicises the code of practice, which has generally proved successful. Nevertheless, MAFF officials are discussing with the NFU the scope for tightening the code.
    Mr. Maclennan: Is the Minister satisfied that the code is being broadly adhered to?
    Mrs. Fenner: I hope that I made it clear that there may well be scope to improve the code.

  PRIME MINISTER

    Engagements
    Mr. Heddleasked the Prime Minister whether she will list her official engagements for Thursday 12 November.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.
    Mr. Heddle: Will my right hon. Friend take time today to consider reports in the national press to the effect that major and leading positions in the Campaign for Nuclear Disarmament are held by card-carrying members of the Communist Party? Will she spell out to the nation that it is only by pursuing realistic policies directed towards multilateral disarmament that we are likely to bring about peace, and that that will not be brought about by policies that pursue the blind folly of unilateralism?
    The Prime Minister: I saw certain newspaper reports which must give great cause for concern to many of those who joined CND and who are well-intentioned and honourable people, even though we believe that they are misguided. I wholly agree that the way to achieve peace with freedom is to pursue multilateral disarmament, so that we can retain our security at very much lesser expense to the nation.
    Mr. Parry: Will the Prime Minister today discuss with the Secretary of State for Employment the appalling unemployment on Merseyside, with 130,000 or 20 per cent. of the population out of work? Is she aware that the situation will be further aggravated by 1,000 jobs being lost at the BL plant at Speke and 500 jobs going with the closure of the P and O line? Does she agree that the appointment of her right hon. Friend as Minister with responsibilities for Merseyside was purely window dressing?
    The Prime Minister: I certainly do not accept the hon. Gentleman's last contention. When my right hon. Friend went to Merseyside, morale rose. He is keen to do every single thing that he can for Merseyside. That is an extremely important factor. He has set up the equivalent

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    of a regional office there to see what we can do to bring extra jobs to the region. He has invoked the interest of the private sector in the area in a big way. I have nothing to add to what my right hon. Friend the Secretary of State for Northern Ireland said about the P and O Line yesterday.
    Sir Paul Bryan: Will the Prime Minister find an opportunity today to ask the Leader of the Opposition whether he accepts or disowns the statement made by his Front Bench spokesman—[HON. MEMBERS: "Oh!"]—
    Mr. Speaker: Order. Although the question was appropriately worded, the right hon. Lady is not responsible for such matters. I presume that she does not want to be. She can be asked only about those things for which she is responsible.
    Mr. Alan Clark: If, during the day, my right hon. Friend could turn her mind to the subject of referendums, would she reflect on the suggestion that, if it is appropriate to ask people by that device whether they want their rates to go up, it would also be proper to invite them to verify their opinion on a subject that has consistently divided the public will and the House for the past decade, namely, the return to the statute book of capital punishment?
    The Prime Minister: There is a great difference between a local poll and a national referendum. On the matter to which my hon. Friend referred, I think that national referendums have hitherto been only advisory. I do not think that a referendum on that matter would make any difference to the way in which the House voted.

    Complaints Against the Police
    Mr. Andrew F. Bennettasked the Prime Minister if she will make a statement on her policy towards the reforming of procedures for complaints against the police.
    The Prime Minister: As my right hon. Friend the Home Secretary has informed the House, we are considering, in consultation with the Police Advisory Board, what changes in the present system may be necessary. A working group under the chairmanship of my noble Friend the Under-Secretary of State is expected to report back to the board shortly.
    Mr. Bennett: Does the Prime Minister agree that it is essential that the police have the confidence of 99 per cent. of the population? Does she further agree that if that is to be achieved there must be effective democratic control and discussion of police policy, a simple procedure whereby minor complaints may be investigated and apologies given quickly, and, finally, a full, independent inquiry into major complaints against the police?
    The Prime Minister: All of those matters are the subject of consideration in reports to the Police Advisory Board. My right hon. Friend the Home Secretary will consider them all together when they arrive soon.
    Mr. McCrindle: Is not the first aim of those who wish to revolutionise society to undermine public confidence in the police? Does the Prime Minister therefore agree that, accepting that the police are not perfect, there is a powerful duty upon the Government to give maximum support to those who stand between the population and the forceful overthrow of law and order?
    The Prime Minister: I am grateful to my hon. Friend. As I made clear in my speech to the House a few days ago,
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    we give our unswerving and unequivocal support to the police in carrying out their vital duties to uphold law and order for all our sakes.
    Mr. David Steel: Does the Prime Minster also welcome the statement by the Police Federation, following the last exchanges in the House when strong views were expressed on both sides, that it now feels that it would be in the best interests of police-public relations if there were an independent system of inquiry into complaints against the police?
    The Prime Minister: That is one of the matters that will have to be taken into account by my right hon. Friend the Home Secretary together with a number of other reports at present in preparation, and also any recommendations that the Scarman report may make.
    Mr. Aitken: Will my right hon. Friend resist all suggestions for further democratic control of the police, which is merely a code word for Livingstonian interference with the police, and instead concentrate upon the real need to restore public confidence in a genuinely independent element in the police complaints procedure? Would not that best be achieved by setting up a police Ombudsman procedure?
    The Prime Minister: My hon. Friend's point about an independent element in police complaints procedure is at present under consideration by my right hon. Friend the Home Secretary, who will make a decision when he has received all the reports. With regard to democratic control of the police, the police must be absolutely free of any political control in making their operational decisions.

    Engagements
    Mr. Strawasked the Prime Minister if she will list her official engagements for 12 November.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some minutes ago.
    Mr. Straw: Is the Prime Minister aware that the average family in Great Britain has had to pay an extra £12·25 per week this year in direct and indirect taxation, compared with only 69p extra in rates? Does she agree that even in Greater London her own increases in taxation have been four times the increase in Londoners' rates? Do not those figures show that her unprincipled attack on local government is no more than a smokescreen to cover the fact that she has imposed massive increases in taxation and living costs on all families in this country, in complete contradiction of her election pledges to reduce taxation?
    The Prime Minister: I look forward to receiving the hon. Gentleman's suggestions for reductions in public expenditure on both a national and a local level, so that both national taxes and local rates may be reduced. It would be entirely dishonourable to suggest that one can increase public spending and reduce taxes at the same time. With regard to the figures that the hon. Gentleman gave, the amount of taxation paid by the average family is clearly much greater than the amount paid in rates. If the hon. Gentleman had considered the percentages, however, he would know that the percentage increase in taxes for a typical family with two children was almost exactly the same as the percentage increase in their rates—before the latest supplementary rate increases.
    Mr. Anthony Grant: Will my right hon. Friend consider the consequences of the intrusion into Swedish waters of a Soviet submarine, which was clearly established to be there for the purposes of espionage and nuclear warfare? Does not this emphasise the vital importance of unity and co-operation among the countries of the Council of Europe as well as within the EEC? Will she therefore confirm that it remains Britain's policy to support and participate in the Council of Europe?
    The Prime Minister: On the last point, it remains Britain's policy to participate in the Council of Europe, which we recognise performs a valuable function and which includes countries that are not members of the EEC, such as Sweden. The incident to which my hon. Friend refers highlights the need to be extremely diligent and to keep our defences on the alert.
    Mr. Foot: Returning to the question put by my hon. Friend the Member for Blackburn (Mr. Straw), do I take it that the Prime Minister has confirmed the figures that he gave? Does she not find it astonishing that the average family in this country is now paying an extra £12·25 per week in Government-imposed taxation? How does she reconcile that with her election statement that she was determined to build real incentives for all into our tax system?
    The Prime Minister: I repeat what I said to the hon. Member for Blackburn (Mr. Straw). The percentage increase in rates and taxes for the average family was approximately the same before the latest supplementary rate demands were issued. On the right hon. Gentleman's specific question, taxation would have been very much higher under a Labour Government. I look forward once again to hearing his proposals for reducing public expenditure. Otherwise, we must conclude that the right hon. Gentleman is giving notice that he would simply print the extra money so that Britain would once again be on the way to the IMF.
    Mr. Foot: I am asking the Prime Minister to confirm that under the Conservative Government taxes for the average family have risen by more than £12 per week. Does she think that that is what she told the electorate at the general election?
    The Prime Minister: Taxes for the average family have indeed increased. As I have frequently explained to the right hon. Gentleman, if we are to maintain prudent and sound financial policies, we should not finance increases in public spending by printing money, as I believe that the right hon. Gentleman would. At least we have the honesty to finance them properly by taxation.
    Mr. Dickens: Will the Prime Minister, in the course of her busy day, find time to consider initiating four or five major capital projects to be financed by the City?
    The Prime Minister: If capital projects can be financed by the City, it is naturally at liberty both to finance them and to set them up. The trouble with some of the schemes put to us is that either they require Government guarantee or they are schemes started by monopoly industries that could put up the price sufficiently to finance the borrowing. That would have a very adverse effect on the private sector.
    Mr. Christopher Price: Can the Prime Minister clear up one discrepancy between her statement about Mr. Leo Long's espionage activities and the statement of the Attorney-General? The right hon. Lady said that there was one other individual to whom inducements had been given, and the Attorney-General said that there were a few other individuals. Will the Prime Minister tell the House what are the facts and what number the Attorney-General was referring to in speaking of a "few" individuals being offered inducements to confess?
    The Prime Minister: If the hon. Gentleman looks closely at both statements he will find that my right hon. and learned Friend the Attorney-General gave the numbers, a few, to whom an informal inducement had been offered. I gave the number—[Interruption.] This is extremely important and I am trying very hard to get it right in response to a question from the other side of the House. I am trying to get it accurate. He gave the number of cases, a few, in which informal inducements had been offered. I gave the number from whom a confession had come as the result of an informal inducement. The two are perfectly compatible.

Ministerial Statements
Mr. Arthur Lewis: On a point of order Mr. Speaker. I have no interest to declare but many hon. Members wish to take part in the business that is to follow. It is, I think, within your prerogative, Mr. Speaker, to suggest to Ministers, including even the Prime Minister, that if they intend to make a statement that will deprive Back Benchers of time in subsequent debates, they should ensure that the statement is not given to the press as happened this morning and in today's midday newspapers. Is it not taking liberties with the House when Ministers come along, as they now do regularly, to make a statement that has already appeared in the press? Would not the best course be for you, Mr. Speaker, to say before questions that you will not allow the statement to be made because you have read it already in the press that day?
Mr. Speaker: I should not like to try on this particular occasion.

Civil Service Department (Transfer of Responsibilities)
3.35 pm
The Prime Minister (Mrs. Margaret Thatcher): With permission, Mr. Speaker, I should like to make a statement on the organisation of the central Departments.
We have made a good deal of progress in the last two and a half years controlling the cost and size of the Civil Service and in improving its efficiency. The Government are most grateful to the Select Committee on the Treasury and Civil Service for all the valuable work it has done in this area and in particular for its report on the future of the Civil Service Department. I look forward to receiving its recommendations as a result of its current study on improving the efficiency and effectiveness of the Civil Service.
I believe that the time has now come when some organisational changes will help us to make sure that the progress we have already achieved is maintained.
Setting up the Civil Service Department 13 years ago had a number of advantages compared with the situation as it existed before. But it had one consequence whose disadvantages have become increasingly apparent over time. It divorced central responsibility for the control of manpower from responsibility for the control of Government expenditure. I judge that the balance of advantage now lies in favour of consolidating the CSD's manpower control responsibilities with the central control of resources.
I therefore propose to reunify responsibility for the central allocation and control of all resources, and to make the Treasury responsible for control over Civil Service manpower, pay, superannuation, allowances and for the Central Computer and Telecommunications Agency. The staff at present concerned with these functions will be transferred to the Treasury.
My hon. Friend the Member for Brentford and Isleworth (Mr. Hayhoe) will be appointed as a Minister of State in the Treasury to help in the discharge of these responsibilities. He will continue to answer in this House for the whole range of Civil Service matters. The duties of the other Ministers of State in the Treasury will remain unchanged, but my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) will assume the title of Economic Secretary to the Treasury.
I turn now to the Civil Service Department's other responsibilities. It remains my view that there should not be a total merger of the Treasury and the Civil Service Department. The efficiency of the Civil Service in carrying out its functions and the selection and development of civil servants are as important to the Government as the control of public expenditure. The machinery of government should make special provision for this, since it is a subject in which any Prime Minister is bound to take a close personal interest.
I shall therefore continue to be Minister for the Civil Service and to be responsible for the organisation, management and overall efficiency of the Home Civil Service and for policy on recruitment, training and other personnel management matters. My noble Friend the Chancellor of the Duchy of Lancaster will, as at present, discharge these responsibilities on a day-to-day basis. She will also answer in another place for the whole range of Civil Service matters.

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The staff involved in these functions will work alongside the Cabinet Office in a new Management and Personnel Office. Sir Robert Armstrong will be Permanent Secretary of this office and will also continue, as the Secretary of the Cabinet, to head the Cabinet Office. He will be assisted on the business of the new office by a second Permanent Secretary, Mr. John Cassels.
An Order in Council will be necessary to transfer the responsibilities for Civil Service manpower and remuneration to the Treasury. The order will be laid before Parliament shortly. In preparation for its coming into effect, the new arrangements will be introduced administratively from 16 November. During the interim period, the Chancellor of the Exchequer will have charge, on my behalf, of the functions to be transferred to the Treasury. Thereafter, there will not be a Department known as the Civil Service Department. There will be some staff savings as a result of the new arrangements.
Sir Ian Bancroft, head of the Home Civil Service and permanent secretary to the Civil Service Department, and Sir John Herbecq, the second permanent secretary, both of whom were due to retire by the end of next year, have with characteristic public spirit accepted that these changes mean their departure from the public service some months early. Both have had long and distinguished careers in the public service, and have served the nation with all the devotion and integrity that we expect from our public servants. Sir Ian served successive Chancellors of the Exchequer with conspicuous distinction. He did much to build up the Department of the Environment before becoming head of the Civil Service in 1977. I am sure that the House would wish to join me in this expression of appreciation and gratitude for the many years of distinguished service that both he and Sir John have given to the country. On Sir Ian Bancroft's retirement, Sir Robert Armstrong and Sir Douglas Wass, the permanent secretary to the Treasury, will become joint heads of the Home Civil Service.
Arrangements are in hand to explain to all the staff of the CSD how they will be affected by the reorganisation. Both the Council of Civil Service unions and the trade union representatives of the CSD's staff are today being informed of the details of the new organisation.
I have placed in the Library copies of a note setting out the distribution of functions between the Treasury and the management and Personnel Office.
Mr. Michael Foot: The right hon. Lady has made an important statement that affects both the efficiency of the Civil Service and the welfare of those employed by it. However, it seems to be a volte-face—I shall not use the offensive term "U-term"—compared with the statement that the Prime Minister made a few months ago. I hope that she will provide more information as to why that has occurred. I hope that there will be a debate in the House so that hon. Members will be able to discuss her proposals.
What consultations have taken place with the unions and staff concerned? The Prime Minister said that they were being informed of the proposals today, but have there been proper consultations about the people who work in those Departments? Why does she now reject the advice of the Civil Service associations, which have given her and her predecessors advice on these matters? Will the Prime Minister tell the House why she has changed her mind since her statement in January, when she told the House
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that she had decided to strengthen and improve the existing Civil Service Department organisation, rather than to merge the two Departments? Has her mind or the Government's mind been in any way affected by the industrial action earlier this year?
Will the Prime Minister give the House an assurance that the new Management and Personnel Office will have all the power and authority of a Department of State? Why does she consider that the diffuse control of the Civil Service will necessarily make it more efficient? Why does she consider that the Treasury has had such brilliant successes in the last few years that extra powers and authority should be transferred to it?
I join the Prime Minister in her tribute to the individuals and high officials whose names she recorded. I knew some of them and I wish them every success. However, the announcement by the Prime Minister of the dizzy promotion of the hon. Member for Knutsford (Mr. Bruce-Gardyne) to the high post of Economic Secretary to the Treasury will cause terror and derision throughout Whitehall.
The Prime Minister: With regard to the right hon. Gentleman's latter point, my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) will carry out the same responsibilities that he carried out previously. I am surprised that a change of name makes such a dizzy change in the right hon. Gentleman's reactions.
We are not transferring the whole of the Civil Service Department to the Treasury, simply a particular part of it. Experience has continually shown the disadvantages of divorcing the management and control of expenditure on manpower resources in central Government from the management and control of Government expenditure as a whole. That is why the change is being made. Those sections of the CSD will now be closely in tune and in touch with policy changes on resources and control. The efficiency units in the management and personnel parts of the CSD will now amalgamate with the Rayner unit, which hitherto has been under the office of the Prime Minister. It will become a management and personnel office and will therefore be closer to policy-making in general.
There were not advance consultations with the unions. It is difficult in a matter of the machinery of government, of which the first formal notice should come to the House, to hold such consultations. We are very sensitive that Parliament should be the first body to be told. That is the way in which to proceed.
Mr. Edward du Cann: Does not my right hon. Friend agree that vastly more important than the location or the chain of command of the CSD—or whatever its new name is to be—is that it should continue to be an arbiter of the effectiveness and efficiency of the Civil Service? It is disappointing that that has not always been the case in recent years. It remains the policy of the Government to bring about that desirable state of affairs and to raise the standards of the great Departments of State—which, alas, vary so much—to the standards of the highest. Ministers also have a substantial responsibility for that.
With regard to the point raised by the hon. Member for Newham, North-West (Mr. Lewis), is my right hon. Friend able to shed any light on the leaks in the newspapers this morning? Is it not agreed that it is very offensive to

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the House that we should read the Government's proposals almost verbatim in the newspapers before we hear them here?
The Prime Minister: I found those reports in the press today as offensive as did my right hon. and hon. Friends. I cannot shed any light on the leak. The first we knew about it was when we received questions from the press late last night. I do not believe that the leak came from my office. I do not know where it came from. I, too, found it as offensive as my right hon. Friend.
I agree with my right hon. Friend that it is important to get the maximum efficiency. That is why we have the Rayner unit in my office, and why Ministers and permanent secretaries are taking a fresh interest in securing the maximum efficiency within their Departments. I hope that the new office will assist in that direction.
Several Hon. Members rose—
Mr. Speaker: Order. I have an exceptionally long list of hon. Members who hope to participate in the main debate. I therefore hope that hon. Members will co-operate during questions on the Prime Minister's statement and be as brief as possible, because a Business Statement is to follow before we reach the main business.
Mr. J. Enoch Powell: In spite of the length of the intervention by the Leader of the Opposition, is there any necessity or justification for the time of the House to be taken up by a long and detailed statement, including notification of personnel appointments and retirements in the Civil Service, such as that which has been inflicted upon us this afternoon by the Prime Minister?
The Prime Minister: I am not usually accused of making too many statements—rather, too few. If the House does not wish me to make statements on these matters, I shall refrain from doing so in future.
Sir Timothy Kitson: Will there be any financial savings following the reorganisation and, if so, what will they be?
The Prime Minister: I believe that the main financial savings will accrue eventually from putting the manpower control division in the Treasury. That should lead to very much greater efficiency than we have seen in the past few years.
Mr. Richard Wainwright: Is the Prime Minister aware that, although she referred in passing to the Select Committee on the Treasury and Civil Service, she omitted any reference to its unanimous report in the previous Session which recommended against the sort of changes that she has announced but made constructive proposals for improving the CSD? The right hon. Lady also did not controvert, or attempt to controvert, the Committee's statement that manpower is a different sort of resource from others and that managing people calls for special skills, not least the ability to negotiate effectively with trade unions?
The Prime Minister: When we received the Select Committee's report we implemented a number of changes that it recommended. Since then it has become increasingly difficult to operate at greatest efficiency with the control of manpower separate from the control of
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expenditure. I am sure that from the point of view of the best allocation of resources we have made the best decision. We look forward to receiving the report on efficiency throughout the Civil Service which I know the Select Committee is engaged upon.
Dr. Jeremy Bray: Will the Prime Minister answer the question of my right hon. Friend the Leader of the Opposition? What has happened since 29 January when she specifically said that she did not wish to merge the CSD with the Treasury because
"all concentration would go on reorganisation rather than on dealing with the true problem?"—[Official Report, 29 January 1981; Vol. 997, c. 1070.]
Does she not feel that there is a danger of weakening the responsibility of departmental Ministers for the management of their own Departments in this gathering to herself and her office of greater responsibility for the management and personnel in the Civil Service?
The Prime Minister: On the hon. Gentleman's latter point, the Prime Minister is the head of the Civil Service and I do not think that he can accuse me of arrogating greater powers to myself. That is not the point at all. On the hon. Gentleman's first question, I said that it has become increasingly difficult to operate separate control of expenditure and control of manpower. I am sure that we have taken the right managerial decision and that now is the best moment to take it.
Mr. Raymond Whitney: May I congratulate my right hon. Friend on the decision to abolish the CSD which, over the past 13 years, has, it is sad to note, made a net negative contribution to the efficiency of the Whitehall machine? Will she assure the House that the Government will take the opportunity of the reorganisation to strengthen the role of the Cabinet Office in the co-ordination, planning and presentation of Government policies?
The Prime Minister: I am grateful to my hon. Friend. It will help many of those engaged on the management and personnel side of the former CSD to be more closely attached to the work of the Cabinet Office, which is a policy-making office. Much of their main work will be in improving efficiency, although, strictly, that falls finally within the sphere of each departmental Minister.
There are many wonderful young people in the Civil Service Department who are anxious to have as much influence as possible on increasing the efficiency of the Civil Service as a whole. I hope that the new arrangements will meet with their approval and that they will enjoy working in their new Departments.
Mr. Stanley Cohen: On a point of order, Mr. Speaker. May I ask for your guidance? I note from our Order Paper that Prime Minister's questions start at 3.15 pm, but is there a limit on how long they should continue? The Leader of the House has to announce next week's business and there is an important debate to follow that. Is there any constitutional rule—
Mr. Speaker: Order. The hon. Gentleman may have overlooked the fact that this is not Prime Minister's Question Time. The Prime Minister has made a statement and at 4 o'clock I shall pass on to the next business.
Mr. John Garrett: Does the Prime Minister agree that her proposals make no sense in management terms? How can it be right to give

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responsibility for pay to the Treasury and responsibility for industrial relations to the Cabinet Office, unless industrial relations now count for nothing? How can it be right to put manpower control in the Treasury and efficiency in the Cabinet Office? Is it not a fact that this has nothing to do with a rational analysis of the functions of Government, but is one of her terrible tantrums over the success of the Civil Service strike?
The Prime Minister: It has been argued that the whole of the CSD should go into the Treasury, but as there was already an efficiency unit in the Prime Minister's office, under Sir Derek Rayner, I felt it best that the other functions of the CSD, apart from those connected with pay, pensions and allowances, should be exercised in relation to the efficiency unit in my office. The unions will deal both with the Management and Personnel Office and with the Treasury, according to the matters involved in the consultations.
I deliberately refrained from putting everything back into the Treasury. I believe that the Civil Service Commission, in dealing with matters of recruitment, will be better if it is kept separate and that the Management and Personnel Office is the best place for that.
Dr. David Owen: Is the Prime Minister aware that many people will view her statement with some anxiety, lest it be the first step towards a Prime Minister's Department? There may be some important constitutional issues involved in the decision. Can the right hon. Lady confirm that no previous Prime Minister has ever seen his responsibilities for the Civil Service as being to hold executive responsibility and managerial responsibility for such important areas of overall Civil Service policy and that previously that responsibility has been designated to another Minister? What makes the Prime Minister believe that concentrating power in her office is the right way of proceeding?
The Prime Minister: I do not think that the right hon. Gentleman could have heard everything I said. The Management and Personnel Office will be attached to the Cabinet Office and the efficiency unit, which was in my office, will go to form part of that management and personnel unit. With regard to the Prime Minister taking executive responsibility, I pointed out carefully in my statement that those responsibilities will continue to be discharged in exactly the same way as they are now, either by my hon. Friend the Member for Brentford and Isleworth (Mr. Hayhoe), who will go to the Treasury to discharge them, or by my noble Friend the Chancellor of the Duchy of Lancaster, who will discharge the day-to-day responsibilities in the Management and Personnel Office in the same way as she does in the CSD now.
Mr. Nigel Forman: Is my right hon. Friend aware that her package of decisions is amply justified by the disappointing record of the CSD in the years since the Fulton report? Will she undertake to come back to the House in due course, perhaps in a few months, with a report on the savings in manpower and money that may flow from her wise decision?
The Prime Minister: I am grateful to my hon. Friend. If we were starting again, I do not think that we would set up the CSD in quite the same way as it was set up. I believe that my hon. Friend's conclusion is correct. In the past few
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years the CSD has reduced its own staff by about 10 per cent. We shall certainly keep a careful watch on the points that my hon. Friend has raised, and report back.
Mr. Michael English: I congratulate the Prime Minister on grasping a nettle that has been around for at least four years. Will she congratulate her hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), who was one of the two people who drafted the recommendation in the 1977 Expenditure Committee report, which she has now substantially implemented? Does she agree that that shows that if a Select Committee takes two years to consider the Civil Service—the first time in 106 years that hon. Members had considered the Civil Service as a whole—it demonstrates the strength of bipartisan Select Committees on such matters?
The Prime Minister: I am grateful to the hon. Gentleman. I was aware of the conclusions of that Committee and am glad of the hon. Gentleman's support and the support of all those who constituted the Committee under his chairmanship.
Mr. Philip Holland: Can my right hon. Friend give an assurance that the demise of the CSD will in no way dilute the follow-through on the recent advice and instructions issued to all Departments on the subject of non-departmental public bodies?
The Prime Minister: I am glad to give my hon. Friend that assurance. I hope that the subject in which he has taken a foremost interest will continue to be prosecuted vigorously by Ministers in charge of Departments.
Mr. Charles R. Morris: Would the Prime Minister explain what contribution to Civil Service efficiency will stem from having a two-headed Civil Service administration? Does she recall the phrase she used in her White Paper of February of this year when she said that the functions of the Civil Service Department had a logical cohesion which it would be harmful to split? How can she justify not only splitting it but splitting it three ways?
The Prime Minister: I have explained the reasons for the split, but the split is two ways, not three ways. Those who go to the Treasury will come under Sir Douglas Wass, and the others will be under Sir Robert Armstrong in the Cabinet Office. They will be joint heads of the Civil Service. The right hon. Gentleman is right in that there have not previously been joint heads of the Civil Service, but I am sure that it will work extremely well.
Several Hon. Members rose—
Mr. Speaker: If hon. Members will be brief, I shall try to call those who have been rising. [Interruption.] Those groans come from hon. Members who have not been seeking to catch my eye.
Mr. Tim Eggar: I congratulate my right hon. Friend on this welcome decision. Is she aware that the evidence to the Treasury and Civil Service Sub-Committee showed quite clearly that the CSD was not doing an effective job, in stark contrast to the work being done by Sir Derek Rayner and his team? Can we now expect that a proper management accounting system will be brought into all Departments, not only the Department of the Environment?
The Prime Minister: I hope that the amalgamation of those two units into the Management and Personnel Office will help both to carry out their responsibilities as efficiently as possible. I am aware that the management accounting unit to which my hon. Friend refers is now being set up in the Department of the Environment. I hope that that will act as a model for other Departments.
Mr. Robert Sheldon: Why on 29 January did the right hon. Lady agree that the Civil Service Department should continue its separate existence when now, a few months later, she is trying to join them once again?
Is the right hon. Lady aware that it will not end here? When these matters of pay are dealt with in the Treasury, they will have to go all the way up to the Chancellor of the Exchequer. The trade unions will not be satisfied with meeting the Chief Secretary to the Treasury, as the right hon. Lady's spending Ministers are: they will want to go to the person who makes the final decision. The work of the Treasury will be increased and there will be a concentration of power without the ability to resolve problems any more satisfactorily than at present.
The Prime Minister: I disagree with the right hon. Gentleman. My hon. Friend the Minister of State, Civil Service Department, will continue to carry out the work he is now doing. He has been doing that work in the CSD. He will be doing it in the Treasury. The trade unions will deal with him and they will also consult my right hon. and noble Friend the Chancellor of the Duchy of Lancaster.
In any event, these matters had previously to come either to me or to the Chancellor of the Exchequer, or groups of Ministers. The system in that respect will not be different.
Mr. Barry Henderson: Is my right hon. Friend aware of the vital role that information technology can play in efficiency in the Civil Service, from her own office down? Will she assure the House that the changes proposed today will not affect the development of the work of the Central Computer and Telecommunications Agency? Might this not be an opportunity for shifting the responsibility for the agency to my hon. Friend the Minister for Industry and Information Technology?.
Will my right hon. Friend also assure the House that these changes will not in any way affect the dispersal of Civil Service jobs in Glasgow?
The Prime Minister: There will be no change whatever in the dispersal programme of the Civil Service as a result of these changes.
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I hope that all matters concerning information technology, in which my hon. Friend the Minister for Industry and Information Technology has taken such a vigorous interest, will continue to be pursued actively. They are important not only to the Civil Service but as an example to the rest of commerce and industry.
Mr. K. J. Woolmer: If a major employer, employing over 600,000 people, announced a decision of this scale and importance only 30 minutes after calling in the unions to tell them, would not this House condemn it as a gross violation of good industrial relations? In view of the significance and importance of such a change, and the reservations expressed today, would it not be appropriate for this House to have the opportunity for a proper debate on the issue?
The Prime Minister: Machinery of government changes have always been announced to this House first, and I believe that that is the way to do it.
Mr. Christopher Price: Where will the ministerial and administrative responsibilities for openness of government, and the follow-through of the flow of directive, now reside? Does the Prime Minister's statement mean that the pledges given to this House by the Lord President of the Council earlier this year, in a debate about the openness of government will be adhered to as strongly as he said they would be in that debate?
The Prime Minister: I do not think that there is any change. I remain head of that part of the office which deals with those things. The Chancellor of the Duchy of Lancaster will carry out those duties on a day-to-day basis, as she does now.
Mr. Stan Crowther: Is it not a fact that the Government, in their doctrinaire pursuit of the notion of reducing the total number of civil servants, have concentrated mainly on the industrial civil servants and handed out their work to private contractors? Will the Prime Minister acknowledge that the cleaners, the painters, the electricians, the drivers, and so on, whose jobs are now being destroyed by the thousand, are no less dedicated to the public service than the very senior people to whom she referred in her statement?
The Prime Minister: I do not accept what the hon. Gentleman has said. There have been some reductions in the numbers in the industrial Civil Service, but there have been a similar number of reductions in the non-industrial Civil Service.
Mr. Michael Foot: May I ask the Leader of the House to state the business for next week?
The Lord President of the Council and Leader of the House of Commons (Mr. Francis Pym): The business for next week will be as follows:
MONDAY I6 NOVEMBER—Second Reading of the Civil Aviation (Amendment) Bill and of the Nuclear Industry (Finance) Bill.
Motion on the statement of the young workers scheme.
TUESDAY I7 NOVEMBER—Second Reading of the Shipbuilding Bill.
Motion on the British Shipbuilders Borrowing Powers (Increase of Limit) Order.
Motion on European Community Document 8832/81 on protection of laying hens kept in battery cages.
WEDNESDAY I8 NOVEMBER—Supply (2nd allotted day): A debate on an Opposition motion on the Government's destrucive policy towards higher education in Britain.
Motion on the Redundancy Fund (Advances out of the National Loans) Fund Order.
THURSDAY I9 NOVEMBER—Supply (3rd Allotted Day): A debate on an Opposition Motion on the Scottish Economy and Industry.
FRIDAY 2o NOVEMBER—Debate on the Report of the Royal Commission on Criminal Procedure, under the chairmanship of Sir Cyril Philips, Cmnd. No. 8092, which will arise on a motion for the Adjournment of the House.
MONDAY 23 NOVEMBER—Second Reading of the Social Security and Housing Benefits Bill.
The following report of the European Legislation Committee is relevant to the debate on the European Community document on battery hens on Tuesday 17 November: 33rd Report, 1980–81, HC 32-xxxiii (1980–81), para. 3.
Mr. Foot: I have four important questions to put to the right hon. Gentleman.
It is evident from the questions that were put to the Prime Minister a few minutes ago that there must be a debate about the statement she has made on the Civil Service, particularly because there have been no consultations in any form whatever with the people who work in the Civil Service.
The right hon. Lady made a statement earlier in the week about Ireland. We asked for a debate then, and there ought to be a debate soon on the discussions between the British Government and the Government of the Irish Republic.
With regard to the local government finance matters which the House will be discussing today, I hope that the right hon. Gentleman will understand that we believe that there must be two full days for the Second Reading of the Bill. Since it involves such important and novel constitutional propositions, it should be discussed on the Floor of the House. I am sure that that will be the desire of hon. Members in all parts of the House.
Lastly, and perhaps most urgently of all, it is conceivable that next week there will be some announcement about GLC fares and the matters which have been the subject of court proceedings during this week. I know that an appeal is pending. I am not making a comment about that now. However, if there are to be
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developments, as has been projected in some quarters, it is obvious that the House of Commons would have to step in. The Leader of the House said in the debate last night:
"It is vital that we ensure that Parliament and no other body stands at the centre of the nation's life and decisions. This is not a matter that can simply be taken for granted or assumed."—[Official Report, 11 November 1981; Vol. 12, c. 621.]
I hope that the right hon. Gentleman understands that we believe that transport policy and the way in which it has been laid down by this Parliament must be protected by this Parliament, and that we cannot have the courts interfering with policy matters of that nature.
Mr. Speaker: I must inform the house that I have been told that an appeal has been registered, which makes the matter sub judice at present. I allowed the right hon. member for Ebbw Vale (Mr. Foot) to conclude his statement, but the matter is sub judice and we cannot pursue it.
Mr. Pym: I note what the right hon. Gentleman says in relation to the Civil Service Department and the statement of my right hon. Friend. I cannot promise that I shall find time for a debate on this important subject. We have had a long statement on it—and some criticism about its length. But let right hon. and hon. Members see whether they can find an opportunity. I do not think that I can offer time immediately.
I note what the right hon. Gentleman said about Ireland. If he is thinking, as I think he was, about talks between the Taoiseach and my right hon. Friend the Prime Minister, that is a matter that falls under the general heading of foreign affairs and Community affairs—although there is a sort of special relationship between this country and the Republic. There was a debate on foreign affairs last week, and I think that it would fall within that context. If the right hon. Gentleman has in mind a debate on Northern Ireland affairs, which are extremely important, there will be opportunities in due course for further debate on that subject. However, the point about Ireland must be looked at in the context of foreign affairs generally.
As to the Local Government Finance Bill, as the right hon. Gentleman acknowledged, I did not make arty statement in the business for next week about that Bill, so I do not think that any matter in relation to it arises in the exchanges over business questions. However, as he said, we are about to have a debate on a motion directly related to the issues behind that Bill.
Sir Frederic Bennett: The Foreign Secretary has just returned from his latest peace mission to the Middle East, where he has been trying to make a worthwhile contribution towards a settlement there. I do not think that we shall be having another foreign affairs debate in the immediate future. In view of the very tendentious misreporting that has taken place in various quarters about our Foreign Secretary's role, may we expect very soon a statement in the other place by the Foreign Secretary and a statement here on the present situation?
Mr. Pym: I am doubtful whether there will be a statement on that matter either in another place or here, but I have no doubt that my right hon. and noble Friend the Foreign Secretary and the Ministers of State in the Foreign Office will take opportunities to make the position absolutely clear. What I think I should say—I am sure that

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it is obvious to all hon. Members—is that the Foreign Secretary has been using all his endeavours to try to improve the situation and to secure peace in the Middle East.
Mr. Arthur Palmer: Does the right hon. Gentleman recall that at the end of the previous Session he promised the House that there would be an early debate on the report of the Select Committee on Energy on the nuclear industry, which was to be combined, I understood, with a debate on the report of the Monopolies and Mergers Commission on the Central Electricity Generating Board? Is there now any hope of such a debate?
Mr. Pym: I do not think that I gave such a promise, but I must check on that. The importance of this subject is clear, but we are to have a debate on the Second Reading of the Nuclear Industry (Finance) Bill next week.
Sir William Clark: As the Scott report on the index linking of pensions was published about eight or nine months ago, and in view of the widespread public interest in index-linked pensions, when will the House have an opportunity to debate the matter?
Mr. Pym: I cannot say when, but I accept the importance of the subject and I shall bear in mind my hon. Friend's representations.
Mr. Bob Cryer: May we have a statement from the Secretary of State for Defence or the Secretary of State for Foreign and Commonwealth Affairs on the conflicting comments of Messrs. Weinberger and Haig and President Reagan on the position of Europe as a tactical nuclear battleground according to the disposition and attitude of American foreign and defence policy? Does the Leader of the House accept the highly undemocratic attitude of the Government in sending the Secretary of State for Defence to the NATO nuclear planning group meeting on 20–21 October and no statement about that meeting being made on the Floor of the House? Only one planted parliamentary question has been answered. This is a continuing disgrace. When will the Leader of the House do something about it and tell the Secretary of State to come to the Dispatch Box and be answerable to the democratic institution that he is supposed to support?
Mr. Pym: On the first question, if the hon. Gentleman and his right hon. and hon. Friends decided to use a Supply day for that purpose, it is open to them to choose it.
Mr. Cryer: You are the Government.
Mr. Pym: On the second point, there is by no means a practice by which, following nuclear planning group meetings, there is an automatic statement in the House. When an important decision is made or something important has to be announced, the House is told. If no decision of particular importance is taken, the House is not told. It is a great mistake to fill up the time of the House every day at 3.30 pm with statements which are not necessary. Statements there must be on matters of importance and of interest, and to the extent to which the House wants them, but not on everything—particularly if there does not happen to be much to be said.
Viscount Cranborne: Will my right hon. Friend consider recalling the Select Committee on Procedure?
Mr. Pym: I indicated in what I said last night that it was in my mind to put down a motion shortly in order to set up that Committee once again.
Mr. Andrew Faulds: Will the right hon. Gentleman reconsider an earlier reply? Does he not accept that there would be considerable value in a statement being made in this Chamber on the admirable efforts of the Foreign Secretary in trying to get general acceptance throughout Europe and the Middle East and in America—one hopes—of the excellence of the Fahd peace plan?
Mr. Pym: I shall convey that view to my right hon. and noble Friend, and he will consider it. I shall consider it, too, but my personal view is that I am not sure that that is very likely. However, I shall consider the matter further.
Several Hon. Members rose—
Mr. Speaker: Order. I want to try to help the House, in view of the noises earlier. I shall allow questions on the Business Statement to run until 4.20 pm, and then I think that we shall move on to the main business.
Mr. Michael Latham: Does my right hon. Friend accept that some of us do not take the same view as the hon. Member for Warley, East (Mr. Faulds) but feel very strongly that there should be a statement on the Middle East, and quickly, if only to try to get together the policies of European Governments and the American Government on the Middle East?
Mr. Pym: Obviously, I shall take that point of view into account.
Mr. David Stoddart: Is the right hon. Gentleman aware of the growing anger and concern among nurses, the general public and Members of this House about the way in which the nurses' salary claim is being treated? Will he ask his right hon. Friend the Secretary of State for Social Services to make a statement, or, better still, will he provide time for a debate about this dedicated body of workers in the Health Service?
Mr. Pym: At the request of the Opposition, there was a debate on the Health Service last Friday.
Mr. Ivan Lawrence: Will my right hon. Friend reassure those of us on both sides of the House who attach great importance to the Madrid conference that he is as sympathetic to us having a debate on that subject now as he was before the day's debate on foreign affairs was fixed?
Mr. Pym: I shall bear that request in mind.
Mr. Robert Maclennan: In regard to the debate next Thursday on the Scottish economy, in view of the overriding responsibilities of the Treasury for the present parlous condition of the Scottish economy, will the right hon. Gentleman ensure that a Minister from the Treasury is present, either to open or to reply to the debate?
Mr. Pym: Again, I shall note that point. I am doubtful whether hon. Members representing Scottish constituencies would be altogether appreciative of that suggestion, but I shall consider it.
Mr. Norman Hogg: May I draw the right hon. Gentleman's attention to early-day motion No. 34, standing in my name, which refers to the Colleges of Education (Compensation) (Amendment) Regulations?
[That an humble Address be presented to Her Majesty, praying that the Colleges of Education (Compensation) (Amendment) Regulations (S.I., 1981, No. 1088), dated 22nd July 1981, a copy of which was laid before this House on 7th August, in the last Session of Parliament, be annulled.]
Will the right hon. Gentleman find time within our procedures for this matter to be considered?
Mr. Pym: I shall consider what the hon. Gentleman has suggested.
Mr. Michael Morris: Will my right hon. Friend take note that there is need for an urgent debate on the report of the Public Accounts Committee on the role of the Comptroller and Auditor General, not least in view of the Prime Minister's statement today?
Mr. Pym: That is very much in my mind, and I hope that before long it will be possible to find an opportunity for such a debate.
Mr. Ioan Evans: Does the Leader of the House recall that I asked last week for a Government statement on the proposal to explode a demonstration nuclear bomb in Europe? Following my question, Mr. Caspar Weinberger made a statement which contradicted the earlier one. Is it not important that the House should know whether Britain is to be used for launching the demonstration nuclear weapon, or whether that weapon is to be exploded in Britain? Will the Government make a statement on that?
Mr. Pym: That is a matter for my right hon. Friend the Secretary of State for Defence. I have nothing to say about it today.
Mr. D. N. Campbell-Savours: Will there be a debate in Government time on the reporting of politics in the media, especially in the light of the media's interpretation of events taking place in the Labour Party?
Mr. Pym: Not in Government time, but if the hon. Gentleman can find some other opportunity he is welcome to raise the matter then.

Civil Service Department (Transfer of Responsibilities)
  BILL PRESENTED
    TRANSPORT (FINANCE)
    Mr. Secretary Howell, supported by Mr. Secretary Younger, Mr. Secretary Edwards, Mr. Leon Brittan and Mr. Secretary Tebbit, presented a Bill to increase certain limits relating to the indebtedness of the British Railways Board and the National Bus Company, to the amount of compensation payable in respect of certain public service obligations of the Board, and to the amount of certain financial assistance given to the Port of London Authority and the Mersey Docks and Harbour Company; and to enable the Treasury to guarantee the discharge of the Board's liabilities to the European Company for the Financing of Railroad Rolling Stock: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 10]
Orders of the Day
  SUPPLY
  [IST ALLOTTED DAY ]—considered
  SUPPLY

    Encroachments on Local Government Autonomy
    4.11 pm
    Mr. Speaker: I have selected the amendment in the name of the Prime Minister. Before calling the right hon. Member for Manchester, Ardwick (Mr. Kaufman) to move the motion in the name of the Leader of the Opposition, I have a ruling to make on the scope of the debate.
    As the House is aware, a Bill has been presented and set down for Second Reading which is not unconnected with the substance of the motion. I must therefore have regard to the rule of anticipation. The effect of that rule, as stated on page 371 of "Erskine May", is that a motion must not anticipate a matter already appointed for consideration by the House. It would accordingly be wrong, in my view, for any right hon. or hon. Member to attempt today to canvass in detail the provisions of the Local Government Finance Bill. There will be other opportunities to do that. There will be a Second Reading.
    Subject to that restriction, a wide debate is possible on the terms of the motion arid the Government amendment that I have selected. As long as hon. Members do not try to deal clause by clause with the Bill, honour will be satisfied.
    Mr. Reg Prentice: On a point of order, Mr. Speaker. I apologise for delaying matters, but I wish to have some clarification. If action is to be taken by the Government to restrain expenditure by local authorities—which is their intention, as expressed in the Bill—will it be in order to discuss whether that should take place by means of a referendum?
    Mr. Speaker: That is covered by the terms of the motion. The motion and the amendment having been accepted as being in order. the right hon. Gentleman will find that it is covered. All that I am asking the House to do, for the sake of respectability, is not to deal with the clauses of the Bill. I am sure that the House will co-operate and work safely through the minefield.
    Mr. Robin Maxwell-Hyslop: I believe that no day has been appointed for a Second Reading of the Bill. It may be that the Bill will not come to Second Reading. Does the anticipation rule mean that we can never discuss in detail the matters in the Bill once it has had a First Reading, even though no day has been appointed for its Second Reading?
    Mr. Speaker: The hon. Genteman always makes me anxious when he rises on a procedural point. I remind him that the Second Reading is down on the remaining orders for today, but it is very unlikely to take place today.
    Mr. Kenneth Marks: Before publishing the Bill the Government submitted a technical

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    memorandum to local authorities giving the various options. Will reference to that technical memorandum be in order?
    Mr. Speaker: As long as the hon. Gentleman does not hang his argument of any special clause in the bill, those who occupy the Chair will be tolerant.
    Mr. Patrick Cormack: Will there be a Division on the substantive motion?
    Mr. Speaker: If it is pressed and the House desires a Division—I should be surpised if it did—one will be called.
    4.16 pm
    Mr. Gerald Kaufman: I beg to move,
    That this House upholds the autonomy of local government and opposes any attempts to impair or undermine it such as were announced by the Secretary of State for the Environment in Torquay on 24th September, including transferring control over rate-making from town and county halls to Whitehall and imposing the device of the enforced referendum, which have been rejected by all local authority associations as totally unjustified, constitutionally unacceptable and technically unsound.
    The words with which the motion concludes are those that the Association of District Councils has used to comment on the proposals made by the Secretary of State for the Environment. The title of the debate, as printed on the Order Paper, is the verdict on those proposals by the Association of County Councils.
    The proposals have aroused profound disquiet throughout Britain, yet the Government are in such haste to implement them that they have rushed out the Local Government Finance Bill within 46 hours of the opening of the parliamentary Session by Her Majesty. The Secretary of State's proposals are based on one false assumption and one undeniable fact. The Government have linked the false assumption to the undeniable fact and decided that the problem that they claim arises from the linkage can be solved only by the means that they propose.
    The undeniable fact is that the rating system is profoundly unpopular. It is regarded as unfair, inaccurate and illogical, and ratepayers have come increasingly to dislike it. That should have caused the Government to go to the heart of the matter and deal with the system that spawns so many anomalies rather than deal with some of the anomalies while retaining the system undisturbed.
    One of the alleged anomalies is a false assumption. It is the repeated implication that local authority expenditure is increasingly spiralling out of control. Ministers have pursued the false assumption and drawn from it the conclusion that the allegedly profligate expenditure by local authorities is responsible for the unpopularity of the rating system. Accordingly, they are trying to control the levying of rates in the hope that that will put a stop to the allegedly profligate expenditure. However, local authority expenditure is far from spiralling out of control. It has been falling for many years now. If the Government controlled their expenditure with the efficiency achieved by local authorities, they would have little difficulty in meeting their financial targets.
    I do not claim that every local authority is a model of financial rectitude in every particular. All of us can point to examples of what we regard as wasteful or foolish local
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    authority expenditure. However, those examples are excrescences within the overall expenditure, which is contained with remarkable effectiveness. The Secretary of State for the Environment concedes that point both explicitly, in statements that he has repeatedly made to the House, and implicitly, when he repeatedly insists that only a small number of authorities are disregarding his wishes.
    The Secretary of State has a penchant for quoting the celebrated speech in which Anthony Crosland, as Secretary of State for the Environment, declared "The party is over". The right hon. Gentleman fails to point out that, far from making that statement in 1975—the occasion of an attack on local government expenditure—Tony Crosland used it to reaffirm his belief in the virtues of public expenditure and to point out that he was allowing for increased spending by local councils in the following two years. Yet each time that the Secretary of State repeats that quotation he tries to give the impression that, since 1975, there has been an orgy of sumptuary debauchery in our town halls and county halls.
    In fact, since 1975–76 local authority expenditure has fallen in real terms by no less than 21 per cent. During that time Government expenditure has risen by 8 per cent. During the time that the Government have held office local authority expenditure has fallen in real terms by 10 per cent., while Government expenditure has risen by 7 per cent.—in part to finance unemployment, which, in part, has been caused by the fall in local government expenditure. Local authority expenditure has fallen from 28·2 to 24·7 per cent. of total public expenditure.
    When those facts are drawn to the attention of the Secretary of State, he has his stock reply ready. He produced it to the House a fortnight ago during Question Time, when he drew attention to the disparity between capital and current expenditure. The implication of the comparison is that while capital expenditure—which is virtuous—is falling, current expenditure—which is vicious—is inexorably rising. That is simply not so. It is true that capital expenditure has fallen disastrously, but local authority current expenditure has fallen also. On one basis of calculation it has fallen by 6·9 per cent. since the Government took office. On another, it fell by 1·25 per cent. last year alone. That contrasts with an increase in the Government's current expenditure.
    If local authority expenditure has been falling, why have rates been rising? I must make it clear immediately that, while rates have risen by 125 per cent. between 1974 and 1980, they have risen less than earnings, which rose by 163 per cent., and less than retail prices, which rose by 145 per cent. Even so, they have risen and have become increasingly unpopular. One reason is that the burden of rates is being cast increasingly on householders. That is not the impression that we gain from the regular and understandable complaints from business, commerce and industry about their rates burdens. However, the increasing impact on householders is vividly illustrated by statistics provided by the Secretary of State to the House only three weeks ago. They show that every year since 1975–76 householders have been paying an increasing share of the rate bill. They paid 38·6 per cent. in 1975–76, but by 1980–81 their share had risen to 43·5 per cent.
    Industry, while justifiably concerned at its rate bill, paid only 0·7 per cent. of manufacturing costs in rates in 1978. Interest rates are a far greater proportion of its costs. Between 1978 and 1980 its interest payments rose by 94 per cent., compared with an increase of 48 per cent. in

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    rates. It is the volume of the rates bill that troubles all who have to pay it—both householders and industry. One reason is the cost of interest rates to local authorities themselves. During the past two and a half years increased interest rates have added billions of pounds to the costs of local authorities. The latest round of interest rate increases earlier this year is estimated to have cost local councils no less than £700 million.
    Local authorities have suffered another crippling financial loss—the withdrawal of Government grants and subsidies. That was made clear in a letter to the Secretary of State from the London Chamber of Commerce only this week, which referred to
    "the loss of Rate Support Grant which London has suffered since the new system was introduced. In the current year this amounts to about £350 million—the equivalent of an 18p rate rather than the 5·6p rate which you predicted in February."
    It is that drain of funds from local councils that causes them to ask for more money from the ratepayers if they are to avoid cutting their services unacceptably.
    Mr. Eldon Griffiths: I am listening to the statistics with interest. Whereas the aggregate figures that the right hon. Gentleman has rightly placed before the House may help his point, what is annoying ratepayers and local councils in many parts of the country is that about 200 councils have made substantial economies in their expenditure, only to see the whole amount—£189 million—wiped out by the additional spending of three large authorities, the GLC, the West Midlands and the Manchester area.
    Mr. Kaufman: I intend to deal with that point later. If I do not do so, I hope that the hon. Gentleman will intervene again. I shall make a note of the figure that he mentioned, because it is important to my case.
    This year the rate support grant in England has been cut by £1,060 million compared with last year. In addition, the housing subsidy has been cut by £738 million. That means that the Secretary of State has subtracted £1,800 from local authorities in reduced grant and subsidy in this financial year alone.
    Let us consider the effect of that on Merseyside. The Secretary of State is now especially concerned with the part of the country that contains Merseyside. He told the Conservative Party conference last month about the needs of Merseyside. He even said that there might be a case for additional public expenditure in that area. Yet this year he is subtracting £33 million from Merseyside in reduced grants and subsidies. For the Merseyside district councils the loss is far greater, at no less than £102 million. If such a deprived area is to maintain essential services, it must obtain the money in some other way. The only way to do that is through the rates.
    The problem of Merseyside is the problem of Strathclyde, Lothian, Greater Manchester, the West Midlands and many other parts of the country. That is why the rate burden inexorably increases while actual expenditure steadily declines. Yet the Government choose as their target not the cause but the effect. For the past two years there have been a series of measures to deal with what Ministers persistently choose to misdescribe as overspending.
    First, in England there was the withholding of £200 million in rate support grant under the transitional provisions of the Local Government, Planning and Land Act 1980. Next came the discriminatory measures against
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    eight local authorities in London, six of which have recently been successful in a court action against the Secretary of State. Throughout last summer there was the exercise in which the Secretary of State, without any parliamentary authority, instructed local authorities to cut their budgets by 5·6 per cent. below their expenditure for 1978–79. He threatened them with what he described as the hold-back of grant if they failed to comply. Right hon. and hon. Members on both sides of the House well know of the anger with which that hold-back operation was greeted by local authorities of every description, controlled by different parties. The councils were infuriated by the injustice of what the Secretary of State had asked them to do.
    The chairman of Buckinghamshire county council, Mr. Roger Parker-Jervis, described the Secretary of State's demands as a grave problem. He said:
    "We believe Mr. Heseltine's formula is unjust and falls particularly harshly upon Buckinghamshire … the only way of achieving economies of the scale now being demanded involves large scale redundancies which will leave children not properly taught in school, old people uncared for, fires unattended and increasing danger on our well worn roads."
    Buckinghamshire was not able to comply fully with the Secretary of State's demands. It is on his list of offenders as an 8·9 per cent. overspender.
    In essence, the chairman of the county council, Mr. Bob Daniels, made similar complaints. He said:
    "We have already cut to the bone. It is physically impossible for us to cut any more. We would have to close old people's homes all over the place and get rid of people all round. There would be a tremendous loss of jobs. It is just not on."
    Even though Essex finally made substantial cuts, it still ended up as a 3·9 per cent. overspender.
    The Secretary of State for the Environment treated Suffolk in such a bad way that one of the local Members of Parliament said:
    "We think Suffolk is very unfairly penalised by the particular method that is being adopted to cut public spending. I am going to say that, as far as Suffolk is concerned, what he proposes is unfair."
    That was said by the present Secretary of State for Northern Ireland. He still counts as someone who, on the whole, is in sympathy with the Government's policies. Suffolk has made cuts, but: still remains a 2·6 per cent. overspender. It was not only the injustice of the hold-back operation that upset the local authority, but the operation's lack of logic.
    That was vividly illustrated at a meeting a few days ago of the South Northamptonshire district council which, like all the local authorities to which I have referred, is Conservative controlled. The chief finance officer, Mr. Harry Hanlon, said:
    "Mr. Heseltine claims to penalise high spenders, but this council is the lowest spending authority in the country per head of population."
    South Northants, like the other district councils, made cuts, but, even so, it is on the Minister's list of transgressors as, a 3·9 per cent. overspender.
    It is no wonder that Conservative Councillor Mr. Sid Wootton accused the Government of what he called "collective dictatorship". It is no wonder either that Conservative Councillor Kathleen Riggall summed up the situation in this way:
    "I never thought I would be unhappy about a Conservative Government, but I think that the last two years have been pretty miserable as far as local councils are concerned."
    Hon. Members may recall that the hold-back operation was designed to cut local authority expenditure by £800

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    million and that the weapon deployed by the Secretary of State was a threatened extra reduction of £450 million in the rate support grant.
    The hon. Member for Bury St. Edmunds (Mr. Griffiths) referred with admiration to the £189 million that had been saved. However, the Government had asked for £800 million to be saved throughout the range of local authorities. The fact that three local authorities counterbalanced the savings cannot hide the overall failure of councils to save more than one quarter of what the Secretary of State told them they had to save. The operation was an abject failure, and planned expenditure rose instead of falling. That did not apply only to the councils referred to by the hon. Member for Bury St. Edmunds.
    Far from compensating for the alleged excessive expenditure by withholding even more grant, the Secretary of State finally cut the grants by far less than he had originally planned, by £311 million instead of £450 million. Targets which were one day imperative became disposable the next.
    One reason for the failure of the expenditure provisions was the illogical absurdity of the system that the Secretary of State employed. So that hon. Members may follow his method with ease, I shall quote the relevant passage from his circular. It said:
    "If a reduction in the amount of grant available for distribution is approved by Parliament, the national poundage schedule would need to be further adjusted so that the Grant Related Poundage for spending at a level equal to Grant Related Expenditure would be increased by 9·03p compared with what would be required simply to close-end grant entitlements in the way described above."
    I am sure that that has assisted hon. Members. The outcome for 30 authorities that took the opportunity not to cut expenditure but to increase it was that the Secretary of State penalised them by the novel punishment of increasing their grants. For the other 46 overspending authorities, the Secretary of State's definition was that he "solved the problem" by changing the definition and turning them into underspenders. The authorities were still overspending by his original criterion by an aggregate of £77 million, but he let them off scot-free. By then, the Secretary of State had completely lost track of what he was doing and where he was going, but he still went on doing it.
    When the Hollywood film director Howard Hawks made the famous thriller "The Big Sleep", he found the script so confusing that he forgot the murder motive. To discover the motive he telephoned the script writer, Raymond Chandler, in New York and requested an explanation. Chandler responded by saying that he could not remember either.
    The Secretary of State for the Environment is on record as, understandably, having written off the whole holdback episode as disastrous. Although he has forgotten his own motive, he still wants to secure a conviction. That is how his latest proposals have arisen. The Government remain convinced that local authority spending is too high and must be reduced. However, instead of trying to force councils to cut their expenditure, Ministers are seeking to control their rate-making powers. Ministers hope that if they continue to cut grants and subsidies and prevent
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    councils from raising their rates to obtain the necessary compensating revenue, local authority expenditure will stop rising, even though it has not risen anyway.
    The Government have chosen as their control method the grant-related expenditure assessment provided under the new block grant scheme. They are contravening assurances given when the grant-related expenditure assessments were introduced. The Government's grant-related expenditure programme, which was published in February, specifically stated:
    "The assessments are not tailor-made to the circumstances of each authority. They do not set an expenditure target for authorities."
    More importantly, when earlier legislation was passing through the House, the Minister for Local Government and Environmental Services made the following categorical statement:
    "Grant-related poundage and grant-related expenditure is in no sense a prescriptive definition by central Government of what the local authority should spend, but is the basis on which the grant will be distributed."—[Official Report, 8 July 1980; Vol. 988, c. 304.]
    Furthermore, the Conservative-controlled Association of District Councils, in a document entitled "Government Proposals for New Rating Procedures—a Threat to Local Democracy", stated that the grant-related expenditure assessments of block grants were intended merely to be the basis of a grant distribution. The document said:
    "They are grossly unsuitable as individual targets because of the numerous and significant anomalies they contain."
    The change of criterion is particularly unfair on the local authorities which, during the hold-back operation, made successful efforts to budget within the volume target. Those authorities have suddenly been shocked to find that they are massively overspending on their grant-related expenditure assessment. An example of that is Tonbridge and Malling, which is part of the constituency that is represented by the Minister for Housing and Construction.
    When the Secretary of State issued his first list of overspendings and underspendings in June, Tonbridge and Malling smugly discovered that it was a 1·7 per cent. underspender and subject to no penalties of any kind. Preening itself, it took the opportunity to increase its expenditure by £42,000. Under the Secretary of State's somewhat unusual system of penalties, that council found itself requited for its addition to its budget by an increase in rate support grant of £23,000. So far so good for Tonbridge and Malting. That council was still an underspender by 0·7 per cent.
    Last month the Secretary of State for the Environment issued yet another of his unending lists of municipal sheep and goats. Tonbridge and Malling discovered that, under the criterion that would trigger off penalties under the Secretary of State's new proposals—although its budget had not been changed by a single penny—it suddenly became a 29·5 per cent. overspender.
    That is not all. The Secretary of State is making new arrangements in his forthcoming rate support grant settlement to reduce grant-related expenditure assessments for district councils in line with the rent increases that he is demanding. This latest development is known as the E7 factor. The lower the grant-related expenditure assessment, the higher the local authority ascends into the penalty zone. The most recent calculation is that Tonbridge and Malling is likely to go 107 per cent. over the grant-related expenditure assessment. If the proposals

