Sitting of 21 April 1982

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

    Wandsworth Borough Plan
    Mr. Dubsasked the Secretary of State for the Environment what steps he has taken following the publication of his inspector's report on the inquiry into the Wandsworth borough plan.
    The Under-Secretary of State for the Environment (Mr. Giles Shaw): In the case of local plans such as this, the inspector reports not to me but to the local authority. It is for the local authority and not for me to decide what action to take. Meanwhile, I have made it clear that the inspector's comments on the housing policy contained in the plan do not represent the Government's view.
    Mr. Dubs: Is it not the case that, following the publication of the inspector's report, the Tory leaders of Wandsworth borough council asked the Minister to dissociate himself from that report because they did not like it and found it embarrassing? Is that not a travesty of what should be a quasi-judicial process and an example of blatant interference in the internal party politics of Wandsworth borough council?
    Mr. Shaw: I disagree. The council commissioned the report. A study was undertaken. I expect that the council appointed the members of the commission and required them to report back to it on matters appertaining to its proposals in the local plan. It was for the council to decide what to do with the report. That remains the position.
    Mr. Jay: Is the Minister aware that the distinguished and impartial inspector denounced the Conservative Wandsworth council's plan as a wholly inadequate effort by a lot of petty party politicians?
    Mr. Shaw: The right hon. Gentleman will be aware that in making that statement the inspector was exceeding his competence and made an error of judgment.

    Derelict Land
    Mr. Dormandasked the Secretary of State for the Environment if he will seek to increase the amount of grant to be made available to local authorities for the clearance of derelict land; and if he will make a statement.
    The Secretary of State for the Environment (Mr. Michael Heseltine): The amount available to county and district councils for grant-aided derelict land reclamation has been increased in 1982–83 to £45 million, an improvement of some 20 per cent. on last year.
    Mr. Dormand: Is the Secretary of State aware of the importance of reclamation to the older industrial areas, such as the Northern region? Has he seen the transformation that has taken place in some areas? Is he aware that there is a strong rumour that the money for derelict land reclamation is to be reduced? Will he scotch that rumour and acknowledge that the rest of the country owes a great debt to older industrial areas?
    Mr. Heseltine: It is obvious that I believe the scheme to be important. That is why I have increased the money to be made available this year by 20 per cent. over last year. I cannot choose which rumours the hon. Gentleman cares to believe, but they have no foundation.
    Mrs. Knight: Will my right hon. Friend impress on local authorities the importance of refraining from taking over people's homes and businesses unless there is a clear plan to redevelop the land? Does he agree that people should not be dispossessed, only to witness land lying derelict for many years?
    Mr. Heseltine: My hon. Friend will realise that tight procedures are associated with compulsory purchase orders. However, it is important to remember that the Government have revealed vast acreages of land in public ownership that could be put to better use. We are now seeking systematically to disgorge that land.
    Mr. Lofthouse: Does the Secretary of State recall his visit to derelict sites in West Yorkshire on 19 March and his press statement that day in which he was reported to have said that £70 million would be available for the derelict land programme? Arising out of that visit, will West Yorkshire county council receive further financial assistance for the derelict land programme?
    Mr. Heseltine: I am sure that the hon. Gentleman will forgive me if I point out that the figures he mentioned relate to a different programme. The £70 million is the sum that I am earmarking for next year's programmes—a combination of derelict land and urban programmes—for development schemes in urban areas. The amount for the derelict land programme this year is £45 million. I discussed that with the West Yorkshire county council, which has made good use of derelict land grants in the past. We discussed a number of schemes. I understand that the council has submitted ideas to my Department, and they will be carefully considered.
    Mr. Stokes: Apart from such vast sums of money being spent—no doubt necessarily—is not this subject ideal for young people under one of the Government's many voluntary training schemes?
    Mr. Heseltine: My hon. Friend will be delighted to know that, through the various urban programmes to which I have referred, young people receive many opportunities resulting from my Department's expenditure programmes.
    Dr. David Clark: Bearing in mind that most of the areas with the highest levels of dereliction have the highest levels of unemployment, does it not make sense to encourage local authorities to employ unemployed men and women to restore derelict land? Will the Secretary of State set up a co-ordinating body for the English regions, similar to the Scottish and Welsh Development Agencies, to bring together the work of local authorities?
    Mr. Heseltine: I should have thought that local authorities were capable of achieving such an objective if they felt it necessary. The hon. Gentleman has a working knowledge of the problems. He will understand that the idea of getting children with picks and shovels to take over from the bulldozers is not compatible with achieving the best value for money in terms of public expenditure.[Interruption.] The Opposition should be concerned about the question put to me by their spokesman. Expenditure under the derelict land programme involves a large amount of mechanisation. I should not carry the House with me if I suggested that we reverted to physical labour.

    Planning Applications
    Mr. Knoxasked the Secretary of State for the Environment whether he is satisfied with the speed with which planning applications are being dealt with.
    Mr. Heseltine: In general, there has been a welcome speeding up of performance, but there is still scope for improvement.
    Mr. Knox: Is my right hon. Friend aware that in the third quarter of last year—the most recent period for which figures are available—40 per cent. of the applications to the Peak park joint planning board took over 13 weeks to determine compared with 16 per cent. in the rest of the country? Does my right hon. Friend regard that as satisfactory, and, if not, can he do anything about it?
    Mr. Heseltine: I am concerned that in some areas the improved performance is not being achieved. The first step that I wanted to take was to publish the figures so that such questions could be publicly ventilated. I hope that individual authorities will react to their own performance without the need for central Government to become involved in trying to do the job that they are properly charged with doing. In the last resort, it would be appropriate for me to ask questions.
    Mr. Chapman: I welcome the speed-up in the determination of planning applications, but is it uniform among minor or modest applications and more significant submissions? Is the welcome expeditious progress reflected in decisions on planning appeals in my right hon. Friend's Department?
    Mr. Heseltine: My hon. Friend has a deep knowledge of the subject. I assure him that the improvement achieved by my appeals inspectorate is commendable. I pay public tribute to the work of Mr. Midwinter and his inspectors for the way in which they have responded to the demands that we have made of them. There has been an improvement by many authorities in dealing with some of the larger applications. That proves that if the will is there, one can move the planning mechanisms faster than in the past. I hope that authorities which have not achieved that progress will make better efforts.

    Improvement Grants
    Mr. Lathamasked the Secretary of State for the Environment what progress is being made in increasing the level of improvement grants that are approved, following the new grant levels announced in the Budget Statement.
    Mr. Hicksasked the Secretary of State for the Environment if he will give a progress report on the
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    allocation of public funds for discretionary improvement grants at the enhanced rate of 90 per cent.; and whether he is satisfied with the response by the householders.
    The Minister for Housing and Construction (Mr. John Stanley): Following the Chancellor's Budget Statement, an additional £74½ million has been made available for home improvement grants in England in 1982–83. Bids for these resources were invited from all local authorities by 31 March. Authorities have received their provisional allocations today, and with permission, Mr. Speaker, I shall place the details in the Official Report. The order increasing the rate of grant to 90 per cent. for intermediate and repairs grant applications made before 31 December 1982 was approved by the House on 8 April and came into effect on 13 April. We shall be monitoring progress closely, but the present indications are that there will be a strong demand for the additional resources for home improvement, which we want to see being fully utilised.
    Mr. Latham: Since the new scheme could make a worthwhile contribution to construction output and work load—and the work load is already beginning to improve—will my hon. Friend ensure that an energetic publicity campaign is launched not only by local authorities but by the construction industry?
    Mr. Stanley: My hon. Friend has been conspicuous in pressing for an expansion in the home improvement programme. I assure him that the Government wish to draw wide attention to the availability of the higher rate of improvement grant and the additional improvement funds. A national publicity campaign will begin in the middle of May. I endorse what my hon. Friend said. I hope that that campaign will be followed by similar efforts in the construction industry to draw attention to the increased availability of home improvement money.
    Mr. Hicks: I am grateful to my hon. Friend for the increased allocation to the Caradon district council. May we have an assurance that if the demand for improvement grants at the enhanced 90 per cent. rate exceeds his Department's allocation, additional funds will be made available so that the Chancellor's terminal date for applications of 31 December 1982 is honoured?
    Mr. Stanley: Applications relating to mandatory grants have to be processed by local authorities. I cannot undertake that there will be any overall addition to the total resources available. We make it clear to local authorities in the allocation letter that, where authorities are underspending on the additional allocation, we reserve the right to transfer allocations to other authorities which want additional resources.
    The £75 million, which is the subject of the special allocation for home improvements, is additional to the existing general HIP resources announced in December last year. The December allocations represent a significant increase in the gross provision for housing for 1982–83.
    Mr. Alton: I welcome the sensible decision to increase home improvement grants, but what action will be taken to force the hands of the many private landlords who are not prepared, even with increased improvement grants, to carry out essential improvements? Is the Minister aware that about 1 million homes are still without inside toilets,

    251
    running water or bathrooms? What powers will the Minister give to local authorities to force private landlords to make basic improvements to homes?
    Mr. Stanley: As the hon. Gentleman knows, powers exist to enable local authorities in certain circumstances to compel the improvement of property. The position of private landlords relates to the overall economics of the private rented sector. The Government's aim has been to make an overall improvement in the fair rents system by a reduction in the phasing period from three years to two years.
    Mr. Durant: I welcome my hon. Friend's announcement, but will he monitor carefully how the scheme operates, to ensure that maximum benefit is gained from the announcement? Will he encourage local publicity, as well as national publicity, because that often has a greater effect?
    Mr. Stanley: The Government's wish is that there should be full use of the additional money. We shall encourage any private bodies—for example, the regional branches of the home improvement industry or local authorities—which wish to publicise the availability of the additional resources.
    Mr. Douglas-Mann: Does the Minister agree that £75 million is the merest window dressing? Has he considered the report by the Association of Metropolitan Authorities, published in December, to the effect that about 2½ million houses are in serious disrepair and over 1 million are unfit for habitation? Does he accept that the allocation of £75 million neglects the problem?
    Mr. Stanley: The hon. Gentleman refers to window dressing, but there has been a large uplift in available finance for housing in the current year. The capital provision available this year compared with the outturn of last year has increased by about one-third, and home improvement expenditure has increased by about one-half. By no stretch of the imagination is that window dressing.
    Following is the information:

    Provisional additional allocations for home improvement grants (April 1982)

    £'000

    North

    Hartlepool

    400

    Langbaurgh

    150

    Middlesbrough

    550

    Stockton-on-Tees

    250

    Chester-le-Street

    80

    Darlington

    200

    Derwentside

    400

    Durham

    180

    Easington

    240

    Sedgefield

    40

    Teesdale

    190

    Wear Valley

    290

    Alnwick

    100

    Berwick-upon-Tweed

    75

    Blyth Valley

    140

    Castle Morpeth

    50

    Tynedale

    140

    Wansbeck

    210

    Gateshead

    320

    Newcastle upon Tyne

    600

    North Tyneside

    670

    South Tyneside

    —

    Sunderland

    400

    Total for Region

    5,675

    252

    £'000

    Yorks and Humberside

    Beverley

    150

    Boothferry

    85

    Cleethorpes

    110

    Glanford

    100

    Great Grimsby

    500

    Holderness

    1

    Kingston upon Hull

    340

    East Yorkshire

    70

    Scunthorpe

    120

    Craven

    133

    Hambleton

    140

    Harrogate

    80

    Richmondshire

    10

    Ryedale

    220

    Scarborough

    200

    Selby

    191

    York

    190

    Barnsley

    240

    Doncaster

    800

    Rotherham

    300

    Sheffield

    —

    Bradford

    1,320

    Calderdale

    350

    Kirklees

    450

    Leeds

    2,000

    Wakefield

    250

    Total for Region

    8,350

    East Midlands

    Amber Valley

    204

    Bolsover

    100

    Chesterfield

    100

    Derby

    477·5

    Erewash

    49

    High Peak

    50·5

    North East Derbyshire

    48·5

    South Derbyshire

    100

    West Derbyshire

    70

    Blaby

    42·5

    Charnwood

    100

    Harborough

    100

    Hinckley and Bosworth

    32

    Leicester

    650

    Melton

    60

    North West Leicestershire

    150

    Oadby and Wigston

    30

    Rutland

    —

    Boston

    20

    East Lindsey

    —

    Lincoln

    120

    North Kesteven

    100

    South Holland

    30

    South Kesteven

    120

    West Lindsey

    —

    Corby

    14·25

    Daventry

    65

    East Northamptonshire

    93

    Kettering

    125

    Northampton

    75

    South Northamptonshire

    60

    Wellingborough

    60

    Ashfield

    200

    Bassetlaw

    43

    Broxtowe

    25

    Gedling

    300

    Mansfield

    250

    Newark

    48·75

    Nottingham

    550

    Rushcliffe

    137

    Total for Region

    4,800

    253

    Eastern

    £'000

    North Bedfordshire

    60

    Luton

    120

    Mid Bedfordshire

    42

    South Bedfordshire

    115

    Aylesbury Vale

    160

    South Bucks

    33

    Chiltern

    54

    Milton Keynes

    80

    Wycombe

    142·5

    Cambridge

    35

    East Cambridgeshire

    130

    Fenland

    80

    Huntingdon

    16·5

    Peterborough

    228

    South Cambridgeshire

    25

    Basildon

    10

    Braintree

    76·9

    Brentwood

    25

    Castle Point

    8

    Chelmsford

    2

    Colchester

    120

    Epping Forest

    15

    Harlow

    9

    Maldon

    25

    Rochford

    59

    Southend on Sea

    90

    Tendring

    250

    Thurrock

    35

    Uttlesford

    10

    Broxbourne

    186

    Dacorum

    20

    East Hertfordshire

    250

    Hertsmere

    7

    North Hertfordshire

    50

    St. Albans

    36

    Stevenage

    4

    Three Rivers

    7·5

    Watford

    250

    Welwyn/Hatfield

    50

    Breckland

    30

    Broadland

    86

    Great Yarmouth

    250

    North Norfolk

    250

    Norwich

    90

    South Norfolk

    135

    Kings Lynn and West Norfolk

    425·6

    Babergh

    110

    Forest Heath

    25

    Ipswich

    97

    Mid Suffolk

    25

    St. Edmundsbury

    90

    Suffolk Coastal

    70

    Waveney

    200

    Total for Region

    4,800

    Greater London

    Greater London Council

    474

    City of London

    —

    Barking and Dagenham

    58

    Barnet

    290

    Bexley

    218

    Brent

    560

    Bromley

    240

    Camden

    138

    Croydon

    136

    Ealing

    500

    Enfield

    356

    Greenwich

    750

    Hackney

    88

    Hammersmith and Fulham

    949

    Haringey

    329

    Harrow

    345

    Havering

    120

    Hillingdon

    294

    Hounslow

    79

    Islington

    949

    254

    £'000

    Kensington and Chelsea

    147

    Kingston upon Thames

    96

    Lambeth

    171

    Lewisham

    420

    Merton

    245

    Newham

    500

    Redbridge

    300

    Richmond upon Thames

    752

    Southwark

    949

    Sutton

    178

    Tower Hamlets

    34

    Waltham Forest

    122

    Wandsworth

    1,200

    Westminster

    763

    Total for Region

    12,750

    South Eastern

    Bracknell

    11

    Newbury

    80

    Reading

    190

    Slough

    20

    Windsor and Maidenhead

    35

    Wokingham

    30

    Brighton

    137

    Eastbourne

    45

    Hastings

    625

    Hove

    50

    Lewes

    210

    Rother

    66·7

    Wealden

    200

    Basingstoke and Deane

    260

    East Hampshire

    100

    Eastleigh

    36

    Fareham

    57

    Gosport

    217

    Hart

    37

    Havant

    8

    New Forest

    210

    Portsmouth

    160

    Rushmoor

    95

    Southampton

    334

    Test Valley

    37·5

    Winchester

    93·75

    Medina

    20

    South Wight

    150

    Ashford

    62

    Canterbury

    10·5

    Dartford

    100

    Dover

    37

    Gillingham

    76

    Gravesham

    600

    Maidstone

    107

    Rochester upon Medway

    308·5

    Sevenoaks

    66

    Shepway

    225

    Swale

    60

    Thanet

    177

    Tonbridge and Malling

    81·3

    Tunbridge Wells

    100

    Cherwell

    201

    Oxford

    145

    South Oxfordshire

    114

    Vale of White Horse

    —

    West Oxfordshire

    80

    Elmbridge

    35

    Epsom and Ewell

    30

    Guildford

    250

    Mole Valley

    20

    Reigate and Banstead

    69

    Runnymede

    92

    Spelthorne

    127

    Surrey Heath

    100

    Tandridge

    100

    Waverley

    —

    Woking

    100

    Adur

    143·75

    255

    £'000

    Arun

    25

    Chichester

    20·2

    Crawley

    50

    Horsham

    100

    Mid Sussex

    16·8

    Worthing

    106

    Total for Region

    7,450

    South West

    Bath

    166

    Bristol

    2,918

    Kingswood

    129

    Northaven

    26

    Wansdyke

    40

    Woodspring

    79

    Caradon

    342

    Carrick

    8

    Kerrier

    35

    North Cornwall

    129

    Penwith

    210

    Restormel

    10

    Isles of Scilly

    —

    East Devon

    182

    Exeter

    244

    North Devon

    100

    Plymouth

    82

    South Hams

    220

    Teignbridge

    192

    Mid Devon

    50

    Torbay

    100

    Torridge

    93

    West Devon

    25

    Bournemouth

    93

    Christchurch

    6

    North Dorset

    —

    Poole

    374

    Purbeck

    55

    West Dorset

    71

    Weymouth and Portland

    593

    Wimborne

    30

    Cheltenham

    515

    Cotswold

    167

    Forest of Dean

    180

    Gloucester

    67

    Stroud

    395

    Tewkesbury

    38

    Mendip

    100

    Sedgemoor

    50

    Taunton Deane

    55

    West Somerset

    198

    Yeovil

    176

    Kennet

    45

    North Wiltshire

    72

    Salisbury

    184

    Thamesdown

    100

    West Wiltshire

    31

    Total for Region

    8,975

    West Midlands

    Bromsgrove

    25

    Hereford

    81

    Leominster

    —

    Malvern Hills

    50

    Redditch

    80

    South Herefordshire

    101

    Worcester

    100

    Wychavon

    25

    Wyre Forest

    33

    Bridgnorth

    15

    North Shropshire

    216

    Oswestry

    40

    Shrewsbury and Atcham

    100

    South Shropshire

    20

    The Wrekin

    —

    Cannock Chase

    3

    256

    £'000

    East Staffordshire

    150

    Lichfield

    55

    Newcastle-under-Lyme

    110

    Stafford

    10

    South Staffordshire

    50

    Staffordshire Moorlands

    80

    Stoke-on-Trent

    350

    Tamworth

    40

    North Warwickshire

    20

    Nuneaton and Bedworth

    51

    Rugby

    50

    Stratford-on-Avon

    125

    Warwick

    20

    Birmingham

    3,500

    Coventry

    1,002

    Dudley

    140

    Sandwell

    144

    Solihull

    14

    Walsall

    450

    Wolverhampton

    200

    Total for Region

    7,450

    North West

    Chester

    49

    Congleton

    50

    Crewe and Nantwich

    150

    Ellesmere Port and Neston

    110

    Halton

    118

    Macclesfield

    60

    Vale Royal

    42

    Warrington

    600

    Allerdale

    350

    Barrow-in-Furness

    285

    Carlisle

    110

    Copeland

    427

    Eden

    120

    South Lakeland

    69

    Blackburn

    750

    Blackpool

    584

    Burnley

    275

    Chorley

    207

    Fylde

    131

    Hyndburn

    350

    Lancaster

    50

    Pendle

    425

    Preston

    140

    Ribble Valley

    276

    Rossendale

    200

    South Ribble

    97

    West Lancashire

    92

    Wyre

    95

    Bolton

    360

    Bury

    500

    Manchester

    1,446

    Oldham

    100

    Rochdale

    532

    Salford

    600

    Stockport

    576

    Tameside

    337

    Trafford

    500

    Wigan

    643

    Knowsley

    95

    Liverpool

    500

    St. Helens

    326

    Sefton

    750

    Wirral

    725

    Total for Region

    14,202

    House Building
    Mr. Gwilym Robertsasked the Secretary of State for the Environment if he is satisfied with the numbers of local authority housing starts and completions.
    Mr. Winnickasked the Secretary of State for the Environment if he is satisfied with the present level of house building.
    The Under-Secretary of State for the Environment (Sir George Young): It is for local authorities to decide how much of their capital resources for housing should be devoted to new building. The provision for local authority gross housing capital expenditure has been increased this year by about one-third above the estimated level of expenditure last year. I hope that authorities will take full advantage of this.
    Mr. Roberts: As local authority house building programmes in both Conservative and Labour-controlled areas have been almost wiped out this year, does the Minister conclude that the devastation has been largely the result of Government policies? Does the hon. Gentleman agree that those policies are destroying all hope for millions of people on local authority housing lists?
    Sir George Young: Before the hon. Gentleman complains about underspending on housing, he should examine the performance of the local authority of whose area he represents a part. In the first nine months of last year Cannock Chase authority spent only 36·1 per cent of its HIP allocation plus housing receipts. It has also failed to obtain receipts from sales of council houses. Of 1,825 admitted applications, only 183 sales have been completed. The resources are in the local authority's hands waiting to be spent.
    Mr. Winnick: Why does the Minister deny that it has been deliberate Government policy to reduce substantially the amount of council house building? The figures that I have from the Library show that public sector house building is at its lowest since 1924. Instead of making references to local councils that have been so hard hit by Tory cuts, why do not the Minister and his team recognise the plight of thousands of people who are desperately waiting to be rehoused and who cannot buy homes of their own? Must the Prime Minister send the Secretary of State on another fact finding tour before he recognises their plight?
    Sir George Young: The hon. Gentleman is wrong. Public sector starts are well up on the 1981 performance. The latest figures show that they are 40 per cent. higher than a year ago.
    Mr. Heddle: Does my hon. Friend agree that the hon. Member for Walsall, North (Mr. Winnick) should stop crying crocodile tears and pleading on behalf of those who wish to have the right to rent? The Labour Party should agree that housing needs can be met——
    Mr. Winnick: The hon. Gentleman should declare his interest.
    Mr. Heddle: —not only by building more council houses, but by producing shorthold accommodation, improving homes for sale and encouraging local authorities to build half and half homes for those who wish to rent.
    Sir George Young: My hon. Friend is right. Many local authorities have been wise enough to seize the many initiatives introduced by the Government. I am sorry that
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    Cannock Chase has not developed schemes, such as low-cost home ownership. The resources of the private sector are also available to tackle the housing needs of this country.
    Mrs. Ann Taylor: The Minister has informed us that there will be more council house building this year than in 1981. Will he remind the House that last year's figures were the worst since records have been kept and that house building generally in Britain was at its worst level since 1924? Does the Minister accept that part of the problem for local authorities is his Department's inconsistent attitude to spending? One moment it tells local authorities to spend money, and the next moment it imposes new cuts on Cannock Chase and other authorities. That is evidenced by the letter that was sent to local authorities in June 1981 telling them to expect further cuts in their capital expenditure this year. Is not the basic problem that the Government came to office with the declared intention of cutting expenditure on housing by half and that they will not face the consequences of that policy?
    Sir George Young: The provision for local authority gross housing capital expenditure has been increased this year to about one-third above the estimated expenditure for last year. That in no way relates to what the hon. Lady said. I remind her that the Labour Government left office with the lowest number of starts since 1945.

    World Cup
    Mr. Canavanasked the Secretary of State for the Environment what matters he intends discussing at his next meeting with the football authorities about arrangements for the World Cup.
    The Under-Secretary of State for the Environment (Mr. Neil Macfarlane): The House is aware that my main concern in the World Cup arrangements has been, and still is, to advise the Spanish authorities about possible hooliganism by a minority of British supporters. My officials are in regular contact with our own football authorities, and the liaison group that I initiated last December met again on 31 March to discuss progress on all aspects of the matter.
    Mr. Canavan: Will the Minister clarify his written reply of yesterday, in which he urged a sports boycott of Argentina, especially as Scotland, England, Northern Ireland and Argentina are all in the World Cup finals? Does he agree that a boycott of the World Cup would not help the oppressed people of the Falkland Islands, but could damage international relations if we allowed a Fascist dictator, such as Galtieri, to spoil one of the greatest international sporting competitions in the world?
    Mr. Macfarlane: There is no question of a boycott. Therefore, I have nothing to add to the written answer that I gave yesterday.
    Sir Hector Monro: Does my hon. Friend accept that many of us agree with his advice? We must hope that FIFA will realise that many European and Commonwealth countries would not wish to be involved in a tournament with Argentina. Should not FIFA take the responsibility of removing Argentina from the World Cup if the present position continues?
    Mr. Macfarlane: I canot anticipate what action FIFA may take, but, as matters stand now, we have no objection

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    to British teams taking part in international competitions where Argentina may also be represented. However, our position must be kept under constant review in the light of changing circumstances. I have nothing more to say now.
    Mr. Denis Howell: Does the Minister accept that if resolution 502 of the Security Council has not been honoured by the time of the World Cup the Government must consider what principles will govern their advice? The Labour Party would support the proposal by the hon. Member for Dumfries (Sir H. Monro) that, in such circumstances, the right course would be for FIFA to exclude Argentina.
    Mr. Macfarlane: Many millions of British people would think it strange if our three teams were not to participate in the World Cup because of the action of an aggressive nation. All those matters are being kept under the closest review. I cannot comment on any events that may take place during the next few weeks. However, I am in close contact with the representatives of the football authorities, both nationally and internationally.

    New Town Development Corporations (Housing Assets)
    Mr. Hal Millerasked the Secretary of State for the Environment what is the present position regarding the transfer of housing assets from new town development corporations to local authorities, including the conclusion of agency agreements pending final transfer.
    Sir George Young: I am hopeful that further transfers will take place once the financial terms have been settled. Meanwhile, we have been encouraging the making of agency arrangements where this is favoured by the parties concerned, as at Milton Keynes and Redditch.
    Mr. Miller: Following the replacement of section 10 of the 1975 Act by section 51 of the current legislation, does my hon. Friend accept that there has been great uncertainty among local authorities about the Government's commitment to the transfer of assets to local authorities? Will he take this opportunity to restate the Government's policy that there should be no burden on the receiving local authority because of the transfer and that housing stock will be brought up to a satisfactory standard before transfer?
    Sir George Young: We hope to resolve the problems with the ADC, to which my hon. Friend has referred, when we receive the report towards the end of May. The principle is straightforward. The receiving authority—in his case Redditch district council—would have an entitlement to housing subsidy that would take into account both the extra reckonable expenditure resulting from the transfer and the increased rent resources available. The council has nothing to fear from such a transfer.
    Mr. Graham: Is the Minister really satisfied that this additional butchery is necessary and in the best interests of the new towns and the people who live in them? Is it still the intention to favour individuals and speculators, leaving the difficult to manage assets to be taken by the authority, adding to its already difficult task with section 10 or section 51 claims and an unrealistic rate support grant?
    Sir George Young: I think that the hon. Gentleman has read out the wrong supplementary question. The question that he asked is about community-related assets. 'The question that my hon. Friend asked is about housing. The principles that govern the two are different.
    Mr. Joseph Dean: Is the Minister aware that the transfer of these properties from the new towns to the local authorities may not be a transfer of assets at all, bearing in mind the rapid deterioration now appearing in industrialised and semi-industrialised built houses and flats not only in new towns, but in local authorities? Will the Minister consider what advice he can give to local authorities faced with this problem on an increasing scale? As the local authorities and new towns start to deal with this ever-increasing problem, which is not of their making, will the Government consider giving them some financial assistance?
    Sir George Young: That is a slightly broader question than the question facing development corporations. We have stressed to development corporations the need to ensure that their housing stock is in good condition be fore it is handed over to local authorities. We have made resources available to make sure that that happens. 'The hon. Gentleman has raised a slightly broader question about industrialised building, but the Government will certainly look into the matter.

    Water Authorities
    Mr. Haselhurstasked the Secretary of State for the Environment what representations he has received about local government links with the water authorities; and if he will make a statement.
    Mr. Campbell-Savoursasked the Secretary of State for the Environment what representations he has received from the North-West water authority on the consultative document relating to the structure of the water authorities.
    The Minister for Local Government and Environmental Services (Mr. Tom King): We have received over 270 responses to our consultation paper on the membership of English water authorities. A majority of these stress the need to preserve close links between water authorities and local government. These include the North-West water authority, which also favoured no change in its present membership arrangements.
    We are now considering these responses.
    Mr. Haselhurst: Will my right hon. Friend assure the House that he is keenly aware of the concern that is felt by local authorities lest in any new arrangements their links with the water authorities should be less sound than they are at present? Will he further assure the House that he will take into account their strongly held views in reaching any final decisions on this subject?
    Mr. King: I am, of course, aware of what my hon. Friend says. We put forward five options for consideration, one of which was the possibility of increased local authority representation. One of the criticisms of the present arrangements is that not all local authorities within a water authority area are represented on the authority.
    Mr. Campbell-Savours: Is the Minister aware that throughout the North-West region there is unanimity about

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    the current construction of the North-West water authority, which has 32 members, including representatives from local government? Does he accept that if he were to reduce in any way the local authority contingent on that water authority it would mean that areas such as mine in Lakeland and Cumbria would find that their rights were severely undermined by Goverment policy? Will he undertake to follow the matter very closely?
    Mr. King: I hope that the hon. Gentleman is considering the problem seriously, because it does involve difficulties. He will be aware that the Monopolies and Mergers Commission drew attention to the problems of running an authority such as Thames, which has 62 members, as the board, or Severn-Trent, which has 48 members. Its estimate was that it added £1 million to the cost of committees and the administration involved with such a substantial membership. These are considerations that we must look at, and the Government are considering all the responses.
    Mr. Bowden: Does my right hon. Friend realise that there is a widespread view that water authorities operate a system of taxation without representation? Will he seriously consider the possibility of bringing in a system of directly elected members to those authorities?
    Mr. King: That option has been advanced by others on previous occasions. One of my concerns—I drew attention in my earlier reply to the inadequacies of the present system—is that there is rather more representation than many people realise. I am concerned about how few people have the slightest idea about who the local representative is on the local water authority. I always make it my business in correspondence to draw attention to who the local person is.
    Mr. Denis Howell: Will the Minister confirm that every local authority that has been consulted on this matter wishes to retain local authority membership? That being so, will he take on board in this review the proposals that we put forward in an earlier White Paper to the effect that a national water authority should own all the water resources in the country, but that the distribution, the clean-off and the disposal should remain with the local authorities, which should be charged with putting wholesome water back into the system? Daily that appears to be a more attractive solution to the problem.
    Mr. King: It was not the biggest surprise to emerge from the consultations that local authorities are in favour of keeping local authority members on the water authorities. That came as no surprise to us. We have no intention of pursuing the course of a national water authority owning all the water assets in the country.

    Greater London (Rate Support)
    Mr. Dykesasked the Secretary of State for the Environment if he has any plans to review the level of rate support to Greater London.
    Mr. King: We have no plans to review the position of London regarding this year's settlement, but we are already in discussion with local authorities, including the GLC and the LBA, regarding the 1983–84 settlement.
    Mr. Dykes: I thank my right hon. Friend for that answer. Has he noticed that Harrow's rate increase this year is nil, while the GLC's rate increase is 91 per cent.,
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    and that the two combine to produce a 13 per cent. increase in Harrow's total rates? What conclusion does my right hon. Friend draw between financial discipline on the one hand, and gross profligacy on the other?
    Mr. King: I hope that the whole House will share my concern about the possible impact on jobs in London of the 91 per cent. increase in rates by the GLC. It is a most serious matter. We shall see the figures mount, if they continue to be portrayed on the roof of the GLC, and we shall know whose responsibility it is.
    Mr. Thomas Cox: Is the Minister aware of the crucial importance to London of rate support on issues such as housing, employment, and improving the environment? Surely he is aware that whatever help private industry may get, the real support has to come via the Government in rate support if we are to tackle the problems of inner London. The Minister can run away if he likes, but the problems will not run away.
    Mr. King: The hon. Gentleman's question shows his total ignorance of the settlement that took place this year. He mentioned the share of the rate support grant. Does he realise that the share of the rate support grant that London received this year is bigger than it received in all but one of the five years of the Labour Government? He should not criticise this Government by saying that London has not received an adequate share. Is he aware that the average rate increases in London are the lowest of any part of the country for this year? My only disappointment is that Labour authorities have not followed the pattern of Conservative authorities. In inner London, the Conservative increases in the borough rates are less than half those of all the Labour boroughs.
    Mr. Greenway: Is my right hon. Friend aware that the London borough of Ealing has reduced its rate by 5·1 per cent., but that the effect of the 91 per cent. GLC increase has been to put up substantially the rate to domestic ratepayers? Is he further aware that people living on the border of my constituency side by side with others in Brent are paying half the rates of those that are being paid in the Labour-controlled borough of Brent for identical properties? Is he aware of the effect of these high rate increases by the GLC on jobs in London?
    Mr. King: I note that the rates on an average house in Ealing of the same rateable value would be £340 and that those in Brent would be £516. The figures that my hon. Friend gives confirm that.
    Mr. Pavitt: Will the Minister consult his hon. Friend the Under-Secretary, the hon. Member for Ealing, Acton (Sir G. Young), on his recent visit to Brent, and compare the inner city and demographic problems that that borough faces with the enormous amount of work that has been done for the disabled, the 10,000 people on the waiting list, and all problems of industrialised buildings having to be repaired because of the Government's previous policy on industrialised building? Will he recognise those factors, as well as the arithmetic?
    Mr. King: I should like to recognise all the factors that are applicable to the efficiency of a borough's operation. I hope that the hon. Member will turn his attention, in the interests of all his constituents, to the way in which economies can be made, for instance, in the better provision of services, perhaps in his own borough of

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    Brent, and then consider how those services and economies can be better applied in the areas to which he attaches the greatest importance.

    Rating Reform
    Mr. Squireasked the Secretary of State for the Environment how many submissions were received on the Government's Green Paper "Alternatives to Domestic Rates".
    Mr. Heseltine: By Friday 16 April, 875 submissions had been received in my Department. We shall complete our analysis of this response as quickly as we can while ensuring that submissions receive the close and careful attention they deserve. I should like to express the Government's gratitude and thanks to all those who have contributed.
    Mr. Squire: Is my right hon. Friend yet able to indicate whether a large percentage of those submissions requested a continuance or even an enlargement of the percentage of local authority expenditure that would be met by some locally determined revenue? If they did, will my right hon. Friend undertake, at least as far as possible, to make that a main principle of any reform that the Government may undertake?
    Mr. Heseltine: I know how much concern my hon. Friend has for that approach to local government finance, but it would be wrong for me so soon after the conclusion of the consultation period to try to anticipate the analysis that is now being made.
    Mr. Oakes: Will the Secretary of State tell the House how many of those 875 submissions advocated a poll tax instead of or in addition to existing rates? Will he examine carefully the suggestion of a poll tax, which could be wide open to evasion, difficult to administer and more inequitable than the existing rating system?
    Mr. Heseltine: A significant number of representations have advocated a poll tax. If the right hon. Gentleman has such firm views, it would have been helpful if his party had responded to my invitation to join in the consultative process, which it refused to do, unlike any other party to which I addressed the invitation.

    Private Sector Homes (Sales)
    Mr. Cryerasked the Secretary of State for the Environment if he will introduce a system to facilitate voluntary arrangements for house or flat purchase by private sector tenants; and if he will make a statement.
    Mr. Stanley: As, at a rough estimate, some 150,000 to 200,000 private tenants have voluntarily negotiated the purchase of their homes over the last decade, the hon. Member's proposal does not appear necessary.
    Mr. Cryer: Why does the Minister repeatedly refuse to introduce legislation to give private tenants the same rights as council tenants? Since the Government are hounding local authorities to force them to sell houses, if that is such a good system why does it not apply to private tenants? Or is it the case that the Tories have double standards of private profit and public exploitation?
    Mr. Stanley: As the hon. Gentleman knows from previous answers, the Government do not consider that they have the right to require the disposal of houses that
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    have been purchased by private individuals with their private assets. If the hon. Gentleman is saying that he is in favour of the right to buy in the private sector, I cannot see why he wishes to fight the next election under the banner of a party that is committed to withdraw the right to buy from the public sector.
    Mr. Dudley Smith: Is my hon. Friend aware that a fair number of people who are voluntarily trying to buy their own homes from housing associations are running into some difficulty? Will he do everything possible to encourage those associations to ensure that people who genuinely wish to purchase their own homes are able to do so?
    Mr. Stanley: I note what my hon. Friend has said. The right to buy in part extends to housing associations. If tenants are having difficulty in exercising their statutory right to buy, I hope that my hon. Friend will write to me, giving the details.
    Mr. Cryer: On a point of order, Mr. Speaker. In view of the totally unsatisfactory nature of that reply, I give notice that I shall seek to raise this matter on the Adjournment at the earliest opportunity.

    London Docklands Development Corporation
    Mr. Leightonasked the Secretary of State for the Environment if he has any plans to review the progress of London Docklands Development Corporation.
    Mr. Heseltine: I keep the corporation's progress under constant review.
    Mr. Leighton: Is the Secretary of State aware that his London Docklands Development Corporation is unloved by the people of east London? One of the reasons is that it has taken all our land and there will be no more houses to rent. Is he aware that one of our major needs is jobs? In my borough of Newham there are nearly 15,000 unemployed. In view of that, will the right hon. Gentleman comment on the view of Mr. Nigel Tuersley, which was reported in The Guardian of 29 March? He said that because of the lack of support by the LDDC for the high technology and "sunrise" industries that he wanted to bring to the docklands he has had to revise his plans downwards. We need jobs. It is only if the corporation brings jobs will it receive any affection from the people of East London.
    Mr. Heseltine: I think that the hon. Gentleman will now find it necessary to start adjusting his hostility to the urban development corporation in the light of the warm reception by the people of the East End to the policies that it is pursuing. There is land available for council house purposes in the London borough of Newham. Also, about 245 people in that area have applied to buy the new houses for sale that have been made available there. About 102 of those people have been nominated by that London borough.
    Mr. Squire: Does my right hon. Friend agree that, despite the observations of the hon. Member for Newham, North-East (Mr. Leighton), it is much more likely that the housing of the people of that locality is at least as strongly in their minds as the question of their employment and that the LDDC has broken through many years of red tape and inaction through its actions, which have been applauded and supported?
    Mr. Heseltine: I rarely disagree with my hon. Friend. It was not red tape and inaction, but pure prejudiced Socialism that was broken through by the LDDC.
    Mr. Spearing: Does the Secretary of State agree that in the previous regime of the docklands joint committee, where there were non-controversial applications for development, with which all the local authorities agreed, little time was lost in going forward? Will the right hon. Gentleman assure the House that, when similar conditions apply to the LDDC, it will not have to apply to him or his Department so that it wastes time obtaining ministerial permission for development? Will he assure the House that no such procedures exist, because, if they did, they would be counter to the objectives of the corporation?
    Mr. Heseltine: I can only assume that if non-controversial matters were necessary for progress to be made, there were few of them. There were vast areas of dereliction as a result of the administration of the authorities in that area.
    Mr. Arthur Lewis: In his first reply the Secretary of State said that he was constantly reviewing this question. In his constant reviews, does he consult the local authorities concerned? If so, when did he last consult the London borough of Newham? Will he give an assurance that he will regularly consult on this matter?
    Mr. Heseline: I am sure that the hon. Gentleman will be delighted to know that the leader of the authority sits on the urban development corporation. He knows that I am available, so that he can consult me whenever he thinks that that is necessary.

    Local Authorities (Repair and Maintenance Work)
    Mr. Hooleyasked the Secretary of State for the Environment what estimate he has made of the additional administrative costs to local authorities arising from the requirement that repair and maintenance work be put out to competitive tenders from private builders.
    Mr. Stanley: Any increase in administrative costs should be marginal if the work is being fully specified and supervised already, and more than outweighed by the pricing benefits of replacing a DLO monopoly with proper competition.
    Mr. Hooley: Is the Minister aware that the Sheffield direct works department carries out at least 12,000 housing repair jobs a month, in addition to maintaining large numbers of public buildings and schools? The proposition that that work should be put out to private tender would create chaos as well as enormous administrative waste.
    Mr. Stanley: That is not the experience of a considerable number of Conservative authorities, which have been able to put out substantial amounts of that work below the £10,000 threshold without the effects to which the hon. Gentleman has referred. A Sheffield councillor, John Senior, is quoted as saying:
    "We mean to obstruct the new law every inch of the way."
    He was referring to DLOs. Comments about DLOs in Sheffield are not the model of objectivity.
    Dr. Mawhinney: Is my hon. Friend aware that, despite the minimal administrative costs, the ratepayers of Peterborough were saved almost £100,000 last week by the enactment of the law? Is he further aware that Conservative councillors in Peterborough have advocated
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    that reduction for some time? Without them, the reduction would not have been approved by the council last week. Even then, some Labour concillors wanted to vote to flout the law.
    Mr. Stanley: I am grateful to my hon. Friend for his remarks and also for the important personal contribution that he has made to the privatisation of much of that sort of work in Peterborough, which has been successful. Further, Peterborough new town puts out all its emergency repair and maintenance work to the private sector, which shows that it is possible to use the private sector on a substantial scale.

    Wildlife and Countryside Act
    Mr. Dalyellasked the Secretary of State for the Environment, pursuant to his reply to the hon. Member for West Lothian on 17 February,Official Report, c. 279, what contact he has had with the Nature Conservancy Council in relation to sites of special scientific interest, such as Halvergate, Walland and the Berwyn Mountains.
    Mr. Macfarlane: The Nature Conservancy Council maintains regular contact with Ministers and officials of my Department on important issues affecting sites of special scientific interest.
    Mr. Dalyell: What exactly did Ministers say to Sir Ralph Verney and his colleagues on the Nature Conservancy Council about Walland? [HON. MEMBERS: "Where?"] Walland, in Romney Marsh. Did they tell him that he should withdraw the NCC's objections on the grounds that Ministers could not provide the money?
    Mr. Macfarlane: I am happy to set the record straight. The NCC discussed the circumstances of the case fully with my colleague the Minister of State at MAFF and myself.
    Mr. Dobson: Maff off.
    Mr. Macfarlane: The council indicated that, in the light of its general priorities, it did not consider this to be a case in which the high cost of the arrangements necessary to prevent drainage works from being carried out could be afforded unless additional resources were made available to it. We concurred with that judgment. We did not consider that an additional allocation of funds was justified. The council accordingly informed the owner that it could not maintain objection to the proposed drainage works. I would also point out that in that area in Romney the RSPB—the Royal Society for the Protection of Birds—[Interruption.] I understood that there was difficulty in understanding initials. Some years ago the RSPB sold part of the bird sanctuary on Walland Marsh.
    Mr. Wilkinson: On a point of order, Mr. Speaker. What is MAFF?
    Mr. Speaker: Order. It is no use asking me.
    Mr. Dobson: Ask Princess Anne.

    Council House Sales
    Mr. Adleyasked the Secretary of State for the Environment what is the total amount of funds realised by, and available to, local authorities through sales of local authority houses to sitting tenants; and if he will make a statement.
    Sir George Young: Sales of council houses in the first three quarters of 1981–82 are estimated to have generated £388 million in capital receipts. Most of the sales were to sitting tenants but I have no separate figures for such sales. In addition, a total of £473 million was left outstanding on mortgages supplied by local authorities following such sales.
    Mr. Adley: Are not those impressive figures a vindication of the Government's policy on the right to buy? As some people still do not recognise the fact, can my hon. Friend confirm that local authorities can reinvest the funds in housing? Are not the few local authorities that are still flouting the law not only being undemocratic but acting contrary to the interests of good housing in their area? As the Act has been on the statute book more than a year, what further action does the Department contemplate to give people the right to buy?
    Sir George Young: My hon. Friend is right. The Government take seriously any denial of rights to individuals that have been passed by the House. As my hon. Friend knows, the Secretary of State intervened to uphold those rights in Norwich. The Minister of State is looking carefully at a number of authorities whose performance is unsatisfactory. The Government are determined that people who want to buy their council houses should not be frustrated in that ambition.
    Mr. Flannery: Is not the sale of council houses a severe loss to local councils and does it not diminish the chances of people on the waiting lists in urgent need of council houses? When will the Government realise that they are selling the houses at approximately half their cost and that the money is in no way sufficient to build the same number of houses for those who urgently need them? Does the right hon. Gentleman accept that those people are in a different position from the people who buy the houses, who have already been housed by the local council?
    Sir George Young: The resources that the local authority gets when it sells council houses are available to it to meet the housing needs in the area——
    Mr. Dobson: One-twelfth.
    Sir George Young: It is not the case that people in immediate need of housing would be helped by changing the policy. People who buy their council houses, by and large, would not have vacated them in the short term.

    Rates
    Mr. Durantasked the Secretary of State for the Environment whether he will make a statement on the average percentage rate rise for 1982–83 compared with 1981–82.
    Mr. Heseltine: Domestic rates in England have increased by about 15 to 16 per cent. compared with 1981–82.
    Mr. Durant: Will my right hon. Friend tell us what the difference is between the Labour and Conservative-controlled council rate rises this year? If, as I suspect, the Labour-controlled council rate rises are nearly double those of Conservative-controlled councils, is that not irresponsible, bearing in mind the effect on small businesses, on people on fixed incomes and on many other of our electors who feel badly about the rate rises this year?
    Mr. Heseltine: I believe that I can help my hon. Friend with some information.[Interruption.] It so happens that I have the figures that he requests. The Conservative-controlled shires have declared precept increases of only 12 per cent. on average, compared with 30 per cent. for Labour-controlled councils. The GLC rate is up by 91 per cent., which is a larger increase in one year than in the previous four years under a Conservative-controlled administration. In Inner London, local rates in Conservative-controlled areas are less than half those charged in Labour-controlled councils. In outer London they are less than two-thirds of rates in Labour-controlled councils. Over the four-year term since the last London borough elections the Conservative record is far better than Labour's. Conservative authorities on average have increased their rate by 56p and Labour authorities by 94p.
    Mr. Frank Allaun: Is the Secretary of State aware that, in addition to the rate increases, mainly due to cuts in Government support, council tenants have had three Government-decreed rent increases in three years? Will he help all tenants by freezing rents for council and private tenants for 12 months, as Labour announced this week?
    Mr. Heseltine: I understand that the hon. Member for Salford, East (Mr. Allaun) announced that this week. I wonder whether the right hon. Member for Manchester, Ardwick (Mr. Kaufman), the Opposition spokesman, made quite the same announcement?
    I assume that, in reverting to the policies that it pursued in office, the Labour Party is about to begin the process of halving local authority capital expenditure on housing.
    Mr. Wilkinson: Does my right hon. Friend agree that if one looked into the details of the figures one would find notorious scandals, particularly in Greater London, where the GLC is expending ratepayers' money on gay liberation groups and other fringe and freakish activities?
    Mr. Heseltine: My hon. Friend will understand that after some experience in this job I find it better not to look into too many details of Labour authority spending.
    Mr. Kaufman: Is not the Secretary of State responsible for half the rate increases, whether by Labour or Conservative-controlled councils, because of his devastating reduction of rate support grant this year by £850 million? When the electors go to the polls on 6 May should they not remember that the Secretary of State. more than their own council, is responsible for their rate increases?
    Mr. Heseltine: I am sure that they will draw their own conclusions from the fact that Labour, not Conservative-controlled, authorities have the largest rate increases. I note that the right hon. Gentleman did not rush to explain the statement made by his hon. Friend the Member for Salford, East (Mr. Allaun), apparently on his behalf. Was he speaking for the Labour Party?

    Homeless Persons
    Mr. Heddleasked the Secretary of State for the Environment if he is able to make any estimate of the number of persons previously homeless who are now housed in privately rented accommodation.
    Sir George Young: Statistics provided by local authorities in England in 1980 indicate that the first accommodation secured for homeless households, for

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    whom they accepted responsibility, was in the private sector in some 800 cases. But this does not cover households originally found accommodation in hostels or bed and breakfast hotels, who may move on into private rented housing; nor those homeless for whom the local authorities do not accept responsibility, almost all of whom will have to find accommodation in the private sector.
    Mr. Heddle: Could not homelessness be considerably reduced if more landlords and tenants could effect tenancies on a shorthold basis? Is it not the height of irresponsibility for the Labour Party to pursue a blind and dogmatic opposition to the principle of shorthold?
    Sir George Young: My hon. Friend is right. The homeless have not been helped by the Labour Party's opposition to our shorthold initiatives.
    Mr. Alton: Is the Minister aware that many of the major agencies dealing with homelessness, such as the Salvation Army and the Church Army, are dangerously short of funds to renew their hostels? Does he accept that many night shelters, such as the Crypt shelter in Liverpool, are turning people away at night because of insufficient beds? What does he intend to do about it?
    Sir George Young: The Government have allocated 1·2 million in 1981–82 for the Housing Corporation, specifically to help housing associations to provide hostels for such groups as the single homeless. We have been able to increase that sum in the current year.
    Mr. Pavitt: Will the Minister try to persuade his colleagues to alter the Government's policy on capital expenditure for the homeless? Is he aware that in my borough there are many who are homeless, and that it would be cheaper to accommodate them if he would accept the proposition put forward by the London borough of Brent that it should purchase the necessary accommodation as a matter of capital expenditure instead of providing bed and breakfast accommodation?
    Sir George Young: I am not sure whether that is the most economic way of meeting housing needs but I shall consider the hon. Gentleman's proposition.

    Wildlife and Countryside Act
    Mr. Andrew F. Bennettasked the Secretary of State for the Environment when he now expects the sections of the Wildlife and Countryside Act relating to footpaths to come into effect.
    Mr. Macfarlane: My right hon. Friend expects to bring into force the sections concerning definitive maps of public rights of way and public path orders by the autumn of this year.
    Mr. Bennett: Will the Minister give a guarantee that in the transition from the old to the new regulations no public rights of way will be lost?
    Mr. Macfarlane: I cannot give any guarantees or promises. It is well known that we are trying to bring these sections into force by the end of the year. I am sorry that it is taking a little longer than we anticipated.

Falkland Islands
3.30 pm
The Secretary of State for Foreign and Commonwealth Affairs (Mr. Francis Pym): With your permission, Mr. Speaker, I will make a statement on the Falkland Islands.
My right hon. Friend the Prime Minister told the House yesterday that I would be travelling to Washington tomorrow to discuss with Mr. Haig our reactions to the latest Argentine proposals. I believe I do so with the support of the whole House.
Any negotiation which is concluded satisfactorily must deal with certain critical points: in particular the arrangements for the Argentine withdrawal; the nature of any interim administration of the islands, and the framework for the negotiations on the long-term solution to the dispute for which the United Nations resolution calls. We put to Mr. Haig, when he was in London, ideas which we believed would commend themselves to the House and accord with the wishes of the islanders. He subsequently took them to Buenos Aires. The latest Argentine proposals—despite Mr. Haig's efforts—still fail to satisfy our essential requirements in certain important respects relating to these points. They reflect continuing efforts by Argentina to establish by her aggression and her defiance of the United Nations—a defiance continued and aggravated by her reinforcement of her invasion force—what could not be established by peaceful means.
These are some of the main issues that I shall be discussing with Mr. Haig, and I shall of course have some ideas of our own to put forward.
We continue to keep in close touch with our friends. In particular, I was glad that a meeting of Community Foreign Ministers could be arranged yesterday under the auspices of the Belgian Presidency and that Ministers were able to attend despite the inevitably short notice. I took the opportunity to thank them personally for their support and to explain the situation to them. They reaffirmed their support for us, emphasising the importance of securing the implementation of Security Council resolution 502, their hope for a peaceful solution and their gratitude to Mr. Haig.
Since I last reported to the House, messages from the Falklands suggest that the islanders are still able to leave if they wish: a further party of 30 are on their way to Montevideo. Most of those leaving appear not to be permanent residents of the islands.
The most recent contact with the 15 remaining scientists and wildlife photographers on South Georgia through the British Antarctic Survey was at 4 pm yesterday our time. I am happy to report that all were safe and well and in good heart
I shall continue to keep the House informed.
Mr. Denis Healey: I thank the Foreign Secretary for making his statement. I think that he recognises that the House wishes to be kept continually informed of developments as they occur. We welcome the right hon. Gentleman's visit to Washington and hope for its success.
I hope that I may be permitted to express our gratitude to Secretary Haig—I am sure that it is the view of the whole House—for the indefatigable efforts that he has made in the negotiations. I cannot recall any representative
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of any Government who has shown greater stamina—intellectual, physical and moral—than he has shown. If we are to believe reports from Buenos Aires, he has put the views of the British people with great force and vigour in the discussions, as no doubt he has put the views of the Argentine Government to us.
We welcome the right hon. Gentleman's statement—the point was made by the Prime Minister yesterday—that islanders who wish to leave the islands at this time are free to come here. The right hon. Gentleman will recall that the Government robbed the islanders of cull British nationality in their recent Bill, in spite of the tied vote in the House of Lords.
Mr. Tam Dalyell: Hear, hear.
Mr. Healey: Will the right hon. Gentleman give the House an assurance that any resident of the islands who wishes to come to Britain to settle here will be free to do so whatever decisions the Government may have taken earlier in their drafting of the British Nationality Bill?
I welcome the clear desire of the Foreign Secretary to achieve a peaceful settlement of this dispute. I shall not quote what he has been reported as saying to some of his friends yesterday about the Duke of York, but he can be assured that we, too, wish to see the British forces able to leave the area without using force in order to secure our needs. The right hon. Gentleman must recognise that the quite exceptional support that the British Government have had from the British people, all parties in the House, the European Community, the Commonwealth and the United Nations depends critically on the Government demonstrating continuously that they are determined to seek a diplomatic solution of this crisis by peaceful means, and that they will spare no effort to secure such a result if that proves possible.
It seems that the central problem on which the right hon. Gentleman has fixed his attention is the interim arrangements after the Argentine forces leave the islands. I was surprised that he did not mention among the three critical elements the wishes of the islanders themselves, although he referred to them in a later part of his statement. I hope that he will reassure the House that it is still his intention to ensure that any settlement is one which is acceptable not only to the House but to the inhabitants of the Falkland Islands.
As for the interim arrangements, I hope that the right hon. Gentleman will continue to consider, as he promised last week, the possibility of asking the United Nations to provide an administrator for the islands. It seems that that at least would be agreed by all Members on both sides of the House as being preferable to a situation which involved the Argentines in exercising administrative powers on the islands after the withdrawal of their forces.
I say on behalf of the Opposition that the strength of the Government's case in the world has depended in large part on the extraordinary and impressive support that we received in the Security Council in the beginning. II is immensely important that we put the United Nations charter at the centre of our policy. I hope that the right hon. Gentleman will not be dissuaded by any voices on the Labour Benches from recourse to the United Nations whenever it appears possible that it might make a useful contribution either to a solution within the context of Mr. Haig's efforts or to a more permanent solution by other means.
Mr. Pym: I am grateful to the right hon. Member for Leeds, East (Mr. Healey) for what he said at the start of his remarks. I endorse all that he said about the efforts that are being made by Mr. Haig. Everyone is extremely appreciative of that. I shall convey the right hon. Gentleman's remarks to Mr. Haig tomorrow.
My right hon. Friend the Home Secretary has been quite clear about the islanders who may wish to settle here. A number of the islanders already have that automatic right. My right hon. Friend made a statement in which he indicated that there would be no difficulties put in the way of anyone on the islands who wished to settle here. I think that I am right in saying that he gave that undertaking quite explicitly. I hope that that will reassure the right hon. Gentleman.
My journey tomorrow and all the efforts that I am making are designed to secure a peaceful settlement. There is no doubt that that is what everybody would like to achieve. I shall spare no effort in seeking to do that. We must hope that success will attend those endeavours, but one cannot be sure. I have made it clear to the British people and to the House just how difficult it is and how many awkward problems remain to be solved. I do not want anybody to be under the misguided impression that negotiations will in any way be easy. I do not wish to mislead anybody. There is the contemplation of the possibility that in the end the negotiations to secure a peaceful settlement may not be successful. We hope desperately that they will be.
There are a number of central problems. The interim arrangements are important. As I think I said on Monday, I would not exclude any possibility at this stage, because that would be a silly stance to take. However, there are other issues that are equally important, including the withdrawal of the Argentine forces, the question of sovereignty and the wishes of the islanders, on which we have made our position clear on several occasions—the right hon. Gentleman made rather a point about that.
The issue here is one of international order. We are dealing with the basic charter of the United Nations, of which self-determination forms a part. It is a wide issue which has associations and connotations for many countries and peoples, not just, as in this case, the wishes of the islanders. Therefore, that is an important issue. The Government have made their position clear on all those central issues.
Mr. David Steel: The United Nations may well have a role in the long-term administration of the Falkland Islands. However, the Foreign Secretary is right in the immediate crisis to continue to use the good offices of the United States Administration in an attempt to achieve the Argentine withdrawal from the islands. For that reason, he carries the good wishes of all parties in the House in his mission.
Mr. Pym: I am grateful for what the right hon. Getleman has said. The withdrawal of Argentine forces from the islands is, of course, a prerequisite for any further progress.
Several Hon. Members rose––
Mr. Speaker: Order. I propose to allow questions today to run until 4 o'clock as I did on Monday.
Mr. Julian Amery: Does my right hon. Friend agree that it may not be possible to
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reconcile the claims of the Argentine with our responsibilities? Therefore, that may lead inevitably to the use of force. But might not this be the moment to try to raise the level of debate while there is still time? Might it not be the time for my right hon. Friend to propose, while maintaining our sovereignty over the Falkland Islands, the creation of a South Atlantic community to which the riparian States might adhere and which might be extended to the southern hemisphere, along with Australia and New Zealand and the signatories of the Antarctic treaty, for the development of the Antarctic continent? Might not such an imaginative idea gain the support of the European Community and the United States and give the Argentine Government, or at least their successor, an opportunity to withdraw from the impossible position in which they have put themselves?
Mr. Pym: I shall certainly consider my right hon. Friend's suggestion. The concept is essentially a long-term one. I doubt that thinking in that direction will contribute a great deal to the immediate problem which we are discussing. However, I am grateful to my right hon. Friend for the thought that he has put to the House, but it is for the longer term.
Mr. J. Enoch Powell: Is it still the intention of Her Majesty's Government to restore British administration of the islands?
Mr. Pym: That is still Her Majesty's Government's intention.
Mr. Charles Morrison: The House will be grateful to my right hon. Friend for the information about the islanders' ability still to leave the islands if they so wish. Bearing in mind the concern that is felt by many relations and friends of the islanders, more particularly those in South Georgia, can he give an assurance that all reasonable steps will be taken to remove civilian personnel from South Georgia?
Mr. Pym: We are doing all that we can. In the first instance, we have tried to obtain an International Red Cross presence on the islands. So far, that has not been agreed to. The Argentine Government have said that they do not believe that to be necessary. Such evidence as we have on that issue would suggest that they are possibly right. We are doing all that we can, within the narrow limits available to us, to care for the welfare of the islanders in the way that my hon. Friend would wish.
Dame Judith Hart: Given the complexity of the negotiations that the Foreign Secretary is about to undertake, and the need to involve the United Nations if that is possible, as the task force moves steadily nearer the Falklands, are the Foreign Secretary and the Government giving priority to peace?
Mr. Pym: I do not see how anybody could say that we have done anything other than give a priority to peace. All our efforts are designed to achieve that. I have made it clear how difficult that might be.
As to the right hon. Lady's point about the United Nations, our first action was to go to the United Nations after the invasion. Resolution 502 was secured and that is still in breach. The first thing that the United Nations should do is to take whatever steps it deems appropriate to see that it is carried out.
Dr. David Owen: Is the Foreign Secretary aware that he will carry the support of

275
all hon. Members in giving a priority to peace? He has a well established precedent. It was Sir Winston Churchill—no appeaser—who said:
"Jaw-jaw is better than war-war."
Does he recognise that when he is in Washington a time will come when, if no response to British ideas is forthcoming from the Argentine, it will be right to tell the United States that it must apply economic sanctions to the Argentine?
Mr. Pym: I am grateful for the right hon. Gentleman's opening remark. Of course, we want to achieve a peaceful solution. He referred to Sir Winston Churchill's words, with which all hon. Members would agree. However, Sir Winston was also a great warrior, and on occasions it does happen—and it has happened—that in order to preserve principles of freedom and democracy, if it is not possible to achieve the result by peaceful means, other methods must be used. The House must face that. I assure the right hon. Gentleman that so long as there is any way in which I can, with Mr. Haig's, or anybody else's help, secure a peaceful solution, that is what my endeavour will be.
Mr. Nicholas Winterton: I wish my right hon. Friend success in Washington and I hope, as much as any hon. Member does, that there will be a peaceful outcome. Will my right hon. Friend explain how there can be any interim arrangement with the Argentine junta? Surely, when the Argentines evacuate the Falklands, we shall immediately restore British Administration. Will my right hon. Friend give an assurance to the House that our interests in the South Atlantic will be safeguarded and that the interests of the islanders will always be paramount?
Mr. Pym: We, and my right hon. Friend the Prime Minister, have made our position clear on that latter point. Of course, we want to preserve British interests in the South Atlantic. However, the House understands that at this stage I do not want to involve myself with the House in any details of any negotiations, particularly because there are new ideas and proposals coming forward. In a sense, that is an encouraging sign because, while there are new proposals which may be considered or rejected by one side or the other, there is undoubtedly life in the negotiations. However, I do not want to go into details at this stage.
Mr. Ioan Evans: As well as meeting Alexander Haig, will the right hon. Gentleman call on the United Nations in case the Haig initiative fails so that we can be thinking ahead as to what course the United Nations can take in the future?
The right hon. Gentleman says that he has ideas of his own to put forward. When will the House know what they are?
As the naval ratings will now stay in the South Atlantic for a longer period than anticipated, may we have a statement from the Secretary of State for Defence that their redundancy notices will be withdrawn?
Mr Pym: On the latter point, no doubt the hon. Gentleman will put a question to my right hon. Friend, who I am sure will make the position clear.
It is not my intention on this visit to include a visit to the United Nations. It is not inconceivable that that might happen at some stage. I am going to Washington to see Mr. Haig. That is where the negotiations will take place and that is the right place for me to be in the next day or two.
Sir Frederick Burden: Does my right hon. Friend agree that the basis of this whole matter is that British land, occupied by British people who speak only our language, has been annexed by force by a ruthless dictator by naked aggression? As we have seen in the past, if we bow to that, the civilised world as we know it will start to collapse. Therefore, the area of compromise must be very small. We shall abide by any compromise, but we cannot be sure that a dictator will not use a compromise to promote his wishes and to take over the Falkland Islands to the exclusion of those people.
Mr. Pym: I repeat that we are dealing with the fundamental question of international order and how countries order their affairs. It is not only in the Falkland Islands that there has been an invasion. The House must not forget that Afghanistan was overrun about two years ago. That country is denied the possibility of self-determination. There are other areas in which that fundamental principle is being breached. We should appreciate that it is not only in the South Atlantic that people are being denied that right. That is why it should be perfectly clear to members of the United Nations and, at any rate, to all freedom-loving and democratic countries that they have an interest in our problem, just as we have an interest in other areas, such as Afghanistan, that have been overrun. Therefore, my hon. Friend is entirely right to point out the basic principle at stake.
Mr. George Foulkes: As time is now running out for a peaceful solution, and as we have now agreed to exchange ideas with Argentina, would it not be quicker and more effective for the Foreign Secretary to meet the Foreign Secretary of Argentina directly, if necessary under the auspices of the United Nations?
Mr. Pym: That would not be helpful at present. As I have said, I believe in the last debate, a solution of the problem by the negotiations undertaken by Mr. Haig is the best outcome that can be achieved. A direct visit by me now would not be helpful. It is better to use Mr. Haig's good offices. The fact that he has had to spend so long in Buenos Aires and quite a long time in London indicates the nature of the difficulty and the extent of the differences. We must go on using that machinery. It is the most helpful way of obtaining a peaceful settlement.
Mr. Patrick Cormack: Does my right hon. Friend accept that, although we are prepared to be patient in our search for peace, any settlement that involves an armed or active Argentine presence on the Falkland Islands would not be acceptable in Britain? Does he also accept that it would be proper to resolve the ultimate question of sovereignty by referring it to the International Court?
Mr. Pym: The withdrawal of all the Argentine forces is the starting point from which everything else must flow. As I have said, I have an open mind about the way in which the long-term solution can, in due course, be achieved. I certainly do not rule out the International Court. Until now Argentina has been unwilling to let its case be heard at the International Court.
As we are in no doubt, and as no British Government have been in any doubt for about 150 years, about the status of the islands, it is up to those who think that they have a claim—contrary to the views of the British Government—to challenge the British Government's

277
claim. However, no one has yet done so. There was a period—I think under a Labour Government—when they put the case on the table at the International Court in the hope that that would bring the issue to a head, but the Argentines refused to play any part. Since then people have drawn the appropriate conclusions.
Mr. Frank Hooley: Will the Foreign Secretary, while he is in the United States, think again about having some conversations with the Secretary-General of the United Nations? If we are relying, quite properly, on the Security Council's decision and on resolution 502, it is surely sensible to bring the Secretary-General into the conversations, at least informally.
Mr. Pym: From the United Nations' point of view, it is important to see that resolution 502 is carried out. I intend to spend the time in Washington, and I do not think that there will be time to fit in a visit to New York. However, I do not exclude any possibility, and I should make it clear that I am not in any way reluctant to talk to the Secretary-General. I am using my time in the way that is likely to be most effective and for the purpose that the House and I have in mind.
Mr. Michael Mates: With reference to the last part of the question put by the right hon. Member for Plymouth, Devonport (Dr. Owen), will my right hon. Friend confirm that the last link in the chain of economic pressure on the Argentines rests with the United States of America? Although it is perfectly understandable that the United States of America has been reluctant to exert pressure while there was any hope of its continuing to act as a negotiator between the two sides, will my right hon. Friend make it clear to Mr. Haig when he visits the United States that at the very moment that the Americans feel that they can do nothing further we shall look to them to take that action quickly and effectively?
Mr. Pym: I am grateful to my hon. Friend for his remarks. I am acutely aware of that point. However, I made the position clear when I answered questions last Monday, and I have nothing further to add now.
Mr. David Stoddart: Will the right hon. Gentleman make further representations to Mr. Haig and to the American Administration and perhaps get them to give a greater commitment to our side of the case? Will he warn the United States of America that any Fascist success in the Falkland Islands will give comfort and encouragement to Fascists throughout the world? For example, in Spain the Falangist movement organised a brazen demonstration only yesterday, which represents at least as great a threat to the democratic Government of Spain as it does to Gibraltar.
Mr. Pym: I have no doubt that the Administration of the United States of America are as keenly aware of the principles of democracy and representation as we are. It is not necessary, therefore, for me to carry that precise message. However, I am sure that the United States of America is keenly aware of the hon. Gentleman's point.
Mr. Alan Clark: With regard to the longer-term considerations that my right hon. Friend said might affect negotiations at some stage, will he confirm that there is no question of ceding our rights either to South Georgia or to the mineral and other resources of
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the Antarctic, and that these are not dependent on the outcome of the negotiations on the Falkland Islands and will not be allowed to go by default?
Mr. Pym: We have never used any language or thought in terms of ceding what is without any question a British possession and a part of this country. We have always made that clear. Argentina is trying to take by force something that it has failed to achieve by peaceful means. We were negotiating with the Argentines in good faith, but they suddenly decided to break off negotiations and to invade. That position cannot be allowed to stand. However, if anyone wishes to challenge our claim to sovereignty, there are ways in which that can be done. The House and the world would like to see that happen, but it has not happened. Therefore, to enable that to happen, the first thing to do is to get the Argentine forces to withdraw.
Mr. Andrew Faulds: Since sovereignty is bound to be transferred at some stage, and since it has been a matter of discussion for some years, would it not avoid an unnecessary confrontation if the interim Administration—once the Argentine forces had withdrawn—were to consist of the three flags—British, United Nations and Argentine?
Mr. Pym: I am afraid that I do not share the hon. Gentleman's view about the ultimate arrangement. He says that that will happen, but I do not say that. I shall not prejudge the final outcome, and I should not do so; it is none of my business. It must be negotiated and all the factors that we have discussed must be taken into account.
Mr. Churchill: When my right hon. Friend visits Washington, will he make it clear, not only to the American Government but to the American people, that the nub of the crisis rests in the apparent determination of the Argentine military junta to ride roughshod over the wishes and liberties of the Falkland Islanders and to impose a neo-colonialist rule over those islands, which is unacceptable under the United Nations charter and to this House?
Mr. Pym: Yes, I will, but that is understood already. It is not only for the United States to understand that; it is for every other country to understand it. They have an interest in it, too.
Mr. Dick Douglas: Will the Foreign Secretary concede that, while the people of Britain are behind all the actions that he has taken so far, they will not wish anyone to be killed on either side unless and until all other means have been exhausted, including pressure by the United States, and by economic sanctions on the Argentine Government and State? Will the right hon. Gentleman take the opportunity when he is in Washington not only to press that on Secretary of State Haig but to arrange for a meeting with the President of the United States to put that point to him?
Mr. Pym: I am doing everything that I humanly can to try to achieve a peaceful settlement, but we have to be realistic because in an endeavour to uphold the freedom of peoples, to defend the liberty of peoples, it has at times, sadly, in history been necessary to resort to military means. Nobody wants that to happen, but we cannot exclude that possibility. But I will exclude it so long as negotiations are in play. We want to do everything we can to achieve a peaceful result. That is as far as I can go.
Mr. Healey: I wish to put again to the right hon. Gentleman a point with which I hope he has some sympathy. Most hon. Members on both sides of the House will recognise that the first and best hope for the diplomatic solution to which the Government have pledged themselves is the success of the efforts of Secretary Haig. None of us would wish to do anything to prejudice the possibilities of that success. However, I hope that he will consider very seriously, as he has already expressed his view that any interim arrangements should not prejudice the outcome of negotiations for a permanent settlement in the islands, that the best possible interim arrangement would be one in which the United Nations accepted responsibility for administration. Will he discuss that possibility with Secretary Haig?
Mr. Pym: I want arrangements to be made in which the search for and the finding of the ultimate solution shall not be prejudiced in any way. That is what we want to try to achieve. A factor in achieving a peaceful settlement is the military pressure that we are applying as well as the diplomatic and economic measures that have been taken. The House must realise that. In the debates it has become
280
quite clear that the diplomatic, economic and military backing that we are giving to our efforts has an important part to play in the search for the settlement.
Later——
Mr. Speaker: I understand that the Foreign Secretary wishes to make a brief statement.
Mr. Pym: After the exchanges in the House just now, it was pointed out to me that I might in a supplementary answer have given a misleading reply.
The whole thrust of my answers throughout the exchanges was to demonstrate that I was using every endeavour—which indeed I am—to achieve a peaceful settlement but that, however regrettably, the use of force could not be ruled out.
I understand that in my penultimate answer there may have been some misunderstanding about that and that I may have used words, which have not yet emerged from the Hansard typewriters, giving a different impression. If so, I wish to correct it, because I think that I made it clear throughout the exchanges that, however hard I was trying to achieve a peaceful settlement, the use of force could not at any stage be ruled out. If there was any misunderstanding, I want to clear it up.
Mr. Speaker: I have received notice of two applications under Standing Order No. 9. I shall call them in the order in which they were received.

Organisation of American States
4.2 pm
Mr. Tam Dalyell: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration,
"the decision of the Organisation of American States at their meeting yesterday to invoke the inter-American treaty of mutual assistance against the wishes of the Government of the United States of America."
This shows that Latin American diplomatic support for Argentina, whether we like it or not, is hardening. It is definite that the Argentine Foreign Ministry had not expected such unanimous support. In fact, it got it by 18 votes to nil. The United States tried to prevent this and abstained. Colombia was the only Spanish-speaking country to abstain. That was on the ground that the matter was sub judice under the United Nations and not because of Colombian support for the British case.
The matter is urgent because Brazil is agreeing to supply the Argentine navy with material support. It is urgent because democratic Peru is leading the campaign for counter sanctions against Europe. It is urgent because, despite formal Peruvian denials—Peru does not want to see reciprocal sanctions applied against it from the EEC—a squadron or more of Peruvian MiG 15 fighters has been sent to Argentina. This is a matter for the Foreign Secretary, and I should like his attention for a moment.
Mr. Speaker: Order. The hon. Member is addressing me at the moment. He must not make the speech that he would make if I were to grant his application. All that he needs to do is to explain the urgency, the necessity and the directness of the issue.
Mr. Dalyell: The urgency relates to the matter of the task force having air cover, and whether it is true, as has been reported, that these formidable fighting machines, the MiG 15s, have already been sent from a member of the Organisation of American States—the democratic republic of Peru—to the Argentine. That has urgent military and naval consequences for the air cover protection of the task force.
The matter is urgent because democratic Venezuela has announced that it is delaying the purchase of spare parts from Britain and is using other economic sanctions against Britain. It is important because no country of the Organisation of American States is supporting Britain other than, very sotto voce, the English-speaking Caribbean countries. Even Chile is keeping silent, and is now tilting towards the Argentine.
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Yesterday the Organisation of American States talked of exercising its right of legitimate defence and of threatening the security of the continent. It talked of the sovereignty and territorial integrity of the Argentine. In the debate on Saturday 3 April, as reported in column 638 of Hansard, we asked the right hon. Lady the Prime Minister who were our friends in South America. We were told in that emergency debate that we had many friends. Alas, that is not true.
I put it to you, Mr. Speaker, as a genuine matter of urgency and not as any type of kite-flying that the House ought, at the very least, to hear a statement from the Secretary of State for Defence on the military and naval consequences of what the Organisation of American States is up to, or at best some opportunity to debate the matter before the weekend, because after the weekend, in view of the OAS's attitude, it could be, alas, too late.
Mr. Speaker: The hon. Gentleman gave me notice before 12 o'clock today that he would seek leave to move the Adjournment of the House for the purpose of discussing
"the decision of the Organisation of American States at their meeting yesterday to invoke the inter-American treaty of mutual assistance against the wishes of the Government of the United States of America."
I have listened carefully to the exchanges in the House this afternoon. I want to make it clear that I have no intention of acceding to the request of the hon. Gentleman for an emergency debate at the present time after what I have heard this afternoon about negotiations. Therefore, I do not submit the hon. Gentleman's application to the House.
In view of what I have said, does the hon. Member for Liverpool, West Derby (Mr. Ogden) wish to press his application?
Mr. Eric Ogden: No, Mr. Speaker. I want only to——
Mr. Speaker: Order. Does the hon. Gentleman wish to make his application?
Mr. Ogden: No, Sir.
Mr. Speaker: Mr. Andrew Bennett.
Mr. Ogden: On a point of Order, Mr. Speaker. I withdraw my application, of course, but I ought perhaps to explain that I had written at the top of my application "Subject to the statement". I tried to put to the Foreign Secretary the simple question that it is not a matter of freedom of movement from the islands since most of the people coming out are being deported.
Mr. Speaker: I ought to explain that if any hon. Member gives me notice of a Standing Order No. 9 application I take that as notice and then I am not likely to call him to ask a question. Hon. Members choose to make applications.

Walkers (Access to Countryside)
4.9 pm
Mr. Andrew F. Bennett: I beg to move,
That leave be given to bring in a Bill to provide for improved access for walkers and other persons to the countryside.
Perhaps, in short, one could call the Bill a walkers' charter. I introduce it on behalf of the Ramblers Association, the Youth Hostels Association and many other groups and individuals who enjoy walking in the countryside.
The reason I believe the Bill to be necessary is that there was a great deal of dispute and frustration as a result of the passing into law last year of the Wildlife and Countryside Act. Walkers and others who use the countryside for recreation got a particularly raw deal from that measure. They were extremely disappointed at the attitude of the Government to such problems as the presence of bulls on footpaths, the ploughing-up and obstruction of footpaths and the difficulties of getting obstructions such as barbed wire removed from footpaths. That is one side of the difficulty.
The other side is that walkers face increasing problems in gaining access to the countryside. It is worth remembering that one in five people enjoy walking two or three miles at least as a recreation, and they go out for such walks fairly regularly. In other words, 20 per cent. of the population enjoy walking, and the numbers are growing steadily.
In some ways, it is almost a self-defeating occupation. Anyone going out into the countryside for peace and quiet on many occasions on the more popular routes finds so many other people that it is almost like walking down a high street. I have in mind such areas as the Snowdon Horseshoe where on any bank holiday weekend there are more people walking and climbing over the area than the numbers attending many league football matches. Taking account, in addition, of the numbers who go up Snowdon by the mountain railway, it is an extremely crowded area.
This is a problem that applies not just to Snowdonia but to many other areas. The peace and quiet that people go out to enjoy is destroyed by the very numbers of people who go there. For that reason it is important to extend the areas of access so that more people can be spread over more areas of land and not find themselves standing almost one on top of the other.
We also have to consider that over the past 30 or 40 years many areas of the countryside have been built over, so many of the walks that people enjoyed in previous years have disappeared under housing estates and industrial development.
We also have the growth in the use of the motor car. I can remember as a child being taken out into the lanes of Cheshire around Manchester for many attractive walks, most of which were along lanes linked by footpaths. Going out on to those same routes today one finds that they are very unattractive because of the numbers of motor cars. Certainly in lowland Britain many of the traditional areas where people walk along lanes have been developed to the extent that recreational opportunities of the sort that I have described no longer exist.
There are other problems. Not only are walkers using the countryside increasingly but many other groups go out into the countryside for recreation. Therefore there is a
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problem of competition from all those groups. I add the fact that the 1949 and 1968 legislation has turned out to be extremely disappointing. It has not given the access to many areas of open moorland that was hoped for. It is suggested that only 2 per cent. of open countryside is open to the public for access. Every so often we get the well publicised instances where access is proving a problem. Possibly the most recent is that of the Arans in Mid-Wales. There have also been reports of the difficulty of climbing on the Roaches in North Staffordshire. There have also been difficulties in the Brecon Beacons and the Fan Frynych area. These are just the tip of the iceberg of areas to which people have difficulty in getting access.
The main aim of the Bill is to improve access for walkers, and I seek to establish seven points. The first is to establish a public right of access on foot to all open country as defined in the National Parks and Access to the Countryside Act 1949. The second is to implement the recommendation that there should be a right of public access on foot to all common land. The third is to close the loopholes in the Commons Registration Act 1965 that have been opened up by the Box common and Clwyd cases and are resulting in the loss of much registered common land. The fourth is to give members of the public the right to apply for access orders to areas of woodland and areas adjacent to stretches of water and for path creation orders. The fifth is to extend section 56 of the Highways Act 1980 so that members of the public can bring to court highway authorities that refuse to deal with obstructed rights of way. The sixth is to reduce the problems of ploughed- up paths by requiring paths to be restored immediately alter ploughing, giving members of the public the right to prosecute offenders, and extending section 56 to highway authorities that refuse to deal with ploughed-up fields. The seventh is to require that bulls should not be kept in fields through which there are public footpaths.
These are very minimal proposals. It is quite clear that there is an increasing belief amongst walkers that they have not got a fair deal in legislation. They are beginning to become frustrated and possibly rather more militant. It is worth remembering, with the fiftieth anniversary of the Kinder mass trespass being celebrated at Hayfield this weekend, that we could return to the era between the wars and just after when there were regular confrontations between walkers, gamekeepers and others. That would be very sad. I believe that we should meet the legitimate requirements of walkers by legislation now rather than see increasing confrontation in the countryside.
We have to make this country one nation of country dwellers and townspeople and not see the two groups in conflict. We have a very beautiful countryside. It is a national asset. It is one that we should be concerned to preserve and protect. We should be doing all that we can to ensure that everyone can enjoy it and that it is not enjoyed merely by a privileged few who can say "Keep out" to the rest of the nation.
Question put and agreed to.
Bill ordered to be brought in by Mr. Andrew F. Bennett, Mr. Clive Soley, Mr. Alfred Dubs, Mr. Phillip Whitehead, Dr. David Clark, Miss Joan Maynard, Mrs. Ann Taylor, Mr. J. W. Rooker, Mr. Jim Callaghan and Mr. Kevin McNamara.