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    are implemented, we may all have to take the train from Charing Cross to campaign in the referendum in defence of the Minister for Housing and Construction and against the Secretary of State for the Environment.
    That is not an isolated instance. The Association of District Councils estimates that the rate arrangements will affect 242 out of 296 shire districts. Other forms of council will also be affected by these absurdities. A quirk of the grant-related expenditure components has an especially severe effect on new towns. Milton Keynes, which is a 1 per cent. underspender on the volume target criterion, is a cool 55·7 per cent. overspender on the GREA criterion. Peterborough will be a 49·2 per cent. overspender, Basildon will overspend by 41·1 per cent., Harlow by 94·8 per cent., Stevenage by 82·9 per cent., Welwyn and Hatfield by 82·1 per cent. and Crawley by 82·9 per cent., though several of these councils are underspenders on the volume target criterion.
    The Government claim that in putting forward these proposals they have only a few profligate authorities in mind. I challenge the equity of that approach. It is unseemly and unfair for Ministers to conduct a vendetta against a handful of authorities with whose policies or political control they may disagree and whose alleged excess expenditure is only a fraction of 1 per cent. of the local authorities' total budget. It is even more unacceptable that to achieve this objective Ministers should employ measures that will reduce the traditional freedom and independence of every local authority.
    That is not the way in which the Secretary of State seeks to present his proposals. Last Friday he held a press conference, at which he said:
    "I want to emphasise that this legislation will apply to only a few high-spending authorities."
    That is untrue, and the Secretary of State knows that it is untrue. His proposals will give him power not only over a few high-spending authorities, but over every local authority. His proposals, as he has formulated them, remove the right of local authorities to make their own rates. They transform every local authority into a puppet. Whose puppets will they be?
    During his press conference the right hon. Gentleman said that it was Parliament that would take over. He talks about rate levels
    "prescribed by Parliament"
    but that is not what the Bill sets out. It provides that limits on local authority rate-making shall be imposed not by Parliament but by a method specified by the Secretary of State. The only role for Parliament will be to say "Yes" or "No" at the end of a 90-minute debate.
    The removal of the power of local authorities freely to make their own rates lies at the heart of the Opposition's resistance to the right hon. Gentleman's proposals. The Times summed up the position last week in a leading article, when it stated that the right hon. Gentleman
    "may be constructing a dangerous hammer to crush some small nuts … It would be imprudent to introduce major constitutional changes in the balance between central and local power in pursuit of isolated deviants."
    To pick up what The Times described as a few high-spending authorities, Ministers must place shackles on every one of the 456 local authorities in England and Wales. They will be shackled whether they are overspenders or underspenders, whatever overspenders or underspenders may be.
    The concept is cogently challenged in a memorandum on the Secretary of State's proposals which has been drawn
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    up by the Royal borough of Kingston upon Thames., a Conservative-controlled authority, which is an under-spender on the right hon. Gentleman's volume criterion, but which will be an overspender on the criterion adopted in the new proposals. The Kingston authority said:
    "The Royal Borough of Kingston upon Thames strongly oppose these proposals … the conflict between central and local government … is the real cause of the proposals … The reality is that the conflict is about power. It is a constitutional matter. It is understandable that central Government does not like having other authorities in the land over which it has Limited control, but if it tries to take control over these authorities it is threatening the basic 'checks and balances' in our unwritten constitution … Local government does not overspend in total. Individual authorities may do but (i) it is difficult to demonstrate what constitutes overspending and (ii) the whole point of local government is that there should be differences between authorities and that some should be high spenders and some should be low spenders."
    Beyond the obnoxious controls over rate-making lies the unacceptable device of the referendum. To many right hon. and hon. Members, whatever their views on local authority spending, it is the Secretary of State's decision to adopt the device of the enforced referendum that lies at the heart of their opposition to the Government's proposals. Others may ask "What is wrong with a referendum? After all, it will give the people the final say. Did not the Labour Government introduce the referendum system on the Common Market and on devolution? Did not the city of Coventry set its own referendum on this very issue of the rates"?
    Whatever we may think of the principle of the enforced referendum, there is a great difference between that and the referendums that were called on the Common Market, devolution and Coventry rates. It is a difference that was pinpointed by the Prime Minister at Question Time today. When referendums took place on the Common Market, devolution and Coventry, Parliament and a local authority were asking of their own free will for the guidance of their electorates. As the Prime Minister said only an hour and a half ago, national referendums have hitherto been only advisory. The Secretary of State's proposals involve timing dictated by the Government, criteria fabricated by the Government and questions framed by the Government, which they will not ask Parliament to approve, although it was promised that they would. The right hon. Gentleman's answer is to insert a compulsory and binding referendum into the budget-making process of every local authority in the land. It is no wonder that all three of the local authority associations in England and Wales oppose the proposed legislation.
    Mr. Harry Cowans: The picture is rather blacker than the one that my right hon. Friend is painting. Referendums will be enforced on local authorities and they will have to pay for them. The AMA estimates that £10 million will be spent by local authorities for no reason other than to please the Secretary of State.
    Mr. Kaufman: My hon. Friend is right. The Government claim that they want to reduce expenditure, and the cost of the referendums requires some explanation from the right hon. Gentleman.
    The Convention of Scottish Local Authorities opposed referendum legislation for Scotland and legislation that was expected to be outlined in the Queen's Speech. Last week the Secretary of State for Scotland announced that he had dropped his plans for referendum legislation. He

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    has other methods that are objectionable enough in their way, and my right hon. Friend the Member for Glasgow, Craigton (Mr. Millan) will deal with them when he replies to the debate on behalf of the Opposition.
    The Secretary of State for Scotland heeded the objections of the Convention of Scottish Local Authorities and dropped the referendum proposals. He explained his decision while referring to the convention. He said:
    "They did not think that it was a good idea. They thought it was a very bad idea."
    If a compulsory referendum is a very bad idea for Scotland, it is a very bad idea for England and Wales.
    If the Secretary of State for Scotland was responsive to the opposition of the Convention of Scottish Local Authorities, why do the Secretaries of State for the Environment and Wales spurn the views of the Association of Metropolitan Authorities, the Association of District Councils and the Association of County Councils? Does genuine consultation end at Berwick-upon-Tweed and the Solway Firth?
    This enforced referendum would mark the end of representative and responsible democracy in our cities, towns and councils. Not just the few councils where the referendum will take place, but all the 456 councils living under the threat of the referendum will become puppets dangling from the strings of Whitehall.
    Mr. Jim Craigen: I hope that my right hon. Friend will not view the withdrawal of the referendum proposals in Scotland as a major concession on the part of the Scottish Secretary of State, because he will still retain the ultimate power over rate-fixing in Scotland. That is what matters.
    Mr. Kaufman: I fully accept what my hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen) says. I was trying to point out that, while the Secretary of State for Scotland and the Secretaries of State for Environment and Wales wish to take control over the activities of local authorities, it is the Secretaries of State for the Environment and Wales who have decided, despite the view of the Secretary of State for Scotland, to retain the uniquely objectionable method of the compulsory referendum.
    The local authorities that are threatened with the referendum are placed in an intolerable position. The cancellation by the Secretary of State of the consultative council on the rate support grant, which was timed for 20 November, means that local authorities have to begin their budget-making procedures without knowing what grants they may expect from the Government. Accordingly, they cannot calculate how to evade the referendum, even if they wish to, because to do so they would need to know the GREA figure and the tolerance limit above it, and those are being withheld.
    In any case, even when they find out what the GREA is to be, it does not mean that local authorities will necessarily be induced to cut their planned expenditure. Many of them may even increase it, because if the Secretary of State is to fix the penalty limit high enough to catch only the small number of councils that he claims are his target he may well induce local authorities to spend more than they originally intended, because they will know that they will not be penalised for doing so. The spending ceiling may come to be regarded as a norm, and
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    the outcome of this whole feverish exercise could be higher rather than lower than total local authority expenditure.
    In its memorandum, to which I referred earlier, the Royal borough of Kingston upon Thames, as a self-avowed Conservative-controlled authority, summed up the position in these words:
    "Conservative Councillors cannot understand how the present proposals can be put forward by a Conservative Government. They conflict with the party's long-established belief in decentralisation. If this policy has now changed, then who changed it, what was the mandate to do so and why has the party not been told?"
    The Secretary of State spoke very differently when, soon after taking office, he addressed the Joint Local Authority Association conference as follows:
    "My philosophy towards local government is clear. It rests on a total commitment to give you the maximum possible freedom."
    The Prime Minister was even more forthright when she told councillors at the Conservative local government conference in 1978:
    "Our aim will be to give you more responsibility for your own communities. It is time-wasting and pound-wasting for central government to spend so much time looking over your shoulders."
    No one claims that local government is perfect or that it does not make mistakes, or that from time to time it does not indulge in excesses. Mistakes and excesses are part of the price that we pay for democracy. Local democracy is very precious to this country. It is a bulwark against the tyranny of the Government. It permits innovation and experiment. It provides for the humanity of diversity rather than the deadening pall of uniformity. It creates opportunities for thousands of men and women, councillors and officers, to dedicate themselves to public service, and it makes our community richer for it.
    Let there be no doubt that these proposals could be manipulated by a Labour Government. As Mr. Noel Hepworth, director of the Chartered Institute of Public Finance and Accountancy, said last week:
    "The whole system of local government as we have known it will soon start to collapse; not necessarily next year, but soon. When the Conservatives lose power you will find the multipliers they have built in being fiddled in a completely different way by other hands."
    I take this opportunity to say, in words firm and clear enough to be quoted to my party as and when we become the Government of the country once again, that we do not want those powers, even though we could indeed make use of them. We find them odious and undemocratic. If they reach the statute book and we are in a position to do so, we shall repeal them. When, at Torquay in September, the Secretary of State quoted Tony Crosland's statement "The party is over", he introduced his own variation. He said that it was now closing time. If these proposals are permitted to become law, it will be closing time. It will be closing time for local democracy. We hope that this House will act, as it has the power to act, in defence of democracy. It is in that spirit that I commend the motion to the House.
    5.6 pm
    The Secretary of State for the Environment (Mr. Michael Heseltine): I beg to move, to leave out from "That" to the end of the Question, and to add instead thereof:
    "this House calls upon Her Majesty's Government to continue its efforts to restrain the activities of overspending local authorities and to provide further protection for domestic, commercial and industrial ratepayers".
    The motion before the House seeks to oppose

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    "any attempts to impair or undermine"
    the autonomy of local government. If the right hon. Member for Manchester, Ardwick (Mr. Kaufman) is serious in moving that motion, he is now seeking a fundamental rewrite of the relationship between local government and central Government.
    Let me first put local government spending in context. In 1980–81, local government in Great Britain spent £24 billion. That is more than the Health Service and the Defence budgets combined. Nearly £9 billion of that was raised in rates. That is equal to just over one third of the total United Kingdom yield of income tax. About 2·8 million people are employed in local government. That is one tenth of the work force. Local government borrowed externally £2·3 billion. That is nearly one fifth of the public sector borrowing requirement. Local government accounts in total for about one quarter of public spending programmes.
    The first question that we must ask ourselves is: does anyone seriously believe that central Government would have legislated to build up local government to its present level if the assumption was that local government would then be free, of its own momentum, to set public expenditure levels of its own choosing? Not a single member of the Labour Party who served as a Minister can believe it, for every one of them took part in the public expenditure reviews. What did they think they were doing? They were fighting as departmental Ministers for the precise totals of expenditure each autumn that local government would spend the following year. Indeed, having fought for the spending allocations, they then continued to control a large part of local government spending—its capital programmes—in suffocating detail.
    Mr. David Ennals rose—
    Mr. Heseltine: I shall not give way.
    Mr. Ennals rose—
    Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. The Secretary of State is obviously not giving way.
    Mr. Heseltine: This is a very important debate. The right hon. Member for Manchester, Ardwick (Mr. Kaufman) was listened to virtually without interruption although he advanced his case at great length and in great detail. I must ask the House to understand that if I give way within a minute of rising to my feet, we shall never reach the important matters under discussion.
    Mr. Ennals rose—
    Mr. Heseltine: I normally give way as much as any right hon. or hon. Member would wish me to. However, interventions add to the time during which a Minister speaks and deprive hon. Members of an opportunity to speak later. I must, at least, be allowed to set out the broad outline of my case.
    If any hon. Member thinks that local authorities used to be free to spend their capital programmes, he should have joined me when I first took over the Department of the Environment, in 1979. No local authority could put a brick on the ground in a new housing programme without filling in eight forms and answering 80 questions to the absolute satisfaction of regional architects employed by the Department. The same attitude prevailed over current expenditure.
    What did the right hon. Member for Stepney and Poplar (Mr. Shore) mean, in 1978, when he said:
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    "I am proposing a level of relevant expenditure of £14,109 million … It accords with the Government's expenditure plans … This is 1·6 per cent. above the level of expenditure which we have estimated authorities are undertaking in 1978–79"—[Official Report, 14 December 1978; Vol. 960, c. 1053.]
    What did the right hon. Gentleman mean in 1976 when he told local Government to make cuts of £100 million and then, without parliamentary authority, withheld grant to ensure that it did so? He asserted the right of the House and of the Government to lay down levels of public expenditure in the country. 'There is not the slightest doubt about what the right hon. Gentleman meant by those words. It was the Labour Government's way of setting out, with brutal clarity, the basic assumptions of local authority freedom. It was freedom within the rules and the House well understood that.
    If the concept of local government freedom is considered, it is found to be extremely limited. Local authorities are established by Parliament and operate within the duties and powers conferred on them by Parliament. They are largely dependent on money that is provided or authorised by Parliament. Once they have been given those powers Parliament—usually through its Ministers—retains a right of appeal or scrutiny over their affairs. Therefore, there is discretion, but within the rules. Every Minister knows that a whole range of local government discretion is ultimately subject to rights of appeal or scrutiny by the spending Departments. The word "circular" is at the heart of the question of Government control.
    In practice, the rules within which local government operates originate with Government. The corner-stone of those rules is that the Government have the right to establish the macro-economic pattern of local authority expenditure. When I took on this job, local government's proudest boast was that it stuck by those rules. One of the earliest consultative councils that I attended raised that fundamental issue. I asked local government how I could secure compliance with the Government's public expenditure target. The answer is indelibly printed on my memory. It came not from a member of the Conservative Party but from a member of the Labour Party. That answer was, "Trust us. You set the targets and we will abide by them. We always do." That is exactly what I proceeded to do. I have often said publicly that local government has a proud record—better than that of central Government—of keeping within overall public expenditure targets.
    At the same time, I did something else. I asked local authorities to keep within the rules when, over a period, the direction of expenditure was downwards. That had never happened before in post-war Britain. I set them the realistic target of a 5·6 per cent. reduction in current spending over three years, or under 2 per cent. per annum. Any of my right hon. and hon. Friends who doubt that figure will bear in mind the pressure that has fallen on the private sector because we have been unable to secure reductions in public-sector consumption. The scale of that pressure can be measured in far higher figures than that of 5·6 per cent. over three years.
    In its totality, local government has failed to keep within the rules. This year, I faced almost £1 billion of overspend in volume terms. I always said, long before I could prove it, that the targets that I had set were realistic and reasonable. Reductions in manpower have taken place

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    at about half the rate at which the Civil Service has been run down and at about one quarter of the rate at which I have managed to reduce the size of my Department.
    I no longer need to rely on my judgment that the targets are reasonable and attainable. Time has marched on and I can now point to the majority of local authorities that have proved that my targets were reasonable and attainable. Of course, the right hon. Member for Ardwick can give quotations from endless local government spokesmen about the difficulty of reaching the targets for their areas. There is no right hon. or hon. Member who does not have a catalogue of quotations from local authority leaders, arguing—as is argued every time that the Government make rate support grant decisions—that their cases are special cases. Ultimately, we must judge on the priorities and allocations that we can afford.
    If one allows for the usual difference between outturn and budgeting, 235 authorities are budgeting to spend at the lower levels of target that I set. It is no good the right hon. Member for Ardwick selecting cases to show that such action might have been possible in Tory shires, or Tory shire districts. Those 235 authorities that have achieved or come close to achieving my target represent a widespread of local government and include authorities under the control of the Labour and Conservative Parties in virtually every circumstance. They include 47 per cent. of the metropolitan districts, 77 per cent. of the non-metropolitan districts, 31 per cent. of shire counties and 69 per cent. of London boroughs. That is the breakdown of the authorities that have proved that the Government's targets are attainable and realistic.
    It serves no purpose to go on selectively quoting those who have not achieved the targets, or do not wish to try to achieve them, when it is provable beyond doubt that it is possible to do what the Government have asked. It was fascinating to listen to the right hon. Member for Ardwick when he described my block grant mechanisms and the hold-back requests as crass failures. Did he not tell the House halfway through his speech that local government consumption was 6 per cent. lower before I became responsible?
    The right hon. Gentleman cannot have it both ways. Either block grant is driving down expenditure, or expenditure has not been driven down. Even better results have been achieved within the block grant mechanisms that I introduced in the area for which my right hon. Friend the Secretary of State for Wales is responsible. All that increases the agony of that £1 billion overspend, because it need not have happened. As has been proved by the authorities that achieved economies, the provision of services would have been adequate if there had been no overspend.
    The right hon. Member for Ardwick always rests his case on the argument that local government has cut its expenditure, although he explained it further than usual today. As a bold assertion that is true. However, it is a misleading statement. Local government expenditure was 18 per cent. lower in 1980–81 than in 1974–75. I do not dispute the broad statement, but behind the crude figures lies the tragedy of Britain's economy. Almost all the cuts were cuts in capital, not cuts chosen by local government. They were not implemented by the deliberate decision of local government. They were cuts imposed by central Government on local government capital programmes.
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    It was under the last Labour Government that the devastation of capital programmes to keep up consumption programmes first got seriously under way. The Labour Party would not face the harsh, unpalatable truths. The country was living totally beyond its means, following the oil price changes of 1973. The Labour Party would not tell the councillors or the public sector union. It would not face its own prejudices with these unpalatable facts. As a result it paid the mounting staff bills by slaughtering the capital programmes.
    We all remember the social contract and the wage explosions of 1974–75. More people were employed in the public sector. Inflationary wage settlements were distributed, and the private sector was expected and ultimately forced, to pay the bills.
    Unemployment rose relentlessly under the last Labour Government. However, it did not rise in local government. Unemployment in the nation rose by 125 per cent. between 1974 and 1979 but the numbers of people employed in local government, far from reducing as a measure of the strain that the economy was going through, went to an all-time high. The figures are clear. For every £100 invested in capital schemes in 1974–75, only £40 was being spent by 1980–81. On the other hand, for every £100 of current spending in 1974–75, in real terms £106 was spent in 1980–81.
    To keep up employment on direct manpower services in local government, we have not built the new houses, the new roads and the new schools. Year after year the Labour Government struck away remorselessly at those capital programmes. They made a judgment about the nation's priorities. They decided on high levels of consumption in the public sector and lowering levels of capital investment. That was the background that I inherited. There were record staff numbers and local government capital programmes were cut in half. That is a record of disaster. We must reverse it if there is to be any prospect of rebuilding the strength of the national economy.
    I asked local government to help me to reverse the process. In total terms the response has been minimal. The majority of local authorities have tried but the minority have sucked up the economies that the majority made. The savings of 258 authorities have been wiped out by the overspending of just 50. About 80 per cent. is caused by only three authorities.
    However, the right hon. Member for Ardwick claims that local government must be allowed to act without constraint. That is what the motion states.
    Mr. Jack Straw: Read the motion.
    Mr. Heseltine: That is what the motion says. It says that there must be no attempt to introduce a control or check on local government. That is what the House is debating.
    Mr. Straw: Read the motion.
    Mr. Heseltine: The House will read the motion for itself.
    Hon. Members: Read it.
    Mr. Heseltine: The motion states:
    "That this House upholds the autonomy of local government and opposes any attempts to impair or undermine it".
    Hon. Members: Read the rest of it.
    Mr. Heseltine: As an illustration of one possible attempt, the motion mentions my speech in Torbay. The motion says that there should be no attempt at all.
    Several Hon. Members rose—
    Mr. Straw: Give way.
    Mr. Heseltine: Right hon. and hon. Gentlemen can read the motion and understand what it means.
    When in power, the Labour Government faced precisely the same need to take such difficult decisions. In Opposition, one can opt out of the lonely decisions, but £1,000 million of overspending cannot be ignored. This Government cannot turn their backs on that degree of overspending, certainly when we were elected to fight this very problem and when time and again in Opposition we attacked the disproportionate share of the burden of the recession being placed on the private sector compared with the public sector.
    The right hon. Member for Ardwick quoted the local authority associations.
    Mr. Ioan Evans: On a point of order, Mr. Deputy Speaker. The Secretary of State has deliberately sought to mislead the House about the motion. He began to read the first part of the motion. Will he read on?
    Mr. Deputy Speaker: That is not a point of order.
    Mr. Heseltine: I have no complaint to make about the right hon. Member for Ardwick quoting the local authority associations. However, when I announced my proposals—I would say the same of any version of the proposals—I made it clear that only authorities spending substantially above their grants-related expenditure levels could be caught by what we have in mind. I made it clear that only a small minority of authorities would be affected. I repeat that to my right hon. and hon. Friends, because it was absolutely clear in the Government's approach that we recognised that the majority of local authorities were co-operating and seeking to secure our targets and that we were concerned only with the small minority of authorities which were not.
    It is reasonable to quote the local authority associations but they represent only one voice to which the Government must listen. They are entitled to be heard, but is it seriously argued that central Government should listen only to their case? Is there no other audience to which we should give our attention? Should we not consider ratepayers, for example? Should we not listen to the industrialists who have to create the resources upon which the whole edifice depends? Should we not concern ourselves with the plight of those whose jobs are being destroyed under the weight of public sector charges such as rates?
    Should we not think of those who do not get jobs because the interest rates are so high, because the Chancellor of the Exchequer must borrow too much to finance the consumption of the public sector? All those people are entitled to ask the Government to listen to their case and to decide where freedom ends and oppression begins.
    The fact is that a £1 billion overspend is not the marginal excess of legitimate freedom. It is the extravagant consequence of political licence. It is too large, too persistent and too flagrant. I do not believe that, up to this point in my speech certainly, my right hon. and hon. Friends would advise me differently. The Government must take their challenge seriously. It is one
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    thing to assert the problem as clearly as I hope I have. Even to secure assent to the definition of the problem is simple enough. However, it is another thing to secure agreement to the solution to the problem which is necessary.
    I know of only three courses of action if we have rejected the option of abandoning the ratepayer to his fate, which is what the right hon. Member for Ardwick and his party believe that we should do. The first course is to reform the domestic rating system. [HON. MEMBERS: "Hear, hear."] I am delighted to know that the Labour Party has joined the cause of conversion to that point of view. It never did when in power.
    The Government will publish shortly their Green Paper on the reform of the rating system and the alternatives. But however quickly we legislate, there will still be a gap. It is with that gap that the motion is concerned. The motion wishes to leave it open and the domestic and industrial ratepayer unprotected. That is a difficult view to accept. Something must be done and done quickly.
    Therefore, there are only two directions in which to advance, either in the direction of Government intervention or in that of enhanced local accountability. The motion rejects all alternatives. It refers specifically to my speech at Torbay, but the wording of the motion rejects not only my proposals, hut any alternatives to my proposals, whether local or central. Therefore, in effect, the motion says "Do nothing; accept the £1 billion overspend with all the consequences for the ratepayers that that implies." I hope very much that the ratepayers will understand exactly where the Labour Party stands on that issue.
    It would be unthinkable, having spent two and a half years wrestling with the dilemma, if I did not have my won views on the best way to proceed. Ideally, the traditional relationship of voluntary adherence to targets is the best way. I did not change that relationship—a minority of high-spending local authorities changed it.
    If that is the ideal way, the alternatives become at best a second or third choice. On the one hand there are those alternatives that represent broadly a local solution. Local polls or local elections are a solution based on local mandate and protect the division of powers between Government and local authorities more clearly.
    Another possibility is the centralised solution. Central targets and the setting of expenditure targets for high-spending authorities by Parliament are not without their constitutional critics, but they appear to offer some clarity, which has its attractiveness. Of course, we can debate those matters. I have thought hard about the alternatives and I will think longer about them. However, in the end we cannot escape the plight of the ratepayer and the £1 billion overspend.
    Another possibility is to remove entirely the right of authorities to levy supplementary rates and to provide that excess expenditure above a ceiling should be financed by borrowing repayable at the beginning of the next financial year. All are possibilities that can be examined.
    Whichever measure is approved by the House, it must be seen as an interim measure. After the Green Paper on alternatives to the domestic rating system has been published, I shall launch a process of consultations so that we can consider all strands of opinion. Therefore, I can assure the House that our present proposals relate only to the short term.
    Mr. Douglas Hogg: If the measure that we will be asked to consider is essentially interim, will my right hon. Friend consider the possibility of that Bill providing in its terms that powers provided under it will expire in, for example, three years?
    Mr. Heseltine: If that is seen as a way of reinforcing the statement that I make and in which I totally believe, it would be a sensible amendment to consider.
    Mr. Cormack: Are we also to understand from what my right hon. Friend said a moment ago that he is prepared to reconsider totally the question of local referendums?
    Mr. Heseltine: I know how my hon. Friend feels on that matter. [HON. MEMBERS: "So do we."] We were having an internal discussion. I was saying to my hon. Friend that I would deal with his question later on.
    As I have made clear, those measures are to be seen in a short term context. I am grateful to my hon. Friend the Member for Grantham (Mr. Hogg) for his helpful question. Everyone understands that the issues that we should discuss today are profound. They touch on the relationship of Government to local authorities, on the management of the economy and the accountability of elected bodies.
    However, I cannot accept the view of the right hon. Member for Ardwick that we should treat local government autonomy as if it were in some way sacrosanct. That is not what he believes. A few weeks ago during the conference at which I spoke, the right hon. Gentleman made his views clear. He said:
    "I do not deny the right of Government to impose specific duties for which it has an electoral mandate. We may require local government to perform certain specific duties."
    At the same conference the right hon. Gentleman also said:
    "I believe a parliamentary mandate overrides local government. Parliament is paramount and the will of Parliament must prevail."
    In June the right hon. Gentleman said:
    "Governments are elected to govern, not to subordinate their views to independent inquiries. If a Government wants to carry something out it should rely on its own judgment."
    Those words are a long way from the right hon. Gentleman's argument when he was trying to imply that, somehow or other, central Government should share the management of the national economy with local authorities. That is not a credible view.
    We must reach decisions, whereas the right hon. Gentleman has only to draft motions. There is no easy course for this party. We have a difficult choice to make. However, the fact that it is difficult does not make the need for it less urgent.
    That leads me to the point made by my hon. Friend the Member for Staffordshire, South-West (Mr. Cormack). What courses are open to the Government? As I have said, there are local options or further central controls. First is the route of enhanced local accountability before higher expenditure can take place. That can be achieved by special elections of the whole council and by building on the existing local government legislation that permits the holding of—I believe—mandatory polls on single issues of local significance.
    In the circumstances of an election or a poll, it is possible to make the domestic ratepayer and the local electorate more conscious of the impact of high levels of spending by lessening the share of the rate burden borne
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    by the non-domestic ratepayer. That offers a degree of protection to the industrial and commercial ratepayer in those areas of high expenditure.
    Painful as it would be, such an approach has the merit of asking the electorate for its views specifically on spending levels and, hence, on the level of rates. The alternative approach is no less painful—increased control from the centre. We could propose that authorities that wish to set rates in excess of limits prescribed by Parliament should be required to seek Parliament's approval for the levying of such supplementary rates as they require. That would entail more central Government involvement in the affairs of individual authorities.
    Let me say something to my right hon. and hon. Friends. I fully understand the anxiety about the choice that I put forward at Torbay—that we should enhance the concept of the local poll as a method to secure our objectives. In choosing the route of enhanced local acceptibility by the use of local polls, the Government in no way believed that it was any easy choice. We realised that it would be controversial, and justifiable only against the background of the scale of overspending and the gap that is bound to exist between now and our longer-term reforms.
    Colleagues want a range of other methods explored. There can be no possible objection to that, and of course I will do so, but I ask them to vote against the motion because it objects to the exploration of any alternatives. The very debate that it would prevent would help to explore the difficulties of controlling local government expenditure.
    Mr. Terence Higgins: Is my right hon. Friend prepared to consider dropping his proposal for a referendum before the thing goes ahead? [HON. MEMBERS: "No."]
    Mr. Heseltine: I am trying to understand as best I can my right hon. Friend's views, and I have had every opportunity to do so. I am trying to make it clear that if there are better alternative ways to deal with the problem there is no timing objection to the point at which those better ways could be adopted. That is intended to be as helpful an answer as I can give to my right hon. Friend against the objectives that we seek.
    My purpose this afternoon is not to argue the merits one way or another of a given solution. I have an open mind about the method.
    Mr. David Crouch: I am grateful to my right hon. Friend for saying that he has an open mind. He talks of giving a degree of protection to the ratepayers who are asked to pay so much more for the unjustified increased expenditure. Will he give a degree of protection to hon. Members who are anxious to protect democracy itself?
    Mr. Heseltine: My right hon. and hon. Friends will need no encouragement from my hon. Friend in the protection of democracy. However, we may feel that democracy as we know it depends on the sovereignty of Parliament and its duty to protect any one group in society against another that seeks to overburden it. Therefore, I believe that the proposal is fully compatible with the high ideals that I and my hon. Friend wish to support.
    I wish to ensure that, if there is a better solution to the problem that we face, we seek it with urgency. The longer that it takes to find an alternative, the greater the risk that

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    we shall not be able to introduce it in time to offer hope to local ratepayers in the next rate fixing round. In pursuit of our objectives it is necessary to seek methods that distinguish between low and high spending authorities.
    With those general principles, it is important to stick by the Government's public expenditure programmes and to give genuine protection by whatever method we find in our consultation. I ask the House to reject the motion, which would prevent us doing any of those things.
    5.46 pm
    Mr. Jack Ashley: The most important moment in the debate was about three minutes ago when the right hon. Member for Worthing (Mr. Higgins) asked a direct question. The Secretary of State's answer was clear. He was asked whether he would drop the referendum, and he refused to say that he would. That message should be brought home to the House, especially to hon. Members on the Government Benches. The essence of the debate is whether the Government intend to pursue the referendum, and it is on that issue that the Secretary of State's speech will be judged.
    Mr. W. R. Rees-Davies: The right hon. Gentleman heard the Secretary of State say that he is prepared to consider any options that the House would like considered. He did not mention the Scottish option—that, in the event of expenditure being far above the prescribed limits, the House may intervene to ensure that the authority does not get its grant. There are other similar ideas. All of these—
    Mr. Speaker: Order. It is a long interruption. Many hon. Members wish to speak.
    Mr. Ashley: The hon. and learned Gentleman's speech was better than that of the Secretary of State. He is trying to get his right hon. Friend off the hook by suggesting that he has an open mind. The hon. Member for Canterbury (Mr. Crouch) has already tried that stunt. However, the Secretary of State's answer shows that he does not have an open mind. He is not prepared to reconsider the referendum issue. Conservative Members must vote in the clear knowledge that it is going ahead.
    The Secretary of State evaded and avoided the question of Scotland. He did not refer to it. My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) invited the right hon. Gentleman to discuss Scotland. My right hon. Friend asked: as the referendum has been dropped in Scotland, why not drop it here? The Minister's evasion clearly shows the weakness of his ground. I do not believe that the hon. and learned Member for Thanet, West (Mr. Rees-Davies) will get much further with that point.
    A futher factor to be borne in mind, especially by Conservative Members, is that, in response to all the arguments, the Secretary of State time and again brought out the old fashioned answer, TINA—there is no alternative. The right hon. Gentleman brought forward various alternatives for the consideration of the House, but the only real proposition that he offers is the referendum. I do not believe that his argument is valid. Indeed, he said that the freedom of local authorities is extremely limited, and then insisted on putting forward proposals which would limit that freedom even further.
    In dealing with the priorities of local government, the Secretary of State took no account of the points made by
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    my right hon. Friend the Member for Ardwick about the closing down of old people's homes and the effect of the cuts on local authorities. There can be endless disputes about the finer points of constitutional changes, but it is beyond dispute that the Government's proposals fundamentally alter the balance of power between central and local government. That is the key issue for the House today. The question of constitutional change is less important.
    The Secretary of State's proposals will turn councillors into robots and town halls into local museums. They will replace local choice by central dictatorship. I hope that Conservative Members, who are proud of their councillors, will remember that. The proposals will lake the "local" out of local authorities. It will no longer be local government. The proposals will give mandarin power to the hopeful mandarins of Whitehall. They will also provide the Secretary of State with the type of supervisory powers for which all aspiring dictators long.
    When my right hon. Friend the Member for Ardwick referred to Hollywood, I thought that he was about to make a joke about the jocular nickname "Tarzan", which friends of the Secretary of State used at the Conservative Party conference. I suspect that the Secretary of State was given that friendly nickname more because of his hairstyle than of his lifestyle. But in these matters he might more aptly be described as King Kong, because he is barging through and destroying the carefully built up structure of local government. The Secretary of State should see the film. He will then appreciate that the lovable monster fell from a great height. Perhaps he had better be safe than sorry. Sooner or later, the right hon. Gentleman must recognise the basic values of local government.
    Many hon. Members on both sides of the House who have served as councillors know of the close interaction between local government and the locally governed. It is as close to pure accountability as it is possible to get. Neighbours come knocking on the door if they are dissatisfied, and no idle councillor can enjoy a pint in peace if people in his ward want action. The telephone becomes less a method of communication, more an instrument of pressure. Councillors must act or quit. There is no half-way house. Local people do not have to table parliamentary questions to get answers or early-day motions or to express their views. They say what they think and councillors are directly responsible to them. It is that earthy, priceless, democratic heritage that the Secretary of State is discarding in pursuit of the discredited monetarist doctrine.
    Any discussions of democracy, local or national, must take as its touchstone the need to persuade. That is the essence of democracy. But that is not so with the Government. They are prepared to dictate where they disagree. They are gaining for themselves the power to overrule, but losing the capacity to win support.
    Last week I attended a meeting called by Staffordshire county council to discuss the Government's proposals. The meeting was attended by Conservative and Labour councillors and by city and county officials who had studied every paragraph, every sentence and every nuance of the Secretary of State's proposals—from the Torquay speech to the technical memorandum—including all the speeches made by the Secretary of State and other Ministers.
    It was the unanimous view of that meeting that the proposals should be rejected. In all my 15 years in

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    Parliament I have never known Conservative and Labour councillors on Staffordshire county council to be united on any issue. The Secretary of State should beware, because the alliance of councillors in that local authority may well be repeated in Parliament. If it is, he has no chance of getting his proposals through. The Conservative councillors at that meeting spoke with as much vehemence, conviction and determination as any Labour Member of Parliament will speak today. The warning signals are out for the Secretary of State, and he should beware.
    The dilemma facing Staffordshire county council, of which the Conservatives were as aware as the Socialists, is that it must now decide whether to make further reductions in expenditure on all services other than education, or to incur the Secretary of State's vicious penalty. The extent of the dilemma may be judged by the fact that some services in the county are already below the average. The poor will therefore be made poorer. That is the classical hallmark of Conservative philosophy. Conservative Members may shake their heads, but Staffordshire councillors are not prepared to wear these proposals. When they return to their constituencies, Conservative Members will find the opposition there as powerful and implacable as any that they have ever encountered.
    The Secretary of State should recognise the resentment among his own supporters. If he did, he would think again. It is one thing to stab one's opponents in the chest. It is quite another to stab one's supporters in the chest as well, and he would be well advised not to do so. It makes a change from stabbing people in the back, of course, which is commonplace in politics, but the Secretary of State will make no friends if he acts in this manner.
    The Secretary of State's erstwhile supporters will object strongly to his attack on local freedom. The question for Conservative Members who reject these proposals is whether they are prepared to act tonight in accordance with their convictions. Without naming names, I see that some Conservative Members agree. This should be noted by the Secretary of State. It means that tonight there will be votes against the right hon. Gentleman, although I do not know how many. I hope, however, that those Conservative Members will vote with the same conviction as they speak. Otherwise, we shall assume that their sound and fury signify nothing.
    The Secretary of State's attack on local government is a serious error of political judgment. He stands condemned by his opponents and abandoned by some of his friends. He can neither expect nor deserve support for such a blunderbuss technique. Instead of decreasing the powers of local authorities, the Secretary of State should be increasing them. Instead of crushing local initiative, he should be nourishing it. Instead of hitting councillors, he should be helping them.
    The relationship between central and local government as always complex and difficult. It is a relationship that requires tact, skill and patience. The Mace-swinging approach is damaging to that relationship and also to the Minister who adopts it. The Secretary of State has a choice. He can keep charging forward, trampling on his enemies, his allies and local democracy. If so, he will come to regret the wreckage. Alternatively, he can do
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    what any good Minister ought to do—respond to the House of Commons, listen to county and city councillors and strengthen the fabric of local democracy.
    6.2 pm
    Sir Derek Walker-Smith: I count it a privilege as well as a pleasure to be called to follow the felicitously-expressed speech of the right hon. Member for Stoke-on-Trent, South (Mr. Ashley), who rightly commands such great and universal respect in this House. He has addressed himself, as will other hon. Members, to the important matters with which we are concerned—local government, finance and rating. They are important but, alas, not easy matters. I recall an observation made in my early days in the House by D. N. Pritt, one of the most eminent lawyers to sit in the House, although his political acumen did not perhaps match his forensic skill because he sat with the Labour Party. D. N. Pritt said:
    "Anybody is very lucky if he is ever right about anything on the Rent Acts."
    Following what is now a long and close experience of rating both in my professional and parliamentary capacity, I would apply the same dictum to that matter. Unlike the right hon. Member for Stoke-on-Trent, South, I have never had the advantage of serving as a member of a local authority. This point was taken in my first general election. I was asked "Will you not be at a considerable disadvantage, Mr. Walker-Smith, in not having been a member of a local authority?" "No, sir," I replied. "In my professional capacity, local authorities pay me for my advice, but I am proposing that here you should get it for nothing, and thereby be much luckier."
    I am glad to say that through the years, in a professional capacity, local authorities have continued to seek my advice, and on a very ecumenical basis. By no means all are of my political persuasion. This enables me, I hope, to take a suitably broad, objective, dispassionate and ecumenical view of these subjects.
    The terms of the motion refer to local government autonomy, the referendum and rate-making. All are matters that require close and careful analysis. They are not to be disposed of by cloudy generalisations or by pejorative epithets. The right hon. Member for Manchester, Ardwick (Mr. Kaufman), who led for the Opposition and who speaks as engagingly as he writes, referred to the traditional freedom and independence of local government—clearly a very considerable oversimplification of a very complex relationship. The relations of local government and central Government in this country are the products of long development. In the British tradition, this has been an ad hoc development, resulting not in a fixed pattern but in a pattern fluid and flexible and capable of adaptation to changing needs and circumstances. That is, indeed, the hallmark of our British constitutional practice.
    We have no written constitution in which we can look up the easy answers. We have only Dicey's twin pillars of the constitution to guide us, the sovereignty of Parliament and the rule of law. That principle negates the possibility of fixed positions in our constitutional arrangements or in our institutional relationships. We have to seek them from the lessons of history and from the application of principle. As usual, we do not seek in vain. We find, it is true, not a fixed pattern unalterable as the law of Medes and Persians, but a key to the principles that should guide us.

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    Modern local government is in essence the creature of statute. I may be told that it has ancient and honourable origins going back as far as Saxon times. That is true. By the nineteenth century it was necessary to give a statutory framework because of changing circumstances. The nineteenth century trend to central supervision derived not from a desire to dictate or dominate from the centre. It derived from the requirements of the situation. It went hand in hand with improved local procedures, in particular the local boards of health set up under the Public Health Acts of those days. It was the Local Government Act 1929 that really set the pattern by combining a transfer of responsibilities to county councils and boroughs with a system of general Exchequer contribution that is now called the rate support grant.
    I suggest, in the light of that history and development, two interrelated principles. The first is maximum practical autonomy in local affairs for locally elected authorities. The second is recognition that, where local spending is in part financed by central grant, autonomy in the nature of things cannot be unlimited. One cannot avoid in local government any more than in any aspect of human affairs the application of the universal and inescapable principle that he who pays part of the piper is entitled to have some say in the tune.
    We know what a substantial payment that is. We have been reminded by my right hon. Friend the Secretary of State in his excellent speech that it amounts to about a quarter of all public expenditure—about £20,000 million. This is more than defence and health put together. Of this enormous expenditure, about 60 per cent. is met by the rate support and other grants and only a minority by rates.
    With such figures, it is fanciful to talk of local autonomy in the abstract, as if it could or should be untrammelled in its exercise. The exercise of power cannot be divorced from the means whereby alone that power can be exercised or from the source which provides that means. The principle is not one of local autonomy as a generalised principle unrelated to reality or circumstance. It is a quest for as much local autonomy as the logistical limitations allow.
    The question for the House, therefore, is, how far are the measures and proposals of Ministers achieving this desired result? The answer to that must be sought in two parts—first, in the progress towards this desirable end achieved up to and including the 1980 Act and, secondly, in the prospects thereafter. On the first part, I say with confidence that the Government measures, including the 1980 Act, have made a substantial contribution to the desired result. I refer, of course, to the recasting of the rate support grant, the introduction of the new block grant, GREAs, the tapering mechanism, threshold, and so on.
    Government thinking and approach was admirably summarised not, I hasten to say, by way of commendation, but as an explanation, by that eminent jurist Lord Justice Ackner in the Camden case. He said:
    "The present Government regarded a grant distribution system with these features"—
    the old features—
    "as intrinsically inequitable and in particular as incompatible with its commitment to achieving substantial and sustained reductions in public expenditure. Whilst the rate support grant mechanism enabled central Government to influence total local expenditure, it only did so in a non-selective, across the board way. Therefore, shortly after taking office in 1979 it began to consider changes in order to remove what it regarded as an incentive to spending, and instead sought to provide authorities with an incentive for economy."
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    I identify three basic questions for the consideration and judgment of the House. First, on the prospects hereafter, is it either necessary, or is it premature, to essay a further step so soon after the passage of the 1980 Act and before assessing its impact. Secondly, without pronouncing on the ipsissima verba of the Bill, which would be out of order, do the proposals that have been outlined appear ex facie to accord with the basic constitutional principles as I have sought to adumbrate them to the House? Thirdly, has full consideration been given to the effect of these proposals on the possibility of a more radical and comprehensive attempt to improve our existing method of local government finance?
    On the first question, whether it is premature to try a further step, that is a matter of judgment. Perhaps my right hon. Friend, who is a veritable Rupert of debate, may think that he should go forward with a proper and characteristic panache, regardless of the cautionary approach of the gentlemen of the long robe. I leave that question to the verdict of time, not least because it is closely involved with the third and basically most important question.
    The second question is that of the referendum. Here again, we have to consider the position in the general context of our constitutional procedure. Again, generalisations and pejorative epithets are of no help. It is nonsense to call referendums per se undemocratic. A referendum is, in essence, a direct consultation of the electorate on a specific issue—hardly, in the ordinary use of language, an undemocratic procedure. It has its origins in the constitution of sixteenth century Switzerland—hardly an undemocratic country. It has an acknowledged place in the practice of the United States and many other great democratic nations. Indeed, much of the case law on referendums is in the United States, including the classic definition in the case of Beall v. The State:
    "The reservation by the people of the State of the right to have submitted for their approval or rejection any law passed by the law making authority."
    The question must then arise "If it is good for these great democratic nations, why should it not be good for us?" There are, of course, basis differences. These are federal States with written constitutions, and we are a unitary State without one. Nevertheless, we can distil some philosophy on the use of referendums from British history and practice. It was advocated originally by the Council of the Army in its submissions to Cromwell—hardly an encouraging precedent. It was eliminated for a long time from British thinking by Burke's classic letter to the electors of Bristol in 1774—konwn by heart by every hon. Member, I would hope.
    The concept of referendums was unsuccessfully revived in proposals of the Conservative Party in 1910, and practical expression has been given to it in special cases, such as Northern Ireland, Gibraltar and—I list these in no order of importance—drinking in Wales. Those are specialised precedents, to which must be added the special case of the 1975 referendum, referred to by the right hon. Member for Ardwick.
    The history of that exercise hardly adds to the weight or respectability of the precedents for referendums. I take my description from the authoritative text of Professor Irving, writing in the European Law Review. He said:
    "The referendum of June 1975 was essentially a political rather than a constitutional device: Harold Wilson's Labour Government decided to hold a referendum on continued British

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    membership of the EEC not because it believed in the intrinsic constitutional or democratic merits of referenda as such, but because it could see no other way to heal the deep-seated divisions within the Labour movement. Indeed, on the eve of the 1970 General Election Mr. Wilson had stated that he was opposed to holding a referendum on British membership of the EEC: 'I think' he said on BBC Television 'that it is Parliament which should take the decision with a sense of full responsibility with a sense that reflects national views and national interests."
    Perhaps the right hon. Member for Ardwick wrote that speech for the right hon. Member for Huyton (Sir H. Wilson).
    Professor Irving continued:
    "Questioned further on the possibility that he might change his mind if opinion polls indicated that the electorate was turning against EEC membership, Mr. Wilson replied: 'I am not going to trim to win votes on a question like that … I shall not change my attitude on that'. Almost exactly two years later, in April 1972 to be precise, Mr. Wilson, as Leader of the Opposition, did change his mind."
    Again, the right hon. Member for Huyton probably had the advice of the right hon. Member for Ardwick, whose thinking was close to his.
    It would not be fair, however, to leave the issue of the constitutional propriety of the referendum in this country without a brief reference to our two great constitutional pundits, Dicey and Sir William Anson. Dicey recorded the view in the Spectator of 1894 that in a country such as ours, with no written constitution, the referendum should be introduced as a constitutional long-stop to prevent party leaders and Whips from abusing their power. Perish the ignoble thought!
    Anson recorded the view in The Times of 1910 that a referendum would afford some security against violent and sudden change and would correct some of the evils of the party system. Clearly, therefore, the concept of the referendum in appropriate cases can find powerful support from this country as well as overseas. But, apart from special cases not here in point, the circumstances in which its use may be appropriate—this is the heart of the matter—are those where issues of great constitutional importance arise, and which are susceptible of clear and direct questions and answers. On the face of it, the use of referendums on supplementary rates in individual areas does not come within that category. I leave the point by saying that the burden of proof must rest on my right hon. Friend the Secretary of State.
    The final question concerns the long-term effects on a more radical review, revision and reform of our rating and local government finance procedures. I find it difficult to exclude the possibility that the proposals may at least defer the consideration in depth of a radical reform of our present system.
    There is nothing sacrosanct about our rating procedures, any more than there is about our local government arrangements. They have a long history and a study of it shows how much the procedures have changed over the years and how different the present financing and use of rate-borne expenditure is compared with its origins in 1601 when it was directed mainly to what we now call social services, which are administered by the Government.
    It follows that there is no prescriptive right for the present rating system to persist in perpetuity. Still less should it be exempt from close and careful scrutiny with
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    a view to change and improvement. It is with that great question that Ministers should primarily be concerning themselves.
    The Government should seek a solution that conforms to four criteria—it should be related to ability to pay, there should be benefit from the expenditure to which the tax is related, reasonable parity of treatment between taxpayers and compliance with the basic constitutional principle of no taxation without representation.
    Those criteria have only to be posed in the context of our rating system to raise grave doubts about its compliance with them. Industrial hereditaments are a classic example of the breach of the constitutional principle of no taxation without representation, because they pay 100 per cent. rates and receive little benefit and have no representation.
    There are plenty of alternatives to canvass, set out and analysed in detail in the report of my distinguished friend Sir Frank Layfield. That is a matter for the future and, I hope, for the early future. This is not the time to specify a choice between alternatives, but it is a time to say to the Government that the case for an urgent examination is clear and the time to start is now. It should have precedence over short-term measures so that we can reach the right result.
    We have to avoid the classic false syllogism "Something must be done; this is something; let's do it"; but it is true that something must be done. With that priority task in mind, the Government should approach the secondary task of their current proposals in a receptive and flexible mood. My right hon. Friend showed such an attitude in his speech and the Government should see the contents of the proposed Bill as a pacemaker for the larger and more important, vital and enduring task of the basic reform of our rating and local government systems.
    Several Hon. Members rose—
    Mr. Speaker: Order. I appeal to hon. Members to help each other. Many hon. Members wish to take part in the debate and we have reached 6.23 pm before I have been able to call anyone who is not a Privy Councillor. I appeal to the House for short speeches.
    6.23 pm
    Mr. Stephen Ross: Perhaps I should start by declaring an interest as the leader of a county council—the only Liberal-controlled county council in the country.
    I enjoyed the speech by the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith), which will undoubtedly be picked up by every local authority association. It seems hard that the right hon. and learned Gentleman cannot charge a suitable fee for his advice, but perhaps I can make it up to him some day. We shall be pleased to retain his services for the Isle of Wight county council any day.
    I support the motion and call on the Government to think again about their actions and legislative proposals. There is still time to withdraw the Bill. I should hold the Secretary of State in considerable respect if he had the courage to do that. He has embarked on a collision course at a time when local authorities and the Government should be working together for the good of our country.
    Moreover, the further move to more centralised control will have exactly the opposite effect to what I believe is

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    the Government's avowed policy which I support—namely, to encourage our citizens to do more for themselves. Surely the more that decisions can be taken at the point of implementation, the better it will be for the encouragement of enterprise and initiative. I have no doubt that the more that we can devolve decision-making to the regions and the boroughs the better it will be, and that the sooner we start on the process the more chance we shall have of a genuine economic revival.
    It is interesting that the AMA poll reported in the Financial Times yesterday seems to confirm that a majority of people support local spending decisions being taken at local level. The Government may be persuaded that their actions will protect industrial and commercial ratepayers from facing unreasonable demands from rating authorities—and I accept that those ratepayers are worried about that prospect—but those very industrialists and small business men are now pleading for help from local authorities—and justifiably so.
    Yesterday, I received a letter from the proprietor of a small boatyard in my constituency. He said:
    "We had hoped that it would never be necessary for us to write a letter of this nature, but we are now clutching at straws in an attempt to save our Company from the impending danger of closing down. A year ago we had 35 employees, now we have only 12, and in spite of our efforts to keep these men occupied we feel we are fighting a losing battle … Sir, we are not looking for a hand-out, but the future of our remaining loyal and hard working craftsmen, who genuinely want to earn an honest day's pay, is in serious jeopardy."
    My heart bleeds for that firm. I am sure that many hon. Members have received similar letters. My fellow councillors on the island would dearly like to help that company, and we would do so, even if only in the limited ways open to us. A growing number of businesses are in a similar position and are looking to us for help.
    In the House last night I met a business man who is hoping to manufacture in my constituency. We have nothing to offer him. We have to compete with urban development corporations, enterprise zones, assisted areas, the Welsh Development Agency, the Highlands and Islands Development Board and others. In addition, there is the cost of getting across to the island by ferry.
    Business men ask us "What can you offer us? What goodies are there?" We have to say that we can offer virtually nothing. We might be able to give them a little rate relief or help to bring equipment over from the mainland, but no more than that.
    The county council would love to establish its own development fund. The Department of the Environment supported the establishment of our enterprise agency, largely funded by private firms, but we want to go further, because we feel that we must.
    Recently, representatives of local builders and construction companies visited me, desperately seeking work and hoping that the county council would be able to provide some capital construction projects so that they would not have to lay off a substantial number of workers. Unfortunately, there is nothing much that we can do about that due to Government restrictions.
    I believe that, if asked to contribute through the rates to specific unemployment reliefs, most ratepayers would willingly do so. But I make a plea to the Government: do not hem us in with unnecessary referendums and the like. Local authorities want more freedom to do what we know needs to be done at local level and to help the wealth creators.
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    The vast majority of us in local authorities will not abuse our position. Unfortunately, it appears that the Secretary of State does not trust us. He said that this afternoon. Yet everyone is agreed that the record of local government over the years has been excellent—far better than that of its masters.
    There is no doubt that there are savings to be made. I am sure that the Minister will not be surprised to hear from me that such savings lie in some future reform of the whole structure of local government. Do we need the GLC—or the metropolitan counties, for that matter? If we have not the stomach to face such major upheavals—and I realise that we probably have not—why not at least let those authorities that want to merge or improve their structures put their case—backed in this case, if necessary, by referendum—to the Secretary of State? I am willing to go before my electorate on the proposition that we have one all-purpose authority for the Isle of Wight, because I know that the support will be overwhelming, so let us get on with it now.
    I believe that other parts of the country would wish to do likewise. Although I do not like to speak in the absence of the hon. Member for Hereford (Mr. Shepherd), I think that Hereford would love to have its own authority back. It would do a rather better job than it is at present by being merged into an authority called Hereford and Worcester. [Interruption.] I gather that there are similar feelings in East Anglia.
    If we can make changes in the Health Service, why not in local government? The Government should concentrate on that issue rather than fix impossible targets, such as: 5·6 per cent. below the 1978–79 budget. It was obvious that authorities would not be able to make huge cuts of that sort. In Essex the necessary cuts amounted to about £24 million.
    In some counties the calling in of outside consultants worked quite well because they were able to convince the Secretary of State that cuts of such substantial sums were impossible if mandatory services were to be maintained. In the Isle of Wight the switch to the GREAs in September got us off the hook, and thank goodness for that. It may have upset Tonbridge and Malling, but we were grateful, because, without that action, we would have had to go for a supplementary rate. There was no other way in which we could have carried on.
    That budget was formed not by a Liberal administration, but by a Conservative one, though I doubt whether a Liberal council would have done anything very different. However, we are now being told that a further 5½ per cent. cut on existing budgets is necessary—which, for some strange reason that I do not quite understand, means cuts of between 6 and 9 per cent.
    The Isle of Wight authority has worked out what this cut would mean. It would mean that 14 out of 47 primary schools would have to close, with a consequent loss of 80 jobs. The school meals service in the primary schools would also have to go—Dorset has done this already, but we have not—with the loss of 200 part-time jobs. This in a part of the country where the unemployment rate is well over 12 per cent. and likely to be 14 or 15 per cent. by the end of November.
    Our school crossing patrols would have to go, and fees and charges would have to be increased. We would have to close two fire stations, reduce road standards and, of course, the work force. We would have to close the only day centre for the mentally disturbed and sack 16 social

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    workers. We would have to close one library and reduce the book fund. That is what a 5½ per cent. cut in our budget would mean for us.
    I am glad to say that it appears from press reports that this requirement is being reconsidered. However, when will we know exactly what is required of us and what the amount of the rate support grant will be? The only other time that I was chairman of the policy and resources committee was in 1974, when we were not told until February. I hope that this year we shall be told in December, not January or February.
    Surely the result of the Croydon by-election, the recent GLC by-election, and even the decision this week of the Court of Appeal together with other events, have convinced the Secretary of State that he does not have to legislate to deal with three bad guys. The voting public will take it into their own hands to deal with these matters, and will do so at the ballot box, until the message sinks in.
    The right hon. Member for Manchester, Ardwick (Mr. Kaufman), quoted Mr. Hepworth, the director of the Chartered Institute of Public Finance and Accountancy. As I follow Mr. Speaker's request to cut speeches short, I advise hon. Members to read the article for themselves. Briefly, it says that referendums are not compatible with the electoral system. What is more, there are only 18 million ratepayers to 42 million voters. The 42 million would, therefore, dictate the size of the rate bills to the 18 million. There are many reasons why I do not think that a referendum is suitable for supplementary rates.
    Why must we have another Green Paper on rating reform? It is only five years since we had the very comprehensive Layfield report. All the answers are in it. I recall giving evidence to the Layfield committee. Surely we do not have to go through that sort of exercise again. The truth is that the Government want to play for time until after the next election. They are pledged to do away with domestic rating, which they know to be politically unpopular, but they have no idea what to put in its place. They are apparently not in favour of a local income tax, which must surely be one source of local government finance; but the Government, of course, are pledged to cut income tax.
    The Government have made trouble for themselves, and I do not feel at all sorry for them. But I hope that they will think again on this question. From what we have heard from the Conservative Benches, there are signs that many Conservative Members are unhappy about it. I do not think that it can be said to be a good day for local government if it has to face a battle with the central Government. I hope that the Government get back on to an even keel with local government so that we can both do the job that so badly needs to be done.
    6.36 pm
    Mr. Patrick Cormack: I cannot begin to compete with the magisterial eloquence of my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith), nor do I have the experience of local government that is possessed by the hon. Member for Isle of Wight (Mr. Ross). Nevertheless, I begin what I fear will be a rather critical speech by congratulating my right hon. Friend the Secretary of State on his pledge to tackle the reform of the rating system.
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    Those who were here on the last occasion when we had a Green Paper, and who waited in eager anticipation for the Layfield report, cannot fail to realise what a mammoth task my right hon. Friend has set himself.
    Having on four occasions introduced my own very modest rating reform Bill in the House, I urge my right hon. Friend not to start from the premise that only total abolition will do. He will answer many of the critics of the present system—not all, but many of them—if he gives local authorities the right to raise additional revenues, ensuring that all adult wage earners who enjoy local facilities and services pay something towards them. This need not necessitate removing the rate base altogether. And, in areas frequented by tourists, there is much to be said for giving the local authority the right to levy a bed occupancy tax.
    Many of the immediate worries of industrial and commercial ratepayers would be eased if, for example, the existing exemption period for empty property were to be extended to six months or more, if some statutory protection were to be given to industries not able fully to utilise their productive capacity for reasons beyond their control—the sort of firm to which the hon. Member for Isle of Wight referred might well benefit from such a change—if they were able to pay their rates by instalments, irrespective of the rateable value of their property, and if local chambers of commerce had statutory rights to representation on appropriate local authority committees, perhaps on the same basis as that on which representatives of the teaching profession sit on education committees.
    These are matters which the Secretary of State will doubtless want to consider. And we must all wish him well in his endeavours. There can be very few hon. Members who do not also wish him well in his endeavours to curb the outrageously excessive expenditure of a few local authorities.
    Those of us who have recently received our supplementary rate demands—I am glad to say that some of us have not paid them, and now await certain events to see whether we have to pay them—fully understand why my right hon. Friend feels as he does. But it is important to say that, although we are picking up the manifesto bill, and although we are underwriting the profligate spending of people such as Mr. Livingstone, nevertheless, he and his colleagues were elected. They were elected very recently and, to give them credit, they did not seek to hide the fact that the ratepayers would have to pay dearly for their services. Be that as it may, I do not think that anyone can seriously disagree with my right hon. Friend's general line in this respect.
    Nor can anyone question the Government's right, as part of their national economic policy, to determine the slice of the cake in terms of the resources that should be allocated to local government from national funds. However, the measures being discussed, so brilliantly analysed by the right hon. Member for Manchester, Ardwick (Mr. Kaufman) and which are enshrined in a Bill that the House will shortly have the opportunity to debate, are measures that go far beyond this. In my view, they amount to a monstrous contradiction of a long and honorouble Tory tradition in local government. They are a contradiction too of the oft-stated belief that the gentleman in Whitehall does not know best. The proposals constitute a massive centralisation of power and are of

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    major constitutional significance. If implemented, they would kill local government as we know it and seriously weaken the entire democratic process.
    Democracy is indivisible and such a shift in the balance of democratic power in this country could have incalculable consequences. I hope that when he has heard the arguments advanced in the debate my right hon. Friend—and his colleagues—will think again. I was glad that we had some assurance at least this afternoon—not enough, but some. I hope that my right hon. Friend will see some merit in the arguments that have been adduced with great clarity and good humour by the right hon. Member for Ardwick. He pointed out that it would be wrong for my right hon. Friend to take to himself powers that he would not wish to see the right hon. Member for Ardwick exercising. That is one of the tests that I apply to myself when considering these measures.
    The worst features of my right hon. Friend's proposals are that they undermine the traditional constitutional relationship between central and local government and militate against true democracy and accountability at local level. Democratic local government has existed for almost as long as democratic central Government. It is an integral part of the economic, political and social order of our nation. It has had a remarkably successful record of achievement, as we were reminded this afternoon, showing itself adaptable to changing circumstances and both responsive and responsible in the way that it has exercised its functions and developed its services.
    Its most important feature is that it is locally accountable for local decision-making over a whole range of services. It is government of local people by local people for local people as a result of local elections, and it is tragic that there has been a breakdown of trust and confidence between local and national Government in recent years. That trust and confidence is essential to the smooth working of our democracy and will not be restored by the sort of proposals that my right hon. Friend has in mind.
    The most objectionable of those proposals and the one on which I concentrate my opposition is the proposal to usurp the will of the people, expressed in local elections, by resorting to local referendum. I voted against the idea of a referendum on the Common Market. I accept that the device is now part of our constitutional system, and I believe that it is reasonable for the Government to use a referendum on issues of major constitutional significance and importance, such as devolution. However, it is a device that should be used sparingly and with the utmost caution.
    If the Secretary of State proceeds with his present plan he will do a grave disservice to the whole democratic structure at local and national level. It would be impossible to refute with any degree of logic the claim that the Chancellor should have a referendum if he wishes to impose a tax between Budgets. There are many populist issues on which people will want this place to abdicate its responsibilities. Panic measures and populist solutions rarely make for good legislation, and the referendum proposal of my right hon. Friend smacks of both.
    I received a letter today from someone who has certainly paid his supplementary rate in London. He says:
    "To seek purely partisan political advantage by imposing ill-considered legislation on local government throughout the country is more than mere ministerial folly—it is the beginnings of the destruction of democracy."
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    My right hon. Friend cited Coventry as an example that inspired him. But what of those areas where a high proportion of the electorate are tenants or employees of the local council and where business finds most of the rates? Will he get the results he wants there? Even on practical grounds, it seems to me that this measure is fraught with danger. I remind my right hon. Friend that the Coventry chamber of commerce is far from happy about this aspect of his package. It sees much more clearly than my right hon. Friend apparently that this is a weapon that can be used two ways and can also lead to unnecessary confrontation between local industrialists and local government.
    If the Secretary of State proceeds along these lines, he will provide for those very few councils which could not care less about their prodigality a platform from which they can blame the Government for all the shortcomings of their services, possibly with results that will not please him. He might be able to frame the questions, but he cannot guarantee the answers.
    Side by side with attempts to reform the rating system, my right hon. Friend should certainly consider how best he can improve local accountability. By all means let us have a reversion to and an extension of the system whereby a third of each council retires each year. That is true democracy. That may not provide the immediate result that my right hon. Friend wants, but it is far better sensitively to alter the system to ensure that future generations will be adequately protected than to resort to a measure which can only damage local government, encourage extremists of all ilks and discourage conscientious and hard-working local people from offering their services to their fellows. That is something else that we should bear very carefully in mind.
    Extreme cases, like hard cases, make bad law. I hope that my right hon. Friend will now give himself a breathing space to consider the views expressed in this Chamber and elsewhere. I hope, too, that he will reflect that, although local authorities have been the subject of a great deal of criticism for alleged overspending and excessive costs of services, the evidence does not support this view in regard to local authorities in general—and my authority of Staffordshire in particular.
    I have never been more impressed than I was a fortnight ago when, like the right hon. Member for Stoke-on-Trent, South (Mr. Ashley), I helped to receive an all-party delegation representing the county council and all of the nine district councils. They came, from all parties, to convey the unanimous view of the councillors and councils of Staffordshire that this legislation, in its present form, must not be allowed to pass. They brought telling evidence of their record of sound budgetary control. They were able to demonstrate that they and most authorities had largely conformed to the guidelines set by successive Governments and that their record could be compared favourably with the central Government's record.
    My right hon. Friend has a chance to reflect on all these things. In his answers this afternoon to interventions by my hon. Friend the Member for Grantham (Mr. Hogg) and myself, I detected that he was beginning to think again. I hope that he will have the courage and wisdom to do so. Tonight, I certainly cannot support my right hon. Friend in the Lobby. If the Bill comes before the House with its referendum proposals intact, I shall most definitely vote against it.
    6.48 pm
    Mr. David Ennals: I often agree with the hon. Member for Staffordshire, South-West (Mr. Cormack), because he is my pair, but I do not think that I have ever agreed with him more than in the speech that he has just delivered, which showed a great deal of courage. My only worry is that if he were to vote against the Government too often I might find that he would be an unstable pair, so I want him to use a little discretion.

    What the hon. Member confirmed was that my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) had made a devastating case when he opened the debate. I think that the hon. Member also confirmed that the Secretary of State, in replying, totally failed to convince his own supporters, let alone any Opposition Member. The argument that Whitehall knows best still seems to lie in the Secretary of State's mind—or perhaps he is not saying that it is just Whitehall that knows best, but that it is he who knows best.
    The Secretary of State's decision to refuse to give way to a former Secretary of State who has sat as a member of the consultative council for even longer than the present Secretary of State has done but to give way to his hon. Friends was an act of considerable discourtesy. I know why he did not give way. It was because at that moment he was talking about the consultative council. Of course the Labour Government had problems over the restraint of public expenditure, but never did we have any disagreement within the consultative council.
    The Labour Government did not threaten to introduce legislation that would screw down local authorities against their wishes. We were never in open conflict, such as now exists, with the associations that represent local authorities. The Association of District Councils says that the proposals make a mockery of the working partnership between local authorities and the Government through the consultative council machinery.
    The right hon. Member for Bridgwater (Mr. King) knows that there was not such a crisis when the Labour Government were in power. The crisis has arisen because of the policies that have been put forward by his right hon. Friend and himself.
    The Minister for Local Government and Environmental Services (Mr. Tom King)rose—
    Mr. Ennals: The Secretary of State refused to give way to me. To show that I am a little more courteous than he was, I give way to the Minister.
    Mr. King: Does the right hon. Gentleman recall that during the previous Labour Government he received full co-operation from Conservative councils? He will recall that the majority of councils then were Conservative-led and that they gave full co-operation to the Government of the day, regardless of party, when economies were called for.
    Mr. Ennals: That did not apply to the metropolitan counties. There were elections during the term of the previous Labour Government. Sometimes councils were Labour-controlled and sometimes Conservative-controlled, so I do not accept the argument.
    The Secretary of State's argument is that the local authorities must trust the Government. I agree with that. The Labour Government set up consultative machinery. What the Secretary of State now proposes will undermine
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    the trust that has existed for many years between the Government and local authorities and their representatives.
    The Association of District Councils has referred to the present crisis of confidence. No one can doubt that if the Secretary of State's proposal goes through it will create a crisis of confidence. His proposal will fetter locally elected councillors. As one of the associations has said, what is proposed will remove the statutory right of the local authority to determine its own level of spending and rates. It will destroy the autonomy of local authorities and undermine local responsibility and democratic accountability. As my right hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) said, it will turn councillors into automatons. The plans threaten the future of local authorities and challenge the relationship with the Government.
    Perhaps the Minister will tell us how many local authorities have written to him supporting the referendum proposals. I can tell him the views of the Conservative-controlled Norfolk county council. Last month it rejected the proposals by 66 to one. [HON. MEMBERS: "Who was the one?"] That was Mr. Ian Coutts, who was defeated by my hon. Friend the Member for Norwich, South (Mr. Garrett). He is in a minority of one on his local council. He cannot remain as chairman of the finance committee of the Association of County Councils.
    The leader of Norfolk county council, Mr. John Alston, said:
    "There are a number of people who take great exception to any idea of a referendum in our constitution."
    He proposed that the council should support the resolution passed by the Association of County Councils, which asserted that local democracy was essential and rejected the referendum concept.
    Another councillor said that he
    "would find it abhorrent to think we would have to have a referendum at local level."
    The county council threw out the idea by an overwhelming majority.
    A referendum can and should be used on national constitutional issues. It was right to use it in respect of the Common Market. However, that is not the Government's view. In view of the Government's position, why should we not have a referendum on the expenditure cuts in universities or on cuts in benefits and services for the disabled? Why should we not have a referendum on the Budget? Why does the Minister not have a referendum on this proposal?
    If the right hon. Gentleman believes that a national referendum would be too costly, let him have a referendum of all elected councillors. If he wishes to obtain a biased result from a smaller electorate, he can have a referendum of Conservative-elected councillors. He may be surprised at the results. If he requires local authorities to have a referendum, why is he not prepared to have a referendum on his proposals?
    The Secretary of State is showing himself to be a potential dictator in his handling of local authorities. There comes a time—as with all would-be dictators—when one has to say that he has gone too far. I believe that that time has come.
    A second example of the Secretary of State using his powers wrongly is his handling of Norwich city council in the context of the right to buy council houses. He picked Norwich as the first authority to threaten with the powers

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    given to him—or which he took—under section 23 of the Housing Act 1980. He threatened to send a commissioner to do the council's work if it did not adhere to his targets. He summoned council officials to his office last week. I was part of the delegation. Why did he pick on Norwich, which is one of the best housing authorities in the country? [HON. MEMBERS: "Oh!"] The electorate in Norwich decided that.
    The local authority is almost crippled by the spending cuts imposed by the Department of the Environment. Fewer than 30 new homes will be handed over to the council in the next 12 months, compared with 500 last year. The ruthless policies of the Secretary of State are wreaking havoc on waiting lists and the many other statutory responsibilities placed on local authorities. Those obligations include improvements, repairs, transfers, sheltered housing schemes—which are now in mothballs because of the action taken by the Secretary of State—accommodation for single or homeless people and slum clearance. Out of that list of statutory obligations, the Government have chosen the sale of council houses as the central issue. The Minister for Housing and Construction is not that—he is the Minister for the sale of council houses.
    The city of Norwich recognises that, against its views, it must live within the law. The councillors were elected overwhelmingly not to sell council houses, but with the law as it is they are now dealing effectively and expeditiously with the statutory responsibilities laid down in the Act.
    The council is issuing section 10 notices at the rate of 60 a month and is changing many procedures to meet the specific wishes of the Minister, who still calls himself the Minister for Housing and Construction. It aims to complete the issue of those notices by next June. Since last week's meeting with the Secretary of State, the council is arranging for the mortgages sub-committee to meet fortnightly until the evaluations are complete.
    However, last week the Secretary of State said that June was too late and that the evaluations must be completed by February. The dividing line is four months. If the Secretary of State decides to take over the responsibilities of elected councillors he will be doing so for the sake of four months. I warn the right hon. Gentleman that if he does not accept the council's response—which is a fair one—to the representations made it, and if he decides in the next few days to issue a notice under section 23 of the Housing Act 1980, the council will take action in the courts to quash it. It has received that advice from learned counsel. The Secretary of State should ensure that his legal advice is better than that which he received when he was last taken to court and was found to have committed an illegal act.
    If I have appeared angry during my speech, it is because of the Secretary of State's handling of my local authority. I was Secretary of State for rather longer than he has been one. I never received a deputation in the climate that prevailed last Thursday when the right hon. Gentleman received a deputation in my presence. I urge him now, as I did then, to take no precipitous action, but to review progress in January. The council has decided to do exactly that.
    Why has the right hon. Gentleman picked on Norwich? I asked him, but he gave me no answer. I tabled a number of written questions asking how Norwich compared with other authorities in its performance. He said that he would
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    answer the questions shortly. Why shortly? He has the information available. All of it must be available in his office, otherwise he would not have decided to pick on Norwich—a Labour council—and issue threats against the autonomy and rights of that locally elected council.
    I know of a number of authorities under Tory control whose records are considerably worse than that of Norwich—even on the issue of the sale of council houses, which the Tory Government so much acclaim. I hope that when the Ministr replies to the debate he will give me a hint of why the Government have picked on Norwich.
    There are too many examples of the way in which what has been built up over many decades—local responsibility and a relationship between local authorities and the Government—is being threatened. It is being threatened not only by the measures proposed by the Secretary of State, but by the way in which he acts. I counsel him to act with some restraint and wisdom, and with sound legal advice.
    7.2 pm
    Mr. Reg Prentice: I agree with the right hon. Member for Norwich, North (Mr. Ennals) on one point, that being his opposition to a referendum. It is significant—and I hope that this has been recognised on the Government Front Bench—that, with the exception of the Secretary of State, every speaker in the debate, Conservative, Labour and Liberal, has been opposed to the referendum proposal, and in expressing that view they have spoken on behalf of many people throughout Britain.
    I intend to confine most of my brief remarks to that subject. However, before doing that I must say that I found the speech of my right hon. Friend convincing on the general proposition that the Government need to take new powers to deal with the big spenders in local government. Given the total overspend, and given also the fact that five out of six local authorities are co-operating with the targets—thereby carrying on their affairs according to the old tradition of the relationship between local authorities and the Government—he cannot avoid bringing the subject to the House in the form of a Bill. He is wrong about the referendum, but right in his objectives.
    I think it sad that the old relationships have been fractured. The right hon. Member for Norwich, North referred to his experience of the relationship between Ministers and leaders of local authorities when he sat on the consultative council. I also sat for a time on that council as a Minister in the Labour Government. The atmosphere was more friendly then—partly for the reason given by my right hon. Friend the Minister, that there were a large number of Conservative leaders of councils, but partly also because the character of the Labour leaders was different.
    Those were the days when the Greater London Council was led by Sir Reg Goodwin. That was a different sort of leadership from that now operated by Ken Livingstone and his colleagues. And it is not only Mr. Livingstone, because since the election changes last May there are now less publicised but equally flamboyant characters throughout Britain operating in the same direction.
    In my county of Northamptonshire the election resulted in a tie between Labour and Conservative. The council is now under Labour and Liberal control. The Liberals are as bad as the Labour members in deciding on higher expenditure and in imposing a supplementary rate.

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    I support my right hon. Friend the Secretary of State's objective, but I profoundly disagree with the technique of a referendum. I carefully noted his remarks. He referred to thinking about the techniques for a longer period. He talked about exploring other methods. With great respect, that is not good enough. The Government's intentions are on record in the form of the Bill laid before Parliament recently. My right hon. Friend knows the extent of the reaction to that. What he could have done, and should have done, was to come to the House today and say that that proposal was being dropped. If my right hon. Friend the Minister, in his reply to the debate, cares to say that it will be dropped, I shall be happy to go into the Lobby with him tonight. If he does not, I shall feel bound to abstain and to vote against Second Reading of the Bill if it contains that proposal.
    My right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) said in his interesting speech that there was nothing incompatible between a referendum and democratic principles. Perhaps not, but it is incompatible with the British tradition of representative democracy. I accept that there are already provisions on the statute book for local polls. Those take place occasionally in unusual and erratic circumstances. They are out of the main stream of political decision-making in Britain. I accept that in recent years there have been referendums on constitutional issues. Frankly, I wish that they had not occurred. But there is a distinction to be drawn between referendums on those subjects, when the relationship of Parliament with the nation is involved, and referendums on matters of general policy.
    I strongly object to the fact that the Government are proposing to bring before Parliament a proposition to have enforced referendums—they would not be consultative referendums, but binding referendums—on matters of important general policy, such as the level of local rates. If that were to happen, no one with any political experience would expect the process to stop there. Once the precedent had been set, there would be further provisions to accelerate the process, in three ways.
    First, successive Governments might find it convenient to use the technique again and again to solve a particular issue. Secondly, the public would demand referendums on certain issues about which there were strong feelings. Capital punishment is the most obvious example of that. Thirdly, pressure groups—large and small, good and bad—would ask for referendums so that they could have a national campaign, paid for by the taxpayer, during which they could put their case to the public.
    One can imagine the situation during the run-up to an election, when pressure groups could ask political parties to include in their manifestos promises of referendums on various matters.
    Step by step we would become a different and worse kind of democracy. Surely we should recognise the simple truth that the complex issues involved in the government of a modern State cannot be split into simplistic questions that lend themselves to "Yes" or "No" answers.
    We are developing a system by which elected Members of Parliament and elected councillors are responsible for taking decisions that are sometimes unpopular. The persons who make them stand or fall on their record when it comes to the next election. In between those elections
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    they have responsibility. That is a distinction that runs through the whole of our constitutional history, and it is something that we should regard as of great value.
    My right hon. and learned Friend the Member for Hertfordshire, East quoted Dicey. I remarked to him afterwards that it was extraordinary that Dicey should have suggested that a referendum was a long-stop, bearing in mind that the main theme was the sovereignty of Parliament. If we are to go through that trend—I hope that we never do—and introduce referendums or long-stops that are an abuse of power by Governments or others, let us do so deliberately and after a long, sustained and detailed debate on whether we want to introduce referendums into our constitution and in what circumstances. Do not let us slide into that process as a byproduct of the Government's need to deal with an isolated problem.
    The alternative, as my right hon. Friend the Secretary of State said, is to increase the Government's power over local government. That does not mean a significant increase of central power over local government beyond that which will be contained in the Bill anyway.
    The purpose of the Bill is to limit the freedom hitherto enjoyed by local authorities in the setting of their rates. That is an alternative balance of power. I see nothing wrong with that. As other hon. Members have stated, the powers of local authorities derive from legislation passed in the House. We have often debated the extent to which Government policies should be superimposed on those of local authorities.
    There had been argument over whether local authorities should be compelled to produce plans for comprehensive secondary education. There has been an argument about whether local housing authorities should be allowed to sell council houses. There will always be similar arguments. It is legitimate to have an argument about rate-setting powers and whether to alter those powers by the process of Parliament. Having done so, I suggest that Parliament should see it through.
    If a local authority proposes a supplementary rate that is against the criteria in the Bill—I am not suggesting any change in that—surely the correct procedure is for the Secretary of State for the Environment or one of his Ministers to meet the leaders of the council. If it is the Secretary of State's view that there is an excessive and unacceptable proposal to increase rates, he should lay orders before both Houses of Parliament, using the affirmative resolution procedure, to settle the matter.
    That would be consistent with our parliamentary system and would settle the issue more rapidly and less expensively than having a referendum. More importantly, it would avoid a departure which many of us are determined to avoid—namely, a departure from the central processes of relative democracy.
    7.13 pm
    Mr. John Home Robertson: The right hon. Member for Daventry (Mr. Prentice) has fallen for a red herring on the issue of referendums. It seems that the Secretary of State for the Environment is likely to give way on that issue—the Secretary of State for Scotland has already caved in—because he knows, as the Secretary of State for Scotland knows, that he can apply as much central control over local affairs as he wants without resorting to a referendum.
    Mr. Anthony Beaumont-Dark: Are we discussing Scotland?
    Mr. Home Robertson: As a Scottish Member I feel qualified to contribute to the debate. I have the benefit of experience of central interference in both tiers of local authority. Both the Lothian region and the East Lothian district in my constituency have already suffered from the full weight of the powers that the Secretary of State for Scotland has obtained for himself in the House. They are powers which are similar to those that the Secretary of State for the Environment hopes to achieve from Parliament.
    East Lothian's unhappy experience of the increased central powers of Whitehall may be a foretaste of things to come throughout the United Kingdom. Central control over local affairs, at least in our experience, has been crude, insensitive and irrational. Its impact has been completely arbitrary and unfair, and it has had a devastating effect on the concept of local democracy and accountability. Incidentally, and in my opinion extremely importantly, these new central powers have taken a heavy toll of the morale of local councillors, who should have a vital part to play in the democratic life of our country.
    As my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) said at the beginning of the debate, this process has been accomplished by the manipulation of the rate support grant, which has been downright brutal since the Conservative Government took office. I cite in evidence of that fact, not a Labour-controlled local authority but the Scottish equivalent of a Tory shire. The Borders regional council covers one part of my constituency. The convener of that council wrote to the Secretary of State for Scotland last month. The letter states:
    "The indications are that if the council projects a realistic figure for inflation and maintains its existing level of services next year, the 1982–83 budget is likely to exceed the cash guideline by at least £2 million and possibly a great deal more. The present level of services are already the result of successive cuts over the past few years and the council believes that it cannot ask the public to accept any further reductions."
    That is a local authority which has an enthusiastic programme of closing local village schools. It has the highest bus fares in the whole of Scotland. At least, it has now decided to say "Enough is enough". I am afraid that the damage has already been done. Other local authorities, which merely try to maintain their existing services find themselves compelled to increase rates by up to 40 per cent.
    During the course of these procedures the Government have successfully generated an elaborate smokescreen of confusion round the whole issue. Any objective study of what has taken place must lay the blame for the cuts and for most of the increased rates fairly and squarely on the Conservative Government.
    I should like to quote from a paper, produced by Strathclyde university earlier this year, by Arthur Midwinter, entitled "Conflict and Confusion: the politics of rates". It states:
    "It must be clearly understood why rates have been rising. The evidence shows that the ratepayers' anger was misdirected and they were firing at the wrong target. The decisions of central Government about inflation were crucially important determinants of local rates, yet played little part in the public debate, which focused on suitably vague concepts like 'wasteful', 'profligate', or 'prudent' expenditure."
    I have so far been talking about what I term "arms length" encroachment on local government autonomy.
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    The Secretary of State for Scotland has obtained powers which he has already exercised in a way which has caused great harm and a degree of chaos amongst both tiers of local authority in the northern part of my constituency.
    Mr. Beaumont-Dark: Are we talking about Scotland?
    Mr. Home Robertson: The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) seems to have neglected the fact that this is a United Kingdom debate. We are talking about the encroachment of central Government on local government throughout the United Kingdom.
    A regional council in Scotland is broadly equivalent to a county council in England or Wales. The Lothian regional council decided to try to resist the encroachment of central Government power. It attempted to call the Government's bluff. The directly elected Lothian regional council, the fully-accountable-to-the-people Lothian regional council, decided to maintain the existing level of services, which in itself was bound to lead to an increase in rates because of the inadequate rate support grant.
    The council also decided, perhaps rashly—I express my personal opinion—to budget for a modest growth in some of its important services. The Secretary of State for Scotland went completely berserk. He used existing powers to interfere with the council's capital spending projects. I was astonished to learn that, under the present Government, decisions on the provision of new facilities at a small primary school in a small village in my constituency were being made not by local councillors, not by local officials at Haddington, not by local officials in Edinburgh and not by civil servants in Edinburgh, but by Scottish Office Ministers and civil servants at Whitehall. Surely that is an example of centralisation gone crazy.
    That still was not enough for the Secretary of State for Scotland. He obtained sweeping new powers from the House to penalise authorities which, in his opinion, were spending excessively or unreasonably. I believe that the Secretary of State for Scotland's judgments on these subjective issues were influenced by political considerations. He exercised his powers against the Lothian regional council, having obtained authority from the House to drive the council into complete submission. Armed with those powers, he arbitrarily deducted £30 million from the council's rate support grant arid handed the money to the Treasury, despite protestations that he was looking after the interests of local ratepayers. He compelled the council to impose an extremely damaging package of cuts at short notice. For example, there was a freeze on education department staffing, which meant that some communities in my constituency which had enjoyed the benefits of the best pupil-teacher ratios in Scotland suddenly found themselves with the worst ratios. In those areas, individuals who had been calling for cuts in the council's expenditure rapidly changed their tune when they discovered what the cuts really meant.
    Charges for the use of school playing fields were forced up by as much as 2,900 per cent. as a result of the package. When the secretary of the Ross High rugby club in Tranent wrote to me about that, I felt that it would not be reasonable to write, as one normally would, to the local authority to complain or to make representations to it about the increased charges. I knew that the local authority had not willingly taken the decision to increase the charges. I wrote to the Scottish Office asking it to justify the

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    increased charges as they stemmed from its decision, not from any decision taken by the council. I am still waiting for a reply. I am sure that many of my colleagues who represent Scottish constituencies will address their queries to the men in Whitehall, to the Scottish Office, rather than to local authorities because the men from Whitehall have taken the decisions upon themselves.
    Mr. Barry Henderson: Some hon. Members will not be as familiar with Lothian issues as the hon. Gentleman. Will he put in perspective for the House the increase in rates that the Lothian regional council originally proposed? Will he give the precise figure so that the House may appreciate the tenor of his speech? Can he mention any regional council in Scotland which proposed a rate increase of half as much?
    Mr. Home Robertson: The increase in rates proposed by the Lothian regional council was 50 per cent., the overwhelming majority of which was attributable to cuts in the rate support grant. I hope that the hon. Member for Fife, East (Mr. Henderson) is aware of that. I certainly hope that my constituents are aware of that.
    I could continue with a list of the wild adjustments that had to be made. They were made, for example, in the social work and transport budgets, and they made complete nonsense of local decision-making and of the continuity of management of local affairs. The saddest feature has been the axing of a proposal to build a day centre for the handicapped during the International Year of Disabled People in Prestonpans, an area of multiple deprivation in my constituency.
    I move on to the experience of the lowest tier of local government in my constituency under the new regime of direct rule from Whitehall. Having flexed his muscles with orders laid before the House against the Lothian region, the Secretary of State for Scotland proceeded with some old-fashioned arm-twisting of a number of smaller authorities. First, he threatened to table orders against them reducing the rate support grant. The process that followed can perhaps best be described as sordid horse trading. At the beginning of the summer the Scottish Office demanded that the East Lothian council reduce its budget by £1·35 million—a cut of more than half of the council's rate support grant. The East Lothian council can by no stretch of the imagination be described as profligate. It has a smaller staff that that of its predecessors before local government reorganisation. However, it is still coming under attack from the Government.
    Everyone in the area, including the Tories, rejected the Secretary of State's initial demand. The issue continued throughout the summer until last month when the Scottish Office agreed to a package of cuts amounting to £700,000—rather less than half of the cut that was originally demanded. The cuts amounting to £700,000 had to be made during the remaining half of the year. The package was agreed against the background of a threatened statutory cut in the rate support grant of £900,000.
    Cuts have had to be made across the board. Libraries have been shut on Saturdays. The opening hours of swimming pools have had to be adjusted. Grants to local voluntary organisations have had to be cut drastically. Of particular importance, grants to community councils have had to be cut drastically. I do not know whether England and Wales have the equivalent of community councils, but
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    they are the most local democratic institutions in Scotland. They have statutory obligations, but they are being deprived of the funds that they require to carry out their obligations by the package that was imposed on local authorities by the Scottish Office.
    In my constituency the ultimate monument to the folly of the Secretary of State for Scotland is a community centre that has recently been completed in Prestonpans. It cost £500,000, but it will remain closed to save £10,000 as part of the package that has been demanded by the Scottish Office.
    I welcome the Government's decision not to proceed with the order to reduce the rate support grant for East Lothian because of the crude deal that has been made. I suppose that is a small mercy. It seems crazy that the council is not to be allowed to use £700,000 of its ratepayers' money. It seems absurd that that money will have to lie uselessly on the side despite the urgent needs of the community. That will have to be done to satisfy the diktats of the men in Whitehall.
    I have been seeking to illustrate from recent experience in my constituency the impact of the Government's encroachment on local government autonomy. It makes nonsense of local management and local accountability. It is a wicked imposition on local councillors. They are being compelled to act against their better judgment. Councillors find that they are getting the blame for all the distasteful consequences of the policies that the Government are implementing because of the devious way in which the Government have handled the process. Councillors are being forced into an impossible position.
    When I was elected to serve as a local councillor for the area in which I live I wanted to improve services for the community. Councillors are now having to carry out the Government's dirty work. They are having to cut services against their better judgment and their will.
    If the Government were to proceed with the referendum proposals, that would be the final straw for many good local councillors. Would Ministers remain in their posts if every key decision that they made in their Departments could be subjected to a final decision by a referendum? Such a process would make nonsense of good management and the responsibility of central Government or local government.
    The Lord President of the Council in his winding-up speech last night said:
    I want to reaffirm our conviction that a strong second Chamber is an essential part of the constitution, and an essential safeguard for individual liberty. We are committed to its continuance and maintenance."—[Official Report 11 November 1981; Vol. 12, c. 621.]
    I believe that strong local democracy is an equally important part of our constitution and our people's safeguards. I urge the House to reject any further proposals for interference in local affairs from Whitehall. In particular, I urge the House to take the earliest possible opportunity to repeal the obnoxious clauses in the Local Government (Miscellaneous Provisions) (Scotland) Act 1980, which have already caused such havoc in my constituency.
    7.30 pm
    Mr. Charles Morrison: I could not help feeling when I read the Opposition's motion that, instead of huffing and puffing about the Government's proposals, they would do the country a far greater service if they were

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    to insist that the few Labour-controlled local authorities which are acting with selfish financial irresponsibility were to have regard to the harsh realities of the national economy. Had the Opposition done that, not only would it have benefited the economy, and local domestic and non-domestic ratepayers, but it would also have helped the vast majority of reponsible local authorities, most of which are grappling with problems and demands for expenditure of equal urgency and complexity, and would have avoided the publication of a Bill which is unacceptable to many of us.
    There is more than a whiff of hypocrisy and self-righteousness about the Opposition's case. It would smell a good deal less of political opportunism if the Opposition's own record of interference in local government were not so bad.
    This afternoon, my right hon. Friend the Secretary of State spelt out the situation as he found it when he first came to office. It was perfectly clear from what he said that the degree of intervention and control by the Labour Government was steadily increasing. He could also have mentioned the Education Act 1976 or the Community Land Act 1975 as other examples of how the Labour Government reduced the discretion and powers of local government.
    Nevertheless, we should look at the position of local government as it exists today, and consider whether there is any threatened further encroachment on the discretion and powers of local government. The objective of local government reform in the early 1970s was, in my view, simply to create a system of autonomous local authorities. On the other hand, the perception of most people, councillors and public, is that local government has been subjected by successive Governments to a process of slow strangulation. If local government is not to be killed off in all but name, the process should be stopped, and preferably reversed.
    There is no doubt that in a small country such as ours there is a case for abolishing local government. After all, our communications are swift and the distances to be covered, in comparison with those in many other countries, are small. In my view, however, to abolish local government would be a mistake for three reasons. First, undoubtedly it would be contrary to Conservative philosophy—the philosophy of decentralisation of power, which sometimes seems to be forgotten; second, it would destroy the opportunity for local interpretation of national policy; third, the national administration of local services would prove to be more expensive in practice than is local administration.
    Our locally-elected representatives get cursed up hill and down dale, and are virtually never thanked. I want to place on record that the vast majority of local councillors are at least as much concerned as we are—if not more—to produce value for money, within limited resources to be stretched over an increasing number of statutory powers and duties imposed upon them by this House and successive Governments. Broadly speaking, local councillors do a very good job.
    Perhaps I should add a fourth reason for the continuing existence of local government, and say that without it the life of a Member of Parliament would be totally impossible. Therefore, I am in favour of the continuation of local government.
    However, if we are to have local government, we must accept that there will be different levels of service,
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    different standards of provision, and different levels of local taxation. That is what local government means. It would be unacceptable if central Government were to legislate just because, as we have been told, they received 1,500 letters of complaint about the rates. It would be odd, and indeed dangerous, if the Government felt impelled to legislate every time they received 1,500 letters of complaint. If they did, most of our time would be spent considering animal welfare. That might be admirable, but it would not advance the interests of the nation.
    In any case, I wonder how many of the 1,500 letters which apparently landed in the Department of the Environment during the past three months came from the high-spending areas at which the Secretary of State is aiming his guns. If many of those letters come from other areas, undoubtedly they will be disappointed by the legislation that the Government propose, and the result will be still more disillusionment with Government and Parliament.
    I suspect that what the writers of those letters wanted—as do most hon. Members—is a thorough-going reform of the system of local government finance. It is no use pretending that such a reform would be simple. I sat on a series of policy groups between 1966 and 1978, and I cannot pretend that we came to any easy answers or found any solutions. However, I hope that my right hon. Friend the Secretary of State will find an answer which will cope with the problem now facing him just as much as it will cope with the interests of the ratepayers.
    My right hon. Friend is saying that in the immediate future, whatever the Green Paper may foretell, we must contain the total of local government expenditure. I do not argue against that proposition, but we should bear in mind the comparative record of local and central Government expenditure, to which the right hon. Member for Manchester, Ardwick (Mr. Kaufman) drew attention. The comparative position of local authority expenditure has altered. Legislation such as the health and safety at work legislation has added considerably to the cost of local government. That legislation may be good in itself, but it has added enormously to the cost of local government, as have the employment protection legislation and numerous other measures.
    If the Government want to control the total of local government expenditure, they should do so by means of a mechanism that will definitely achieve its objective. As likely as not, a referendum will not do that. Just because it happened to do so in Coventry, it does not follow that it will do so everywhere.
    Even if the Secretary of State achieves the result that he seeks in the first year that a referendum is held in one area, it does not follow that he will get the result that he desires thereafter. Let us think what a determinedly bloody-minded council could do to its emotion-packed services in the year following the year that it lost the referendum. Let us think whom the authority would blame. After a year of blaming the party in power at Westminster, the result would probably be very different the next time the authority was forced to hold a referendum. There is not much point in mobilising a sledgehammer unless one can be certain that it will crack the nut. Referendums are as likely as not to miss the target.
    If referendums are used for the purposes that the Secretary of State desires, they will be wholly unacceptable. At the best of times, I am not a referendum fan since they undermine the concept of representative

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    Government. However, they are probably necessary on some constitutional issues. They are not acceptable for practical issues and I will not vote for them in that sense. As my right hon. Friend the Member for Daventry (Mr. Prentice) pointed out, if referendums are allowed for local government, the demand for them for other purposes will grow day by day. It will be almost impossible to resist those demands. In fairness and in logic, how could we resist such demands if we had conceded referendums for local government?
    Legislation such as the Local Government Finance Bill is unnecessary. It would be better by far to rely on the electorate, coupled—if need be—with the sensible and judicious use of the powers that the Government gave themselves last year in respect of the block grant. If the Government use the type of powers that they propose in the Local Government Finance Bill, people such as Mr. Livingstone will be turned into martyrs. I suspect that that is precisely what such people want. It would be far better to leave the electors to get rid of him. Indeed, the Labour group within the GLC may do so before any election.
    If the Secretary of State insists on legislation he must first issue a Green Paper on rating reform. Secondly, the legislation should be temporary and that should be emphasised by making it annually renewable. Indeed, the Secretary of State referred to that in his speech. Thirdly, the legislation should allow the Secretary of State to take action against local authorities, subject only to the approval of the House.
    I listened carefully to the Secretary of State. For the purposes of this debate, I shall pretend that I have not read the motion or the amendment. However, the Secretary of State paved the way for sensible withdrawal from the position that he took up. Therefore, I am prepared to support the Government, but purely on the assumption that the concept of referendums in this context will be withdrawn, because for that, in a Bill, I will not vote.
    7.45 pm
    Mr. Bruce Douglas-Mann: Like the hon. Member for Devizes (Mr. Morrison) and every hon. Member who has spoken—with the possible exception of the Secretary of State—I strongly believe that local government serves a valuable function which the proposed measures are in danger of destroying. I am sorry that, in a serious debate, the Secretary of State felt it necessary to misrepresent the Opposition's position by pretending that the motion called for total local government autonomy.
    Of course, Opposition Members accept that local government cannot be completely autonomous. We would not want it to be. The Secretary of State quoted my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman). My right hon. Friend's remarks showed that we accept that the Government are responsible for the overall conduct of the economy. However, the measures that are suggested will probably be used for five or six local authorities. I very much doubt whether the economic consequences of a few local authorities increasing their expenditure and funding it 100 per cent. from rates will be serious. The arguments are well presented in the current issue of the Municipal Review which I strongly commend to the Secretary of State.
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    The danger is that the proposed legislation will destroy the machinery of local government. Where does the Secretary of State think that the next generation of local councillors will come from? Where will he find people who are genuinely concerned to work in the interests of their local community, instead of those who are merely interested in the prestige and status of being able to call themselves councillors? Why on earth should anyone put up with all the disadvantages of serving in local government, with the hours of unpaid work, the tedium of reading through vast agendas of committee meetings and so on, and the boredom of sitting through one's opponents' speeches—[Hon. Members: "Hear, Hear']—and those of some of one's colleagues. Attendance at local council meetings is far better and more continuous than attendance in the House, so their sessions seem longer than ours. Who would put up with the risk of a personal surcharge as a result of an error of judgment or of interpretation? Who would put up with the risk of penalties for speaking or voting when one has a potential but remote interest?
    Who would put up with spending weeks or months of work on shaping a policy that the electorate may never allow him to put into effect? Who would put up with the risk that, even if he is elected, he will be subject to the scorn of Lord Denning for having used his discretion unreasonably? The traditional test of reasonable conduct is that of the view of the ordinary, reasonable man on the Clapham omnibus. I suspect that that particular reasonable man would have adopted a different position—
    Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Order. I understand that the matter about which the hon. Gentleman is addressing the House is sub judice.
    Mr. Douglas-Mann: I sought to make a general point. Nothing that I am likely to say will be of concern to the court that will deal with that matter. However, I shall change the subject.
    Such discouragements were bad enough in my day in local government. However, since the Conservative Party has been in office, the discouragements have become worse. As a result of the evidence on the sale of council houses given to the Select Committee, I am, more than most hon. Members, aware that local councillors have become very demoralised, because they have been compelled to sell the local housing estates in which they took great pride. Such demoralisation is not confined to Labour-controlled local authorities. We heard evidence from authorities of all political persuasions, and particularly from those in rural areas. They were desperately anxious about the consequences of being compelled to sell council houses against their better judgment.
    Local councillors have had to recognise that their ratepayers are liable to be penalised if the Department of the Environment considers that their expenditure is too high; but, up until now, elected councillors could control their budgets. They could provide services if they thought that the community needed them provided that they were willing to take the risk of presenting their case for higher rates and better services at the next council elections. Now the Government have devised a system which makes local councillors no more than agents of the central Government.
    The Government are making any council which wishes to spend even a little more than the Government consider

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    necessary levy a first supplementary rate in July instead of budgeting for it in April and collecting it immediately. That involves substantial additional and unnecessary administrative costs and cash flow problems for the local authorities. It involves difficulties for individuals in relation to rate rebates and instalments.
    Mr. Bert Bucknall, in the Local Government Chronicle for 16 October, says:
    "I cannot see the reason behind the requirement to have two bites at the cherry with an initial and first supplementary rate, when the authority will presumably know at budget time that it needs the sum of the two rates."
    I suggest a reason. It is purely political. It is to pile up unpopularity for the council by having a first supplementary rate to make it as near as possible certain that the council will be so unpopular by the time that the second supplementary rate is levied that it will lose the referendum. The Secretary of State grins. Perhaps he acknowledges that.
    Mr. Heseltine: The hon. Gentleman is describing the scheme that we have not adopted.
    Mr. Douglas-Mann: The Secretary of State has by no means allayed the fears of local authorities on that score.
    As a consequence, in any referendum the cards will be viciously stacked against the council. That creates a situation which is contrary to every principle of responsible government. The right hon. Member for Daventry (Mr. Prentice) said that the electors choose a Government for the country or for a local authority to take responsibility for a period of time. I agree. I strongly oppose people who call for unconstitutional action to prevent the Government from carrying out the contents of their manifesto. The Government have a responsibility, and in their term of office they must be permitted to do what they believe to be right. So, within the powers that we have delegated to local authorities, must an elected council.
    We must not emasculate a council and say "You have been naughty. You spent more than the man in Whitehall thinks that you should spend. Yes, you can keep your robes and chains and call yourselves councillors, but you can no longer be trusted with money". In effect, that is what the Government are saying to local authorities. That will ensure that self-respecting members of local communities will not be willing to serve. They will have no power to carry out the programmes on which they are elected.
    Three other issues need urgent attention if healthy, democratic and responsible local government is to be developed. The rating system is unpopular, but it has many advantages. It is cheap to collect, difficult to evade and people with low incomes are protected. It constitutes about 2¾ per cent. of personal expenditure and 1 per cent. of business turnover. There are unfairnesses in the way that it operates, but they would be tolerable if the total collected through the rating system were smaller. Instead of 37 per cent. of contemplated local government spending being met from rates, between only 15 and 20 per cent. should be raised. For most of us that would mean that the money would be paid out of one pocket rather than another. It would also mean, however, that the difference between the high spending and low spending local authorities would be much more apparent to the rate-paying electors. The electors should be able to make their choice at the ballot box, and then abide by the consequences.
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    There is an urgent need to amend the rule in relation to surcharges which makes it possible for a local councillor to be made personally financially liable for the loss to the council, which could run into hundreds of thousands of pounds, as a result of what might be no more than an error of judgment or a failure correctly to interpret a complex or ambiguous statute.
    Not many right hon. and hon. Members, who authorise the spending of billions of pounds on the nod and seldom with adequate scrutiny, would be willing to accept that risk. However, we are paid to do the job, and local councillors are not. The fact that the surcharge is more often used as a threat rather than a penalty does not detract from its obnoxiousness. It is unnecessary. The courts already provide a forum where unauthorised expenditure or decisions can be challenged, as we have seen. Perhaps we need to improve the machinery by which ultra vires or improper actions can be challenged in the courts. However, if we want constitutional, responsible and democratic local councillors, we must remove the threat of personal bankruptcy from people who carry out their duties conscientiously.
    I turn to the personal interests of councillors. We must remove the risk of penalties being imposed on councillors who speak or vote on issues on which they have a general, rather than a specific, pecuniary interest. Judges who are London ratepayers and who use London Transport can decide issues, such as the GLC case. Of course, it is right that they should. They will not be influenced by that. Equally, it should not be necessary for the current issue of the Local Government Chronicle to warn:
    "Businessmen may feel obliged to avoid the planning committee … and parents the education committee "
    That is absurd. I trust that it will be eliminated as rapidly as possible.
    Local government must operate within the powers that we delegate to it. Elected local councillors know their local problems, their local electorates and their local resources far better than the Secretary of State or his civil servants. If we destroy the voluntary, dedicated structure of local government which has been built up over many years, it will be hard to replace. The present proposals are likely to destroy it.
    7.58 pm
    Mr. Terence Higgins: Many hon. Members have concentrated on the referendum issue. That is at the heart of our debate. It is a matter of profound concern on both sides of the House. I share the Secretary of State's concern that excessive expenditure and rate increases by local authorities should be curtailed, but his proposals are the worst possible way to do that. As has been stressed by a number of hon. Members, they endanger our whole system of representative parliamentary democracy. I hope that the Government will think again and will not go ahead with the Bill, which incorporates the referendum idea.
    In my right hon. Friend's opening remarks, in response to an intervention, he seemed to indicate that he was prepared to reconsider the matter, but his terminology was not as clear as many of us would have wished so that we could be convinced that he would examine the matter afresh and come forward with better and less dangerous proposals.
    I shall set out the fundamental objections to ex tending the use of the referendum in the way in which the

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    Government propose. As Burke said, we are sent here not as delegates but as representatives. We are not simply a computing machine which, if it could define precisely how many of our constituents would vote in a particular way on an issue, would feel obliged to vote in that way. The contrary is true. We are here as representatives to take fully into account all the views expressed by our constituents. We are here to take fully into account all the debates in the House and all the information that we are able to acquire on an issue.
    At the end of the day we do not vote simply as if we represent numbers in our constituency. Our duty is to vote as our constituents would vote if they had all the available data, and to vote in the interests of the country. That is a complex task. The idea of a referendum is alien to that system of representative democracy. For that reason, I view with great concern any extension of the referendum principle.
    We have precedents for the principle but the issues for which referendums have been used, greatly to my regret, and despite my opposition, as far as national issues are concerned, have been constitutional—the EEC, devolution, the Northern Irish border and so on. On those issues one can reasonably distinguish constitutional issues from others. However, this is a different matter.
    Mr. Tam Dalyell: Will the right hon. Gentleman give way?
    Mr. Higgins: With respect, I should like to put forward a complicated argument, so I shall not give way. Also, many other hon. Members wish to speak.
    At the other end of the scale, there are so-called local polls. I notice the change from referendums on the one hand to local polls on the other. In the explanatory memorandum, what is proposed is described as a referendum. If we go ahead we shall effectively put in a formal way the imprimatur of the Government and the House of Commons on the idea of a referendum. That is objectionable. I shall deal with some of the specific problems that will arise on the proposals put forward by the Government.
    Apparently, the debate before the referendum takes place will be on whether local rates should be increased. However, the people who will vote in the referendum will not be those who pay the rates. Many of those who vote will not be paying rates. More of the total cost of local government expenditure comes from industrial rates than from domestic rates. Those involved in industry and with industrial interests will have no vote in the referendum. That is the first thing that seems wrong.
    What form will the question take? There are specific proposals, but I shall not go into details. Presumably the sort of question that will be asked will be "Do you want your rates to increase?" It would not be surprising if many people said that they would prefer not to have their rates increased. The alternative question is "Do you want more spent on local services?" In that referendum one would almost certainly receive the opposite answer. There would be a conflict. It is just such a dilemma that people who are elected to Government must decide. They weigh the expenditure against the taxation. Therefore, to introduce that concept into our fiscal affairs seems to have serious disadvantages.
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    The Secretary of State sought to placate some of those who object to the extension of the referendum principle by saying that it would be only temporary or that there would not be many referendums. That makes his case a great deal worse, not better. It means that the dangers involved in extending the referendum principle are being opened up for something that is temporary and, in any case, will not affect many councils. That makes it worse than if he said that that was a panacea for all our economic problems, that there would be hundreds of referendums, public expenditure would be brought under control and such a measure would be permanent. I could not agree with that but it might be thought to be worth while. But to say that we will go down that road, when it is a temporary and stopgap measure, seems wrong. The result of the referendum might be perverse and contrary to expectations. In a number of cases the local referendum might produce a result that led to the rates being increased.
    The alternative centralist solutions are also worth mentioning. The Secretary of State is concerned that the courts may find that he has not been reasonable. I am not sure that if he concurred with the view expressed in the local referendum the courts would believe that that was reasonable, because one would have to consider whether those voting in the local referendum had had all the data that was necessary to reach a reasonable decision. I doubt whether they would have studied all the ways in which the money might have been spent or raised. Therefore, it is not just the general principle that is wrong and the dangers that are grave, but that there are specific problems in introducing the measure into fiscal legislation in the context that we are debating.
    That being so, the Secretary of State is right to ask what the alternative solution is. He put forward one alternative—the so-called centralist solution—that would bring back authority to the House. That is infinitely preferable to the idea of a referendum. At all events, it is a stop-gap. We are all agreed that what is needed is a change in the rating system.
    The Secretary of State seeks to placate those who do not like the proposals by saying that the Government will produce quickly a Green Paper on alternatives to rates. I have lost count of the number of Green Papers and other documents on alternatives to the rating system. In addition, the Layfield committee produced a thick report which went into the matter in significant detail and made recommendations. We do not need another Green Paper. What we need are positive decisions by the Government. There is no reason why there should be further procrastination.
    It will be said that it will take a while to devise a system that will replace the rates. I confess that I have a simple solution. The rating system, with its many deficiencies, which I shall not recount now, cannot be reformed. The only answer is to abolish it. That is the right line along which to go. Whether one would find an alternative is an interesting thought.
    If we introduce a local income tax—I am not in favour of that—will we have referendums on whether local income tax should be increased? If we have such referendums, will we avoid the argument that we should have a referendum on whether national income tax should be increased? That situation should not be contemplated without the gravest consideration of the fundamental constitutional issues that are opened up by what is proposed.

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    There is a tremendous electoral advantage in abolishing the rating system and transferring the cost of so doing to the Exchequer. It would cost the equivalent of 4p on income tax. I think I heard someone say 13p, but I am talking about domestic rates. That was an answer to a parliamentary question that I received a short time ago. In many ways, it would have great attractions and would still leave local authorities with important decisions on how they spent the money. In many ways, they would have less interference from the centre than now. There is now considerable interference, and it is steadily increasing.
    For all those reasons, the Government must reconsider the matter fundamentally before they go ahead with their proposals in legislative form. Sufficient attention has not been given to the matter. There has not been sufficient consultation. If the Government seek to obtain a Second Reading of the Bill as it now stands, incorporating proposals for a referendum, I am convinced, for the reasons that I have set out, that it will be wrong to vote for the measures. At that stage it will not be an extension issue. It will be an issue on which one should make up one's mind. I shall vote against any Bill in that form.
    8.8 pm
    Mr. A. E. P. Duffy: I shall not pursue the arguments of the right hon. Member for Worthing (Mr. Higgins), if he will forgive me. Many people in South Yorkshire are justifiably concerned about the proposals and about the matters that clearly disturbed the right hon. Gentleman—the accountability of local authorities, and, especially, the proposed referendum. It is only fair to say that in that part of England, where there is more deprivation than in many other parts of England, there is currently more concern about the impact that such proposals might have on the maintenance of services and on jobs.
    Within one year of carrying through the Local Government, Planning and Land Act, which produced a major change in the relationship between Government and local authorities, the Government have now, in effect, admitted the failure of the Act and are proposing a yet more fundamental constitutional change, all to meet a temporary financial crisis that is of the Government's own making.
    The Secretary of State for the Environment intends to make referendums a part of the budgetary process of local authorities. He attacks the principle on which local government has been based—the right of a local authority to determine its own expenditure if financed from local taxation—and he is preventing local authorities from balancing their books at the time of their budgetary decisions, thus forcing them to short-term borrowing.
    The implications of the proposals for local democracy everywhere are extremely serious, as has been said from both sides of the House. They can only have a devastating impact on the provision of services and jobs by local authorities such as Sheffield and the South Yorkshire county council.
    They are seen, first, as an attack on local democracy. Local councillors have been described by my hon. Friend the Member for Berwick and East Lothian (Mr. Home Robertson) and the hon. Member for Devizes (Mr. Morrison) as those on whose shoulders the sustenance of democracy rests most. They have been led to believe that, within a reasonable framework of what national policies
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    and local resources will allow, they are entitled to provide an environment for their communities and services for those whom they were elected to represent.
    Secondly, the proposals seem to threaten the accountability of local authorities. The imposition of referenda not only changes the relationship which they have had with their local communities and which they have valued, especially as expressed through local taxation. In addition, by isolating only the level of expenditure, with the wording of the questions under the control of the Secretary of State, the process would be complex, costly and capable of manipulation.
    Thirdly, the proposals smack of injustice. As the right hon. Member for Worthing reminded us, the Government do not subject their own taxation decisions to referenda. They would plead that they have already received their mandate from the ballot box. Why then should local taxation decisions be subject to local referendums?
    Fourthly, the proposals stem from false premises, such as that local government is out of control. The fact that that is a false premise was amply proven in the powerful speech of my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman). I take up one piece of evidence that he cited. Local authority spending has been close to central Government targets each year from 1975–76 to 1978–79. Despite being faced with several different sets of targets since then, overspend is estimated at only 5·6 per cent. this year. Local government spending is not out of control.
    Nor is there, fifthly, an urgent need to protect non-domestic ratepayers. I know of the distress of industry as much as any other hon. Member. Few hon. Members have more industry in their constituencies. I try to have the closest possible working relationship with the industries in my constituency and to give them every possible help. However, I cannot close my mind to the fact that the contribution of domestic ratepayers to the total rates bill has fallen in recent years and that there is no satisfactory evidence that an unfair burden is being imposed on industrial ratepayers.
    Finally, the proposals as published are full of technical shortcomings. First, the predictability of the rate yield—a major advantage of this form of tax revenue—will be lost. Secondly, as local authorities lose local financial stewardship, they will be forced into the money markets at short notice. However, at the same time, thirdly, the standing of local authorities in the money markets will seriously decline, as the loss of the certainty of their rate income will increase the apparent risk to lenders. Fourthly, no technically acceptable limit has yet been devised.
    Central Government have established several different financial targets for local authorities, and those have very diverse consequences. The South Yorkshire county council has been accused of overspending by 75 per cent. in 1981–82, but, taking other yardsticks and targets, the figure could be as low as 17 per cent.
    Fifthly, the provisions of the Bill increase the complexity of the rating system and will confuse taxpayers. We know that even in 1981 and within our mature democracy we cannot take for granted public awareness of the complexity and mechanics of Government.
    Finally, the legislation will inflict extra costs on local government. Thus, the Government will be the instrument

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    of increasing overheads for local government while it is pressing local authorities to cut the services that they provide.
    In the words of Professor George Jones of the London School of Economics and Professor John Stewart of the university of Birmingham, both distinguished scholars and outstanding authorities on local government:
    "It is likely that the proposals will not achieve their intended effect. The high target for overspending which will trigger the referendum, is likely to encourage spending in other authorities which will feel it safe to come closer to the target. It is therefore probable that Mr. Heseltine will have to admit the failure of this new measure before the year is out."
    That was stated in a letter to The Guardian on Tuesday. I am aware of no weightier authorities on the subject of local authorities than those two gentlemen.
    Why then is the Secretary of State persisting with such ill-thought-out measures in the face of that opinion and of the resistance within his party, as well as from Conservative-controlled local authorities? His only possible purpose can be to control a small number of authorities with whose policy the Government disagree. Everyone in local government in South Yorkshire believes that those authorities may be at the top of his hit list. He resents not only their overspending but also the character of their policies.
    They believe that the proposals are designed to restrict spending levels and are, therefore, related to the grant related expenditure assessment and not to the current level of rates being levied. Therefore, it would appear that it is not a straight restriction on how much Sheffield and the South Yorkshire county council increase their current rate but the rate they can levy under the proposed law, related directly to their grant-related expenditure assessment.
    However, the assessment is made up of a large number of elements. It is made up of elements that local authorities never really accepted, some of which were deliberately weighted against metropolitan urban areas such as Sheffield and South Yorkshire and which resulted in the switching of resources to the shire areas. Next year that arbitrary form of assessment of needs will be used to judge authorities as overspenders, whereupon they will be subject to the new restrictions and penalties and made to suffer all over again.
    Limitations on a local authority's freedom to levy the rate needed to pursue the policies for which it was elected are damaging in themselves, but for metropolitan urban areas such as Sheffield and South Yorkshire, where the Government grant-related expenditure is particularly low, the expenditure limit could easily be lower than current spending, resulting in reduced services and loss of jobs.
    In short, the grant-related expenditure assessments put forward as a basis for setting rate limits are extremely crude attempts to measure need. In South Yorkshire, the social need which generates spending is certainly regarded as a good deal more complex, and the current method of quantification is regarded as profoundly unsatisfactory.
    What will areas such as Sheffield and South Yorkshire do? They will oppose the legislation, even though we have been told today that it will be of limited duration. Even if both authorities attempted to achieve the Government's targets, it is almost impossible at this stage to predict exactly what that would mean. On all known estimates, it would certainly mean a massive reduction in spending to meet the tightest of the likely limits. Such a draconian
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    exercise at this time would inevitably destroy the current standard of services. More flexible limits at the outset would still pose acute problems for those areas. Therefore, although the Secretary of State gave the impression today that he was trying to accommodate the fears expressed on both sides of the House, I must tell him that he said nothing which might begin to assuage the fears of my colleagues in South Yorkshire.
    Finally, both those authorities, as well as the district councils of Barnsley, Doncaster and Rotherham, are excellently staffed as well as represented. So far, I have heard only tributes to those who represent us in local government. I pay tribute also to those who staff local authorities. They are all men and women of high motivation, devoted to the public service and proud of their councils' successful and distinctive accomplishments. That is particularly true of the district and county councils of South Yorkshire.
    I hope that the Secretary of State will therefore hesitate before obliging such people to make an almost certainly vain attempt to fulfil his ill-considered proposals when they can plainly see that the minimum savings required to meet the so-called targets cannot be achieved without a significant effect upon jobs or services or the undermining of the policies on which they stand. Their councillors would regard that option as entirely unacceptable.
    8.23 pm
    Mr. Tony Durant: I shall be brief so that all hon. Members who wish to speak may do so. I shall not follow the hon. Member for Sheffield, Attercliffe (Mr. Duffy) in all his arguments, but I wish to take up his point about the business rate. I have visited his city, although not his constituency. I went there for the first time quite recently to attend a conference. I was taken to the conference by a taxi driver who did not know me from Adam. The first thing that he mentioned was the commercial rate in the city, so it is not true that there is no anxiety about it. I believe that there is deep anxiety in that area.
    I do not wish to follow through the argument about referendums. My right hon. Friends the Members for Daventry (Mr. Prentice) and Worthing (Mr. Higgins) have made the argument extremely well, and I do not wish to take it further. I wish, however, to draw attention to what I regard as the slight humbug on the Labour Benches about intervention in local government. The relationship between the Government and local authorities is not sacrosanct. It has developed over the years. Indeed, local government in its present form is a relatively recent development in the history of this country, so we cannot suddenly regard it as holy—a thing with which we must not interfere. We must therefore consider the whole matter very carefully.
    I put it to the Opposition, first, that the Government even now provide 58 per cent. of the money which goes to local government. Secondly, the House lays many statutory requirements upon local government. We pass legislation as though it were going out of fashion and then leave local government to pick up the tab. Labour Governments are the principal offenders, but Governments of both complexions have interfered far too often in local government.
    I cite some of the actions taken by the Labour Government. Did not the Community Land Act constitute interference in local government, forcing authorities to

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    assemble land and imposing upon them an entire Act of Parliament dealing with land? What about the Clay Cross people? I support and admire the action taken by the Labour Government to deal with them, but was not it an incursion into local government?
    The right hon. Member for Stepney and Poplar (Mr. Shore) interfered in pay settlements. He encouraged local government unions to demand high pay rises which cut right across the efforts of local authorities to keep pay within certain restraints. The right hon. Member for Manchester, Ardwick (Mr. Kaufman), at the conference at Torbay, gave a categorical assurance that the Labour Party would take over all rented accommodation. If he became a Minister, which God forbid, and a particular authority did not wish to take over all rented accommodation, would he force it to do so? He condemns interference with local government, but says that the Labour Party would take over all rented accommodation, so he must answer the question. Would he interfere? It is clear that there is a certain amount of humbug in this.
    The Government are, of course, in difficulty on this issue. They wish to do something about rates, particularly business and industrial rates. The problems are the high spenders and the low spenders. By any standards, local government administration in Britain is far too big. In other countries, local government administration is much smaller. In this country, a staff of 3 million is involved. As the Secretary of State pointed out, that is 10 per cent. of the working population. That is an enormous number. Expenditure of £15·5 million is involved. No Government could brush that aside as unimportant. The Government therefore have a right to intervene.
    The argument is not whether but how we should intervene. Since last year, we have had the GREA, but it is in its infancy and parts of it are not particularly good. The E7 proposals on housing, for example, which were mentioned by the right hon. Member for Ardwick, require urgent examination. I agree, and I support the right hon. Gentleman in that view. I believe that we may be rushing headlong into a new system without giving it time to settle down. I am told that in coastal resorts problems have arisen because there is not much for coastal preservation in the GRE. That, too, needs to be examined. I do not say that the GRE is wrong, but it is a new system which needs time to settle down. The Government must therefore take care in this area.
    On the question of rates and the electorate, one of the difficulties is that council tenants still believe that they do not pay rates, although of course they do. When the rates are increased, the rent appears to rise, so they say that rents have been increased. They do not realise that an element of rent is rates. I urge the Government to consider separating the rates from rents so that council tenants receive a separate rate demand. This was salutary in Lambeth. When the supplementary rate demand was distributed in Lambeth, it went to every individual. The effect was dramatic. Council tenants were saying "My God, a rate demand. What is this? I have never seen it before."
    I prefer reconsideration of the whole question of a third of each council retiring each year. There are two arguments in favour of this proposal. The first is the achievement of some continuity, which I believe is important in local government. The second is that councillors have to face the electorate one year after some high spending. The case can be taken to the electorate and
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    argued. A proposal can be put in the manifesto. It will either be thrown out or accepted. I urge the Government to consider this possibility.
    I agree that the Government have rights in dealing with the money that they provide. They can do what they like about the element that they provide. I agree that big spenders should be fined.
    I should like the Minister to examine the role of parish councils in relation to rate levels. Parish councils in some parts of the country—this is happening in a district not far from my constituency—are causing great difficulty by their demands on the district council. If the Secretary of State is to impose rate levels on local authorities, he must consider the parish councils.
    I urge my right hon. Friend to re-think what he is trying to do. At meetings I have attended with councillors up and down the country, most people do not decry the aim of the Secretary of State. The argument is on the way that he is going about it. It is taking a hammer to crack a few nuts—and they are nuts. If there were regular elections in those areas, they would not last long. The public is not stupid. They soon catch up with what is happening. They will put things right if they believe that people are acting foolishly.
    I urge the Government to examine this matter again. I am concerned about what is proposed. I hope that following further consideration there will be fresh ideas.
    8.31 pm
    Mr. R. C. Mitchell: At the last general election, Conservative speakers—
    Mr. Nigel Spearing: The hon. Gentleman was elected as a Labour Member.
    Mr. Mitchell: There is something wrong with the acoustics, some humming in the background. At the last general election, many Conservative speakers toured the country advocating greater freedom to local authorities. Since the Government came to power there has been a succession of measures, one after another. All have slowly but surely diminished the freedom of local government. This is an inevitable part of trying to run the economy on monetarist lines. It must mean taking central control of all expenditure. It must diminish the freedom of local authorities.
    The monstrosity that we are discussing today is the last straw. It has been condemned by every responsible organisation connected with local government. It has been condemned by virtually every council, including Conservative councils, as striking a severe blow at local democracy. I attended a meeting this morning of the district councils in Hampshire. All are Conservative controlled, as one would expect in Hampshire. Speaker after speaker condemned the proposals that the Government are introducing. The Government had no friends among the Conservative councillors at that meeting.
    The councils also objected strongly to the lack of consultation before the proposals were introduced. I understand that the technical memorandum that preceded the proposals was issued only at the end of September this year. Local authorities were given about three weeks in which to comment on what is a fundamental constitutional change in their position. This is treating local government with contempt.