Walkers (Access to Countryside)
  WALKERS (ACCESS TO COUNTRYSIDE)
  Mr. Andrew F. Bennettaccordingly presented a Bill to provide for improved access for walkers and other persons to the countryside: And the same was read the First time; and ordered to be read a Second time upon Friday 30 April and to be printed. [Bill 111.]

Public Expenditure
4.18 pm
The Chief Secretary to the Treasury (Mr. Leon Brittan): I beg to move,
That this House takes note of the White Paper on the Government's Expenditure Plans 1982–83 to 1984–85, Cmnd. 8494.
The White Paper is the third full public expenditure White Paper of this Government and the first resulting from a public expenditure survey that I have seen through from the outset. We have taken the opportunity to change the format of the document, and I hope that hon. Members have found the new format, and particularly the tables, an improvement. It is also, of course, the first White Paper to be expressed in cash—a point to which I shall, of course, return later. This debate will also be informed by the report of the Treasury and Civil Service Committee, for which we are grateful.
The Government's broad strategy with regard to public expenditure is to reduce it gradually as a proportion of gross domestic product. To achieve this, when real GDP is growing, we must at least hold public expenditure steady, and preferably reduce it. But when GDP is falling, as it has been over the last couple of years, progress towards this objective would mean not only reducing public expenditure but actually doing so at a faster rate than the fall in GDP. This would be a formidable task, and in my view we have been right to accept that some, at least, of the pressures for expenditure that arise in time of recession should be accommodated.
Apart from the inevitable increases in spending on unemployment and social security benefits, there are measures to alleviate or mitigate the effects of the recession that a Government should take, even if they do not believe that the recession can itself be brought to an end by a massive dose of reflation. The very large increases in special employment measures that we have introduced are a clear example of this approach in action.
It is also important to recognise that there are limitations on the Government's control over expenditure. This is particularly true of local authority current expenditure, where there has been an overspend in 1981–82, compared to plan, of over 1½ billion. We can exert strong pressure on local authorities, but under our present arrangements we cannot, in the last analysis, stop them spending more than they should if they are prepared to inflict excessive rate increases on their unfortunate ratepayers. In planning for 1982–83, we were therefore faced with a choice between sticking to unrealistic plans or increasing the plans to realistic levels. I am sure that we were right to choose the latter.
Therefore, it is not at all surprising that a Government with a strategy of reducing public expenditure have found in present circumstances that they have had to defer the reductions when they get to the year for actually implementing them. In the case of 1981–82 and 1982–83, as I have explained, I believe that there were good reasons for this. However, it is important to point out that in 1982–83, even with the increases to planned expenditure that we have announced, the GDP ratio will be the same as in 1981–82. As the economy recovers, I believe that our plans for reducing public expenditure, expressed as a percentage of GDP, from 44½ per cent. in 1982–83 to 41 per cent. in 1984–85 are reasonable and realistic. To

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achieve this requires proper control as well as the appropriate policy decisions. In this respect it is significant that, in terms of outturn compared with plans, 1981–82 shows a distinct improvement compared with 1980–81. The 1981–82 outturn cannot as yet be finalised, but it is now thought likely to be very close to, if not below, the planned cash figure of £104·8 billion, compared with an excess of £1·7 billion in 1980–81.
As I shall explain, there have been some overspends and underspends within the overall total, but the real problem in 1981–82 has been one of monitoring. The effects of last year's Civil Service strike meant that for the early part of 1981–82 no good information was available on Government expenditure and that many of the subsequent data have proved unreliable.
At the time of the Chancellor's December statement, he was pressed to give a figure for the estimated outturn for 1981–82. He stressed the unreliability of the estimate of £107 billion that he then gave, for the reasons that I have given. By the time that the White Paper went to press early in February, the estimated outturn was put at £106·1 billion. This reflected the fact, indicated in the White Paper, that a saving of £900 million was expected on the Contingency Reserve compared with the December figure. By the time of the Budget, the estimated outturn was put at £105·2 billion, which reflected later information on the spending on Government cash limits and by nationalised industries.
The further reduction in the estimated outturn now expected mainly reflects lower spending on central Government cash limits compared with the estimate at the time of the Budget. One effect of this further reduction is that public expenditure as a percentage of GDP in 1981–82 is now expected to fall from the 45 per cent. estimated at the time of the Budget to 44½ per cent. This reduced expenditure was a reason for the lower than expected 1981–82 outturn figures of Government borrowing published last week, which were over £1 billion down on the Budget estimate. Preliminary figures for public sector borrowing as a whole will be published tomorrow.
A breakdown of the latest estimate of outturn for 1981–82 is not yet available, but, within the overall outturn estimated at the time of the Budget, the main expected increases over the plans set out in last year's White Paper were as follows. The most significant was overspending by local authorities on current account of some £1·7 billion. Higher nationalised industries' net borrowing of £700 million and higher social security payments of £500 million both reflected in their different ways the effects of the recession. Special sales of assets were £300 million lower than planned, due partly to the decision not to proceed with a further programme of advance oil sales in a weak market, and partly to the delay of the sale of Wytch Farm, announced in the Budget. There was one major change in Government expenditure. The defence budget cash limit was increased by £350 million.
To set against these increases, local authority capital expenditure was lower than planned by some £¾ billion, mainly due to lower tender prices and higher than expected capital receipts. About £½ billion of this underspend was on housing. Net payments to European Community institutions at £400 million and housing expenditure at £300 million were also lower than planned. Finally, central Government cash limits were underspent by about £½ billion, and there were savings of over £1 billion on the Contingency Reserve.
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The public expenditure totals for 1982–83 announced in December and reflected in the White Paper showed an increase of some £5 billion compared with the cash equivalent of the previous year's plans. Some of the main increases—defence, employment measures, nationalised industries—reflect our priorities as a Government. The increase in employment expenditure reflects the Government's determination to provide worthwhile training opportunities for those who are unemployed, particularly school leavers. The social security increase reflects both the effects of high unemployment and higher payments of supplementary benefits, and the Government's decision to make good in the November 1982 uprating the 2 per cent. shortfall for some benefits, later extended to all benefits in the Budget. For nationalised industries, we are providing finance to protect capital investment that would otherwise have been affected by the shortfall in receipts resulting from the recession.
The remaining major increase was for local authority current expenditure. It is a regrettable necessity. We have had to increase the planned provision for local authorities' current spending by £1·3 billion in 1982–83 and by a similar amount in 1983–84, because overspending by local authorities in 1981–82 had made unrealistic any prospect of their containing expenditure within the original 1982–83 plans. The future years' plans allow less rapid cash growth in order to get local authority spending back on course.
The plans now contained in the White Paper will not be easy to secure, but they are perfectly realistic provided that local authorities are prepared to make real efforts to achieve them. Many local authorities have heeded the Government's plans. We need to build on the co-operation of the majority and intensify our pressure on the remainder to achieve savings. Action through the rate support grant using the block grant mechanisms is one way of doing this.
As in previous years, we have published the White Paper at the time of the Budget to try to bring together consideration of public expenditure and its financing. This year, however, the Chancellor announced in his Budget a number of measures affecting the spending plans, and these overtook some of the programme figures set out in the White Paper, which was already in the press. In particular, the Government decided to increase public spending in a number of areas that would benefit industry, in tune with the overall tone of the Budget. The construction industry will benefit from the additional £100 million being made available in 1982–83 for the improvement and insulation of private houses. Large industrial users of electricity and gas will benefit from the changes announced to pricing arrangements estimated to cost £160 million in 1982–83. The increased spending on industrial innovation—£20 million in 1982–83 rising to £45 million in 1984–85—will help firms to take advantage of the latest advances in technology.
On employment, the Government have put forward an imaginative scheme to enable the unemployed to use their skills for the benefit of the community on tasks that otherwise would remain undone. As my right hon. and learned Friend said in his Budget Statement by way of illustration, £150 million, excluding supervision costs, would support around 100,000 places. We are ready to back this kind of development on an even larger scale if the demand is there.

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Finally, on social security the Chancellor announced that the restoration of the 2 per cent. uprating shortfall would be extended to all benefits, not just to retirement pensions and associated benefits.
The cost of these Budget changes was £368 million, but some of that was charged to the Contingency Reserve, so that the increase in the planning total amounted to £200 million. This was more than offset by reductions of £460 million elsewhere. There were three main reasons for this.
First, the upratings in social security benefits were based on a forecast price movement of 9 per cent. between November 1981 and November 1982, whereas the White Paper figures were based on an assumed movement of 10 per cent. Second, the gas levy was reduced, and special sales of assets increased by the postponement of the Wytch Farm sale. Third, the Chancellor announced in his Budget a reduction in the national insurance surcharge. This reduction applies to all employers, public and private, because the legislation does not permit differential reductions. But the intention of this was to benefit the private sector.
Accordingly, the Chancellor announced that the Government will reduce the 1982–83 Government cash limits, rate support grants for local authorities and external financing limits of the nationalised industries to offset the benefit of the national insurance surcharge reduction in the public sector. Thus, the net effect of all the Budget changes was to reduce the total of public expenditure by some £260 million in 1982–83 and by some £700 million in 1983–84 and 1984–85, as compared with the figures published in the White Paper.
Mr. Reg Race: Will the right hon. and learned Gentleman confirm that the parliamentary answer given to my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) on 18 January to the effect that the Government changes to social security benefits have cut £1,520 million from the level of benefits in the financial year 1982–83 in relation to the way in which benefits were calculated when the Labour Government were in power?
Mr. Brittan: I do not have that particular answer to hand. If it was given by one of my hon. Friends in answer to a question, I am sure that it was accurate.
The changes to the spending plans, which had been announced in outline last December, have led to renewed interest in the proposal by the Institute for Fiscal Studies committee, chaired by the late Lord Armstrong, for a unified draft Budget incorporating public expenditure plans in the autumn. The Treasury and Civil Service Select Committee is of course, currently considering this proposal, and the Chancellor and I await its report with interest.
To return to 1982–83. Although I regard the increases in expenditure that have been made to our original plans as necessary and realistic, most of them are increases in current expenditure. In principle, I would have preferred to see more capital expenditure, although I do not accept any simplistic equation between capital expenditure and "good" or productive expenditure, and long-term comparisons of capital spending are vitiated by changing expenditure needs. Even so, the picture on capital spending is a creditable one.
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In cash terms, capital spending in 1982–83 is planned to be about the same as that expected to be achieved in 1981–82. But the recent fall in tender prices means that most programmes will be carried out as planned. In addition, the construction package announced in the Budget will add £100 million to planned capital spending in 1982–83. Local authorities should be able to increase their housing investment output in 1982–83. There should be a slight increase in work actually done on water and sewerage projects in 1982–83.
Mr. John Maxton(Glasgow, Carthcart): Will the right hon. and learned Gentleman say what percentage of the construction package is coming to Scotland? That important figure has not been made available to my Scottish colleagues and myself.
Mr. Brittan: I shall be happy to try and give the hon. Gentleman the figure, either in the course of the debate or in another form.
Mr. Peter Shore: All hon. Members are concerned about the decline in capital expenditure during the period since the Government came to power. A table in the Select Committee report shows that, taking 1978–79 as 100, general Government capital expenditure is down this coming year, 1982–83, to 65·9 per cent. How can the right hon. and learned Gentleman claim that this is a creditable performance particularly when he, like his Back Bench colleagues, was vociferous in the past, with some reason, in criticising earlier cuts in capital expenditure?
Mr. Brittan: I think I can make the claim on the basis that I have just explained. If tender prices fall, as is the case, and it is possible to secure the same provision for lower costs, that is to be regarded as an achievement. Criticisms of cuts in capital expenditure do not come well from the lips of the right hon. Gentleman who was a member of a Government responsible for a massive cut in capital expenditure unprecedented in recent years.
I remind the House that the nationalised industries' investment in 1982–83 is planned to be 26 per cent. higher than expected in 1981–82 and 40 per cent. higher than in 1980–81. It is also important to remember that the Government definition of capital spending is different from that of a commercial concern. Most defence expenditure for example, whatever its purpose, is classified as current expenditure because of international accounting conventions, although about half is spent on what anyone not familiar with those conventions would unquestionably regard as capital goods.
Mr. Terence Higgins: Will my right hon. and learned Friend agree, in the light of the intervention that has just been made, that complaints from the Opposition that the ratio of capital expenditure and current expenditure has moved in the wrong direction overlooks the extent to which the deterioration in that ratio is due to excessive pay claims made in the past and the fact that the Labour Government left a big inheritance of large pay claims that increased current expenditure at the expense of capital expenditure?
Mr. Brittan: That is unquestionably the case. I have not noted—I am not necessarily criticising the Opposition—any reticence in the call from Opposition Members for increases in social security benefits which, however meritorious, are current expenditure and not

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capital expenditure. The lesson that the right hon. Member for Heywood and Royton (Mr. Barnett), at least, has learnt, if not the right hon. Member for Stepney and Poplar (Mr. Shore), is that it is not possible to have one's cake and eat it and to demand increases in social services expenditure and capital expenditure without a consequence in terms of inflation or interest rates.
As I have already said, the increase in current expenditure, which has caused the fall in capital expenditure as a proportion of the planning total, reflects in part the Government's priorities and the needs of programmes. That is particularly true of the increases for defence and employment measures, which I regard as wholly justified but which happen to count as current expenditure. The increases in nationalised industry expenditure to which I have referred and which are substantial are designed to protect the capital investment of those industries.
Within the total of current expenditure, we have taken steps to secure substantial reductions. There has been an overall reduction of at least 2 per cent. applied to all Government cash-limited programmes except defence. But within that we have applied a specific reduction of at least 2 per cent. to staff and administrative expenditure. Since we entered office, we have reduced Civil Service numbers from 732,000 by about 60,000—at 1 April 1982—and are on course for achieving the planned reduction to 630,000 by 1 April 1984. Further, the 4 per cent. provision for public service pay increases is a significant move to contain current costs. It should also be remembered that not all capital spending is necessarily productive while current expenditure on such things as research and development and teacher training is of lasting value.
Mr. Jack Straw: On the question of public sector pay, is the Chief Secretary therefore saying that if the arbitration panel recommends a higher increase than 4 per cent. overall, the Government will automatically block it in the House?
Mr. Brittan: I am not saying that at all. There is a variety of ways to deal with that situation. The hon. Gentleman must await the outcome of that consideration before he will be in a position to see what route we are to follow.
Mr. Anthony Nelson: On that point, would my right hon. and learned Friend confirm that any settlement by the arbitration panel outside the suggestion put forward by the Government so far of 0 per cent. to 5 per cent. will have major consequences for the next pay round, which is bound to affect other parts of the public service? If the Government made a settlement outside the 4 per cent. norm, or what they have already put forward, the situation would be very serious.
Mr. Brittan: I agree that an excessive determination would have the serious consequences to which my hon. Friend has referred.
The objective of the public expenditure survey is to set realistic planning totals year by year, within which resources can be managed in the most efficient way. Each successive survey, therefore, consists of a re-examination of the plans drawn up the year before, and tends to concentrate on the year immediately ahead—in this case 1982–83. But it is important not to neglect the future years,
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and we have tried this year to embody in the White Paper realistic planning totals for 1983–84 and 1984–85. Of course, the composition of individual programmes will be subject to ministerial review in the usual way. But the Contingency Reserves in both years have been deliberately set high to reflect the increased uncertainty in those years, which is inevitable in a cash planning regime. It should be possible to accommodate any changes thought necessary to programmes without affecting the overall planning totals.
It is obviously more difficult to look ahead beyond 1984–85, but I do not think that relieves us of the obligation to attempt to do so. I do not think one can set sensible planning totals more than four years ahead. This is why we decided, in last year's White Paper, to drop the fifth year of the survey. But, as I have said, our fundamental objective is to reduce the ratio of public expenditure to GDP.
Dr. Jeremy Bray rose——
Mr. Brittan: A little later, please.
To do this successfully, we need to frame our medium-term decisions in the light of likely longer-term trends. Some of those are distinctly ominous. The four largest public expenditure programmes—social security, defence, health and education—between them account at present for about 60 per cent. of the total. That is a static picture, an analysis of where we are now. But expenditure planning is obviously a dynamic process. We can already discern patterns in our society that create great pressure to increase expenditure unless present policies are changed.
Dr. Bray rose——
Mr. Brittan: Not just for the moment.
Demographic pressures alone mean that an ageing population will require, by way of social security benefits and health care, a larger slice of the cake. The proportion of very old people, who naturally place greater demands on the Health Service, will rise quite quickly thoughout the next 10 years. The demographic pressures exist quite independently of the improvements in health care that we can expect from medical advances and the new technology. Desirable though these things are, they tend to drive up the cost. Clearly, increases in efficiency will become even more important as a way of containing costs. Demographic trends work in the opposite direction at present in the education service, reducing the demand on existing facilities. But who can be sure whether that pattern will reverse istelf in the next few years?
As for the defence programme, the uncertainties are all too clear. These four big programmes alone have an inbuilt momentum of their own which can only be arrested by quite fundamental policy decisions. Smaller economies in other programmes are, of course, desirable for their owl sake and will be vigorously pursued. But they are not enough to compensate for the dynamism of the big programmes. I say all this to illustrate and to demonstrate that the control of public expenditure requires, and deserves, a long-term strategy as well as the unrelenting day-to-day war of attrition that the right hon. Member for Heywood and Royton has described so vividly.
Dr. Bray rose——
Mr. Brittan: In a moment.
Governments are sometimes accused of concentrating too much on the immediate problems to the exclusion of

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these longer-term trends. I am very well aware of that danger, and am determined that we must analyse the long-term trends and carry back what we learn into our present decisions. That means giving up the soft options and easy promises, despite any apparent short-term political advantages. It means being realistic about what we are likely to be able to afford. It means avoiding new long-term commitments. It means looking very critically at the thin ends of thick wedges. In the remaining years of this Parliament it means denying ourselves the luxury of pledges that we might not be able to deliver when we come back to office in the next one.
Dr. Bray: I am grateful to the Chief Secretary for giving way. He referred to the role of the £6 billion Contingency Reserve for 1984–85 as an insurance against a higher rate of inflation than he is assuming with his present cash planning process. Can he assure the House that if the rate of inflation turns out to be lower than he is expecting, he will allow real public expenditure to increase above the levels that he expects them to take?
Mr. Brittan: I am happy not to give such an assurance because that might not be the appropriate response in the circumstances in which such a happy event might occur.
For 1982–83 the increase of £5 billion on our previous plans is in my view entirely justified in present circumstances. It is justified above all because it is needed by the current circumstances and it is being financed responsibly without pushing the level of borrowing to a dangerous point. What I do not accept is the argument that reflation, primarily through increased public spending, would encourage long-term economic growth and produce a lasting reduction in unemployment. Nearly all our major overseas competitors realise this is not the case. Fiscal policy in most industrial countries is now dominated by efforts to restrain public expenditure and, thereby, to reduce, or at least contain, budget deficits.
In Germany the federal budget shows an actual decline in real terms, and in consequence federal borrowing is to be cut by 30 per cent. The Government there propose to cut planned youth, family and health expenditure by 7 per cent. and social security expenditure by 1 per cent. That is the Social Democratic Government in Germany. In the United States the budget proposed by the President also shows a slight reduction of expenditure in real terms. The Japanese Government have tightened their fiscal policy for the third year in succession.
France's Socialist Government—not just a Social Democratic Government but a Socialist one with Communist members—are showing mounting concern over their deficit. President Mitterrand has decided that they must not exceed 3 per cent. of GDP in 1983. The Dutch Government have just announced economy measures designed to rein back their public sector borrowing requirement. Belgium is another example of a country where the Government have announced their intention to cut public expenditure plans this year. The Governments of Italy, Denmark, Ireland, Canada and Australia are all committed to holding back in the long term the public sector's claim on their nation's product.
Mr. Derek Foster: Is it not remarkable that all the countries that the Chief Secretary has quoted, with very different rates of inflation and with
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very different levels of public expenditure as percentages of their gross domestic product, are pursuing rather similar policies? Is it not true that this Government have pursued a fiscal and financial policy which is three times more restrictive than that of any other European country? Is it not because of the tremendous conservatism of financial opinion throughout the world that we are all pursuing these mad policies? Will he not use his influence to transform world opinion and to get things moving again?
Mr. Brittan: I do not accept the hon. Gentleman's analysis. In contrast, I would say, without agreeing with the figure that the hon. Gentleman gave, that it is precisely because of the policies that we have been carrying out that we are emerging from recession in a better shape, while many of the countries to which I have referred are encountering increasing difficulties.
I am not pretending that the consequences of doing the sort of things that I have described those other countries as doing are not painful in the short term. The Dutch Government's decision earlier this month included economies in child benefit and some shifting of the burden of social security payments from employers to employees. Such decisions are never easy. Although the Governments of our competitor countries are of very different political complexions, they are united in recognising that the restoration of their economies to health and their companies to full profitability requires firm resolve of the kind that I have described.
We have only to look at our own experience over the past decade to realise how essential it is to maintain that resolve. Between 1970 and 1980 real output grew at only a twentieth of the growth in money GDP. In short, our economy did not respond flexibly to the stimulus that that growth afforded. It was dissipated in higher inflation and higher imports. As we can now see only too painfully, it did not prevent higher levels of unemployment emerging during the 1970s. If anything, it caused it.
If increased public spending is not to increase inflationary pressures, it needs to be financed responsibly. That means higher interest rates or higher taxes. I do not believe that either of those alternatives would assist our recovery. It is in the context of this approach to spending that we must consider the question of medium-term cash planning and short-term cash control.
As I said at the beginning, this is the first White Paper to have been planned in cash, rather than in the "funny money" of constant prices, or so-called "volume". It is a change that I regard as of the highest importance. It is essential, if we are to tailor our planning to the financial resources likely to be available, and to achieve more effective control of public expenditure. It certainly needs full discussion, if its implications and advantages are to be properly understood. That is why I welcome the recent report of the Select Committee on the Treasury and Civil Service.
But although experience of operating cash planning will no doubt suggest modifications to the present arrangements, I am convinced that our primary effort must be to ensure that the new system works and is understood. To do that we must be clear about the disadvantages of the volume system and the reasons for the change. The old system had become outmoded and damaging, because it encouraged an all-too-easy assumption that, whatever the cost of maintaining or enhancing a programme, the money would have to be found for it. It led to an assumption that

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one was always entitled to more cash. It sometimes even led to a lack of appreciation of just what the cash implications of a decision might be. Those contemplating spending lived in the world of funny money, and those paying for it had to provide for it in the cash of the day. Planning in volume also tended to provide automatic so-called "validation" of past inflation and to build in the latest estimate of future inflation. That simply consolidated people's exaggerated expectations of inflation.
It was essential to break the pattern. But to do so meant little short of a revolution in the way in which we handle these matters. It is not surprising that that has taken a little assimilation. The new system will work quite differently. Public spending decisions are now taken in a financial framework. The gains are manifold. The key task of the public expenditure planning system, controlling the spending total in the year next ahead, is improved. In the past this was achieved by cash limits, but this meant that survey decisions were not final decisions on control totals, because they were taken in funny money which had later to be translated into cash limits. Ministers could not clearly see the cash implications of decisions that they were taking, nor could expenditure decisions be readily related to revenue projections.
Under cash planning, survey decisions for the year ahead automatically translate into cash limits. This means, in particular, that Ministers can take into account forecast relative pay and price movements in the survey discussions and make any adjustments that they wish during the survey as a conscious policy decision. Previously, this was added on rather mechanically as an afterthought.
A more subtle but perhaps equally important effect is that cash planning does not automatically carry forward increases in public sector costs. In the past, these might have been contained for one year by cash limits, but any containing effect was automatically lost by the revaluation for the next year's survey, which was based on the actual movement of pay and prices rather than that for which it had been thought right to make provision. Programme managers knew this and were tempted to cope with cash limits by short-term measures, rather than measures that would have a continuing effect into the following year, such as improving efficiency or obtaining greater value for money.
The real advantages of cash planning mean that our first priority must be to make it stick. This is one reason why we have made such a clear break with the old volume figures.
Mr. Robert Sheldon: The right hon. and learned Gentleman will have read the article in the Financial Times by Mr. Samuel Brittan, headed
"The Last Laugh for Funny Money",
in which Mr. Brittan pointed out that what was happening would
"play into the hands of those people who want to bring back funny money",
because, as he put it, imagine his
"horror when the public expenditure White Paper appeared as a string of meaningless numbers."
That is the criticism that the right hon. and learned Gentleman must answer.
Mr. Brittan: It will not be the first time that I have not agreed with my brother, however eloquently and elegantly he expresses himself. I have had the opportunity of discussing these matters with him and explaining to him
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that it is necessary, for the reasons that I have given, to move to the new system. I shall come in a moment to the point discussed in the article and covered by the Select Committee.
Mr. Douglas Jay rose——
Mr. Brittan: I should like to develop the argument a little further before giving way to the right hon. Gentleman.
There is a more fundamental point. I agree—and this, rather than the comprehension problems of transition, is the real area of debate—that a major concern of the Government must be the level of service that is provided. But it is wrong to believe that the old volume figures were a measure of the level of service. They were not. To believe that they were is a mistake, and a dangerous mistake, which lies at the root of the failings of the volume system.
The volume figures simply measured the resources that were put into programmes—the inputs. They did not measure the efficiency or effectiveness with which they were used, or the value for money that was obtained, and it is that which in large part determines the level of services actually provided. Indeed, as I have said, volume figures tended to distract programme managers from concerning themselves with greater efficiency. What we should be concentrating on is indeed the level of service provided—the output—taking account of not only the resource inputs, but the efficiency and effectiveness of their use and the value for money obtained.
In order to do this properly much greater effort will have to be put into developing a more effective range of measures of output over the next few years. Some progress in this direction had already been made in the last years of volume planning, but the move to cash planning has given this work a new impetus and importance. Of course, one must be realistic about it. There are large areas of public expenditure where it is difficult even to define, still less to measure, what we mean by final output. In some cases, such as defence, it may be particularly difficult. In such cases one may have to be content to use measures of intermediate output as proxies.
A considerable amount of information on what the cash is being used for is already given in part 2 of the White Paper. Some of the more significant output measures front it were conveniently brought together in the public expenditure press notice issued on Budget day—for, example, of the number of young people engaged in Government training schemes, of the numbers of hospital cases treated, and of school pupil numbers and pupil-teacher ratios. The Treasury and Departments are continuing to develop the use of output measures in the planning and efficient management of public expenditure.
In future years, output measures will increase in quantity and importance, not least because Departments will increasingly realise their importance for understanding what is happening in the services for which they are responsible, for arguing their cases for more cash where this is genuinely needed and for reporting to Parliament and to the public generally on levels of service. But output information will never be comprehensive. It can never be reduced to a single indicator of public welfare. For some purposes I accept that it may be appropriate to take a constant price series of inputs—that is of expenditure—to

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see what is happening to public expenditure over a run of years, but not to control it or to provide the basis for deciding its cost levels.
Mr. Jay: If the right hon. and learned Gentleman is so much against funny money and in favour of cash value, why is he introducing, at this stage, index-linking for gilt edged bonds which really means funny money for future gilt edged interests?
Mr. Brittan: The two are not related. It is one thing to decide whether to compensate for inflation. That should be a conscious, not an automatic, decision. In terms of public expenditure and the share of resources that it takes, it is not appropriate for the decision to be automatic.
Mr. Jay: Surely, however, if the same system of automatic increases were introduced in the pay of public servants according to the RPI, for example, that would be compensation for inflation. That is what the right hon. and learned Gentleman calls funny money.
Mr. Brittan: I have made it clear that I do not favour doing that. Unless my memory fails me, I recall the right hon. Gentleman being present on Second Reading of the Finance Bill. I explained then why automatic belief in indexation or automatic belief in its reverse was not an appropriate way of dealing with such matters. I also said that in all countries that are remotely comparable to Britain, a range of decisions about the appropriateness or otherwise of indexation was taken. I said that I thought the type of indexation that the right hon. Gentleman suggested especially inappropriate.
A constant price series of inputs for certain purposes but not for control might be appropriate.
One way that a series of constant price figures can be provided is by using, for example, the GDP deflator to provide a series in "cost terms". That has been done by the Select Committee. It has asked us to publish such figures in future White Papers. I shall certainly consider that proposal. I must stress that such series are of limited usefulness, even if they provide some relevant information. As they are adjusted by the general rate of inflation, they cannot truly show whether the quantity of goods and services bought will be greater if costs for a particular service increase less than the general rate—whether because of greater efficiency or for any other reason.
I am much more doubtful about the Committee's related proposal—that we should publish volume figures as a supplement to the cash programmes. I have explained some of the problems that that would cause but, of course I shall not give a final reply today, because I would naturally like to consider all the recommendations carefully and take account of any relevant points made during the debate.
The Select Committee made one further observation on this subject that requires a response. It says in paragraph 6 that the inflation assumptions used in the White Paper were already out of date at the time of the Budget. I do not accept that, as the cash factors used in preparing the new cash programme were not meant to be simple projections of inflation. Obviously, they took account of the best forecasts that the Government then had of the future movement of prices.
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As a matter of record, those forecasts were not very different from the assumptions published in the Red Book at Budget time. But that is not the point. The cash factors did more than recognise future inflation. They were themselves a conscious political decision about the increase in public sector pay and prices which the Government were prepared to finance. They were not just a scientific observation or prediction, they were intended to influence the phenomenon being observed. The Government are major employers. They are paymasters to other big employers and they are significant purchasers with considerable power in the market for many other goods. The cash programmes that we have published are themselves intended to exercise some pressure on prices and not passively to accept them. Some of the Select Committee's observations seem to me not to take account of that important point, and I therefore wanted to restate it as clearly as I could.
All the major industrial countries and, in fact, most others do not, in general, plan or control public expenditure in volume terms. They use cash, just like industry, agriculture, commerce or households the world over. Probably only in the United Kingdom's public sector has the funny money of volume expenditure and survey prices crept in. The Government have put an end to that and returned the British public sector to the real world where everyone has to make contracts in cash terms and, therefore, must make their own allowances for inflation.
I have spent some time on the change to cash planning and its implications because I regard it as a major new tool to achieve the Government's overall strategy on public expenditure. That strategy is of course, itself part of an overall economic strategy that has been steadily showing increasing signs of success recently. It is as part of that strategy that I commend the White Paper to the House.
5.5 pm
Mr. Peter Shore: I listened with some care, especially to the last part of the Chief Secretary's speech. I shall comment upon that aspect later. I was surprised that he omitted to mention the task force. It would be unrealistic not to say something about the implications for public expenditure that the Argentine seizure of the Falkland Islands has imposed upon us.
As the scale of the British operation begins to unfold, every other day bringing fresh announcements of deployment of men, aircraft and ships, it is clear, even when the task force is only a little beyond Ascension Island, that large and increasing costs are being incurred. They are not necessarily one-off costs—such as is entailed in requisitioning the "Canberra", 14 other Merchant Navy vessels and the chartering of, I understand, another 15. The decision that was announced this week to maintain and re-equip Vulcan squadrons for conventional bombing roles will substantially increase expenditure not only for this year but for some considerable time to come.
Furthermore, whatever the Defence Secretary and the Chief Secretary may say about the composition of our defence forces, I find it almost impossible to believe that major changes in policy decisions, especially those affecting naval forces, will not now be made. It is surely inconceivable that the programme for closing naval dockyards in Britain and Gibraltar and the scrapping and sale of fighting ships that have proved indispensable in the launching of the British armada can proceed at anything like the pace or scale that was originally proposed.

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Therefore, we are discussing major increases in at least one major component of public expenditure—the defence Estimates. It is plain to everyone that, unless a political settlement is rapidly achieved, we shall be speaking not of tens of millions of pounds, but of hundreds of millions of pounds of additional expenditure.
Speaking in Oxford last Thursday the Chief Secretary assured us that
"there is no cash ceiling to the cost of this operation. The needs of the Task Force must and will come first."
It is remarkable and perhaps not without its unintentional humour that the Chief Secretary should find it necessary even to make such a statement. Nevertheless, no doubt the House is gratified. No doubt, also, whoever is in command of our task force will be equally gratified by the Chief Secretary's words.
The House should consider, however, the wider significance of the Chief Secretary's statement. The sacred cow of cash limits is slaughtered without a murmur when it is considered to stand in the way of an overriding need. I do not complain about that in relation to the task force. I only wish that a similar urgency and overriding need was felt by the Government when dealing with our inner cities and national unemployment problems.
It would be unacceptable to us, if the rescue of the Falkland Islands does involve substantial increases in public expenditure, that that should lead to a cutback in other public expenditure programmes, including the preemption of the Contingency Reserve, or to the imposition of further taxation. With the unused resources of production and people in the United Kingdom on their present scale, it would be a disgrace if either of those courses were pursued.
Mr. J. Enoch Powell: The right hon. Gentleman has made an important statement on behalf of Her Majesty's Opposition; it is important that it should not be misunderstood. I listened carefully. Is the right hon. Gentleman saying that additional expenditure on warlike preparations and, if necessary, warlike operations should not at all be financed out of increased taxation?
Mr. Shore: Indeed I am saying that. I am saying that with massively unused resources we can finance, to the benefit of our economy, substantial increases in stores and other necessary purchases without resorting to any further restrictions or without exerting any further pressures on our underused economy.
The White Paper is as unacceptable to us as its predecessor was last year. Nothing that the Chief Secretary said has made it any more attractive. Our principal objections are as follows. First, it does nothing to alleviate the problem of unemployment. Indeed, it simply accepts it. Secondly, it further damages the range of essential public services at national and particularly local level. Thirdly, it is largely self-defeating in that its stated purpose of reducing public expenditure is offset, as the Chief Secretary confessed, by the extra cost of the recession. Fourthly, it reflects the animus and hostility to public expenditure which have informed the Government's whole policy and philosophy. Last, but not least, in presenting public expenditure in cash terms, the White Paper disguises and confuses when it should seek to reveal and clarify the real implications of Government expenditure decisions. I shall develop the criticisms in turn, I hope at not too great length.
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This year opened with the number of registered unemployed being just under 3 million. The Government expect that to continue not just for the next 12 months but throughout the planning period. With 12½ per cent. unemployed, Britain now has the highest percentage unemployment in the seven major industrial countries of the Western world.
Far from using public expenditure to create demand and therefore to create the extra jobs that the economy and the country needs, the Government are still pursuing public expenditure cuts. They believe, as the Secretary of State for Employment recently said, that the Government cannot create demand; only customers can. Such statements blithely ignore the obvious fact that the Government and their agencies are large customers. Such words slipped from the Chief Secretary's mouth only a few minutes before he sat down.
As the White Paper shows, current expenditure on goods and services alone accounts for just over £22 billion a year. Capital expenditure is more than £6 billion. That £28 billion worth of demand is spent overwhelmingly upon the products of Britain's manufacturing and construction industries. There is little evidence that demand from other customers will increase, and if there is evidence it is not shown in Government speeches or in the publications accompanying the Budget. It is common sense for the Government, within reason, to increase demand from British suppliers through increasing their own purchases and their agencies' purchases. The Government's failure to do that and to recognise the central role that Government can play is our principal charge against them in relation to the unemployment problem.
Our second and related charge is that once again vital community services are being deprived of the resources and finances required. Alas, to document that charge is all too easy. I shall content myself with two areas of policy—housing and the inner cities. Anyone who has examined the housing section in Volume Two of the public expenditure White Paper and whose eyes have alighted on page 28 must have caught his breath at the table relating to public sector housing.
Completions of public sector housing, still reflecting starts in previous years, fell steeply from 91,000 dwellings in 1979 to 72,000 in 1981. The figures for new starts show what can be described only as an appalling collapse of the public sector housing programme. There were 93,000 starts in 1978, 69,000 in 1979, 46,000 in 1980 and 31,000 in 1981. In three years the Government have slashed public sector new house building by two-thirds.
Mr. Ian Lloyd: One of the most interesting figures in the table is that the largest fall in public sector housing was in the last year of the Labour Government's period of office. Is there a factor common to both Administrations?
Mr. Shore: I do not think that there is. If the hon. Gentleman cannot understand the difference between starts of 93,000 in 1978 and starts of 31,000 last year, I cannot assist him. There was no compensatory increase in private sector house building. Indeed, starts in private sector housing building, which were 157,000 in 1978 and 144,000 in 1979, fell to 98,000 in 1980 and 116,000 last year. Thus, in the past two years we have experienced the; lowest level of housing starts in Britain since the 1920s.
Mr. John Townend: Will the right hon. Gentleman give way?
Mr. Shore: No. I shall not be anything like as charitable as the Chief Secretary, who had to explain his own White Paper. I do not intend to explain a White Paper which is not mine. I have no intention of repeating the hour-long seminar which I gave to Government Back Benchers the last time that I spoke in the House on the Second Reading of the Finance Bill.
Mr. Townend: Give way.
Mr. Shore: I do not intend to give way, however pressing the hon. Member for Bridlington (Mr. Townend) may be.
In the inner cities the evidence of need and neglect is overwhelming. At first sight, the figures for the urban programme show an increase in spending and the two urban development corporations have additional funds to dispose of. Unhappily, the increase is more apparent than real. What has happened is that relatively small increases for the worst afflicted inner city authorities in the form of urban aid have been accompanied and more than offset by the withdrawal of block grant and housing investment allocations.
I tabled questions to the Secretary of State for the Environment a few weeks ago about the amount of Government grant and housing investment allocations paid to the 14 local authorities in the seven inner city partnership areas in England, including Liverpool, and parts of London and Manchester, which by general agreement are the areas of greatest need. The House will be interested to know that by 1981–82, while the urban aid programme shows an increase, in the Government's figures, of about £100 million for a three-year period, the rate support grant or block grant was running at £187 million lower in those 14 authorities than it was in 1978–79.
In addition—I found this almost believable but I always believe the figures supplied by the Secretary of State for the Environment—in those 14 local authorities the housing investment programmes were £450 million less in 1981–82 than in 1978–79. The modest increase that is marked in the urban aid programme is dwarfed by the withdrawal of other forms of Government aid as a direct result of Government policy decisions.
I have singled out housing in the inner cities, but the outlook for local authority expenditure as a whole could not be more gloomy. Page 11 of the White Paper shows that, in cash terms, the Government intend to limit the increase in total rate fund expenditure this year to no more that £350 million. That is 1½4 per cent. more in cash terms. In real terms, with the assumption of an increase in inflation and costs of 11 per cent., that must mean a massive reduction in total local authority expenditure and a much larger cut than we have experienced even in the past two years.
My third charge against the Government is that, inadequate as their public expenditure provision is and damaging as their cuts are to the services on which they fall, the Government's central objective of sharply reducing public expenditure is not being attained. That is the paradox. Their reasons are all too clear, as the right hon. and learned Gentleman told us again today. During a recession, cuts in public expenditure and services do not release resources for alternative use in the manufacturing
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or private service sectors. They leave those resources in idleness and the Government then find that the costs of idleness must be paid for out of public funds. Whether those costs are incurred on special "make work" programmes for the young, social benefits paid to the increasing army of unemployed and their families or in increased subsidies to industries and services whose underused capacity would otherwise force them into liquidation, the costs of recession must be met.
That is what happened last year. The Chief Secretary was obliged to confess to the House on 9 April 1981:
"In 1980–81, the actual cash expenditure on programmes, it now seems, was about £2¼ billion higher than we had provided a year ago. The recession directly accounts for £1 billion of this excess, through higher expenditure on social security and unemployment benefits and by the redundancy fund. There are other areas of expenditure where the recession has had an indirect impact … For example, we increased the finance available to the nationalised industries in large measure because of the difficult trading conditions resulting from the recession."—[Official Report, 9 April 1981; Vol. 2, c. 1124.]
It has been the same story this year. In the main points of the White Paper, which are itemised on page 2, the Government admit that their cash planning for 1982–83 has had to be increased by about £5 billion more than they had hoped for last year. Among the main increases are social security payments, which are up by £0·9 billion, and employment services, which are up by £0·8 billion; and the total net external finances of nationalised industries have been increased by £1·3 billion. Recessions are expensive and cuts in Government expenditure only make them worse. The Government are achieving much more a distortion of the pattern of public expenditure than the overall and massive reduction that they had originally planned.
Just how far short the Government have fallen of their original targets because of their failure to anticipate the costs of the recession, which they helped to bring about, is partly revealed in the summary table of public expenditure on page 2. The Labour Government, in their January 1979 White Paper, planned for a steady 2 per cent. growth in public expenditure and envisaged expenditure in 1982–83 of £120 billion at today's prices. The Government, in their March 1981 White Paper, aimed at an expenditure of just over £110 billion, which is a reduction, if they had achieved it, of no less than £10 billion.
The White Paper of March 1980 showed a figure about £3·5 billion lower than the £110 billion in the March 1981 White Paper. Against the Labour Government's original £120 billion plan for 1982–83, the Government, in the first fine frenzy of their assault on public expenditure in 1980, aimed at an expenditure this year of less than £107 billion. There would have been a saving of no less than £13 billion. Now we have the reality. The figure is not £107 billion as planned in 1980, nor £110 billion as planned in March 1981. If the present White Paper plans are not in turn revised, the figure for 1982–83 will be more than £115 billion.
Another indicator that reinforces my point is table 14 on page 7. There we see public expenditure as a proportion of GDP, to which the Chief Secretary alluded. The public expenditure, which took 41 per cent. of the GDP in 1978–79, the last year of the spendthrift Labour Government, and which remained at 41 per cent. in