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    I should like to refer to a document sent to all hon. Members representing constituencies in Hampshire by the Hampshire county council. It will not surprise hon. Members to learn that the council is fairly overwhelmingly Conservative-controlled, as has been the case in living memory. It says:
    "Local government has already been forced to accept central Government targets for grant purposes and for capital expenditure.
    It now faces the prospect of absolute targets for revenue expenditure as well.
    Targets can be manipulated by the centre to force an authority to spend at a level either lower or higher than it desires. The setting of yet more targets will actually encourage higher spending and borrowing levels in some cases. The proposals also debar an authority from rating to meet its total planned expenditure. The references to supplementary rates in the proposals are misleading. At present, supplementary rates are sought only when an authority finds during the course of a year that the original rating levy is going to be insufficient. Under the new proposals, supplementary rates will become in some cases a means of 'topping up' income to allow the original budget plans to be financed. An authority should always rate or tax immediately for the total of its revenue expenditure and should not be allowed to mortgage future generations of ratepayers."
    Those are great words of wisdom from a Conservative-controlled local authority.
    If this country is to be governed efficiently, central Government and local government must work together in harmony and must not be in perpetual conflict. The Government must not seek to dictate to local government—Whitehall does not always know best—but, equally, those in control of local authorities should not try to use their position to force a direct conflict with the elected Government of the day.
    To deal with a few recalcitrant local authorities the Secretary of State seems to be willing to destroy the relationship that exists between central Government and local government. As the hon. Member for Reading, North (Mr. Durant) said, he is taking a sledgehammer to crack a nut. I agree that there are a few nuts. Those few local authorities that have imposed swingeing rate increases well above what is reasonable do great damage to local government. Not only do they cause unemployment in the area because firms move out, but they impose intolerable burdens on ordinary people who have to pay the price. Some of those unreasonable burdens, particularly in the London area, are the fault of the Secretary of State, due to his manipulation of the block grant. Others are due to the profligacy of a few extremist authorities.
    The proposals on referendums are ill conceived and ill thought out. The democratic process in this country depends on an elective test of a wide range of policies and programmes, which include financial policies. To take a single issue for a referendum is a bad and expensive means of obtaining a public view on the complex issues involved. In the long term, many extreme policies could be eliminated by a fundamental reform of the voting system. Until that occurs—as it inevitably will—I re-emphasise a suggestion that was made by the hon. Member for Reading, North.
    My experience in local government has shown that there are less extreme policies in those councils where one-third of the councillors retire every year and annual elections to the council are held. That is a valuable suggestion as a possible alternative to a referendum. If the
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    London boroughs held annual elections of a proportion of their membership, instead of councillors being in office for four years, we would not have some of the silly policies that are put forward today. Nothing concentrates the mind of a councillor more than if he knows that he or some of his colleagues have to face the electorate the following year. I should like the Minister to make it compulsory for all district councils at least, and certainly all London boroughs, to hold annual elections, with a proportion of their councillors retiring every year.
    I urge the Secretary of State to withdraw the proposals and to concentrate his mind and efforts on producing suggestions for a fundamental reform of the rating system. I know that it will not be easy. There have been many reports, White Papers and Royal Commissions on the matter ever since the war, all seeking alternatives to the rating system. Perhaps all that the Secretary of State need do—instead of wasting time writing a new Green Paper—is to look out the 1971 Green Paper, dust it off and reprint it. I doubt whether any new ideas have been put forward since that Green Paper was published and I am sure that no new ideas have emerged since the Layfield committee report.
    The Hampshire county council said in its message to the Prime Minister:
    "At a meeting this morning Hampshire County Council voted unanimously to oppose the proposed legislation on new rating procedures. The County Council has consistently played its full part in containing public expenditure and stands on its record. Nevertheless, we believe that the proposals which have been placed before you are seriously flawed on both financial and constitutional grounds. We do not think that they will meet the short term aim of curbing the profligate on the one hand, while on the other we are certain that in the long run they will impair efficiency and lead to worse services at greater cost. Members and officers of this County Council stand ready to assist your Government immediately in framing alternatives to meet the present needs, but we urge you respectfully, yet most earnestly, not to proceed with the proposals presently before you."
    I echo those words, which could have been written by almost any council in the country.
    The SDP will vote for the motion, even though we recognise that there is a slight defect in the wording, but we make it quite clear that we are totally opposed to Ken Livingstone, Ted Knight and the other extremists who are bringing local government into disrepute.
    8.41 pm
    Mr. Anthony Beaumont-Dark: A consideration of Parliament's attitude towards local government in the past 40 years is a melancholy one. Time and again and in Bill after Bill, Parliament has adopted a policy of cnetralisation and we have seen almost a Becket-like principle; "Who will rid me of local government, and who can do it soonest?"
    Many services that local goverment use to perform have gradually been taken away from it, including electricity supple and distribution, gas, water, sewerage, hospital services and local health services. Has the transfer of those powers and functions led to a better service to the community?
    Anyone who remembers the services as they were when run by the local community will agree that nowadays there is usually a rotten service, which is vastly expensive and has involved massive staff increases, enormous bureaucracy and less service to the people. It is generally less responsive.

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    Local authorities are not perfect, but I have been offended by the argument that has got through to the public, that if any hon. Member is against the proposed referendums he is, therefore, in favour of high-spending authorities. Because a person stands clearly on the principle that referendums should not become an established part of our procedures—with the result that councillors and hon. Members will become delegates instead of representatives—that does not mean that he is in favour of high-spending authorities.
    The Government have panicked. They have looked at the figures and someone has bullied my right hon. Friend the Secretary of State for the Environment and told him to play his part and a bit more. I know that some of the cuts have been made in capital projects, which is a bad thing, but let us remember the Blue Books, Red Books and White Papers on future Government expenditure that were produced when we first came to office.
    I say to any Minister who claims that local authorities are ruining things that if the Government had got their cuts only half right interest rates would be about 6 per cent. now. Our problems have not been caused by profligate local authorities. They have to pay high prices for energy, high charges for gas and so on.
    Democracy, local and central, is often inconvenient, uncomfortable and fractious. But is any other system devised by mankind as good as the system we have today?
    The Minister would be right to ask me what I would do. I was strongly in disagreement with the Local Government, Planning and Land Act 1980. I am now even more pleased that I voted against it. The 1974 Local Government Act set up the weird county authorities which many hon. Members now agree should be changed. Local authorities should not have a four-year run of office. That is quite incredible. It can and should be changed, and I am sure that this House would pass a speedy Bill to see that every local authority had a third of its members re-elected every year.
    Council tenants should clearly understand that in their rents they pay heavy rates. I agree with what I believe the Government wish to do. The way to bring the problem home to people is not to go in for a system of referendums, where Granny Whitehall knows best. Having worked for about 20 years in local government, I am aware that it certainly does not. Better, more sensible and responsive people, with more interest in their communities are to be found in town halls than in Whitehall.
    We must encourage people to vote. Most people vote with their backsides, but there is one way to get them to move. The domestic rate relief of 18·5p should gradually be moved over to an industrial rate relief. If local authorities wish to have a right to spend that money, they should be willing to defend it to their electorate. The whole idea of local democracy is not that local authorities should have one bag of gold after another to spend as they wish but that they should be able to explain to people what they wish to do with the money and allow the people to vote. Voting every May is a first-class idea.
    If we are meant to be a democracy, the one thing that has to be made clear is that the rating system may seem to the professional to be a good idea, but to the man in the street, who pays his rates in anger, it seems unfair.
    Successive Governments have all promised to do something about the rating system. I have the greatest regard for the Prime Minister's knowledge of local government. She said that she would do away with rates.
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    If there is any electoral promise that people always demand that Governments keep it is this. People will still have to pay for their services but the rating system seems unfair. If enough people think that it is unfair, even though we clever dicks think that it is as good as any other system, it should be changed. That is what being responsive to democracy means.
    The Secretary of State made one fundamental error when he said that all have to play our part in cutting expenditure. That was when he said that he would be willing to let local authorities borrow money. If local authorities are allowed to raise rates, that does not affect the PSBR—the magic figures of today. However, if local authorities borrow money, that affects the PSBR. I know a little about treasury affairs, and the one thing that local authorities should not be allowed to do is to borrow money. If money has to be raised, let it be raised by the rates, but let us hope that within a very short time it can be raised on a system that is more just.
    Let us defend local democracy, not overspenders. Let us defend the right of local authorities to make mistakes. Let them go to their electorate each May, so that the electorate can tell them whether they were right or wrong. That is far better than adopting a panicky, escapist measure about referendums—a system that no Conservative Government should use.
    Democracy is not some kind of expedient. We should hold on to the belief that people have a right to be difficult and fractious. The democratic way of life in this country should be regarded as inviolable. The local government way of doing things is the right way, and we should not deprive local authorities of their powers.
    8.50 pm
    Mr. Frank Dobson: There are three really objectionable features of the Government's proposals. The first is the referendum, about which several hon. Members have spoken. It may to some extent be a red herring—or, rather, a blue herring.
    An even more objectionable feature is the extent to which the Government's proposed measures will allow the totally arbitrary interference by the Secretary of State in the expenditure of local authorities and in the amount of grant that is given to them.

    The third objectionable feature is what is described as a measure of protection for industrial and commercial ratepayers. It springs in part from the Government's desire to perpetuate the myth that British business is overtaxed. It simply is not true. In 1980, the corporate business sector contributed only 8·4 per cent. to total Government revenue—and that included petroleum revenue tax.
    The extent to which the payment of tax can be avoided by big corporations is so enormous that Britain is now regarded by the major multinationals as a tax haven. While small businesses may suffer, the big corporations and multinationals have reached the stage at which they pay corporation tax only by accident, or if their accountants are incompetent. That is one reason why rates come as a great shock, particularly to large businesses. It is the one tax that their accountants and lawyers cannot fiddle their way out of; they have to pay it. It is worth remembering, when talking about non-domestic ratepayers, that they can all set their liability for rates against their tax liabilities. Consequently, large numbers of them do not, in effect, pay any rates.

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    The area in which I live, and which I also represent, has what can only be described as rather high rates. That is partly because the London borough of Camden received no grant from the Government this year; nor did the Inner London Education Authority, which was robbed by the Government of £128 million.
    Although some small businesses are in danger of being driven out, other businesses seem desperately eager to move into the area, despite the high rates about which they complain. The Confederation of British Industry moved into Centre Point not long ago and is now moaning about the rates that it has to pay. About two years ago, the CBI was on its knees, begging and praying the Camden local authority to change the use class of part of that building in order to facilitate the CBI's use of it.
    I understand that Times Newspapers has also been moaning, and even went to the extent of changing its architect, so that it could get through its scheme for its new premises in Grays Inn Road.
    Another gigantic office development in my area is that of EMI. When the Chancellor of the Exchequer was one of the directors of EMI, it said to the Camden council, and at subsequent inquiries and at appeals before the courts, that it could not survive or compete internationally unless it went into a large building that was being constructed in Tottenham Court Road. Not a word was said then about the extent of the rate burden that it would have to pay.
    Another organisation that is very close to the heart of the Conservative Party is Saatchi and Saatchi. That firm is so desperately oppressed by the commercial rate in Camden that, without benefit of planning permission, not long ago it extended its offices into property which at that time was zoned for light industrial purposes.
    All of these organisations are very keen to move into central London despite the fact that they have very high rate burdens.
    I am very disturbed at the prospect of the Government abating rate increases for such organisations and, at the same time, not seeking to abate rate increases for people who live in London. I have considerable sympathy with small businesses in London because of the rates that they must pay, but I hope that they will recognise that the main reason for the increase in the rate burden on residential and non-residential ratepayers in London over the last year is the robbery by the present Government of about £450 million in one year. That is the main reason why there have been rate increases in London, and it is not the sort of madnesses referred to by the hon. Member for Southampton, Itchen (Mr. Mitchell), who is apparently such an expert in the affairs of London local government—and who has now disappeared.
    8.55 pm
    Mr. John Butcher: In the five minutes available to me, I should have found it extremely agreeable to respond to the reference by five hon. Members to the Coventry referendum. I do not have time to explain why that referendum had a number of curious features that may have led us to conclusions that were not entirely accurate.
    I should like to refer to two documents. One is a discussion paper entitled "Decentralisation of Government" which was produced at the Social Democratic Party conference this year, and the other is
    734
    entitled "An Encyclopaedia of Local Government Law." Unfortunately, Social Democrat Members, in a poorly attended debate on their part, are no longer with us. I can only assume that they are in a buffet car somewhere between Euston and Croydon, enjoying rhyming couplets and a general singalong. I beg the pardon of those hon. Members. I made a Freudian slip. The buffet car is somewhere between Euston and Crosby.
    The Social Democrats emphasise that this is a discussion document, because policies are something to be feared rather than projected. They say in the document:
    "There is no evidence that local micro-economic intervention need upset central Government's macro-economic calculations and if local decisions were in the hands of those with local knowledge who were locally accountable, it is reasonable to expect they would be relevant to the locality and therefore effective."
    They use the words "no evidence."
    The fact that we are having this debate is surely indicative of the conditions surrounding the relationship between local government and central Government. There is ample evidence that the microeconomic decisions of local government often clash with the macroeconomic decisions of the Department of the Environment and its Ministers.
    This pitiful, sorry, policyless document goes on, when it discusses regional elected assemblies, to say:
    "In some parts of the country the boundaries will suggest themselves. In others the public identification with the particular locality will follow, rather than precede, the delineation of regional boundaries".
    What that means is that even though one may have no loyalty to or identity with a particular region at the moment—in the way that Coventrians no longer have any loyalty to or identify themselves with the West Midlands county region—"We, the SDP, will tell you what your region is and you will grow to like it, will you not?"
    The hon. Member for Southampton, Itchen (Mr. Mitchell) accused the Government of arrogance in their dealings with local government. That shows the arrogance of those who think that they were born to lead, the arrogance of those whose shock troops are the militant middle management of the public sector. My goodness, they are serving their supporters well in this sorry document.
    The only other document to which I should like to refer is the one published by Sweet and Maxwell entitled "An Encyclopaedia of Local Government Law". It lists all those Acts that have affected local government since 1970. There are 148 in total. I am ashamed to say that 23 of them were passed in the last 18 months by this Government. Parliament has imposed thousands of measures upon local government during the past 10 years. That is why there are now 500,000 more full-time employees in local government than there were in 1970. We must review the weight of that legislation and, if necessary, repeal it.
    If my right hon. and hon. Friends were to start with the abolition of the West Midlands county council, they would be cheered to the echo. We would hear the noise at this end of the M1. The arguments deployed for the abolition of the West Midlands county council may be frighteningly similar to the arguments deployed against other metropolitan county councils and that awesome body the GLC.
    9 pm
    Mr. John Forrester: There have been many periods of strain between local

    735
    government and national Government, but relations have never been as bad as they are now. The Secretary of State has welded a united band of councillors, of all political persuasions, that would not have been thought possible years ago. They stand united against the Whitehall juggernaut.
    The message that we received from the Staffordshire councillors was that if Whitehall is to decide what is spent—and when and where it is spent—there will be no need in the future for free-thinking men and women with a social conscience serving on local councils. Many of those serving in local government will fade away and leave the way open for others whose motives may be different from those of the councillors who have, on the whole served Britain so well for so long. That would be a tragedy for Britain and for local government.
    Most local authorities have played fair with the Government. They have tried to achieve their targets, but they are somewhat annoyed when, once the target is in their sights, it moves away. Sometimes when they achieve their target they receive notice of a hold-back of their rate grant. That may be due to some miscalculation by the Whitehall computer, despite the fact that figures have been presented to the Government. That attitude is demoralising, both for councillors and for the officials who feel now that they are always walking on shifting sands. My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) produced evidence that local authorities are better than central Government at controlling their expenditure.
    One problem is that local authorities are being asked to contract when there is an ever-increasing demand for their services. The increasing demand is imposed upon them by new legislation from the Government. There is also a feeling that the Government are trying to use a broad brush approach and are insensitive to local problems. The Secretary of State has recently seen and appreciated the magnitude of inner city problems in Liverpool. To a greater or lesser extent, those problems apply in all of Britain's major cities. He now knows that we cannot solve those problems with massive cuts in local expenditure.
    No one doubts that rates are an unwelcome expenditure. No one wants to pay rates. Nor do they wish to pay taxes. However, we do not need a referendum to tell us that. We know that the nation's answer would be that it does not wish to pay any more. If we introduce Government by referendum in Britain, the Secretary of State will be making a grave error of judgment. A referendum should be used only for great constitutional changes in society.
    We have a very good method called local elections. I support the view put forward earlier that if four years is too long for a council to sit—even a county council—we should change the law so that one third or one quarter of councillors retire every year. That is sufficient incentive for councillors to keep their houses in order. If Government by referendum is to become part of the British way of life, where will it end? Will we degenerate into referendums on individual topics such as a town hall here and an old folks' home there? That appears to be the position that will come about.
    Many hon. Members on both sides of the House hold dear to their hearts various services and issues that they would not wish to be the subject of a referendum because they would be fearful of the results. The battle cries of TINA and TINOW—there is no alternative and there is no other way—cannot be right. Few things in life respond to
    736
    only one approach. The Secretary of State should know that there are those in local government who recognise his problem. There must be ways to control the few big spenders other than by destroying local democracy for the innocent and guilty alike.
    I ask the Secretary of State to think again before he introduces this legislation. I ask him not to open that Pandora's box. I ask him not to put on the statute book powers that he would not have urged on another Government—powers that he would not willingly have voted for when in Opposition. Laws made for short-term expediency have a habit of becoming long-term shackles in other people's hands.
    The lessons of Croydon, Camden and Coventry have been well learnt in the town halls and political offices throughout Britain. They will take due note of them without the necessity to introduce a dictatorship into local government.
    9.7 pm
    Mr. Bruce Millan: The most significant feature of the debate has been that not one hon. Member from either side of the House, with the exception of the Secretary of State, has supported the proposals. There were eight Conservative Back Bench speeches, and not one supported the proposals. As I listened to the right hon. Gentleman I was not sure whether, towards the end of his speech, even he was convinced about his proposals. He certainly did not convince either side of the House. I hope that that will be reflected in the Minister's reply. In view of the contributions from both sides of the House, it would be a travesty of the debate if there was not a positive and constructive response from the Minister.
    A number of hon. Members said that they were expecting great things of the Government's proposed consultative document on the reform of the rating system. They want to believe that there will be great things in the document. I am sceptical whether that will be so. We have been over that ground before on many occasions. I doubt whether there will be anything original in the document. A report today in the Financial Times of evidence given by the Inland Revenue shows that local income tax—one of the favourite alternatives to rates—could not be introduced for a number of years for technical and other reasons.
    The right hon. Gentleman said that the Government were serious about reforming the rating system, that they had alternatives to put before the House in the form of a Green Paper, that there would be consultation, and that the Government would press ahead as rapidly as possible. If that is the Government's intention, it is all the more extraordinary and unnecessary to press ahead with the Secretary of State's proposals now. If the Government intend to make fundamental changes in the rating system within a measurable period, it does not make sense to introduce proposals which are so controversial and which are opposed by all local authority associations and by large numbers of Government supporters in the House.
    One of the arguments we have heard today about local government expenditure—important in terms of the economy as a whole—is that it is out of control. In an extremely able speech this afternoon, my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) mentioned some figures which were published by the AMA. In whatever way one considers the comparison between local government and central Government

    737
    expenditure over the past six or seven years, it is not possible to argue that local authorities have a worse record over the control of their expenditure than central Government.
    Details such as how far a particular base year is sensible and appropriate can be argued about. The division between current and capital expenditure can be argued about, as in a rather laboured passage of his speech the Secretary of State did this afternoon. However, the overall picture is not disputable. It is indisputable that local government has a better record of controllong total expenditure than the central Government.
    There is a close link between capital and revenue expenditure. It is a fallacy to imagine that while we attempt to screw down local authorities' current expenditure, a stimulus to capital expenditure can be obtained at the same time. Capital expenditure has revenue consequences. The CBI and some hon. Members today have called for reflation by means of local authorities' capital expenditure without giving some leeway to their revenue expenditure. They are crying for the moon. That will not happen, because it is not in the nature of local government that we can have one without the other.
    The Government have gone well beyond saying that local government expenditure is too high. They have said that it is they, and they alone, who should decide the total of local government expenditure. The Secretary of State tried to pretend that that had always been the position, whatever Government were in power. Successive Governments had taken the view that the Government alone should decide the total of local government expenditure. That is not so, and the right hon. Gentleman's attempt to describe what happened under the previous Labour Government does not carry conviction.
    It would be futile to argue that any Government are unaware of or are indifferent to total local government expenditure. Of course they are not. Every Government—whether Labour or Conservative—are interested in the total of local government expenditure. If, in the Governments view, total local government expenditure is likely to be too high, they try to persuade local government to reduce its expenditure, or at least to confine it to parameters that the Government of the day believe are in the national economic interest.
    Long before the 1980 legislation and before the Local Government (Miscellaneous Provisions) Act 1981, the Government had powerful weapons in their hands to control local government expenditure. As the right hon. Gentleman stated, local authorities are virtually unable to spend anything on capital account without the central Government's permission. If it is revenue expenditure, the pressure that can be exerted on local authorities under the old system of rate support grant to keep total expenditure within reasonable limits is great indeed. That was true before the Government's misguided attempts to interfere with the system in 1980 and 1981.
    While every Government certainly take the view that local government expenditure is something that they should be interested in and should try to influence, this is the first Government to attempt to impose an overall control on local government expenditure by Act of Parliament. All previous Governments have taken the view that central Government contributions towards local expenditure through the rate support grant, or in other
    738
    ways, are matters for the central Government. They have taken the view that, in the last analysis, local government's contributions to its own expenditure should be the responsibility of local government itself.
    The Government say that total expenditure should be controlled directly by the central Government and that the only decisions made in that regard should be those of the Government. That is fundamentally antithetical to what we understand to be local democracy. It is the first major mistake that the Government have made, and it is the first injustice that they are imposing on local authorities.
    Part of the Government's defence has been that it is necessary to take the action that they are proposing because, although most local authorities are reasonable, a few do not listen to any advice from the central Government.
    I take up one of the arguments that was advanced by the hon. Member for Staffordshire, South-West (Mr. Cormack) in an interesting and effective speech. The essence of local democracy is that some local authorities should behave in a way that the central Government find disagreeable. Otherwise, every local authority will be turned into an agent or creature of central Government. Every Secretary of State, whether for Scotland, the Environment or anything else, must accept that if local democracy is to mean anything, some authorities will behave in ways that he finds unacceptable or disagreeable whatever pressure he might apply to them. That is no reason for changing local government's financial system. It is certainly not a reason for changing the system in favour of the central Government and against local democracy.
    The Government have to deal with not a few local authorities. I am pleased that the Secretary of State for Scotland has taken his place. He has not been here all day but I am delighted to welcome him now. When the right hon. Gentleman issued his guidelines to Scottish local authorities, 59 of the 65 authorities were spending in excess of the guidelines. The overspenders were not just a few recalcitrant authorities. Nearly half of them—28 authorities—were about 20 per cent. above the guidelines. My right hon. Friend the Member for Ardwick demonstrated that while some Labour authorities in England were spending in excess of the Government's assessment of what they should be spending a considerable number of Conservative authorities were in a similar position.
    Against that background, the Government are acting not only as if they know enough in Whitehall or at St. Andrew's House to determine the total amount of local government expenditure and to try to coerce local authorities to stay within that grand total. They are claiming to know enough to lay down limits of expenditure for individual local authorities. That is demonstrable nonsense. No Government and no Department can possibly know enough about local circumstances to be able to lay down in detail the right expenditure for any individual local authority.
    Scotland has had experience over the past few years of the Government's penalties. Local authorities have been asked to respond to the Secretary of State's demand for reduction in expenditure. The local authorities supplied the right hon. Gentleman with details of their local circumstances. It was demonstrated beyond peradventure that, even in Scotland, which is a smaller country than England and Wales taken together, with fewer local

    739
    authorities, with a much smaller population and with an intimate relationship between the central Government and local government, it was impossible for the Scottish Office to know the details about individual local authorities' circumstances—details that it would be necessary to know if we accept that the principle should be applied—to enable it determine what penalties to impose on individual local authorities for spending beyond what the Government considered to be reasonable amounts.
    It is significant that the Secretary of State for Scotland has refused to give details to the Scottish local authorities of how he has drawn up the guidelines that he expects them to follow. Yet the idea of the Government knowing best is now to be taken beyond the 1980 Act in England and the 1981 Act in Scotland to the new proposals that we are now debating.
    Before I deal with those proposals I want to give more details of the background, which is important to the whole question of the relationship between local authorities and the Government. The Government have not dealt with local authorities honestly during the past two and a half years. Not only have they asked for cuts in local government expenditure, but they have asked for unrealistic targets, despite the right hon. Gentleman's protestations this afternoon. He seems to think that if some authorities can meet his targets every local authority should be able to do so. What a non sequitur that is. Moreover, he says that the targets are perfectly reasonable and realistic.
    That is absurd. Many local authorities believe that the targets laid down for them by the Government are unrealistic, and they are also suffering the penalty that the cash limits imposed on them by the Government each successive year have included wholly phoney inflation limits which have not met the real inflationary expenditure which local authorities have had to meet—from no wish of their own, but as a result of the general economic situation.
    In that wholly dishonest situation, expenditure limits have been unrealistic, and doubly so, because they have been accompanied by cash limits that have not allowed local authorities to meet the inflation that has been imposed on them by Government policy. That is why, as my right hon. Friend the Member for Ardwick said, there have been reductions in expenditure, poorer services and at the same time soaring rate bills for domestic and other ratepayers. The main responsibility for those soaring rate bills lies with the Government, not with local authorities.
    As well as soaring rate bills, the new proposals will mean that there will be an even greater breakdown of confidence between local authorities and the Government. The relationship between them is now at a lower ebb then ever before in recent history. The relationship has been damaged because Ministers have often sought to stimulate and encourage prejudice by ratepayers and others against local authorities.
    I was glad to hear the hon. Member for Devizes say that virtually all local authorities and councillors are trying to do a decent job for their areas. Much as I may disagree with Conservative councillors from time to time, I believe that that is true of most of them as well as of most Labour councillors. It does no good to local democracy, to the Government or to the House, to stir up prejudice against local authorities. That is an unfortunate result of the great
    740
    battle between local authorities and the Government, and it has been encouraged by Ministers both in the Department of the Environment and in the Scottish Office.
    It is hardly necessary for me to repeat the arguments against the referendum proposals. However, I repeat that no hon. Member has defended these proposals today, not even to a limited extent. If there are any Conservative Members who are prepared to defend them, it is a pity that they did not do so. The proposals have no friends in the local authority associations, in the House, in the media, in the press or in the country.
    In those circumstances it is extremely foolish of the Secretary of State to press ahead and publish provocatively a Bill while he is in the midst of discussions with members of his party. As a result, he has not had a single friend in the House today.
    The referendum proposal is dangerous, not only for local democracy, but for democracy in general. Some hon. Members have speculated about the result of a local referendum. They have pointed out that it might produce perverse results. If the Secretary of State lays down the terms on which a referendum is to be held, if he sets the question and it is concerned solely with whether the rates should be increased, the referendum will be phoney. People will not be asked to make a sensible choice In such circumstances, no authority could win.
    I am sorry to say that such action is reminiscent of the tactics used by authoritarian Governments—of both Right and Left—all over the world. They hold phoney general elections, in which 90 or 95 per cent. of the electorate are apparently in favour of the Government of the day. Such elections are completely phoney and so is the poposed referendum.
    An analogy can be drawn. If it is good enough for local government to hold referenda, why cannot the same type of referendum be held for Budget proposals? In 1979, why should not the Government have put the doubling of VAT to a referendum of electors and taxpayers? Why should the decision not to increase personal income tax allowances—contained in the 1981 Budget—not he put to a referendum, so that we can see how the people feel about it? On populist measures, why should we not put the question of capital punishment to a referendum? Few hon. Members would believe that to be sensible. It would bite at the roots of parliamentary democracy.
    The Government will no doubt say—whether in relation to Budget proposals, or anything else—that they have a mandate for what they are doing. We may or may not like that, but it is up to the Government to discharge their mandate and put their record to the electorate at the end of their term of office. That is a valid argument, and if it is valid for the Government it is valid also for local authorities. That is the type of decision that electors should take. They should not be faced with some phoney referendum, with a choice that will almost inevitably go against the local authority and is calculated to stir up even more antagonism towards local democracy.
    An interesting comparison can be drawn between the Secretary of State's decision in relation to England and Wales and the decision that has been made in relation to Scotland. We are glad to see the Secretary of State for Scotland in the Chamber.
    Mr. George Foulkes: Why is he not replying?
    Mr. Millan: The right hon. Gentleman does not have a reply. As recently as last month he told Scottish local authorities that he would go ahead with a referendum. Why has that decision been dropped in the last month? The excuse that is being given is that the Government have decided that they have sufficient powers in Scotland. However, they have not gained any new powers between October and November, or between the date on which the proposals were put to the Scottish local authorities and the day, last week, on which they decided to drop them.
    The Government have dropped the proposals for Scotland because they were unanimously condemned by Scottish local authorities and by many Conservatives, who previously supported the Government in their actions in relation to local government finance. The Government did not have a single friend in Scotland—among local authorities or anywhere else—for their proposals. They have no friends for their English proposals either. If the proposals are to be dropped for Scotland, why should they not be dropped for England and Wales?
    Mr. Ioan Evans: There is complete unanimity in Wales on the condemnation of these measures.
    Mr. Millan: I should expect that from Wales.
    The Secretary of State said that he had an open mind on the matter. That was a revelation. It was a change from his behaviour during the last few days. If he has an open mind and is willing to consider alternatives, we are entitled to an explanation of the alternatives. It is not enough to be offered the vague proposition that if he does not go ahead with his proposals he will introduce other measures that will result in more local democracy or more central Government intervention. We are entitled to more detail than that.
    Some hon. Members have suggested that we should go for the Scottish option. Let me make the position clear. Government Members had better understand that there is no question of either my right hon. and hon. Friends or local authorities in Scotland finding the Scottish option acceptable. The Scottish local authorities are against what is being done in Scotland. If similar measures are introduced in England and Wales, there will be considerable hostility among the English and Welsh local authorities.
    The Scottish option contains all the objectionable elements except the referendum. We are grateful for small mercies. All other aspects of the scheme are objectionable. There are no supplementary rate powers for Scotland. Under the 1981 Act the Secretary of State can determine local spending. He can do that on an individual basis and he does not have to justify his action. He has arbitrary powers and will not have to explain the guidelines. He does not even have to justify the choice of authorities that he singles out for penalty under the Act.
    If those arguments do not appeal to Government Members, I warn them that one of the arguments in favour of the Scottish system was that it would allow the good and bad authorities, in the Government's estimation, to be dealt with differently. The good authorities were supposed to escape scot-free and only a few recalcitrant authorities were to be dealt with. However, every local authority in Scotland is being penalised this year by the Government. That is so whether they have attempted to co-operate with the Government and whether they are Tory or Labour controlled. All local authorities in Scotland are being
    742
    penalised and have had their rate support grant reduced. If anybody believes that there is a solution for authorities in England and Wales in the Scottish option, they could not be more wrong and will be disillusioned.
    We require neither the English nor the Scottish option. The Government's whole approach to the problem is wrong. Their attempt to push through the idea that the Government know best, that only the Government have a right to decide local authority financial matters, is at the root of the problem.
    That whole idea, far from encouraging a conciliatory or helpful approach by local authorities, simply provokes local authorities into opposition. If the Government had attempted to maintain the normal harmonious relationships between themselves and local authorities with regard to total expenditure, they would have done a great deal better from their point of view than they have so far.
    During the debate hon. Members on both sides of the House have said that there is a desperate need to restore confidence between the Government and local authorities and to try to recreate the harmonious relationship which by and large, although with exceptions, has existed for many years. We badly need that new relationship. The first step towards creating it would be to abandon the referendum proposals. The Secretary of State will not be able to carry through those proposals. He would do better to give in graciously now and accept the Opposition's motion.
    9.36 pm
    The Minister for Local Government and Environmental Services (Mr. Tom King): We have had a serious and interesting debate on local government and its relationship with the Government. A number of hon. Members have spoken of their experience in local government. The hon. Member for Mitcham and Morden (Mr. Douglas-Mann) struck a chord in describing his concerns about the morale of councillors and the hardships that they must face. He described as one of those hardships the boredom of having to listen to one's opponents' speeches. At certain moments in the debate that also struck a chord with me. I felt that that problem was not confined to councillors.

    I understand why the right hon. Member for Glasgow, Craigton (Mr. Millan) dwelt on the situation in Scotland, particularly the Lothian regional council. The action taken by my right hon. Friend the Secretary of State was the only responsible action that he could have taken in the circumstances, when faced with such gross overspending. I understand that, faced with such a problem, the right hon. Gentleman would have done nothing, but, in all candour, that hardly seems to ring true. He was a member of a Government who were faced with a similar situation. The then Secretary of State for Transport was not prepared to put up with high overspending in England.
    With regard to the relationship between the Government and local authorities, most hon. Members recognise that the Government have a responsibility to set the macro-economic targets and fix the overall levels of public expenditure. It cannot be otherwise. I shall not rehearse the arguments and quotations of my right hon. Friend the Secretary of State, but the House knows that the late Anthony Crosland, when he was Secretary of State for the Environment, and the right hon. Member for Stepney and Poplar (Mr. Shore) made clear their determination to secure the overall levels of public expenditure represented

    743
    by the sums involved in local government services. The right hon. Member for Manchester, Ardwick (Mr. Kaufman) knows that he was a member of the Government and a Minister in the Department of Environment when that policy and approach were being followed. Therefore, as my hon. Friend the Member for Devizes (Mr. Morrison) said, it is extremely hypocritical to suggest that it is just this Government who have taken such a keen interest in the levels of public expenditure in local government.
    The clearest impression that I have had in my time as a Minister in the Department of the Environment is that every responsible local government leader, regardless of party, has made it absolutely clear that he accepts entirely the proper role of the Government in setting those overall expenditure targets. Moreover, they take pride in achieving over the years their overall public expenditure targets.
    However, we must recognise that that was at a time when expenditure was consistently increasing, especially in the post-war period. The problem is much more difficult when public expenditure is being reduced. I pay tribute to those authorities which in such difficult times have shown their determination to play their part and to achieve the targets. Of 413 local authorities in England, 235 will hit their target. They are not just the small shire districts but also comprise metropolitan districts, shire counties and London boroughs. Every sector of local government has played its part. The majority are trying to achieve the targets.
    However, more recently there has been a change. When the right hon. Member for Norwich, North (Mr. Ennals) was recounting his happy experiences of the consultative council, my right hon. Friend the Member for Daventry (Mr. Prentice) pointed out that they were due to the co-operative attitude of a vast number of Conservative authorities and Conservative-led associations that recognised their responsibility in the national interest to contribute to economies in public expenditure. My right hon. Friend also pointed out that the sharp distinction and difference now is among some Labour leaders in local government.
    Mr. Ennals: Does the Minister not accept that all local authority associations, whatever their political control, are against the proposals, including the Association of County Councils and the Association of District Councils? By no stretch of the imagination does that view come from only one political party.
    Mr. King: I shall come to that point shortly.
    Relationships between local government and central Government relationships have rested on voluntary understanding, but that is now under threat. I make no bones about it. It is under threat from people who are no longer prepared to accept the basic tradition on which local government has stood—the acceptance of the Government's responsibility to set overall public expenditure targets, which we happen to believe are important.
    The hon. Member for Sheffield, Attercliffe (Mr. Duffy) said that local government spending was on target, as it was only 5·6 per cent. over. I do not know how he would have got on had his right hon. Friends been in Government and he had told them that he had overspent by only £1 billion. He also suggested that people in Sheffield were not concerned about commercial rates. Like my hon. Friend
    744
    the Member for Reading, North (Mr. Durant), I visited Sheffield. I spoke at a chamber of commerce lunch on the day when a number of companies working under extremely difficult trading conditions learnt that their commercial rates were to be increased by 42 per cent. The hon. Gentleman has less understanding of his constituency than I would expect if he believes that those companies were not concerned.
    We cannot allow a few authorities to destroy the traditional relationship between central Government and local government. If they went ahead, the authorities that have willingly co-operated and honoured that traditional relationship will no longer feel that there is justification in continuing to do so. When people in local government who are playing their part see the extravagances of the few they wonder why they should bother. Action must be taken to protect the traditional relationship. The introduction of the block grant last year in the Local Government, Planning and Land Act worked on the basis that local government was still free and that local authorities would be free to set their own rate levels. There was a disincentive in the grant distribution system against higher levels of spending, but the essential freedom remained.
    Hon. Members have asked about grant distribution. The Government hope to make an early announcement of the settlement this year, as the hon. Member for Isle of Wight (Mr. Ross) asked. We understand the importance of doing this as soon as possible, but important decisions are involved. We are conscious of the need to make the decision and help local authorities.
    My hon. Friend the Member for Reading, North was concerned about the housing aspects of the famous E7 indicator. That, too, is very much in our minds. I cannot anticipate the rate support grant distribution but I can confirm the Government's close interest in that matter. The basic assumption of block grant rests on the cardinal issue that local authorities will have some ultimate regard for their ratepayers because of the disincentive whereby higher levels of expenditure curtail the level of grant and can lead to higher rates. This implies that local authorities will have some ultimate regard for the level of rates imposed on ratepayers.
    The Government's concern must be for the overall level of public expenditure. It must also be to ensure that there is some ultimate protection for ratepayers against gross abuse. We have listened to all points of view in drawing up our proposals. The views of local authority associations are important. Local authorities are far from unanimous on this question and there is considerable support for the proposals among councillors. The interests of business are important also and we have had representations to that effect.
    Let us consider the options before us. The first would be to do nothing about the level of overspend and extravagance by a few authorities. The right hon. Member for Ardwick clearly favoured that option. We believe that we cannot ignore the problem and must confront it with a number of courses of action. Conservative Members have made it clear that they wish to see early action on rate reform. My right hon. Friend the Member for Worthing (Mr. Higgins) wished to see rates abolished immediately and transferred to a central Government vote and operated in that way. My hon. Friend the Member for Staffordshire, South-West (Mr. Cormack) had different ideas on rating reform.

    745
    My right hon. Friend the Secretary of State has made it clear that a Green Paper will be published shortly. I hope that we can arrive at an early understanding on the best way to proceed. From what my right hon. and hon. Friends have said, there will need to be discussions on this. Perhaps my hon. Friend the Member for Staffordshire, South-West did not hear all of the speech of my right hon. Friend the Member for Worthing. Certainly their approaches to the rating problem did not entirely tally. I make no more of that, as clearly there are difficult problems imvolved in these matters.
    Against the background that we must proceed as speedily as possible with the issues involved in the Green Paper, we nevertheless see a need for interim measures. I emphasise, as did my right hon. Friend the Secretary of State, that there are interim proposals. It was suggested that these measures should be on a time limited basis, possibly renewable annually or triennially. My right hon. Friend responded very positively to that proposal.
    The important thing, however, is that we have an option available to work for next year. We have put forward our proposals. We recognise that they are controversial. There are different ways to enhance local accountability. One option is the local election. The other is the local poll. A number of my right hon. and hon. Friends made clear their views on national referendums. My right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) pointed out the constitutional background. He did not refer to the local poll, enshrined in the Local Government Act 1972. That is an established precedent which has been used on various occasions. As my right hon. and hon. Friends will be aware, we take the view that the proposal is perhaps not the constitutional departure that others may feel it is, but I understand the views that are sincerely held on this and we have, of course, listened to them with great interest.
    I turn to the possible alternatives. My right hon. Friend the Member for Daventry suggested that there should be parliamentary approval for expenditure above a certain level, and that instead of the local poll approach there should be some form of parliamentary order to sanction spending above another level. Clearly that would involve problems and difficulties, but it is an option. The suggestion that we should remove the power to levy a supplementary rate, which has been made before, would also involve problems, but again it is an option which can be discussed.
    The alternative means of improving accountability which has been most canvassed in the debate, however—I noticed that it spanned all parties, including my hon. Friends the Members for Reading, North and Birmingham, Selly Oak (Mr. Beaumont-Dark) and the hon. Member for Stoke-on-Trent, North (Mr. Forrester)—was that of regular annual elections, electing one third each year. Certainly the present pattern of local government elections is inconsistent. In some cases, all members stand for re-election, in others only one third. There may be an argument to be considered in that respect.
    So that there can be no misunderstanding, I should make clear exactly what my right hon. Friend the Secretary of State said in opening the debate. He made it clear that he has to fight for the Government's public expenditure programme, as we all do. He made it clear that most local authorities have tried to meet their targets, but
    746
    that a minority has not and he cannot ignore that. He made it clear that he has an open mind as to how we achieve control over the small minority, but we cannot ignore its existence.
    My right hon. Friend made it clear that he will consult and will examine any alternatives—including all the suggestions put forward in the debate—which can achieve the Government's objectives, provided that this can be done quickly enough for the Government to act in time for the next rating round. In all sincerity, I do not believe that my right hon. Friend could have shown a more responsive and responsible attitude to the concern expressed by a number of my right hon. and hon. Friends today and by others who I know are concerned about this. We understand their concern. I very much hope that my right hon. and hon. Friends will be able to respond in a constructive way to the approach that my right hon. Friend has adopted. In contrast to that flexible and constructive approach, I believe that my right hon. and hon. Friends are far too sophisticated to fall for the glib and facile political approach adopted by the Labour Party.
    These are difficult issues. As my right hon. and learned Friend the Member for Hertfordshire, East stated, we have no written constitution. The actual balance between central and local government has evolved over the years. There is no hard line or exact correctness of line that can be claimed at any one time. We are, however, seeking to maintain a sensible balance and not allow the few authorities to destroy what otherwise should be a proper voluntary relationship between central and local government.
    The right hon. Member for Ardwick said that the block grant had failed and later claimed that the saving in local government expenditure that my right hon. Friend had achieved was an even higher figure than the Government had suggested. If there was one part of my right hon. Friend's speech to which I would have taken exception, it was the outrageous remark that the right hon. Member for Ardwick could not have it both ways. That challenges a very dangerous concept in this House. The right hon. Member for Ardwick has been having it both ways in every speech I have heard him make. I am puzzled that it came as such a surprise to my right hon. Friend.
    The right hon. Gentleman is guilty of gross hypocrisy in bringing this motion—
    Mr. Speaker: Order. I think that the Minister means that the argument is hypocritical. He cannot accuse the individual.
    Mr. King: I am grateful to you, Mr. Speaker. [HON. MEMBERS: "Withdraw".] Of course, I withdraw immediately. I think that the arguments advanced by the right hon. Gentleman are the grossest hypocrisy. The right hon. Gentleman accused us of seeking to centralise, to interfere and to change the balance fundamentally. It occurs to me that he was a member of a Government whose idea of running local government was an endless avalanche of circulars and Government directives that used to pour out of the Department of the Environment at every conceivable opportunity.
    I should like to put the facts so that the House can judge which side of the House is the keenest to interfere and to supervise at every stage. In their last year, the Labour Government issued no fewer than 1,873 circulars to local authorities on how to run their business in every nook and

    747
    cranny of their activities. I am pleased to say that, under the watchful eye of my right hon. Friend the Prime Minister, this number has been sharply reduced. The figure in our first year was 671, one-third of the number in the right hon. Gentleman's last year. I am pleased to say that in the second year we reduced that figure by another 50. I am delighted to say that I hope we shall make further economies.
    The right hon. Member for Craigton, in his slightly confusing speech, referred to the detailed control over capital expenditure exercised by every Government Department. The right hon. Gentleman is a little out of date. We have now changed that system.
    Mr. Millan rose—
    Mr. King: Now, for England, we have a single block system. In my own area of responsibility, local environmental services, we have allocated the responsibility individually to the associations to make their own distribution. We have not kept it within the Department of the Environment. We have spread the responsibility and diffused it, and also decentralised power to give local authorities more say over their own capital allocation.
    I hope that the House, having heard the proposals made by my right hon. Friend, will feel that this is a fair basis on which to proceed and will recognise the hypocrisy of the Opposition motion and have no hesitation in substantially rejecting it.
    Question put, That the original words stand part of the Question:—
    The House divided: Ayes 249, Noes 299.

    Division No. 4]

    [10 pm

    AYES

    Abse, Leo

    Crowther, Stan

    Adams, Allen

    Cryer, Bob

    Allaun, Frank

    Cunliffe, Lawrence

    Anderson, Donald

    Cunningham, G. (Islington S)

    Archer, Rt Hon Peter

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

    Ashley, Rt Hon Jack

    Dalyell, Tam

    Ashton, Joe

    Davidson, Arthur

    Atkinson, N. (H'gey,)

    Davies, Rt Hon Denzil (L'lli)

    Bagier, Gordon A.T.

    Davies, Ifor (Gower)

    Barnett, Guy (Greenwich)

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

    Beith, A.J.

    Deakins, Eric

    Benn, Rt Hon Tony

    Dean, Joseph (Leeds West)

    Bennett, Andrew(St'kp'tN)

    Dempsey, James

    Bidwell, Sydney

    Dewar, Donald

    Booth, Rt Hon Albert

    Dixon, Donald

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

    Dobson, Frank

    Bradley, Tom

    Dormand, Jack

    Bray, Dr Jeremy

    Douglas, Dick

    Brown, Hugh D. (Provan)

    Douglas-Mann, Bruce

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

    Dubs, Alfred

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

    Duffy, A. E. P.

    Brown, Ron (E'burgh, Leith)

    Dunnett, Jack

    Callaghan, Rt Hon J.

    Dunwoody, Hon Mrs G.

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

    Eadie, Alex

    Campbell,Ian

    Eastham, Ken

    Campbell-Savours, Dale

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

    Canavan, Dennis

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

    Cant, R. B.

    Ellis, Tom (Wrexham)

    Carmichael, Neil

    English, Michael

    Carter-Jones, Lewis

    Ennals, Rt Hon David

    Clark, Dr David (S Shields)

    Evans, Ioan (Aberdare)

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

    Evans, John (Newton)

    Cohen, Stanley

    Ewing, Harry

    Coleman, Donald

    Faulds, Andrew

    Concannon, Rt Hon J. D.

    Field, Frank

    Conlan, Bernard

    Fitch, Alan

    Cook, Robin F.

    Fitt, Gerard

    Cowans, Harry

    Flannery, Martin

    Craigen, J. M. (G 'gow, M'hill)

    Fletcher, L. R. (Ilkeston)

    Crawshaw, Richard

    Fletcher, Ted (Darlington)

    748

    Foot, Rt Hon Michael

    Molyneaux,James

    Ford, Ben

    Morris, Rt Hon A. (W'shawe)

    Forrester, John

    Morris, Rt Hon C. (O'shaw)

    Foulkes, George

    Morris, Rt Hon J. (Aberavon)

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

    Morton, George

    Freeson, Rt Hon Reginald

    Moyle, Rt Hon Roland

    Freud, Clement

    Mulley, Rt Hon Frederick

    Garrett, John (Norwich S)

    Newens, Stanley

    Garrett, W. E. (Wallsend)

    Oakes, Rt Hon Gordon

    George, Bruce

    Ogden, Eric

    Gilbert, Rt Hon Dr John

    O'Halloran, Michael

    Ginsburg, David

    O'Neill, Martin

    Golding, John

    Orme, Rt Hon Stanley

    Grant, George(Morpeth)

    Owen, Rt Hon Dr David

    Grant, John (Islington C)

    Palmer, Arthur

    Grimond, Rt Hon J.

    Park, George

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

    Parker, John

    Harrison, Rt Hon Walter

    Parry, Robert

    Hart, Rt Hon Dame Judith

    Pendry, Tom

    Hattersley, Rt Hon Roy

    Penhaligon, David

    Haynes, Frank

    Pitt, William Henry

    Healey, Rt Hon Denis

    Powell, Rt Hon J.E. (S Down)

    Heffer, Eric S.

    Powell, Raymond(Ogmore)

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

    Prescott, John

    Home Robertson,John

    Price, C. (Lewisham W)

    Homewood, William

    Race, Reg

    Hooley, Frank

    Radice, Giles

    Horam, John

    Rees, Rt Hon M (Leeds S)

    Hoyle, Douglas

    Richardson, Jo

    Huckfield, Les

    Roberts, Albert (Normanton)

    Hudson Davies, Gwilym E.

    Roberts, Ernest (Hackney N)

    Hughes, Mark (Durham)

    Roberts, Gwilym (Cannock)

    Hughes, Robert (Aberdeen N)

    Robertson, George

    Hughes, Roy (Newport)

    Robinson, G. (Coventry NW)

    Janner, Hon Greville

    Rodgers, Rt Hon William

    Jay, Rt Hon Douglas

    Rooker, J. W.

    John, Brynmor

    Roper, John

    Johnson, James (Hull West)

    Ross, Ernest (Dundee West)

    Johnson, Walter (Derby S)

    Ross, Stephen (Isle of Wight)

    Jones, Rt Hon Alec (Rh'dda)

    Rowlands, Ted

    Jones, Barry (East Flint)

    Ryman, John

    Jones, Dan (Burnley)

    Sandelson, Neville

    Kaufman, Rt Hon Gerald

    Sever, John

    Kilroy-Silk, Robert

    Sheerman, Barry

    Kinnock, Neil

    Sheldon, Rt Hon R.

    Lambie, David.

    Shore, Rt Hon Peter

    Lamborn, Harry

    Short, Mrs Renée

    Lamond, James

    Silkin, Rt Hon J. (Deptford)

    Leadbitter, Ted

    Silverman, Julius

    Leighton, Ronald

    Skinner, Dennis

    Lestor, Miss Joan

    Smith, Rt Hon J. (N Lanark)

    Lewis, Arthur (N'ham NW)

    Snape, Peter

    Lewis, Ron (Carlisle)

    Soley, Clive

    Lofthouse, Geoffrey

    Spearing, Nigel

    Lyon, Alexander (York)

    Spriggs, Leslie

    Mabon, Rt Hon Dr J. Dickson

    Stewart, Rt Hon D. (W Isles)

    McDonald, DrOonagh

    Stoddart, David

    McElhone, Frank

    Strang, Gavin

    McGuire, Michael (Ince)

    Straw, Jack

    McKelvey, William

    Summerskill, Hon Dr Shirley

    MacKenzie, Rt Hon Gregor

    Taylor, Mrs Ann (Bolton W)

    Maclennan, Robert

    Thomas, Dr R.(Carmarthen)

    McNally, Thomas

    Thorne, Stan (Preston South)

    McTaggart, Robert

    Tilley, John

    McWilliam, John

    Tinn, James

    Magee, Bryan

    Torney, Tom

    Marks, Kenneth

    Urwin, Rt Hon Tom

    Marshall, D (G'gow S'ton)

    Varley, Rt Hon Eric G.

    Marshall, Dr Edmund (Goole)

    Wainwright, E. (Dearne V)

    Marshall, Jim (Leicester S)

    Wainwright, R. (Colne V)

    Martin, M (G'gow S'burn)

    Watkins, David

    Mason, Rt Hon Roy

    Weetch, Ken

    Maynard, Miss Joan

    Wellbeloved, James

    Meacher, Michael

    Welsh, Michael

    Mellish, Rt Hon Robert

    White, J.(G'gow Pollok)

    Mikardo, Ian

    Whitehead, Phillip

    Millan, Rt Hon Bruce

    Whitlock, William

    Miller, Dr M.S.(E Kilbride)

    Wigley, Dafydd

    Mitchell, Austin (Grimsby)

    Willey, Rt Hon Frederick

    Mitchell, R.C. (Soton Itchen)

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

    749

    Wilson, Gordon (Dundee E)

    Wright, Sheila

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

    Young, David (Bolton E)

    Wilson, William (C'try SE)

    Winnick, David

    Tellers for the Ayes:

    Woodall, Alec

    Mr. Allen McKay and Mr. Hugh McCartney.

    Woolmer, Kenneth

    Wrigglesworth, Ian

    NOES

    Adley, Robert

    Durant, Tony

    Aitken, Jonathan

    Eden, Rt Hon Sir John

    Alexander, Richard

    Edwards, Rt Hon N. (P'broke)

    Alison, Rt Hon Michael

    Eggar, Tim

    Amery, Rt Hon Julian

    Elliott, Sir William

    Ancram, Michael

    Emery, Peter

    Arnold, Tom

    Eyre, Reginald

    Aspinwall, Jack

    Fairbairn, Nicholas

    Atkins, Rt Hon H. (S'thorne)

    Fairgrieve, SirRussell

    Atkins, Robert(Preston N)

    Faith, Mrs Sheila

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

    Farr, John

    Baker, Kenneth (St.M'bone)

    Fell, Anthony

    Baker, Nicholas (N Dorset)

    Fenner, Mrs Peggy

    Banks, Robert

    Finsberg, Geoffrey

    Bell, Sir Ronald

    Fisher, Sir Nigel

    Bendall, Vivian

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

    Bennett, Sir Frederic (T'bay)

    Fletcher-Cooke, SirCharles

    Benyon, Thomas (A'don)

    Fookes, Miss Janet

    Best, Keith

    Forman, Nigel

    Bevan, David Gilroy

    Fowler, Rt Hon Norman

    Biffen, Rt Hon John

    Fox, Marcus

    Biggs-Davison, Sir John

    Fraser, Peter (South Angus)

    Blackburn,John

    Fry, Peter

    Blaker, Peter

    Gardiner, George (Reigate)

    Body, Richard

    Gardner, Edward (S Fylde)

    Boscawen, Hon Robert

    Garel-Jones, Tristan

    Bottomley, Peter (W'wich W)

    Gilmour, Rt Hon Sir Ian

    Bowden, Andrew

    Glyn, Dr Alan

    Boyson, Dr Rhodes

    Goodhart, Sir Philip

    Braine, SirBernard

    Goodhew, Victor

    Bright, Graham

    Goodlad, Alastair

    Brinton, Tim

    Gorst, John

    Brittan, Rt. Hon. Leon

    Gow, Ian

    Brooke, Hon Peter

    Gower, Sir Raymond

    Brotherton, Michael

    Grant, Anthony (Harrow C)

    Brown, Michael (Brigg&Sc'n)

    Gray, Hamish

    Browne,John (Winchester)

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

    Bruce-Gardyne, John

    Griffiths, Peter Portsm'th N)

    Bryan, Sir Paul

    Grist, Ian

    Buchanan-Smith, Rt.Hon.A.

    Grylls, Michael

    Buck, Antony

    Gummer, John Selwyn

    Budgen, Nick

    Hamilton, Hon A.

    Bulmer, Esmond

    Hamilton, Michael (Salisbury)

    Burden, Sir Frederick

    Hampson, Dr Keith

    Butcher, John

    Hannam, John

    Butler, Hon Adam

    Hastings, Stephen

    Cadbury, Jocelyn

    Havers, Rt Hon Sir Michael

    Carlisle, John (Luton West)

    Hawksley, Warren

    Carlisle, Kenneth (Lincoln)

    Hayhoe, Barney

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

    Heddle, John

    Chalker, Mrs.Lynda

    Henderson, Barry

    Channon, Rt. Hon. Paul

    Heseltine, Rt Hon Michael

    Chapman, Sydney

    Hogg, Hon Douglas (Gr'th'm)

    Churchill, W.S.

    Holland, Philip (Carlton)

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

    Hooson, Tom

    Clark, Sir W.(Croydon S)

    Hordern, Peter

    Clarke, Kenneth (Rushcliffe)

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

    Clegg, Sir Walter

    Howell, Ralph (N Norfolk)

    Cockeram, Eric

    Hunt, David (Wirral)

    Colvin, Michael

    Hunt, John(Ravensbourne)

    Cope, John

    Hurd, Hon Douglas

    Corrie, John

    Irving, Charles (Cheltenham)

    Costain, Sir Albert

    Jenkin, Rt Hon Patrick

    Cranborne, Viscount

    Jessel, Toby

    Critchley, Julian

    JohnsonSmith, Geoffrey

    Crouch, David

    Jopling, Rt Hon Michael

    Dean, Paul (North Somerset)

    Joseph, Rt Hon Sir Keith

    Dickens, Geoffrey

    Kaberry, Sir Donald

    Dover, Denshore

    Kellett-Bowman, MrsElaine

    du Cann, Rt Hon Edward

    Kershaw, Sir Anthony

    Dunn, Robert (Dartford)

    Kilfedder, James A.

    750

    Kimball, Sir Marcus

    Rathbone, Tim

    King, Rt Hon Tom

    Rees, Peter (Dover and Deal)

    Kitson, Sir Timothy

    Rees-Davies, W. R.

    Lamont, Norman

    Renton, Tim

    Lang, Ian

    Rhodes James, Robert

    Latham, Michael

    Rhys Williams, Sir Brandon

    Lawrence, Ivan

    Ridley, HonNicholas

    Lawson, Rt Hon Nigel

    Rifkind, Malcolm

    Lee, John

    Roberts, M. (Cardiff NW)

    LeMarchant, Spencer

    Roberts, Wyn (Conway)

    Lennox-Boyd, HonMark

    Rossi, Hugh

    Lester, Jim (Beeston)

    Rost, Peter

    Lewis, Kenneth (Rutland)

    Royle, Sir Anthony

    Lloyd, Ian (Havant & W'loo)

    Sainsbury, Hon Timothy

    Lloyd, Peter (Fareham)

    St. John-Stevas, Rt Hon N.

    Loveridge, John

    Scott, Nicholas

    Luce, Richard

    Shaw, Giles (Pudsey)

    Lyell, Nicholas

    Shaw, Michael (Scarborough)

    Macfarlane, Neil

    Shelton, William (Streatham)

    MacGregor, John

    Shepherd, Colin (Hereford)

    MacKay, John (Argyll)

    Shepherd, Richard

    Macmillan, Rt Hon M.

    Shersby, Michael

    McNair-Wilson, M. (N'bury)

    Silvester, Fred

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

    Sims, Roger

    Madel, David

    Skeet, T. H. H.

    Major, John

    Smith, Dudley

    Marland, Paul

    Speller, Tony

    Marlow, Antony

    Spence,John

    Marshall, Michael (Arundel)

    Spicer, Jim (West Dorset)

    Marten, Rt Hon Neil

    Spicer, Michael (S Worcs)

    Mates, Michael

    Sproat, Iain

    Maude, Rt Hon Sir Angus

    Stainton, Keith

    Mawby, Ray

    Stanbrook, Ivor

    Mawhinney, Dr Brian

    Stanley, John

    Mayhew, Patrick

    Steen, Anthony

    Mellor, David

    Stevens, Martin

    Meyer, Sir Anthony

    Stewart, Ian (Hitchin)

    Miller, Hal (B'grove)

    Stewart, A (E Renfrewshire)

    Mills, Iain (Meriden)

    Stokes,John

    Miscampbell, Norman

    Stradling Thomas,J.

    Mitchell, David (Basingstoke)

    Tapsell, Peter

    Moate, Roger

    Taylor, Teddy (S'end E)

    Monro, Sir Hector

    Tebbit, Rt Hon Norman

    Montgomery, Fergus

    Temple-Morris, Peter

    Moore, John

    Thatcher, Rt Hon Mrs M.

    Morgan, Geraint

    Thomas, Rt Hon Peter

    Morris, M. (N'hampton S)

    Thompson, Donald

    Morrison, Hon C. (Devizes)

    Thorne, Neil (IlfordSouth)

    Morrison, Hon P. (Chester)

    Thornton, Malcolm

    Mudd, David

    Townend, John (Bridlington)

    Murphy, Christopher

    Townsend, Cyril D, (B'heath)

    Myles, David

    Trippier, David

    Neale, Gerrard

    Trotter, Neville

    Nelson, Anthony

    van Straubenzee, Sir W.

    Neubert, Michael

    Vaughan, Dr Gerard

    Newton, Tony

    Viggers, Peter

    Normanton Tom

    Waddington, David

    Nott, Rt Hon John

    Wakeham, John

    Onslow, Cranley

    Waldegrave, HonWilliam

    Oppenheim, Rt Hon Mrs S.

    Walker, Rt Hon P. (W'cester)

    Osborn,John

    Walker, B. (Perth)

    Page, John (Harrow, West)

    Walker-Smith, Rt Hon Sir D.

    Page, Richard (SW Herts)

    Wall, Sir Patrick

    Parkinson, Rt Hon Cecil

    Walters, Dennis

    Parris, Matthew

    Ward, John

    Patten, Christopher (Bath)

    Warren, Kenneth

    Patten, John (Oxford)

    Watson, John

    Pattie, Geoffrey

    Wells, John (Maidstone)

    Pawsey, James

    Wells, Bowen

    Percival, Sir Ian

    Wheeler,John

    Peyton, Rt Hon John

    Whitelaw, Rt Hon William

    Pink, R.Bonner

    Whitney, Raymond

    Pollock, Alexander

    Wickenden, Keith

    Price, Sir David (Eastleigh)

    Wiggin, Jerry

    Prior, Rt Hon James

    Wilkinson, John

    Proctor, K. Harvey

    Williams, D. (Montgomery)

    Pym, Rt Hon Francis

    Wolfson, Mark

    Raison, Timothy

    Young, Sir George (Acton)

    751

    Younger, Rt Hon George

    Mr. Anthony Berry and Mr. Carol Mather.

    Tellers for the Noes:

    Question accordingly negatived.
    Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 32 (Questions on amendments).
    The House divided: Ayes 312, Noes 247.

    Division No. 5]

    [10.14 pm

    AYES

    Adley, Robert

    Dean, Paul (North Somerset)

    Aitken,Jonathan

    Dickens, Geoffrey

    Alexander, Richard

    Dorrell, Stephen

    Alison, Rt Hon Michael

    Dover, Denshore

    Amery, Rt Hon Julian

    du Cann, Rt Hon Edward

    Ancram, Michael

    Dunn, Robert (Dartfbrd)

    Arnold, Tom

    Durant, Tony

    Aspinwall,Jack

    Dykes, Hugh

    Atkins, Rt Hon H. (S'thorne)

    Eden, Rt Hon Sir John

    Atkins, Robert (Preston N)

    Edwards, Rt Hon N. (P'broke)

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

    Eggar, Tim

    Baker, Kenneth(St.M'bone)

    Elliott, Sir William

    Baker, Nicholas (N Dorset)

    Emery, Peter

    Banks, Robert

    Eyre, Reginald

    Beaumont-Dark, Anthony

    Fairbairn, Nicholas

    Bell, Sir Ronald

    Fairgrieve, Sir Russell

    Bendall, Vivian

    Faith, Mrs Sheila

    Bennett, Sir Frederic (T'bay)

    Farr,John

    Benyon, Thomas (A'don)

    Fell, Anthony

    Benyon, W. (Buckingham)

    Fenner, Mrs Peggy

    Best, Keith

    Finsberg, Geoffrey

    Bevan, David Gilroy

    Fisher, Sir Nigel

    Biffen, Rt Hon John

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

    Blackburn, John

    Fookes, Miss Janet

    Blaker, Peter

    Forman, Nigel

    Body, Richard

    Fowler, Rt Hon Norman

    Bonsor, SirNicholas

    Fox, Marcus

    Boscawen, Hon Robert

    Fraser, Peter (South Angus)

    Bottomley, Peter (W'wich W)

    Fry, Peter

    Bowden, Andrew

    Gardiner, George (Rigate)

    Boyson, Dr Rhodes

    Gardner, Edward (S Fylde)

    Bright, Graham

    Garel-Jones, Tristan

    Brinton, Tim

    Gilmour, Rt Hon Sir Ian

    Brittan, Rt.Hon.Leon

    Glyn, Dr Alan

    Brooke, Hon Peter

    Goodhart, Sir Philip

    Brotherton, Michael

    Goodhew, Victor

    Brown, Michael (Brigg&Sc'n)

    Goodlad, Alastair

    Browne, John (Winchester)

    Gorst,John

    Bruce-Gardyne,John

    Gow, Ian

    Bryan, Sir Paul

    Gower, Sir Raymond

    Buchanan-Smith, Rt. Hon. A.

    Grant, Anthony (Harrow C)

    Buck, Antony

    Gray, Hamish

    Budgen, Nick

    Griffiths, E. (B'ySt.Edm'ds)

    Bulmer, Esmond

    Griffiths, Peter Portsm'th N)

    Burden, Sir Frederick

    Grist, Ian

    Butcher, John

    Grylls, Michael

    Butler, Hon Adam

    Gummer,JohnSelwyn

    Cadbury, Jocelyn

    Hamilton, Hon A.

    Carlisle,John (Luton West)

    Hamilton, Michael (Salisbury)

    Carlisle, Kenneth (Lincoln)

    Hampson, Dr Keith

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

    Hannam,John

    Chalker, Mrs.Lynda

    Haselhurst, Alan

    Channon, Rt.Hon.Paul

    Hastings, Stephen

    Chapman, Sydney

    Havers, Rt Hon Sir Michael

    Churchill, W.S.

    Hawksley, Warren

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

    Hayhoe, Barney

    Clark, Sir W. (Croydon S)

    Heddle, John

    Clarke, Kenneth (Rushcliffe)

    Henderson, Barry

    Clegg, Sir Walter

    Heseltine, Rt Hon Michael

    Cockeram, Eric

    Hicks, Robert

    Colvin, Michael

    Higgins, Rt Hon Terence L.

    Cope,John

    Hogg, Hon Douglas (Gr'th'm)

    Cormack, Patrick

    Holland, Philip (Carlton)

    Costain, Sir Albert

    Hooson, Tom

    Cranborne, Viscount

    Hordern, Peter

    Critchley,Julian

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

    Crouch, David

    Howell, Ralph (N Norfolk)

    752

    Hunt, David (Wirral)

    Parris, Matthew

    Hunt, John (Ravensbourne)

    Patten, Christopher (Bath)

    Hurd, Hon Douglas

    Patten, John (Oxford)

    Irving, Charles (Cheltenham)

    Pattie, Geoffrey

    Jenkin, Rt Hon Patrick

    Pawsey, James

    Jessel, Toby

    Percival, Sir Ian

    JohnsonSmith, Geoffrey

    Peyton, Rt Hon John

    Jopling, Rt Hon Michael

    Pink, R.Bonner

    Joseph, Rt Hon Sir Keith

    Pollock, Alexander

    Kaberry, Sir Donald

    Porter, Barry

    Kellett-Bowman, Mrs Elaine

    Prentice, Rt Hon Reg

    Kershaw, Sir Anthony

    Price, Sir David (Eastleigh)

    Kilfedder,James A.

    Prior, Rt Hon James

    Kimball, Sir Marcus

    Proctor, K. Harvey

    King, Rt Hon Tom

    Pym, Rt Hon Francis

    Kitson, Sir Timothy

    Raison, Timothy

    Knox, David

    Rathbone, Tim

    Lamont, Norman

    Rees, Peter (Dover and Deal)

    Lang, Ian

    Rees-Davies, W. R.

    Latham, Michael

    Renton, Tim

    Lawrence, Ivan

    Rhodes James, Robert

    Lawson, Rt Hon Nigel

    Rhys Williams, Sir Brandon

    Lee,John

    Ridley, Hon Nicholas

    LeMarchant, Spencer

    Rifkind, Malcolm

    Lennox-Boyd, Hon Mark

    Roberts, M. (Cardiff NW)

    Lester, Jim (Beeston)

    Roberts, Wyn (Conway)

    Lewis, Kenneth (Rutland)

    Rossi, Hugh

    Lloyd, Ian (Havant & W'loo)

    Rost, Peter

    Lloyd, Peter (Fareham)

    Royle, Sir Anthony

    Loveridge,John

    Sainsbury, Hon Timothy

    Luce, Richard

    St. John-Stevas, Rt Hon N.

    Lyell, Nicholas

    Scott, Nicholas

    McCrindle, Robert

    Shaw, Giles (Pudsey)

    Macfarlane, Neil

    Shaw, Michael(Scarborough)

    MacGregor,John

    Sheiton, William (Streatham)

    MacKay John (Argyll)

    Shepherd, Colin (Hereford)

    Macmillan, Rt Hon M.

    Shepherd, Richard

    McNair-Wilson, M. (N'bury)

    Shersby, Michael

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

    Silvester, Fred

    Madel, David

    Sims, Roger

    Major, John

    Skeet, T. H. H.

    Marland, Paul

    Smith, Dudley

    Marlow, Antony

    Speed, Keith

    Marshall, Michael (Arundel)

    Speller, Tony

    Marten, Rt Hon Neil

    Spence, John

    Mates, Michael

    Spicer, Jim (West Dorset)

    Maude, Rt Hon Sir Angus

    Spicer, Michael (S Worcs)

    Mawby, Ray

    Sproat, Iain

    Mawhinney, Dr Brian

    Squire, Robin

    Mayhew, Patrick

    Stainton, Keith

    Mellor, David

    Stanbrook, Ivor

    Meyer, Sir Anthony

    Stanley, John

    Miller, Hal (B'grove)

    Steen, Anthony

    Mills, Iain (Meriden)

    Stevens, Martin

    Mills, Peter (West Devon)

    Stewart, Ian (Hitchin)

    Miscampbell, Norman

    Stewart, A. (E Renfrewshire)

    Mitchell, David (Basingstoke)

    Stokes, John

    Moate, Roger

    Stradling, Thomas,J.

    Monro, Sir Hector

    Tapsell, Peter

    Montgomery, Fergus

    Taylor, Teddy (S'end E)

    Moore, John

    Tebbit, Rt Hon Norman

    Morgan, Geraint

    Temple-Morris, Peter

    Morris, M. (N'hampton S)

    Thatcher, Rt Hon Mrs M.

    Morrison, Hon C. (Devizes)

    Thomas, Rt Hon Peter

    Morrison, Hon P. (Chester)

    Thompson, Donald

    Mudd, David

    Thorne, Neil (IlfordSouth)

    Murphy, Christopher

    Thornton, Malcolm

    Myles, David

    Townend, John (Bridlington)

    Neale, Gerrard

    Townsend, Cyril D, (B'heath)

    Nelson, Anthony

    Trippier, David

    Neubert, Michael

    Trotter, Neville

    Newton, Tony

    van Straubenzee, Sir W.

    Normanton, Tom

    Vaughan, Dr Gerard

    Nott, Rt Hon John

    Viggers, Peter

    Onslow, Cranley

    Waddington, David

    Oppenheim, Rt Hon Mrs S.

    Wakeham, John

    Osborn, John

    Waldegrave, Hon William

    Page, John (Harrow, West)

    Walker, Rt Hon P. (W'cesfer)

    Page, Richard (SW Herts)

    Walker, B. (Perth)

    Parkinson, Rt Hon Cecil

    Walker-Smith, Rt Hon Sir D.

    753

    Wall, Sir Patrick

    Wiggin, Jerry

    Walters, Dennis

    Wilkinson, John

    Ward, John

    Williams, D. (Montgomery)

    Warren, Kenneth

    Winterton, Nicholas

    Watson, John

    Wolfson, Mark

    Wells, John (Maidstone)

    Young, SirGeorge (Acton)

    Wells, Bowen

    Younger, Rt Hon George

    Wheeler, John

    Whitelaw, Rt Hon William

    Tellers for the Ayes:

    Whitney, Raymond

    Mr. Anthony Berry and Mr. Carol Mather.

    Wickenden, Keith

    NOES

    Abse, Leo

    Eadie, Alex

    Adams, Allen

    Eastham, Ken

    Allaun, Frank

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

    Anderson, Donald

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

    Archer, Rt Hon Peter

    Ellis, Tom (Wrexham)

    Ashley, Rt Hon Jack

    English, Michael

    Ashton, Joe

    Ennals, Rt Hon David

    Atkinson, N. (H'gey,)

    Evans, Ioan (Aberdare)

    Bagier, GordonA.T.

    Evans, John (Newton)

    Barnett, Guy (Greenwich)

    Ewing, Harry

    Beith, A.J.

    Faulds, Andrew

    Benn, Rt Hon Tony

    Field, Frank

    Bennett, Andrew (St'kp'tN)

    Fitch, Alan

    Bidwell, Sydney

    Fitt, Gerard

    Booth, Rt Hon Albert

    Flannery, Martin

    Bottomley, RtHonA. (M'b'ro)

    Fletcher, L. R. (Ilkeston)

    Bradley, Tom

    Fletcher, Ted (Darlington)

    Bray, Dr Jeremy

    Foot, Rt Hon Michael

    Brown, Hugh D. (Provan)

    Ford, Ben

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

    Forrester, John

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

    Foulkes, George

    Brown, Ron (E'burgh, Leith)

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

    Callaghan, Rt Hon J.

    Freeson, Rt Hon Reginald

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

    Freud, Clement

    Campbell, Ian

    Garrett, John (Norwich S)

    Campbell-Savours, Dale

    Garrett, W. E. (Wallsend)

    Canavan, Dennis

    George, Bruce

    Cant, R. B.

    Gilbert, Rt Hon Dr John

    Carmichael, Neil

    Ginsburg, David

    Carter-Jones, Lewis

    Golding, John

    Clark, Dr David (S Shields)

    Grant, George (Morpeth)

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

    Grant, John (Islington C)

    Cohen, Stanley

    Grimond, Rt Hon J.

    Coleman, Donald

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

    Concannon, Rt Hon J. D.

    Harrison, Rt Hon Walter

    Conlan, Bernard

    Hart, Rt Hon Dame Judith

    Cook, Robin F.

    Hattersley, Rt Hon Roy

    Cowans, Harry

    Healey, Rt Hon Denis

    Craigen, J. M. (G'gow, M'hill)

    Heffer, Eric S.

    Crawshaw, Richard

    Hogg, N. (EDunb't'nshire)

    Crowther, Stan

    HomeRobertson, John

    Cryer, Bob

    Homewood, William

    Cunliffe, Lawrence

    Hooley, Frank

    Cunningham, G. (Islington S)

    Horam, John

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

    Hoyle, Douglas

    Dalyell, Tam

    Huckfield, Les

    Davidson, Arthur

    Hudson Davies, Gwilym E.

    Davies, Rt Hon Denzil (L'lli)

    Hughes, Mark (Durham)

    Davies, Ifor (Gower)

    Hughes, Robert (Aberdeen N)

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

    Hughes, Roy (Newport)

    Deakins, Eric

    Janner, Hon Greville

    Dempsey, James

    Jay, Rt Hon Douglas

    Dewar, Donald

    John, Brynmor

    Dixon, Donald

    Johnson, James (Hull West)

    Dobson, Frank

    Johnson, Walter (Derby S)

    Dormand, Jack

    Jones, Rt Hon Alec (Rh'dda)

    Douglas, Dick

    Jones, Barry (East Flint)

    Douglas-Mann, Bruce

    Jones, Dan (Burnley)

    Dubs, Alfred

    Kaufman, Rt Hon Gerald

    Duffy, A. E. P.

    Kilroy-Silk, Robert

    Dunnett, Jack

    Kinnock, Neil

    Dunwoody, Hon Mrs G.

    Lambie, David

    754

    Lamborn, Harry

    Roberts, Ernest (Hackney N)

    Lamond, James

    Roberts, Gwilym(Cannock)

    Leadbitter, Ted

    Robertson, George

    Leighton, Ronald

    Robinson, G. (Coventry NW)

    Lestor, Miss Joan

    Rodgers, Rt Hon William

    Lewis, Ron (Carlisle)

    Rooker, J. W.

    Lofthouse, Geoffrey

    Roper, John

    Lyon, Alexander (York)

    Ross, Ernest (Dundee West)

    Mabon, Rt Hon Dr J. Dickson

    Ross, Stephen (Isle of Wight)

    McCartney, Hugh

    Rowlands, Ted

    McDonald, DrOonagh

    Ryman, John

    McElhone, Frank

    Sandelson, Neville

    McGuire, Michael (Ince)

    Sever, John

    McKay, Allen (Penistone)

    Sheerman, Barry

    McKelvey, William

    Sheldon, Rt Hon R.

    MacKenzie, Rt Hon Gregor

    Shore, Rt Hon Peter

    Maclennan, Robert

    Short, Mrs Renée

    McNally, Thomas

    Silkin, Rt Hon J. (Deptford)

    McTaggart, Robert

    Silverman, Julius

    McWilliam, John

    Skinner, Dennis

    Magee, Bryan

    Smith, Rt Hon J. (N Lanark)

    Marks, Kenneth

    Snape, Peter

    Marshall, D (G'gowS'ton)

    Soley, Clive

    Marshall, Dr Edmund (Goole)

    Spearing, Nigel

    Marshall, Jim (Leicester S)

    Spriggs, Leslie

    Martin, M (G'gowS'burn)

    Stewart, Rt Hon D. (W Isles)

    Mason, Rt Hon Roy

    Stoddart, David

    Maynard, Miss Joan

    Strang, Gavin

    Meacher, Michael

    Straw, Jack

    Mellish, Rt Hon Robert

    Summerskill, Hon DrShirley

    Millan, Rt Hon Bruce

    Taylor, Mrs Ann (Bolton W)

    Miller, Dr M.S. (E Kilbride)

    Thomas, DrR. (Carmarthen)

    Mitchell, Austin (Grimsby)

    Thorne, Stan (Preston South)

    Mitchell, R.C. (Soton Itchen)

    Tilley, John

    Molyneaux, James

    Tinn, James

    Morris, Rt Hon A. (W'shawe)

    Torney, Tom

    Morris, Rt Hon C. (O'shaw)

    Urwin, Rt Hon Tom

    Morris, Rt Hon J. (Aberavon)

    Varley, Rt Hon Eric G.

    Morton, George

    Wainwright, E.(Dearne V)

    Moyle, Rt Hon Roland

    Wainwright, R. (Colne V)

    Mulley, Rt Hon Frederick

    Watkins, David

    Newens, Stanley

    Weetch, Ken

    Oakes, Rt Hon Gordon

    Wellbeloved, James

    Ogden, Eric

    Welsh, Michael

    O'Halloran, Michael

    White, J. (G'grow Pollok)

    O'Neill, Martin

    Whitehead, Phillip

    Orme, Rt Hon Stanley

    Whitlock, William

    Owen, Rt Hon Dr David

    Wigley, Dafydd

    Palmer, Arthur

    Willey, Rt Hon Frederick

    Park, George

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

    Parker, John

    Wilson, Gordon (Dundee E)

    Parry, Robert

    Wilson, RtHonSirH.(H'ton)

    Pendry, Tom

    Wilson, William (C'try SE)

    Penhaligon, David

    Winnick, David

    Pitt, William Henry

    Woodall, Alec

    Powell, Rt Hon J.E. (S Down)

    Woolmer, Kenneth

    Powell, Raymond (Ogmore)

    Wrigglesworth, Ian

    Prescott, John

    Wright, Sheila

    Price, C. (Lewisham W)

    Young, David (Bolton E)

    Race, Reg

    Radice, Giles

    Tellers for the Noes:

    Rees, Rt Hon M (Leeds S)

    Mr. Joseph Dean and Mr. Frank Haynes.

    Richardson, Jo

    Roberts,Albert(Normanton)

    Question accordingly agreed to,.
    MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to
    Resolved.
    That this House calls upon Her Majesty's Government to continue its efforts to restrain the activities of overspending local authorities and to provide further protection for domestic, commercial and industrial rate-payers.

    Corby Development Area
    Motion made, and Question proposed, That this House do now adjourn—[Mr. Thompson.]
    10.29 pm
    Mr. Bill Homewood: My request for this Adjournment debate arose from an exchange of correspondence in September with the Department of the Environment. I was seeking to support a request by Northamptonshire county council that the Minister should receive a delegation from the council to discuss the issue of special investment area status for the south and west of Corby.
    The exchange of correspondence terminated with the Under-Secretary of State for the Environment writing to me as follows:
    "I have considered the previous correspondence on the subject most carefully and agree with my predecessor that there would be no benefit in meeting a delegation at present. I do of course fully appreciate the seriousness of the present unemployment position in the Corby area and the need to provide alternative sources of employment. But there can be no question of agreeing to any more special investment areas while the development commission's and COSIRA's functions are being examined by the Government and hence there is little to be gained from a meeting."
    It was the passage about the Minister appreciating the seriousness of the unemployment in Corby that raised doubts in my mind and led to this debate.
    Local opinion in Corby is convinced that the official unemployment statistics seriously understate the unemployment level in the core of the town, in the designated new town development area. There is a strong belief that in that area unemployment is already 28 to 30 per cent. and not the 20·8 per cent. that was recorded in the October figures.
    We are keenly aware that between now and Christmas substantial numbers of ex-steel workers will be completing retraining courses, with little prospect of finding permanent employment thereafter. We believe that there will be a substantial increase in unemployment in Corby between now and March 1982.
    About two years ago, when I was deploring the tragedy that Corby would experience with the closure of the steel works, the then Secretary of State for Industry intervened to accuse me of talking as if the unemployed of Corby would never find alternative work. Two years have passed, and the vast majority of them have not found alternative work.
    There are few of us who concern ourselves with the economic and social future of Corby who do not believe that, in the long run, Corby will extricate itself from its current tragic situation, but it is the length of the long run that worries us. It was Lord Keynes who said that in the long run we will all be dead, and that is what is bothering us about Corby.
    The current experience of the Corby people is traumatic. Most people will agree, I think, that a community can be sustained by promises of jam in the future only for a limited period. We as a society are not very well informed about the social consequences of large-scale unemployment, but there can be no doubt that the scale of unemployment that we are experiencing in Corby must have a debilitating effect and that over a period it can lead to complete disintegration of the social structure. That is why I spend much of my time here seeking to ensure that
    756
    Corby receives every particle of the help to which it is entitled, and that is why I am pressing this case on the Minister tonight.
    Despite the responsibility that the Government must carry for Corby's plight, it should never be forgotten that the steel industry there was publicly owned, and that the town was a new town that was created purely and simply to serve that industry.
    The Government have been less than helpful in three critical respects. First—and this was the direct responsibility of the Minister's Department—Corby suffered a loss of about £600,000 under the revised block grant formula. It was a savage blow to a community that was well aware of the difficult time through which it had to pass. Indeed, it added to the basic unemployment problem, because the local council, in seeking to placate the Government, cut its own work force by about 20 per cent.
    Secondly—and I hope that the Minister will tell me what went wrong here—there was the rate revenue loss that accrued from the closure of the steel works. I was present in the Chamber when the Secretary of State for the Environment appeared to give a categorical assurance that the Government would be prepared to make a substantial contribution to local authorities that suffered rate revenue losses as a result of steel works closures. However, as I understand it, the Corby district council has not received one penny of such compensation. It is suffering from the failure to carry out what appeared at the time to be a specific Government commitment.
    Thirdly, there has been no resolution of the problem of the heavy financial commitments that new town local authorities inherited when they took over housing properties from the New Towns Commission. Therefore, there is strong local feeling that the assistance that is being given by various arrangements to attract industry is being extracted from the social fabric of the town by burdensome impositions on the local authority. That has happened to an authority that has done everything in its power to accommodate the Government's public expenditure aspirations.
    I mentioned that the council work force had been cut by 20 per cent., and local officials inform me that, pro rata, that cut is the highest in the country. In addition, the council has sought to relieve its burdens by the sale of council houses. That policy is dear to the Government's heart. I am informed that those transactions are taking place at rate of 30 per week and that, pro rata, that is the highest rate in the land.
    Corby has sought to help itself and to struggle out of the slough of despond into which the decisions of others have plunged it. The town needs and deserves all the help that it can get. It has an enterprise zone, but it should now receive special area development status and the area should be extended. Help is needed now. Corby cannot afford to wait for further inquiries. I urge the Minister to reconsider the decisions detailed in the letter that I quoted.
    10.41 pm
    The Under-Secretary of State for Industry (Mr. John MacGregor): I welcome this opportunity to reply to the hon. Member for Kettering (Mr. Homewood), and I well remember our debate in February on the particular problems of Corby. The hon. Gentleman has placed me in some difficulty, because the subject of this Adjournment debate is industrial investment to the south and west of

    757
    Corby and not special development area status. Therefore, I hope that he will forgive me if I make a few remarks about industrial investment to the south and west of Corby—the subject of the debate—before I turn my attention to some of the other issues that he raised.
    I shall deal later with Corby. Although the hon. Gentleman concentrated on the difficult problems—as he sees them—that continue to exist, there have been some encouraging developments since February, which could be important to the nearby areas, including those south and west of Corby.
    I deal first with the main subject of the debate—the problems faced by the other parts of the hon. Gentleman's constituency, and in particular the Kettering travel-to-work area, which includes Desborough. I wish to put one or two points about the south and west of Corby on the record.
    I recognise that the closure of the steel-making plant and a general decline of the area's traditional industries, particularly footwear, have led to a relative decline in the prosperity of that area. Indeed, I recall that the problems of Desborough in particular were brought to the attention of my predecessor through correspondence last year with the district council, which culminated in a meeting between the Department's regional director and the district council.
    The hon. Gentleman made a request about special investment area status. In any discussion of the problems of a particular area, it is, of course, essential to set the difficulties in the regional and the national context. Traditionally, unemployment in the Kettering area has been below the rate for both the East Midlands and Great Britain. In the past two years there has been a weakening of this position, and we now find unemployment in the Kettering travel-to-work area standing at 12·3 per cent. which is very slightly above the British average of 12·2 per cent, and rather more above the East Midlands average of 10·9 per cent. However, I suggest to the hon. Gentleman that, although such unemployment levels are high—no one wants any increase in unemployment levels if that can be avoided—and are also high in many other parts of the country, they do not point to a particularly severe problem in that part of his constituency or to a problem that cannot be coped with.
    Had the hon. Gentleman raised other matters relevant to that part of the area I should have dealt with them and explained what the Government were trying to do to help.
    I shall deal with what the Government are doing in terms of positive aid. However, it is necessary to restate two points. A large part of the increased unemployment in many parts of the country is caused by the fact that the Government have to deal with a severe economic decline all over the country, which has continued for many years. We have to try to pull that round and to deal with overmanning and uncompetitiveness during a general world recession.
    The restructuring, therefore, is taking place in difficult circumstances.
    Inevitably, it is a painful process in many parts of the country. It is particularly painful in areas such as Corby where restructuring is taking place on a dramatic scale. Whatever we do, we cannot expect quick and immediate results when an industry has gone out of existence. We
    758
    cannot find new jobs and new industries overnight. The process takes time. It is necessary to go through the exercise if Corby is to have a sensible economic base.
    I shall concentrate on specific Government assistance, but it is important to emphasise that the process of dealing with declining industries, uncompetitiveness and restructuring is a matter for management and work forces as well as for the Government.
    The hon. Gentleman mentioned the special investment area application by Northamptonshire county council. Other areas have made similar requests. Some have made such requests in my part of the country. It is a fair response at this stage to say that the Government are still considering their recent review of the Development Commission and COSIRA. That review encompasses the geographical coverage of the commission's operations. It would be inappropriate to approve any new special investment area applications or to extend existing areas before the outcome of the review is known. We should take broad decisions on the review. Large parts of the area in question are already designated by the Development Commission as pockets of need and already qualify as priority areas for assistance from COSIRA.
    I feel compelled to mention another matter, which the hon. Gentleman did not mention. I have communications problems in my area and communications are important to industrial investment south and west of Corby. The Corby-Kettering area has the great advantage of lying on the proposed route of the A1-M1 link road. This remains one of the Government's highest road priorities, not only because it will help to provide a high standard route for industrial traffic between the West Midlands and the East Coast ports but because, with the proposed Kettering northern by pass, it will be an important help to the Corby and Kettering areas by improving access. A significant factor in the Government's decision to stick to their preferred "green route" rather than adopt an alternative strategy was that it would bring earlier help to the area.
    While the preparation of such a complex and expensive scheme is inevitably lengthy, my right hon. Friend the Secretary of State for Transport is aware of the urgency. He hopes to publish draft orders under the Highways Act 1980 early next year. The hon. Gentleman will recognise—and I have similar problems in my constituency—that this will have to be followed by a public inquiry as part of the normal democratic process. It is relevant to raise that matter, because it shows that hopeful signs are developing in areas of Government activity that bear on future industrial investment south of Corby. It is important to bear that in mind.
    A number of the points raised by the hon. Gentleman on block grant, rate support grant, new towns and the sale of council houses are not matters for me but for my hon. Friends in the Department of the Environment. It would be wrong for me to refer in detail to those points in relation to Corby in this Adjournment debate. However, I understand that in due course Corby district council should receive compensation for the rate revenue loss due to the closure of the steel works. I shall draw the hon. Gentleman's remarks to the attention of my right hon. and hon. Friends in the Department of the Environment.
    As the hon. Gentleman has widened the debate to include Corby, it gives me the opportunity to say one or two things about the town. I shall bring up to date the progress that has been made there since Corby was debated in an Adjournment debate on 20 February. The hon.

    759
    Gentleman said that he was optimistic in the long run. I hope that he is right, and I share his view. He spoke eloquently of the present-day problems. I understand why he keeps raising them in the House. He is right to do so, but I hope he will acknowledge that a battery of Government weapons are continuing to be brought to bear on the problem of dealing with the closure of the steel works and restructuring the economy, and that real progress is being made. That is important, and I hope that he and his local community will take some credit for it.
    As the hon. Gentleman knows, the principal advantage brought to Corby by development area status has been eligibility for both regional development grant and selective financial assistance under section 7 of the Industry Act 1972. To date, over 130 firms have approached the regional office of the Department for such selective assistance—as distinct from regional development grant, which is automatic within the area to which it applies—and applications are now running at a rate of about 6–5 per month. Of course, only a proportion of those projects come to fruition, but so far 30 projects have received firm offers of grant totalling £3·606 million and they are expected to provide about 2,200 job opportunities in due course. Applications for selective assistance which have been received, but where no offer has yet been made, could provide a further 1,250 jobs. At a time of deep world recession and low levels of investment everywhere—not only in the United Kingdom—this is a considerable response on the part of industry.
    Section 7 is, of course, not the only source of finance available to firms in Corby. European Coal and Steel Community loans are also available and being widely taken up. About £1·07 million of foreign currency and sterling loans have already been dispersed, and commitments of a further £6·26 million have been made.
    That financial assistance is fully supported by the factory building activities of the Commission for the New Towns and the district council. I understand that the commission is planning to invest £7·9 million in Corby in 1981–82, following an investment of £8·8 million in 1980–81. I am giving those figures to place them on the record. I do not expect the hon. Gentleman to follow them all, as there are rather a lot of figures.
    The commission is completing the infrastructure for a 100-acre extension to its industrial estate at Earlstrees. During 1980–81 it constructed 365,000 sq. ft.—24 units—of advance factory space and is planning a further 200,000 sq. ft.—29 units—during the current financial year. The commission is also making available for industrial development 120 acres at Weldon and has sold 5 acres to ABR Chemical Ltd. Infrastructure works are now well advanced, and some advance factories are also to be provided. The Earlstrees and Weldon industrial sites together comprise the enterprise zone.
    In addition, the commission and the district council are in the process of developing a 77-acre industrial site at Oakley Hay. Finance for infrastructure development is being provided largely by the district council. I understand that the first parcel of 7 acres has been sold to Oxford University Press for use as a distribution centre. The Prudential Insurance Company has also financed the development of 19 nursery factory units on the estate.
    BSC (Industry) Ltd. has also been active both in the provision of advice and assistance as part of the general development effort and in the conversion of redundant space in the steelworks to small workshops. I understand
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    that it has recently made a start on the conversion of an initial batch of six units. I have seen for myself in other parts of the country how such work can help to regenerate small business.
    As well as providing assistance to firms through ECSC loans, the European Community has strongly supported the local effort in Corby through the European regional development fund. To date, about £3–4 million has been allocated in assistance to projects related to the provision of industrial estates, roads, water and sewerage in Corby.
    However, perhaps the most important new development since we last debated the subject has been the designation of the enterprise zone. When the formal designation took place on 22 June, Crosby became the site of England's first enterprise zone. I have heard almost envious statements made about the progress in Crosby and the fact that it was the first area to get off the ground.
    When enterprise zone status was offered to Corby, the land in question had already been opened up and sites prepared. About 300,000 sq. ft. of speculative factories were under construction and more planned, the first new companies being already on site. Sites of up to 40 acres for industry are available, and sites suitable for office development and distribution are being prepared. Nearly one-third of the area is now committed or the subject of continuing negotiations. Twelve companies have set up in the zone, and Corby can boast one of the major success stories so far in any of the enterprise zones—the £25 million investment by Associated British Foods in a new flour mill, which will create 110 new jobs.
    What does all the progress add up to? I recognise the severe impact of the steel closure on that part of the hon. Gentleman's constituency, but in difficult economic times it is bound to take time to restructure. The story so far in that environment has been one of considerable success. Although unemployment remains unacceptably high in Corby, it is now declining. In August it stood at 22·3 per cent. and it is now 20·8 per cent. Compared with other parts of the country, there has been a downward movement—although only gentle—during the year. As I said, we always knew that it would take time. However, the achievement so far in Corby reflects favourably on all concerned.
    I have been interested to see the range of firms coming to Corby in the past year. They cover many different sectors of industry and commerce and include a substantial number of small firms.
    Corby's problems have by no means gone away and there is no room for complacency, but there is room, as the hon. Gentleman hinted, for a great deal more optimism than was appropriate some time ago. To date, the progress justifies my stanace in February that Corby had advantages over the existing special development areas, so the case had not been made out for a further upgrading.
    I hope that the situation will continue to improve. The hon. Gentleman said that it might deteriorate between now and March. We have always stated that we would watch for evidence of permanent change relative to other areas, and we shall continue to do so. However, we should acknowledge that considerable progress has been made this year and that a considerable number of batteries of Government aid have been brought to bear on the problem.
    I am encouraged by the progress made in Corby. The hon. Gentleman raised other matters affecting other parts of his constituency. I have dealt with those. I am convinced that the combination of all those factors and the

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    Government's economic policies will prove sufficient to enable industry throughout the hon. Gentleman's
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    constituency to survive current difficulties and emerge fit and ready to grow and flourish as we emerge from the recession into a new period of soundly based prosperity.
    Question put and agreed to.
    Adjourned accordingly at one minute to Eleven o' clock.

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

NHS Patients: Use of Private Hospitals
Lord Molloy: 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 there is any truth in reports in the Guardian newspaper of 29th October that two former Ministers in the Department of Health and Social Security have been involved in endeavours to have prospective National Health Service patients diverted to a private hospital; and if so what action they propose to take.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Elton): My Lords, the endeavours to which the noble Lord's Question refers were directed at assisting a number of health authorities in the long established policy of using facilities outside the National Health Service for the benefit of National Health Service patients where that constitutes the best use of the resources available. This policy maximises the services available to patients, and the appropriate action is to continue it.
Lord Molloy: My Lords, would the noble Lord not agree that when things like this appear in newspapers there should be a full explanation of what has really happened so that people should not be left to think harmful things because of innuendoes or improper or incomplete press reports? I ask the noble Lord to consider that there should be full Government statements when something like this appears in the press about Ministers and such statements are denied.
Lord Elton: My Lords, nothing unusual or untoward has happened and it would not be possible to have a public inquiry into every piece of correspondence that issues from my department.
Lord Gisborough: My Lords, would my noble friend agree that it would be desirable if more beds could be found for National Health patients in hospitals funded by private enterprise at prices less than those in National Health hospitals, and that their use would be a good step rather than a bad one?
Lord Elton: My Lords, the Government's intention is to make the greatest range and excellence of service that is possible available to the public through the National Health Service. At present about 3,000 beds in private hospitals and nursing homes are used by the NHS on a contractual basis.
Lord Molloy: My Lords, would the noble Lord not agree that what people are thinking—perhaps incorrectly—is that there is a possibility of Ministers getting in, so to speak, on the ground floor when they have an advantage and being able to make money by getting people who would normally have the National Health Service to take up private medicine?
Lord Elton: My Lords, I do not think the noble Lord wishes to imply that my honourable and right honourable friends were doing anything of the sort. What my honourable and right honourable friends were doing was providing the means whereby area health authorities could avail themselves of resources available to them in the private sector. There is nothing unusual in that, and nothing improper.

Works of Art and Civil Defence
3.4 p.m.
Lord Jenkins of Putney: 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 which works of art are to be selected for location in the arts bunker at Blaenau Festiniog in the event of nuclear war; whether this bunker is currently in course of restoration and maintenance for the purpose; and whether provision is being made to house there any living artists or Arts Council officials.
The Earl of Avon: My Lords, it would not be in the public interest to disclose details of security arrangements, whether for use in war or in peace. Security arrangements involve transport, safe keeping, storage, guarding and many other matters which, if disclosed, would prejudice the safety and security of the items for which the arrangements are made.
Lord Jenkins of Putney: My Lords, would not the noble Earl agree that it is really quite scandalous that arrangements were made during the recent civil defence exercises for the evacuation of works of art whereas no such arrangements have been made for the civilian population? Despite the great reverence that we all have for our art treasures does not our own population deserve a higher priority than that?
The Earl of Avon: My Lords, I should like to comment on the first part of that supplementary question. I said before that it is not in the public interest to disclose details of security arrangements. Successive Governments have decided against an official programme of purpose-built shelters because of the enormous cost set against the slight risk of war. The Home Office published this year booklets giving guidance to the general public on domestic shelters suitable for protection in a nuclear war and detailed design outlines of certain types of shelter.
Lord Brockway: My Lords, may I ask the Minister whether this Question does not concern something almost as serious as human lives? Great works of

311
art, great works of literature—where are they to be protected under nuclear attack when it is now recognised that a nuclear attack would destroy even the deepest shelters?
The Earl of Avon: My Lords, I must leave the noble Lord to use his own imagination on it. As I said before, in the public interest we will not disclose details of security arrangements.
Lord Paget of Northampton: But, my Lords, since it is public knowledge that, very properly, certain works of art will be removed in case of war, how in the world is security affected by saying which works of art they are to be? The argument for the preference list would be fascinating and the greatest fun.
The Earl of Avon: My Lords, I think the noble Lord has answered himself. It would be an impossible subject to go into at Question Time in this House and I do not wish to be drawn into it.
Lord Robbins: My Lords, will the Minister not admit that in point of fact in various biographies photographs have been exhibited of arrangements which were made in the last war?
The Earl of Avon: My Lords, I am grateful to the noble Lord for his intervention—yes.
Lord Jenkins of Putney: But, my Lords, would not the noble Earl agree that in the Government's own pamphlet on this matter Sweden and Switzerland have been held out as examples of efficient civil defence, and is not the reason why they are so efficient that they are spending on civil defence money that our Government are wasting on nuclear missiles?
The Earl of Avon: My Lords, I am not prepared to be drawn into that argument by the noble Lord. No, I do not agree.

Wages Councils and Economic Policy
3.7 p.m.
Lord Boyd-Carpenter: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they are taking to ensure that the decisions of wages councils are consistent with the policy of Her Majesty's Government in respect of the appropriate level of wage increases.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): My Lords, the Government have made clear their view that all negotiators, including those on wages councils, should aim for realistic settlements which improve competitiveness and which do not discourage employment. However, we remain opposed to direct Government intervention in specific negotiations and consider
312
that where wages councils are still necessary the minimum rates should continue to be set by representatives of the trade.
Lord Boyd-Carpenter: My Lords, while thanking my noble friend for that reply, may I ask him two questions? Where do the Government think wages councils are still necessary and, secondly, are the Government satisfied that the present wages councils' decisions are consistent with the Government's general policy on moderation in wage increases?
Earl Ferrers: My Lords, the wages councils are set up and are in operation only in conditions where there are no other recourses to collective bargaining or where pay is low. My noble friend asks whether we are satisfied with the results of the settlements. I can only tell him that Her Majesty's Government are not satisfied if the settlements of wages councils are such as to lead to an unacceptable increase in unemployment. That is why Her Majesty's Government are concerned to ensure that wages councils should take full account of the consequences of their decisions before they arrive at settlements.
Lord Boyd-Carpenter: My Lords, I am afraid my noble friend misunderstood my question. I asked him whether the Government were satisfied that wages councils did conduct themselves in that way, or whether they did not?
Earl Ferrers: My Lords, the wages councils can conduct themselves in whatever way they wish. If he is worried about that, all I would tell my noble friend is that during the 1980–81 pay round the manufacturing industries' wages councils settled at about a 9 per cent. increase, which was about the equivalent of the private sector; the non-manufacturing wages councils settled for about 12 per cent., which was about 3 per cent. higher than the private sector.
Lord Underhill: My Lords, may I ask the Minister whether it is not correct that it has been reported that a substantial number of employers do not pay the present rate set out by some of the wages councils and, if that is correct, what is the proportion and what will the Government do about it?
Earl Ferrers: My Lords, my information is that on the whole employers pay above the minimum rate set by the wages councils, and in fact sometimes in the nature of 20 per cent.
Lord Spens: My Lords, may I ask the Minister whether he has had time to consider the suggestion on the wages councils, which I put to him about three or four weeks ago, that the Government should declare an economic state of emergency and suspend minimum wage rates, particularly for the young people who are unemployed who are now being priced out of jobs?
Earl Ferrers: My Lords, argument can be made for the abolition of all wages councils—I accept that. What the Government have concluded is that the arguments for doing so have not yet been sufficiently persuasive to suggest that this should come about,

313
simply because—I agree with the noble Lord in his thesis—if you abolish wages councils you will abolish minimum rates of pay. If that happens, you will encourage more employment. The reverse side of that is that employers of those people who already have employment may be encouraged to pay them less than at the moment, and this could in certain circumstances lead to undesirable practices.

Cyprus: UN Settlement Proposal
3.12 p.m.
Lord Brockway: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what has been the reply of the Government of Cyprus to the United Nations proposal for a settlement of their dispute with the Turkish occupiers of 40 per cent. of the island.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Lord Trefgarne): My Lords, a United Nations paper was informally handed to the parties on 22nd October. The Cyprus Government have raised no objection to its being tabled formally, but they have as yet made no official comment on its content.
Lord Brockway: My Lords, is the Minister aware that there is a good deal of surprise about these proposals? Would he confirm—and I am reading because I am quoting—that the Turkish Cypriots, 18 per cent. of the population, under these proposals would have 30 per cent. of the land, that they would take 40 per cent. of the public services, that the Presidency would rotate yearly, that they would have one-third of the Cabinet and that they would have the right to veto legislative and constitutional proposals? In those circumstances, is it likely that President Kyprianou, anxious for a solution, or the Greek Government would be prepared to endorse these proposals?
Lord Trefgarne: My Lords, I cannot answer either for the Greek Government or for President Kyprianou; nor, I fear, can I comment on the details to which the noble Lord referred, which doubtless he has obtained from some unofficial source.
Lord Maybray-King: My Lords, is the noble Lord aware that the new Prime Minister of Greece, Mr. Papandreou, has rightly pointed out that this problem of the Greeks and the Turks in Cyprus is not an inter-communal problem only, but arises from the fact that this independent sovereign state of Cyprus has been invaded and occupied now for several years, that the efforts of the United Nations to bring the contenders together have so far failed because Turkey has not responded to the latest appeal? Can he ask his noble friend, whose work we so much admire, whether he could take some initiative in bringing this whole question either to the three co-chairmen appointed for
314
the purpose of looking after the sovereignty of Cyprus or to the United Nations again?
Lord Trefgarne: My Lords, the opening part of the noble Lord's supplementary question, of course, puts one view of this problem. As for an intervention by my noble friend, I think it is important that we do nothing to cut across the present United Nations initiative and the current intercommunal talks. But we are ready to help in any way that the United Nations or the parties may find useful.
Baroness Jeger: My Lords, when the noble Lord says that it would not seem advisable for the Foreign Secretary to intervene, is he saying that Her Majesty's Government do not regard themselves any longer as a guarantor power of Cyprus, which was put into the Treaty of Independence? Surely we have a special responsibility. Would it not be helpful if, when the Foreign Secretary is touring the Middle East, he could spare some time to take this problem on board and perhaps visit Cyprus?
Lord Trefgarne: My Lords, our anxiety to see a solution to this matter is no less acute because of our position as a guarantor power. But I say again that I think it is necessary for the proper procedures to be advanced in this matter. The United Nations have made significant progress in recent months and weeks, and I think it would be wrong if we were now to try to cut across that procedure without at least a clear indication from the parties that that was their wish.
Lord Brockway: My Lords, while many of us have the greatest respect for Dr. Waldheim, may I ask the noble Lord whether his proposals have been endorsed by the Security Council of the United Nations, and have the British Government given support to them? Is the noble Lord aware that so many of us are surprised that he should have made such biased proposals for a solution of this problem?
Lord Trefgarne: My Lords, I am surprised to hear the noble Lord speaking in those terms. These proposals have only just been tabled. No party has yet indicated its acceptance or rejection of the proposals, and to speak in the terms in which the noble Lord has spoken is not, I suggest, conducive to moving the matter forward.
Lord Shinwell: My Lords, why does the noble Lord say that it would be improper for the EEC to cut across the initiative which is now in the possession of the United Nations? Has not the EEC, by its initiative over the Middle East problem, cut across the initiative which is still in the possession of the Camp David agreement?
Lord Trefgarne: My Lords, I did not say it would be improper; I said it would be inappropriate. We judge our actions in these matters by the criterion: in which way do we think these matters can best be moved forward? Our judgment is that it is better for the present to allow the United Nations' initiative to run forward rather than for us to intervene as noble Lords suggest.
Lord Shinwell: My Lords, is the noble Lord aware that "inappropriate" will satisfy me if it is a semantic discussion?—but get something done about it.
Lord Trefgarne: My Lords, the progress that has been made in recent weeks and months, principally through the medium of the Secretary General's special representative in the area, has been quite significant.

Organisation of the Central Departments
Lord Denham: My Lords, at a convenient moment after 3.30 p.m. my noble friend the Leader of the House will, with the leave of the House, repeat a Statement to be made in another place on the organisation of the Central Departments.
County of Avon Bill [H.L.]
Read 3ª, and passed, and sent to the Commons.
Derbyshire Bill [H.L.]
Read 3ª, and passed, and sent to the Commons.

Unemployment: Select Committee
3.18 p.m.
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move the first Motion standing in my name on the Order Paper.
Moved, That, as proposed by the Committee of Selection, the following Lords be named of the Select Committee:

Carr of Hadley, L.

De La Warr, E.

Kilmarnock, L.

Lee of Newton, L.

McCarthy, L.

Melchett, L.

Rochester, L.

Seear, B. (Chairman)

Spens, L.

Vaizey, L.

Wolfenden, L.

Worcester, Bp.

That the Committee have power to adjourn from place to place.
That the Committee have leave to report from time to time.
That the Committee have power to appoint Specialist Advisers.
That the Minutes of Evidence taken before the Committee from time to time be printed and, if the Committee think fit, be delivered out.
That the Proceedings of the Select Committee on Unemployment in the last two Sessions of Parliament be referred to the Committee.
That the Committee do meet on Tuesday, 17th November at Three o'clock.—(Lord Aberdare.)
On Question, Motion agreed to.

European Communities Committee: Select Committee
Lord Aberdare: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That a Select Committee be appointed to consider Community proposals, whether in draft or otherwise, to obtain all necessary information about them, and to make reports on those which, in the opinion of the Committee, raise important questions of policy or principle, and on other questions to which the Committee consider that the special attention of the House should be drawn:
That, as proposed by the Committee of Selection, the Lords following be named of the Committee:—

Ardwick, L.

Bessborough, E.

Campbell of Croy, L.

Cledwyn of Penrhos, L.

Cranbrook, E.

Crowther-Hunt, L.

Elles, B.

Faithfull, B.

Gladwyn, L.

Greenhill of Harrow, L.

Hayter, L.

Kilmarnock, L.

Kings Norton, L.

Mackie of Benshie, L.

Mottistone, L.

Mowbray and Stourton, L.

O'Brien of Lothbury, L.

Plowden, L.

Rochdale, V.

Ross of Marnock, L.

Scarman, L.

Seebohm, L.

White, B. (Chairman)

That the Committee have power to appoint Sub-Committees and to refer to such Sub-Committees any of the matters within the terms of reference of the Committee; that the Committee have power to appoint the Chairmen of Sub-Committees, but that such Sub-Committees have power to appoint their own Chairman for the purpose of particular enquiries; that two be the quorum of such Sub-Committees;
That the Committee have power to co-opt any Lord for the purpose of serving on a Sub-Committee;
That the Committee and any Sub-Committees have power to adjourn from place to place;
That the Committee have power to appoint specialist advisers;
That the Committee have leave to report from time to time;
That the Reports of the Select Committee from time to time shall be printed, notwithstanding any adjournment of the House;
That the Minutes of Evidence taken before the Committee or any Sub-Committee from time to time shall, if the Committee think fit, be printed and delivered out;
That the Committee or any Sub-Committee appointed by them have leave to confer and to meet concurrently with any Committee of the Commons on European Legislation, &c. or any Sub-Committee of that Committee for the purpose of deliberating and of examining

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witnesses; and have leave to agree with the Commons in the appointment of a Chairman for any such meeting; and
That any Lord requested by any Committee of the Commons on European Legislation, &c. to attend as a witness before them or before any Sub-Committee appointed by them shall have the leave of this House so to attend, if his Lordship think fit.—(Lord Aberdare.)
On Question, Motion agreed to.

Statutory Instruments (Joint Committee): Select Committee
Lord Aberdare: My Lords, finally I beg to move the third Motion standing in my name on the Order Paper.
Moved, That a Select Committee of seven Lords be appointed to join with a Committee appointed by the Commons to consider—
(1) Every instrument which is laid before each House of Parliament and upon which proceedings may be or might have been taken in either House of Parliament, in pursuance of an Act of Parliament; being

(a) a statutory instrument, or a draft of a statutory instrument;

(b) a scheme, or an amendment of a scheme, or draft thereof, requiring approval by statutory instrument;

(c) any other instrument (whether or not in draft), where the proceedings in pursuant of an Act of Parliament are proceedings by way of an affirmative resolution; or

(d) an order subject to special parliamentary procedure;

but excluding any Order in Council or draft Order in Council made or proposed to be made under paragraph 1 of Schedule 1 to the Northern Ireland Act 1974.
(2) Every general statutory instrument not within the foregoing classes, and not required to be laid before or to be subject to proceedings in the Commons only, but not including Measures under the Church of England Assembly (Powers) Act 1919 and instruments made under such Measures:
with a view to determining whether the special attention of the House should be drawn to it on any of the following grounds—

(i) that it imposes a charge on the public revenues or contains provisions requiring payments to be made to the Exchequer or any Government department or to any local or public authority in consideration of any licence or consent or of any services to be rendered, or prescribes the amount of any such charge or payments;

(ii) that it is made in pursuance of any enactment containing specific provisions excluding it from challenge in the courts, either at all times or after the expiration of a specific period;

(iii) that it purports to have retrospective effect where the parent statute confers no express authority so to provide;

(iv) that there appears to have been unjustifiable delay in the publication or in the laying of it before Parliament;

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(v) that there appears to have been unjustifiable delay in sending a notification under the proviso to subsection (1) of section 4 of the Statutory Instruments Act 1946, where an Instrument has come into operation before it has been laid before Parliament;

(vi) that there appears to be a doubt whether it is intra vires or that it appears to make some unusual or unexpected use of the powers conferred by the statute under which it is made;

(vii) that for any special reason its form or purport call for elucidation;

(viii) that its drafting appears to be defective; or on any other ground which does not impinge on its merits or on the policy behind it; and to report their decision with the reasons thereof in any particular case:—

That the Lords following, as proposed by the Committee of Selection, be named of the Committee:

Airedale, L.

Auckland, L.

Brooks of Tremorfa, L.

Cathcart, E.

Dilhorne, V.

Segal, L.

Spens, L.

That two be the quorum of the Committee.
That the Committee have power to agree with the Committee appointed by the Commons in the appointment of a Chairman.
That the Committee have power to appoint one or more Sub-Committees severally to join with any Sub-Committee or Sub-Committees appointed by the Committee appointed by the Commons; and to refer to such Sub-Committee or Sub-Committees any of the matters referred to the Committee.
That it be an instruction to the Committee that they do not consider any instrument which is directed by Act of Parliament to be laid before and to be subject to proceedings in the Commons only; and that the Committee do not join with the Committee appointed by the Commons in considering any such instrument.
That it be a further instruction to the Committee that, before reporting that the special attention of the House be drawn to any instrument, the Committee do afford to any Government department concerned therewith an opportunity of furnishing orally or in writing to them or to any Sub-Committee of the Committee such explanations as the department think fit.
That the Joint Committee have leave to report from time to time.
That the Committee do meet with the Committee appointed by the Commons on Tuesday, 17th November at a quarter-past Four o'clock.—(Lord Aberdare.)
On Question, Motion agreed to.