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1979–80, rose to 43·5 per cent. in 1980–81 and to no less than—we heard the revision—44·5 per cent. last year. This year it is expected to fall because of the anticipated
"real rise in GDP and the curbing of public expenditure."
The Government believe that this year there will be an increase of 1·5 per cent. in the GDP. I am not persuaded that there are sound reasons for that expectation, but I am even more sceptical about the curbing of public expenditure, both because of the unrealistic inflation assumptions, especially in public sector pay, that are built in to the 1982–83 estimates, and because of the substantial increase in defence costs that is now almost certain.
My fourth charge is the unreasoning hostility that the Government show towards public expenditure. It is one matter for Governments to accept that the claims of public expenditure must be fitted in with other demands on total national resources; it is quite another for a Government to be so ideologically motivated that they consider it a positive virtue to reduce public expenditure, to reduce and traduce those employed in the public services and to plunder and disperse public property, whether it be our forests, houses, oil wells or national airlines.
I draw attention to the special combination of discriminatory measures that has emerged this year and to which there have already been indirect allusions in exchanges in the House. This year for the first time the public expenditure accounts have been presented in cash terms only. The old presentation, based on constant prices or volume, has been abandoned. The central point that the Government wish to make, which the Chief Secretary emphasised, through the change is that henceforth cash plans and limits will rule public expenditure. No attention will be paid—in theory, at any rate—to levels of service, to quanitity or to quality. To put it another way, in the fight against inflation, public expenditure is to be de-indexed. That is the point. Yet this is the very year which has seen, in other parts of the Budget and in the Finance Bill, the largest extension of indexing—that is to say, the indexing of private wealth against price inflation.
Index-linked Government stocks are now to be available, not just to pension funds but to private investors. Capital gains tax thresholds and chargeable gains are to be indexed, and there is now to be indexing of the bands of the capital transfer tax, too. In short, in the public sector there is to be nil protection against inflation, whereas in the private sector there is to be a massive extension of protection through the indexing of capital. It is, of course, the mass of our people who will suffer from the de-indexing of public expenditure, since it is through public expenditure that the major community services are provided. It is only a small minority of our people—the richest—who will gain from the private indexing of capital.
Mr. Brittan: That observation carries much less weight than would appear because the right hon. Gentleman ignores the fact that within each year's programme there is a provision for inflation. The right hon. Gentleman may not agree as to its extent, and he may not agree to any changes that are made to programmes in the light of subsequent developments, but simply to say that there is absolutely no provision for future inflation is quite different from the facts.
Mr. Shore: I am quite prepared to modify what I said, and simply say that the right hon. and learned Gentleman's whole explanation and justification of what he has put
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forward—the changed presentation—is that cash limits were not enough and that one needed to strengthen the control over public expenditure against the pressures of inflation by having simply cash planning and not having what he and others have alluded to—the funny money approach of the past. It is an attempt to make far more rigid and far less accommodating the use of cash limits in future to control and reduce public expenditure. It is a strong contrast with the automatic indexing of private capital. It is in marked contrast to the treatment being meted out elsewhere to people and institutions in the private sector.
My last objection to the White Paper is to the way in which the new presentation of public expenditure in cash terms has been put to us. I readily concede the inadequacies in the old methods of presenting expenditure plans in constant prices, but at least they were intelligible to anyone seeking to measure the trends of public expenditure as a whole or in particular sectors in which they were interested. However, the new system envelops the whole of public expenditure in an arithmetical fog. We can make no meaningful comparisons of one year with another unless we have not only the inflation rate of the past but the inflation assumptions of the present and the future.
Mr. Brittan: They have been published.
Mr. Shore: The Chief Secretary says that those figures have been published, but they were published in the most obscure way that he could possibly find. The energetic and skilled assistant who is employed by the Select Committee had to hunt his way through both volumes of the public expenditure White Paper and the Red Book before he found the inflation assumptions. That is not good enough. It is absurd not to state clearly the inflation assumptions or the GDP deflator. Unless that is done, and done clearly, there is no possible way in which the House can exercise its proper and traditional role of examining public expenditure. Indeed, we do not even know whether public expenditure will rise or fall.
It is not clear to me from the exchanges that took place between members of the Select Committee and Treasury officials whether Ministers themselves any longer have any clear way of measuring their own programmes in meaningful terms. This is a serious point because we have been told that, apart from the Department of Education and Science and the Ministry of Defence, figures on the old constant price basis are no longer available or being kept, either in the Departments themselves or in the Treasury at the centre.
Therefore, what information, other than cash figures, is available to Ministers and to cabinet when they are now considering public expenditure questions? I assume that they have to put their own figures on a constant price basis, or they must have fed to them a clear GDP deflator. Otherwise, they would not know what they are talking about or whether they have done well or ill as a result of their attendance of a particular Cabinet or sub-committee meeting.
I conclude simply by saying that this is an incompetent, obscure, muddled and ill-motivated White Paper. There is a clamant need for the use of the public expenditure weapon to engage the great problems of unemployment which is now afflicting all parts of the country and all age groups. That need will not begin to be met by this White

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Paper. It is for that reason, and for the other reasons that I have outlined, that we shall vote against the White Paper tonight.
5.36 pm
Mr. Terence Higgins: I hope to take up a number of the points raised by the right hon. Member for Stepney and Poplar (Mr. Shore). I should like to say something about the debate itself, something about the change in the basis of the figures in the White Paper, to which the Chief Secretary devoted a considerable amount of time, something about the allocation of resources revealed in the White Paper, and, finally, a word or two about the general state of the economy. I hope to do all that in not too long a time.
These debates do not have a long-standing tradition. I believe that the first took place on 21 January 1970, so it is not a long tradition. Indeed, the White Papers themselves have been in existence for only that length of time. However, it is true to say that none of the debates on the White Paper could reasonably be described as a great parliamentary occasion. It would be accurate to say that most of them have been somewhat unsatisfactory. We realise how insignificant they can be when we recall that the Labour Government lost the vote at the end of the debate on one of their White Papers, and that the net effect was absolutely nothing. So these are strange debates. Of course, they give hon. Members an opportunity to have a general discussion on the economic situation and to raise points about particular programmes in the public expenditure set-up, and so on, but they are not satisfactory occasions, and the reason is that the House does not take any meaningful decisions.
I hope that as a result of the proposals put forward by the Select Committee on Procedure (Supply), which sat in the last Session, we shall move to a system—at any rate on the detail of these matters—in which individual estimates can be debated and voted on. We should then need to consider carefully what role this particular debate on the annual White Paper—which, of course, is not just for the immediate year ahead but for a period of years ahead—should play in our proceedings.
There is also the question of the timing of these debates. This debate takes place after the Second Reading of the Finance Bill, whereas on some occasions it has been the other way about. Many hon. Members have taken the view that there was a case for bringing public expenditure and taxation together, so that we could strike a balance between the revenue raised and the revenue spent, and take a view on the difference between the two, which would normally represent itself in the form of public sector borrowing.
The Government have brought the two together by what might reasonably be called the device of delaying the publication of the White Paper that we are debating today from last autumn to the spring of this year. In many respects that is an unfortunate way of bringing the two together. The House could have received the information earlier than in the elaborately presented White Paper this year. In the light of the Armstrong committee's reports, which are being looked at by the Select Committee on Procedure (Supply) and the Treasury and Civil Service Committee, we should consider that matter. The two sides need to be brought together, but it is not satisfactory to
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bring them together in this way. The net effect has been that the debate has taken place later than would have been the case normally.
I shall take the opportunity of this debate to make some specific points. There is the important question of the way in which the figures have been presented and the radical change from funny money to a cash basis. The Select Committee and I do not see anything wrong with that change.
The practical effect of funny money was to compensate spending Departments not only for inflation but for all increases in the costs that those Departments faced. As a result, the control that the Treasury exercises over spending Departments was loosened. I am concerned about the level of public expenditure. Therefore, I think that it is good that the Treasury should have more effective control over spending Departments.
There has been a move to the system of cash planning in addition to cash limits, which is a different animal. It is clear from the evidence that the Select Committee received that officials feel that it is necessary to say that they will move to the cash planning system on its own, because otherwise they would have great difficulty in preventing spending Departments from reverting to the old system. That is naive argument. If the system is to be changed within the Government, it is extraordinary that the Treasury should think that it cannot effectively enforce the change. It is also clear from the evidence that we received that it appears not to have done so, at any rate in respect of some Departments.
Be that as it may, it is still crucial that the House of Commons should have some means of comparing public expenditure in one year with public expenditure in the current year, and future years. While we look at this beautifully presented set of tables—for example, table 1·9 or 1·1 in the Blue Book—the reality is that the pounds in one column, 1977–78, are not the same as in the 1978–79 column. During the Select Committee's examination I asked one of the senior officials at the Treasury whether he would have preferred to spend £1 million last year or this year. He said that he would have preferred to spend that amount of money last year. The reason is simple: it was worth more last year than this year.
My point is simple. The run of figures in the White Paper is meaningless. It is essential that we should have some means of making them reasonably comparable. For the past, that is no great problem. We know what the rate of inflation has been. We also hope that we can obtain estimates of the change in relative costs, that may be more difficult. For the past, those problems can be overcome.
For the future—looking forward from now—it is right that the inflation assumption should be made explicit. The Treasury and Civil Service Committee's advisers eventually managed to dig out some inflation assumptions. There is a strong case for moving forward to the time when a better system is devised, which still enables one to make a comparison from one year to another. In the light of the debate and other representations that he has received, I hope that my right hon. and learned Friend the Chief Secretary will ensure that the White Paper includes such a calculation in a sensible form and that the House has better information.
Reference has been made to an article by my right hon. and learned Friend's brother, Mr. Sam Brittan, a distinguished writer in the Financial Times. He said:

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"The Armstrong Committee recommended a switch to 'cost terms'. This is best regarded as the nearest equivalent to cash control in an inflationary world. If you like, it is indexation without 'funny money'."
Mr. Brittan takes a hypothetical example of a battleship costing £100 million. On an assumption of inflation of 10 per cent., the cost would be £115 million in a year's time. Under the bad funny money, no increase in expenditure is registered. Under pure cash measurement, it is a 15 per cent. increase. In cost terms, however, perhaps it would be a 5 per cent. increase. That is what has happened to the cost of that item of expenditure over and above inflation.
The definition that Mr. Brittan sets out is convenient for the House to consider. I hope that my right hon. And learned Friend, when the White Paper is published next year, will make allowance for those crucial distinctions so that we can take into account what is happening and have a better basis for adjusting the changes that are taking place.
Mr. Brittan: Does my right hon. Friend agree that, while that is something that we shall want to consider, the article to which he referred did not commend cost terms but asked merely for a more prominent display of the cash factors?
Mr. Higgins: With respect to my right hon. and learned Friend, that is not what his brother was arguing. We all agree that the change to a cash basis is a good thing in terms of Treasury control over spending Departments. We also agree that it would be unfortunate if the old system of funny money undermined that control. None the less, we want to move forward to a better system of analysing the changes in costs and prices, which will enable the House to appraise what is happening.
It is true that the change in the inputs, however it is adjusted, is not a true measure of what one is getting for the money afterwards. That is a more fundamental problem, which is difficult for the statisticians to reduce to simple figures.
Mr. J. Enoch Powell: Is it not true to say that, while the cost method, to adopt the phraseology of the right hon. Gentleman, can be applied retrospectively, we can retrospectively know what that battleship of those specifications cost? It is impossible to apply that principle in future, because we cannot know what changes in the future in real terms there will be in building that battleship.
Mr. Higgins: The right hon. Gentleman is right. None the less, one can make assumptions about what is likely to happen. It is curious that, in a sense, it does not greatly matter how accurate the assumptions are, but it is important that we should get an idea of the direction in which those figures are changing.
Dr. Bray: Does the right hon. Gentleman agree that the right hon. Member for Down, South (Mr. Powell) is wrong about the battleship? We know what the battleship costs in real terms. It costs one battleship. That is what we mean by real terms. We do not know how much we shall have to pay for it.
Mr. Higgins: This argument is becoming a little philosophical, which is always a danger. None the less, one can assume what the change will be in cost terms and relate that to the present situation. I could illustrate that example more easily if I had a blackboard. It is a disadvantage that we do not have such an object in the Chamber. However, I am on dangerous ground.
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With regard to the allocation of resources, attention has been focused on the relative proportions on capital as against current expenditure. In that context, it is important that the Government should seek to control overall expenditure. The balance between current and capital expenditure has been radically changed, partly as a result of the recession—I noted with interest what my right hon. and learned Friend the Chief Secretary said about adjustments for that—and partly as a result of public sector pay. We have made considerable progress, but I hope that in winding up the Minister will comment further.
The run of figures over recent years, particularly with regard to the balance between current and capital expenditure, has been biased unfavourably by the extent to which pay has increased. I hope that the change to the cash system will enable us to take a more precise view.
The tradition is that in this debate we review aspects of the general economic situation. I wish to make a bread point. In a sense, the debate and Second Reading of the Finance Bill come together. The Treasury and Civil Service Select Committee has issued two reports this year. One is on the White Paper. The other is on the Budget, which provided ammunition for Second Reading of the Finance Bill.
I am concerned about the lack of clarity in Government policy on monetary control. In the early part of the Government's period in office I repeatedly stressed that we could control the money supply in one of two ways. There could be a small gap between public expenditure and taxation and a low public sector borrowing requirement. The money supply could be controlled in that way at low rates of interest. Alternatively, there could be a large gap between public expenditure and taxation and a large PSBR, which, if financed in a non-inflationary way, would require high interest rates so that the Government could borrow from the so-called non-bank public. The objective should have been the first. In practice, it was the second. To a large extent that was due to the failure to cut public expenditure. That is clearly brought out by one of the tables published in the Select Committee's report on the public expenditure White Paper.
That having happened, we move to a different situation. It is generally agreed that one can control either the supply of money or interest rates, but not both simultaneously. We have been told consistently that the Government are involved with the control of the money supply. I have always been anxious that effective control should be exercised over the money supply.
A little over a year ago the Bank of England pumped in considerable amounts of money by a system of purchase and resale agreements in the gilt-edged market, which had the effect of keeping down interest rates rather than controlling the money supply. That fact was brought to the attention of the Government and others and was effectively reduced.
This year—this comes out in the evidence to the Select Committee, which will be printed on Friday; it has already been publised in roneo form—the Goverment overfunded the deficit substantially by about £3 billion. They could, had they wished, have controlled the money supply within the original limits. In the event, they went into the market and purchased large quantities of private bills, thereby offsetting the £3 billion overfunding.
Presumably on instructions from the Chancellor, the Bank of England has been reducing the level of interest

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rates. Had the Government not re-lent the money by purchase of the bills but had simply overfunded, they would have been within the money supply targets.
Perhaps the Minister will confirm whether my impression is right or wrong. I get the impression that when it came to the crunch—whether to control the money supply or interest rates—the decision was to keep interest rates down rather than to allow them to rise to levels which would have kept the money supply within the original targets.
It is a strange situation. It all relates to public expenditure and taxation, but, in a more complex way, to the exchange rate. We have had earlier debates about whether the Government have an exchange rate policy. Within broad limits, they now have one. We need a clearer exposition than we have had in the Budget debates or on Second Reading of the Finance Bill of precisely what the Government's policy is. Are they controlling interest rates in relation to the exchange rate or the money supply? To which have they given primacy? One cannot control interest rates and the money supply simultaneously. I raise that point because it is important, and by tradition we raise broader issues as well as the philosophical and pedantic ones to which I referred.
The move to cash limits is right, but we need to reassert Parliament's demands for information on what is happening to the spending programme in figures that are meaningfully comparable over a period of years.
5.55 pm
Mr. J. Grimond: I do not intend to follow the right hon. Member for Worthing (Mr. Higgins) in stirring up once again the endemic trouble and strife between the Chief Secretary and his brother.
However, the right hon. Gentleman raised an important point about the unit of account in the papers that we are considering. The Government point out again and again that, not only in regard to inflation and price rises but to the level of unemployment that they expect, it is not a forecast or prediction. If it is not, what on earth is it? On what basis are we to proceed? I am not averse to having the figures set out in terms of cash, but we must have some way of making a forecast in real terms. How is the transition effected?
The right hon. Member for Stepney and Poplar (Mr. Shore) started his speech by pointing out that the expedition to the Southern Atlantic would cost money and would no doubt affect public expenditure. I agree, but I do not intend to go into matters that arise from that, except to say that the Government might again look at their determination to expend enormous sums of money on an independent nuclear deterrent which many of us believe is now unnecessary.
Secondly, my faith in the Government's judgment will be even more shaken than it is now if they proceed to build an enormous new Navy to carry out such expeditions. It would be padlocking the door after the horse has escaped on a large scale. No doubt some adjustments will be necessary, but I trust that we shall not have a huge naval programme on the principle that such situations are likely to arise all over the world. I am glad to see that at least I have the agreement of the Chief Secretary.
To say the least, the production of our national accounts has always been eccentric. Any company that confused
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income and capital in the way those accounts do and considered the raising of money separately from expenditure would soon be bankrupt, if not at the Old Bailey.
The right hon. Member for Worthing, who has great experience in these matters, made an important point. It is a good thing that we should consider these White Papers now in the spring instead of in the autumn, but we should do so before the Budget and the Finance Bill and we should do so on comparable figures. As they stand, they are not comparable. It is not a comparison of how we spend and how we raise the money.
The Treasury and Civil Service Committee has criticised the lack of information about the services on which the money is to be spent. It rightly states:
"Ministers, Members of Parliament and the public all need to know what levels of service are planned to be supplied in the various parts of the public sector."
We are presented with sets of figures for various programmes. They appear to be derived not by considering what is desirable in each programme but by trying to equate likely demand with the amount of public expenditure that the Government consider that they can sustain. They are largely essays in accountancy.
The Chief Secretary shakes his head. They appear to me, as an amateur, to be essays in accountancy, and not a very convincing form of accountancy. I shall take part of the section on health as an example. Section 9 begins:
"Demands for health services are growing".
Section 10 begins:
"Plans for future health spending must however be formulated with strict regard to the total public expenditure which the economy can sustain."
There is no real attempt to discuss whether the growing needs in the Health Service are justified. The Chief Secretary has referred to the increase in the number of old people. I accept that this has resulted in a growing need that is justifiable. However, there has been no attempt to discuss the general position. Apparently there has been a huge increase in demand for health services and there has not been the money to meet them. On Monday the hon. Member for Horsham and Crawley (Mr. Hordern) said that the staff of the National Health Service had increased in two and a half years by 67,000 and yet there was a waiting list at hospitals of no less than 628,000. It seems that something is gravely wrong and the House has not discussed it in practical terms. It is something that goes far beyond the accountancy of the public expenditure White Paper.
Public expenditure White Papers are already fairly lengthy. The amount of paper that is poured out by Governments increases yearly and I am loth to demand any more, especially if that will result in extra time and effort for the Treasury. The White Paper before us is an elaborate production. However, I should like to feel more assured that in Ministries a rather different examination is taking place of the needs of the various services that we provide and that in due course the results of such an examination will be brought to Parliament.
We should be examining the essentials of Government activities, especially in welfare services, and new methods of meeting them. I do not know whether hon. Members have read a book that has been published by Mr. Le Grand. The book is the latest in a long series of publications which observe that in many of the social services the very people who are paying taxes to maintain the services are those

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who benefit from them, and that really there is a transfer of moneys from one pocket to another with a considerable cut being taken by the Civil Service on the way.
The statistics in Mr. Le Grand's book, which is entitled "The Strategy of Equality", show that it is the comparatively well-off who gain, for example, from the subsidies on housing, transport, and health care. Surely the time has come when we should consider abolishing this cat's cradle of taxation and subsidies with a view to introducing something in the nature of a reverse income tax scheme or, as I would put it, national minimum earnings.
A striking feature of the forecast before us is that public expenditure at market prices as a proportion of gross domestic product is now over 40 per cent. It has been rising even under the present Government. I can remember the days when Conservatives and many others said that if the proportion rose above 30 per cent. the economy would be unmanageable. Although the Chief Secretary has said that he expects the proportion to fall next year, it is a fact that it has been rising over the past two years.
I accept that our kind of public expenditure at market prices as a proportion of gross domestic product is not unique in Europe. There are other countries where the proportion is as high. I accept that it is caused in part by the heavy claims of unemployment. The right hon. Member for Stepney and Poplar said that a high number of unemployed will inevitably increase Government expenditure. However, the proportion of public expenditure to which I have referred is a matter that should concern us. It appears that we are becoming inured to a high proportion of Government expenditure against GDP that will be extremely difficult to sustain.
The Government wish to take credit—the Chief Secretary mentioned this today—for reducing the number of civil servants. Some of the reduction has possibly been achieved by sleight of hand. As I said following the Budget Statement, I believe that we should have new methods for paying for some of the services that are included in the White Paper that count as Government services.
It is alarming that when cuts take place they fall largely on capital and not on consumption. This has been going on for several years. In page xiii of last year's report of the Select Committee on the Treasury and Civil Service it was stated:
"One cause of the past decline has been the relative ease with which, when spending cuts are required, capital spending can be reduced. Irrespective of what political view is taken about overall public spending as a proportion of GDP, the Committee believe that the decline in capital spending relative to current expenditure should be halted and reversed."
That view is repeated this year and it is said that no improvement has been made. I do not believe that it is desirable to pour money into capital expenditure projects of any and every sort. The reason why investment has been so low is probably due to the sluggishness of the economy. I do not advocate that the Government should back every capital project that is brought before them. However, we should take not of what the Committee, which is represented by all parties, has said for two years. It is obviously easy, especially in the local authority sector, to cut capital expenditure. It is much easier to do that than to get rid of staff or to cut current expenditure. The Government should give more of their attention to this area of public expenditure.
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In the local authority sector the Government have warned of the need to economise. The method of local authority finance does not encourage economy. The grant system produces a direct incentive to spend as much as possible so long as the Government will pay a high proportion of the expenditure. Local authorities should realise that all parties are carrying out a re-examination of possible methods of raising local government finance. Whatever changes are made to the rating system and irrespective of whether we have the introduction of local income tax, there will be a need for more money to be raised locally. I am not certain that the local authorities appreciate that. They seem still to be entering into commitments with Government approval that will have to be paid for over many years. They will not be able to look to the Treasury for the removal of these obligations.
Mr. Nigel Forman: Prudent local authorities, such as Sutton, examine capital projects carefully, although they may appear desirable, because they have to consider the recurrent revenue implications of the projects.
Mr. Grimond: I am glad to hear the hon. Gentleman say that. I do not want to say that all capital expenditure by local authorities should be cut, particularly at this time. it has been said that high unemployment provides a way of creating employment. I am glad to hear that authorities appreciate that it it is unlikely that the new system, whatever it may be, or changes in the present system of local finance, will mean that they can look to the Exchequer for as much money as they get from it now.
Special indexation is important for local authorities as well as for Government. I suspect that it will soon be extremely difficult to raise money at fixed interest unless there is indexation. This is something that will spread throughout the market. If inflation continues at the rate that many think is certain, there will be a heavy burden on generations to come.
There is a need to examine how public expenditure is to be controlled, and so far we have not found the answer. As the right hon. Member for Worthing has said, we want more information on how the Government are managing the economy. I found the right hon. Gentleman 's concluding remarks extremely interesting. We need to know far more about what would happen if a rather looser hand were placed on the public sector borrowing requirement. Would that, as the Treasury model indicates, yield a considerable amount of employment without any great increase in inflation? These appear to be matters on which the House needs further information.
The time has now come for a radical reappraisal of the functions of Government. At the moment they are unable to discharge their obligations. The happy prophecies of Beveridge have come to the end of the road. There is simply not the money available from taxation. There is not the elasticity of tax resources to pay for the great increase in social services that we all consider necessary. Therefore, we must look at other resources. I should like to think that the Government will continue to try to raise more money for the nationalised industries from the equity market, and, whether they remain nationalised or are denationalised to some extent, to take that off the PSBR.
Mr. Straw: Does what the right hon. Gentleman said about the Beveridge promises having come to the end of the road mean that he does not take the view—which was

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a central part of the Beveridge report—that the Government should regard it as a duty to maintain full employment?
Mr. Grimond: It is absurd to say that the Government have a duty to maintain full employment. They are not maintaining it. It is like King Canute's courtiers. He might tell them to tell the tide to go back but the tide sticks true. Governments can say what they like. They can say that they can bring sunny weather this summer. It is a preposterous question and always was. Governments cannot maintain full employment in every case. There was not full employment under the last Labour Government and there will not be under this. It is part of a Government's duty to try to maintain as stable a level of employment as is reasonable, bearing in mind other claims that they have, such as stopping inflation. There is a great deal to be said for the proposition that was put forward by Professor Meade, that a more consistent Government policy on the gradual expansion of the money supply without explosive breakaways might increase employment. For a Government to say that they take responsibility for maintaining full employment always seems to be the sort of preposterous thing that only Governments dream of saying. The sooner they give it up the better. It is their business to reduce unemployment. At the moment, in order to undertake a certain amount of capital investment, they are reducing it. If I were the Government I would be chary of saying that I could maintain full employment for all time whatever that great Liberal Lord Beveridge said. I am not sure that he did say that.
Mr. John Major: Does the right hon. Gentleman recall that the Beveridge projections never anticipated that the cost of the National Health Service would exceed £200 million in 1945 terms?
Mr. Grimond: Of course, Beveridge defined full employment as having a quite large amount of unemployment, and so have all Governments. Certainly, Governments have a strong duty to act on the market so that maximum employment can be guaranteed. I do not think that they can undertake to maintain full employment in all conditions if that means an unemployment rate below 3 per cent. or even perhaps 5 per cent.
We should look at the way in which these various subsidies and services have grown up. Most services are essential and must be kept going. My complaint is that they are not being kept at a sufficiently high level. There is a great deal to be said for turning over some of the aid to direct help to incomes, either by reverse income tax or by minimum earnings. We should try to get away from the endless different forms of subsidy that are supposed to help different categories of people and which in many cases are expensive to administer, and often do not achieve their aims.
6.14 pm
Dr. Jeremy Bray: There is a lively and active interest in public expenditure debates nowadays. That is partly because the public expenditure White Paper is subject to some examination by the Treasury and Civil Service Committee. The right hon. Member for Worthing (Mr. Higgins) ventilated some of the arguments that were brought out earlier.
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There was a time when the Government could stand a defeat on the vote on the public expenditure White Paper and press on regardless with all the programmes contained therein. Previous Governments did that, but I do not think that it will be so easy today. The Chief Secretary tried to argue that while there have been palpable failures in the control of public expenditure, matters have looked up since he took control. That argument is not borne out by the figures. My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) drew attention to the fact that the March 1980 White Paper was not included in the comparisons in the first table in the published White Paper. It is equally relevant that the Chief Secretary, when he said how splendidly he had been controlling the level of public expenditure—because the outturn in his first year of control, 1981–82, would be more or less spot-on on the target set in last year's White Paper—failed to take account of the fact that the decisions for which he has been responsible during the past year relate principally to public expenditure in 1982–83, not 1981–82. If we look at the outturn there, compared with the planned total for 1982–83 in last year's White Paper, there has been an increase of about £5 billion.
I do not, for one moment, argue that there should not have been that increase. However, for the Chief Secretary to say that there is a virtue in sticking to the planned figures and then, on the decisions for which he has been specifically responsible, to depart from them in this way, underlines the muddle that the Government have got into the operation of their public expenditure planning system. They have been unable to fulfil their programme. Their objectives in that programme had faults and the programme was wrong anyway.
What should the strategy be? If it is wrong to criticise the Government for departing from targets that they had mistakenly set themselves, by what arguments should the Government plan and control the course of public expenditure during this and future years?
It is a highly uncertain world and a whole lot of events can hit one. However, what needs to be made clear, is how one responds to those unexpected events. Past assumptions on which the Government have turned their back were that the real value of programmes should be maintained and accommodated in an increase in the current price of those programmes. However, the doctrine now is precisely the opposite—that the cash value of programmes is frozen and stuck to all costs. The Government are already acknowledging that that is inapplicable over wide fields of Government expenditure—certainly those which are not cash limited—and they will find that the number of areas which cannot be cash planned are even wider still.
Every time I try to argue about how to accommodate uncertainty and say that it is impossible to do it without reference to the full planning apparatus that the Treasury has at its disposal, in particular the use of the Treasury model, the Chancellor displays his crashing inferiority complex on these matters and launches into a personal attack on myself, as he did at Question Time the week before Easter. However, that does not deter me in the least from arguing that the declaration of objectives that the Chancellor adopted is extremely important. It is important to set objectives, not only on the final objectives of inflation and unemployment, but on intermediate objectives. The setting of those objectives should not be for specific figures such as the 8 to 12 per cent. on money supply, or the £10 billion on PSBR.

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The objectives should be stated in terms of how much unemployment we are prepared to put up with to reduce inflation by 1 per cent. If trade-offs were systematically stated, we would know how to adjust to the unexpected. We would still retain a high degree of discretion and we should still exercise political judgment, but such a statement of objectives would greatly clarify the way in which Departments operate and in which markets respond to the present uncertainties of Government policy.
If we were to state the priorities, the Government would be unable to justify the present level of public expenditure. The present squeeze is quite unjustifiable. That is true whatever weight the Government may place on the reduction of inflation and whatever the time period. Indeed, that was clearly brought out in the Government's paper to the National Economic Development Council. The paper was withheld from publication, but is available in the the Library. If the Government were to follow the logic of the figures in that paper, public expenditure would be much higher than it is.
However, a price of some kind must be paid some time in the increased likelihood of inflation. A price will also have to be paid in the private sector and in the balance of resources used by the public and private sectors. The balances against inflation and between the public and private sectors are the very considerations that should be properly and robustly formulated. My right hon. Friend the Member for Stepney and Poplar outlined the result of such trade-offs in his pre-Budget speech. He argued that an increase in public expenditure should be matched by a very big reduction in employers' national insurance contributions. It is implicit that the number of unemployed knocked off the register could be greatly increased if there were some wage restraint.
The Chancellor of the Exchequer took up that point about wage restraint. In his NEDC paper he produced a simulation, showing the benefits of wage restraint and made a point that the Chief Secretary has apparently not grasped. He pointed out that under the Government's cash planning system, the advantages of wage restraint were even greater. The cash limit and the cash planned total mean that if the rate of inflation is lower than expected for any cash planned total, the level of public expenditure in real terms will be higher and the level of unemployment will be lower.
A framework within which the totals of public expenditure can be sensibly planned will not dictate the volume of public expenditure or the balance between different programmes. Why? The impact on the rest of the economy largely depends on the objects of public expenditure. Public money spent on transfer payments, the purchase of imported goods or on the construction industry will have an accordingly different impact on the balance of payments, the current account, the exchange rate and even on the money supply. Each item of expenditure has a different impact on the economy. Therefore, the way in which the public expenditure programme is put together necessarily plays upon the determination of the total.
Consequently, the Government's public expenditure strategy is incomplete without an industrial and social strategy. However, the Government have no industrial strategy. They take pride in the fact that they leave everything to the market. Perhaps they are beginning to repent of the attention that they are giving to nationalised industry investment. However, they totally ignore the industrial impact of their policies in macro terms on the
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private sector. The Government have a clear social strategy. The social impact of their economic policy is highly regressive. The balance of public expenditure damages those who are dependent on the Welfare State and the impact of their economic policy hammers, in particular, low paid and manual workers, whose earnings fluctuate far more with the level of economic activity than those of the white-collared, salaried, middle class.
The Government have followed an economic strategy that does not include an industrial strategy and that has a highly regressive social content. As a result, they have an extraordinarily contorted attitude. The most public evidence of that is the imbalance between capital and current spending. That is revealing not only in terms of their wisdom—or lack of wisdom—in provision for the future, but in terms of the extraordinary pressures placed on those in local authorities and elsewhere who have to decide between capital and current expenditure. There is no discretion. Any discretionary area has to go—whether it is housing modernisation, school books, or the modernisation of British Rail. The consequences for the future quality of life in Britain are appalling.
If we are to have a Government who base their public expenditure plans on a proper social and industrial strategy, the design and implementation of that strategy cannot primarily be a matter for the Treasury or for the central Government Departments but must primarily be a matter for those in the field. If we told those in local government, in the education system and in the National Health Service that resources were limited, but that we believed that they had a better idea than anyone else of how to run a tight ship, we would receive a constructive response. If we asked them to tell us the appropriate management system in, for example, the National Health Service to give good value for money, the pattern of spending would be quite different. There would he much more emphasis on preventive medicine and on delivered personal services and less on organisation and bureaucracy. However, because we have centrally planned and departmentally administered programmes, rather than managerially devolved programmes, our public expenditure system is out of control.
Mr. John Townend: Does not the hon. Gentleman agree that local authorities have such autonomy? They are not dictated to from the top about their management systems. Does not the hon. Gentleman agree that local authorities have exceeded their spending limits and have often been guilty of far more extravagance than the National Health Service?
Dr. Bray: That is not the story that is heard nowadays. I am talking not about Labour councillors, but about responsible officers for major local authorities. I invite the hon. Gentleman to talk to Mr. Robert Calderwood, chief executive of the Strathclyde region. That is the biggest local authority in the country. I invite the hon. Gentleman to ask him what the Government's measures have done for financial responsibility in local authorities. They have gravely undermined it. If we are to set up devolved management systems in the public sector, we must put much more emphasis—as the Chief Secretary rightly said—on output measurement. I refer to measures of output that are developed not centrally and not controlled centrally—because they cannot possibly be uniform—but developed down the line and by the people who are to operate them.