The Queen's Speech
ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH
Debate resumed on the Motion moved on Wednesday, 4th November, 1981, by the Lord Bethell—namely,

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That a humble Address be presented to Her Majesty as follows:
"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament".
3.19 p.m.
The Minister of State, Treasury (Lord Cockfield): My Lords, my pleasant duty first is to congratulate most warmly my noble friend Lord Constantine of Stanmore on a maiden speech which combined brevity with force and cogency. The point he raises is one of great importance. We have given much thought to this problem and shall continue to do so.
I was equally fascinated by the speech of the noble Baroness, Lady Birk, but for entirely different reasons. Her frequent references to the "Thoughts of Sir Ian Gilmour" lead one inescapably to the conclusion that the Labour Party has no policy of its own and can do no better than cling to the coattails of a former Tory Minister. Her own prescription for the very great ills which beset our economy was a combination of higher expenditure, lower taxes and lower interest rates. These objectives are plainly inconsistent with one another. Higher expenditure can only be financed by higher taxes or higher borrowing. Higher borrowing leads to higher interest rates, not lower. There is an inescapable dilemma: higher expenditure leads either to higher taxes or higher interest rates.
The noble Baroness's policy is the one that the Labour Party advocated at the time of the 1974 election and tried to put into operation thereafter. The result was economic crisis and the virtual bankruptcy of the country. We faced first the humiliation of Mr. Healey's panic return from Heathrow and then the bailiffs, in the form of the IMF. Does the Labour Party really want to repeat that experience?
Baroness Birk: My Lords, I wonder whether the noble Lord will give way for one moment? Does the Minister agree that when the Conservative Government came into office in 1979 the rate of inflation was 10·3 per cent.?—it is now higher than that and although unemployment was far higher than we would have wished, it was certainly nowhere near over the 3 million, nudging 4 million, that it is now.
Lord Cockfield: My Lords, the noble Baroness has already had ample opportunity to make those points. So far as the first one is concerned, the rate of inflation was rising rapidly in 1979 and the big increase which occurred subsequently was largely due to the policies that had been followed by the Labour Government.
The noble Lord, Lord Rochester, spent most of his time in a charming if somewhat embarrassing courtship of the SDP. Such dalliance is more seemly when conducted in private. But the various exchanges which followed made it quite clear that not even the Liberal Party believes that the SDP has a policy.
The noble Lord, Lord Taylor of Gryfe, endeavoured to repair the damage by giving us a fascinating account of what the SDP Manifesto would be if only he had the chance of writing it. But he was put down very
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promptly by the noble Lord, Lord Winstanley, whose policy closely resembled that pronounced by Mr. Asquith in 1910: "Wait and See". It is interesting that in 71 years since then, the Liberal Party has been able to make no further advance in formulating a policy.
My sympathy in all this goes out to the noble Earl, Lord Longford, who gallantly, if somewhat rashly, popped his head up over the parapet only to be caught in the cross-fire between the members of the putative alliance. There is a lesson to be drawn from this. The treatment meted out by the Liberal Party to their erstwhile allies should serve as a warning to the SDP. He who sits down to dine with the Liberal Party is apt to find the chair snatched away from under him.
The noble Lord, Lord Rochester, perhaps predictably, raised the question of incomes policy. He was supported by the noble Baroness, Lady Birk, by the noble Lord, Lord Roberthall, and by the noble Lord, Lord Jacques, but opposed by my noble friend Lord Mottistone and the noble Lord, Lord Robbins. It will be of great interest to hear what the noble Lord, Lord Scanlon, says about this. He is a distinguished former union leader. For this reason I will deal with this point when I come to reply to the debate on the amendment.
My Lords, so much of what has been said is an attempt to escape from reality. Reality is harsh and unpleasant. But there is no escape from reality. The 'eighties will prove to be a much more difficult and challenging era than the 'fifties and the 'sixties. In the 'Fifties and the 'Sixties output was growing at a rate of 2½ per cent. per annum. In other countries it was growing at a rate of 4 per cent. or 5 per cent. per annum. But even our own rate of growth supported expanding social services and left sufficient to spare to support a higher standing of living.
My noble friend Lord Butler of Saffron Walden predicted in the early 1950s that the standard of living in this country would double in 25 years. And, broadly, that target was achieved. Too little recognition has been given to the tremendous contribution my noble friend made in those days.
My noble friend Lord Alport referred to the description of the Conservative Administration of 1951 to 1964 as the "Thirteen Wasted Years". This phrase was coined by the Opposition. For my part I have always referred to this era as the "Thirteen Golden Years". We look back on them with pride. The 1970s, in contrast, were a period of hesitation and confusion when new problems appeared, imperfectly understood, unsuccessfully coped with.
In the 1980s, rates of growth are unlikely on, a sustained basis to match those of the 'fifties and the 'sixties. We shall be fortunate, this century, if we see rates of growth over a period of years of more than 1 per cent. or 2 per cent. per annum. This is not a problem which affects this country alone: it affects all the countries of the western world. It poses a challenge: and a challenge which we must meet. Growth even at this rate, however modest it is, will support a rising standard of living. It will enable us to improve the circumstances of our life. But we must tailor our expectations to what is likely to be available. If we try to spend too much, whether on consumption

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or by Government, we shall inevitably—as the noble Lord, Lord Robbins, has so cogently argued in a speech of great insight—find ourselves in very great trouble.
We can spend only what we earn. Our first priority, therefore, must be directed to improving our level of output; to creating conditions in which, in a hostile environment, we can secure the maximum growth of output attainable. Governments themselves do not create wealth; they consume it. Wealth is created by the private sector of the community, by individuals and firms, whether they are management or workers and whether they are professional men or the self-employed.
One can debate the abstract merits of nationalisation. Some support it, some are opposed. We see the opposing views illustrated very sharply in this debate. Even the Labour Party has always been divided on this issue. Hugh Gaitskell fought valiantly to have Clause 4 deleted from the Labour Party constitution; he failed. The question which needs to be asked is not a philosophical one; still less is it a debating one. It is quite simply, what have the nationalised industries added to the national wealth; what have the nationalised industries subtracted from the national wealth? In the three years since the election the nationalised industries will have received £8,500 million of Government money. Since 1945, and revalued at current prices, the nationalised industries will by this year have received well over £40,000 million of Government money. Some of this has gone in productive investment. Most of it in supporting losses. This is the extent to which the nationalised industries have absorbed wealth, not created it. What others have earned, they have spent.
There have been some success stories. I pay tribute to the noble Lord, Lord Beswick, for his achievement at British Aerospace. But the more that one can point to success in some areas, the more it highlights the failures elsewhere. It is not for want to trying. Many distinguished men have grappled with these problems. There is—and one has to say it with regret—little public satisfaction with the standard of service given by the nationalised industries, or with the prices they charge. Nor have they provided secure employment for those who work in them. It is the combination of these factors which points to the solution of returning the industries or their activities to the private sector wherever this is feasible and where there is a clear case for doing so. This is not a politically motivated policy. It is aimed very directly at improving the efficiency of the economy; the achievement of higher output, lower costs, greater consumer satisfaction and more secure employment.
We have already taken important steps in this direction. Others have been indicated in the gracious Speech. British Aerospace, Cable and Wireless, the National Freight Corporation, the railway hotels have already been returned in one guise or another to the private sector. As the gracious Speech indicates, the oil producing business of BNOC will be brought into the private sector; and there will be measures to facilitate private investment and private competition in the activities of British Gas.
I welcome the vigorous defence by my noble friend Lord Lauderdale of private enterprise in the North
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Sea. The North Sea has been a great success story. It demonstrates what vigorous private enterprise can do. I do not accept my noble friend's strictures on the Treasury; nor do I accept many of the allegations he makes. My right honourable friend the Chancellor of the Exchequer approaches these matters with an open mind. He has invited the North Sea operators to suggest an alternative tax regime. They have done so. We are looking very carefully at what they have said.
For all the reasons I have outlined, our hopes for the future thus lie primarily with the private sector of our economy. It follows that we must remove restraints and obstacles and give active encouragement to enterprise and growth. Most people cannot generate their own employment opportunities; they look to others to provide employment for them. This is why we must help those who provide those employment opportunities; not for any political advantage; not because they are our natural supporters; but because without them there would he no work for the rest of the community.
In the two and a half years we have been in office we have endeavoured to reduce the size of the bureaucracy at both national and local levels. The size of the Civil Service has been reduced by 50,000, from 732,000 to 680,000. In the Chancellor's departments, where I have a measure of personal responsibility, we have reduced numbers from 127,000 to 112,000. I am glad to be able to tell your Lordships that there are now fewer tax gatherers in the Inland Revenue than there are men and women in the Royal Navy and the Royal Marines.
We need not just to remove obstacles, but to provide positive encouragement as well. This we have given in each of our last three Budgets. We need to encourage the development of new enterprises and the expansion of existing enterprises. The Venture Capital Scheme, the Business Start-Up Scheme and the Loan Guarantee Scheme are all aimed in this direction. It is in this way and from this source that expansion for the future will come; that new opportunities will be created and new and secure employment provided. These, then, are the positive steps the Government have taken to secure long-term a higher level of output.
But in addition there is a very heavy onus on Government to conduct their own affairs so that they do not themselves impose an added burden on the economy. Here the level of the Government's expenditure is a crucial factor. A Government which spend more money than they receive add to the community's problems; they do not solve them. Government expenditure is all too easily increased, is remarkably difficult to reduce, never more so than during a recession. But it is the size of budget deficits, all over the world, not just in this country but in almost every developed country, which is responsible for the worldwide spread of high interest rates.
There is little point in arguing whether our own high rates of interest are due to the influence of international and particularly American interest rates, or to our domestic circumstances. As John Donne said,
"No man is an Island, entire unto himself".
We are all, all over the world, responsible for high interest rates, because we all, all over the world, run

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high budget deficits. The increasing awareness of this truth is to be seen in efforts now being made all over the world to reduce budget deficits and to trim public expenditure—in the United States, Japan, Germany, Italy, the Netherlands, Sweden, Australia and even France. We stand not alone in our determination to deal with these matters.
A reduction in interest rates is essential for industrial recovery. But we have calls for massive increases in Government expenditure on the argument that this would solve our problems. We have heard such calls from the Opposition in this debate. It is described as "reflation". We are accused, overtly or by innuendo, of deflating the economy. How anyone can claim that a Government which is adding £10½ billion to purchasing power through its budget deficit is pursuing a deflationary policy, is beyond belief. This point was made very forcefully by the noble Lord, Lord Robbins. I entirely agree with his analysis. Moreover expenditure, as my right honourable friend the Chancellor of the Exchequer has said, will be higher next year than previously envisaged because, for example, of additional expenditure on special employment measures—some £700 million extra on these measures next year.
The proportion of the gross national product taken by public expenditure is higher this year than last year; was higher last year than the year before. We take no joy in this. But we need to recognise this is what has happened. But to pretend that further massive increases in public spending would cure our ills is a cruel deception. It would lead to more borrowing, higher rates of interest and almost certainly higher taxes as well. It would abort our industrial recovery just when it was beginning. Like the late frost in spring it would kill the flower in the bud.
We have been here before. In the 1970s money income increased by 345 per cent., output by a mere 17 per cent. The repeated attempts to reflate the economy by increasing nominal demand, in the aggregate by more than four-fold, brought little increase in output; what it did produce was massive inflation. In the words of Marlene Dietrich, "When will they ever learn?" Will they never learn?
In the end Governments must pay their way in the same way as individuals. You can live on credit so long, but in the end it catches up with you. Nowhere is this better illustrated than by the fact that the interest on the national debt—and the national debt is nothing but the accumulation of past Budget deficits—now exceeds the public sector borrowing requirement and is almost as much as the yield of VAT. One wonders whether the people asking for more reflation, asking for more borrowing, really realise this; whether they really understand the implications for future generations of the policies they are advocating. The remind one of Madame de Pompadour—"Après nous, le déluge". And what a déluge it was! And what a fate overtook la Pompadour!
Just as most industrial countries are now committed to reducing public expenditure, they are also committed to reducing inflation. The link between inflation and unemployment is now universally recognised. The point was made very clearly in the communiqué issued
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following the September meeting of the interim committee of the IMF:
"The Committee again assigned a clear priority to the firm pursuit of policies to reduce inflation for the purpose of lowering interest rates, encouraging productive investment, and achieving better rates of economic growth and employment".
It is, of course, much easier to diagnose the causes of inflation than to remedy it. Some of the underlying causes are world wide—the two great oil price explosions, the breakdown of the Bretton Woods system, the increasing militancy of trade unions, growing expectations without the means to meet them. Others are more peculiar to this country—a slow growth of output, a low level of productivity, overmanning and excessive union power not always wisely used—and they go a long way to explain why our performance has tended to be worse than that of other people. Lax fiscal and monetary policies have then allowed these pressures to feed through into prices and appear as high rates of inflation. But it is not enough for Government alone to pursue the right policies. There is equally an onus on other people to behave responsibly in relation to these policies.
In one of the earliest speeches I made in your Lordships' House, on 19th June 1979, I said that excessive pay settlements would lead to unemployment for those who demanded them, and low profits and insolvency for the firms that conceded them. It gives me no pleasure that that prophecy has come true. The law regards every man as responsible for the natural consequences of his own acts. Whether we like it or not, the same is true in the economic field. The trade union movement made a cardinal error of judgment in the 1979–80 pay round. They went bull-headed for pay increases: they would have been much wiser to go for job protection. This error of judgment was compounded by management conceding these claims in the mistaken impression that they could pass on the increased costs in prices. As a result the unions secured for their members high nominal wage increases, an improvement in their standard of living, and massive unemployment. This is the tragedy of our time. It need not have happened like this. We could not have opted out of the world recession. Unemployment we would have had to face. But not unemployment on the present scale.
The bitter lesson is being learned. British Leyland is the latest and most dramatic example. It is not the only one. The rate of wage settlements in the last pay round was halved. In the coming year it will need to be drastically reduced again. There is an air of realism on the shop floor. The union leadership ought not to lag behind their members.
Greatness lies in understanding the essence of a problem, the relationship of events to one another. The ordinary man grasps only the symptoms and sees only a series of disconnected events. The great man has a vision of the future which enables him to place obstacles in proper perspective. It is greatness we need in the leadership of unions and industry alike.
Lord Davies of Leek: And in Government, my Lords.
Lord Cockfield: My Lords, the Government in their turn will provide the leadership the country needs to refashion its economy, rebuild its finances and enable

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us to live successfully in a harshly competitive world. We have and will continue to set the parameters within which the economy needs to operate. There are no soft options. We delude ourselves and we delude our fellow citizens if we pretend there are. We will win this battle; signs of success are already appearing, not everywhere but in sufficient number to indicate that we are moving firmly in the right direction. Out of this new beginning will come a stronger, healthier economy which will provide work for our people and a more secure future than they have had for many generations.
Baroness Burton of Coventry: My Lords, before the Minister sits down, may I ask whether he imagines he has dealt with yesterday's debate or whether those of us who asked him specific questions may hope to have an answer to them?
Lord Cockfield: My Lords, on the assumption, a rather extended one, that I have not yet sat down, I shall he answering further matters when I come to speak to the amendment later in the day.

Organisation of the Central Departments
3.52 p.m.
Chancellor of the Duchy of Lancaster (Baroness Young): My Lords, with the leave of the House I will now repeat a Statement being made in another place by my right honourable friend the Prime Minister on the organisation of the central departments. The Statement is as follows:
"We have made a good deal of progress in the last two and a half years in controlling the cost and size of the Civil Service and in improving its efficiency. The Government are most grateful to the Select Committee on Treasury and Civil Service Affairs for all the valuable work they have done in this area and in particular for their report on the future of the Civil Service Department. I look forward to receiving their recommendations as a result of their current study on improving the efficiency and effectiveness of the Civil Service.
"I believe that the time has now come when some organisational changes will help us to make sure that the progress we have already achieved is maintained.
"Setting up the Civil Service Department 13 years ago had a number of advantages as compared with the situation as it existed before; but it had one consequence whose disadvantages have become increasingly apparent over time. It divorced central responsibility for the control of manpower from responsibility for the control of Government expenditure. I judge that the balance of advantage now lies in favour of consolidating the CSD's manpower control responsibilities with the central control of resources.
"I therefore propose to reunify responsibility for the central allocation and control of all resources, and to make the Treasury responsible for control over Civil Service manpower, pay, superannuation, allowances and for the Central Computer and Telecommunications Agency. The staff at present concerned with these functions will be transferred to the Treasury.
"My honourable friend the Member for Hounslow, Brentford and Isleworth will be appointed as a Minister of State in the Treasury to help in the discharge of these responsibilities. He will continue to answer in this House for the whole range of Civil Service matters.
"The duties of the other Ministers of State in the Treasury will remain unchanged, but my honourable friend the Member for Knutsford will assume the title of Economic Secretary to the Treasury.
"I now turn to the Civil Service Department's other responsibilities. It remains my view that there should not be a total merger of the Treasury and the Civil Service Department. The efficiency of the Civil Service in carrying out its functions and the selection and development of civil servants are as important to the Government as the control of public expenditure. The machinery of Government should make special provision for this, since it is a subject in which any Prime Minister is bound to take a close personal interest. I shall therefore continue to be Minister for the Civil Service and to be responsible for the organisation, management and overall efficiency of the Home Civil Service and for policy on recruitment, training and other personnel management matters. My noble friend the Chancellor of the Duchy of Lancaster will, as at present, discharge these responsibilities on a day-to-day basis. She will also answer in another place for the whole range of Civil Service matters.
"The staff involved in these functions will work alongside the Cabinet Office in a new Management and Personnel Office, Sir Robert Armstrong will be Permanent Secretary of this Office and will also continue as the Secretary of the Cabinet to head the Cabinet Office. He will be assisted on the business of the new Office by a second Permanent Secretary, Mr. John Cassels.
"An Order in Council will be necessary to transfer the responsibilities for Civil Service manpower and remuneration to the Treasury. The order will be laid before Parliament shortly. In preparation for its coming into effect, the new arrangements will be introduced administratively from 16th November. During the interim preiod, the Chancellor of the Exchequer will have charge on my behalf of the functions to be transferred to the Treasury. Thereafter, there will not be a department known as the Civil Service Department.
"There will be some staff savings as a result of the new arrangements.
"Sir Ian Bancroft, Head of the Home Civil Service and Permanent Secretary to the Civil Service Department, and Sir John Herbecq, the Second Permanent Secretary, both of whom were due to retire by the end of next year, have with characteristic public spirit accepted that these changes mean their departure from the public service some months early. Both have had long and distinguished careers in the public service, and have served the nation with all the devotion and integrity which we expect from our public servants. Sir Ian served successive Chancellors of the Exchequer with conspicuous distinction. He did much to build up the Department of the Environment before becoming the Head of the Civil Service in 1977. I am sure the House would

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wish to join me in this expression of appreciation and gratitude for the many years of distinguished service both he and Sir John have given to the country.
"On Sir Ian Bancroft's retirement, Sir Robert Armstrong and Sir Douglas Wass, the Permanent Secretary to the Treasury, will become Joint Heads of the Home Civil Service.
"Arrangements are in hand to explain to all the staff of the CSD how they will be affected by the reorganisation. Both the Council of Civil Service Unions and the trade union representatives of the CSD's own staff are today being informed of the details of the new organisation.
"I have placed in the Library copies of a note setting out the distribution of functions between the Treasury and the Management and Personnel Office."
3.58 p.m.
Lord Peart: My Lords, The noble Baroness the Leader of the House has repeated a very important Statement which is being made by the Prime Minister. I wish to convey on behalf of noble Lords on this side of the House our desire to wish the civil servants who have been made redundant a long and happy life because they have served the country well, and I have a feeling that their arm has been twisted in this case, but I will not develop that too much.
Lord Davies of Leek: Broken, not twisted.
Lord Peart: It seems, however, rather a volte face on the part of the Government, my Lords, and I hope that we shall be provided with some more information about the background to this development. I hope too that there may be a debate on it in this House. Perhaps we can discuss that through the usual channels. I know there is a feeling that it is such an important matter that we should know what is happening.
Meanwhile, I have some questions to put to the Minister. What consultations were there with the staff before today's announcement? Why is the Prime Minister now rejecting the advice of the Civil Service associations? May we be told why the Prime Minister has changed her mind since January of this year, when she told the Commons that she had decided to strengthen and improve the existing organisation of the CSD rather than merge the two departments? What has happened in the interval? Has there been annoyance with the Civil Service because it took industrial action against Government decisions earlier this year, I wonder? Can we now have an assurance that the Management and Personnel Office will have all the power and authority of a full department of state? This subject is too important to relegate to a side room in the Cabinet Office.
Why is it thought important to diffuse control of the Civil Service, and will that necessarily make it more efficient? I cannot see the argument here. Does not the Minister consider that, at a time when Civil Service morale is low, it can only make things worse to give overall control to the Treasury, whose main consideration will be economic policy, as it has always basically been? Will not the Civil Service
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under the scheme become an irritable burden on both the Treasury and the Cabinet Office?
There is another point on which I wish to question the noble Leader of the House. I had hoped to put this point to her previously in the House; it is not connected with the Statement. I refer to the whole issue of science, its policy and direction. This came under the Civil Service Department. ACARD, which has worked so well, producing major scientific documents and providing leadership in the science world, came out of the Civil Service Department. Is this to be dropped, or is it to be extended? I wish to know because the importance of science is obvious, and I have a feeling that the Government are rather lackadaisical about this, so I hope that we can have a positive view from the noble Baroness when she replies.
Lord Rochester: My Lords, from these Benches I should like to join in thanking the noble Baroness the Leader of the House for having repeated the Statement. The Statement does not say so, but we are of course concerned, as is the noble Lord, Lord Peart, that the Government's decision in this matter appears to run counter to the conclusions reached less than 12 months ago by the all-party Treasury and Civil Service Committee in another place. We are much more concerned about the damaging effects that this somewhat precipitate announcement may have on the morale of civil servants. We note that the staff of the Civil Service Department are today being told of the details, but we should like to know what consultation there was with the Civil Service unions before the decision was taken.
Can the noble Baroness assure us further that this decision will not prejudice the outcome of the Megaw Inquiry into the future of Civil Service remuneration? As the noble Lord, Lord Peart, has already suggested, the aim of the reorganisation appears to be to tighten still further the control exercised by the Treasury over that remuneration. Is the noble Baroness aware in particular that in the light of the happenings of last summer, the Liberal Party has reached the conclusion that in the event of negotiations in future resulting in a failure to agree, there should be provision for awards to be made by a standing commission, chosen not by the Government of the day but by an electoral college? That would be designed to ensure that the commission was independent, that there was continuity of office for its members, and that its composition was acceptable to the Government, the main opposition parties, and organisations representing both employers and trade unions.
4.5 p.m.
Baroness Young: My Lords, I should like to thank both noble Lords for their comments, and I wish very much to endorse the point that the noble Lord, Lord Peart, made about Sir Ian Bancroft and Sir John Herbecq, who have done so much very valuable work for the country. I think it most important that they should know that thanks come from all parts of the House. The noble Lord asked a number of questions. In particular, he asked why was it decided to make a change at this time. My right honourable friend the Prime Minister has made clear that we believe that much good work has already been done and that we

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are well on course for the 1984 Civil Service manpower target of 630,000, but much remains to be done. Experience has shown the disadvantages of divorcing the management and the control of expenditure on manpower resources in central Government from the manpower and control of Government expenditure as a whole. That was a point that was made by Sir Derek Rayner.
The noble Lord, Lord Peart, raised a number of other quite specific points, and the noble Lord, Lord Rochester, raised some similar questions. In matters affecting changes of this kind in Government machinery, it is not the custom to consult the trade unions, but, as I have indicated, they have been informed and the changes are being explained in detail to the staff at the CSD. I should like to confirm that the Management and Personnel Office will be a department of state. The noble Lord, Lord Peart, might recall that science has not been under the Civil Service Department since 1979, when it was placed under the Department of Education and Science and the Department of Industry.
The noble Lord, Lord Rochester, raised a particular point about the Megaw Inquiry, and I should like to confirm that this will continue and will be taking evidence. Its work will not in any way be affected by these changes. I also wish to say that we attach great importance to the morale of civil servants, and I want to stress that although, with the co-operation of the Civil Service, we have been successful in reducing the total numbers of the service, that has been done so that it may become a leaner and more efficient service. I and all my colleagues in Government are most grateful for the very good work that we obtain from the civil servants, and I should like to place that, too, on record.
Lord Soames: My Lords, I should like to give my support to the noble Baroness over the broad thrust of this question. For a long time I have felt that divided responsibility for financial control on the one hand and manpower control on the other was a bad thing for the Civil Service Department and indeed for the national interest. In view of a false report in The Times today, I should like to assure the noble Baroness, lest she should not already know it, that I have consistently held this view and advocated it unequivocally in the proper quarters. I am glad that action is now being taken, but I must say that I am a little worried that it is not going far enough. My fear is that we are substituting one form of divided responsibility for another form, inasmuch as, if I understand aright—and I had the advantage of reading in the daily editions this morning what I thought to be a fairly authoritative leak—the Treasury (the Chancellor of the Exchequer) will be responsible for pay and for numbers, while my noble friend will continue to have responsibility for what goes under the generic term of personnel management, which includes everything concerned with morale and efficiency. I deeply question whether it is wise to divide one from the other. Perhaps my noble friend will tell me whether or not I have rightly understood the proposal. If I have rightly understood, why was the dividing line drawn just there? I hope that I am wrong.
Baroness Young: My Lords, in answer to my noble friend Lord Soames, I should like to say how very glad I am to have his support on the Statement, and I hope that he will recognise that it includes the important work that has been done since May 1979 in the Civil Service Department. He asked whether I had noticed a comment in today's edition of The Times, which of course I had, but I was aware that it was his personal view that there should have been a merger between the Treasury and the Civil Service Department; and I am sure that he, like me, does not believe everything he sees in the newspaper, even when it is such a good newspaper as The Times.
On the second point he raised, as to whether we shall be having further divided responsibility, it is the view of my right honourable friend the Prime Minister that there are certain aspects of Civil Service management with which she should be particularly closely concerned and these are notably personnel management and appointments. As the House will know, she has taken a keep personal interest in the promotion of efficiency in the Civil Service, and she in fact appointed Sir Derek Rayner in May 1979 to his present post with a remit to report directly to her. On the exact division of responsibilities, there is a note now placed in the Library, and I think it would be easier for noble Lords to refer to that rather than for me to go into precise detail as to how the division between the two departments will be made. But we recognise that it is extremely important that there should be the closest liaison at both ministerial and official level between the Treasury and the Management and Personnel Office.
Lord Diamond: My Lords, I am sure noble Lords would wish to hear the views of those on this Bench, small though it is but ever-expanding as it is. We on this Bench welcome very much indeed the Statement that has been made. Indeed, one of us gave evidence to the Select Committee exactly along these lines. We feel that the new division of responsibilities is right; it contains nothing which will be damaging to the essential interests of the Civil Service but contains a great deal which will be helpful in the interests of the nation. I refer in particular to the sentence appearing in the Statement which says that the previous division
"divorced central responsibility for the control of manpower from responsibility for the control of Government expenditure".
That will no longer exist. Your Lordships will appreciate what an enormous element in the national budget is manpower expenditure in such a matter as the departments of state with which we are all concerned.
I would also want to associate every one of us—and in this every single Member of your Lordships' House who has had the privilege of working with these two distinguished civil servants will join with me—in supporting what the Prime Minister has said about the work of these two most able civil servants. Indeed, I remember how Ian Bancroft, as he then was, worked himself into a hospital bed in order to try to cope with the work which his Ministers required of him. We wish them both very well indeed.
My Lords, there is just one part of the Statement which I would seek to question, and that is with regard to the remaining responsibility of management where

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the control of it is not absolutely clear at the moment. I would ask the noble Baroness to use her good offices and her responsibilities, as she will now have them, to ensure that professionalism (if I might so put it) in management is even more apparent in the future than it has been in the past.
Baroness Wootton of Abinger: My Lords—
Baroness Young: My Lords, I will just answer the noble Lord, Lord Diamond, and then I will turn to other noble Lords. I should like to thank the noble Lord, Lord Diamond, very much for his welcome and for his recognition of the importance of the amalgamation of the functions of manpower and expenditure in the Treasury. I should also like to thank him for his most warm and welcome remarks about Sir Ian Bancroft and Sir John Herbecq, and say that we absolutely accept his comments about professionalism in the Civil Service. This is something to which we attach great importance, as well as to efficiency.
Baroness Wootton of Abinger: My Lords, may I raise a point of order? Under standing orders a debate on a Statement may not take place unless there has been a Motion of the House to allow such a debate. Standing orders require that after a Statement has been made speeches from the rest of the House should take the form simply of questions for information and clarification. I do not think anybody could deny that a debate has been taking place here and now, and that is entirely contrary to standing orders.
Lord Boyd-Carpenter: My Lords, may I ask two questions of my noble friend? Is she aware of the fact that many of us who served at the Treasury at the time when the Treasury was responsible for the Civil Service never understood the wisdom of removing that responsibility in 1968, and therefore welcome very much the return of a good deal of it as announced in the Statement that has been made? But will my noble friend explain a little further why it has been thought necessary to split the responsibility, and, in particular, whether (I hope my noble friend will not think that this question sounds too materialistic) it really makes sense to leave morale the responsibility of one side and pay the responsibility of the other? Is there not perhaps a necessary link between the two? Would my noble friend be prepared to say that further consideration will be given to restoring the 1968 situation in toto and to putting the whole management of the Civil Service back in the Treasury? The only other question I want to ask is whether my noble friend has any comment to make on the fact that the substance of this Statement appeared in the press this morning, and is there some indication of a leak?
Baroness Young: My Lords, I should like to thank my noble friend Lord Boyd-Carpenter for his support, especially in view of the fact that he speaks from experience of working in the Treasury when the two departments were combined there. He asked me why there was this division between those parts going to the Treasury and those parts which will remain in the department of Manpower and Personnel. I hoped that
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I had given an answer to this question earlier on. I do not think I have anything further to add except to reiterate that my right honourable friend the Prime Minister believes that it is very important to have as a separate department the promotion of efficiency in the Civil Service, and she believes that this will best be achieved by the present division of responsibilities. There is no further consideration being given to restoring the situation to as it was in 1968. This would obviously be for consideration, if at all, on another occasion. It is of course a matter of deep regret when these matters come out in the press before the Statement has been made in Parliament.
Lord Houghton of Sowerby: My Lords, time is pressing and there is a long debate to follow. It is very unfortunate that this important matter comes just at this moment. Can the noble Baroness assure us that we will have an opportunity to debate this on whatever occasion presents itself to do so? This is far more important than can be dealt with by question and answer across the Floor of the House. May I ask the noble Baroness to give assurances on this point, which will spare me the duty of asking a few more questions about the situation? But I do say that this Marks and Spencer's demolition job is one which will create deep dismay in the Civil Service and stir up the embers of discontent which are now lying about as a result of the recent pay dispute.
Baroness Young: My Lords, I certainly take the point made by the noble Lord, Lord Houghton, and made by the noble Lord, Lord Peart, about the possibility of a debate, and I think this would be a matter for the usual channels. I should like to thank the noble Baroness, Lady Wootton, for her intervention. She is absolutely correct, and she has drawn the attention of the House to an important point, that remarks following Statements should be questions and not a debate. I am most grateful to her for making this point. I would have thought that it was now for the convenience of the House that we might return to the debate on the Address in reply to the gracious Speech.

The Queen's Speech
ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH
4.20 p.m.
Debate resumed.
Lord Scanlon,Lord Scanlon, rose to move, as an amendment to the above Motion, at the end of the Address to insert—
"but regret that the gracious Speech indicates the continuing reliance of Your Majesty's Government on those same fiscal and monetary policies which have created irrevocable damage to the nation's industry, and caused a massive increase in unemployment; proposes further divisive legislation hostile to the trade unions; announces economically irrelevant measures for the sale of public assets; and consequently offers no prospect of economic recovery, no hope for the establishment of social justice and

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no vision of a united national effort for the benefit of all."
The noble Lord said: My Lords, I beg to move the amendment standing in my name. I may say in so moving that your Lordships will know that it is virtually impossible for me to deal with all the items of criticism contained in the amendment and many of them, I hope, will be dealt with by my noble friends on this side of the House. The general economic situation, by any yardstick, is, to say the least, alarming. I know that it has been outlined many times but it will bear repetition: in real terms, over 3 million unemployed; a nil growth rate; inflation well into double figures, and interest rates at quite unacceptable levels—and the answer to this catastrophic situation, at least as contained in the gracious Speech, is a tedious reaffirmation of all the old medicine which has failed so dismally in the past and which will surely fail again in the future.
In all truth, it is bad enough to witness these basically ill-conceived and wrong policies that are creating "stagflation" and the miseries of the highest level of unemployment that this country has ever known, but the follies are compounded and made even more nonsensical when the Government and all their supporters must know that the ever increasing cost of financing this unemployment, currently estimated at the staggering figure of 12 billion pounds per annum, is increasing public expenditure costs at a greater rate than their most severe cuts are curtailing them. That, I believe, is economic nonsense. And the Government's ever more desperate attempts to resolve the irresolvable are these: more savage cuts in public expenditure; selling off in a one-off operation some of this country's most priceless assets; more attacks on trade unions; and more of what many of the Government's own supporters consider to be the quite unconstitutional interference with the responsibilities and the rights of local authorities.
There is no easy solution to the present economic difficulties that we are in, but I thought that there was common ground between previous Governments and this Government that, although we would disagree over the means to bring out certain issues, the issues themselves were agreed upon. I thought that in the debates on training and on other economic matters we were all agreed that if we wished to have rising living standards, roads, hospitals, care of the sick and aged, et cetera, we could do so only on the basis that we produced the goods to pay for them—and that that meant a transfer of resources in terms of capital and in terms of trained personnel into the wealth-producing manufacturing base, whether it be private or public. I believe that that should be, if it is not, common ground between us.
It will be no surprise to your Lordships, therefore, to know that I wish to concentrate on the question of trade union legislation and on the issue of privatisation, or, by its true name, denationalisation. I do not want to repeat the name of the song that was mentioned by the noble Lord, Lord Cockfield. I put it this way. Do we ever learn from history, recent history? Have we forgotten the three and a half years of existence of the Industrial Relations Act? To the extent of boring your Lordships, please let me briefly take you through those years. In those three and a half years it cost my union £8 million in fines inflicted
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by the courts, in legal fees (both those of those who took us there and our own), and in dispute benefits to our members. This staggering sum took no account of the eventual sequestration—I had never heard of the word before; but I can assure your Lordships that it is very painful. Every building, every typewriter, every piece of equipment, was taken into the possession of the courts in order to get the money to pay those fines.
A noble Lord: Hear, hear!
Lord Scanlon: My Lords, before you say, "Hear, hear! It should be much more severe", consider this for a moment. If that was the cost to the union, what was the cost in lost production? What was the cost in the souring of relationships between workers and management? And what was the cost of the continuing aggravation that exists?
And what was all this about? For what? Not one responsible employer, not one employers' organisation, ever used that Act. I hope that it is not unparliamentary language, but the people who used it on the employers' side and on the trade unions' side were the "nutters". On the employers' side they were those who wanted to abolish trade unionism in their factories without any concern whatsoever for the effect on the country or on their own industry; and, on our side, they were those who saw the means of getting a fast buck in the shape of money that might be granted under the terms of a "golden handshake" in order to restore peace into a given factory.
All that loss of our funds, all that sequestration of assets, all those disputes, did not deter in any way the trade unions, and particularly my own, from pursuing what they thought was, and still think to be, a correct policy of saying that industrial relations and negotiations are matters between management and the trade unions and that we should be as free from Government interference here in Britain as we are trying to maintain that the Polish trade unions should be in Poland. That is a principle which I believe is well worth fighting for.
Yet here in the Government's proposals, once again we are going to make unions' funds vulnerable by withdrawing immunities which have been in existence for over 70 years. When will we learn that the strength of the trade union movement here and elsewhere consists not of money in the bank, not of offices and typewriters; their strength lies in the members' conviction of the justice of their cause and, when so convinced, of the need to fight with spirit and determination until that cause is achieved, whatever the cause might be. Therefore, as somebody who has gone through that, and does not want to see its recurrence on the industrial scene, I plead for the Government to think again. We have no specific information on what the actual proposals of the Government are; but we understand that the other items that are to be considered are making strikes which are outside procedure equally removed from the immunities that they presently have.
Let me again remind your Lordships that, in what I consider to be one of the most important industries in Britain—namely, the engineering industry—it took us 40 years to establish a procedure which had a simple status quo clause in it to say that, if two parties have a

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dispute, neither party shall take sanctions against the other until the procedure is used and exhausted. Of course, if agreement is reached in the operation of that procedure, there is no need to take sanctions. Additionally, since that agreement has been reached, my own union has determined that no dispute play will be made whatsoever unless the procedure has been exhausted.
So a determination to do that, together with—let us face it quite frankly—the present economic climate, has brought about a remarkable change in the willingness and ability to use the procedure in the proper manner. But, in any case, are we not all aware of the fact that most of the major disputes that take place—unfortunate as they may be—are certainly taking place after procedure has been exhausted? Could anybody say that the civil servants' dispute was outside procedure or even, for that matter, any of the unfortunate disputes that took place in the so-called "winter of discontent"? Of course they were not. One thing is certain, however. If this legislation goes through in the manner which is proposed, one of two things will happen: either procedures will be looked at much more closely by legal people, with all that that may imply, or trade unions may even find a quicker way out and have no procedures at all. Then at least in that aspect of the legislation they will not be vulnerable.
I do not wish to carry on on the question of the closed shop and other matters, not because these are not important but because I believe that the majority of employers do not see this as a major issue. Even if legislation were introduced, the closed shop would continue in many, many industries where it is presently of mutual benefit or at worst would continue in some clandestine fashion.
Finally on this question of trade union legislation, I frankly admit that the Government were given a mandate to look at and revise trade union arrangements. I hope nobody in this House or in another place will subscribe to the view that promises made in a manifesto are either worthless or should be ignored. The Government have attempted to fulfil their pledge. We know what has happened on the law of picketing. We know that there has been legislation on the closed shop. I appeal not in any debate scoring manner but to the Government to think again on these issues. Let us deal with the main issue facing us: how can we through co-operation create that additional wealth in the manufacturing and other bases which is so essential for us to continue?
Regarding ballots, I—if I may make this personal—spent 30 years of my life either fighting my own election or seeking to go up the ladder by fighting others. There is no officer from a shop steward to the national president who can hold office without an election and without submitting himself for re-election. He can be thrown out or his period of office can be reaffirmed. Therefore if I spoke personally I would not disagree at all with the Government on the question of ballots. But the vast majority of unions do not elect their officials by ballot and they will put forward very cogent arguments as to why. One thing is certain: we are not going to persuade them or compel them by legislation.
Consider for a moment, however cynical it may
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appear, the fact that nobody considered the need for a ballot when the workers at British Leyland rejected their stewards' advice and voted to accept the recent offer; but were this legislation in force, anybody could then demand a ballot and say that they wished to return because the people had been misled and they did not know what they were talking about when they put their hands up. That is usually the explanation when decisions go the reverse way.
There is much wrong with the trade union movement. It is ludicrous that it takes 12 unions to build a motor car or 20 to build a ship. It is time that we all co-operated on this issue and gave the TUC the assistance that it needs in bringing about new arrangements. That will be indeed difficult. It is one of my regrets that I did not succeed in getting more amalgamations within our own industry, for this is certainly needed and long overdue.
I turn very briefly—because I know that it will be dealt with elsewhere—to privatisation. I hope that because of the time we can deal with other aspects of privatisation outside the one that I am dealing with, which concerns gas. I declare an interest as a part-time member of the Gas Corporation. There was relief—I put it no higher—that in the Queen's Speech there was no mention of going ahead with showroom privatisation, although we know that the Government will seek powers which may be operated in the future. I plead that the breathing space that this has given will be used to recognise what is being done, and that the danger will be recognised, both in terms of safety and in terms of temptation, of people doing things which they should not do and which the sale of these showrooms can bring about. I say no more at this particular point.
I should like to turn to the question of the disposal of oil assets. There are two main reasons for involvement by British Gas in the exploration for gas and oil: first, it gives British Gas some direct control over its primary feedstock and useful knowledge about the overall size of United Kingdom gas reserves. Secondly, it enables British Gas to acquire direct information on the technology and cost of exploration and development work. This provides the expertise needed for negotiations on gas purchasing. How can we believe that if anybody can purchase gas from the producers themselves, as we are proposing to allow, by increasing the number of people requesting this service we are going to bring the price of gas down? Inevitably what will happen is that the price of gas will go up and that, although in the main it will go up on industry, the domestic user will likewise be a sufferer.
I do not propose to go into the matter in too much detail. I know that the time given to us by the Government for disposal can only mean that the price obtained for Wych Farm and other places will result in a price much below the market value. That places members of the corporation—and I say this with quite considerable reserve—in a very difficult position. They have duties under the Gas Act, and duties to sell whatever is sold at its best commercial value. I leave it to your Lordships in that setting and would again ask you to consider the situation that might confront the corporation.

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I turn now to this final point. It is a sad thing when, either through invective or spleen, the media or Parliament choose to particularise problems on one individual. The chairman of the Gas Corporation has been so chosen and I consider it my duty to defend him here. He is looking after the interests of that industry which he was pledged to look after when he took over the responsibilities of chairman of that board. He is not doing it on his own; he is doing it with the united Gas Corporation Board behind him. Everybody but myself on the board is an avid supporter of the Government of noble Lords opposite. Therefore to think that the board were acting from ulterior motives, or that the chairman was acting somehow on his own, is absolutely wrong, and I take this opportunity of remedying that matter.
I was rather goaded by the noble Lord, Lord Cock-field, into the question of incomes policy. It is not mentioned in the Queen's Speech. It may well be that there are other noble Lords in this House who wish it were. But I would ask your Lordships to consider before you start deriding it. I make no apologies for that. I have described what the trade union movement went through in its resistance to the Industrial Relations Act. We stood on our heads under the so-called "Social Contract". It is true that, as a result of the sacrifices of working people as well as management, who all accepted for over three years levels of settlement well below the rate of inflation, the rate of inflation in 12 months was halved, being brought down from 25 or 30 per cent. to 15 to 17 per cent. In the subsequent 12 months it was again halved and eventually reached single figures.
I wish the matter could have been left there, and perhaps we would not have had the winter of discontent. But there were strikes other than that winter of discontent, despite all that went on in that sacrifice—and I do not demur at the word. There was a strike of capital. The investment that should have occurred in our industry never did. I would remind your Lordships that one of the reasons we kept on was the existence of a National Enterprise Board which had not been—forgive the word—castrated, and it was willing to take the steps it thought necessary in its own judgment to ensure that investment went into the right quarters. There would have been no British Leyland now and no Rolls-Royce if that board had not existed and done what it did. It is in that setting that an incomes policy is possible.
I repeat again and finish with a plea: if on these matters you want the co-operation of trade unions in its widest sense, you are not going to get it by the policy of confrontation or by introducing legislation such as I have tried to describe. I know it is perhaps pleading in vain but I hope, even at this late stage, that the Government may well take notice of some of these things and will not make the mistakes which I believe have been made previously. I beg to move.
Moved, as an amendment to the motion, at the end of the Address to insert—
"but regret that the gracious Speech indicates the continuing reliance of Your Majesty's Government on those same fiscal and monetary policies which have created irrevocable damage to the nation's industry, and caused a massive increase in unemployment; proposes further divisive legislation hostile to the trade unions; announces economically irrelevant measures for the sale of public assets; and consequently offers no prospect of economic
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recovery, no hope for the establishment of social justice and no vision of a united national effort for the benefit of all."— (Lord Scanlon.)
4.46 p.m.
Lord Banks Lord Banks rose to move, as an amendment to the above amendment, at end to insert "any more than would the policies of Your Majesty's official Opposition".
The noble Lord said: My Lords, I beg to move the amendment standing in my name on the Order Paper. This amendment would add to the amendment just moved the words:
"any more than would the policies of Your Majesty's official Opposition".
I should like to say right away two things about the amendment just moved so forcefully by the noble Lord, Lord Scanlon. First, we on these Benches have considerable sympathy with the terms of that amendment because, like the noble Lord, we do not accept the medium-term strategy which lies behind the Government's policy. Nor do we support the policy actually practised by the Government. Fortunately, the Government have not been able to match the severity of their strategy in their attempt to apply it. Even so, in our view the policy in action has done much damage to the economy. I am not surprised that the noble Lord, Lord Cockfield, should dislike references to the right honourable gentleman Sir Ian Gilmour, so recently in the Cabinet and so recently sharing responsibility for these matters. But he has pointed out that the results of the Government's policies are that unemployment has passed the two and three quarter million mark and is approaching 3 million; output has fallen more than at any time since the 1930s; the number of bankruptcies and closures is unprecedentably high; and price inflation is still higher than at the time of the general election.
Secondly, we on these Benches join with the official Opposition in condemning the dire results—and the adjective is Sir Ian Gilmour's—of the Government's policy. We do not accept a great deal of the alternative programme to which the Labour Party are committed, and our amendment to the official Opposition's amendment is designed to give expression to that fact. For example, we are not in favour of this country pulling out of the European Economic Community. We believe that to do that, among other things, would place 2½ million jobs at risk, would cut us off from our biggest market and would greatly reduce our opportunities for exercising influence in the world. In fact, we would like to go further towards integration and would like to see this country a member of the European Monetary System. Also, we are not in favour of the establishment of a régime of import controls; we believe that would be suicidal for a nation which exports one-third of its gross national product.
Thirdly, we are not in favour of further widespread nationalisation. The Socialist Alternative, the document which was presented to the last Labour Conference by the Labour Party National Executive Committee, said this:
"We will establish a publicly-owned stake in each important sector of industry".
We believe that such a policy would be completely

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irrelevant to the solution of the problems facing our economy at the present time.
I put forward our plan for recovery in this House on 11th February, when I opened a debate on the 10-point programme which had been set out by my right honourable friend, Mr. David Steel. I shall not go into the detail again, but I should like to remind the House that we stand in favour of a limited expansion of the economy, which we see might be done in two ways, at least: first, by an increase in investment in the capital structure of the country, which has been sadly neglected; and, secondly, by the reduction or abolition of the national insurance surcharge, which, of course, does not go towards national insurance at all. We want to link that limited expansion of the economy with an incomes policy, believing, as my noble friend Lord Rochester said yesterday, that agreement and consensus are better than bankruptcies and redundancies as a means of linking incomes to productivity.
Then, in the field of industrial relations, we should like to give a minimum statutory basis to consultation by the establishment of works councils. There might well be a triggering mechanism included in this, so that if a certain percentage of the workforce in any company were to apply for a ballot to decide whether or not a statutory scheme should be introduced, that ballot would decide whether the scheme would be set up or whether some other scheme, acceptable to the workforce and already in practice, should continue. In this way, we would not necessitate the abolition of existing schemes which might not conform to a statutory pattern, and we would retain a measure of flexibility.
The noble Lord, Lord Cockfield, objected to the Government's policy being described as deflationary. He explained that the Government were spending more and that the public sector borrowing requirement had increased. But, of course, it is not only these factors that have to be taken into account. It is also true that taxation is rising and we have to consider the impact of the high exchange rate which we have had, and which we still have in real terms, and the high interest rates on prices—and prices have been rising substantially faster than the rise in money national income. We believe that a combination of these factors has had a powerful deflationary or disinflationary effect and this, I think, is the fundamental disagreement between the Government and their critics, as to whether the policy which they are pursuing is inflationary or deflationary. We have no doubt that it is deflationary. So far from wanting to see further cuts, we want to see some relaxation and, in particular, no more cuts in social security and welfare.
According to EEC figures, our spending on what is called "social protection", which includes social security, expressed as a percentage of gross domestic product, has been lower than in all the other EEC countries, except Ireland. Admittedly, we must remember that more of the cost of pensions is borne by the employer in Britain through occupational schemes, than is generally the case in the EE3. But, even so, I think there is no indication to suggest that we are out of line with similar countries in what we spend in this field.
But to return to the main argument, the noble and
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learned Lord the Lord Chancellor, in the stimulating and thought-provoking speech which he made to us a week ago today, reminded us that a debate had been going on for 150 years between two schools of thought—the advocates of the market economy on the one hand, and the advocates of collectivism on the other. The noble and learned Lord described the first of these—the defence of the market economy—as the classic Liberal thesis and he added:
"… at a time when … the Liberal Party … needed no allies from pink-centred collectivists".— [Official Report, 5/11/81; col. 21.]
I thought I detected a slight note of criticism there of the alliance between the Liberals and the Social Democrats.
But the New Liberalism, as it is often described, which developed in the early years of this century, recognised the need for both individual initiative by private individuals and by private corporations, and collective action through the machinery of the state, and recognised the need to secure a proper balance between them.
This recognition was expressed very clearly by Winston Churchill, then a member of a Liberal Government, in a speech which he made in 1906 and which was republished with others in 1909. He said this:
"It is not possible to draw a hard and fast line between individualism and collectivism. … That is where the Socialist makes his mistake.… No man can be a collectivist alone or an individualist alone. He must be both an individualist and a collectivist. The nature of man is a dual nature. The character of the organisation of human society is dual".
The journal, The Nation, commenting at the time on these speeches of Winston Churchill, declared:
"This moving equilibrium of the forces of collectivism and individualism, not a contradiction or a compromise but a harmony, is of the very essence of that social progress to which Liberalism commits itself with fresh faith and growing courage".
I believe that this is as true today of Liberalism as it was then.
Of course, there is something of the market economy and something of collectivism in the policies which all Governments have pursued in this country since the war. But the Conservative Party today, whatever Disraeli may have said, is ideologically committed to the market economy and the Labour Party, however gradual the inevitability at various times, is ideologically committed to collectivism.
Incidentally, I was fascinated to see this week that the name of Disraeli has become so much associated with rebellion in the Conservative ranks at the present time that the Daily Telegraph—that daily source of instruction for loyal Conservatives—felt obliged to publish a leading article on Tuesday debunking Disraeli's political record. We read of his "stupendous immobility", his "broad lethargic indifference". We were told that he was a showman and a charade master. It was asserted that he is no more remembered for what he did than Phineas Finn. But I think that even Gladstonians would jib at that. It is clear that, in the eyes of the Daily Telegraph, any Conservative who calls Disraeli in his defence is well down what the porter in Macbeth called "the primrose way to the everlasting bonfire."
The noble and learned Lord said—and I was glad to hear him say so—that he listened often with a high

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measure of agreement to speeches from these Benches. In so far as they relate to economic matters, I think that must be because, as he said, as between collectivism and the market economy, he has never fully accepted either point of view. But the rhetoric of the Government is heavily biased in the direction of the market economy, and so, I believe, are their policies. I believe it is plain to the people of this country that the Government have lurched heavily towards the market economy school, and that the Labour Party have lurched heavily towards the collectivist school. The compromise, to use the noble and learned Lord's expression—the harmony, as I would prefer to call it—has disappeared.
I believe that the Social Democrats see this as clearly as do the Liberals. I believe that they, with us, stand for that balanced partnership between individualism and collectivism, between market forces and collective action, which is essential for the provision of true economic freedom. I am happy to be associated with them in the pursuit of that end. My Lords, I beg to move.
Moved, as an amendment to the above amendment, at end to insert "any more than would the policies of Your Majesty's official Opposition".— (Lord Banks.)
5 p.m.
Lord McFadzean of Kelvinside: My Lords, when I first joined your Lordships' House, several of the senior Members kindly gave me advice on procedure, particularly the procedure to be followed in a maiden speech: "Be brief", I was told, "and try to be non-controversial, but if it proves difficult to observe both these restraints do not sacrifice brevity".
As we arc all aware—or we certainly shall be by the end of this debate—economics is a many splendoured subject. Its devotees occupy every point of the compass and most are convinced that the direction in which they are pointing represents the only true way. In such circumstances it is difficult to speak in any debate on the economy without appearing controversial to one group or another. I shall therefore be brief. I should like to devote the few minutes which precedent allows to supplementing some of the observations which were made yesterday by the noble Baroness, Lady Young, on the causes of our slow rate of economic growth.
Within the lifetime of many Members of this House we have not only seen the purchasing power of the pound shrink to less than 7 per cent. of its pre-war value but, as was mentioned yesterday, we have been steadily sliding down the international league table in per capita income. Not only have we long since been passed by Denmark, West Germany, Belgium, France, Luxembourg and the Netherlands but our rate of growth over the last two decades has been the lowest of the 10 countries in the EEC. This performance has dismayed our friends and produced more than a tinge of contempt from those less well disposed.
The noble Lord, Lord Kaldor, in his inaugural address as Professor of Economics at Cambridge attributed a large part of Britain's slow rate of growth to the fact that the country was what he called "prematurely mature", in the sense that industrialisation started first in Great Britain and that, unlike many other countries, we no longer have the resources of labour in agriculture to sustain any great expansion in
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manufacture. Of course there is great force in this argument. Since 1870 there has been an exodus from the land, accompanied by an increase in productivity of those who remained, so that at the present moment agriculture accounts for something close to 3 per cent. of our gross domestic product while employing less than 2 per cent. of the working population. Compared with most of our Continental neighbours, British agriculture is efficient, but this does not mean that the disguised unemployment has been squeezed out of the economy. In fact, the disguised unemployment has moved over to the manufacturing and service industries.
It has become fairly commonplace to blame Britain's lack-lustre performance on a deficiency of capital equipment per man employed; if only the proper tools were provided we would reach the productivity levels of our main competitors. This is sometimes generalised, as it was generalised this afternoon by the noble Lord, Lord Scanlon, into a claim that there has been an investment strike by private enterprise. I have some difficulty in accepting this concept. It does not require too close a survey to discover that over a wide range of British industry it would be possible to increase output appreciably from existing plant by reducing the over-manning and using the manpower thus set free to double shift the equipment which is already installed.
Secondly, figures giving capital employed per worker are not only a function of the amount of money invested. They are also a function of the manner in which the investments are utilised. Thus, with modern, numerically controlled machine tools, multi-machine manning has not only become possible but it has been followed in many other countries. If our work practices are such that we force one man, one machine, while others operate four machines to one man, it is not at all surprising that the per capita capital employed by some of our competitors is four times greater than in Britain. But more investment is not the answer to this problem.
Thirdly, if people refuse to adapt and change their ways to enable the economies of advanced technological equipment to be realised in practice, the incentive to invest is diminished or eliminated altogether.
An article published in New York last month and already mentioned in another House highlighted some of these problems and pointed some very adverse criticism at British industry. It gave a comparison between two car plants, broadly similarly equipped, but one located in West Germany and the other in Great Britain. The German plant was reported as producing 50 per cent. more cars with a workforce approximately 30 per cent. less than that employed in the United Kingdom. In spite of wages in Germany, in this particular plant, being 50 per cent. higher than in the United Kingdom, the German plant could still produce and land a car in the United Kingdom for appreciably less than the cost of producing it here.
This is not an isolated example. It is well known that similar investments can produce widely different results according to the country of location; and the different results are largely the product of unquantifiable factors: the political and economic environment, the existence or otherwise of incentives, traditions, industrial skills and, above all, the attitudes of the

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managements and workers involved in the projects. Economics, in my view, has become too obsessed with the quantifiable to the detriment of the unquantifiable, yet it is these intangible factors which I have mentioned that largely determine whether a nation prospers or shuffles and stumbles into relative decline.
The dynamic concept of an economy which used to dominate Britain has to a large extent been replaced by a near zero sum mentality. The focus is not on the future and new opportunities but on what already exists: on protecting jobs, on closing markets, on shunning ideas, on re-distributing rather than expanding income. This static philosophy tends to become self-fulfilling and results in the ossification of the economy. If but a fraction of the time and effort put into confrontational industrial relations in Britain could be channelled into improving efficiency and productivity it would soon be possible to increase real incomes all-round. However, changing long established and deep seated attitudes, while essential, is not an easy task. But over the last year— glad to hear the noble Lord, Lord Scanlon, speak in the same way—there has been a growing realisation that unless many of our present practices are abandoned we shall continue to lose ground and jobs to competitors who adapt more speedily to an ever-changing technological environment.
5.9 p.m.
Lord Kilmarnock: My Lords, it is a privilege indeed to be the first to congratulate the noble Lord, Lord McFadzean of Kelvinside, on a notable maiden speech. He brings, of course, the strength of the McFadzean clan in your Lordships' House to two and thus comes within striking distance of Clan Hunt, which I believe heads the league. There is also, I understand, a family connection between the noble Lord, Lord McFadzean, and the noble Lord, Lord Marsh, who is to speak after me. Therefore I shall do my best in my speech not to interpolate at excessive length between this double-star billing on the Cross-Benches which the Chief Whip has so cunningly devised for us.
As your Lordships will know, the noble Lord, Lord McFadzean, has had a very distinguished career in industry and brings a wealth of experience and achievement to your Lordships' House. The noble Lord is also an author. I was intrigued to read from his entry in Who's Who that he has written a book called the Economics of John Kenneth Galbraith: A Study in Fantasy. As I am in fact in agreement with some of Professor Galbraith's ideas, I look forward to debating this with the noble Lord on some future occasion, and I am sure all your Lordships look forward to frequent contributions from the noble Lord.
The theme of unemployment has been remarkably persistent, not only in this debate but also in the debate on home affairs where, in happier times, it would probably not have received much mention. This is further evidence of the definite emergence of this subject at the head of the league of what we and millions of our fellow countrymen are most worried about, and therefore I make no apologies for turning to it again this evening. Personally I am convinced that this social and economic blight will remain with us to an uncomfortable, if not intolerable, degree
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until we thoroughly shake up all our accepted ideas about the relationship of man to work. The ultimate aim must be to give every citizen the right to a maintenance allowance sufficient to enable him or her to choose between not working, working, part-time working for an employer and working for himself or herself, and varying his choice at different periods of his or her life to suit his or her educational, marital or other requirements. The way towards this is quite clearly by a merger of the present tax and social security systems in a single tax credit or negative income tax system, but this is a subject for another occasion.
In the meantime, we have the fact that 3 million of our fellow citizens are now officially unemployed and are not enjoying it, despite innuendoes to the contrary. There is a fairly wide spread of projections as to what the situation may be by 1984 or 1985 or 1990, assuming present policies. Even the most optimistic is not very encouraging. For instance, the Cambridge Econometrics Industrial Subscription Service pushed up its June 1978 forecast of 2.7 million unemployed in 1985, to 3.4 million in its revised forecast for the same year made in June 1981. The Cambridge Economic Policy Group forecast in April 1981 that there would be 4.3 million in 1985, excluding school-leavers, and of course there are other forecasts of an even more alarming nature.
Distressing as these projections are, I believe it would be unwise, not to say dishonest, of any self-respecting political party to nail the flag of full employment in the old style, as we were accustomed to it, to its masthead and to sail with this as one of its principal commitments into the next election. That could only be achieved by stoking up the economy and going hell-bent for growth at all costs, and without a massive increase in public sector employment it is very much to be doubted whether it could achieve its objective, even in the short term, for the more competitive arm of the economy would still have to aim for improved productivity and lower manpower costs if it were to maintain, let alone increase, its market share.
If there were to be a massive increase in centrally provided public services, these could only be funded by a tremendous increase in Government—that is to say, national—debt, or by taxation. If unilaterally imposed controls were added to the package, it would merely be a question of time before fortress Britain went broke and had to be demolished for scrap. Yet that is the essence of the package offered in the Labour Party's alternative economic strategy, as outlined in their pamphlet called Manifesto.
But between doing nothing and such desperate, if not suicidal remedies, there are other positions. We are not helpless. During the Warrington campaign my right honourable friend Mr. Roy Jenkins put forward a six point programme designed to remove approximately 1 million people from the unemployment register at a net cost to the PSBR of between £2 billion and £3 billion. This was, and remains—and it has never seriously been challenged—a responsible and realistic programme. Very briefly I will remind your Lordships of the six main headings.
The first is based on the Treasury's own estimate that an unemployed person on average costs the Government approximately £3,500 a year in benefits and forgone revenues. This is now an under-estimate.

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I think the figure should be nearer £5,000. We shall have an occasion to discuss this, when, it is to be hoped, some time in the new year the report of your Lordships' own Select Committee on unemployment is debated, but let us accept the Treasury's figure for the moment. The proposal is that this sum should be paid to every employer who takes on an additional worker who has been unemployed for over six months. The gross cost is, of course, reduced by the direct and indirect tax revenues, national insurance contributions, et cetera generated by the re-employment of these people.
Some of us may not like the idea of subsidies at all, though goodness knows! there is enough subsidy in one form or another in the economy at the moment owing to the imperfect functioning of the free market. If subsidies are to be applied in the interests of employment, then obviously employment subsidies are preferable to investment subsidies. This grant would be limited to two years, and Mr. Jenkins estimated the cost at £400 million a year for 250,000 jobs. As we are a democratic party and allowed to disagree with our leaders, I would put it slightly higher, at £500 million. Even so, I submit that this is not excessive for an emergency measure; and who can doubt that we have an emergency on our hands?
The second proposal is for £500 million of worth-while expansion in the public sector, and the first candidate here is obviously telecommunications. It is ridiculous that investments which bring in good hard returns—no soft options here—should be subjected to the same cash limits as basically non-constructive or palliative public expenditure. We could learn a great deal from the French here. The direct job yield may not be very great here, as was suggested in the very distinguished debate in your Lordships' House on Friday, 10th July, on the EEC Committee's 27th Report on information technologies. But it is a field that we have to be in, and I would suggest that investments should be spread between higher and lower technologies, to include railways, roads, drainage and water, with the aim both of improving the general public infrastructure and of catering for workers with higher and lower skills. Mr. Jenkins foresaw here the generation of 50,000 jobs.
Third, we have the extremely interesting and not vastly costly suggestion of a national housing renovation programme—new homes for old, as it has been called—specifically aimed at unemployed workers with wasting and wasted, but by no means irrelevant, skills. It is surely a scandal that the total expenditure on housing has fallen from £6,072 million in 1975–76 to £4,256 million in 1980–81 and the statistics recently compiled by Shelter show that more than 3,300,000 flats and houses in England are now unfit, lacking in basic amenities or in need of substantial repair. The suggestion is that those receiving unemployment benefit should be given the opportunity of working in this field for, say, an additional £15 a week over and above their unemployment entitlement. In fact the Government have gone some way in this direction by raising the disregard on unemployment benefit from £4 to £10 a week, but they have not made any suggestion as to how or where the unemployed should turn for work.
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Here I should like to add a suggestion of my own. Why not make it possible for the handier unemployed—and there are many of them—to draw this additional sum to improve their own homes, whether rented or owned, the materials to be provided from a revived improvement grants scheme, and our charming but antiquated housing stock would take on a new lease of life without any vast programme of building or public expense. Mr. Jenkins estimated the cost of getting 250,000 people back to work in an activity which would be congenial to many at no more than £250 million a year—surely cheap at the price.
Fourth, there is a very large scope for relatively inexpensive improvements in what one might call the caring services, that is to say, crèches, pre-school education, play groups and home helps, enabling the old to continue in their own homes instead of going into costly residential care. That sort of work is ideally suited to women who want part-time work and it would cost about £200 million a year to provide 60,000 part-time jobs in such activities, which is another real bargain for the taxpayer and a real benefit for society.
Fifthly, there is the vitally important question of holding the pound at a viable rate on foreign exchanges, and keeping it reasonably steady, in contrast with the wild fluctuations of the last year or so. A major proposal here is that the oil depletion rate should be cut by a third and held there for the rest of the decade. Funds jostling into this country to take advantage of high interest rates would decrease as interest rates fell, the exchange rate would fall, exports would be better placed, and manufacturing investment would not be crowded out so fast. It is also important to stress that this is not a classical reflationary exercise. There is no reason for any increase in that "damned elusive" money supply. It should never be forgotten that inward flows of hot money and a large balance of payments surplus actually increase the money supply which the Government are trying to control. The loss of oil revenues would be partly offset by the depreciation of sterling against the dollar, in which currency oil is priced. Furthermore, Government revenue would be increased and expenditure on unemployment benefits would fall as output expanded and unemployment decreased. It would not be unrealistic to envisage a gain of 250,000 jobs over two years as a fairly direct result of this depletion policy without any weakening of the Government's fiscal or monetary stance.
Finally, my Lords, there is the question of the young—16 to 18 or 16 to 19, whichever bracket you prefer. Everyone is bristling with ideas in this sector. The Government themselves will have to spend money here if they are to pay anything more than lip-service to the new training initiative to which they are committed. The Labour Party has a grand new plan which will certainly be very expensive. Our own proposals are still under study by our education policy committee, but at the very minimum we are going to have to overhaul the whole apprentice system, improve the Youth Opportunities Programme with a better training and further education element, and introduce mandatory educational allowances to allow all those who want to stay on in non-advanced further education after 16 to do so. Our provisional calculations are that an

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additional £300 million will be required in order to bring down the dismal tally of young unemployed by 200,000.
The six-point programme I have briefly outlined would in our estimation bring approximately 1 million people back into employment over the next two years at an annual cost to public borrowing in the region of £2,000—£3,000 million which, as my right honourable friend pointed out, not without some effect, to the electors of Warrington, is less than Sir Geoffrey Howe's last year's margin of error. This is, of course, no heady panacea, just a set of modest, rational, perfectly hard-headed proposals aimed specifically at improving the lot of those groups of our fellow citizens who are worst affected by unemployment, at little cost to the economy as a whole and with significant social benefits to our society.
Some of the critics of those of us who sit on this Bench have been at pains to suggest that we have no policies and are all things to all men. Such accusations stem, of course, from the habituation of people to the sloganised and dogmatic approach to policy of the two major parties. I hope I have managed to demonstrate that in the area I have been discussing we have a specific short-term emergency programme with some medium and longer-term implications. It is not gospel. It may receive some shifts in emphasis when our full party membership have had the opportunity of commenting on the green paper to be put out by our policy committee in this field. It does not, I must stress, exhaust our thinking on unemployment. In fact, my noble friend Lord Walston speaking yesterday from this Bench made a notable speech linking unemployment in the West with the problems of the third world. As David Steel said the other day in a lecture sponsored by the Federal Trust, it is absurd to think you can divide time up like lengths of carpet into short-term, medium-term and long-term, and then forget the last of those or bundle it into the cupboard because it is over the average politician's horizon. It is perfectly true, as Keynes said, that in the long-run we are all dead. But other people, our children and grandchildren, with a bit of luck will be alive.
Truly serviceable policies cannot be confined within a time-scale of two years or even five years. We shall, therefore, also be thinking very seriously about the devolution of powers from the centre to local authorities and the encouragement of local labour markets, with considerable implications for locally generated full-time and part-time jobs. I hope we shall be thinking, too, of reform of the tax and social security systems, which will have a very profound effect on the relationship of men and women to work. If an intelligent consideration of such reforms, because it is still tentative and still dependent on the work of our policy committees and the individual voices of our members, is tantamount to a lack of policy, then I rejoice in the jibe, because we, and I venture to think our Liberal allies, want nothing to do with policies consisting of little more than facile slogans mouthed by demagogues; and I think it is no wild claim that a growing number of people in this country are coming to think likewise.
5.24 p.m.
Lord Marsh: My Lords, it is at least a comfort to know that, whatever acrimony there may be—and for those who come from another place lack of acrimony is already one of the more comforting features of this establishment—all your Lordships will recognise the feeling of apprehension with which any new Peer speaks here for the first time. Indeed, it is a sense of apprehension which I think is equalled only at that point where one finally decides the particular debate in which to intervene. I chose today's debate with considerable trepidation. As I look around your Lordships' House there are so very many familiar faces. Many of them have managed to retain a degree of elegant slimness which has escaped me. But none the less they represent elements in my political past, many old friends, politicians and civil servants, eminent economists, people who over the years have played a major part in making this country what it is today.
Some of us over the years have changed our views, and I see this as no cause for surprise or for apology. Indeed, with the emergence of the SDP I am bound to say that parts of your Lordships' House make the road to Damascus seem singularly uneventful. In my case, I have to confess that, like many others, I have changed, and today I sometimes lie awake concerned about what possibly seem to be the Left-wing tendencies of Professor Milton Friedman. I will resist the temptation to develop that theme on what is a privileged occasion, in case it is thought controversial. I will, however, hope to return to it at a later date when I have been, I hope, accepted here.
I have always believed that in any modern society a degree of intervention by the state in industry and the economy is inevitable. I do not think there can be any sensible argument which says that a modern Government can remain aloof from what goes on. I do not think the sophisticated electorate will allow any modern Government to stand aloof from what goes on. I think a degree of state intervention is inevitable, whichever party is in power. I have not yet learned the conventions of this House. but I think it would be safe for me to say that when I served in the public sector the most interventionist Prime Minister I encountered—and I will not give his name—was in fact Conservative rather than a member of the Labour Party. In fact intervention occurs under all Governments at all times.
But I do think, and have become convinced over the years, that not only do we exaggerate the extent to which governments can influence the economy—because in most of these big issues there is relatively little that the Government of a country the size of this one, with the economic vulnerability of this one, can achieve—but also, more dangerously, underestimate the irreconcilable and fundamental conflict between politics and industrial management.
I am conscious of the pressure of time today and I will not weary your Lordships with a long speech. I want to confine myself to one issue, because I think that this irreconcilable conflict between politics and industrial management is a major problem, one of many problems but a major problem, regardless of party. Indeed, until very recently the main argument between the parties, regardless of what was said in the manifestoes or in party political broadcasts, was on how, rather than whether, to intervene in industry. Both

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parties tended to compete with each other with new methods, new solutions, wondrous pieces of legislation, wise men, norms, wages councils, prices and incomes policies, and Ministers of technology, departments of the environment, Ministers for Wales and for Scotland—ccasion we had a Minister for the North-East. We have tried all these various solutions and the one thing which has emerged is that they clearly have not worked.
I find it extraordinary that we in this country still seem to indulge in this extraordinary pretence that one party actually has the solution—somehow or other it slipped out of their hands a year or so before when they were in office—and the other party has no chance of finding it. In fact, the truth is that we have both sought for three decades to find a solution to an economic situation in regard to this country which is intolerable by any standards and unacceptable to any part of the House. It is also worth saying—it cannot be said too frequently—that I find the suggestion of a monopoly of moral concern about social problems deeply offensive.
As I have said, I think that there are three factors which present massive problems for industries which are subject to political intervention, and I believe that they are factors which influence the relationships between Governments of whatever colour and the economy as a whole. I do not believe that ownership, whether it be by the state or by private enterprise, is the essence of political philosophy. It is an argument about management, but I do not think that it is particularly an argument about philosophy. If one takes those three factors, leaving aside the policy of whichever party one supports, I think that there is a fundamental conflict of objective between the politician and the industrial manager.
One cannot run any enterprise properly—which is saying the obvious—unless one has a clear view of the objective of the enterprise. The true fact is that the objective of the politician can never be the same as the objective of the industrial manager because the objective of the politician is macro in concept. He or she must be concerned with the economy as a whole, with questions of the balance of payments, with questions of unemployment and—perfectly legitimately in a democracy—with the question of winning the next general election, which is what most politicians are involved in anyhow. Whereas the objective of the industrial manager is micro in concept. He is concerned with the welfare of a particular company, with trying to provide for the owner that which the owner—whether the owner be the state or an individual—has invested his wealth in that industry for.
The first problem of state intervention, the first problem of the public sector, is not a philosophical problem in my view, but the fundamental problem of two groups of well-meaning people with totally irreconcilable objectives. The second conflict is that of time-scale. However much we try, the reality is that politicians cannot think and cannot work on the time-scales of modern industry and a modern economy. Political parties cannot work on the basis of seven-year lead times or five-year lead times. They cannot go to the electorate in all fairness after a four-year term of office and say, "We are terribly sorry, we haven't done anything for the last four years but we
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have been reading an awful lot about it". Therefore, the time-scale is totally out of gear and, time and time again, one finds in the public sector that the time-scale by which the politician is operating is so different from that which the enterprise requires that, in fact, great damage is done to the enterprise.
The final and most serious problem is that of accountability, because if there is one thing which is crucial in the enterprise it is that accountability should be clear-cut at all levels. The paradox is that over the years Governments of all colours have paradoxically sought to increase accountability in the public sector, and in the process of so doing they have virtually destroyed it. In the public sector you cannot hold anyone accountable for anything.
I spent five years as chairman of the British Railways Board. During that time we had two Governments; we had five Ministers and we had seven changes of the investment programme. I frequently ask myself whether I was a success or a failure as chairman of British Rail. Many people—without being invited to give their opinion—answer that question to my disadvantage. But, in all seriousness, the fact is that one will never be able to say, because the investment programmes we followed were investment programmes to which frequently the board were opposed. The pricing policies we followed were frequently policies of which I violently disapproved and, indeed, we had income blocks on the amount of money we could pay the most senior people in the industry and so we could not even employ the people we wanted. At the end of five years one can look at these massive undertakings, and the frightening thing is that at the end of the day they are accountable to no one. That is inevitable in the public sector, and I believe that it is one of the inevitable and serious problems with it.
Of course there is no simple or single reason for the economic problems of the last several decades; likewise, there is no single, simple solution. There is no new piece of legislation or new Quango that we can set up. In the last 30 years Governments have tried—at least, I hope that they have tried and finished by now—every conceivable form of intervention in economic and industrial management. I played my part as a Minister responsible for nationalised industries. I Subsequently received my just deserts as a nationalised industry chairman, suffering under Ministers I previoulsy regarded as my friends. I cannot help feeling that if all Ministers were forced to spend a period as chairman of nationalised industries before they became Ministers, legislation would evaporate overnight and so would Government intervention.
The past few years have been interesting and fascinating and have convinced me that political intervention in industry is sometimes inevitable with industries like the British Railways Board as a classic example. I remain totally convinced now that, while it may sometimes be inevitable, it is almost never desirable.
5.35 p.m.
Viscount Eccles: My Lords, this is indeed my lucky day because I have the privilege which will never happen to me again, to congratulate two "maidens" sitting next to each other—first, the noble Lord, Lord McFadzean of Kelvinside. I do not know whether your Lordships share with me the feeling that when some

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body talks with a delightful Scottish accent he must be very efficient. The truth about the noble Lord, Lord McFadzean, is that he not only has a beautiful voice but he is very efficient and he knows his business so well that we hope he will come many times to this House.
As to my noble friend Lord Marsh, he has made a maiden speech that we shall remember for a very long time. Someone who has been on both sides of the table—the political side and then the industrial side—has unique experience and, if I may I would ask my noble friend to come frequently to this House because he is no doubt absolutely right that there is, in the complexity of our modern society, great difficulty in talking across from politics to business and from business to politics—and I mean by "business" both sides of industry. The more men of experience who will come and tell us the problem and, if possible, the solution—but at least make the problem clear which is a matter which has not really been well thought about in this House—the better. We can say that the two maiden speeches coupled with the speech of the noble Lord, Lord Scanlon, also a man of great experience, show what this House is good at. We are very fortunate to be able to have men who have served so well and held the highest ranks in their career, to come and talk to us in a way which would be very difficult in the other place.
Having said that, I enjoyed the speech by the noble Lord, Lord Scanlon, very much, but it did not have much to do with the amendment. If he will pardon me, I shall go back to the amendment which he only moved formally and did not really go into. What does the amendment, coupled with the speech last night of the noble Baroness, Lady Birk, amount to? If we vote for it we would be voting to call off the fight against the unfinished battle with inflation. It is the relationship between that fight against inflation and the present dreadful situation of unemployment that is the heart of the argument between the two sides of the House. So I would like to devote a few remarks to that point.
We did not expect that it would be so difficult to bring inflation down to single figures. Your Lordships can judge for yourselves to what extent causes outside the control of the Government have contributed to that disappointment. I mean the high wage settlements that were in the pipeline when we came into office, the soaring price of energy, the pressure of interest rates in the United States, and of course, the depth and length of the recession itself.
But, however prolonged the difficulties may be, I thoroughly agree with my noble friend Lord Cockfield in his admirable opening speech today that inflation remains enemy number one. It is the expectation of inflation that does the damage. It stifles investment, turns us into short-time speculators, and pulls apart the fabric of society. Costs spiral and jobs are lost. The institutions are bound to seek a positive return on the money which they lend (and they are lending other people's money). That means the Treasury has to offer a rate of interest substantially above the expected rate of inflation; furthermore, a rate which is competitive with that offered by other good borrowers. So I think that your Lordships would agree that, to
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make a real impression on the total of the unemployed, the interest rate must come down, but that it cannot come down more than a point or two unless the rate of inflation comes down first.
Apart from the effect of inflation on interest rates, it is very bad for new business; manufacturers want to be reasonably confident that if they take on more labour, they can sell the product. But if they cannot calculate, for reasons beyond their control, what will happen to their costs, how can they be confident? The result, of course, is that they put their plans for expansion in the pigeon hole. My noble friend was chairman of the British Railways Board. I hope he will not mind my asking this question. Suppose that the capital were now to be provided to electrify the railways and that when the work was completed it was found to be impossible to cover the then running costs, plus the new interest charges, without doubling fares and rates. What then? Would the public be able and willing to pay or would they desert the railways for some other form of transport? That is the kind of dilemma which continuing inflation brings. It also stimulates wage claims.
The wife says "I know, pretty well, what things cost today, but shall we have enough money in six months' time?" If the Labour Party had their way, with their massive reflation, the wife would ask that question more often and more anxiously. The greatest service which the Government can do for those in work and those out of work is to fight inflation to the point where employers, workers and savers change their minds about the prospect of rising prices and become convinced that their money will not, forever, lose it value.
I turn to the composition of the 3 million unemployed. That presents us with a new problem. The men and women out of work today are made up very differently from the mass unemployment that we knew before the war. Of the present total, 40 per cent. are under the age of 24, as the right reverend Prelate the Bishop of Worcester reminded us last week in what was sadly his last speech in your Lordships' House. The total of young and its proportion of the 3 million is a new experience. So, too, was the exceptional degree of overmanning at the time when the oil crisis hit our economy. The other day I was astonished to read that when we last had 600,000 out of work our gross national product was almost exactly the same as it is likely to be this year, when we have 2·4 million more out of work. That must be some indication of the overmanning. Since the mid-1970s thousands more jobs have been lost by the replacement of human labour with electronic devices. I very much hope that my noble friend Lord Weinstock will tell us something about that when he comes to speak.
In my political life I have listened to many false claims, but none more outrageous than the pretence that the Conservative Government are responsible for the overmanning of the 1970s and the job-destroying power of technology; for it is those two factors that account for a large proportion of the present total of unemployed. Those two factors have this sad result. Straightforward reflation—that is, borrowing money to pay for work for which the market will not pay—would have only a tiny impression on the total of unemployed compared to what it might have had in the

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days of Lord Keynes, whose pre-war theories are now so dear to Mr. Michael Foot.
If there was no money around, there might be a better case for reflation. But, as your Lordships know, there is plenty of money waiting for investment—witness the over-subscription of the Cable and Wireless shares this last week. How then do we create the conditions in which industry will think it worthwhile to borrow and to take on workers in jobs that will stick?—not the same jobs as have been lost in the last two years. Abroad this requires a recovery in the United States' economy. Without that things will be very difficult. At home it requires the defeat of inflation followed by a substantial fall in the interest rate and backed by the training schemes which the Government are developing on a large scale.
If that is a fair description of the situation, what have we to say about the alternative strategies proposed by the Government's critics? At their recent conference the Labour Party voted for a programme so remote from reality, so inconceivably dotty, that I gasp to think of men of experience—such as sit on the Front Bench opposite with the noble Baroness, Lady Birk—standing up and defending such a policy. Therefore, I want to ask the noble Lord, Lord Bruce of Donington, who is to wind up for the Opposition, whether he would be good enough to tell the House how the British economy could recover and flourish if his party did what they said they would do at Brighton; that is, enclose Britain within a ring-fence, compounding our failure to compete by putting on tariffs and quotas, confronted by retaliation against our exports in our best European markets, isolated—no one knows how—from the exchange and interest rates of the rest of the world and then, within this socialist stockade, borrowing or printing money to pour into the public sector and non-productive services. Nothing in the whole range of science fiction could be found to equal that nonsense.
I turn to what little we know about the policies of the Liberals and the Social Democrats. I contested the Chippenham division of Wiltshire in six elections. In each one I had a Liberal opponent—of course, he was not the same man each time. I never discovered what his party's policy was other than proportional representation. It may be an advantage at by-elections to be all things to all men, but not, I think, when a Government and a Prime Minister have to be chosen. So I have been listening to and reading the speeches of the dozen or so contenders for the leadership of the alliance, and some of those who probably are not in the race at all. The differences are interesting. Each one offers almost a whole policy. Of course they are not the same, but it is extremely interesting, and in a moment I am going to mention what I believe to be the highest common factor.
Does any of them really represent an organised party? I do not know, and I do not mind very much because I am encouraged to see the SDP destroying all chances of the Labour Party winning the next election. On behalf of my children and grandchildren, for that relief much thanks. On the other hand, it is difficult to see with the best will in the world how this collection of leaderless, floating voters can organise themselves into something which looks like an alternative Government by the time the election comes along. Well, we shall wait and see.
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There is something important which most of the speakers on behalf of the alliance seem to me to hold in common. They would not reflate without an incomes policy. I think that the noble Lord, Lord Rochester, said that. I think, so far as I could understand him, the noble Lord, Lord Roberthall, said that too, and we have had the noble Lords, Lord Banks and Lord Kilmarnock, more or less saying that. So far, so good. But how would they get an incomes policy if they make proposals like Mr. Jenkins's unworkable tax which would exasperate the unions and be circumvented by the employers? On other subjects, such as help to the young unemployed, help to small businesses, there is very little to choose between the SDP and my party. But what is important for British politics is that the gap between the SDP and the dwindling Labour Party is growing every day. It will go on growing, because Mr. Benn and his numerous friends are determined that it shall.
I apologise for taking so long, but before I sit down I have two short suggestions. We must feel our way towards an incomes policy. Could the Government offer to large capital programmes finance on what one might call anti-inflationary conditions? I mean, in return for loans could a bargain be struck with the industry concerned to limit the demands for increases in salaries, in wages, and dividends if there are any? I do not believe that the electrification of the railways could be justified unless some agreement of that kind had been reached beforehand, and I do not see why it should not be reached. If we cannot find new ways in which to be more responsible in pay bargaining, the competitive world of tomorrow will see us off.
Finally, I want to take up something that the Prime Minister said last week in another place, at column 22 of the Commons Official Report. Mrs. Thatcher said:
"We must also stimulate the new jobs of the future".
My right honourable friend then listed several ways in which the birth and growth of new businesses are already being encouraged, but she left something out. No mention was made of industrial design. British industry continues to neglect design. We were the first in the Industrial Revolution. It was easy then to sell anything that worked, but now conditions are very different: advertising is international; consumers buy what they see, motor-cars, kitchen equipment, clothing and much else, beautifully designed and presented—and of foreign origin. Our goods will not be competitive, never mind how well they are made, unless we make more use of talented designers and give them the facilities to study the cultures and tastes in our export markets.
I know from experience how difficult it is to persuade industry to give more scope to designers. The directors say they cannot be sure of the results. Indeed, art in any form is a very embarrassing subject at a board meeting. I know it from experience, my Lords. The Government should see what they can do to train designers and promote their use by our manufacturers. Otherwise, the new entrants to industry may be better trained but they will not make goods which will sell. In conclusion, I repeat that a vote for the amendment would be a vote to call off the unfinished fight against inflation, and we must, like the Prime Minister, have the courage not to do that.
5.56 p.m.
Lord Kaldor: My Lords, I too should like to add my congratulations to the two maiden speakers, and particularly to the noble Lord, Lord McFadzean, who has the rare combination of academic excellence combined with first-rate business abilities. Also to the noble noble Lord, Lord Marsh, who will add to the distinguished ranks of those who graduated to business from politics.
This is the third debate on the Queen's Speech in the lifetime of the present Parliament. I count myself fortunate to address your Lordships from the Back Benches of this side of the House and not from the Front Bench of the other side. I certainly do not envy the noble Lord, Lord Cockfield—even though I admire him—in keeping up his usual air of effortless superiority and infallibility, while having to eat quietly so many of his past words.
The noble Lord, Lord Cockfield, with the same confidence and superiority, explained to us two and a half years ago that from now on everything would be different. It is a completely new world we are entering; the money supply will be strictly controlled; the control of the money supply will work miracles; inflation will rapidly disappear, and there will open up a marvellous new era of growth and prosperity. I do not want to repeat too many times the figures that have already been bandied about and quoted. The fact is that our production shrunk; our GDP in two years by 7½ per cent., which is more than has ever happened before in peace time; a fifth of our manufacturing output disappeared; and I could add many other features.
Turning to the methods by which this new Government thought to bring about a new Jerusalem in this country, they were always concerned with turning back the frontiers of government; reducing government expenditure. Today we heard almost with satisfaction a statement from the noble Lord that government expenditure, as a matter of fact, increased as a percentage of the national income from 50 per cent. to 55 per cent., and it will be higher still next year. The PSBR, by whose reduction they still seem to set great store, was exceeded by 57 per cent. as compared with the Government's target in one year, and by 40 per cent. in the next.
I will not go into, but merely register my utter and total disagreement with, his present emphasis of the budgetary deficit and the level of interest rates. I could demonstrate to him—I have done so and I am ready to supply written proof—that there is no necessary connection whatever between the budget deficit and the interest rates; you can have high interest rates and no deficit, enormous borrowing and very low interest rates; you can have a 2 per cent. war (as we had in the Second World War) or a 6 per cent. war (as we had in the First World War); and lately the great Milton Friedman has come round to this view too, and I could supply references to that effect also. Let us leave that there.
What was missing from the noble Lord's excellent and wide-ranging account today was any reference to the money supply, whereas, by Jove, two years ago the money supply was the centrepiece of everything. The control of the money supply and the reduction in its growth rate would result in all sorts of miraculous changes coming about, so we were told. In the event what happened? Since the day the Government came
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to office, the money supply, by their own definition, has increased at an annual compound rate of 18 per cent., as against the 11.2 per cent. in the previous five years, between the second quarter of 1974 and that of 1979, and that was under a Labour Government. So the money supply increased more than 50 per cent. faster than it did before. That has been the net result of monetarism.
Certainly the noble Lord did not expect, and could not have expected, that the rate of inflation would be higher, and not much lower, than before. He could not have expected, either, that the rate of inflation would bear no relationship to the change in the rate of the money supply, which would call for an even higher inflation than we had. And he would not have said that despite North Sea oil and an unprecedented recession—which, of course, was not foreseen or taken into account—the balance of payments on current account, as the latest published figures show, would barely break even.
Indeed, if the latest published trade figures, for September, turn out to be more than a freak, 1981 will go down in history as the first peace time year in which Britain was a net importer of manufactured goods—the first time, that is, since the 16th century. Since 1975, the volume of imports of manufactures increased by 76 per cent., while the volume of exports of manufactures increased by 14 per cent. only, which means that imports grew nearly five times as fast as exports. Since the first quarter of 1980, while the economic recession was rapidly deepening, the volume of imports of manufactures nevertheless rose by 9 per cent., whereas the volume of exports fell by 7 per cent.—the very opposite of what one would expect to happen when a country has a much deeper economic recession than its trading partners.
I submit that there is not a single aspect of the Government's policy, announced or unannounced, in which the desired objectives of the Government have been attained, except perhaps one, but that is not one for which anyone could openly claim credit. They have managed to create a pool—or a "reserve army", as Marx would have called it—of 3 million unemployed, and but for the fact that British Leyland was not closed down, as looked like happening—a lame duck, by Sir Keith Joseph's definition, if ever there was one—the figure would soon have risen to 4 million.
There is no use blinking at the fact that in terms of the power of masters over men, the existence of 3 million unemployed makes a vast difference. One has only to scan the statistics of absenteeism, the number of days lost through strikes and the size of wage settlements, both absolutely and relatively to the increase in the cost of living, to realise that the British working classes have been thoroughly cowed and frightened. The trade unions are demoralised and a climate of fear dominates the land. The defeat of a near-unanimous strike recommendation by 350 shop stewards—I never knew there could be so many shop stewards in one firm—of British Leyland only a week ago bears eloquent testimony to that.
Mrs. Thatcher is our first Marxist Prime Minister—none but a Marxist could speak so contemptuously of consensus politics. She was reported to have said in Australia recently:

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"To me, consensus seems to be the process of abandoning all beliefs, principles, values and policies. … It is the process of avoiding the very issues that have got to be solved merely to get people to come to an agreement on the way ahead".
I can almost hear Lenin speaking those words when in October 1917 he bullied 17 "wet" members of his politburo in order to take risks and seize power which they were most reluctant to do.
Yet despite the Russian revolution, and despite Britain's present untimely essay into Victorian capitalism, the successful trend in the present century, at any rate in its second half after Hitler was defeated, has been precisely towards the kind of consensus politics our Prime Minister so despises.
Perhaps she needs reminding that there was never a more far-reaching consensus in Britain than that attained by the war-time coalition Government of Winston Churchill, which certainly did not involve abandoning all beliefs, principles and values; whereas the previous "conviction politics" of Neville Chamberlain—a Prime Minister with much the same qualities of single-mindedness, courage and obstinacy as Mrs. Thatcher—divided the nation as it had never been divided before.
Coming nearer to our time, the successful democracies of post-war Europe—countries like Germany, Australia, Holland and the Scandinavian countries—follow the principles of consensus politics characterised by ever-widening consultation at all levels and by making all employees participate in decision-making at all levels. Those are the countries which have excellent labour relations, relatively low rates of inflation, few strikes and high productivity and production records, countries in which you find a recognition of a common interest in the success of the enterprise by all participants—which I consider a most important feature of success.
I would put Japan in the same category. There, in apparent contrast to its strong hierarchical traditions, there is in fact widespread regular consultation between management and staff, as we learned from an article in The Times the other day; and I must say that one of the most promising and cheerful features of recent events has been the increasing involvement of Japanese management in British industry. I cannot see anything but good in that kind of development. In Japan, wages are rapidly rising, in real and money terms, and are twice as high now as they are in Britain, and workers are protected, by the guarantee of lifetime employment, from being made redundant as a result of either automation or robotisation.
In miserable contrast to all that, British industry, as represented by the CBI, or the Government, is convinced that it is only through a large fall in the workers' standard of living, through wage increases consistently falling short of the rate of increase in prices, that industrial competitiveness can be restored. What nonsense that is! Improved competitiveness requires modernisation through new investment. It requires expanding home markets, which require higher, not lower, real wages and, most importantly, it requires an improvement in the technical competence of industrial management which, in the view of all foreign experts—though not perhaps the native experts—is one of the worst in the world.
Real wages could be much higher if our national
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production could be raised to its economic potential, and I failed to hear a single reference by the noble Lord, Lord Cockfield, or anyone else on the Government side, to this vital difference between actual output and potential output. If we could raise output to the full employment level, our production would be around 20 per cent. higher than what it is now; and if that cannot be achieved it simply means that our organisation of the economy, our market system, and the whole system of production and distribution is fundamentally defective.
The only way that I can see of regaining full employment is by expanding the demand for the products of British industry, which in our present feeble state, I readily admit, would not be possible without protection or import controls of some kind. It would be possible only if we could channel the additional demand to British products and not to foreign products. To that extent I agree with the Government that within the confines of their ideological parameters, which abjure controls of any kind—whether exchange controls, import controls, wage controls, price controls, or any form of planning—there may indeed be no alternative to their miserable policies, which I am convinced will lead us further down and down, with more and more unemployment until some type of revolution changes things radically, for the worse or for the better. Whether it will be a revolution of the Right or a revolution of the Left, I do not know; either might happen.
But in terms of their own chosen criteria the Government's two and a half years of office has been one of unmitigated failure, unless the rise in unemployment by 2 million is taken on the plus, not on the minus, side of the account, and that Government speakers are anxious to deny. Nevertheless, as we heard yesterday from the noble Baroness the Leader of the House, they feel both pride in their achievement and a great deal of confident optimism. This was particularly prominent in the Prime Minister's speech in another place last week. She talked about
"the signs of economic success … a testament to our new economic strength".
She said that
"the major changes that we have so long needed and so often shirked have now been made, and … we shall secure the kind of success which our neighbours have achieved and which has eluded us since the war".—[Official Report, Commons, 4/11/81; col. 28.]
She did not tell us what she meant by "the major changes" which have now been made; we can only guess. None the less, I am sure that those were not debating points. They were genuine expressions of a deeply felt conviction which alone can sustain the Prime Minister in the face of the tremendous pressures to which she must be exposed, and one cannot suppress a certain admiration of the way that she stands up to them.
But unfortunately her convictions, however deep, however genuine, are based on a delusion. It is the delusion that Britain's failures and difficulties are the result of Fabian Socialism and the welfare state, the result of Keynes and Beveridge, and once we—here I quote again—
"return as many industries as possible to the private sector"
and get rid of the powers and privileges of trade unions,

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everything will come right. We shall again be one of the leading nations of this world. That that view, which, on my interpretation, is the basis of the Government's whole philosophy, is fundamentally false should be evident from two considerations. One is that our neighbours who have been so much more successful (to which the Prime Minister referred) had a bigger dose of Keynes and Beveridge since the war, not a smaller one. Social security and full employment were more consistently pursued in post-war Germany, Austria, France, Sweden, Denmark and Norway than they were in Britain. Yet they have not been enfeebled, but very much enriched by those policies.
The second point of which the Prime Minister should have been made aware is that of the broad facts of history. Success has not begun to elude us since the war. This is simply untrue. On the contrary, the 25 years of the post-war period were years in which we made greater and more rapid progress than in any comparable period since the second half of the 19th century. Something like that was acknowledged by the noble Lord, Lord Cockfield, today. From the point of view of lack of development in British industry there was no worse period than the 1870s and 1880s, periods of unhindered laissez-faire capitalism; and even more so, the period from 1899 to 1913, the 14 years preceding the First World War. True, we managed to keep a growing volume of exports in cotton textiles—which made up nearly half of our exports—but we were sadly slipping behind in the new science-based industries, resulting from the invention of electricity, the internal combustion engine and the whole revolutionary change in chemicals. We were totally unfitted industrially to carry on a war with a country such as Germany. Indeed, for the first three years we were dependent on imports from Germany, through neutral countries, for absolutely vital and indispensible parts of all internal combustion engines. Germany grew at a rate of nearly 5 per cent. per annum in the 40 years before the war. America did even better, while we grew at a miserable rate of between 1½ and 2 per cent. Yet during that period there was no dole, no other kind of social benefits in Britain. In fact the only country which at that time had social security legislation, with unemployment, health insurance and old-age pension, was Germany, where it was introduced by Bismarck.
Now the Government evidently put their best hopes on the new labour legislation. Well, with the best will in the world, or perhaps I ought to say with the worst will in the world, they cannot bring back the combination laws of Napoleonic times. The most that they can do is to withdraw the provisions of the Trade Disputes Act 1906, and no doubt Mr. Tebbit will see to it that that is done. But have they stopped to inquire whether pre-1906 Britain was such a paragon of bustling, innovative progress—the kind of country which, in the view of the Prime Minister, Britain will become as a result of the new policies?
The facts are that those years, the early Edwardian period, were the worst years, and not the best, in British history. Output was stagnant, unemployment was relieved only by mass emigration on an entirely unprecedented scale; British industrial investment was very low and falling; and through the City, the
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world's financial centre, we exported the incredible figure of 10 per cent. of our national income. We invested all our savings abroad; and with the measures that this Government are taking very much the same thing will happen again soon.
So I suggest, in conclusion, that the Prime Minister had better think again. The true cause of our failures lies very much deeper. It lies not in the behaviour, the laziness or the recalcitrance of the British working classes; it lies in our class system, in our system of selection of business leaders, and in the nature of our system of education.
6.21 p.m.
Lord Thorneycroft: My Lords, I do not know whether many of your Lordships happened to see the Speaker of the House of Commons having a conversation with Norman St. John-Stevas on the television, but in it the Speaker said that short speeches were incompatible with oratory. Your Lordships will have to sacrifice the oratory so far as I am concerned because I would prefer to make a very short speech, and I think Lord Watkinson and Lord Weinstock would probably go along with this suggestion. So I will keep it very brief. I have really only one point which I wish to discuss. It was touched on by my noble friend Lady Young and, in an admirable maiden speech, by the noble Lord, Lord Marsh. It concerns the practical limits that are set to the powers of a Government today to intervene in economic affairs. The idea that the national Government of one small country can really have a decisive effect upon what happens to the economy over the next two years is a proposition which does not really bear very close examination.
Other things affect us. I was particularly interested in the speech of the noble Lord, Lord Scanlon. May I, perhaps, without presumption, thank him for his extreme courtesy in the way that, after his speech, he has sat and listened to every comment that has been made upon it. I can assure him that it is deeply appreciated by the House. My noble friend Lord Eccles, whose speech I agreed with in almost every respect, said that Lord Scanlon's speech was not directed to the amendment. This may have been true, but it was directed to the reality of the life which we lead. He talked about the real things, including the relations between trade unions and management; and I thought how fortunate we are in this House to be able to listen, first of all, to a leading trade unionist on that side and then to hear Lord McFadzean in an absolutely first-rate maiden speech answer the points made by Lord Scanlon from a different point of view.
I am not going to debate those issues today, but I am saying that they were talking about the realities of the world, the things that really do affect us. There are many things outside government which deeply affect us. Interest rates in the United States of America may well be decisive. The price that OPEC sets for oil is enormously important. Then there is the trading climate of the world. All these things are vital, and not only outside but inside. The decision by the workers in BL not to go on strike—and I think Lord Scanlon will probably bear me out in this—which may have been against the advice of their shop stewards but which was however following the advice of the engineering union, was a decisive decision.

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Had they gone on strike the unemployment which is referred to in other contexts in this amendment, the unemployment that would have been caused not only in BL but in the whole of the West Midlands, would have been upon a scale which none of the measures we are debating in this House would have any effect upon at all. Therefore, I say that these are the things that really matter.
If I may touch on a slightly more controversial note, if Alex Kitson is accurately reported in the Sunday Times I must say that the line he is taking would affect employment in this country. He said:
"There will not be anybody going into the refineries. They will have to pump the bloody fuel into the river".
That would affect unemployment in this country. These are the realities of life. It is whether or not the trade union movement can exercise its undoubted and important influence to be able to ensure that we carry on our discussions and our arguments in an orderly way, and that we do not do desperate damage to one another in the process. I therefore say that all these factors seem to me to outweigh the rather narrow economic issues that we debate.
What Governments do, of course, matters. But I always think that what they do not do matters more. I think that by far the most important political decision that has been taken in recent weeks was the Prime Minister's decision not to intervene in the BL strike She was under tremendous pressure to do so. Pressed daily by the Leader of the Opposition in another place, with millions of jobs and the prosperity of thousands of families hanging on the decision, the temptation for the politician to act was almost irresistible in our democratic society; and she had the cold, quiet courage not to act. It is just that kind of courage that is required more than anything else, and certainly more than any trick of economics, if we are going to get through some of the problems that confront us at the present time.
Having said that, let me say a word or two about what the field for positive action is in a world of deep recession. I have been pondering what parties really would do; and I know the key men (because I am getting very old) rather well. The key men in this argument would be, first. Denis Healey. I must be careful what I say about Denis Healey because whenever I praise him he gets into such awful trouble, but if the Labour Party is going to get anywhere the sooner he is the Leader of it the better. There is Denis Healey. There is Roy Jenkins, who is the only man of any weight or note in the Social Democratic Party. And, of course, there is our own Geoffrey Howe. These are the three men.
I find it difficult to see where they would really differ. One of the most attractive things about Denis Healey is that he is always much ruder to his friends than he is to his opponents. He regards his friends as zombies, and who am I to quarrel with him over that? I remember Denis Healey saying when he was Chancellor that anybody who was trying to spend money which was not there was "out of his tiny Chinese mind". I do not think he has changed very much from that. In many ways, I would rate him a rather stricter monetarist than Geoffrey Howe or Margaret Thatcher; and, certainly, he has been so at various times in his career.
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Now Roy Jenkins. In the trade—and I was in the trade myself; there is a union even among Chancellors—he is regarded as rather a good Chancellor of the Exchequer with a predilection for balancing his budgets. That was his reputation in those days. He is playing with this idea of inflating the economy and holding it with an incomes policy; but I do not think that even he believes that. Why buy all over again the experience that the Conservatives among others, as well as the Labour Party, have bought already? There is not one of us who has not been associated with a policy like that. It is like turning up the gas under the kettle and sitting on the lid; it does not work. I doubt that, faced with the responsibility, he would try it.
And Geoffrey Howe: I agree with the noble Lord, Lord Robbins. How much I enjoyed Lord Robbins' speech. You may say anything about Geoffrey Howe but you could not say that he was a desperate deflationist. But when the history of these times comes to be looked at in cold analysis, he will go down as one of the big spenders. Enormous sums of money have been spent. Some were outlined in the speech made by my noble friend Lady Young. There is a billion and a half pounds being spent in the coming year on youth opportunities and training schemes and the rest.
If you put those three men into a room, I am really puzzled as to how they would differ. I think that they would come down on the side of prudent flexibility. I prefer the term "rising damp"; but do not press it on the Government. I recognise the presentational difficulties of adopting it as a slogan, but I will settle for "prudent flexibility". I do not see any great likelihood of three men with their amount of knowledge and experience behind them doing otherwise. And if I am wrong about that, and I could be, events would drive them together. For if we moved at this moment very far along any of the attractive avenues which are being urged upon us, we would precipitate a crisis in the overseas exchanges, in inflation and all the rest. We would precipitate a crisis in which we should have to come rushing back to cover quickly—and Denis Healey knows about that. He has rushed for cover before: seized the car, caught the coat tails of the chauffeur before he got out at London Airport and was back in time to call in the IMF. He has done it all before. Why should I assume that a man of that intelligence is going to run those risks again?
Obviously, some things are possible. Governments can work at the margin. I listened to my noble friends Lady Young and Lord Cockfield—and if I ever have any doubts about policy then I sit down and listen to my noble friend Lord Cockfield; although the noble Lord, Lord Kaldor, was slightly critical of his speech. But for a really clear and lucid exposition of a difficult subject my noble friend takes a lot of beating, and I am grateful to him. My noble friends outlined what can be done. Let us face it, what can be done is operating at the margin. I am not saying that these things should not be done. I am all for operating at the margin and working on youth employment schemes and so on; but there is not room for enormous financial and fiscal adventures, nor would they serve much purpose.
My Lords, I am coming to the end of my remarks. I have reached that stage in politics where—though

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it may sound cynical—I praise people more for what they do not do than for what they do; and I have a few "dont's" for a recession. One is: Don't criticise one another and attribute to one another the views of Marxists or monetarists or all that. The theories that lie there are unreal in the world in which we live. There is not a proletariat to play with or a perfect economic climate in which to operate. We live in the jungle of a mixed economy. It is a different world. I was delighted when my noble friend Lord Cockfield called in his new advisers, Marlene Dietrich and Madame Pompadour. This was a remarkable improvement in which I thought that the whole House and country would rejoice. And what sound advice they gave!
Don't talk about leaving Europe. If I am right in saying so, we live in a world today where we are influenced by huge forces. Don't step out of the world and imagine that you can live on a little island isolated from it. Let us stop even talking about leaving Europe. Don't run for protection and abandon the principles of the General Agreement on Tariffs and Trade. This country and our jobs—these are the realities; and no one knows this better or has done more for them than the noble Lord, Lord Scanlon—hang on the engineering exports. If we go and start a new climate of protection then we will get nowhere and we will have no jobs to give the chaps.
Don't repeat the mistakes that we have made before. We will find plenty of other mistakes to make, so that there is no need to go on repeating the old ones. We have tried inflation and incomes policies and all the rest. They do not work. We have to find a quieter way. I am sorry to say this to the noble Lord, Lord Scanlon, but do not strengthen the trade unions. I hope that he will take that from me. I just ask him to agree not, at least, to strengthen the trade unions; they are strong enough already.
My Lords, do not nationalise any more industries. I accept what he said about privatisation and so on, but, in the light of what my noble friend Lord Cockfield said, when you tot up the amount of wealth that has been consumed in total by the nationalised industries, whatever the theoretical arguments—and there is merit in public ownership; I agree with that—we cannot afford to nationalise any more industries.
My Lords, I recognise that these are rather drab approaches to life but I believe it is better to take things in a sense of reality. I realise that people may not feel very happy to know that they are in large majority at the mercy of market forces working on a worldwide scale. But I believe we are. I do not believe that the world can yet influence these forces to any great extent, although we can try. We should be members of the great international organisations and make our influence felt. Nevertheless, in the main there are forces very largely outside our control.
We have not done too badly. We are far more efficient than we were a few years ago; our productivity is going up; there is good sense in our wage settlements; we are far more export conscious than we were and, although many firms have suffered, many new enterprises have started. It is not too bad a story in very foul weather. I think that the political prizes of the future will not go to those who boast loudly that they
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have new solutions to our problems; I believe that they will go to those who are quietly competent and brave.
6.40 p.m.
Lord Benson: My Lords, I have a very simple point to put before this House and I promise not to keep you very long. You may find it so naive as to ridicule me, but I speak with conviction. The point is merely this: I do not believe, whatever other policies are necessary, that the economy of this country will be put on a firm footing until our industrial performance at least matches those of our competitors in Europe. I do not know how many of your Lordships have had the advantage of reading a recent NEDO report, completed in September, taken at the council meeting in October and then issued to the press. It was a balanced, objective report, free, so far as I can see, from political bias. It sought to establish how we stood with our competitors in Europe and what policies they adopted to make themselves more successful than we are.
The basic factors which came out of it make dismal reading. The growth rate of the gross domestic product showed that this country had been bottom of nine for the past 30 years. The growth rate of industrial production showed that we had been bottom of nine for 30 years; the productivity of labour showed that we had been bottom of seven for 20 years. Unemployment as a percentage of the total labour force showed that we had been second or third highest of nine for the past 20 years. The rate of inflation: we had been second or third highest of nine for the past 20 years. With regard to investment, as a percentage of the gross domestic product, we had been bottom of nine for the past 30 years. Finally, regarding the numbers of 17 to 18 year-olds not receiving education or training, we were the highest of six in the year 1978, which was the last year for which the figures were available.
Of course the study went much further than that. It tried to ascertain and isolate the policies which had been adopted in these nine countries abroad and which had made them more successful than this country. You may feel, my Lords, that those policies were so unusual, so peculiar, so bizarre, that they were quite out of keeping with the British public's view of how industry should be managed. But not at all. They are so simple, so straightforward, so full of common sense that I should like to give them to you. They are only six in number and are very short. The detail, of course, is put out in the study itself.
The first one is continuity and stability of policy. Secondly, concentration of effort—that is to say, a package of different measures which are mutually reinforcing. Thirdly, careful planning of long-term industrial priorities. Fourthly, selectivity in industrial policy measures as opposed to blanket measures. Fifthly, investment in human resources; higher quality of technical and vocational education and training. Lastly, consensus and commitment at national and company level by all those engaged in the industrial process.
The simple point that I want to put before the House is this: Is it beyond our capacity in this country

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to follow the same policies which have proved themselves to be successful abroad and which have made those countries abroad more successful than we are? Of course, even if those policies were followed on a sustained and continued basis, that would be only half the journey. We would have to find the quality and depth of leadership in management and in the unions which would make those policies successful. By way of example, I believe that the great mass of people in this country are saddened and sickened by the industrial scrimmaging which goes on day after day and makes orderly production on a competitive and economic basis impossible. Yesterday it was motor cars; today it is oil tankers; tomorrow it will be something else. We all know very well indeed that in a year's time the whole dismal process will begin all over again.
If that quality and leadership does not emerge, then we may have to find some measures which will substitute for the leadership which is lacking. But the simple point that I want to put is let us first do Phase 1, let us establish the policies which have been successful in all the countries in Europe, and the let us attack the second phase and see whether there is the leadership there capable of carrying those policies into effect.
6.46 p.m.
Viscount Watkinson: My Lords, I should like first to add my very sincere congratulations to two very remarkable maiden speakers upon their speeches and hope with others that we shall hear them here often again. I am very glad to follow the noble Lord, Lord Benson. I am not sure I can quite emulate his absolutely dramatic shortness and succinct approach, but I agree with every word that he said. It goes very well with what my noble friend, our noble Leader, said in opening this debate. We are examining not so much economic policy as such but the fundamental changes that underline it—changes that are bound to affect our lives and those of our children. Therefore, one finds it a little depressing sometimes that the general economic debate across the nation seems so often to illuminate the confusion rather than come to any agreed conclusions which might lead to action.
I believe that there is only one objective way to judge the validity of the Government's economic policy. It is by long term results. The problem here is, as the Government and the Prime Minister have always said (and what is true) is that these results need a time-scale of well over two or three years in which to justify themselves. Yet during this period of we have any major switch in strategy all it will mean is that much hard and often very painful effort will be denied any real chance of success. So it is a dilemma and a probem.
The noble Baroness who opened the debate for the Opposition seemed to imply to me that the CBI wanted no part of this problem and on the whole were perhaps against present Government policy. That is not so, my Lords. What worries the CBI is that the Government may not have the time to see their policy through to success. I think I can fairly say that there might be a unanimous vote in the CBI council that they do not want to see the present strategy stood on its head by the Left-Wing of the Labour Party. So we need continuity; but in our kind of democracy continuity is very difficult to achieve. Yet, if we do not persevere in this
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effort, we have very little chance of improving our economic performance. As the noble Lord, Lord Benson, just said, if we could even catch up with our immediate competitors, we should be doing a very great deal.
The first issue that we have to take on board on this side of the House and in my party is that, if we believe that this is the right road for Britain—as I do—and that there should be no turning back, then we must do a great deal more to lift the level of debate across the country and to try to bring it to a rather more factual appreciation of what we really face. We must say more clearly that it will do no one any good now to throw away the clear gains from increased productivity that we are achieving and the more realistic pay bargaining and manning levels that we are getting, nor should we prejudice the growth of genuine participation that management is encouraging as the correct response to the harder times which are imposed on us by world conditions.
So I think that to succeed in this difficult task really does mean that we ought to try and concentrate the argument on the real gains. Will current policies make our country more efficient, more productive and thus more prosperous and more fully employed? That is the real test, and it really is no good, if I may say so to the party opposite, confusing and debasing these issues, as the Labour Party perhaps has to do as part of the struggle for power by its militant Left-wing. Nor is it any good, nor does it do any service to anyone, to pretend that unemployment was invented by the Conservative Party. I think it is right to say that during the whole of the last Labour Government the CBI and its various officers at that time are on the record time and time again as warning that if we did not change the then policies unemployment levels of 3 million or more were inevitable—and so, sadly enough, it has proved to be. And if I may venture to say so in the presence of my old friend the noble Lord, Lord Scanlon, it really is not a great contribution for the TUC to take dazzling decisions about unilateral disarmament and that sort of thing, when one really wishes they would be concentrating their minds on the struggle for economic survival. Referring to the noble Lord, Lord Scanlon—and I agree with practically everything he said, if I may say so, about labour relations—I think as a matter of fact he may find that the Secretary of State for Employment's bark is worse than his bite. I hope so.
But coming back to my argument, the noble Lord did not say much about the joint TUC-Labour Plan for curing all our problems because I think that in his heart, as my noble friend Lord Thorneycroft has just said, he knows it simply is not workable and would only throw us back once again into yet another economic crisis. So this is a sincere plea to all those who wish our country well—and we are still in the majority—for a more practical and businesslike examination of what we have to do to bring down unemployment, inflation and interest rates and step up productivity, output and exports.
I believe the best way we can do that is to apply one test to everything we try to do: the test of "will it help when the upturn comes?"—because, my Lords, one thing is certain, in my view. In the cyclical way in which the world economy has always behaved there

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must in due course be an upturn in world trade. It may be slower or slighter than we would wish, but it is bound to come and we have to be ready for it.
Let me give one or two short examples of what I think this approach might be. For example, to be ready to expand when the chance comes we have to give more emphasis to exports and the technical skills that back them. We have got to provide exporters with a pound that does not behave like a yo-yo, and I hope the Government will give very serious thought to whether joining the European currency Snake might not be one way of stabilising our currency. That is what exporters need. We need a new concerted export drive. I believe the noble Lord, Lord Scanlon, would not disagree with that; and here is one cause anyway in which the interests of the Government, of the employers and of the unions ought to coincide—and we had better have just one or two causes where we can perhaps try to find some common ground. I find it very difficult to say today that one can have the sort of consensus I have always wished for with a TUC that has voted, in my view, to increase unemployment by at least another 2 million by leaving Europe. But leave that on one side: let us at least try to find some things we can do together and some things we can work for in Neddy and other bodies.
There are a number of things I think the Government ought to do, without in any way departing from their strategy. Our biggest and best invisible export is inward tourism, and we really do not do enough to back that. But coming to the hard question and the centre of most of this debate—the question of unemployment—the CBI rightly ask the Government to reduce the burden of the national insurance surcharge originally imposed by Mr. Denis Healey when he was Labour Chancellor of the Exchequer. The Government certainly should do this and I hope they are giving it some very coherent thought. It would help many firms to take on more labour more quickly as soon as any upturn develops.
I should also like to suggest that the Government might consider going further in this matter. Unemployed men and women are a serious problem at all ages, but, my Lords, to leave young people, the seed corn of our future, on the street corners is the most serious problem of all. I understand that the Secretary of State for Employment has plans for a wide increase in youth training. These deserve the strongest support, but also we need a strong follow-up with more apprentice training and more skilled training of all kinds, leading to actual job employment. I think that would be much encouraged if the Government would consider offering further reductions in national insurance surcharge to firms who would offer apprenticeships and then jobs to young people up to an approved level. At least it is something which is worth considering. We must give these young people some hope for the future somehow.
There are a number of capital works which the Government are going to do, such as more nuclear power stations or the Channel Tunnel. Again, if they are going to do such things I hope they will say more clearly what they will mean in terms of new jobs and new opportunities for the future. My greatest anxiety about the present position of Her Majesty's
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Government is that if we cannot show a bit more light at the end of the tunnel we may not be able to persuade the nation to goad itself to go the full distance that we all know is necessary for success. This would be a tragic thing for our country. To have second thoughts halfway is a mistake that we have made too often in the past, and we ought not to make it now. So the Government and all who support them should do more to underpin the main strategy by emphasising the positive aspects of what we are trying to do. After all, is it wrong to try to turn our country away from a steady decline in the world economic league—the sort of decline that you really cannot argue with on the figures that the noble Lord, Lord Benson, has just set forth? Is that wrong? Is it wrong to try to get back to the dominant position we once enjoyed as a trading nation not so very long ago? Is it wrong to have real participation in industry and commerce in a concerted drive for more efficiency and productivity? Surely all our social policy and everything else depends on this. I believe that is basically what could be the out-turn of our present policies if we have the guts to continue with them, and I think there is very little future for our country if we fail—so why not see it through to success?
6.58 p.m.
Lord Weinstock: My Lords, I, too, should like to congratulate the noble Lord, Lord McFadzean of Kelvinside, on a speech of characteristic good sense. It is quire clear that the noble Lord, Lord Marsh, is going to make a positive and enlivening contribution to the proceedings of your Lordships' House in the future.
The speech with which the noble Baroness the Leader of the House opened this debate contained much which was not only true but incontrovertible. I found it surprising that the noble Baroness, Lady Birk, in her reply could find no common ground with her—surprising that is, unless it is accepted that the asperity of the party political battle overrides all other considerations, including the national need to decide what Government can and should do for the best. Happily, my old friend and adversary, the noble Lord, Lord Scanlon, took a more constructive line, although he seemed to lose nothing in robustness in the course of doing it.
This debate has followed many trails and, although it gives me great pain to disappoint the noble Viscount Lord Eccles, I do not have it in mind to pursue another one in the form of a lecture to your Lordships' House on electronic devices. But I do have to tell him that it is no longer true, if it previously was, that industry neglects matters of design.
I agree with what was said yesterday by my deeply respected friend and mentor, the noble Lord, Lord Robbins, to the effect that one can only have sympathy with the general aims of Government policy, even if not agreeing with it in every respect. It is surely wrong to attach to Ministers the whole blame for the current recession in trade, or for the unemployment that follows from it. Nor can they he blamed for that part of our high level of unemployment which results from the inefficiencies of our industries over many years—for bad management, apathetic shareholders, or the short-sighted foolishness of those who sought