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The Government and the Treasury need to know what is going on. In a fumbling way, they are trying to find out. The Treasury is conducting a survey on output measurement. The report of the Treasury and Civil Service Committee—"Efficiency and Effectiveness in the Civil Service"—published recently, shows that the Government and Treasury have covered less than half of public expenditure, and within that half only a tiny proportion has any output measurement supplied to it.
The position now is that output is not being measured and the prospect of it being measured sensibly in the lifetime of the Government is not on. We are stuck with an entirely financial approach to the control of public expenditure, which has no practical impact on the efficiency with which public expenditure is managed.
I hope that the Minister of State, Treasury, who has a particular responsibility in the Civil Service Department, will give a great deal of attention to the practical suggestions that are made in the report on efficiency and effectiveness. Even if the fruits are not reaped by the Government, they will certainly be down to the reputation of the Minister in ways which I am sure he would value.
If we developed a much more devolved approach to public expenditure management in local authorities, in the nationalised industries and in the National Health Service, the impact on public expenditure, on the public expenditure White Paper, and on this type of debate, would be substantial. We would be concerned not just with planning totals stretching five years ahead, but with management systems. We would not be debating the issue against a set of financial accounts in which the figures being debated bear no relationship to the decisions being made. We would be in a position to exert a practical influence on particular programmes.
When the permanent secretary and the financial officials at the Ministry of Defence were giving evidence to us recently, we asked them "If the House of Commons wished to have a vote on the Trident expenditure programme, and wished to have less Trident and more frigates, on which Vote would we exercise that judgment?" The answer we received was that there is no Vote where the House can exercise its judgment. There is only one Vote, which covers maintenance, investment and provision for ships in the Royal Navy. The management decisions that the Government take, and even the political decisions that the Cabinet takes, bear no relation either to the programmes as published in the White Paper or to the Votes as published in the Estimates.
The reform of our system of public expenditure control is a long-running campaign. It has run through every Parliament of which I have been a Member. Reform will not be achieved in this Parliament. I regret very much the backward steps that are taken from time to time. One of those backward steps is this year's public expenditure White Paper. By merely publishing the cash figures, and by its artificial inflation of output measurement when it had no basis on which to justify such statements in terms of actual practice in Government, the White Paper has done the responsible development of public expenditure control a great disservice. Mr. Peter Hennessy, a former correspondent of The Times, described the role of the Civil Service as "male nurses to delinquent Ministers". That type of unhappy result shows in the debate today. Only under a future Government, when we get a combination
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of a responsible management system with the right social and economic priorities, will the sad story that we are debating today in this White Paper look better.
6.34 pm
Mr. Nigel Forman: I do not wish to follow the hon. Member for Motherwell and Wishaw (Dr. Bray) except to endorse strongly his plea for greater efficiency in various areas of public spending and to agree with him on the emphasis that he sought to put on the output of public spending and the attention that should be given to that aspect.
In what I hope will be a short speech, I wish to make three points. My first point relates to some aspects of trends in public expenditure which are of concern to me and to other hon. Members. My second point relates to the composition of public spending. My last point relates to public attitudes towards public spending and what I see as the role of public spending in the economy.
Many hon. Members on both sides of the House now agree that it is disturbing that total current spending more than doubled in cash terms from 1976–77 to 1981–82, and that within that doubling we saw a doubling of public sector pay. That in itself would not be a cause for great gloom were it not for the fact that over the same period total capital expenditure in the public sector increased by only one-fifth and gross domestic fixed capital formation actually fell. I agree with the Treasury and Civil Service Select Committee that this trend must be reversed.
It is equally disturbing, when examining trends, to see the figures for local authority spending over the same period. Again, we find that total current spending doubled in cash terms, whereas total capital spending on goods and services fell by nearly a third. That trend is not healthy in the longer term and needs to be reversed.
It is always difficult in a free and democratic society to have a consistent bias in favour of investment for a long period rather than to allow, which is always easier and sometimes electorally popular, indiscriminate present consumption. None the less, this is an aim to which we must direct our efforts constantly, because the price of inadequate investment, whether in new plant, equipment and machinery or in the education and training of people, will be too high in future and will have serious long-term consequences.
Therefore, although I agree with some of my hon. Friends who take the view that there are some forms of current spending which are eminently desirable both in themselves and in the interests of the wider community, such as doctors, nurses, home-helps and police, I believe that the whole House would be right to endorse the point made in the Treasury and Civil Service Select Committee's report about the disturbing discrepancy between the trend on capital spending and the trend on current spending.
My second point relates to the composition of public spending. All hon. Members know that the composition of public spending, as reflected in the public expenditure White Paper every year, tells us a great deal about any Government's political and social priorities. It is an X-ray of those priorities.
I am happy to see that, under this Government, defence spending should be up so significantly on a sustained basis and I approve of that. Equally, I approve very strongly of the fact that law and order is getting a generous share of

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the available public spending. These are clear priorities of the Government, as they have been of the Conservative Party for many years.
It is fair to say, as the right hon. Member for Stepney and Poplar (Mr. Shore) pointed out, that there are a number of demand driven forms of public spending, such as social security and nationalised industry borrowing, where we get higher spending than was otherwise planned. My right hon. and learned Friend the Chief Secretary referred to these matters as well.
The effects of factors such as demography and the economic recession are ineluctable. I suggest that in such cases it is right for sensible Governments to adjust to reality rather than to seek to adjust reality to their predispositions. However, it underlines the problem for any Government who are seeking to take a responsible attitude towards public expenditure, because only 40 per cent. of total public spending is directly cash limited. The rest is either demand determined or only under what might be called remote control—for example, via the rate support grant and the control which that has on local authorities.
At a time when public sector pay accounts for 30 per cent. of the total of public spending—at the fairly alarming figure of £34,000 million in 1981–82—this underlines one aspect of concern about the composition of spending, which is the rather ambitious nature of the Government's policy in assuming a negative relative price effect with their 4 per cent. cash limits for public sector pay in 1982–83. That assumption flies in the face of all the historical evidence. I allow that it is worth a try, because, as my hon. Friend the Member for Bath (Mr. Patten) is fond of saying, we have to bear down on public sector pay. But the fact remains that it is a fairly heroic assumption. I hope that the Government get somewhere near it. I hope, too, that all the public spending plans are not put out by the unreality of that target.
Mr. Race: Is the hon. Gentleman aware that the relative price effect was negative during the last 2 months and that one of the reasons for it was the decline in the real value of the take-home pay of public sector employees—those whom to some extent the hon. Gentleman has been criticising?
Mr. Forman: I am grateful to the hon. Gentleman for pointing that out, because to some extent it endorses my argument. It is unrealistic to expect that relationship to continue indefinitely in a free society, especially one in which elections have to be held every four or five years.
Finally, I touch on some of the possible ways forward on public spending. It is obvious from what my right hon. and learned Friend the Chief Secretary said and from what a number of other hon. Members have said that we must get better performance and better value for money out of the 60 per cent. of public spending which is either demand determined or under no more than the remote control to which I referred.
In that context, I was glad to see in the Treasury press release put out at the time of the Budget some positive examples of the ways in which the Government were seeking to get better output from public spending programmes and to ensure that output measurements were brought more to the fore in the assessment of public spending. I commend the Treasury for that. I hope that it will continue to give wider publicity to those achievements.
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It is vital to retain more realistic attitudes to public sector pay as we begin to emerge from the worst of the recession and to do something more effective than we have achieved so far on what is called the administration of public spending.
I was concerned to see that in December 1981 my right hon. and learned Friend the Chancellor of the Exchequer said that the administrative costs of central Government were now not far short of 10 per cent. of total public expenditure. He pinpointed that as an area in which further progress needed to be made—progress which need not be made necessarily at the expense of those who rightly look to the public services for benefits and for the provision of services.
In this area the Government will need a combination of correct and responsible policies on public spending and the encouragement of realistic attitudes among the public. In these matters there are devices which can help in both respects. For example, I favour the wider use in the nationalised industries and elsewhere of the Monopolies and Mergers Commission. I should like to see a stronger competition policy introduced by the Government. so that it is not just a matter of political rhetoric but that we see more powers and greater effectiveness for bodies of that kind. I also favour some of the work which has been done in the so-called Rayner exercises and the new idea of an independent audit in local government. In my view, all these are steps in the right direction if we want to control and to raise the efficiency of public spending.
Behind all these matters we rest fundamentally on improved public understanding of the correct priorities in all forms of public spending, and I end by offering the House one or two brief comments on what I believe the main priorities should be.
It is indubitable at this stage that we have to put a higher priority on investment than on consumption. We have to do what we can to restore the respectability of the argument for wealth creation before redistribution, because we all know that when redistribution is done on a zero sum basis, it becomes increasingly difficult for any democratic Government to carry it through, whatever may be the argument for it.
Especially relevant to the Conservative Party is the need to put a more prominent and frequent emphasis on co-operation rather than conflict in all forms of industrial relations. We have seen the disastrous effects of bloody-mindedness in industrial relations in some recent examples involving British Rail and ASLEF and possibly in the near future the National Coal Board and the NUM. We do not want to see that behaviour extended. I hope that satisfactory examples will be set in the Civil Service, and perhaps some encouraging remarks will be made about that before the end of the debate.
There is a vital role for public spending of many kinds in any advanced society, especially on the essential services which only the Government and State agencies can provide. But, at the end of the day, we want to see the development of a more social market economy, to use the German term. By that, I mean an economy in which the Government take on those responsibilities which must be performed and which, if the Government and State agencies were not performing, no one else would provide satisfactorily, but in which the market sector of the economy is encouraged and expanded wherever possible as well. We must have such public spending as we can

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afford without undue inflation. At the same time, we must be prepared to meet the true price of our social responsibilities.
6.48 pm
Mrs. Shirley Williams: It is an astonishing fact about the control that Parliament has of public expenditure that, in a debate which is probably even more important than the Budget debate, very few right hon. and hon. Members are present. That is because of the difficulty the House has in getting to grips with what is involved in public expenditure statements by the Government. That is not just a criticism of the way that they have been presented this year, though I shall say a word about that in a moment. It is to do with the procedure of our control over individual headings of public expenditure.
It is appropriate and right for the House to congratulate the right hon. Member for Taunton (Mr. du Cann) and his Committee on producing an excellent report—one that the Chief Secretary, in a triumph of diplomacy over what might be described as literacy, said that he welcomed. If the right hon. and learned Gentleman had read it carefully, it would have been difficult for the Government to welcome it as a comment on the way that this set of public expenditure plans was presented.
The truth is that the Government's plans are deeply obscure. The Chief Secretary covered himself with his usual sophisticated glory in suggesting that somehow they clarified the situation. However, it is fair to say, as the Select Committee said, that virtually any decent private company would have felt that it had to set out some sort of volume indexes alongside the cash control indexes. That is what we have not got. If we believe, as I and my party passionately believe, in open government, we have to make these things a little clearer to our fellow citizens than they are in this group of documents.
Before I turn to the public expenditure plans, I must pursue the point raised by the right hon. Member for Stepney and Poplar (Mr. Shore) about the Falkland Islands invasion. I shall not pursue what he said about the Royal Navy task force and something that must be in all our minds—whether that task force could have been assembled in 1983–84 as it was in 1981–82. Some of us have our doubts about that.
However, I add one small but very important fact. I do not know whether the Government can give an assurance on this point. There are, in effect, two campaigns in the Falkland Islands—one military and the other diplomatic. Many of us recognise that one of the most significant weapons in the diplomatic campaign has been and is the world service of the BBC. It has done a great deal to gain opinion in the Third world for Britain. This item of expenditure comes up as part of the Government's expenditure plans. We have now seen a great deal of rushing around to restore the cuts so unwisely made last autumn. They were small but significant cuts of just over £1½ million, but I hope that the Government, in their wisdom, will see that such cuts will not happen again. It is significant that the cuts were in Latin American and European services, the very services that we now find we can least do without.
On the main headings, I have two criticisms of the broad strategy of the Government's approach. My first criticism is one that has been made from both sides of the
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House; it is quite simply and crudely that the Government's plans to reduce public expenditure as a share of gross domestic product have failed. That share is today higher than it was in 1979–80. There are two explanations for that, and I shall say a word about them on behalf of my party later.
It is significant that that should be so in the face of all the Government's efforts to try to reduce public expenditure's share of GDP. The simple truth is that the share of GDP now going to public expenditure is the highest that it has ever been, apart from when it reached the same level in the year before the International Monetary Fund took control of our finances in 1975–76. That is significant and we should explore why it should be so.
I shall pursue my second point without grinding too many political axes. The hon. Member for Carshalton (Mr. Forman) referred to the significance of public investment, and I am worried that some areas of saving mean that the country's economic infrastructure is being put at risk. In that respect I shall mention the areas. One is housing, where not only housing construction has been sharply reduced—incidentally, under both Governments—but, which is perhaps at least as disturbing, the level of house improvement and house maintenance is being drastically cut causing the housing stock to decline. The hon. Member for Enfield, North (Mr. Eggar) may shake his head, but I shall give him my arguments for saying that in a moment.
The other area of infrastructure that has suffered a devastating decline in public investment has been that not very glamorous one of water and sewerage. I am sure that the House is aware, and any examination of the subject will drive the point home, that this substantial public service system is close to the point of no return in many of our great cities. It would cost about £19,000 million to restore it throughout to levels that are now widely accepted as appropriate to a modern industrial economy.
Can the Minister say any more about the difference between the Financial Statement's estimates of the deflator in 1982–83 and 1983–84 and the figures now used in the Government's White Paper? Secondly, is he proposing in future to make the kind of retrospective changes that are being made in respect of the the 13 per cent. pay settlement for the police force? That has already led to a re-estimate of public expenditure figures for law and order. Are the Government proposing to re-estimate other parts of the White Paper in those respects?
Further, what is the Minister's view as to the likelihood of the nationalised industries spending the £7·6 billion estimated for them in the Treasury and Civil Service Select Committee report? The question arises since in 1981–82 the final returns showed a 16 per cent. fall on the estimated figure. The reason for that fall remains into this year. It is that the Government expect the nationalised industries to find £6 out of every £7 towards their public investment from their own internal resources and only £1 in every £7 from borrowing. That is a much tougher criterion than even the best of blue chip companies would be expected to have to match.
Do the Government seriously suppose that the nationalised industries will meet that target? If they do not, the proportion of GDP going to public investment will be even lower than the figures already criticised by the Committee. What estimate has been made of the effects of high interest rates on the national debt at a time when

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inflation reduces its true value? What is that figure estimated to be over the next two years? It is a significant figure that has become much more significant over the past two years, and it has a substantial effect on the House's estimate of what is happening in real terms to the growth of public expenditure.
Last year the local authorities exceeded their budgeted expenditure by 7·7 per cent.—some £700 million plus. In his introductory remarks the Chief Secretary somewhat enigmatically said that the Government were determined to claw the money back, but he also said that he would not try to do so in the current year or, as I understood him, next year either. Therefore, how do the Government propose to claw back this "overspending" as they see it? Are they proposing to do so by setting a new trend in local government spending, or are they proposing to do so in a much more brutal and short-term way by once again reducing the rate support grant, as they have done this year with devastating consequences for local government?
It is important that we recognise the extent to which the local authorities are inwilling to dip into their balances, as in circular after circular the Secretary of State for the Environment has constantly invited them to do. Local authorities are now so unsure of the future policies of the Government that they insist on maintaining a margin of safety in the shape of balances. The Government do not want that, and I think that the Opposition parties do not want it either. Most of us would like to see that money spent on housing and local environmental projects, but the money will not be so spent until there is a much more certain pattern to local authority policy than has been established over the past year.
I do not ask the Minister of State to take that from me. The last word on the subject was in The Economist on 17 April, when it said of the Secretary of State's approach to local authorities spending their balances:
"The problem is largely of his own making."
For local authorities planning has simply become impossible.
I wish to refer briefly to public sector investment's share of overall expenditure. It was typical of the way we discuss things in this House when the Chief Secretary, in responding to the right hon. Member for Stepney and Poplar, immediately said "Yah boo, you started it first." It does not much matter who started the process of reducing the level of capital investment. The truth is that, whichever Government have been in power, all of us have allowed political expediency to come first. This means that it is harder to justify a cut in current expenditure than it is in capital expenditure—with devastating consequences. In 1972–73, the level of capital expenditure in general central Government expenditure was 17·8 per cent. By 1981–82, that figure had fallen to 8·7 per cent. Local government capital expenditure over the same period fell from 32 per cent. to 17·1 per cent. The process will continue further in 1982–83, in 1983–84 and in 1984–85 if the Government's plans are carried out. In housing, sewerage, water supplies, transport, roads and other areas, the basic economic infrastructure is at risk.
Mr. John Townend: All hon. Members will, I think, agree with the points that the right hon. Lady makes. However, does she agree that the principal cause of the reduction in capital expenditure and the rise in current expenditure is that, over the last five to 10 years, the rise
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in public sector wages has been generally ahead of the rise in private sector wages and amounts to far more than the country can afford?
Mrs. Williams: There was some increase in public sector wages until a couple of years ago. I accept that between 1970 and 1979–80, it is largely true that public sector wages moved ahead of private sector wages, although that has more recently been reversed.[Interruption.] All hon. Members can look at the statistics, but those are the statistics that I have seen. Even in periods when public sector wages were relatively controlled, as in the first two years of incomes policy from 1975 to 1977, one still sees a decline year by year in the levels of capital investment. Therefore, I do not think that we can fairly put the entire blame on public sector wages. Some of the blame rests with those who made the decisions.
Sir William Clark: The logic of the right hon. Lady's argument is that we should spend more on the infrastructure—housing, sewerage and the rest.. I think that all hon. Members will agree with that. Will the right hon. Lady address her mind to where the money is to come from, in view of the fact that she has criticised the Government accurately for having spent a greater percentage of the GDP than a few years ago?
Mrs. Williams: If the hon. Gentleman will bear with me, his intervention relates to the last part of what I want to say. I shall come to it. I should like to say a few words about housing and education.
On housing, I give a clear indication to justify what I say. In one year, between 1979 and 1980, it is estimated by the President of the Institute of Environmental Health Officers that the number of unfit houses increased by 42 per cent.—a dramatic figure. It is also estimated, if I take the inner city of Liverpool, that the cut in expenditure on improvements and renovations in what is almost the poorest inner city of them all was no less than 21 per cent. between 1979 and 1981. In my own district of Sefton, the cut was 41 per cent. between 1978–79 and 1981–82. What we are seeing is savings on sustaining the existing housing stock at a time when new house construction has been slashed. That cannot make sense to hon. Members, on which ever side of the House they sit. It means that we are simply storing up trouble for the future. As the writers Mr. Fleming and Mr. Nellis in the "Lloyds Bank Review" of this month remark, we are setting up a major housing problem for the middle 1980s at a very fast rate of speed.
Mr. Dan Jones: I wonder why the right hon. Lady, whom I know and respect, concentrates on the cities. Why does she not refer to the large towns? I give one brief illustration. There are houses in Burnley, the constituency I am proud to represent, that were built in lie last century and still exist. Although two Ministers have visited the constituency at my request, not a damn thing has been done. These areas surely deserve a mention.
Mrs. Williams: I would never doubt the hon. Gentleman's concern for his constituency. He make!. a point with which I fully agree. It was a very good speech. When we talk about housing renovation and improvement, we should not just remember statistics. In my constituency, and also in the constituencies of many other Members, this means saying to people that they will live

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in dampness, condensation, infestation and tumbling housing. It is difficult to convince people in these circumstances.
There are two other major crises coming down the track in housing. Both have been mentioned in the past week. One is the rapid deterioration of the semi-detached houses built in the great housing boom of the slump in the late 1920s and early 1930s and now reaching the end of their natural life. The other is the major crisis of the system-built housing of the 1960s. In many areas, those houses are no longer habitable, but people still have to live in them. I wish simply to underline the consequence of the cuts in public investment for that sphere.
I feel strongly about education. The problem is much more a matter of the way in which the cuts have been administered than perhaps anything else. The Government came to office on a manifesto that stated:
"We shall promote higher standards of achievement in basic skills".
The truth, as Her Majesty's inspectors point out in their current report, is:
"Unless the level and pattern of staffing and the provision of other resources for primary schools can be maintained in such a way that they allow broad coverage of the curriculum and both expertise and time for teachers to deal with the range of learning needs identified, it is unlikely that existing standards, particularly in numeracy and literacy, will be maintained."
The inspectors say of secondary schools:
"These characteristics"—
they are talking of the cuts—
"add up to a serious threat to the maintenance of standards and to desirable improvements."
The speed of the rundown in education, not least in higher education, makes no administrative sense. We are spending money by insisting on making cuts at a speed to which the system cannot adjust itself.
Mr. Race: If the right hon. Lady is so concerned about cuts in the higher education sector, why did she, as Secretary of State, initiate them? If she doubts that—she denied it in the Budget debate—I refer her to page 38 of volume 2 of the White Paper where her deplorable record on capital spending in universities is plainly set out.
Mrs. Williams: The hon. Gentleman will also know that, in the year when I left office, we restored a substantial part of the current cuts. We left behind an operating margin of 15,000 teachers and fresh provision for in-service training. All that has now gone. The hon. Gentleman should have the honesty to admit that there is more than one side to the point he has made.
The cutting of student numbers within a given figure of expenditure on higher education is absurd. There is no reason why the universities should be forced to be inefficient. They should be encouraged to be more efficient and to take on as many students as they can. On the question of where the money is to come from, I believe that the Government must consider the consequences of the ratchet effect of demand-driven public expenditure. This is why public expenditure has risen from 41½ per cent. in 1979–80 to 44½ per cent. at the present time.
It is the demand-determined expenditure on social service benefits, on Manpower Services Commission expenditure on youth and other forms of employment support, on family income supplement and on means-tested benefits for children and others where there has been an explosion of expenditure over the last three or four
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years. Year by year that increase has gone up and up. We are now spending £13,000 million on maintaining current levels of unemployment. There comes a point at which the Government try desperately to get down the public sector borrowing requirement by reducing expenditure in ways that create a fresh demand on the public sector borrowing requirement by passing through the process of making people unemployed. This is what has driven all the Government's estimates awry.
The Government have only two ways out. One they have partly pursued, which is to cut the benefit going to the unemployed. I am one Member of Parliament who is extremely frightened about the social consequences of that. This is the first year in which earnings-related supplement comes to an end and in which we have over 1 million who have been unemployed for so long that they will not receive earnings-related supplement and will run out of redundancy payments.
The second point, a very serious one, is that the Government's obsession with the public sector borrowing requirement is counter-productive. I should like to quote the words of the Clare group in the "Midland Bank Review" for winter 1981:
"It is the pre-set paths for the PSBR which are the most immediate obstacles to fiscal action intended to create more jobs"
It has always been a characteristic of a well-run economy that the public sector borrowing requirement is a form of buffer to economies as they rise and fall. It is normally accepted that they rise proportionately in a period of massive recession as they fall in a period of boom. The Government are chasing their own tail in terms of public expenditure by insisting upon this rigid approach to the PSBR. That is why I shall be advising my colleagues tonight not to take note of or to accept the Government's plans.
7.13 pm
Mr. John Major: The right hon. Member for Crosby (Mrs. Williams) spoke convincingly of the decline in public sector investment. We all recognise that as a problem which has continued and in some ways has accelerated year upon year, whichever party has been in power, for the last decade or so. The right hon. Lady made a brave but not completely convincing attempt to explain how the restoration of the programmes might be funded. The net result of her explanation must surely be in both the short and medium term either a substantial increase of taxation or a much larger public sector borrowing requirement.
The experience that we have had with a large public sector borrowing requirement in recent years leads me to believe that if we were to go back down that route we might pay a heavy price in inflation, interest rates and in the consequential knock-on effect on the sterling exchange rate. At the precise moment when—the Falkland Islands apart—it looks as though the economy is beginning to improve and interest rates and inflation are poised to come down dramatically, I doubt whether her policy is a credible posture or that it would have the effect which the right hon. Lady would wish.
I regret that the right hon. Member for Stepney and Poplar (Mr. Shore) is not in the Chamber. He made a convincing but contentious speech; he declined to give way, for understandable reasons of haste, to certain of my hon. Friends who wished to challenge some of his

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assumptions. Suffice it to say in his absence that I doubt that we would accept the premises upon which he based his case. His conclusions were far away from those that we would reach.
There is one aspect of the right hon. Gentleman's comments that I am not prepared to let rest—the crocodile tears normally shed by the right hon. Member for Manchester, Ardwick (Mr. Kaufman) but which we had today from the right hon. Member for Stepney and Poplar on the subject of housing expenditure. I should be a little more impressed with the Labour Party's concern about housing expenditure if it were not a fact that for each of the five years of its administration it reduced the level of public investment on housing.
Again, I should be more impressed if, for completely dogmatic reasons, the Labour Government did not seek to prevent the success of the shorthold experiment in the Housing Act 1980 that might provide much rented accommodation for people who needed it.
Mr. Race: One in London.
Mr. Major: That may well be so. I will tell the hon. Gentleman why there is one in London. It is because the principal Opposition party has threatened to kill a scheme and terrified landlords out of bringing on to the property market accommodation that people in bad housing could use. That is precisely the reason. I am glad the hon. Gentleman accepts the responsibility for the fact that many people will remain in those cold, damp houses about which the right hon. Member for Crosby talked. Let us have no more crocodile tears from the hon. Gentleman.
Mr. Sydney Chapman: Does my hon. Friend accept that in London of all places there will be an increase in demand for single person accommodation or one-parent family accommodation? It is in places such as London that we need shorthold tenure and the guarantee that it will he a permanent feature.
Mr. Major: I accept entirely the point my hon. Friend makes. Indeed, I would extend it a little further. There is also a vast number of young people who tend to be an itinerant and moving population who might also benefit from the provision of shorthold because they find themselves in poor housing accommodation. If the hon. Member for Wood Green (Mr. Race) can smirk at their being in poor housing accommodation, I hope his constituents know about it.
Mr. D. N. Campbell-Savours: The hon. Gentleman has referred to the reductions in expenditure which, he said, took place under the Labour Government between 1975 and 1979. Does he not recall that the real resistance to housing development came from Conservative-controlled authorities which, despite relentless pressure from the Labour Government and resolutions from Labour groups in the authorities, still refused to press on with housing construction programmes?
Mr. Major: I am afraid that the hon. Gentleman will not get me to concede that point because I do not accept it. If he looks at the provision made in capital in successive White papers, quite apart from the physical starts made, he will discover that the provision for capital expenditure was not made by the Labour Government. However he may wriggle, that cannot be ignored.
Our debates on public expenditure White Papers in recent years have tended to turn, regrettably, to a
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touchstone on philosophy. They have become a litmus test of where one stands in the political landscape. The further to the Left one is, it is said, the more one wishes to spend. I regret that, because, for a variety of reasons, I do not accept that it is an accurate reflection of opinion in the House.
I join forces with my right hon. Friend the Member for Worthing (Mr. Higgins) and the right hon. Member for Crosby in the belief that this debate is far more important than the attendance in the Chamber at the moment might indicate. It may not have the glamour of the Budget. The public expenditure White Paper may not determine taxation and raise revenue; it does precisely the converse. It sets out and determines how the revenue will he spent. It governs the level of public services to a substantial part of the economy. It governs to a degree—here I join forces with some Labour Members—the development or decay of some parts of our national infrastructure. It determines the capacity of our education, social and other services to meet the demands that are made upon them. Moreover, the White Paper is critical to the nationalised industries and to local government.
This is an exceedingly important debate. The policies that underlie the White Paper are important for all those reasons of expenditure as well as for determining the effect that that expenditure may have on inflation, interest rates and other items within the economy. Those policies, therefore, are an important arbiter of demand, of investment, of employment prospects and of inflation. The White Paper is far more than simply a paper for accountants to look at this afternoon. I hope that we shall continue the debate with that carefully in mind.
One comment that has been repeatedly made, and I suspect will be made again during the debate, concerns the relationship in the national accounts between capital and current expenditure. There has been a general conviction that there should be more capital expenditure, however financed, and perhaps lower current expenditure. I understand that as an admirable principle, but it is one that in many respects we should treat with a certain degree of caution, because in the context in which that argument is advanced current expenditure tends to be regarded as bad expenditure while capital expenditure tends to be regarded as virtuous. I draw a different distinction. I believe that categorisation is false.
The point about expenditure is not whether it is capital or current but whether it is necessary and desirable. For example, I should not regard at this moment capital spending on a new town hall as necessarily virtuous. However, I certainly should regard current expenditure on police forces or the increase of medical staff within the National Health Service as virtuous. We should do well to bear those distinctions in mind.
In the White Paper this year there is a projected current expenditure of £115 billion. Differing views have been expressed about whether that should be increased or should be slightly lower. I find it exceedingly difficult to see how that total could be significantly reduced—and I stress "significantly".
When we look at the breakdown of the figures and bear in mind the plurality of our society, we see clearly that there are four programmes, none of them easily capable of contraction, which take up nearly £73 billion of that expenditure. The social security programme is £32 billion, half of which is spent on the elderly. When we project that further, bearing in mind, first, that there will be more

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elderly people, and, secondly, that they will—we trust—live longer through better medical attention, we see that that demand on the national Exchequer will increase, not decline, in years to come.
Defence expenditure is over £14 billion, and the claims upon that at present and for the future are surely obvious. Health expenditure, in the wake of a health reorganisation which I entirely welcome, is £13½ billion, but still with the long waiting lists to which the right hon. Member for Orkney and Shetland (Mr. Grimond) referred. We see little realistic chance of that expenditure reducing. As the hon. Member for Motherwell and Wishaw (Dr. Bray) suggested, there may be savings to be made within that programme, but if they are made within the NHS they could well be used to meet other demands that already exist but are not met within that programme.
Education has a projected expenditure of £12½ billion in the current year. Education has already taken significant reductions. I bear in mind and understand the declining rolls, but the reduction in expenditure does not necessarily correlate in precise proportion to the decline in the number of pupils in our schools.
Therefore, I doubt very much whether there is a great deal of scope in a significant part of the White Paper for reductions now or in the future. As we project what will happen with our expenditure patterns in future years, we shall do well to accept that now, and build upon it as a premise, as we calculate what our future structure of accounts will look like.
Mr. Jim Craigen: Does the hon. Gentleman see no scope to reduce the amount of public expenditure going towards sustaining unemployment? Does not he agree that the Government will have to do that in order to get more people into paid employment, in order to continue to fund our system of social security, which otherwise is in danger of collapsing in another 10 years?
Mr. Major: The hon. Gentleman anticipates me. Had he waited a moment he would have seen a distinction that I would draw within the half of the social security budget that does not relate to elderly people, to make precisely the point that he has made. We all wish to see a reduction in that element of social security expenditure, though I suspect that in the short term that might be reflected by a reduction in the social security budget but perhaps an increase in the employment budget, or an increase in capital expenditure. Therefore, I think that the basic expenditure upon which future accounts will be built is unlikely to be shrunk dramatically, for the reasons that the hon. Gentleman suggests.
Of course, there are some cuts to be made. What I am saying is that I do not think that they are any longer significant when set against the scale of the expenditure that seems surely to follow us year upon year. There is further scope in local authority staffing levels. A 3 per cent. cut in three years is a puny return. When we consider that of the 70,000 people who have left local government service 60,000 were in education alone, we suspect that there are other areas of local government where there may be significant savings to be made, especially in administrative and other staffs. There is of course scope for a continuing reduction in the Civil Service. I welcome the movements that have been made in that direction and trust that they will continue.
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To counterbalance that in terms of revenue-raising, I entirely support the sale of assets that has taken place. I trust that that trend will continue, controversial though it may be among some Members of the House. It will raise an estimated £700 million this year, and far better use can be made in future of the money remaining within the public sector once that, too, is raised. That is entirely right.
Mr. Maxton rose——
Mr. Major: I do not wish to give way, because if I do so I shall be inordinately long, and a number of other hon. Members are still waiting to speak.
I doubt that there are significant savings to be made within the present expenditure pattern. However, the converse question remains to be asked: what is not in the White Paper in terms of expenditure that perhaps should be? I do not think that we can realistically consider that until we consider the resources available to put it into the White Paper.
The background to an increase in expenditure at present does not seem to me to be very attractive. We certainly have some promising signs. The economy, patchily perhaps, appears to be emerging from the depths of the recession that has engulfed it over the past 18 months or so. There has been a significant fall in the oil price, which may be bad for revenue to the Exchequer but which I believe is undiluted good news for industry and for employment prospects. Above all—here my right hon. and learned Friend the Chancellor can take great personal credit, though it is rarely accorded to him—there has been a real and sustainable fall in inflation that looks as though it will continue in the months to come.
That is all excellent news. What is less excellent is the fact that we are operating from a very low base of industrial productivity and profitability, and consequently a very low tax yield from industry. It is also unfortunate that we have seen in recent years, as a counter-inflation measure, which I supported, substantial reductions in real incomes in many sectors of the community and the dangers that they will leave behind them of pent-up demand for wage inflation in the years to come. As has been pointed out, and as no one will deny, public spending remains at too high a proportion of the gross national product.
Against that background, whatever desirable schemes for expenditure may be suggested—we all have a whole kitbag of them—it would be difficult to justify that extra expenditure unless we were prepared to tax for it or to assume that the public sector borrowing requirement would not have disadvantageous effects on other parts of our economy. I do not make that assumption, and I do not believe that we can significantly increase taxation, so I fear that there is at present no scope for significantly increased expenditure.
There is one area in which expenditure may in net terms be substantially smaller than it seems in gross terms. I refer to some elements of construction expenditure and especially improvement and renewal. I welcome without qualification the extra £100 million provided at a late stage in the public accounts this year for improvement and renewal. I also welcome the expected 13 per cent. increase in capital expenditure on construction to £10¼ billion in the present year.

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I hope that the money that has been set aside this year for construction will be spent on construction and that this time next year we shall not find that there has been a substantial underspend on housing.
I turn now to the change in the planning of the White Paper from volume to cash terms. I shall deal with the effect that it may have on some aspects of local government. I welcome the change to cash terms rather than constant prices at an historical date or volume, as we quaintly call it. Planning in volume terms invites an increase to compensate for inflation each year plus a real increase in the size of the programme. That is inflationary and the record has shown that on balance it was.
The question that remains and cannot be answered without experience is whether cash planning will be better. Beyond doubt, it will impose stricter discipline on spending programmes. It is important, however, that it should be seen to be fair. Given that local government now feels exceedingly embattled, it is important that planning should be seen to be fair to local government. In that context, I shall examine local authority expenditure in two regards.
Last year, local authorities overspent substantially—I understand by £1·3 billion. It is now intended in the accounts for 1983–84 and 1984–85 that there will be a substantial reduction—3 per cent. in the first year and 3½ per cent. in the second year—in real terms in local authority expenditure. Additionally, I understand that the Treasury is intending to claw back the predicted underspend of 6 per cent. in the current year by an across-the-board method of clawback.
I have no objection in principle to the general cutback in expenditure, but if cash planning is to be fair and is to be seen to be fair I simply do not believe that it is reasonable to proceed with an across-the-board clawback that will affect even those local authorities that have remained within the set planning targets. They already have to cope with two planning targets—an historical one and an assessed target, the grant-related expenditure assessment. As from the White Paper, they also have cash limits.
Many local authorities—I can vouch for Cambridgeshire—will make great efforts to meet that target. Others will not. In those circumstances, when one looks back at the outturn for the current year, it will seem grossly unfair to authorities that met their targets if there is an across-the-board clawback to compensate for those that have overspent deliberately or have made no realistic attempt to hold back their levels of expenditure. When that clawback is applied to county authorities, it must be borne in mind that the savings overwhelmingly must come from education and police service budgets. In county budgets, there is no realistic alternative to reducing those budgets if there is to be a significant clawback.
After the introduction of cash planning, we would be wise to re-examine the principle of across-the-board clawback. Perhaps we should substitute a more refined system under which the guilty are charged and the innocent are not involved. It is in the Government's interests to do that. I fear that if local government anticipates general clawback, that anticipation will invite general overspending and will be precisely the converse of what the Government seek.
Mrs. Shirley Williams: The hon. Gentleman seems to be quite clear that that is the Government's intention. I did not read that much clarity into the Chief Secretary's statement. Are his remarks based upon other sources?
Mr. Major: I shall be delighted to be corrected by the Minister when he replies. I can think of no hon. Member who would be happier to be corrected than I. I have stated my understanding of the likely position. It has been reached as a result of discussions with local authorities. If I am incorrect, I trust that I shall be put right before 10 o'clock tonight.
I turn now to pay negotiations that are determined for local government but at a national negotiating level. Many of them are critical to the pattern of local government expenditure. The teachers' award, which is currently going through arbitration, the police award, the firemen's award and the manual workers' award all have a tremendous effect on local government expenditure. The White Paper recognises 4 per cent. for pay. That is fed into the grant-related expenditure assessment targets. I am not absolutely clear about the last sentence of paragraph 26 of volume I of the White Paper. It refers to cash limits and states:
"The remaining 20% is local authority current expenditure: the rate support grant, the Government's main contribution to the financing of such expenditure, is subject to a cash limit, but not the expenditure itself."
I shall pursue what precisely that may mean. Does it mean that rate support grant could be amended by increase orders to accommodate wage settlements that for good reasons exceed 4 per cent., or does it mean that in no circumstances will increase orders be introduced to compensate for such wage settlements? Whatever the answer, it is critically important that local authorities should be aware of that at the earliest stage. If they are aware of it, I confess to my ignorance because I am not.
If the answer be "No, increase orders will not be applied either in part of or in whole", will the GREA targets be amended to relieve individual local authorities from penalty because of a national award? If the GREA target levels are amended, local authorities may rate and raise their own funds, but if the targets are not amended local authorities may move into penalty for circumstances over which they have little or no control. That is of some concern.
I emphasise those points because in counties the only sources from which emergency savings can be made are the education budget and the police service budget. If necessary savings are to be required from those sources, the sooner that they are planned for the better as emergency savings from those two budgets cause special difficulties.
Notwithstanding the qualifications and questions that I have raised about the future of local authorities under the guidelines, cash limits and GREA targets, I shall have no difficulty in supporting the White Paper. It is right to reduce public sector manpower. It is right to increase cash expenditure modestly. I welcome the £5 billion increase that has been put into the accounts this year. It is right, in general, to claw back local authority expenditure, though not by universal clawback from those virtuous authorities that remain within the Government's targets. It is right on balance to retain the principal thrust of Government policy which was, is, and, I trust, will remain the lowering of inflation as rapidly as possible so that investment and growth can take place in a satisfactory economic climate.

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The White Paper is an extension and a refinement of the Government's previous plans that are well worth supporting. I shall have no difficulty in supporting them.
7.40 pm
Mr. Reg Race: The speech by the hon. Member for Huntingdonshire (Mr. Major) had an overwhelming failing. It addressed itself to some of the individual components of public expenditure, but not to the macro-economic effects of the Government's economic policy or, in particular, to the effects of their White Paper.
The White Paper and the Budget will further increase unemployment. They will lead to a modest level of economic growth—about 1½ per cent. this year. They will not reduce inflation dramatically and they will lead to further stagnation. That is the prescription for which Conservative Members are being asked to vote this evening.
Before I discuss the central features of the Government's White Paper, I wish to comment on the remarks that the hon. Member for Huntingdonshire made about education staffing. The hon. Gentleman referred to the 60,000 drop in education staff as a cut in administrative staff.
Mr. Major: I did not.
Mr. Race:Hansard will show who is right. The truth is that the cuts were made not in administrative staff, but in school meals staff. When the hon. Gentleman advocates cuts in the numbers employed in the education service, he is talking not about some faceless bureaucrat sitting at a desk in the town hall, but about people who serve meals to children.
Mr. Major: The hon. Gentleman seems to have the wrong point. Perhaps I was not as lucid as I hoped. Before the hon. Gentleman pursues his argument further, it would be prudent for him to read Hansard to see what I really said.
Mr. Race: The hon. Gentleman used the words "administrative staff" when referring to the 60,000 drop. If he withdraws what he said, I should be grateful.
The main myths perpetuated by successive Governments about public expenditure are five. First, we are told by the Government that public spending in Britain is too high. My basic proposition, and that of the Labour party, is that it is not too high. Our public spending in many cases is lower than in other Western industrialised countries. That is true particularly if one takes out the nationalised industry sector from our public accounts. It is included in public spending as a proportion of GDP in Britain but it is not in many other Western industrialised countries. That argument for reduced public expenditure is shot out of the water.
The second myth perpetuated by the Government is that public sector wages are too high. They are not too high. In real terms they have been reduced since 1979. For example, the wages of a grade 1 ancillary worker in the National Health Service would have to be increased by £19 a week to restore them to the level that they were when the Clegg report was implemented in 1979. That is true of many other public servants, including nurses, teachers and other local authority staff.
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When one compares the rates of pay of some public servants with those outside the public sector, one is driven to the conclusion that public servants are badly paid in relation to the social value of their work. That second myth is shot out of the water. Our public and civil servants are not overpaid, except in the imagination of Conservative Members who want to give wage increases only to judges, lawyers, policemen and Members of Parliament.
The third myth perpetuated by the Government is that our major international competitors spend less than we spend on the public services. They do not. Some spend more and some spend at the same level.
The fourth myth perpetuated by the Government is that there have been no cuts in public services. It is said that, because the Government have failed to control public expenditure in their own terms, there have been no real reductions in levels of services to the public. That is outrageously untrue. Hon. Members who represent urban constituencies know plainly the effects of the Government's policies on living standards, social security benefits, housing and a whole range of other issues.
The fifth myth perpetuated by the Government is that local authority spending is out of control and needs to be reduced sharply. The truth is that local authority spending has been cut in real terms by 21 per cent. since the financial year 1975–76. If that amounts to profligate overspending, then meaning is taken from the English language.
Given that the Government perpetuate such myths and given the interesting fact with which we were regaled by the right hon. Member for Orkney and Shetland (Mr. Grimond) that he is not necessarily in favour of a commitment to full employment, what is the Labour Party's task? The Labour Party's task is to re-erect a consensus in support of valid public expenditure. That is the mood in which we approach the debate.
We are interested in supporting valid public expenditure because we believe that without it we cannot achieve full employment and eliminate the public sector borrowing requirements. It is important to mention both issues, because it is plain that the whole of the public sector borrowing requirement is a direct consequence of the economic recession and the slump. If we pursue policies designed to create full employment the PSBR will be reduced or eliminated.
The plain truth that we in the Labour Party know is that in some areas of public spending the Government's policies have ravaged living standards. One of those areas, to which I shall devote most of my speech, is housing. Treasury Ministers and Ministers responsible for housing should sleep uneasily in their beds when they contemplate their records.
In Britain 1½ million dwellings are unfit for human habitation or lack basic amenities. An additional 1¾ million dwellings are in need of major repairs. According to Shelter, more houses are now becoming substandard than are being improved.
In addition to those unpalatable and disgraceful facts, 400,000 construction workers are unemployed and millions of bricks lie idle in Bedfordshire and Northamptonshire. What type of system is it that can tolerate mass unemployment in the construction industry—the highest in living memory—and at the same time condemn thousands of people to a permanent lack of basic housing facilities, particularly in the inner cities?