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protection for living standards and job security through industrial malpractice, instead of through constructive co-operation with management and investors. But efficiency in British industry has improved quite a lot in the last few years, and so have the relationships between those who work in it. That improvement now needs a more positive impetus than is to be gained from growing unemployment and increasing pessimism. The Prime Minister's indication of better things to come within a year is therefore welcome. And it is in line with her straightforward and consistent approach that she has the courage to put down a specific marker by which the success of her regime may be measured. The noble Lord, Lord Cockfield, has actually observed signs that the economy is now on the way up, but they are not generally readily discernible.
Many suggestions have been made as to programmes to reverse, or at least temper, the present negative trend. Some of them would give a renewed impetus to inflation; they are irresponsible and ultimately self-defeating. But several are worth serious consideration and action by the Government, although some of the "hard-headed" six points of the noble Lord, Lord Kilmarnock, sounded as if they had been thought up by people with soft heads. But the noble Lord was, mercifully, speaking rather quickly and perhaps I did not hear him aright. I do not propose a detailed list to your Lordships today, because the company which employs me is more or less concerned with many of them. But there should not be any particular difficulty in choosing between projects which, on the one hand, merely involve current, or perhaps wasteful, expenditure and, on the other, those which are properly to be regarded as investment to produce future economic and social returns.
If we are unjustified in blaming the Government for the greater part of our economic maladies, they deserve no praise for their presentation to the British people of the problems. The noble and learned Lord the Lord Chancellor went so far in this debate as to say that public opinion has been left in a state of near bewilderment, because of the watershed of our public affairs. That is hardly surprising when Ministers have been almost entirely negative, depressing and demotivating, in contrast to the country's need of more enterprise, more creativity and more vigour. If we have merited sulphur and brimstone, it has been duly administered and perhaps we should be thankful for it. But most people will not place their confidence indefinitely in physicians who offer no prospect of any other diet, and who have increasingly given the impression that they would not know how to concoct one.
That these feelings of unease and discontent should be widespread reflects political failure. But it is not failure beyond redemption. Neither is it a failure to be redeemed by resort to other forms of nastiness, such as union bashing. No doubt there is need for reform in the trade union movement. The time may well have come to put right specific failings, where there is at least a chance of a measure of acceptance.
I cannot follow the noble Lord, Lord Scanlon, all the way in what he had to say on this matter. But do not believe that it will be productive now to attempt a thorough-going reform of the trades unions, so attacking their basic rights and privileges that no such measure of acceptance would be even remotely probable,
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and risking an upsurge of bitterness which would greatly reduce the influence of moderate and enlightened opinion in the labour movement. In some other respects, I am afraid that I cannot follow the noble Lord, Lord Scanlon, at all, particularly when he conjures from his imagination a strike of investors which never existed, or the fanciful idea that the remedy for that non-existent strike was to be sought in recourse to the National Enterprise Board.
Apart from the political aspect of Government, for which we cannot so far award Ministers high marks, there is the managerial function in which their performance has been worse. It is probably too much to expect efficiency in public administration, but it is ridiculous to abrogate common sense in favour of a Treasury-dominated régime constructed around arbitrarily contrived statistics.
No one contends that money supply should not be controlled, even if few of us really believe it possible to identify exactly what that means. But the narrow system of cash limits, as applied, is too restrictive to permit the departments of state and the nationalised industries to function even as efficiently as they could. The result of this way of doing things is to stultify good ideas and initiative and to slow down the whole administrative and managerial process.
The Treasury's accounting system often conceals and can easily work against the national interest. An example worthy of your Lordships' consideration is in the field of public purchasing. The buyer department in a particular project does not have to take numerically into account all the costs arising from a course of action to which it may become committed. It may congratulate itself on deciding to pay, say, £10 million less to a foreign supplier than the price offered by his United Kingdom competitor. It does not put against this one-off saving the indefinite and continuing future costs in unemployment pay and social benefit, and the knock-on effects to sub-contractors and component suppliers, not to mention the damage to potential exports.
These costs will usually soon eat up the apparent savings, but the system does not require the buyer to take them into account. On the contrary, it encourages the narrow departmental interest not to do so. There is no machinery to measure from the outset these adverse financial consequences for other departments, or to see that credit is given against the appropriation of the buying department, if it does not look to the foreign source. The buying department must take its position on the basis that it will be debited with the gross cost. If it buys a home-made product at a higher price than that of a foreign supplier, it must forgo other items it wants to buy, in the absence of additional funds. The overall national interest is not seriously considered until Cabinet committee, long after the isolated departmental view has hardened.
A thorough revision of the accounting procedures, to take a full synoptic view of the implications of the different options, would bring about a considerable change in the way departments deal with each other and in the relations between the Treasury and other state-controlled organisations. The present self-appointed Treasury monopoly of concern for the national interest, measured in cash, is based on dividing and ruling the other departments in constant bilateral negotiations, effectively overriding their specialist judgments and

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responsibilities. In different circumstances, all this may not matter very much, but in times of recession and high unemployment it is especially relevant. For those engaged in the private sector, it is not possible to be precise about the effect on the economy of the consequences of their purchasing decisions. Nor do they individually carry quite the same responsibility as do the Government. Nevertheless, I would hope that private sector buyers and, indeed, all consumers do not disregard the damage done to British industry when making decisions to buy from abroad goods and services available from United Kingdom suppliers, because damage to our industry and our country there will certainly be.
Your Lordships will generally agree that it is right and necessary to hold down public expenditure as an extremely important element in the struggle to contain inflation, but it is not at all clear, having reached the present stage when there are idle resources of men and machines, that it is more inflationary to spend public money on providing useful goods than to spend almost as much on paying the dole.
One should not be too dogmatic about these things and I note with satisfaction every sign—and there are signs—that Her Majesty's Government are now likely to take a more flexible view. Money well spent is one thing, but what is unquestionably undesirable is to waste public money. And, for all its unyielding rhetorical rejection of reflationary proposals, the Government have in fact spent heavily and not always wisely. Leaving out of the reckoning some of the more naive projects undertaken at public expense by the National Enterprise Board and the Department of Industry, there is one aspect of their activities which is especially questionable. This is the so-called inward investment policy which causes Ministers and officials to desert their overflowing in-trays for the joys of travel to foreign parts.
There may be much merit in the establishment of new, foreign-owned, enterprises in this country when they are intrinsically complete and innovative. And joint or collaborative projects between British and foreign firms may well turn out to be highly productive. It is good to have the help and encouragement of Ministers in all this. But who, except the noble Lord, Lord Kaldor, can see the justification for the invitation to Japanese manufacturers to establish, with large grants of British taxpayers' money, assembly plants in the United Kingdom which will operate as marginal extensions to their main activities and, in our home market, take business from our own established firms which have not enjoyed any such subsidy? What is the good of creating, if that is the right word, two new jobs in one place at the cost of destroying two, or perhaps even three, already existing somewhere else? Is it sensible, or is it even sane, to expect foreign powers to export jobs from their countries to the United Kingdom—which is to say, to import some of our unemployment? The Government offer to pay them to do it, and they do so from taxes gathered from British firms who will suffer as a consequence.
I do not wish to denigrate the constructive work of the Department of Industry, of which my employer is, after all, a client. The department is in many respects helpful and sometimes indispensable to the success of
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British companies in particular instances. But it is sometimes arbitrary and idiosyncratic and can be more than a little extravagant in the expenditure of public money, as well as in promoting wasteful expenditure by others, in the mistaken pursuit of objectives the usefulness of which it does not have the expertise or competence to judge.
I have already detained your Lordships too long at this late hour, but I ask your indulgence to make one last point. The scourge of unemployment worries and dismays noble Lords on all sides of the House, and the disproportionate share of it which falls on young shoulders is a demoralising factor which will have unhappy long-term effects on the structure of society. It is not beyond our collective wit to create schemes by which the money which must in any case be paid out in social benefit can be better spent to render greater value to the community. I do not believe that compulsion has any part to play in this, or that we can expect only by that route to stabilise the outlook of a generation at risk. We need to mobilise the latent desire of our people to prove their worth as human beings—as the noble and learned Lord the Lord Chancellor said, to re-awaken a sense of civic and national pride. We need to combine the fulfilment of the public need to provide work with the individual's sense of wanting to make some constructive contribution and to earn his, or her, keep.
The noble and learned Lord, Lord Elwyn-Jones, drew your Lordships' attention to the Prime Minister's reference to "a comprehensive training scheme for the young unemployed." The noble Viscount, Lord Watkinson, also mentioned this subject. There are reports of Treasury approval of a scheme proposed by the Secretary of State for Employment for the training of all school-leavers. I hope the report is true and I hope your Lordships will welcome it. Imaginative training programmes, in collaboration with industry and commerce, are of obviously special importance in the present circumstances. We should remember in this connection that British industry is quite seriously handicapped by shortages of particular skills, despite the present high level of unemployment.
Man does not live by bread alone, and in these difficult times there is an urgent and special need for inspiration and leadership. That is surely the first and indispensable duty of Her Majesty's Government. I do not think that the proposed amendment which we are discussing today helps in any way to take us forward.
7.16 p.m.
Lord Sandford: My Lords, I rise to draw attention to the hypocrisy in the Laour Party's amendment. I invite the House to look at their handling of the economy in those parts of local government where they now have control and exercise direct responsibility. It is in the metropolitan cities where enormous difficulties are being caused to industry and where great damage is being caused to business—not by the policies of Her Majesty's Government but by the high-spending policies of Labour councils, elected last May and led in profligacy and irresponsibility by the Greater London Council.
In a debate on national economics it is as well to

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bear in mind that local government is responsible in this country for no less than one-quarter of all public expenditure. They spend not far short of £20,000 million a year, so there is no doubt at all that the economics of local government have a direct bearing on national economics and that there is need for trust and co-operation between local government and central Government.
May I remind your Lordships that on 2nd June last the Secretary of State came to the Commons and announced (and my noble friend Lord Bellwin announced here) that local government seemed set to be planning to spend £1,000 million more than had been allowed for in the public expenditure plans of central Government. The Secretary of State asked for revisions of budgets and warned of legislation to come if those revisions were not sufficient. In a short intervention I suggested that the Secretary of State should wait as long as he could for local government to exercise their common sense and show their responsibility.
He waited for three months. By that time, the great majority of local authorities had responded: as he asked, 75 per cent. of the non-metropolitan districts had revised their budgets downwards, with 63 of the London boroughs, 42 per cent. of the metropolitan districts and 33 of the shire counties. But at that stage all that effort, all that thrift, all that economy was completely cancelled out by the deliberate defiance of three Labour-controlled metropolitan counties, led by the notorious example of the Greater London Council.
I should like to suggest to the House that it is this defiance which is damaging industry and raising unemployment in the inner cities. It is this profligacy which is threatening the integrity of local government and damaging the image of local government in the public esteem. It is this that has led the Secretary of State to propose legislation. It is the Labour Party's total failure to constrain this irresponsibility in the authorities for which they are now responsible that is fast losing them credibility and losing them members to the Social Democratic Party. If the Labour Party cannot stop this sort of thing then it is not surprising that the Secretary of State has to step in.
Lord Mishcon: My Lords, would the noble Lord forgive me? Looking behind me to the back, the Opposition does not seem to have lost very much by the presence of the SDP, not one of their members being present in the Chamber for this important debate.
Lord Sandford: Well, my Lords, that is not my responsibility. As I was saying, in my view, it is the failure of the Labour Party to constrain the irresponsibility being shown by these councils, notably the GLC, that has obliged the Secretary of State to consider what he should do about it and required the Local Government Finance Bill to be included in the Queen's Speech and published last week.
My Lords, just consider what his options are. Can he ignore this sort of thing if nobody else is prepared to do anything about it? Can all the economies and efforts of all the thrifty and responsible local government authorities be set at nought by the defiance and
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irresponsibility of a few? I submit to your Lordships that they cannot. If the present judgments against the GLC are sustained in your Lordships' House and similar judgments are sustained against other authorities elsewhere, then of course that legislation may well not be needed, but we cannot yet be sure of that. Therefore the Secretary of State has had to introduce the present Local Government Finance Bill. In that his civil servants have recommended the grant-related expenditure assessment as a way by which they will decide what each authority ought to be planning to spend. A referendum is then prescribed before any authority is allowed to spend more than a certain percentage (which the Secretary of State will decide) above that. By any accounts that is a major intrusion by central Government into local government and is highly undesirable. But it may be unavoidable.
The Scottish approach, whereby under alternative forms of legislation the Secretary of State for Scotland has been able to curb the Labour extravagance in the Lothian region of Scotland, has been recommended for the Secretary of State in England. I do not believe that is a viable alternative. The Secretary of State in Scotland has surveillance over the whole range of local government expenditure—education, social services, transport—these do not lie within the responsibilities of my right honourable friend the Secretary of State for the Environment in England. I do not believe that without that he is in a position to judge the reasonableness or unreasonableness of the spending plans of the much larger number of authorities for which he is responsible in this part of the kingdom.
It seems to me that in so far as this excessive expenditure which has cancelled out all the thrift and prudence of all the other authorities and in so far as a substantial part of that over-spending is in the field of transport—bus fare subsidies—almost all of it in the case of the Greater London Council—it may be sufficiently effective, and certainly I think it would be more acceptable, to substitute for the present Bill a No. 2 Bill confined solely to the field of transport. I hope that my noble friend and my right honourable friend will bear that possibility in mind.
Whatever legislation we are faced with to deal with the situation which the Labour Party does not seem able to deal with—and it is their responsibility—it does seem most important that that legislation should be of limited duration. If an amendment to that effect is not introduced by the Government or by somebody else in another place, it is my intention to invite your Lordships to support me in an amendment to secure that this legislation is in force only for the minimum amount of time necessary to produce the responsibility which Labour-controlled councils do not seem able to produce for themselves.
All this points to the very urgent necessity once again to see whether we cannot tackle and solve the problem of revising the rating system. I am delighted to hear from the Secretary of State that his proposed consultative document is now on his desk, waiting for his approval before going off to the printers. I think that this is the way in which we can tackle this vexed problem once and for all, but in the meantime we have an extremely difficult problem to solve entirely as a result of the irresponsibility of the Labour-controlled metropolitan county councils.
7.26 p.m
Lord Hankey: My Lords, I should like to begin by congratulating my noble friends Lord McFadzean of Kelvinside and Lord Marsh on their remarkable maiden speeches. f hope we shall hear them very often. We have heard many remarkable speeches in this debate from both sides of the House and I thought my noble friend Lord Robbins gave us an absolutely admirable analysis of the economics behind our present situation. The noble Lord, Lord Weinstock, gave us a remarkable analysis of how these things work out in practice and the difficulties that we meet with, and I agree most warmly with what he said.
I do not suppose anybody in this House is more anxious than I am that the Government should succeed in getting this country back on its feet. I agree with the Government that they cannot cure inflation unless they get the monetary equation right, but I am not personally a monetarist because I cannot persuade myself that we know enough about the ever-fluctuating factors at home and abroad that influence the money supply to be sure of measuring it accurately. As I have often said before, I know from over five years with OEEC and OECD that not even Mrs. Thatcher's Government can cure inflation unless they keep industry going. I greatly appreciated what the noble Lord, Lord Cockfield, said in his very noteworthy speech about the help the Government are giving to industry. We also had a remarkable contribution from the noble Lord, Lord Thorneycroft.
Industry, including service industries and together with agriculture, of course, produces the income of our whole community, including the income of the Government. I am sorry to say anything so basic but I often wonder whether the journalists and others really do seize this basic fact and hold it. Our factories, offices and land, and especially the applied genius and experience of the people who work there, constitute the source of all our wealth and health and a very great amount of our happiness. If they are allowed to decline or are hampered in their activity by Government measures or by management failures, or by trade union excesses, then the product on which we all live in practice will never match up to the monetary factors. We cannot—repeat cannot—cure inflation unless industry of all sorts is kept going.
It may be that the Government are right in thinking that we have passed the worst of the depression, although the CBI seem to have little confidence about that. The point is that we know what the situation was six months ago because we have the final statistics; we think we know what the situation was three months ago, but we do not know what the situation is today. We can only make a "guesstimate", so it is really very hard to steer an economic policy with any sort of accurate fine tuning, especially where monetarist factors are concerned. But one thing is quite certain: on all previous experience our industry is always very slow to get moving after a recession. This is a point which really worries me now. This is what happened in 1962, in 1969, and again in the 'seventies. In every case the Government were faced with tremendous problems of getting industry moving, and in the end they expanded demand, caused inflation and a flood of imports, and we did ourselves very little good. So we are, or should be, all agreed that we really must
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not now expand demand. That is really central and I am very glad the noble Lord, Lord Cockfield, made that abundantly plain; I most warmly agree with him. The situation, in my opinion, calls for much more selective measures.
My Lords, I believe this is now urgent. I am quite sure that our people will not long stand for having three million unemployed, whatever the party in power. If the Government do not get industry moving soon, in spite of the world recession, they must surely face very big electoral trouble, and our industry is definitely going to be slow this time. I believe time is running out.
So what should we do? Well, I am going to come in cautiously where angels fear to tread. I am sure I shall probably tread on a landmine or two. I ask your Lordships' indulgence. But I shall try hard to be constructive, and as brief as possible. Boards of directors, as we have been told by several people, really require stability before they dare to undertake any large developments and investments. Equally, they must not be hampered by too many restrictions. Take stability first. The instability of the exchange rate has been a real disaster to export industry—worse, I believe, than the revaluation of 1925, though of course that lasted longer.
As we now send such a huge proportion of our exports to Europe, I do strongly urge the Government to join the European Monetary System. A number of other noble Lords have said the same. I know there may have to be periodical realignments of the currency parities. There was one the other day. But realignments do happen periodically anyhow. I do not know that that changes much. If necessary, I should like to suggest to the Government that, if they are nervous about this, we might claim the same freedom as Italy, which has a right to vary the exchange rate plus or minus 5 per cent. each side of the agreed parity instead of the usual 2½ percent. By joining the European Monetary System I think we should strengthen both ourselves and Europe. So let the Government do it now and no shilly-shallying.
Next I come to the instability of interest rates, which many other people have mentioned; especially the high rates which we now suffer have, I believe, been an unmitigated disaster. My noble friend Lord Eccles had a great deal of great interest to say on this subject. Companies, businesses, shops, corporations, house purchasers, all of them have had to borrow to meet the situation. The high level of borrowing really has not helped to restrain the money supply. Many companies arc said to have borrowed even more to meet the high interest payments. The high rates of interest have attracted to Britain some of the huge liquid funds floating around the world, and that has also increased our money supply, even if only indirectly. The high rates, I believe, are self-defeating, therefore.
I should like to say another thing. The principle of playing yo-yo with the interest rates, of which the Americans are the highest—perhaps I should say the worst—exponents, is done without regard to its effect on other people. The thing we learned at OECD was that it is really vital to make sure that the economic policies pursued by various Governments in the leading countries are so constructed as to dovetail in with each other. When the American rates go charging up and

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funds rush out of Britain and Germany and France into America, and when the Americans suddenly drop the rates down by 20 per cent. and the funds rush back into Britain, it is a great embarrassment to everybody. I do not think it is good for business. I hope, therefore, that the Government will lean on the market through the Bank of England and get lower rates.
The Government's own borrowing requirement is, of course, a major factor in pushing rates up. I am very fully aware of this. But I think they ought to do their best to keep rates down. I shall later have more to say about this. In any case, I urge that the Government should decide which industries and which businesses should be helped most, especially the new ones involving the many new technologies which are now awaiting industrial application. It is no good just leaving this to market forces, I believe; I wish it were. The Government have done much already to promote industry, as the noble Lord, Lord Cockfield, said. But I think the Government should press forward with even more measures, such as tax concessions, perhaps with more credit at lower differential rates. There are probably all sorts of gimmicks that can be found. They have done a great deal already; I hope they can do more. In spite of what my noble friend Lord Benson said (I am sorry he is not here), I am assured that the French and Germans and Japanese have found means of doing this. I cannot help thinking it ought not to be beyond our wit to find similar measures, even if we do not talk about them too much.
Energy costs are another sore point with industry. We have oil and gas in real profusion; one might say we have it running out of both ears. But the Government lets both be priced at top world rates and even puts an extra tax on oil. In the desperate situation our industry is in does it really make good sense? I do really have doubts about this. I think industry should have cheaper energy, and further I urge that it is more than high time that we got on with the fast breeder reactor, because that completely changes the financial aspect of nuclear power production by using the by-product from our existing magnox reactors. I cannot think why the politicians have not got on with this for so many years. The fast breeder reactor at Dounreay has been pumping electricity into the grid for 21 years. All sorts of other powers are now doing it, but here we are lingering in the background; it is ridiculous.
None of these measures is going to reduce unemployment entirely, though they will help. But, if this country is to recover by 1984, the Government, in my view, have to prime the industrial pump, not—I repeat not—by any general reflation of demand, which would be disastrous, but by careful selective measures. What I want is a règime of intelligent exceptions. I think that is a very diplomatic phrase. I think the Government should at once get on with public works which will help industry. Here are some examples: the repair of the Manchester sewers is an instance; it is manpower intensive, it involves no imports; it is vital for Manchester's health and the safety of its roads. It really ought to be got on with in times of recession. Next, the communications with Tilbury, which is the port of London and a major container port, are really an inexcusable disgrace. The A13
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is cluttered up with lorries going in both directions at a fairly slow speed all day and pretty well all night. There should be motorways both from London and from the Midlands to Tilbury. The M25 ought to be finished urgently, if only for that purpose, and to ease the dreadful truck traffic right through London. The motorway and trunk roads to Southampton should be completed very soon and something should be done about the trade union situation at Southampton. Your Lordships will note that I am suggesting things which will greatly help our exports. I think it is important to very be selective in the suggestions that I am making.
I mentioned the trade union situation at Southampton. It is exactly 25 years since I reported from our embassy in Stockholm that the Scandinavian shipowners had decided never to send their ships any more to London or Liverpool if they could possibly avoid doing so, because they were subject to so much thieving and extortion by the dockers. Both ports have now gone bust. I am sorry to say that there is some reason to think that the same will happen at Southampton unless somebody goes and sets matters right there. There is a real muddle.
Next, I urge the Government to let the nationalised industries borrow more to meet their investment requirements. T honestly do not think that it pays in the times we are in to have them subject to narrow cash restrictions. I urge the Government to do something about this. A recession is the time to do it, anyhow. It will help industry throughout the whole country.
I want to urge the Government again to order more ships for the Navy. I know that this means spending money, but our Navy is inadequate and there ought to be more equipment also for our other armed forces. That would help steel, coal, electronics very much, shipyards—indeed, the whole engineering industry right across the country. We have to pay the men anyway, so these will really be the cheapest ships et cetera that one could buy, and the genius and experience and the morale of our working production teams and other workers will be preserved. It was, I think, the noble Lord, Lord Weinstock, who made a very good point in this connection.
I do not have time to say this more than superficially, but I want to suggest that the time has come to consider reintroducing some sort of national service. I know that that will be regarded by many as a scandalous suggestion, but we have a very undisciplined country now and there is no doubt that such a measure would improve discipline. It would be a framework within which extensive training could be given and I support very much the training which the Government are giving. Those measures are very important. However, it would solve youth unemployment all at once and that is really something that ought to be seriously considered.
I shall not go on with more ideas, although I have lots more. It is too late. Having been 38 years a civil servant, I have one very important point to make. The Civil Service Ministries live in boxes. I say, "Build more ships", for instance, but the Ministry of Defence will say that their budget does not allow it. But the savings on redundancy and social security payments of all sorts, for the men who would otherwise be unemployed, surely ought to be taken into account. The

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Department of Social Security, however, lives in a separate box and I suspect that section of the Treasury does also.
In addition to that offset which I have mentioned, there will be more Government receipts from corporation tax, VAT, income tax and so on. Those are important offsets. This is where a Government of real character and determination, such as Mrs. Thatcher certainly aims to have, should survey the general scene, I suggest, and take a wise and broad view. These ideas for a regime of intelligent exceptions are, in view of the offsets, not as inflationary as they look; and in political terms they are far safer than the unemployment which we have now. I believe that they would greatly help industry to get moving out of recession and that we have not much time to let things drag on.
To conclude, I think that the time is coming when our hard-pressed people might answer to a clarion call on behalf of all sections to pull together to get this country going again. Self-help by all would be the word. But, before the Government could do that, I believe that they must be able to show to everyone's satisfaction that they have got industry going again and unemployment on a strong downward path. I earnestly hope that the Government will be able to bring that about.
7.45 p.m.
Baroness Seear: My Lords, I should like to add to the congratulations which have been offered to the two noble Lords who have made their maiden speeches tonight. They were such informative and delightfully delivered speeches and we shall look forward to hearing from them very often in the future.
If I had been one of the 3 million unemployed and over the last two days I had been sitting in the Gallery of your Lordships' Chamber, I would be going away tonight angry and in something near to despair. I would have looked to the Labour Benches expecting, perhaps naturally, that from the Labour Benches would come real help. But if I were a thoughtful member of the unemployed—and there are many such—I would have had questions to ask about what we heard from the Labour Benches. We are being told by them and we are being led to believe that there is a choice between pulling down inflation and improving the employment situation and that there is something evil in attempting drastically to reduce inflation, and something righteous in promoting more employment—and of course we all want to see more employment. However, I am deeply convinced that, unless we can reduce inflation, any attempt to improve employment can only be short-term.
It is the most wicked deception to say to people who are unemployed, "We can buy you jobs" if you know that that method of buying jobs will increase the unemployment queues in four or five years' time. That is not to say that I do not believe—and I shall go on to explain that I do believe—that there is some expenditure that should be made. But it is folly in the extreme—and we must try to stop this because it is developing in the country—to set the reduction of unemployment as a low-grade objective and the increase of employment as the immediate objective as if they were in conflict; whereas, in fact, the two
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objectives march together although the time-scale may seem different.
If I were an informed member of the unemployed—and there are many such—I would have been saying to the people on the Labour Benches, "Yes, you are suggesting that there should be expenditure in order to increase jobs, but what else are you suggesting?" I have great sympathy with the Labour Front Bench today in your Lordships' House. What on earth is the Labour Front Bench in your Lordships' House to say when the Labour Party produces conflicting policy after conflicting policy and the country is presented with the scene of the two wings of the Labour Party locked in deeper conflict than the Opposition and the Government? Indeed, one of the great weaknesses of politics today is that we have no effective Opposition, because parliamentary democracy can only operate if there is a strong, united Government and a strong, united Opposition. We have a disunited Government and a disunited Opposition.
The noble Lord, Lord Cockfield, is obviously sufficiently concerned about the development of the Social Democrat/Liberal alliance to take time out to put us in our place. Our place, I fear, is filling a vacuum: I hope that it will be a great deal more. In my view, we have a great deal more to contribute than that. But the extent of the support, from a national point of view, almost alarms me. It alarms me because it is a measure of the failure of both Government and Opposition to command any support in the country at a time when unified support was never more greatly needed. I shall not spend more time on what the contribution of the alliance will be, because the last thing I want to do tonight is to talk in divisive terms. I have simply been factual about the position of the Labour Party. If the Labour Party can reassure me that the two wings of that party are united, then I would he delighted to withdraw what I have said.
On the other hand, the noble Lord, Lord Cockfield, said that the intention of the Government was to go right on to the end; and so did the noble Baroness, Lady Young. The noble Baroness, Lady Young, claimed that the Government, though determined to continue with their declared objective of putting the reduction of inflation first, had been flexible. But I- fear that the best she was able to do—and she did it with the greatest of grace, and how nice it was to listen to a woman Leader of your Lordships' House—was to tell us that the "flexibility" of the Government, as she called it, was really the ability of the Government, too little and too late, to react against circumstances which they had not anticipated; that if that flexibility had been built into the policies in the first place, then indeed the story would be different.
But what was there in the flexibility that reflected the policy? Nothing at all. It only reflected pressures to which, when they became too great, the Government had to yield. The noble Lord, Lord Cockfield, said—and I agree with him—that we enjoyed a most enlightening and helpful speech from my old colleague and mentor, the noble Lord, Lord Robbins. However, I hope that the noble Lord, Lord Cockfield, was not too selective in his listening to the speech of the noble Lord, Lord Robbins, because while the noble Lord, Lord Robbins, most certainly said that he believed in the Government's objectives, he also said loud and clear

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that a too single-minded, narrow approach to the achievement of those objectives was a failure to recognise that an immensely complex problem must have a many-pronged approach to its skewer. That message came over loud and clear from the noble Lord, Lord Robbins. If the noble Lord, Lord Cockfield, is indeed so great an admirer of the noble Lord, Lord Robbins, then surely he takes that part of the message as well as the support for the determination to reduce inflation.
The noble Lord, Lord Cockfield, also said that greatness lies in the understanding of the essence of a problem. I fear that it is here that the Government are lacking. Surely the essence of the problem is that we can solve our joint problems of inflation and unemployment; that the core of the matter is the gross uncompetitiveness of British industry; and that this has continued not just in the lifetime—of course not—of the Conservative Government or even of previous Labour Governments; but, as the noble Lord, Lord Kaldor, has told us again and again and as any of us who have looked at the text know, it began indeed at the end of the 19th century. It has accelerated of recent years, but the disease is deep-seated.
The only way out of this uncompetitiveness is a ruthless determination to restructure British industry. That is easily said, but it is desperately difficult to accomplish. We know that on the horizon there are opportunities. They may not be there by the time we have done our restructuring because our competitors will he there ahead of us, and it is always more difficult to get into new markets when other people are there in advance. But there are opportunities in high technology.
Other speakers this afternoon have reminded your Lordships' House of the debate we had in the summer on micro-technology in relation to the European Community, and a very informative and alarming debate that was. Noble Lords were told that of those new markets, 70 per cent. were already in the hands of the Americans and the Japanese, and it is not easy for other people to get into markets when so much has already been done by our competitors. Yet there are opportunities and there have been opportunities. This is the case against both the other parties. There have been opportunities over the last decade, and what has been done to seize them? They have been there to seize, otherwise the Americans and the Japanese would not be able to be in the position in which they are. There are other opportunities. We bewail the fact—unworthily in my view—that many of the developing countries are now competitors; but if they are competitors, they are also markets, markets to be taken by people who have the enterprise, the flexibility and the determination to do so.
There are opportunities in the field of small businesses. I shall not say much about that; I am much in favour of the development of small businesses. But it will not be the sovereign cure. It is only one ingredient of the whole range of new opportunity. Then, of course, if we are successful enough and are wealth-creating enough, there are almost unlimited opportunities in the field of services, both private and public. There are plenty of opportunities for job-creation for a country that is economically successful and adequately wealth-creating. But it means a
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determined attempt to bring about quite drastic change in the structuring and ordering of industry in this country.
The essence of this problem is not only the need for change and the fact that we are at the eleventh hour of making that change; it is also the recognition of Government that this can only be done with allies, wherever we can find them. This is not something which Governments themselves can do. They must have allies among the employers; allies among the trade unions; allies among the general public and the consumers, and allies with our partners overseas in Europe. All round your Lordships' House tonight, representatives, people with knowledge of industry, have been urging that the Government should take action for some modified relief of the burdens that industry has to carry. Let us press again that they should at least do something about the national insurance surcharge. That is just one—I shall not give a long list—of the things that should be done.
In relation to the trade unions, there is the need to get them together to discuss these matters with an open mind and with a determination to collaborate, and there is not much time left in which to do this. At this of all moments of time, when the need to collaborate with the unions and to get the support of the rank-and-file was never greater, why go and introduce legislation which is bound to have an extremely divisive effect, which is bound to put the leaders of the trade unions in an extremely difficult position? How can the leaders of the trade unions go to their rank-and-file and ask them to make the changes in which everyone's interest lies if, at the same time, they are being confronted with legislation which, however rationally you might be able to make a case for it, the Government must know will be represented up and down the country as being a deliberate attack on trade unions and trade unionists?
I agree, and everyone in this House agrees, that there are reforms which need to be made in the trade unions, but in God's name, what a moment to choose—what a moment to choose! Can you not discuss again with them? Can you not get together with the employers and the trade unions to talk this over again to see what can be done? What is the price—because everything has a price—of getting the changes that we need in industry?—which is the very heart of the matter.
Of course, along with this is the reduction of unemployment. I do not for one moment believe that the Government are using unemployment as an instrument; that they want to drive people into unemployment in order to get discipline. This is a measure of the distrust which the Government have created, and it is not only theirs; it is a long and unhappy tradition in this country. But gestures to show that they care, to catch the imagination of people, would make such an enormous difference.
At the beginning of my remarks I said that I am not advocating that we spend our way out. But the latest figures that I have seen indicate that an adult male in terms of benefit paid and loss of tax is costing £5,500 a year. There is much that you can do in terms of employment with £5,500 a year. I am not talking about temporarily useful, but rather insignificant, job-creation; I am talking, as other noble Lords this evening have talked, about the kind of job-creation and

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investment which is genuinely an investment, which will make for a more efficient country in the long-run. Energy conservation is one; other noble Lords from all round the House have given the list. We have this £5,500 per head with which to do something.
I agree that there are other things we should be talking about. I agree that in certain sectors—and I think that young people comprise one of them—wages have priced people out of jobs. This problem will only be solved with real collaboration between both employers and trade unions. It could perfectly well be that with pay increases in the future it will come to be accepted that for pay increases the percentage given to 16-year olds will be a lower percentage than the percentage given to adults, because I think the gap between the school-leaver rate and the adult rate has become too small for all sorts of reasons which to some extent were not anticipated.
Then again the Government should put their whole weight—this is another form of investment—behind training. We have had the initiative from the MSC. We have also had some striking initiatives from employers. I see that the noble Lord, Lord Weinstock, is no longer there. In one of his factories the organisation is offering one job to two youngsters who will share the work and share the pay, with the understanding that they go and get some training during part of the rest of that week.
Just imagine what, if that were widespread, it would do in terms of jobs for school-leavers. This is an initiative which has come from an industrialist who is not known as the most sentimental and starry-eyed industrialist in the country. Yet it is a real initiative which, if followed through in the country, would make a great deal of difference. As I understand it, it does not cost them anything. I am a deeply cost conscious person—cheeseparing, my friends call me—but this is something that could be done for nothing in terms of cost to a firm. Why not give incentives to employers? Say that if they use schemes of this kind then they need not pay National Insurance contributions. It would be cheap in terms of the money we are having to pay in unemployment benefit.
On to that we have to add the unquantifiable but real costs that arise as a result of youngsters being out of work month after month after month, and it would add to the stock of skilled labour. I hope that the noble Lord, Lord Cockfield, will not tell me that, "We are not prepared to train unless, you know, there is a job at the end". One thing we know about the future is that for a great many of the really unskilled there will be no jobs. The falling off in the demand for really unskilled people is going to get worse and worse. If people have a skill, a proportion of them at any rate will find a way of turning it to wealth creation, and therefore it is worth while doing this.
Again, if you do not want to teach these people a skill, improve their educability. It was the Engineering Federation which said to me, "What we want is people who are more numerate and more literate". So let them spend part of their time when they are not in employment improving their ability to learn, their ability to be trained to be flexible as jobs change in a changing labour market. With actions of this sort, developed in conjunction with the employers and trade
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unions, which show that the Government are really deeply concerned, that they have an objective, that this is what they are doing in the process of restructuring and with a view to restructuring, then indeed the Government might capture the imagination of the country.
The noble Lord, Lord Cockfield, cannot in his wildest dreams imagine that this Government have caught the imagination of the country. I, from a party political point of view, do not much want him to catch the imagination of the country. I do not think he is likely to do it. But if he could, it would be worth it even at the price of the development that I am so glad to see in the alliance between us.
We need another ally. We need our allies in the EEC. We need our allies, as that debate in July showed, for research and development in high technology industry and in other areas too. May I also follow other noble Lords who have said how astonishing it is that, at this moment when there are so many difficulties, when the level of sterling, both too high and now perhaps too low, has caused us so much concern, we have heard nothing from the Government side about the EMS. There has been no discussion even of whether this is the right moment to start considering, at least, going into the EMS. Let us at least have a discussion about it.
I know there are difficulties. I do not claim to be an expert on this, but more and more voices are saying that, now that the level of sterling is lower than it was, this is the time at least to consider it, because it would give the stability that industry so much needs. A ruthless and narrow pursuit of a policy which has the right objectives will, I assume, be defeated by the failure of the Government to catch the imagination of the country. I beg them to enlarge the horizons of what they can do to see that there are opportunities which will convince people that they know where they are going and that they intend to carry people with them.
8.5 p.m.
Lord Bruce of Donington: My Lords, we on this side of the House found so much of what the noble Baroness, Lady Seear, said to be quite agreeable that we almost forgot what she herself would call the party tit-for-tat with which she commenced her speech. I shall indeed return to some of the things that she was kind enough to suggest to your Lordships. Before doing so I should like to offer our felicitations to the noble Lord, Lord McFadzean, and the noble Lord, Lord Marsh. The conventions of the House forbid me from commenting further upon what they said, because, if I were tempted to do so, I myself should be drawn into the realms of controversy which are not always appropriate to these occasions. However, I hope that both noble Lords will take it from us that the whole House will be very pleased indeed if they will favour the House with their attendance at frequent intervals, and give us many opportunities of listening to their views.
I was fascinated by the speech of the noble Lord, Lord Cockfield. There was a certain familiarity about it, and since I am just as much an avid reader of his speeches as he is of his own, I am bound to tell him that I have heard the basis of this one many times before. But I must congratulate the noble Lord: he has relaxed his attitude towards this problem quite considerably.

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It takes a bold economist to bring in Madame de Pompadour together with Marlene Dietrich, and I most certainly do congratulate him on that.
In the course of his peroration, which the noble Lord delivered with his accustomed gravity, he invited us to face realities. One could almost hear the exclamation mark ringing through the Chamber by the amount of emphasis that he gave to it. This is what I think we ought indeed to do, except of course that one's views about what the realities are vary considerably.
Not wishing to detain the House very long, I shall not give my own view of the realities. I shall confine myself to a source which is generally reckoned to be far more neutral than that pleasant state to which I can aspire, and which is not entirely unfriendly in the normal way to the noble Lord. If we want the realities we need go no further than the Economist for 10th October. This indeed paraphrases the realities in inimitable style.
"When Mrs. Thatcher became prime minister in May, 1979, year-on-year inflation stood at 10 per cent.; now it is 11½ per cent. Banks' base lending rates were 12 per cent.; today 16 per cent. Mortgage rates were 11¾ per cent.; this Friday, they will be raised to possibly 15 per cent., probably more. The pound's trade-weighted exchange rate stands almost exactly where it was when she acceded, having risen and fallen by a bankruptcy-creating 20 per cent. in the meanwhile. In the last days of Mr. James Callaghan's government, investment was higher, profits were higher, real personal disposable incomes were higher. The two biggest changes between end-Callaghan and mid-Thatcher are both catastrophic: manufacturing production is 16 per cent. lower and an extra 1·4 million people are out of work".
There is the paraphrased answer to the noble Lord. He is, as always, an optimist. Indeed, Her Majesty's Government are perennially optimistic. The noble Lord seemed to think that signs of improvement were on the way. Mind you, they were only the odd decimal point or so, but hope springs eternal and one is entitled to derive some minuscule comfort from even such vague movements of statistics at decimal point level.
I observed, however, that the noble Lord's confidence was not exactly shared by the noble Viscount, Lord Watkinson. He seems to think it will take very much longer. In fact, so long will it take, from his standpoint, that he is getting worried about winning the elections in 1984. His perspective is very much longer indeed; he already sees what the bulk of his colleagues in the CBI see; namely, that there is no way out of this for a very long time.
The forecasts of recovery—and I do not want to remind the noble Lord too unkindly of the forecast about the rate of inflation he made at the end of his speech at the end of July; I will not tax him with that—have been going on now for 18 months. "Next year"—that is, this year—we were told the recovery would take place. Then we were told the recovery would be taking place later on, in 1981. Now, in 1981, we are told it will be some time in 1982. How long are people going to have to wait? What vista is there at the end of the tunnel? The gravamen of our complaint against the measures contained in the gracious Speech is that they are completely irrelevant to the problems facing the country today.
Not that the Government have no philosophy. The noble Lord, Lord Thorneycroft, who becomes more rumbustious the further he is removed from the cares of the high office he recently occupied, gave the game away. Many of us of course suspected—we were not entirely sure before—that he was, as it were, an intellectual
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anarchist who believed that all government was ineffective anyway and that we did not want government. But what we have realised all the time is that there was no philosophy for him, and there is no philosophy for the party opposite, but reliance on market forces. That is the only remedy they have to offer.
The noble Lord, Lord Thorneycroft, supported by other noble Lords, was himself at pains to point out that, after all, Governments could really do very little at all in the current situation, that it was outside the powers of Government to influence anything. That was not the story in the election manifesto of the party opposite, and noble Lords opposite who are artistically inclined, like the noble Viscount, Lord Eccles, who believes in art, will remember the big Conservative Party posters showing a lengthening line of unemployed, all put in such terms as implying that people only had to elect a Conservative Government in order for unemployment to be eliminated.
The noble Lord says he believes in market forces, and of course he does, as does the party opposite. But in order to maintain that position, they have to blame all the ills of the country on everything but the Government. They blame the working person. Indeed, the noble Baroness the Leader of the House said yesterday:
"What has been happening since up and down the country in private and public sectors of industry is that concealed unemployment in the form of overmanning has suddenly come through in perceived unemployment".—(Official Report, 11/11/81; col. 238.)
That is the most extraordinary statement I have ever heard from a Government Front Bench because it implies that the vast increase in unemployment, of 1.4 million, since her Government took office is, in the main part, due to a shedding of labour, so enabling industry to become leaner and fitter, whereas it is nothing of the kind. Manufacturing production has gone down by 18 per cent. and manufacturing employment has gone down by 16 per cent. What has happened has not been a thinning out; there has been a wholesale slaughter of firms up and down the country, a wholesale destruction of industrial capacity, due entirely and deliberately to the policies of the Government. To blame the ordinary working person for pricing himself out of a job by demanding even up to the present rate of inflation is to put the blame precisely where it does not belong.
I have been a member of the Labour Party for 46 years and shall, I hope, remain a member of it until my demise. I well remember the times before the war—as possibly the noble Lord, Lord Thorneycroft, also can—when we had exactly the same story put before the working people—that unemployment was essentially their problem; that it was due to restrictive practices and to a lack of production effort by the ordinary working person. It was due to everybody except the system. People may have short memories, but we, and the bulk of the people, now know how untrue that was. And how odd it was that when a national effort had to be made to defeat a wicked and ruthless enemy, the economic activities of this country, the production apparatus, under state supervision, was brought to a state where production went up by leaps and bounds, as did enthusiasm, and the arms for our forces were sustained by British effort in British factories by both men and women.

387
In those days everybody seemed to praise the ordinary working person on whom the victory finally depended, except those people, immortalised by Nathanial Gubbins, in the safe hotels whose perpetual function it was, even in wartime, to grumble at everyone else; and what we see today is strongly reminiscent of a return to that kind of attitude. The irony of war was that we then had no unemployed at all; and the further irony was that under rationing, probably for the first time in their lives, millions of our citizens received a square meal of a quality and a quantity that they were unable to have in the years before the war. En those years there was a greater measure of fairness and justice which contributed to the spirit of our country, to which the noble and learned Lord the Lord Chancellor was able to refer in his remarks in opening the debate.
It is no good any Government any longer adopting an attitude of contempt towards the bulk of the people of this country. It is all very well for those of your Lordships, and those people outside the House, who have comparatively comfortable circumstances, who go to homes where, within fairly spacious conditions, their eyes can easily rest on things which please their eyes, where they can find some degree of personal serenity. It is all very well for people who are privileged by space as well as sheltered by income to say to the rest of the country that they are wrong. The people of whom I speak are in a position that is much different from that of millions of our people who today live under conditions of unimaginable squalor. Many of them live in great poverty, with very great problems, and, above all, seek somehow to have a purpose, which at present eludes them.
The function of government in this country—and there is a function, whatever the noble Lord, Lord Thorneycroft, might think about it—is so to guide our affairs that the people of the nation, in particular the young, can have a purpose in life, can have some vision, can be allowed to dream dreams, and can be allowed the luxury of the possibility that, given some effort and co-operation, those dreams can be realised.
Both competition and co-operation have a role to play in all economic and social conditions. Competition, in particular in the intellectual sphere and in the field of excellence, is a very good thing indeed. But if we are to live together in society, we must co-operate, and co-operating together means immediately restriction on the individual liberties of people who co-operate with one another. It consists essentially of all of us giving up some of our rights in order that we might achieve common objectives.
It is that spirit to which we on this side of the House desire to return. We desire to rekindle some of that enthusiasm to which the noble and learned Lord the Lord Chancellor referred, some faith in the greatness of our country, some vista of the possibility of obtaining personal serenity for large numbers of our citizens. These are worthy aims. They go beyond party. But they are the aims to which Her Majesty's Government should address themselves. Our regret about the gracious Speech is essentially that it reflects a doctrine that is sterile and disproved. It reflects no real purpose outside the recognition of market forces. It sets out no reforms other than those minimal reforms by
388
virtue of which a bemused electorate might be persuaded to return the present Government for a further term of office. It is no inspiration to the nation at all.
We note with some amusement that from the Liberal Benches there is an amendment to the amendment which we have proposed. Well, it might suit that immediate political purpose to put down amendments of that kind. I recall the noble Lord, Lord Rochester, in the earlier part of his speech admiring the courage of his new colleagues in the Social Democratic Party in having the strength of their convictions. Convictions are good things to have, and I am sure that one of the most interesting things that will emerge eventually over the next couple of years, is precisely what are the convictions of the Social Democratic Party. So far they have been inexplicably postponed, but I can assure the Social Democratic Party that as and when they are publicised they will be received with great sympathy. I must say that I was most encouraged by the excellent speech of the noble Lord, Lord Walston, a former colleague of mine, on aid to the third world.
I hope that the House will not take too seriously the amendment from the Liberal Benches. We ourselves shall of course vote against it, and if, as a result of that Division, it is possible for us to vote for our own amendment, as distinct from an amendment that has been tampered with, we shall of course vote for it. In its present form our amendment is moved in the belief that the Government have to go a very long way yet before they become even the plausible custodians of the nation's destiny.
8.27 p.m.
Lord Cockfield: My Lords, the contempt for the electorate expressed by the noble Lord, Lord Bruce of Donington, in the course of his speech no doubt reflects the contempt that the electorate will express for Lord Bruce and his party when the time comes. We have had two distinguished maiden speeches from the noble Lord, Lord McFadzean of Kelvinside, and the noble Lord, Lord Marsh, and I most sincerely congratulate them both. The noble Lord, Lord McFadzean, has immense industrial experience. Indeed, there are few branches of industry with which he has not been associated. He was a most distinguished chairman of British Airways. He speaks with great authority on industrial matters. The noble Lord, Lord Marsh, has great breadth of experience spanning politics and industry, in both the public and the private sectors. He is able to speak from direct personal experience of the problems that he discusses, and this is a factor that your Lordships always appreciate.
I propose to deal with one or two major issues which have been touched upon in the course of the debate and to which I did not refer when I spoke on the original Motion. I should like to refer briefly to the question of incomes policy. This was strongly supported by the noble Lords, Lord Rochester and Lord Banks, on behalf of the Liberal Party, by the noble Baroness, Lady Birk, and the noble Lord, Lord Jacques, on behalf of the Labour Party—and I hope that they do not get expelled for their temerity—and by the noble Lord, Lord Roberthall, on behalf of the SDP. On the other side, incomes policy was opposed

389
by my noble friend Lord Thorneycroft in a brilliant, wide-ranging speech of deep wisdom. It was also opposed by Lord Mottistone and by the noble Lord, Lord Robbins. I mention this only to illustrate the diversity of views on this subject.
But let us not debate at this time of night the policy issues involved, the philosophical or even the moral principles. Surely it is enough that on no less than seven or eight occasions since the original White Paper on Full Employment was published in 1944 incomes policies have been tried, and they have always failed. Incomes policies always go through precisely the same history. They start by being voluntary, flexible and ill-defined, but over the years, as the problems multiply, the rules become more complex. As individuals or groups ignore or evade the rules there are demands for enforcement, whether by union muscle or by statutory provision. Ted Heath tried the latter, Jim Callaghan the former. Both failed. We need to learn from their failure, not brush it on one side. We can go down the same route again and will end up in the same way. The crucial point now is that many of the most powerful union leaders have made it clear that they will not accept an incomes policy under any circumstances. This being so, as the noble Lord, Lord Robbins, pointed out, there are no circumstances in which a voluntary or a statutory incomes policy would be feasible.
The noble Lord, Lord Banks, the noble Baroness, Lady Seear, the noble Lord, Lord Hankey, and the noble Viscount, Lord Watkinson, all raised the question of the EMS. The Government support the broad aims of the EMS as a step forward in monetary co-operation in the Community. We contribute 20 per cent. of our gold and dollar reserves to the fund, and participate fully in discussions on future developments. We have stated our intention to join the exchange rate mechanism when conditions are right, but the very substantial fluctuations in the sterling exchange rate in the last two years have made this impracticable. If we go into the EMS we must go into it in circumstances which ensure that we stay in. Noble Lords with longer memories will remember that when we joined the Snake in the days of the Heath Government we stayed in it for only six weeks. This is an experience we do not wish to repeat.
Lord Davies of Leek: Crawling pegs!
Lord Cockfield: My Lords, the noble Lord is no doubt a great expert on these matters and we shall have an opportunity to listen to his views on crawling pegs and other forms of insect life some day in the future.
The noble Lord, Lord Kaldor, has offered to provide statistics which refute the assumptions on which our monetary policy is based; but statistics can prove or disprove anything, and the noble Lord is a great expert in their use. Common sense tells us that more money chasing the same amount of goods will drive up prices, and that if Governments try to borrow more by competing with the private sector for funds interest rates will be bid up. The money supply figures have been biased upwards by the removal of the so-called corset, and now by the Civil Service dispute. But the general thrust of our policy remains the same. Only when
390
inflation is permanently at a low level will the conditions be right for sustained growth in output and employment. The noble Lord complained that I had not on this occasion dealt at length with monetary policy. I would have thought the remainder of your Lordships' House would have been relieved.
I promised that I would reply to the noble Baroness, Lady Burton of Coventry. She asked about the legalisation of "bucket shop operations for the benefit of scheduled airlines. This is a matter that the noble Baroness has raised directly with my right honourable friend the Secretary of State for Trade. When Titans are locked in battle the wise man stands aside. She also raised the question of the report dealing with the position of consumers in relation to the nationalised industries. This is a matter of great importance, but I fear there is nothing I can add to what my noble friend Lord Lyell told the noble Baroness on 22nd October. As she knows, this is a complex matter, and a Statement will be made as soon as possible.
My noble friend Lord Sandford referred to the Local Government Finance Bill. May I assure him that the Government are conscious of the concerns to which he has referred, and I will ensure that his comments are brought to the attention of my right honourable friend the Secretary of State for the Environment.
I now turn specifically to the amendment moved by the noble Lord, Lord Scanlon, on behalf of the Labour Party. We welcome the noble Lord's active participation in our affairs. He has a great fund of wisdom and experience to bring to hear. The points he raised, which are important—and, indeed, much the same points were made later by the noble Baroness, Lady Seear—will form the substance of the debates which will take place in your Lordships' House when the relevant legislation comes before us. We look forward to the noble Lord's participation in those debates. At this stage I m ill say no more than that the Government's policy is based on the simple proposition that the balance of power has swung too much in favour of the unions. It is this balance we aim to get right.
The Opposition have a perfect sense of timing: they always get it precisely wrong. Had they moved this amendment last year, when the economy was still slipping into recession, they would no doubt have been able to produce many agruments. But this year, today, there are many encouraging signs appearing, and they will multiply. The rate of inflation has come down. It has been virtually halved in just over a year. Today it stands only marginally higher than the OECD average, and actually lower than the OECD figure for Europe. Despite the recent and temporary setback, the long-term trend remains downwards. We must work resolutely to achieve it.
Manufacturing output in the three months to September shows an increase of 1½ per cent. Productivity is up by 5 per cent. in the first half of this year—a massive increase by any standard. Engineering orders are up by 15 per cent., and investment in plant and machinery now stand at an all-time record level. I am sure that the noble Lord, Lord Scanlon, will welcome both those developments. Unit costs in manufacture have stabilised for the first time in a decade; company liquidity has improved; our exports

391
have held up remarkably well, and the fall in the exchange rate will give our exporters further assistance.
We have secured a number of immensely important overseas orders individually worth many hundreds of millions of pounds. The Castle Peake Power Station in Hong Kong, £600 million; the steel plant in Orissa for the Indian Government, £1,250 million; the submarine cable from Sydney to Vancouver, £172 million; the university in Oman, £150 million; the steel plate mill in Mexico, £350 million, and the Anglo-Brazilian project involving £380 million. These are all great achievements by British industry in which we ought to take great pride.
The number of trade disputes is the lowest since the 1940s, wage settlements have fallen and will go on falling, thus helping our competitive position; unemployment is rising, regrettably still rising, but at a much slower rate. The increase in recent months is less than half those at the end of last year. Movements in unemployment always lag behind changes in output, so that a rising level of output needs to be firmly established before unemployment falls; but fall it will. There has already been a substantial reduction in short-time working, and overtime is showing signs of picking up. These are all encouraging signs.
My Lords, we are not yet out of the wood by any means, but at least let us take encouragement and new heart from what is going right. It is all too common in difficult times for pessimism to abound. Oppositions of whatever colour have a professional interest in encouraging it. But never was there a time when it was more necessary for us to hold fast to our hopes, never was there a time when there was more evidence to justify our so doing. My Lords, I must conclude by asking my noble friends who sit behind me to abstain if the noble Lord, Lord Banks, presses his amendment to the amendment but I must advise them to vote against the amendment in the name of the noble Lord, Lord Scanlon, regardless of whether or not that amendment has been amended.
8.42 p.m.
On Question, Whether the amendment to the amendment (moved by the Lord Banks) shall be agreed to?
Their Lordships divided: Contents, 34; Not-Contents, 40.

DIVISION NO. 1

CONTENTS

Airedale, L.

Mayhew, L.

Amherst. E.

Ogmore, L.

Aylestone, L.

Perry of Walton, L.

Banks, L.

Roberthall, L.

Barrington, V.

Robson of Kiddington, B.

Beaumont of Whitley, L.

Rochester, L.

Burton of Coventry, B. [Teller.]

Sainsbury, L.

Seear, B. [Teller.]

Byers, L.

Simon, V.

Diamond, L.

Tanlaw, L.

Donaldson of Kingsbridge, L.

Tweeddale, M.

Evans of Claughton, L.

Wade, L.

Gladwyn, L.

Wilson of Langside, L.

Hacking, L.

Winchilsea and Nottingham, E.

Hampton, L.

Harris of Greenwich, L.

Winstanley, L.

Kennet, L.

Winterbottom, L.

Kilmarnock, L.

Young of Dartington, L.

392

NOT-CONTENTS

Ardwick, L.

Milner of Leeds, L.

Bernstein, L.

Mishcon, L.

Beswick, L.

Molloy, L.

Birk, B.

Noel-Baker, L.

Bishopston, L.

Oram, L.

Boston of Faversham, L.

Parry, L.

Brockway, L.

Peart, L.

Bruce of Donington, L.

Pitt of Hampstead, L.

Cledwyn of Penrhos, L.

Ponsonby of Shulbrede, L. [Teller.]

Collison, L.

Cooper of Stockton Heath, L.

Ross of Marnock, L.

David, B.

Scanlon, L.

Davies of Leek, L.

Stewart of Alvechurch, B.

Elwyn-Jones, L.

Stewart of Fulham, L.

Jeger, B.

Stone, L.

Jenkins of Putney, L.

Strabolgi, L.

John-Mackie, L.

Strauss, L.

Kaldor, L.

Underhill, L.

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

Wallace of Coslany, L.

Wells-Pestell, L.

Lovell-Davies, L.

Wynne-Jones, L.

Resolved in the negative, and amendment to the amendment disagreed to accordingly.
8.52 p.m.
On Question, Whether the amendment (moved by the Lord Scanlon) shall be agreed to?
Their Lordships divided: Contents, 42; Not-Contents, 122.

DIVISION NO. 2

CONTENTS

Ardwick, L.

Milner of Leeds, L.

Bernstein, L.

Mishcon, L.

Beswick, L.

Molloy, L.

Birk, B.

Noel-Baker, L.

Bishopston, L.

Oram, L.

Boston of Faversham, L.

Parry, L.

Brockway, L.

Peart, L.

Bruce of Donington, L.

Pitt of Hampstead, L.

Cledwyn of Penrhos, L.

Ponsonby of Shulbrede, L. [Teller.]

Collison, L.

Cooper of Stockton Heath, L.

Ross of Marnock, L.

David, B.

Scanlon, L.

Davies of Leek, L.

Stewart of Alvechurch, B.

Denington, B.

Stewart of Fulham, L.

Elwyn-Jones, L.

Stone, L.

Jeger, B.

Strabolgi, L.

Jenkins of Putney, L.

Strauss, L.

John-Mackie, L.

Underhill, L.

Kaldor, L.

Wallace of Coslany, L.

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

Wells-Pestell, L.

Wynne-Jones, L.

Lovell-Davis, L.

Young of Dartington, L.

NOT-CONTENTS

Abinger, L.

Campbell of Croy, L.

Airey of Abingdon, B.

Cathcart, E.

Aldington, L.

Chelwood, L.

Alexander of Tunis, E.

Cockfleld, L.

Alport, L.

Coleraine, L.

Avon, E.

Colwyn, L.

Bellwin, L.

Constantine of Stanmore, L.

Beloff, L.

Craigmyle, L.

Selstead, L.

Croft, L.

Bessborough, E.

Cullen of Ashbourne, L.

Boothby, L.

Daventry, V.

Brabazon of Tara, L.

de Clifford, L.

Brain, L.

Denham, L. [Teller.]

Brougham of Vaux, L.

Digby, L.

Brownlow, L.

Drumalbyn, L.

Caldecote, V.

Dudley, E.

Campbell of Alloway, L.

Eccles, V.

393

Ellenborough, L.

Mottistone, L.

Elles, B.

Mountevans, L.

Elliot of Harwood, B.

Murton of Lindisfarne, L

Elton, L.

Nairne, Ly.

Fairfax of Cameron, L.

Northchurch, B.

Faithfull, B.

Norwich, Bp.

Falkland, V.

Nugent of Guildford, L.

Ferrers, E.

Nunburnholme, L.

Ferrier, L.

Orkney, E.

Fortescue, L.

Orr-Ewing, L.

Fraser of Kilmorack, L.

Polwarth, L.

Gardner of Parkes, B.

Radnor, E.

Gibson-Watt, L.

Reigate, L.

Gisborough, L.

Robbins, L.

Glasgow, E.

Rochdale, V.

Glendevon, L.

Romney, E.

Gormanston, V.

St. Davids, V.

Gray, L.

St. Just, L.

Gridley, L.

Sandford, L.

Hailsham of St. Marylebone, L.

Sandys, L. [Teller.]

Savile, L.

Hankey, L.

Selkirk, E.

Henley, L.

Sempill, Ly.

Hornsby-Smith, B.

Skelmersdale, L.

Hylton-Foster, B.

Stodart of Leaston, L.

Kemsley, V.

Stradbrooke, E.

Killearn, L.

Strathclyde, L.

Lane-Fox, B.

Sudeley, L.

Lauderdale, E.

Swinfen, L.

Lindsey and Abingdon, E.

Thorneycroft, L.

Linlithgow, M.

Tranmire, L.

Long, V.

Trefgarne, L.

Luke, L.

Trenchard, V.

Lyell, L.

Trumpington, B.

McFadzean, L.

Tweeddale, M.

McFadzean of Kelvinside, L.

Vaizey, L.

Maclcod of Borve, B.

Vaux of Harrowden, L.

Mancroft, L.

Vivian, L.

Margadale, L.

Wakefield of Kendal, L.

Marley, L.

Watkinson, V.

Marsh, L.

Weinstock, L.

Massereene and Ferrard, V.

Wolverton, L.

Melville, V.

Wynford, L.

Mersey, V.

Young, B.

Monk Bretton, L.

Resolved in the negative, to accordingly.
On Question, Motion agreed to: the said Address to be presented to Her Majesty by the Lords with White Staves.

  PRISONERS OF CONSCIENCE: AMNESTY INTERNATIONAL PROPOSAL
  PRISONERS OF CONSCIENCE: AMNESTY INTERNATIONAL PROPOSAL
  SOVIET/BRITISH CULTURAL AND ACADEMIC EXCHANGES
  SOVIET/BRITISH CULTURAL AND ACADEMIC EXCHANGES
  THE HOUSING ACT 1980: SCHEDULE 24
  THE HOUSING ACT 1980: SCHEDULE 24