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What have the Government done? They have said that they will allow another £100 million in the current financial year for additional spending on construction and improvements. What does that amount to? Nobody has told us how many homes that will produce. According to the industry, which should know, between 5,000 and 6,000 homes will be produced by that increased spending. Let us compare that with the fact that there are 1·5 million families on council house waiting lists. It is a disgrace that some hon. Members should put their names to an early-day motion that lauds the Government's policy on housing construction and welcomes the increased housing expenditure, when they know full well that the increased expenditure will have a minuscule effect on the waiting lists.
A second point about which the Government talk continuously when they discuss housing is the capital receipts from the sale of council houses. They say the local authorities are not spending those capital allocations on new housing. They say that council house sales mean that local authorities can replace a proportion of the houses sold by building new ones. The problem is that the Government have made that impossible because, through the Department of the Environment, they have changed the rules whereby local authorities can acquire land. It is now not the case, as it was under the Labour Government, that when a statutory undertaker—such as a water authority or British Rail—disposes of land surplus to its requirements it must offer that land to a local authority for housing purposes. A statutory undertaker can now dispose of the land on the open market and the local authority must compete in that market and pay the price. The local authority may be able to pay the price because it has money in its coffers, but it must then go back to the Department of the Environment to gain approval through the housing cost yardstick in order to build the houses.
One test used by the Department of the Environment to determine whether a local authority can do that is the amount that will be spent on each unit of accommodation. That amount includes not only the materials and labour, but the cost of the land. Therefore, when the Government tell local authorities to build more houses because they have more capital receipts, yet at the same time change the rules whereby land can be acquired and built on by a local authority. they are condemning the people on housing waiting lists to continuous waiting with no action from the Government or the local authorities.
That is all rather abstract for the average person on the council house waiting list. It is abstract for the 10,300 families who are on the waiting list in my borough of Haringey. What are the direct consequences of the Government's housing policy? It means that more people are waiting for accommodation in Haringey. Many thousands are waiting to obtain council house transfers from high-rise flats to houses with gardens because they have children. It also means that the borough must spend a much larger proportion of its housing resources on rehousing homeless families than hitherto.
During 1982–83, it is estimated that the housing emergency group in Haringey will deal with between 1,400 and 1,500 referrals of homeless families. Because of the enormous cuts in the house building programme, which have affected Haringey and other boroughs, the number of homeless families approved for rehousing but who must live in hostel accommodation pending a suitable offer of accommodation is growing rapidly. In June 1981,
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Haringey had only four homeless families approved for rehousing living in hostels waiting suitable accommodation to be made available. In February this year, there were 89 families with children living in hostels, all of whom were approved for rehousing. That shows what a progressive, intelligent authority—one of the worst affected by housing problems—must put up with because of the Government's policy.
When the hon. Member for Huntingdonshire talks about the Government's record on housing, he and other Conservative Members must remember that the Government are now building fewer council houses and flats than any Government since the 1920s—indeed, since Neville Chamberlain was Minister for Housing. That is the comparison that we shall ram down their throats. We must ensure that, at the next general election, that record is fully spelt out.
Of course, many other important social deprivations have been imposed by the Government. Earlier, it was said that the Government must spend substantially more money on the social security programme. As with the family practitioner programme in the National Health Service, the social security programme is demand-driven and not cash limited. Therefore, the Government must pay out benefits to those who require them.
The principle of the Government's policy was set out plainly in the parliamentary answer given to my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) on 18 January by the then Under-Secretary of State for Health and Social Security. The hon. Lady said that the Government's policy meant that, during 1982–83, £1,520 million would be cut from social security benefits by the Government either as a consequence of administrative action or legislation. It was caused either by the abolition of the earnings-related supplement to unemployment and other benefits or by other action that had been taken.
We cannot refer in this debate to the number of people nationally who obtain supplementary benefit, because the DHSS has not yet answered questions put down for answer on Monday which asked for national figures. However, we can see how the Government have been increasing the numbers of people who depend on supplementary benefit in some localities. On Monday 19 April the Under-Secretary of State for Health and Social Security gave a written reply at c.44 of Hansard, to my question about the numbers claiming supplementary allowance in May 1979 and February 1982, the period during which this Government have been in office. I referred to three social security offices in Haringey. At the Archway office, 5,721 people claimed and received supplementary benefit in may 1979. By February of this year, the number had risen to 9,611. At the Wood Green office, the number in May 1979 was 1,432, but it as now risen to 3,726. At the Tottenham office, in May 1979, 4,101 people claimed supplementary allowance. That number rose to 8,121 in February 1982.
Those three offices are dealing with more than double the numbers of people at the official level of poverty who are forced to rely on supplementary benefit by dint of the Government's action. Many of those will be long-term unemployed who have exhausted their entitlement to unemployment benefit and are going on to receive the short-term—not even the long-term—rate of supplementary benefit.
The Government are not only cutting the housing programme and attacking the education service and local

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authority provision, but they are driving thousands more people to rely on the basic level of State provision in social security because they have cut their benefits since they took office. That is a prescription for absolute disaster. If Conservative Members believe that that is the right public expenditure policy, they have a strange concept of social priorities.
They are prepared to spend vast amounts of public money on the Trident nuclear weapon system, they are prepared to spend a great deal of public money on adventures in the South Atlantic, they are prepared to spend huge sums of money on other prestige projects, but they are not prepared to get Britain out of the slump, to reflate the economy, and to get back to full employment.
We in the Labour Party should put forward our Socialist alternative strategy and say that we intend to recreate full employment, to use public expenditure as the main tool to do that, to create more jobs in the public sector at higher wages, to get that policy across and to make it work. That is what the Labour Party should be saying plainly tonight.
The Deputy Speaker (Mr. Bernard Weatherill): It may be for the convenience of those who are waiting to speak if I say that six right hon. and hon. Gentlemen have indicated their wish to take part in this debate, and that the wind-up speeches will start at 9 o'clock.
8 pm
Mr. John Townend: I am sure that the hon. Member for Wood Green (Mr. Race) will not be surprised if I say that I agree with very little of what he has said. Indeed, the prescription that he has offered the House is probably less acceptable to his own Front Bench than the views that I am about to express. The hon. Gentleman seems to believe that the tragic problem of unemployment could be solved merely by spending a lot of money. Typically, he does not say where the money is to come from. Moreover, he did not explain why the Labour Government could not eliminate the figure of 1½ million unemployed that existed when we were elected by spending that sort of money. The Labour Government did not believe that that was an effective way to deal with the problem, and nor do we. He said, too, that there were fewer council houses. In my view, the telling factor in the next election will be the increase in the number of owner-occupiers.
In considering the public expenditure plans, I suggest that right hon. and hon. Members should remember that the Government were elected on a policy of honest money, reducing public borrowing, and reducing the overall burden of taxation, particularly direct taxation. To achieve that, it is clearly absolutely vital to cut public expenditure. There is no doubt that the Government started with every intention of honouring those pledges. They appointed Sir Derek Rayner to look into the Civil Service, to find economies and cheaper ways of doing things. They produced the medium-term financial strategy, in which it was planned that public expenditure should take a smaller share of our gross domestic product.
Mr. Maxton: It is a bigger share.
Mr. Townend: I am coming to that.
The Government set about reducing the size of the Civil Service. The Prime Minister, by her strength of will,
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managed to renegotiate our contribution to the EEC budget so that the contribution has gone down from £856 million in 1978 to only £45 million in the past year.
Despite all those efforts, to date the Government have not achieved what they set out to do. The share of Government spending as a proportion of gross domestic product has risen from 41 per cent. to 45 per cent. I understand from the White Paper that the revised figure is 44½ per cent. The Chief Secretary said today that if the Government managed to keep to their plans it is likely that by the end of this Parliament it will have come down to 41 per cent. again. [HON. MEMBERS: "Oh!"] Hon. Members have a right to be sceptical, in view of what has happened.
We have not been very successful in the policies that we proposed at the last election. I accept that there are a number of factors which are outside the Government's control. The world recession has caused a drop in GDP, and it has caused an increase in the cost of financing unemployment. Local authority expenditure has not kept within the levels set for it by the Government.
However, two significant factors have not been mentioned. One is the explosion of public sector pay in 1980–81, which as hon. Members will know, was due to the Clegg commission and the Pay Research Unit, both of which we inherited and were committed to. The result was that public sector pay in that year went up from £24·8 billion to £30·7 billion, an increase of almost 24 per cent. That is one of the most significant reasons why the Government did not achieve their original target. That expenditure swallowed up all the savings that were being made in reducing the size of the Civil Service and reducing our contribution to the EEC budget.
As public expenditure continued to rise, it became clear, particularly in 1980–81, that cash limits were not adequate by themselves. They were continuously revised upwards to take account of volume spending, which was based on funny money, and particularly to accommodate the large wage increases. I therefore welcome the Government's decision that in future our spending programmes are to be based on cash rather than on constant prices. That should help to bring to the public sector the disciplines that the private sector has always had. Spending should be contained, regardless of inflation, within the resources available. I have had considerable experience in local government, and I believe that one of the reasons for the explosion of local authority spending over the past 10 to 15 years was the practice of dealing with expenditure by volume.
The Government failed to control spending as originally envisaged in the medium-term strategy. I therefore welcome this White Paper, because it shows that the Government are making some effort to get back on course. In the next year, spending is expected to increase by 8·5 per cent. in cash terms, which is likely to be about, or slightly below, the rate of inflation. I trust that in the coming year the Government will do everything possible to keep to those plans.
The Government are making strenuous efforts to control wage increases in that part of the public sector where they are the direct employer. However, we should remember, bearing in mind the current negotiations, the effect of the cost of increments. I hope that the Government succeed, but I am a little doubtful about whether they will manage to keep to the 4 per cent.

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Furthermore, as yet, the Government have failed to grasp the nettle of inflation-proofed pensions, the cost of which has doubled since we came to power.
My hon. Friend the Member for Huntingdonshire (Mr. Major) felt that there was no scope for reducing Government spending in the next few years. I want to deal with one or two items in the public expenditure White Paper. In particular, I want to draw attention to the cost of the nationalised industries. I agree with what some hon. Members have said today about the difficulty of following the figures. Page 3 on nationalised industries shows the total external finance, and page 78 gives the details of the grants to the nationalised industries, but it is difficult to tie up the figures with the grants under industry, energy, trade and employment on page 12. However, we see that the total EFL in the year that has just finished was no less than £3·3 billion. That, of course, did not include many of the grants under the industry heading, particularly £620 million for British Leyland. In all, that is costing us about £4 billion a year.
It is important in the current year that the effort that the Government are making in trying to reduce the level of public sector pay in the areas that they control should also apply in the nationalised industries. It is disturbing that on too many occasions the taxpayer has had to pay the cost of excessive redundancies and of keeping open uneconomic operations such as the coal mines, where in the current year there was an operating loss of £773 million. If the miners, through the use of the muscle, insist on keeping open uneconomic pits, is it right that the whole of that cost should be borne out of Government expenditure and ultimately by the taxpayer? Should it not be considered that that should be taken into account when fixing the miners' wages for the coming year?
Mr. Maxton: Will the hon. Gentleman say something about workers in the gas industry, the telecommunications industry and the electricity industry, all of which are making profits? The Government came to power on the understanding that there would be no incomes policy and that incomes would he based on companies' profitability. Surely the profitability of nationalised industries should mean that the workers receive higher wages.
Mr. Townend: What the hon. Gentleman has not taken into account, particularly in the telecommunications industry, is the need for high profits to finance capital expenditure. Any company that pays out all its profits regardless of other factors will not be in business for long.
The taxpayer has been asked to finance the overmanning of British Rail, which will cost £1,000 million next year. He has been asked to finance pay increases which could not be justified by the performance of the industries concerned and which have been much higher than increases in the private sector.
I welcome the fact that in 1982–83 the EFL will be reduced to £2,739 million, a reduction of £600 million. There is to be another reduction in the following year. The record of the nationalised industries is referred to on pages 74 and 75 of the expenditure plans. The forecast for 1980–81 has been exceeded by approximately £700 million. The forecast for 1981–82 has been exceeded by £600 million. If that happens again, as I fear it may, the Government's spending plans will be knocked around once more.
It is perturbing that in the current year, 1982–83, grants will increase by a further £500 million to £1·8 billion.
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When the Government are making every effort to try to bring in control, particularly over wages, their policy will be undermined if loss-making nationalised industries award wage increases of 8, 9 or 10 per cent.
It is significant that the gross debt interest is now £15½ billion. The net debt interest is £6·5 billion. During the Government's period of office, the national debt is likely to have almost doubled. The net debt interest will certainly have doubled. With the introduction of inflation-proofed bonds over the next few years, there will be a reduction in interest charges. I am perturbed by the fact that we are having no sinking fund for the loss caused by inflation. In the national accounts we will charge about 2½ or 3 per cent. a year as opposed to the previous rate of the non-inflation-proofed bonds.
We are making no provision for a sinking fund. Therefore, in the year after the bonds mature, there will be a dramatic jump in interest charges and a large jump in the public sector borrowing requirement. If private business changed its method of financing in that way, there would be serious questions about the probity of that in the financial press. We are seeing what so often happens in politics—planning for a relatively short period rather than taking into account what will happen over the long term. I should like the Government to reconsider a sinking fund.
One of the most significant sections of the Budget is the horrendous cost of the Welfare State, which is £43 billion. The right hon. Member for Orkney and Shetland (Mr. Grimond) was right when he said that we must consider exactly what we are doing. Much of the Budget concerns taking money away from people and giving it back, with the State taking a big cut in the middle.
We must also consider—it will be difficult for anyone to do this—the whole question of indexation. In Parliament we are committed to indexed pensions. So far we have indexed most other benefits and the 2 per cent. shortfall on short-term benefits has been restored. With the demographic changes, with people living longer and with possible earlier retirement, that is a matter that all Governments will have to consider seriously in future.
Mr. Race: Is the hon. Gentleman therefore saying that a future Government or the present Government should consider giving increases to retirement pensioners and those on supplementary benefit that are less than the current rate of inflation?
Mr. Townend: As the numbers of people who do not work increase and the numbers of people at work decrease because of demographic factors, unless we are able to increase substantially the wealth of the nation that will be a problem that we cannot ignore.
Through the health authorities, the Government do not have the control on spending in the National Health Service that they should, which is a problem. My hon. Friends the Members for Horsham and Crawley (Mr. Hordern) and Norfolk, North (Mr. Howell) have done a considerable amount of work on that. Over the past two decades the number employed in the NHS has doubled. I am not sure that we are getting as much value for money out of the NHS as we should. During the last two or three years, we have increased spending in real terms. As a nation we shall probably not be able to continue those increases.
The overseas aid budget is due to increase in 1983–84 and 1984–85. I have always had reservations about the size

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of that budget and its effectiveness. However, I note that in the expenditure plans the contribution to the EEC budget is rising from £45 million to £500 million. We must wish the Prime Minister and her colleagues who are renegotiating with the EEC the same success as in the past. It would be useful to the Minister to have a £3 million or £4 million saving.
Local authority spending varies from area to area, but there is vast scope for reductions. In my area this year the county council has increased rates by no less than 61 per cent.; it has taken on 300 or 400 more staff. I come to the point made by the hon. Member for Wood Green. There is ample scope for staff savings in catering and cleaning, where in many cases manning has been too high. We should seriously consider savings through privatisation in local authorities and the Health Service.
Basically we have a problem of controlling expenditure. I have sympathy with the Government. All Conservative Members were elected on a policy of reducing manning and increasing efficiency.
Mr. James Hamilton: And reducing taxation.
Mr. Townend: And reducing taxation. That is why we must continuously pay attention to expenditure.
From day one, apart from the Prime Minister and Treasury Ministers, when Ministers go to their offices, the permanent secretaries start working on them. They are told that their job is to fight for the Department in the Cabinet—to fight for more resources or at the very least to ensure that the budget is not cut. Furthermore, Ministers are so involved with legislation that they do not have sufficient time to master the bureaucracies and make significant savings in their costs. There are odd exceptions. The Secretary of State for the Environment has made significant savings. But "Yes, Minister" is not far from the truth.
I was leader of a county council. I was elected for a party determined to stabilise or reduce rates and expenditure. I had a united party. Within three months chairmen told me that, although they were still 100 per cent. behind the policy, in education, for instance, the future of our children was at stake, and on behalf of the police force I was reminded that the Conservatives were in favour of law and order. That went on until in our group meetings only the leader, the deputy leader and the chairman of finance were trying to make savings.
What is the answer? We have an ex-Civil Service Minister at the Treasury. I should like his comments. We should consider having a Minister in every Department whose main responsibility is not to develop services but to look for savings, increased productivity and reduced staff. The Prime Minister should tell those Ministers that their promotion depends on their success. Each Minister should be assisted by a senior civil servant whose promotion also depends on that achievement. As final icing on the cake, the permanent secretary should be told that his knighthood depends on his success in cutting public expenditure.
The Opposition are right in saying that because of our failure to reduce public spending we have not yet been able to reduce the overall burden of taxation. If we take into account national insurance increases, a large section of the
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population is now paying higher direct taxes than in 1979. The hon. Member for Wood Green is smiling. He wants to see people pay more direct taxes.
I congratulate the Chancellor of the Exchequer on his success in bringing down the rate of inflation. Interest rates are also tending to come down. Had it not been for the unfortunate problem of the Falkland Islands, they would probably already be coming down. He must now vigorously tackle public spending. We must face one fact. Had it not been for North Sea oil, which is bringing in £5·8 billion a year, we could not have afforded the present level of spending. Unfortunately, so much of the revenue has gone to current spending and high wages and not to capital investment.
The Chancellor and the Treasury team do not have an easy task. We have seen the problems with local authorities. We have hardly made an impact on savings in the Health Service. The problems of the nationalised industries are proving intractable. I see no long-term solution other than pressing on with privatisation.
My verdict on the public expenditure White Paper is that the Government are making good progress but that there is still a lot of room for improvement. The Chancellor will need the support of all his colleagues in the Government and on the Back Benches, particularly in the autumn when we come to the current year's expenditure review. He needs our united support so that in two years we can go to the electorate having fulfilled our pledge to cut the level of public spending as a proportion of GDP and to cut direct taxation.
Mr. Deputy Speaker: I remind the House that Front Bench speeches are due to begin at 9 o'clock. I ask hon. Members to be brief.
8.25 pm
Mr. David Ennals: I do not wish to take up the remarks of the hon. Member for Bridlington (Mr. Townend), although he tempts me to do so, because he makes outrageous statements with which I disagree.
My hon. Friend the Member for Wood Green (Mr. Race) concentrated on housing. I wish to concentrate on the significance of Government spending programmes on the National Health Service, on medical education in medical schools and on the personal social services of local authorities. I believe it to be sensible to concentrate on those three questions.
The hon. Member for Bridlington reminded the House of the Conservative Party's election pledge that it would protect the National Health Service from cuts in public expenditure. We have seen assaults on the pockets of the sick and the poor caused by massive increases in prescription charges and charges for spectacles and dental treatment. The Government now plan—I am sure that the hon. Gentleman will be pleased with what I am about to tell him—major cuts in the National Health Service.
We are greatly indebted to the Treasury and Civil Service Select Committee, which is chaired by the right hon. Member for Taunton (Mr. du Cann), for turning the Government's Blue Book into a much more comprehensible explanation of what public expenditure means in volume terms. I believe that the cash presentation creates great confusion, and the Committee shares that view.
I wish to examine what has happened in the National Health Service. The outturn from 1978–79 to 1980–81 was an increase of 5·2 per cent. By the time we arrived at

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1981–82, the figure had gone down to a 1·2 per cent. increase. In the following year there is to be a decrease of 1·1 per cent. and a decrease of 0·9 per cent. in the year after that. Consequently I am sure that the hon. Member for Bridlington will be delighted that there will be actual cuts. However, the situation is far worse than even those figures present.
The figures for this year are based on assumptions about cost inflation and a level of wage inflation that I believe will be proved wrong. They assume that this year inflation will be reduced to 9 per cent. Many of our discussions in the House lead me to believe that we shall not see a 9 per cent. increase as an average over the course of a year, still less with pay awards at 4 per cent. The Secretary of State has agreed that nurses should receive an increase of 6·4 per cent. They, quite rightly, find that figure grossly unsatisfactory. If inflation remains at 11 per cent. this year, the average health district will have to find an extra £200,000 in cuts from its planned programme. If pay awards average 5½ per cent.—I am not optimistic about that, knowing the strength of feeling among nurses and others who work in the NHS—there will be a further £220,000 to be found. That will happen despite the growth in the number of elderly people, which will add about £300,000 to the bill that an average health district has to find. We are talking about serious cuts in the NHS.
In regions with a low growth rate, on what we have called the RAWP formula, the average health district will face not an increase but a 1·7 per cent. cut in real terms in the NHS. The National Association of Health Authorities has said that many new health districts that are coming into existence this month may find themselves starting life with cuts in essential services. These cuts will have an effect on patient care and on staff of all types. The cuts will result in increased waiting lists. Whatever the Government may say, waiting lists are now longer than at any time between 1974 and 1978. There will be cuts also in community services.
National Health Service treasurers, the people who know the situation best, are extremely concerned about the prospects as they see them in the White Paper. Mr. Don Wild, the secretary of the Associations of Health Service Treasurers, said:
"When you hear politicians talking about growth for the health service, it sounds fine, but when that's followed by pay awards over the cash limit, a squeeze on prices and modest increases in petrol, we are in for a hard time."
He added that he
"was bitterly disappointed that the 1 per cent. in employers' national insurance surcharge would only apply to private industry."
He reckoned it would have saved the NHS £50 million enabling it to take on more staff.
Mr. John Townend: The right hon. Gentleman has referred to waiting lists. To the best of my knowledge, waiting lists have been reduced considerably under the Government. If the right hon. Gentleman disagrees, will he give the figures?
Mr. Ennals: They came down from a high level at the time of the industrial dispute in the early part of 1979. Until then the figures had been very much lower than they are now. It has taken the Government three years to bring down waiting lists to about 30,000 more than they were at the end of 1978. The Government can take no credit for the length of waiting lists.
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We must give a warning to the country, because Ministers seem not to have enough guts to do so, despite all their fine words. The Government are planning a major cut in the NHS over the next few years. Those who will suffer most will be those whose needs are greatest. They will be the elderly, the mentally and physically handicapped and the mentally ill. The cinderella services will be hit the hardest. With the present boost in private medicine, the two-tier Health Service about which we have warned over the years is rapidly approaching.
I have already said that we shall see major cuts in the NHS that will hit services throughout the country. There is another aspect that the NHS is facing and which in some areas it is already experiencing. There will be further blows as a result of the cuts in the grant to the University Grants Committee. That comes under the education charge, but with swingeing cuts in support for the universities there is no protection for medical schools. This issue is being urgently considered by the Select Committee on Social Services, which will be publishing its report fairly soon.
My impression is that there was virtually no consultation between the Department of Education and Science and the Department of Health and Social Security about the effect that this would have on the National Health Service. We have already seen that about 200 clinical academic posts have been frozen. In two years, that figure will probably be as high as 400. This is serious.
For the first time, the medical schools have received no protection. For the first time, the University Grants Committee has been faced with administering major cuts as a result of decisions of the Government and the Secretary of State for Education and Science. This will affect services. I emphasise the number of clinical academic posts that will be reduced because those are all filled by people who are looking after patients. This is happening in almost every medical school in the country.
Richard Smith set out the problem succinctly in the British Medical Journal on 30 January 1982. In an article headed
"The starving of the Medical Schools",
he pointed out that most university departments have a commitment to teaching and research. He went on to say:
"The UGC may have forgotten the clinical medical departments have an additional commitment to treating patients."
He said that the effect of the cuts was likely to be most severe in the provision of certain highly specialised services, which are largely provided by universities, and there was a danger of small departments concerned with shortage specialties, such as anaesthetics and geriatrics, being cut.
Mr. Dan Jones: On a point of order, Mr. Deputy Speaker. I should like to ask succeeding speakers to be brief and a little less effusive in their speeches so that those who have been in the House, perhaps all evening, can make a five-minute contribution.
Mr. Ennals: I assure you, Mr. Deputy Speaker, that I shall be much briefer than the hon. Member for Bridlington. I am anxious that others should have a chance to speak in the debate. Time is not on our side. Interventions, even from my hon. Friend, do not help. We are talking about a part of the Welfare State with which he is concerned.

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University cuts are affecting not only service but, in many cases, research departments, which I fear will be lost. We have already had several examples which I shall not go into now.
In the personal social services there is a similar picture of downturn when needs are steadily growing. The prophecies that we receive in information from the Department of Health and Social Security show that a reduction of 2·9 per cent. is envisaged for 1982–83, with no growth in 1983–84 and only a 0·6 per cent. growth in 1984–85. Therefore, it is planning major cuts there.
The county of Norfolk made cuts of 0·1 per cent. in 1980–81 and 1·4 per cent. in 1981–82. Therefore, it is seeing cuts in services. Those cuts will affect what can be done for the elderly and the disabled—adaptations, holidays for the disabled, home helps, meals on wheels, and so on. As a result of Government cuts, my area is seeing a major reduction in the number of people who are able to make use of the home help and the meals on wheels services. All requests made by my Labour colleagues on the Norfolk county council are turned down. We are seeing services worsen at a time when they should improve.
The public expenditure Blue Paper, as interpreted and clarified by the Select Committee, shows that the provision for health, medical education and personal social services is a disgrace to our country. It is staggering that any Government could take pride in decisions that have done so much to affect the lives of ordinary people. I refer not only to housing, but to the health and welfare of those whom we represent.
It is no wonder that the Government brought out a new version of their public expenditure review. It was largely designed to conceal the facts from the people. The situation is very disturbing. The Government cannot give any answer, because the facts are concealed in the Blue Paper.
8.40 pm
Mr. Sydney Chapman: I am glad to follow the right hon. Member for Norwich, North (Mr. Ennals), who speaks with great authority and experience on health and social security as a former Secretary of State. I shall take up some of his points.
I welcome the White Paper, Cmnd. 8494, and the statement of figures in cash terms. They show that total public expenditure has risen by 94 per cent. in the past five years. In the past three years, under this Government, total public expenditure has risen by 61 per cent. I accept that those figures will have to be slightly revised in the light of the remarks made by my right hon. and learned Friend the Chief Secretary. However, total public expenditure under this Government has increased, in round figures, by 60 per cent., while the retail price index has increased by about 50 per cent.
Therefore, there has been no overall cut in real terms and there has been a pretty massive increase in public expenditure in cash terms. Consequently, it is wrong to talk about slashing overall public expenditure. Indeed, to put things at their most charitable, the Government have had only mixed success in their attempts to cut the rate of increase in public expenditure. No doubt the Government wanted to control public expenditure more effectively than
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they have been able to. Indeed, I am sure that they would have done so had it not been for the severe world recession.
As we export more than a quarter of our total national output, we cannot insulate ourselves from the deep world recession that was basically caused by the doubling in price between the second quarter of 1979 and the end of 1980 of an OPEC barrel of oil. With the greatest deference to Opposition Members, I should point out that we could not have spent our way out of the recession. I call in aid previous experiences, particularly in the 1970s. Reflations have had an increasingly impotent effect on real output and have certainly caused more inflation or re-inflation and thus, a lack of competitiveness in world markets.
Whatever else may have happened in the past year, the Government have spent more than they have received in receipts. The difference between £119·5 billion and £109·2 billion is a gap of 9·4 per cent. Therefore, it is no exaggeration to say that despite the Government's attempts to cut public expenditure, the nation is still living almost 10 per cent. beyond its means. Indeed, Mr. Micawber's dictum of the old sixpence overspend on £20 pales into insignificance.
However, I disagree with the right hon. Member for Norwich, North because in real terms we have still increased public expenditure on health and personal social services. We have also increased in real terms public expenditure on the social security programme. We have also increased it in real terms in the defence and law and order sectors. Those were policy decisions of the Government, and I welcome them, but it has made it all the more difficult to cut overall expenditure—which we have not done—because those four Departments represent over 50 per cent. of total public expenditure.
Of course I regret the "reduced" expenditure in other Departments. I give education as an example. We have increased expenditure on education this year by only £1,000 million. The plan is that next year we shall increase expenditure on education by only £400 million.
Mr. Maxton: A cut in real terms.
Mr. Chapman: Obviously it is a cut in real terms, but those figures should be seen in the context of the dramatic fall in numbers of pupils in State primary and secondary schools. In England alone, the fall is 800,000 or approximately 10 per cent., but in real terms the cost per pupil has risen in the past five years. I am told that there will be a further reduction of 600,000 in the next three years.
To take another point, five years ago, local authority total expenditure was about 43 per cent. of the expenditure of central Government. Last year that figure had been reduced to 34 per cent. It can be argued—as it has been argued in the House and I concede the point straight away—that local government has been better at controlling its overall expenditure, but it ought to have been for two reasons.
First, the Government priorities of increased expenditure in certain Departments—health and personal social services, the social security programme, law and order and defence—are virtually exclusively in the central Government sector and not in the local authority sector. Secondly, education—one of the reductions—is the most significant item of local government expenditure. By my calculations, education had 52 per cent. of all current local

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authority expenditure in England last year. Therefore, I believe that the local authorities ought to be cutting back, and there was no excuse for some of them raising their rates to the extent that some of them have.
I wish to make one passing remark about the difference between current and capital expenditure. This subject was touched upon by my right hon. and learned Friend the Chief Secretary to the Treasury and by my hon. Friend the Member for Huntingdonshire (Mr. Major). We must examine this matter more closely. To me, if renewal of a sewer is capital expenditure, so the renewal of a motorway should be counted as capital expenditure. While a new hospital is counted as capital expenditure, the pay and number of nurses, an equally important investment in health, goes down on the current account. New schools are counted as capital expenditure but much-needed textbooks for those schools count as current expenditure. Therefore, I hope we can devise a means of understanding these matters better so that we can equate their importance.
Significant demographic trends are taking place in our society and will continue to take place. In the past three years, the number of retirement pensioners has risen by 360,000. The working population has fallen by 300,000 but, more importantly, the number of those in employed labour has fallen in the past three years by about 1¾ million.
I do not believe that in the short term we can expect a dramatic reduction in the number of jobless. It is irresponsible for anyone to pretend that it will happen. Therefore, given a reasonably static population of 56 million, whereas three years ago 55 per cent. of the population was dependent upon 45 per cent., today 59 per cent. is dependent upon 41 per cent. That is to state the position in very crude terms and round figures. This is quite apart from what I believe will be the quite significant impact of the new technologies. The microchip and the word processor may open up whole new industries, but I do not believe that they will be responsible for employing many more people. Listening to some of the recent remarks of the captains of business, it seems that they may replace many more people in the professional and business and clerical and secretarial sectors.
Given the pressure that will face Governments of whatever hue in the next decade; given the pressure of the increased number of people who are now retired; given the pressure for reducing the retirement age for which there are demands from both sides of the House; and given the pressure of reduced employment prospects, fewer people and a reduced proportion of the population will be asked to pay for more people requiring and expecting greater benefits.
In the face of these facts and trends, I wish the Government well in keeping to their planned increase of 8·5 per cent. in total public expenditure in the next financial year. On the basis of experience, I shall be pleasantly surprised if they do so. I shall be even more surprised if in the following two years the increases are only 5·1 per cent. and 6 per cent. respectively.
The implications are obvious. In the short term at least I cannot see taxation going down. Quite properly, the social security programme will represent an increasing proportion of public expenditure. Any Government will have to select their priorities for public expenditure and face the fact that in reality they will have to try to cut expenditure in certain sections. I do not believe, for
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example, that we can think in terms of pouring hundreds of millions of pounds of more subsidies into public transport. We have to live in the world of realism.
We have increased expenditure in real terms on health and the personal social services. The waiting list for hospital treatment has gone down by 120,000 compared with when we came to power, and there are 34,000 more nurses working in the National Health Service than there were three years ago. These are considerable achievements given the economic realities facing the Government.
I commend the Government's White Paper at least for its realism. It will not lead to false optimism and to hopes that so often in the past have been dashed by successive Governments thinking that they can create increased output when they are not able to do it.
8.54 pm
Mr. John Maxton: I agree with the hon. Member for Chipping Barnet (Mr. Chapman) about the relationship between capital expenditure and current expenditure. I have in mind especially the example that we see in Scotland, where a brand new hospital has been established in the capital expenditure programme but has not been able to open simply because the health board has been unable to afford the current expenditure to employ the doctors, nurses and other staff to ensure that the hospital can work. That is due to the cuts in current expenditure in the National Health Service imposed by the present Government.
I must take issue with the hon. Member for Chipping Barnet about education and how it could be cut because of the reduction in numbers. That appears to be an easy argument on the basis of demography. However, the numbers have fallen dramatically at the bottom end of education where, essentially, it is quite cheap per capita to educate children. The big numbers in education are moving into the top of the secondary school and the post-school education system, where per capita expenditure is very heavy. Therefore, although it may appear that one can reduce education expenditure, it needs to be kept at about the same level to maintain the same standards, If expenditure is reduced there will be a decline in service.
What came through more than anything else in the speeches of the hon. Members for Chipping Barnet and Bridlington (Mr. Townend) is that they believe—and they have stated this pretty clearly although they will vote for the Government—that the Government White Paper shows that the Government have failed dismally in their own terms. They have failed, not in our terms but in their own terms, to carry out the policies that they set for themselves when they came into office.
The Government set themselves to reduce taxation but they have dismally failed to do that. For most people personal taxation is now higher than it was in 1979. They said that they would reduce inflation. They may have done so in their own terms but inflation is still running higher than it was in May 1979 when they came into office. Thirdly, the Government said that they would reduce public expenditure. That again, as a percentage of gross national product, has been shown by the White Paper not to be the case.
All that was to be done to release greater amounts of money into private investment. That again has dismally failed to happen. There has been a reduction in the investment levels in private industry yet the Government

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carry on with privatisation. The Conservative Party keep labouring the point that privatisation, the selling of a public assets, will somehow be of great benefit. Yet the result is against all the policies that the Government came in on.
Their idea was to reduce public expenditure to allow more money for private investment. However, if one sells public assets it means that people will sell their private capital to purchase existing capital and goods. Therefore, they will not invest it in new industries for new employment. No new employment comes from selling off public assets yet large amounts of private capital are being used in that exercise. That capital should have been used, according to the Government's ideas, to stimulate new industry and jobs in our economy.
The Government have failed, but at what expense? They have failed to reduce public spending but they have managed dramatically to reduce the services in the public sector that the people in my constituency rely upon. At the end of the day, that is what public expenditure is about. The Conservative Party seem to think that it is a matter of the Government taking money out of their pockets and spending it as liberally as possible and in the most spendthrift manner around the country.
Public expenditure is about providing services for people, services that most people, certainly in my constituency, cannot afford to provide for themselves. For example, they cannot afford to pay for the education of their children or for the operations that they require—and that being hospital and doctors' bills. They cannot afford to light the lamps outside their houses or pave the streets. The services provided by the public sector are those that people, especially in urban areas, cannot afford to pay for out of their pockets.
There is no better example than housing of what is wrong with the Government's policies. In Scotland we do not have to worry about the change from volume terms to cash terms in housing because in both senses, even in cash terms, the money that is being spent is being dramatically reduced. It will be reduced by 14 per cent. in the coming year in cash terms, leaving aside inflation.
In the city of Glasgow that means that there are fewer houses being built. Very few council houses are being built in Scotland as a whole and practically none in Glasgow. A few sheltered houses are being built for the elderly to meet the dramatic need that exists in Glasgow. There is practically no improvement taking place. The pre-1950s housing in my constituency is now in need of major refurbishment. Because of the cuts imposed by the Government on the local authority, this is not taking place.
The Government may say that they are increasing the capital allocation. If, however, the Glasgow local authority says that it will increase rents by only 30 per cent.—itself well above the rate of inflation—rather than the 79 per cent. that the Government would prefer, it does not receive the same size of capital allocation that it would otherwise have done. That is the law in Scotland. I believe that it is slightly different in England and Wales. If local authorities in Scotland do not increase their rents, the Government cut their capital allocation. That is happening in Glasgow.
My constituents find that repairs are not carried out. They find themselves on waiting lists for longer than should be the case. They find that the redevelopment of
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areas that was necessary has not happened. Many of my constituents who suffer these high rents and housing problems are former construction industry employees. They are precisely the people who should be refurbishing the houses, but they have no job. That is what the Government's expenditure plans really mean. The Government have failed to carry out what they promised. They have massively cut public services so that constituents of mine and those of most of my hon. Friends find that their standard of living has been grossly reduced by the Government. That is why I shall be voting against the expenditure White Paper.
9.1 pm
Mr. Robert Sheldon: My hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) was right in relating the White Paper to the particular problems, including the housing problems, in his constituency. If one multiplies those problems 635 times, one sees the disadvantages that this White Paper has brought not only to the housing sector but also to many other sectors, as I shall seek to demonstrate.
This is the first time that the expenditure debate has followed the Second Reading of the Finance Bill—the first occasion that we have discussed spending after taxing. The intention originally had been to hold the expenditure debate in November or December every year after finalising the expenditure plans. A number of notable slippages occurred in the arrangements. This means that a November consideration has become an April assessment. Since those days, we have had the Armstrong report to which the Chief Secretary to the Treasury referred. We look forward to the presentation of the Select Committee report, which will bring together the presentation of taxation and expenditure each December. The report, I gather, will not be long delayed.
Now we are to discuss expenditure in the light of the Government's firm proposals on taxation. Some might consider that this timing is not accidental. There are those who wish us to consider expenditure in the light of taxation and that before, rather than after, the meal should come the reckoning in order that the mind of the House will connect any extra expenditure with extra taxation. As a general rule, this connection is fairly sensible. But in the same way that anyone who sees his factory on short time can expect to be able to engage in prudent borrowing, so a nation on short time should also be able to increase its borrowing. We need to discuss not just taxation and expenditure but borrowing which, at a time of severe slump, needs to be a major element in our consideration.
This debate covers the third general examination of our financial affairs—a matter to which the right hon. Member for Worthing (Mr. Higgins) referred. The first, of course, was the Budget, which covers the general economic assessment and the measures taken to deal with it. The second debate was on the Second Reading of the Finance Bill, which deals with the revenue aspects of the Budget. This, the third debate, covers the expenditure side. It is the hardest element to operate and control.
The amounts of money with which Treasury Ministers have to deal are very large. We have a record number of Treasury Ministers. I offer my congratulations to the Minister of State, Treasury, the hon. Member for Brentford and Isleworth (Mr. Hayhoe) who, I understand, is to wind up. I welcome him to these debates. We have

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known each other for some time and I look forward, if not to harmonious relationships, at least to understanding relationships.
Any Treasury Minister knows that the figures he approves have to pass down through many grades of civil servants, as well as others, before reaching the point where things actually happen, where jobs are created, homes are built and there is investment in industry. The whole process is like having a long piece of string. When the Minister twitches it, it is not always easy to comprehend fully what will happen at the other end.
The programmes are many and the manner of deciding priorities is essentially primitive. It depends partly on the strength of the case, but much more on the strength of the Minister. As Edward Boyle pointed out many years ago—and he was not the first or the last to make the observation—the success of a departmental Minister depends on how much money he can get from the Treasury for his policies. A Minister with money can do things. A Minister without has only his speeches for consolation.
The hon. Member for Bridlington (Mr. Townend) referred to the strength of the Prime Minister and the way in which Ministers might wish to save money to please the Prime Minister. I do not see it in that way. When I look at the Cabinet arguments of last year and the year before, I find a great similarity between the arguments on public expenditure as Minister after Minister sought to defend his spending plans. This is what provides a Minister's reputation and he will always try to retain his plans.
Mr. John Townend: To clarify what I said, I made the point that the right hon. Gentleman is making. The problem is that departmental Ministers, urged on by their chief officials, feel that their first job is to fight to maintain their budget rather than to reduce spending, which was the policy on which the party was elected.
Mr. Sheldon: It will continue for a long time. Suggestions have been made to alter the way of determining how money is spent. The birth of the old Expenditure Committee was one suggestion. Another was that there should be a Cabinet Committee of wise and disinterested elders. Further ideas have been put forward from time to time and some have even been implemented. On all of this I remain a sceptic. So long as we are dealing with the reality of political power, so long will all these matters come to be dealt with in Cabinet, with the powerful exercising of political strength.
The first thing we notice in the White Paper, as Sam Brittan has mentioned in the Financial Times, is that the Government have handed the House of Commons a meaningless document. By putting everything in cash terms they have told us how much will be spent but not what we will get for our money. Several hon. Members, including my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) and the right hon. Member for Orkney and Shetland (Mr. Grimond) have referred to this.
The pound notes are being provided for the week's shopping but with no shopping list and with the job being given to someone who does not like shopping anyway. We do not know what we shall get. As an example, we see in table 1·5 of the White Paper that Government expenditure in industry will increase by more than £200 million. What will we get for this money—more assistance or less? We do not know. Before we pay the bills we are entitled to have the answer. The House could hardly ask a more
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fundamental question. The taxpayer may not be able to call the tune with this Government, but he has the right to know what the tune is.
According to the Financial Statement and Budget Report, inflation is assumed to fall to around 7 per cent. in the next financial year, 1983–84, and to 6½ per cent. the year after. In the same two years public expenditure will be squeezed by public expenditure totals 2 to 3 per cent. below the rate of inflation.
What happens if the Government's forecasts for inflation are wrong and next year the rate of inflation is higher than 7 per cent? After all, the Government have not had conspicuous success with their forecasts so far. We have only to look at sterling M3, the lodestar of their economic religion, which has been upped by nearly 100 per cent. It was expected to rise by 29 per cent. in the period up to now and it has risen by 56 per cent.
In the Government's search for economic certainty sterling M3 was replaced by the public sector borrowing requirement, which has a target of £9½ billion for 1982–83. However, table 8 in the Red Book has an average error which provides for a range of between £5½ billion and £13½ billion. If the Government dropped sterling M3 as a target because it was not predictable enough, they have not done much better by signing up the PSBR. They have a peculiar talent for picking targets which, even if they have any sense in them, are exceptionally difficult to hit.
The Government's achievements in the art of forecasting are being brought into the new area of public expenditure. It is the reality, the pounds and pence of public expenditure, which must fit the guesses of inflation. Homes, jobs, roads and schools will be sacrificed to any mistake that the Government make in their hopes for the future. As my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) pointed out earlier, it is strange that a Government so devoted to indexation, particularly of the assets of the wealthy, should deny the sense of indexing essential services and the planning of them.
I agree that the amount that any country can afford to spend on the non-productive parts of public expenditure must have some relation to the productive parts of the economy, whether or not the productive parts are in the public sector. There are many such parts. The ratio of public expenditure to gross domestic product has been rising steadily under the Government, from 41 per cent. to the figure produced this afternoon by the Chief Secretary to the Treasury of 44½ per cent. in the past year—not, unfortunately, because the Government are spending more on our essential services but because production is less as the Government's economic policies throttle the nation's output.
The Chief Secretary pointed out that there was bound to be a pause in his hopes for the reduction of public expenditure, which is being offset by the cost of recession. This afternoon we saw the first realisation by the Government that there are costs in the policy that they are pursuing and that the reduction in public expenditure is being offset by the cost of recession. I thought of the old saying that true wisdom begins when a man realises that he does not know what he thought he knew. We can at least find some consolation in the right hon. and leaned Gentleman's understanding that the world is a little more complicated than he thought when the Government set out on the road several years ago.
The Chief Secretary must say why the costs of the recession have increased in the way that he now accepts.

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If we examine the total of £115 billion we see that about £15 billion represents the cost to the Exchequer of unemployment. That is not the cost to the economy, which is more. That is not the cost to the families of hardship, not the cost to the unemployed, whose livelihood has gone. All that is extra. We are merely examining the cost to the Exchequer, which is about £15 billion.
The interest that we pay for the money borrowed in deflationary circumstances now costs more than £15 billion—roughly the same figure. That latter £15 billion a year is the cost of high interest rates resulting from Government policy. Indeed, that figure understates the true position. The Government have introduced index-linked gilt edged stock. We must pay about 2 per cent. a year for that stock now. However, the true rate of interest, up to perhaps 15 per cent., will accrue to the next generation. They will pay for the failure of this Conservative Government.
Sir William Clark: I am most interested in indexation and I agree with what the right hon. Gentleman has said. Is he saying that if perchance his party were ever to get back into office they would stop issuing index-linked bonds?
Mr. Sheldon: I am merely pointing out that the Government index some things and not others. I note the early-day motion signed by the hon. Member for Croydon, South (Sir W. Clark) and 25 or more of his colleagues, demonstrating their dislike of indexation. However, the Government index capital transfer tax and capital gains tax, which provide relief for the well-to-do. They index areas which are advantageous to those on high incomes and with a high standard of living but do not index others. The Government do not even tell us the levels of public expenditure in real terms. They deny us any information on such matters.
Sir William Clark rose——
Mr. Sheldon: No, I shall not give way again. We shall continue the argument in Standing Committee 10 for many weeks and months to come.
Mr. Austin Mitchell: We shall see the hon. Member for Croydon, South (Sir W. Clark) then.
Mr. Sheldon: The problem to which the hon. Member for Croydon, South refers, is that the Government spend money not for the good of the people but to compensate for the damage that they are doing. That is no way to spend public money. There is no return to the community from that money. Just as important as the quantity of money spent is the quality of public expenditure. My hon. Friend the Member for Wood Green (Mr. Race) rightly referred to that. The Opposition are concerned, not simply with the amount of public expenditure, but about whether value for money is received. We must ask ourselves what is being provided—what we are getting for our £115 billion. We know that the policy of spending £15 billion on unemployment and the creation of a disillusioned generation is one with which the Opposition disagree. We note also that the reduction of investment in nationalised industries was referred to by the Treasury and Civil Service Committee. We are grateful for its report. The reports form an important part of our debates in economic matters. The way in which the Committee is able to
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produce those reports at such short notice is a notable service to the House and worthy of great commendation. In paragraph 15 it states:
"General government investment is estimated to be £671 million, more than 10 per cent., below the level planned, … the share of capital in total expenditure again fell significantly … this is a profoundly disturbing trend."
Knowing the restrained language that the Committee normally uses, those words can only make us extremely depressed about what is being done in the White Paper.
A prominent part of the White Paper covers the Contingency Reserve. What is the Contingency Reserve for? It is a sum of money not set aside for any of the main Departments. It represents the unknown factors that may arise. However, with this Government it has increased enormously, from £300 million in 1981–82 to a projected £6 billion in 1984–85, as their control has obviously weakened. It is now a major project in its own right, exceeding the entire amount that we spend on law and order and what we spend on industry, together with trade, employment and energy. Parliament is being asked to approve expenditure about which it knows nothing. We are providing £6 billion which may be spent at the discretion of the Government. We shall not even be consulted about it. The only examination that we can make of this enormous expenditure is the post mortem on the dissecting table of the Public Accounts Committee. That is wholly wrong.
The right hon. Member for Crosby (Mrs. Williams) mentioned defence expenditure. The Chief Secretary has been informing us almost daily that even if the events in the South Atlantic are protracted there is no question of breaching the Government's economic strategy to pay for the operation. The Financial Times reported on 16 April that
"The Treasury yesterday disclosed that it has agreed to sign a blank cheque for the cost of the Falkland operation".
The Chief Secretary to the Treasury does not know what a blank cheque is. It is an instrument to pay, the amount of which is filled in by someone else. Does he mean that such an action can have no effect upon his strategy and that there is therefore no cash or budgetary problem?
Many commentators believe those statements to be too optimistic. I find them quite unreal. Of course spending must increase if we are to obtain our objectives, but to assume that the same cash limits can continue is to believe the unbelievable. Defence is expensive and the cost of war can be extortionate. The Chief Secretary cannot do what he did in West Germany. He cannot restrict the rounds fired to save ammunition, nor can he limit training flights to save fuel. When war comes in at the door, cash limits go out of the window.
The Chief Secretary says that all the extra expenditure may be financed easily because the revenue may be more buoyant. However, the Budget is only one month old. Presumably it was prepared on the basis of some up-to-date information. Do the new factors that he outlined to the industries in the North-West and elsewhere make him more confident than the people to whom I and others have spoken? If so, we wish to hear why. The fact is that the Chief Secretary to the Treaasury is whistling in the dark and it is the same old tune. He says that revenue may be more buoyant but he knows that it may be less buoyant. He has no new information. All that is new is his rising optimism to compensate for the gloomy expectation that he, as Chief Secretary, must feel at such a time.

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If the revenue cannot be guaranteed to be more buoyant, what is left to him, if his blessed financial strategy is to stay immaculate? We know the answer to that. It will be still more cuts in other areas of public expenditure. Is the Chief Secretary arranging for Cabinet discussions on such cuts? Is he arranging bilateral discussions with spending Ministers? Of course not. The Chief Secretary is rightly worried because the position threatens to get out of control.
The Chief Secretary is certain to have difficulties with defence expenditure. There have been difficulties in the past. It is not something new. We had a public accounts debate on Monday. We heard that during the past three years there has been overspending of cash limits. Year after year here has been overspending, despite the increases in expenditure allocated to defence.
My right hon. Friend the Member for Heywood and Royton (Mr. Barnett), on 19 April, said:
"The Comptroller and Auditor General tells us that there are more than 20 projects with costs in excess of £500 million, which highlights the startling size of projects within the Ministry of Defence. There are bound to be unforeseen difficulties and escalating costs, but the Ministry of Defence constantly and seriously underestimates them. Would many of the huge projects have been started had there been a more realistic cost estimate?"
He went on to say that
"it is not unusual in such large projects for the costs to escalate vastly."—[Official Report, 19 April 1982; Vol. 22, c. 31–32.]
That was at a time of peace, when everything was under control, when the Ministry of Defence was being brought before the Chief Secretay to the Treasury as well as before the Public Accounts Committee. The kind of control that one can have at a time of peace is not likely to be more rigorously applied at a time of conflict. That is the problem that we have to face now.
The right hon. Member for Orkney and Shetland said that the happy prophecies of Beveridge had come to the end of the road. I heard that with great sadness, because the Beveridge report came to many of us as a beacon at a dark time during the war. When asked by my hon. Friend the Member for Wood Green whether he accepted that the Government had responsibility for full employment, the right hon. Gentleman said that that was a preposterous question. The Labour Party does not find that a preposterous question. It is clear now that, for the first time since before the war, the Labour Party is the only party which believes in the viability of full employment. It believes that the Government have the responsibility for providing full employment.
Mr. Grimond: If the right hon. Gentleman knows how Governments can guarantee full employment, why did he not tell the Labour Government how to do it when they were in office?
Mr. Sheldon: The right hon. Gentleman forgets that from 1945 to the mid-1970s full employment was the norm in the British economy. The few years when that was not the norm are the deviant years—not the years when full employment was achieved. If the right hon. Gentleman has any respect for his former mentor—I know that he has—he will read the arguments that he deployed. They are as valid now as they were when he set them on the record. I am sorry that the right hon. Gentleman is withdrawing from those commitments, because they formed the most honourable part of the Liberal Party for many years.
356
When we look at the ratio of public expenditure to gross domestic product, we should not be mesmerised by it. We must increase output so that we can afford a larger level of public expenditure, without the agonies, which other countries with better economies can afford. We used to concentrate and we need to concentrate on output. growth and industrial expansion.
The lesson that the Government have not learnt is that we cannot have industrial expansion by making industry fear for its markets, employees fear for their jobs, and companies fear the liquidator and the receiver. It may be that the great success of the post-war years was the expansionary belief held by millions of people throughout the world. To build, to expand, to grow and to invest require confidence. The greatest disservice that this Government have performed has been to demolish that confidence. In the darkest days of the war, a surprising element was the belief that changes, advances and progress would be the normal course of events. There was the Beveridge report and homes for all. That attitude endured into the 1950s, with the doubling of the standard of living claims, and into the 1960 with the "Get Britain moving" slogan, until the present time.
All these hopes have been withering in the face of unemployment, the arrival of the liquidator and the hammer of the auctioneer. All those hopes are dying as more of our industrial assets are sold to countries that are more ready to make use of our machinery and equipment for their own expanding economies. To the millions of people who are yearning to be proud of our country, that is a cause for shame. To reverse that will not be easy. New attitudes will need to be fostered. The people have been injured and their hopes and expectations have been destroyed. A resurgence of will and confidence is needed. Such resurgence that can never come from the Government, who are the architects of the misfortunes so graphically set out in the wretched White Paper against which we shall vote tonight.
9.31 pm
The Minister of State, Treasury (Mr. Barney Hayhoe): This is the first time that I have been privileged to intervene in a Treasury debate. I am grateful to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) for his courteous welcome to the distinguished group of people who participate regularly in these interesting debates. As he and my right hon. Friend the Member for Worthing (Mr. Higgins) said, this is the third go, because we have had the Budget, the debate on the Second Reading of the Finance Bill and now, out of turn this year, the debate upon the public expenditure White Paper. When I was young we used to have a hot roast for Sunday lunch, cold meat on Monday and Tuesday and on Wednesday and Thursday we had shepherd's pie. I can only assume that this is the shepherd's pie debate of this year.
This debate has been wide ranging, from the highly technical comments made by my right hon. Friend the Member for Worthing to savage criticisms of the Government's policy. I make no complaint about that because it is the essence of our parliamentary process that such complaints should be made. I shall seek to respond to them in the time available to me.
The right hon. Member for Stepney and Poplar (Mr. Shore) referred to the cost implications for the defence budget of the operation in the Falkland Islands. The right hon. Member for Ashton-under-Lyne became very excited

357
at the prospects for defence spending. It is not possible at this stage to assess the total cost of the Falkland Islands operation. However, as the Government have made clear in the House and elsewhere, while there is no cash ceiling on the cost of the operation, it will be met in ways that are consistent with the Government's economic strategy. [HON. MEMBERS: "What strategy?"] The significance of that may escape those who have no strategy and no consistency, but my right hon. and hon. Friends will understand the significance.
Additional expenditure arises only when the cost of the operation proves to be more at the margin than the cost that would be assigned to the forces and individuals if they were engaged in other duties. At this stage, the extra cost represents a small proportion of the defence budget. As we have increased the defence budget from £7½ billion, which we inherited in 1978–79, to over £14 billion, even a 1 per cent. increment on that overall budget amounts to £140 million, which, on estimates that have been made, is well above the costs that have been incurred at this stage.
It has been suggested that our ability to respond to the Falkland crisis, or others like it, has been weakened by the Government's so-called cuts in defence spending. That is complete nonsense. The figures speak for themselves. This year we are spending £½ billion more in real terms on conventional naval forces than was spent in the year before we came to office. The conventional Navy still enjoys, and will continue to enjoy, as high a proportion of the defence budget—28 per cent.—as it did in that year. The current programme of modernisation and rebuilding will leave us with more ships and submarines operational in 1985 than today. Such good results flow from the Government's deliberate decision to give defence spending the priority it was previously denied.
The right hon. Member for Crosby (Mrs. Williams) referred to overseas broadcasts. They have been stepped up to the Falklands and to Latin America. Her more general comment is a matter for my right hon. Friend the Foreign Secretary.
The form of this year's White Paper has been widely welcomed. It uses a cash basis instead of funny money and that has found general support. Many right hon. and hon. Members are concerned about there being no effective way, as they see it, of making comparisons, particularly about the level of future spending. My right hon. and learned Friend the Chief Secretary has undertaken to examine all those matters in the light of the Select Committee's comments and of today's debate.
My right hon. Friend the Member for Worthing raised another important, highly technical matter about Bank of England funding operations and the purchase of commercial bills. I shall write to my right hon. Friend about that because it is a matter of considerable complexity.
The right hon. Member for Stepney and Poplar and others referred to housing. They pointed, as they were entitled to do, to the declining level of starts under this Government. They neglected to point to the more sharply declining level of starts that occurred under the Labour Administration. Perhaps that is understandable. They did not appreciate the substantial underspend by local authorities last year. With receipts from council house sales, the gross amount available for new housing
358
investment in 1982–83 is about £3 billion. In cash terms, that is about 15 per cent. more than the amount available in the last year of the Labour Administration.
The right hon. Member for Crosby referred to housing improvements. She will recall, although she did not have the grace to refer to it, that the Chancellor, in his Budget, increased the amount available for housing improvements. I hope that the money will be fully taken up by individuals and local authorities.
Mrs. Shirley Williams: I apologise for not welcoming the Minister. I did not appreciate that he was speaking as a Treasury Minister for the first time. I understand that the improvement grants were announced by the Chancellor as if they cover all improvement grants when they cover only intermediate and repair grants, which has caused disappointment to many.
Mr. Hayhoe: The intention was to direct the grants to the most urgent cases and to ensure a quick take-up so that there was an effect this financial year. The details are the responsibility of my right hon. Friend the Secretary of State for the Environment.
Many right hon. and hon. Members have referred to the public services—their pay, numbers and efficiency. As I have within the Treasury particular responsibility for certain aspects of that matter, may I first say that they were right to lay stress on those areas of public expenditure? The Government are the direct employer of over 1 million people—nearly 700,000 civilians and more than 330,000 Service men and women. Indirectly, they are the paymaster in whole or in part of many other large employers—the National Health Service, local authorities through the rate support grant, and the nationalised industries which look to the Government for loan capital. In all, about 6 million employees are involved. The efficiency with which those manpower resources are used is of enormous importance, as was recognised by many of my hon. Friends in their speeches.
The savings from comparatively small improvements in efficiency can pay for considerable additons to programmes. Conversely, continuing inefficiency can prevent us from spending money on desirable objectives. A 1 per cent. improvement in Civil Service efficiency overall would yield about £50 million, whereas for the public services as a whole—the Civil Service, the National Health Service and local government—a similar 1 per cent. improvement would amount to about £300 million. Even by present-day standards, that is a formidable sum.
The converse is also true. An extra 1 per cent. on the public service pay bill takes £300 million away from what might otherwise be highly desirable capital expenditure. That point must be underlined in the context of the Select Committee's comments about the ratio of current and capital expenditure.
What are the Government doing about that? Let me deal first with the Civil Service, which is my particular responsibility. The Government have given a high priority to improving the efficiency and effectiveness of the Government machine. The general thrust of that work is set out in the White Paper on efficiency in the Civil Service published last July. But even before it was published the Treasury and Civil Service Select Committee had begun its own inquiry into efficiency and effectiveness in the Civil Service. It was a worthwhile inquiry by a subcommittee, with the hon. Member for Motherwell and

359
Wishaw (Dr. Bray) as Chairman. The report was published recently. The report, the oral evidence that accompanied it and the written memorandum published with it contained a full account, in much more detail than the White Paper, of the work that is going on.
The Committee naturally did not take everything that the Government said at face value. It probed deeper. Nor did it always agree with what we were doing. It made its own recommendations for change, some of which were very far-reaching. There is no difference of principle between the Government and the Select Committee. We welcome its thorough and constructive report. Of course, the House would not expect me to answer it in detail this evening. We are giving it careful consideration and will publish our reply in due course. That reply may also be a convenient way to update our previous White Paper. Work and action on that front are continuing apace.
For the work to be effective and lasting, good management must harness the talents, experience and enthusiasm of those who do the job. Those qualities exist in plenty at all levels of the Civil Service. I wish that those facts were more widely recognised and acknowledged. The Civil Service gets far more than its fair share of ill-informed and plainly hostile criticism. Nevertheless, steady progress to improve efficiency and cost-effectiveness is being made. Attitudes are changing as a result of the pressures of the past few years. Although ministerial interest has been of crucial importance, it has generated a ready and helpful response throughout the service.
Mr. Foster: How is it possible for the Minister to argue that efficiency is significantly increasing when one thrust of the argument for producing the expenditure White Paper in its present form was that the measure of output was completely inadequate? He cannot have it both ways. If the measure of output is completely inadequate, how do we know that we are more efficient?
Mr. Hayhoe: The hon. Member for Bishop Auckland (Mr. Foster) has a fair point in referring to measurement of output in taking up the Select Committee's report.
The lasting reforms to which I have referred, to use Sir Derek Rayner's phrase for them, owe much to his own personal drive and inspiration. The old Civil Service Department and now the Management and Personnel Office have a crucial role in training and succession planning and in making sure that the right people with the right knowledge and experience are available to fill the key posts. The need for managerial skills in top jobs is more widely recognised and the Government are in no doubt about their responsibilities in securing effective financial management of the resources they control.
My right hon. and noble Friend the Lord Privy Seal and Leader of the House of Lords, with her special responsibilities for the MPO, will publish tomorrow an important action document setting out the early tasks, the objectives and priorities for the Management and Personnel Office over the next 12 months. The Treasury's detailed involvement in all this work has much increased since last year's public expenditure White Paper debate. The reorganisation of the central Departments announced by my right hon. Friend the Prime Minister last November has returned responsibility for Civil Service pay and numbers to the Treasury.
Firm control over the wages bill is obviously very important. This year's pay claim by the Council of Civil
360
Service Unions and the Government's pay offer have been referred to the Civil Service arbitration tribunal. Hearings were held on Monday and Tuesday of this week and the tribunal's findings are expected shortly—I hope before the end of the week. The Government will consider implementation as soon as the tribunal's findings are known. As the House will be aware, the Government reserved the right, when they agreed to recourse to arbitration at the end of last year's pay dispute, to ask the House to approve the setting aside of the award if the Government judged that to be necessary in the national interest.
In the longer term we are awaiting the report of the Megaw inquiry into Civil Service pay arrangements.
Mr. Tim Eggar rose——
Mr. Hayhoe: I am sure all concerned are grateful to Sir John Megaw and his colleagues for their efforts to achieve the tight timetable of reporting by the summer. The Government hope that the report will influence next year's pay negotiations and will help achieve an ordered and agreed pay system for the Civil Service which will be acceptable to civil servants, the Government and the public.
Mr. Eggar: In relation to the present inquiry on Civil Service pay, can the Minister give us an assurance that the cash limit will be paramount and that there will be no reason why the Government should exceed the amount of cash allocated for pay increases?
Mr. Hayhoe: I repeat the assurance which was given last year, and which has been repeated many times since, that for this year's Civil Service pay negotiations and settlements there will be no predetermined cash limit. As has been said, we must judge the award when it conies and there is always the possibility, as happened last year, of making savings by reductions in numbers and administrative savings. My hon. Friend will remember that we were able to get a 7·5 per cent. increase out of the cash limited expenditure of 6 per cent. In other words, 107·5 was got out of 106.
Mr. Straw: If the total cash bill for Civil Service pay is more than 4 per cent. up on last year, will the Government block the award?
Mr. Hayhoe: The Government will make their judgment when they know the award, and the) have already indicated in evidence to the Select Committee, which I thought the hon. Gentleman would have read in detail, that there is always the possibility of recourse to the Contingency Reserve if that is required. The Government will give careful and urgent consideration to the tribunal's award as soon as it is heard.
The Civil Service now employs about 670,000 people and is smaller than at any time for nearly 15 years. There has been a reduction of about 60,000 since we came to office. We are on course to achieve our target of 630,000 at the end of the next financial year. That will give us the smallest Civil Service that we have had since the end of the Second World War.
Reductions in numbers are only part of the story. We are tightening up on grading standards and examining critically what in the jargon is described as "grade drift". During the 1970s the proportion of senior to junior grades increased quite sharply. No doubt changing patterns of work provided some justification, but I suspect that

361
grading standards were allowed to slip. In the light of the Wardale report, all Departments are now undertaking a rigorous assessment of the need for all their senior posts. The reviews are nearly complete and the Treasury is now examining departmental proposals. New guidance on grading has been issued by the Treasury to all Departments, and I expect this work to yield positive improvements in helping to create the tauter, leaner but certainly no less efficient structure that modern circumstances demand.
Sir William Clark: I am sure that the House is grateful to the Government for ensuring the more efficient running of the Civil Service. However, although the Government can control pay awards, for example, under the Scott report they have no control over the index linking of pensions. Will the House have an opportunity to discuss the Scott report?
Mr. Hayhoe: That matter has been raised on a number of occasions. My hon. Friend will be aware that the Scott committee reported about 15 months ago. The Government have been considering the matter, and I hope that very soon their conclusions will be made known to the House. My hon. Friend will understand that I am not the sole determinant of the timing of such a debate.
There is a supplementary factor to the entire business of reducing numbers. The Government are not concerned only with efficiency in the narrow sense of containing and reducing the cost of public services, vital though that is. They are concerned also with the effectiveness of such services. We share the Select Committee's wish to define objectives more precisely and to analyse separately the cost of attaining each objective, and wherever practicable to audit and measure output. The press notice that accompanied this year's White Paper gave some details, but I accept that much more needs to be done in that area.
The title of the Select Committee's report, "Efficiency and Effectiveness in the Civil Service", gets the balance about right. It is our policy to reduce the cost of the public sector wherever possible. That may mean abandoning some operations altogether or transferring them to the private sector. Where we recognise the need for a service to continue in the public sector, we are determined that it will be delivered effectively as well as efficiently.
The Civil Service is only part of the story. The Government are the paymaster for the health services and about half of the resources for local authority services. The right hon. Member for Orkney and Shetland (Mr. Grimond) referred to National Health Service costs and manpower. I do not want to retread the ground of Monday's debate on the Public Accounts Committee reports. I have noted, as have my right hon. and hon. Friends at the Department of Health and Social Security, the powerful arguments deployed by my hon. Friends the Members for Horsham and Crawley (Mr. Hordern) and for Hove (Mr. Sainsbury). No one doubts the need for the efficient use of manpower in such a manpower-intensive service. Excluding the general practitioner service, the National Health Service pay bill amounts to about £7·5 billion a year. Increased services to patients have meant some increases in NHS numbers. However, productivity—if one may use such a word in this context—is improving. Efficiency is greater and pressure to continue to reduce management and administrative
362
costs will be maintained. Targets have been set for significant reductions over the next few years—for example, a 10 per cent. reduction in management costs over the next three years.
Mr. Robert Sheldon: We have had a debate on the whole of the public expenditure White Paper. The hon. Gentleman has been interesting us with details about the Civil Service. However, the debate covered much more than the Civil Service. The hon. Gentleman has only five minutes left to speak. I should have thought that the least he could do was to spend that time on the other issues.
Mr. Hayhoe: I was about to come to local government. The right hon. Gentleman must appreciate that public service manpower amounts to 30 per cent. of total public expenditure. These matters have been raised by many right hon. and hon. Members in the debate. It is right that I should spend some time referring to them.
In local government we must also seek manpower reductions. These are manpower-intensive services, and the more that we can do to reduce costs by the more efficient use of manpower, and by giving better value for the money raised from both ratepayers and taxpayers, the better it will be. I hope that the results of local government elections will help to contribute towards that.
In opening the debate, the right hon. Member for Stepney and Poplar concentrated on unemployment, as did one or two of his hon. Friends. This annual debate on the public expenditure White Paper is an opportunity for technical points to be raised and for criticisms of Government policy. It also gives an opportunity for the Opposition to deploy their own proposals on public spending. In particular, I want to look at the right hon. Gentleman's much flaunted plans for reducing unemployment to under 1 million in five years or so.
Hon. Members will have noticed an article in The Guardian yesterday by Christopher Huhne, which gives a most useful, and not all that unobjective, assessment of the Labour Party's strategy from a viewpoint which is surely a little more sympathetic to the right hon. Gentleman's proposals than that of many newspapers. Huhne's assessment is so important that all hon. Members should study it carefully. First, the article gives the lie to the right hon. Gentleman's proposition that the strategy has a seal of good housekeeping from the Treasury model. Huhne has run the right hon. Gentleman's proposals—or something very like them—through the model. It is clear that, whatever else, they are a recipe for plunging the economy into an almost impossible shambolic state.
Mr. Shore rose——
Mr. Hayhoe: I shall not give way now.
How the right hon. Gentleman can promise that on his strategy there would be no horrors ahead is beyond comprehension. Huhne's conclusion promises a crisis that makes the 1976 disaster look like a women's institute tea party in comparison. For starters, without an effective incomes policy, the right hon. Gentleman's strategy would give what Huhne calls "electrifying" increases in the money supply of over 30 per cent. One does not have to be a rabid monetarist to be a bit worried about that. Interest rates would have to be held down to an unbelievable 8 per cent., while inflation accelerated and rose before long to 18 per cent. per annum and more. The exchange rate would have to be devalued or allowed to depreciate by

363
staggering amounts—25 per cent. in the first year, and then 14 per cent., 17 per cent., 14 per cent. and 10 per cent. in later years, with the pound-dollar exchange rate falling by 1986 to close to 94 cents. compared to $1·76 now.
It is perfectly clear that the massive public spending proposals which the right hon. Gentleman would try to foist on the country, and the proposition that that would lead to a substantial reduction in unemployment——
Mr. James Hamilton rose in his place, and claimed to move, That the Question be now put.
Question, That the Question be now put,put and agreed to.
Question put accordingly:—
The House divided: Ayes 292, Noes 238.

Division No. 124]

[10 pm

AYES

Adley, Robert

Crouch, David

Aitken, Jonathan

Dean, Paul(North Somerset)

Alexander, Richard

Dickens, Geoffrey

Alison, Rt Hon Michael

Douglas-Hamilton, LordJ.

Amery, Rt Hon Julian

Dover, Denshore

Ancram, Michael

du Cann, Rt Hon Edward

Arnold, Tom

Dunn, Robert(Dartford)

Aspinwall, Jack

Durant, Tony

Atkins, Rt Hon H.(S'thorne)

Dykes, Hugh

Atkins, Robert(PrestonN)

Eden, Rt Hon Sir John

Baker, Kenneth(St.M'bone)

Edwards, Rt Hon N.(P'broke)

Baker, Nicholas(NDorset)

Eggar, Tim

Banks, Robert

Elliott,SirWilliam

Beaumont-Dark, Anthony

Eyre, Reginald

Bendall, Vivian

Fairbairn, Nicholas

Benyon, Thomas(A'don)

Fairgrieve, SirRussell

Benyon, W.(Buckingham)

Faith, Mrs Sheila

Best, Keith

Farr John

Bevan, DavidGilroy

Fenner, MrsPeggy

Biffen, Rt Hon John

Fisher, Sir Nigel

Blackburn, John

Fletcher, A.(Ed'nb'ghN)

Body, Richard

Fletcher-Cooke, SirCharles

Bonsor, SirNicholas

Fookes, Miss Janet

Boscawen, HonRobert

Forman, Nigel

Bottomley, Peter(W'wich W)

Fowler, Rt Hon Norman

Bowden, Andrew

Fox, Marcus

Boyson, Dr Rhodes

Fraser, Peter(South Angus)

Braine, SirBernard

Fry, Peter

Bright, Graham

Gardiner, George Reigate)

Brinton, Tim

Gardner, Edward(S Fylde)

Brittan, Rt.Hon.Leon

Garel-Jones, Tristan

Brooke, Hon Peter

Gilmour, Rt Hon Sir Ian

Brotherton, Michael

Glyn, DrAlan

Brown, Michael(Brigg&Sc'n)

Goodhart, SirPhilip

Browne, John(Winchester)

Goodlad, Alastair

Bryan, SirPaul

Gow, Ian

Buck, Antony

Grant, Anthony(HarrowC)

Budgen, Nick

Gray, Hamish

Bulmer, Esmond

Greenway, Harry

Burden, SirFrederick

Grieve, Percy

Butcher, John

Griffiths, Peter Portsm'thN)

Cadbury,Jocelyn

Grist, Ian

Carlisle, John(Luton West)

Grylls, Michael

Carlisle, Kenneth(Lincoln)

Gummer,JohnSelwyn

Chalker, Mrs.Lynda

Hamilton, Hon A.

Channon, Rt.Hon.Paul

Hamilton, Michael(Salisbury)

Chapman, Sydney

Hampson, Dr Keith

Churchill, W.S.

Hannam,john

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

Haselhurst, Alan

Clark, Sir W.(Croydon S)

Hastings, Stephen

Clarke, Kenneth(Rushcliffe)

Havers, Rt Hon Sir Michael

Cockeram, Eric

Hawksley, Warren

Colvin, Michael

Hayhoe, Barney

Cope, John

Heath, Rt Hon Edward

Cormack, Patrick

Heddle, John

Corrie, John

Henderson, Barry

Costain, SirAlbert

Heseltine, Rt Hon Michael

Cranborne, Viscount

Hicks, Robert

Critchley,Julian

Higgins, Rt Hon Terence L.

364

Hill, James

Page, Richard(SWHerts)

Hogg, Hon Douglas (Gr'th'm)

Parkinson, Rt Hon Cecil

Holland, Philip(Carlton)

Parris, Matthew

Hooson, Tom

Patten, Christopher(Bath)

Hordern, Peter

Patten, John(Oxford)

Howe, Rt Hon Sir Geoffrey

Pattie, Geoffrey

Howell, Rt HonD.(G'ldf'd)

Pawsey, James

Hunt, David(Wirral)

Percival, Sir Ian

Hunt, John(Ravensbourne)

Peyton, Rt Hon John

Hurd, Rt Hon Douglas

Pink, R.Bonner

Irving, Charles(Cheltenham)

Pollock, Alexander

Jenkin, Rt Hon Patrick

Porter, Barry

Jessel, Toby

Prentice, RtHonReg

JohnsonSmith, Geoffrey

Price, Sir David(Eastleigh)

Jopling, Rt Hon Michael

Prior, Rt Hon James

Joseph, Rt Hon Sir Keith

Proctor, K. Harvey

Kaberry, SirDonald

Raison, Rt Hon Timothy

Kershaw, Sir Anthony

Rees, Peter(Dover and Deal)

Kimball, Sir Marcus

Rees-Davies, W. R.

King, Rt Hon Tom

Renton, Tim

Kitson, SirTimothy

Rhodes James, Robert

Knight, MrsJill

Ridley, Hon Nicholas

Knox, David

Ridsdale, SirJulian

Lamont, Norman

Rifkind, Malcolm

Lang, Ian

Rippon, Rt Hon Geoffrey

Langford-Holt, SirJohn

Roberts, M.(CardiffNW)

Latham, Michael

Roberts, Wyn(Conway)

Lawrence, Ivan

Rossi, Hugh

Lawson, Rt Hon Nigel

Rost, Peter

LeMarchant, Spencer

Royle, Sir Anthony

Lennox-Boyd, HonMark

Sainsbury, HonTimothy

Lester, Jim(Beeston)

St. John-Stevas, Rt Hon N.

Lewis, Kenneth(Rutland)

Scott, Nicholas

Lloyd, Ian(Havant & W'loo)

Shaw, Giles(Pudsey)

Lloyd, Peter(Fareham)

Shaw, Michael(Scarborough)

Loveridge, John

Shelton, William(Streatham)

Luce, Richard

Shepherd, Colin(Hereford)

Lyell, Nicholas

Shepherd, Richard

Macfarlane, Neil

Shersby, Michael

MacGregor, John

Silvester, Fred

MacKay, John(Argyll)

Sims, Roger

Macmillan, Rt Hon M.

Skeet, T. H. H.

McNair-Wilson, M.(N'bury)

Smith, Dudley

McNair-Wilson, P.(NewF'st)

Speed, Keith

Madel, David

Spence, John

Major,John

Spicer, Michael(S Worcs)

Marland, Paul

Sproat,Iain

Marlow, Antony

Squire, Robin

Marten, Rt Hon Neil

Stainton, Keith

Mates, Michael

Stanbrook,Ivor

Maude, Rt Hon Sir Angus

Stanley, John

Mawby, Ray

Steen, Anthony

Mawhinney, DrBrian

Stevens, Martin

Maxwell-Hyslop, Robin

Stewart, A.(ERenfrewshire)

Mayhew, Patrick

Stewart, Ian(Hitchin)

Mellor, David

Stokes,John

Meyer, Sir Anthony

Stradling Thomas, J.

Miller, Hal(B'grove)

Tapsell, Peter

Mills, Iain(Meriden)

Taylor, Teddy(S'end E)

Mills, Peter(West Devon)

Tebbit, Rt Hon Norman

Miscampbell, Norman

Temple-Morris, Peter

Mitchell, David(Basingstoke)

Thatcher, Rt Hon Mrs M.

Moate, Roger

Thomas, Rt Hon Peter

Monro, SirHector

Thompson, Donald

Montgomery, Fergus

Thorne, Neil llfordSouth)

Moore,John

Thornton, Malcolm

Morris, M.(N'hamptonS)

Townend, John(Bridlington)

Morrison, Hon C.(Devizes)

Trippier, David

Morrison, Hon P.(Chester)

Trotter, Neville

Mudd, David

van Straubenzee, SirW.

Murphy, Christopher

Vaughan, Dr Gerard

Myles, David

Viggers, Peter

Neale, Gerrard

Wakeham,John

Needham, Richard

Waldegrave, HonWilliam

Nelson, Anthony

Walker, B.(Perth)

Neubert, Michael

Wall, Sir Patrick

Newton, Tony

Waller, Gary

Nott, Rt Hon John

Walters, Dennis

Oppenheim, Rt Hon Mrs S.

Ward,John

Osborn, John

Warren, Kenneth

365

Watson, John

Winterton, Nicholas

Wells, John(Maidstone)

Wolfson, Mark

Wheeler, John

Young, Sir George (Acton,)

Whitelaw, Rt Hon William

Younger, Rt Hon George

Whitney, Raymond

Wickenden, Keith

Tellers for the Ayes:

Wiggin, Jerry

Mr. Anthony Berry and

Wilkinson, John

Mr. Carol Mather

Williams, D.(Montgomery)

NOES

Adams, Allen

Eadie, Alex

Allaun, Frank

Eastham, Ken

Alton, David

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

Atkinson, N.(H'gey,)

Ennals, Rt Hon David

Barnett, Guy (Greenwich)

Evans, Ioan(Aberdare)

Barnett, Rt Hon Joel(H'wd)

Evans, John(Newton)

Beith, A.J.

Faulds, Andrew

Bennett, Andrew(St'Kp'tn)

Field, Frank

Bidwell, Sydney

Fitch, Alan

Booth, Rt Hon Albert

Flannery, Martin

Boothroyd, Miss Betty

Fletcher, Ted(Darlington)

Bottomley, RtHonA.(M'b'ro)

Foot, Rt Hon Michael

Bray, Dr Jeremy

Ford, Ben

Brown, Hugh D.(Provan)

Forrester, John

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

Foster, Derek

Brown, Ronald W.(H'ckn'yS)

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

Brown, Ron(E'burgh, Leith)

Freeson, Rt Hon Reginald

Callaghan, Rt Hon J.

Garrett, John(Norwich S)

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

Garrett, W. E.(Wallsend)

Campbell, Ian

George, Bruce

Campbell-Savours, Dale

Gilbert, Rt Hon Dr John

Canavan, Dennis

Ginsburg, David

Cant, R. B.

Golding, John

Carmichael, Neil

Graham, Ted

Carter-Jones, Lewis

Grant, George(Morpeth)

Cartwright, John

Grimond, Rt Hon J.

Clark, Dr David(S Shields)

Hamilton, James(Bothwell)

Cocks, Rt Hon M.(B'stolS)

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

Coleman, Donald

Harrison, Rt Hon Walter

Concannon, Rt Hon J. D.

Hart, Rt Hon Dame Judith

Conlan, Bernard

Hattersley, Rt Hon Roy

Cook, Robin F.

Haynes, Frank

Cowans, Harry

Healey, Rt Hon Denis

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

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

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

HomeRobertson, John

Crawshaw, Richard

Homewood, William

Crowther, Stan

Horam, John

Cryer, Bob

Howell, Rt Hon D.

Cunliffe, Lawrence

Hoyle, Douglas

Cunningham, DrJ.(W'h'n)

Huckfield, Les

Dalyell, Tam

Hughes, Mark(Durham)

Davidson, Arthur

Hughes, Robert(Aberdeen N)

Davies, Rt Hon Denzil(L'lli)

Hughes, Roy(Newport)

Davies, Ifor(Gower)

Janner, HonGreville

Davis, Clinton(HackneyC)

Jay, Rt Hon Douglas

Davis, Terry(B'ham, Stechf'd)

Johnson, Walter(DerbyS)

Dean, Joseph(Leeds West)

Jones, Rt Hon Alec(Rh'dda)

Dewar, Donald

Jones, Barry(East Flint)

Dixon, Donald

Jones, Dan(Burnley)

Dobson, Frank

Kaufman, Rt Hon Gerald

Dormand, Jack

Kilfedder, JamesA.

Douglas, Dick

Kilroy-Silk, Robert

Douglas-Mann, Bruce

Lambie, David

Dubs, Alfred

Lambom, Harry

Duffy, A. E. P.

Lamond,James

Dunn, JamesA.

Leadbitter,Ted

Dunnett, Jack

Leighton, Ronald

Dunwoody, Hon Mrs G.

Lestor, MissJoan

366

Lewis, Arthur(N'ham NW)

Rooker, J. W.

Lewis, Ron(Carlisle)

Roper, John

Litherland, Robert

Ross, Ernest(Dundee West)

Lofthouse, Geoffrey

Rowlands, Ted

Lyon, Alexander(York)

Ryman, John

Lyons, Edward(Bradf'dW)

Sandelson, Neville

Mabon, Rt Hon Dr J. Dickson

Sever, John

McCartney, Hugh

Sheerman, Barry

McDonald, DrOonagh

Sheldon, Rt Hon R.

McKelvey, William

Shore, Rt Hon Peter

MacKenzie, Rt Hon Gregor

Short, MrsRenée

Maclennan, Robert

Silkin, Rt Hon J.(Deptford)

McNally, Thomas

Silkin, Rt Hon S. C.(Dulwich)

McNamara, Kevin

Silverman, Julius

McTaggart, Robert

Skinner, Dennis

McWilliam, John

Smith, Rt Hon J.(N Lanark)

Magee, Bryan

Soley, Clive

Marshall, Dr Edmund(Goole)

Spearing, Nigel

Marshall, Jim(LeicesterS)

Spriggs, Leslie

Martin, M(G'gowS'burn)

Stallard, A.W.

Mason, Rt Hon Roy

Steel, Rt Hon David

Maxton, John

Stoddart, David

Maynard, MissJoan

Stott, Roger

Meacher, Michael

Strang, Gavin

Mellish, Rt Hon Robert

Straw,Jack

Mikardo, Ian

Summerskill, Hon Dr Shirley

Millan, Rt Hon Bruce

Taylor, Mrs Ann(Bolton W)

Miller,DrM.S. (E Kilbride)

Thomas, Dafydd(Merioneth)

Mitchell, Austin(Grimsby)

Thomas, Jeffrey(Abertillery)

Mitchell, R. C.(Soton Itchen)

Thomas, Mike(NewcastleE)

Morris, Rt Hon A.(W'shawe)

Thomas, DrR.(Carmarthen)

Morris, Rt Hon C.(O'shaw)

Thorne, Stan(Preston South)

Morris, Rt Hon J.(Aberavon)

Tilley, John

Morton, George

Torney, Tom

Moyle, Rt Hon Roland

Varley, Rt Hon Eric G.

Mulley, Rt Hon Frederick

Wainwright, E.(DearneV)

Newens, Stanley

Wainwright, R.(ColneV)

Oakes, Rt Hon Gordon

Walker, Rt Hon H.(D'caster)

Ogden, Eric

Watkins, David

O'Halloran, Michael

Weetch, Ken

Orme, Rt Hon Stanley

Wellbeloved, James

Owen, Rt Hon Dr David

Welsh, Michael

Palmer, Arthur

White, FrankR.

Park, George

White, J. (G'gowPollok)

Parker, John

Whitehead, Phillip

Parry, Robert

Whitlock, William

Pavitt, Laurie

Willey, Rt Hon Frederick

Penhaligon, David

Williams, Rt Hon Mrs(Crosby)

Powell, Raymond(Ogmore)

Wilson, Gordon(Dundee E)

Race, Reg

Wilson, William(C'try SE)

Radice, Giles

Winnick, David

Rees, Rt Hon M(Leeds S)

Woodall, Alec

Richardson, Jo

Woolmer, Kenneth

Roberts, Albert(Normanton)

Wrigglesworth, Ian

Roberts, Allan(Bootle)

Wright, Sheila

Roberts, Ernest(HackneyN)

Roberts, Gwilym(Cannock)

Tellers for the Noes:

Robertson, George

Mr. James Tinn and

Robinson, G.(CoventryNW)

Mr. Allen McKay.

Rodgers, Rt Hon William

Question accordingly agreed to.
Resolved,
That this House takes note of the White Paper on the Government's Expenditure Plans 1982–83 to 1984–85, Cmnd. 8494.

BUSINESS OF THE HOUSE
Ordered,
That, at this day's sitting, the Industry Bill may be proceeded with, though opposed, until any hour.—[Mr. Lang.]

Orders of the Day

  Industry Bill
  Order for Second Reading read.
  10.15 pm
  The Minister of State, Department of Industry (Mr. Norman Lamont): I beg to move, That the Bill be now read a Second time.
  The Bill has two purposes. First, it increases the cumulative limit on selective financial assistance which may be provided under section 8 of the Industry Act 1972. Section 8 is part of the Act that enables the Secretary of State, at his discretion, to give financial assistance to industry when he considers that to do so would be in the national interest. Secondly, the Bill increases the threshold at which individual offers of assistance under section 8 are subject to the approval of the House of Commons from £5 million to £10 million.
  To deal with the threshold first, it has so far remained unchanged since the original legislation in 1972. In that time project costs have increased substantially. Parliamentary time is now required to approve individual cases which, in real terms, are a lot smaller than was envisaged at the time of the 1972 Act. It seems sensible to take some account of the increase in costs and the rate of inflation. Therefore, we propose to raise the threshold to £10 million, which is considerably less than the rate of inflation in the intervening period.
  The second and main purpose of the Bill is to increase the cumulative statutory limit that applies to all sums paid under section 8 since 1972, including both grants and loans, as well as to sterling guarantees which remain outstanding. Guarantees in foreign currency have since 1980 been subject to a separate limit. The original Act contained a limit of £150 million, with provision for up to four increases by statutory order of up to £100 million each. The statutory limit was raised to £600 million in the Industry (Amendment) Act 1976, again with provision for up to four increases by order of up to £250 million each. Four orders have been made, so the limit now stands at £1,600 million.
  To understand fully the need to increase the limit would require my delving back into history and detailing all the expenditure which has been made under section 8 since 1972. The House, I think, will be relieved to hear that I do not intend to refer to all the past schemes in detail. I shall concentrate most of my remarks on the forms of assistance that are available today.
  The essential feature of the Government's policy is to create an environment in which industry can flourish and prosper. This means tackling the root causes of our poor competitiveness and, above all, controlling inflation which is vital for an exporting nation. This is not a new aim. What is new is that, while other Governments have set their sights on it, they have shied away when the going got tough. We have not, and there are now clear signs that our policy is taking effect. Through a combination of economic measures and by direct financial support to industry, we are encouraging and assisting industry to become more efficient and more innovative and to face up to problems that have been avoided for years.
  My right hon. and learned Friend the Chancellor of the Exchequer in his Budget speech, dwelt on the general
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  economic measures that we have taken and the improvement in manufacturing output and productivity last year which show clearly that this policy is producing benefits. The Budget measures, worth over £1 billion to industry in 1982–83, are designed to maintain the momentum of the Government's industrial policy and to be a springboard for further recovery in 1983.
  The House will not need to be reminded that over the past few years the great bulk of Government spending in industry has taken the form of support for nationalised industries and public sector companies. Roughly speaking, about two-thirds of the total Department of Industry budget of £3 billion in 1981–82 was used in this way. This is not a satisfactory situation. As my right hon. Friend the Secretary of State said last month, we are deliberately setting out to shift the emphasis of departmental spending away from traditional industries and towards advanced technology sectors. We seek to reduce the need to subsidise the public sector and instead to devote special attention to three areas, which are of crucial importance for the competitiveness of our industry.
  The first is the promotion of new technology across a range of industrial sectors. We are concentrating particularly on microelectronics, optoelectronics, robotics, flexible manufacturing and advance office systems.
  The second area is research and development. In a recession, investment in this area is often the first economy made by companies seeking to preserve their cash resources, but it is essential for the long-term health of our industry that companies continue to innovate and modernise. We are helping them to do so with schemes such as the product and process development scheme.
  Thirdly, we shall continue to promote the small business sector. Our small firms loan guarantee scheme has had a strong and good response.
  Section 8 of the Industry Act is not the only instrument for furthering technology and modernising industry. Many of the schemes in the development of new technology—for example, the microprocessor applications project and the product and process development scheme—are funded under the Science and Technology Act. Equally, the major regional incentives are provided under sections of the Industry Act other than section 8. To put the point into perspective, annual expenditure under section 8 is currently running at £80 million, compared with expenditure on regional assistance of £425 million or on support under the Science and Technology Act of £220 million. But section 8 is important as a means of improving the competitiveness of our industry by supporting high quality investment projects. Often it is closely connected with assistance provided under other powers.
  I undertook not to delve too much into history, but let me explain briefly how the current limit has been reached over the last 10 years.
  Three main forms of expenditure can be distinguished in the past. First, especially in the early years, a number of payments were made to individual companies outside any general scheme of assistance. These include contributions to several rescue operations, such as Chrysler, Alfred Herbert and BL. Of course, BL has not been helped generally under section 8 of the Industry Act. Under the previous Administration, most of the money

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  was advanced through the National Enterprise Board. Under this Administration, it has been advanced under the Industry Act 1980.
  Secondly, assistance has been provided through specific schemes, usually aimed at particular sectors of industry. In the 1970s, 18 schemes of this type were introduced to support projects concerned with modernisation and rationalisation in several sectors.
  Thirdly, use has been made of section 8 to provide assistance for investment projects across the whole range of manufacturing industry according to general criteria. Two schemes of this sort were set up by the previous Government—the accelerated projects scheme and the selective investment scheme.
  When the present Government took office, we reviewed all the schemes of assistance existing at that time. We decided to let the schemes under section 8 which remained open for applications run their course and to process applications under those schemes and the remaining applications under other schemes which had already closed. Of the schemes open at that time, the energy conservation scheme, the redmeat slaughterhouse industry scheme, the offshore supplies interest relief grant, the footwear manufacturing industry scheme and the selective investment scheme have since closed for applications. Payments are, of course, still being made for projects under these schemes, since the final instalment of grant is not normally made until the project has been completed.
  Not all schemes operated by previous Governments have been closed. For example, the microelectronics industry support programme, which assists the development and expansion of the microelectronics industry in the United Kingdom, particularly in the manufacture of integrated circuits, was started by the previous Government, but we have reviewed and altered its objectives and extended its time scale. I include this as a section 8 scheme, but part of the expenditure under the scheme is funded under the Science and Technology Act.
  We have also introduced new schemes to meet specific industrial needs. We have introduced a scheme to encourage industry to switch from oil and gas to coal-fired boilers to improve energy efficiency and increase the use of indigenous coal resources. More recently we introduced two measures affecting the steel industry. One is a scheme to help with rationalisation and restructuring costs in the private steel sector. Grants are given towards the costs of statutory redundancy payments if they are part of a restructuring programme, and money is also given towards the costs of closure or restructuring projects. The other is a contribution to self-help schemes devised by the high-alloy steel castings industry to enable closures to take place in an orderly way. We have also announced a new scheme to help small engineering firms—those employing 200 people or fewer—to invest in the latest engineering technology.
  Another area of assistance under section 8 is that provided for small firms. Small firms are vital for our industrial future. Small is successful. The Government have not only recognised the importance of small firms to the future growth of our economy but have put public money to work for this purpose. We now have a battery of incentives for small companies which are probably unequalled anywhere in the world. On 1 June last year we
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  introduced the small firms loan guarantee scheme. The aim of the scheme is to back by guarantee the sort of marginal proposition that a bank judges to be potentially viable but turns down, either because of lack of adequate security or because the individual business or business man does not have an established track record. The original intention was to provide for a three-year pilot scheme which would cover £150 million of borrowing, for which the Government's guarantee, covering 80 per cent. of the risk, would be £120 million. Such has been the response from industry that we have now doubled the scheme to £300 million, of which the guaranteed portion will be £240 million.
  We have also continued to offer assistance according to general criteria to major investment projects in all parts of manufacturing industry. We have altered the criteria to ensure that assistance is used where it is most needed and is concentrated on investments which will do most to improve industry's competitiveness. Assistance is offered on a selective basis for inward investment and other large projects which involve substantial improvements in performance or the introduction of new products, and which either produce a substantial net contribution to United Kingdom output or introduce a significant degree of innovation.
  I have explained the broad purposes for which money has been advanced in the past. Before putting figures on them, perhaps I should emphasise that in fixing a limit under the Bill we need to ensure that statutory cover exists for offers of assistance which form commitments to make payments. Because of the time between approval and project completion, payments tend to lag some way behind commitments. there are also a number of potential commitments represented by the amounts within the sums allocated to the various schemes which, although as yet uncommitted, can reasonably be expected to be taken up by future offers of assistance.
  I shall summarise the amounts of money which have been paid out under the various headings. Under section 8, £296 million was paid out to individual rescue schemes in the 1970s. A further £660 million is accounted for by schemes introduced by previous Governments and which no longer exist, and £45 million is committed under schemes introduced by previous Governments and continued by the present Government. New schemes introduced by the Government up to the time of the Budget involved an allocation of £295 million. Taken together with the £200 million guarantee for ICL, which the House approved last year, payments, commitments and guarantees amount to £1,500 million, compared with the existing limit of £1,600 million. Hon. Members may think that that is close enough to the existing limit, but in addition, it was announced in the Budget that the small firms loan guarantee scheme would be doubled in size and that a new scheme for small engineering firms would be introduced.
  The £140 million that has been allocated to those two measures will clearly take us beyond the existing limit. In addition, other new schemes are being considered as part of the £130 million innovation package announced by my right hon. and learned Friend in his Budget, some of which will fall under the Science and Technology Act and some under section 8, depending on the precise form of the scheme.
  I hope that that explains why the Government are now seeking new powers. The Bill will increase the immediate

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  limit by £300 million to £1,900 million, and provide for up to four further increases by order of up to £200 million each. I do not claim that these amounts represent precise estimates of expenditure over any specific period. They follow the pattern of previous Acts in providing room for continued expenditure over a period of years, subject to approval by the House as the intermediate points are reached.
  Taken by itself, the Bill will not have any immediate impact upon Government spending or the public sector borrowing requirement. The sums mentioned in the Bill do not add to Government spending until a decision is taken to allocate them to the various forms of assistance, and those decisions will take full account of our policies on public expenditure. In no sense do we believe that indiscriminate spending by the Government on industry is the way to create viable industries and secure employment. The Government's role is to shape the economic environment in such a way as to encourage initiative and enterprise.
  Mr. D. N. Campbell-Savours: The Minister said that the Government intend to shape the economic environment. He has listed what he called a battery of incentives for small and other industries. What does he say to manufacturers who tell him that, more than incentives, they want an inflation of the economy? Surely that is how they will be able to generate the wealth that is necessary to fund the social wage.
  Mr. Lamont: I do not know the business men to whom the hon. Gentleman talks, but the overwhelming majority of business men to whom I talk say that it is important for their businesses that we get on top of inflation. They say that low inflation is important for competitiveness. They point out that only when we have a low rate of inflation—lower than that of our competitors—will our economy begin to expand. Furthermore, most of the business men to whom I talk do not want a sudden upturn. They want a gradual emergence from the recession. They recognise the importance of getting on top of inflation.
  Within the framework of the measures to which I have referred we shall continue to offer support for industries in selected areas, especially those concerned with innovation and the introduction of new technologies, because they will improve efficiency and increase competitiveness.
  10.35 pm
  Dr. John Cunningham: I welcome the debate because it gives us an opportunity to comment on the industrial scene. As the Bill will become law it is an opportunity to welcome the Government's apparent determination to continue to intervene in industry and provide assistance, albeit in a small way.
  The Minister's speech was strange. I hope that he is not offended by that remark. It was a detailed description, mainly of past events. There was no mention of the effect of Government policies on British industry. The Minister did not say anything about output, investment or capacity as a result of three years of Conservative policies. A sum of money appeared in almost every line of his speech. Millions of pounds were thrown about like confetti. Most of the sums have already been committed. For the casual observer, myself and many other hon. Members it was difficult to discern what, if anything, new was being said.
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  I am not surprised that the Minister made such a speech because the industrial scene in Britain after three years is grim and appalling. It is, perhaps, no surprise that the Minister glossed over that.
  It is uncharacteristic of the Minister to treat the House to such a speech because in the past he has not lacked guts in facing up to situations. His speech did not face up to what has happened to British industry after three years of Thatcherism.
  There was a notable lack of design in the Minister's remarks about the Government's views on the future of British industry, with two exceptions. I refer to his remarks about information technology and the associated industries, when he made a semblance at attempting a strategy for British industry.
  We welcome the small firms loans guarantee scheme. It is a success and we hope that it will continue. I smiled when the Minister said that the Government had made industry face up to the problems. That is true, whichever way they face the problems of three years of the present Administration. They have no option. Many major industries are beset by massive and severe problems which little or no sign of being able to solve them. Nothing that has been said tonight will bring much encouragement to firms.
  Comments that I hear from people in industry—I have spent some time this week talking to senior managers and trade unionists—belie the claims reiterated tonight by the Minister, and often from the Dispatch Box by the Secretary of State for Industry and the Chancellor of the Exchequer, that we are on the brink of a sustained and significant industrial recovery. There is little or no sign of that in views that are expressed to me by people in the manufacturng industry.
  My right hon. Friend the Member for Salford, West (Mr. Orme) and I today met a delegation of shop stewards from the aerospace industry. As a result of the Government's defence policies and their stupid adherence to Trident, at a time when we are apparently close to hostilities, we are closing down that industry 's maintenance and repair capacity. There is no sign of any recovery or upturn for the workers and managers there.
  Mr. Hal Miller: What about British Aerospace?
  Dr. Cunningham: British Aerospace is privatised, which is yet another failure of the Government's approach.
  The Minister talked about an environment for industry. His right hon. Friend the Secretary of State for Education and Science used to talk about a climate for enterprise when the Government first came to office. What has happened as a result of the attempt to create an environment for industrial progress? Output and investment are significantly down. Unemployment has scandalously increased. Bankruptcies and company closures are at all-time record levels. This year there has been an increase in the number of companies folding up as a result of the Government's policies.
  The present Leader of the House, when he first became Secretary of State for Industry, deliberately legislated to reduce his ability to intervene in industry. That was one of his first acts. He reduced his flexibility to respond to the difficulties, which he must have known existed, by changing section 8 of the 1972 Act, by reducing resources to the Scottish and Welsh Development Agencies and by

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  reducing the effectiveness, role and scope of the National Enterprise Board. The resources to the development agencies were soon increased, if not completely restored. That decision was rapidly reversed, but as for the remainder, the Government were almost guilty of hamstringing themselves because of those measures.
  Far from a climate for enterprise, Thatcherism has caused an economic blizzard for the British manufacturing industry. Many firms, good and bad, have perished in the blizzard. Many of those that have survived, far from being leaner and fitter, as is claimed, are skinny and weak. They are hanging on by the skin of their teeth with low, if any, profits, and low output, capacity utilisation and market demand, as my hon. Friend the Member for Workington (Mr. Campbell-Savours) said in his intervention. Inevitably, they have a low chance of survival.
  That is where the Government have brought British industry. In the process, they have created much human misery, from the board room down to apprentices. People with great experience and considerable skills have been swept away. This has been the worst industrial decline on record. It is certainly as bad as anything that happened earlier this century. So it is not surprising that the Minister's speech was purely descriptive. I imagine that, for once, his courage failed him. The Minister says "Tut, tut", but he did not mention any of this in his speech. It could not be said that anyone was pressing him to be brief, or that the House was short of time. The process of deindustrialisation has massively accelerated as a result of three years of this Government's policies.
  I shall mention a few brief comments about expectations—not from the Labour Party or from me, but from the CBI. It said on 9 April, under the headline "Manufacturing output 'slowly improving"'
  "However, and as the chart shows,"—
  this is a chart about the economy—
  "there is still no sign yet of any marked recovery in production levels".
  That is what the CBI says about the situation.
  The director-general of NEDO said something very similar in recent press statements. Barclays Bank, in its "U.K. Economic Survey", said:
  "Although the Treasury's forecast for growth in 1982 has been revised upwards, it is neither sufficient to alter the broad view of a modest, fragile recovery, nor do more than check the upward pressures on unemployment. A stronger recovery would demand a more robust world upturn than can currently be forecast".
  That is saying that the Government's policies will not bring an upturn, and that without a major world upturn there is little prospect of any significant change. That is the implication there. There is not much comfort for the Government in those comments. The Government cannot claim that those people are motivated by a desire to support Opposition speeches or the Labour Party when they make their assessments of the industrial and economic prospects.
  I shall mention a couple of industries. The chemical industry was hitherto a relatively successful industry, with a good investment record, a good productivity record, and a good record in industrial relations. Major companies in the industry which are household names have been making massive losses in the past two or three years—ICI and BP Chemicals, to name but a couple of the most obvious ones.
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  The textile industry, too, has been devastated. The British Textile Confederation's "Review of 1981–82 and Annual Report 1981" says:
  "In common with the rest of British industry, but to a greater extent than most of it, the textile industry has suffered grievously from recession. High interest rates and the expectation of a decline in consumer demand led to sharp destocking, the major contributor to a further 10 per cent. fall in the industry's output in 1981, leaving it 26 per cent. below the level of output achieved in 1979."
  It goes on to say that employment in the textile industry fell again last year, from 384,000 in December 1980 to 358,000, 12 months later, and it had been at 458,000 in December 1979.
  Those are the real results of what has been happening in British industry. It is a devastatingly bad record. that is the reality for British business. I shall quote what the Government's own House magazine British Business says in its issue of 16 April on page 689 about investment:
  "For 1981 as a whole, manufacturing investment was almost 18 per cent. lower than in 1980 … When manufacturing industries investment is augmented with leasing from the service industries, 1979"—
  the last year of a Labour Administration—
  "is the highest recorded level of investment and the 1981 figure shows a reduction of nearly 19 per cent. from that peak."
  Those are the figures from the Government's publication. So much for the claim, often repeated erroneously by the Secretary of State, that investment is holding up well. He has said that from the Dispatch Box on at least two occasions when I have been in the Chamber. The Government's figures show that statement to be manifestly untrue. There has been virtually a 20 per cent. fall in investment in the last three years of the Government's term of office.
  The Bill, such as it is, is welcome. It will provide extra resources that are desperately needed by many sections of British industry. It implies intervention. At least that should bring a small glow, if not a smile, to the face of the right hon. Member for Sidcup (Mr. Heath), if he knows that one small aspect of his Government's work is recognised as worthwhile and is accepted by this Administration.
  Even the Government's record to date under section 8 of the 1972 Act does not stand comparison with the record of the Labour Government. In 1978–79, offers under section 8 of the Act totalled £162·8 million—almost £163 million. By 1979–80, they had fallen to £71 million, down by more than 50 per cent. in the first year of the Government's period of office. By 1980–81 they hadfallen to just under £37 million, down another 50 per cent. on the previous year. By August 1981 they had fallen again—down another 60 per cent. in that 12 months.
  Therefore, in reality, the value of offers currently made under that section of the Act, as a result of the Government's approach, is about one-sixth, or 17 per cent., of what it was the year before the Government came into office. That is the reality of what the Government have been doing, even under that section of the Act, which the Minister of State has said will play an important part. The Government's record, even with section 8, is poor.
  The Government's own publication said recently, with regard to the formation of small firms, that more than 35 per cent. of companies set up in 1980 were based in the South-East, whereas poorer areas such as Northern Ireland, East Anglia and the North of England had only 3 per cent. of the new firms that were being created. We share some of the Government's enthusiasm for

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  development in that sector, if not all of it. Although that policy may be claimed to be a great success in the worst affected regions, the Government figures show that not to be so. There is little hope of future employment for the thousands of people in the regions as a result of those policies if such an outturn is repeated. I do not have the latest figures. If the Minister has them, perhaps he will give them to me.
  The Secretary of State for Wales (Mr. Nicholas Edwards): Wales has some of the worst unemployment levels of all the regions. I can report a record level of formation of new and small businesses and a record level of enquiries on the same subject.
  Dr. Cunningham: No doubt a record number of failures, too.
  I am pleased that at least I have provoked the Secretary of State for Wales into defending the Government's record. He is wrong to say that Wales has the worst unemployment. The worst is in the Northern region. I am pleased to hear that Wales is making progress on small business creation. The people of Wales have suffered grievously from the policies of the right hon. Gentleman and his colleagues.
  Mr. Norman Lamont: I do not accept that one can judge a Government's policy simply by their spending. The hon. Gentleman has quoted figures for selective assistance. The Government have spent more than their predecessors under the science and technology legislation. They have also spent more on the advanced technology centres. Then there are the schemes that my hon. Friend the Minister for Industry and Information Technology has promoted. The Government have spent substantially more than the Labour Administration on all that and on the small business sector.
  Dr. Cunningham: It is perhaps as well that the hon. Member for Knutsford (Mr. Bruce-Gardyne) is now a member of the Government and a prisoner in the Treasury. Had he been in his former place below the Gangway he would have frothed at the mouth at the claims about what the Government have done.
  I do not deny what the Minister says, but the outcome has been a major deterioration in British industry. There is a 20 per cent. drop in investment in industry as a result of the Government's policies. There is no escaping the fact. The Government's own figures are on the record. It is no good the Minister saying that the Government are spending more and therefore are getting it right. The figures prove that that is no argument. The Government are increasingly getting it badly wrong.
  We need a much more coherent approach to our industrial difficulties than the Government show any sign of introducing. Like our competitor countries and our partners in Europe, we need to plan our industrial recovery and the development of our industries and trade. Japan, West Germany, France and America increasingly plan them in a far more sophisticated way than we do. That comment also applies to previous Labour Administrations.
  All the evidence shows that if we are to avoid a continuing slide into de-industrialisation in Britain we must plan our industrial development, investment and trade in a coherent and strategic way, with our eye on the goals that we wish to achieve. That is the lesson to be learnt from the approach of this Government and the
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  Labour Government. When the Labour Party returns to office, we are determined to show that we have learnt it. Without a coherent set of policies for investment, growth, rationalisation and the introduction of new technology, our industrial base will continue to decline.
  The Government offer no hope. There is no evidence of a sustainable recovery in our industrial situation. They stand condemned by the figures published from their record. That is the reality of our industrial situation as a result of three years of Conservative administration.
  11 pm
  Mr. Hal Miller: The only common ground that I can find with the hon. Member for Whitehaven (Dr. Cunningham) is his insistence on the need for a more coherent approach to our industrial policy. I have been trying to set out my ideas on that policy inside the House and elsewhere for a number of months.
  I am not known for my partisan approach to the se debates, but I cannot understand the hon. Gentleman's purpose in peddling doom and gloom, which cannot help those in his region, my constituents, or the country generally. There was nothing positive in his remarks. The hon. Gentleman has experience in these matters and he is well aware that the state in which the last Labour Government, of which he was a member, left British industry made it unable to face the world recession that hit us.
  The hon. Gentleman talks of the need for inflated demand, but there is perfect evidence of adequacy of demand for cars, washing machines, tape recorders and computers. He knows that the problem lies with the policies of the Labour Government, who flattered and deceived. They pretended that jobs could be propped up in declining and dying industries by the spending of taxpayers' money, that customers would be found for their products, and that the new products that the market needed would be evolved. The present state of our industry is directly the responsibility of the hon. Gentleman's Government. It was his Government who propagated myths and illusions and he has sought again to put them before the House.
  It is not good enough to pretend that this Administration's policies, especially for small businesses, have failed or are confined to the South-East. Last week there were frequent press reports about Corby, for example. Small business has taken up the whole of the lost 5,000 jobs from the Corby steelworks.
  Mr. Campbell-Savours: No, 1,600 jobs, not 5,000.
  Mr. Miller: I have referred to facts that are On the record. I pay tribute to my hon. Friend the Member for Norfolk, South (Mr. MacGregor), the Under-Secretary of State for Industry, for his small machinery scheme.
  I shall return to the tenor of the remarks that I had intended to make before I was provoked by the attempt made by the hon. Member for Whitehaven to depress the country and to sell it short so that there will be no confidence that we are able and willing to produce the goods.
  I agree with the hon. Gentleman about the need for a more coherent approach. It is interesting that there has recently been a call from his party's supporters in the West Midlands to support policies that I have been advocating for a number of months relating to an industrial strategy

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  for the West Midlands. I welcome and support the philosophy that my hon. Friend the Minister of State, Department of Industry set out when introducing the Bill. The object is to establish a climate in which industry can flourish and prosper. As a West Midlands Member, I second that.
  I am grateful to my hon. Friend for introducing the Bill. I only wish that he had not been so coy about it. I urge him to go further down this road. We are still spending £425 million a year on the blanket regional distribution of cash irrespective of the prospects of success. That spending depends merely on the location of the enterprise. On my hon. Friend's figures we are spending only £80 million a year on selective assistance, apart from the spending on science and technology.
  I have been urging the Government to get away from this blanket approach to regional policy. We need to consider individual industries on a sectoral basis. That is why I welcome the start that my hon. Friend has made in this direction in high technology with microcomputers. I welcome the start that he has made on the restructuring of the private steel industry. In justice, that was delayed far too long. It was put out of business by the British Steel Corporation, whose competition and restructuring was subsidised by the taxpayer. I particularly welcome the scheme to enable smaller industries to buy the higher technology numerically-controlled computer machine tools.
  My hon. Friends in the Administration are edging along the path that I have been urging for so long. We need a sectoral approach. It is not just a question of spending. The hon. Member for Whitehaven referred to the amount that was spent by his Administration under section 8. However, a lot of it was misspent. We need only think of the ferrous foundry scheme where money was invested—the need for which the hon. Member harped on about—quite regardless of the capacity of the industry. We need to restructure the industry. That is the path that my hon. Friend has been pursuing, and I should like to congratulate him on it. I wish him to extend it.
  My hon. Friend referred to the self-help scheme for steel castings. I wish him to extend that to the open die steel forging industry. With the expiry of the British Steel and Firth Brown agreement on this type of forging, which was confirmed by the chairman of BSC, and the statement about ingot sizes below which there will or will not be competition from BSC, there is now the real prospect that in this industry, too, we shall see subsidised competition from BSC putting private firms out of business. The restructuring should be extended. The scope of my hon. Friend's scheme—for which I have already thanked him on more than one occasion—was too narrowly drawn to exclude the open die steel forges.
  Mr. Ian Wrigglesworth: In view of the hon. Gentleman's comments. I am a little surprised at his criticism of the ferrous foundry scheme. My impression is that that has had a considerable beneficial impact in helping to modernise and restructure that industry.
  Mr. Miller: It introduced some more modern capacity but did nothing to take out the old and out-dated capacity. That is what I was arguing. I was just about to make the point that I hope my hon. Friend, apart from considering the open die forges, will also look at the plight of the
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  foundry industry. He has referred only to the steel and alloy foundries. I wish him also to consider the position of the iron foundries.
  That is all part of a more considered approach, at which point I join the hon. Member for Whitehaven. In the context of the West Midlands, I have been urging that we need this sectoral approach. We need to concentrate on the higher technologies and on the introduction of the new processes. My hon. Friend and his right hon. and hon. Friends in the Administration have made strides with his product and process development scheme and with the assistance given to science and technology. We need another element—what I call a competition policy. I again join with the hon. Member for Whitehaven in saying that that should include our trading policy. It is ridiculous that, for instance, the tariff against our cars going into Spain is nine times that on their cars coming to Britain. That means that we are unable to sell our Metros in Spain, but the Fiestas come in from Spain. In addition, there will be the new General Motors S car coming from Spain. The same situation applies to castings and forgings from Spain. There are problems in other markets upon which I must not spend too much time. We need a competition policy to ensure that there is free and fair competition and to give our industries an equal chance to compete with other suppliers.
  I am sorry if I was provoked into prolonging my remarks by the doom and misery peddled by the hon. Member for Whitehaven.[Interruption.] I hope that he will not provoke me again.
  However, I congratulate the Minister on the start that he has made in that direction. I hope that he will continue and extend it. Again, I stress that the Labour Party in the West Midlands has also adopted that criterion for future industrial development in the region. At long last the West Midlands is speaking with a united voice, determined to regain its rightful place in our manufacturing economy.
  11.10 pm
  Mr. Ian Wrigglesworth: I am pleased to follow the hon. Member for Bromsgrove and Redditch (Mr. Miller), because I very much agree with the general approach that he outlined. That is one of the reasons for my party's support of the Bill.
  The Bill is an archetypal example of selective Government assistance and should lie at the core of their industrial strategy. The difficulty is that it is almost impossible any longer to ascertain their strategy. If the Bill had been introduced against the background of a comprehensive strategy or a sectoral approach, I should have been much happier. The Government's policy is evolving and developing and I welcome that. It is moving in just the direction that my hon. Friends and I welcome. However, until there is a more whole hearted and comprehensive strategy than at present, it will not be satisfactory.
  I regret the fact that the Bill is being debated at such a late hour, although I assume that discussions have taken place through the usual channels. The Government's industrial strategy should be the central part of their policies. Against the background outlined by the hon. Member for Whitehaven (Dr. Cunningham), I should have thought that there would be a consensus in the House that the Government's industry policy was the most important aspect of all their policies. Given the decline in output and the increase in unemployment, such a policy must be the

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  kernel of any Government's strategy. If our industries are uncompetitive and unsuccessful, we shall not have the wealth, the employment, or the resources to spend on our social services and we shall be unable to achieve what many of us wish to achieve both nationally and internationally.
  To discuss such an important Bill at an hour approaching midnight relegates it to a second division position that is neither wise nor justified in the present climate. I am surprised that the Government should decide to debate the Bill now. I do not wish to take up the remarks made by the hon. Member for Whitehaven, because, although I agreed with the general thrust of his criticisms of the Government's policy, he was predominantly concerned with their economic policies. It is those policies that have led to the high unemployment, bankruptcies and the industrial decay found in the Northern region and in many other parts of the country.
  Some very important speeches on industrial policy will probably not be made tonight. We may hear a speech from the hon. Member for Surrey, North-West (Mr. Grylls), who represents a partial strand of thinking. I shall be interested to hear exactly which strand he represents. There are two strands of thinking in the Labour Party and the Conservative Party that have wrought havoc on our industrial scene. Unfortunately, I suspect that they will not be represented in the debate.
  Those strands are represented most clearly in the public mind—certainly in the mind of industry—by the right hon. Member for Bristol, South-East (Mr. Benn) for the Labour Party and by the right hon. Member for Leeds, North-East (Sir K. Joseph) for the Conservative Party. What was most striking about the Minister's speech was the way he announced with pride the assistance that was being given to industry. It is inconceivable that such a speech would have been made from the Treasury Bench two years ago under the then Secretary of State for Industry. That is what is wrong with industrial policy in Britain. We had two years of the policies of the right hon. Member for Leeds, North-East, and in the previous Administration we had two years of the right hon. Member for Bristol, South-East. After two years of the policies of the right hon. Member for Leeds, North-East, we have now a reversal to the type of policies promulgated by the Treasury Bench today.
  Mr. Campbell-Savours: The hon. Member has spent part of his speech drawing attention to the policies of my right hon. Friend the Member for Bristol, South-East (Mr. Benn) and the right hon. Member for Leeds, North-East (Sir K. Joseph). What many of us are unable to understand is how, with a formula for a £3 billion reflation of the economy when the Labour Party is promoting an objective of £9 billion, it is possible to reflate the economy in such a way that demand is restored. What proportion of that £3 billion would the hon. Gentleman allocate as increased support to the industrial budget of another Government?
  Mr. Wrigglesworth: We have limited time this evening. I should be delighted to take another hour repeating the speeches by my right hon. Friends the Members for Glasgow, Hillhead (Mr. Jenkins) and for Crosby (Mrs. Williams), or, indeed, many of speeches that my right hon. Friend the Member for Crosby made during the election campaign in Crosby. The hon.
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  Gentleman knows the SDP view on the reflation of the economy. However, I wish to examine industial policy and not the overall economic policies of the Government.
  It is inconceivable that the claims of aid to industry which were outlined by the Minister would have been made two years ago—£11 ½ billion total support for British industry. I welcome what the Minister said and the record that he has described. I also welcome his desire to extend aid for industry in the way that he has outlined. The choice of support for new technologies that his Department is pursuing is the right policy for the country. My only regret is that it is coming two years too late, and that a great opportunity was missed during that period when it was vital that industry should have the support and the cooperation of Government in order to resist and live with the consequences of the international recession.
  If selective assistance to industry is to succeed, it must be within an overall strategy for industry, and, indeed, a partnership with industry. One of the most depressing aspects for many industries—the hon. Member for Bromsgrove and Redditch will understand this as well as anyone as he comes from an area that is dominated by the motor industry—was the way in which industries vital to the future of Britain were told that they were standing alone, that they were expected to stand on their feet not only without assistance but without any type of friendship or co-operation from the Department of Industry. Fortunately, that position has changed, and industry overall is getting much greater co-operation and assistance from the Department of Industry than it was at that time.
  That is the right approach. We on the Social Democratic Party Bench want to see partnership between the Government and industry. We want to see the Government providing the environment which will improve the competitive edge of British industry, which it can succeed in doing. There are many examples of sectors of British industry that have succeeded and can still succeed in the world today. But they need Government cooperation and assistance if that success is to be forthcoming. They do not want the Government planning urged by the hon. Member for Whitehaven. The Government must follow a strategy, but the last thing that industry wants is big brother in Whitehall—which usually means civil servants and not Ministers—telling it what it should be doing. That is why the sort of assistance under section 8 of the Industry Act is the best from of assistance that can be given to British industry.
  I say once again how much we welcome the new approach of the Department of Industry under its new Secretary of State and its new Ministers. They will get every support from my party in the policies that they are pursuing now and in the passage of the Bill. It can be of great assistance to British industry, and I hope that the House will give it its full support so that it can be put on the statute book as soon as possible.
  11.22 pm
  Mr. Michael Grylls: I began to think that I should have to ask for your protection, Mr. Deputy Speaker. I was sitting here listening quietly and attentively to the hon. Member for Thornaby (Mr. Wrigglesworth) and trying to follow his speech carefully when suddenly he launched into a trailer of the speech which even then I was not sure that I should make at all. I suppose that it is the hon. Gentleman who has prompted me to intervene in the debate.

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  In almost every other debate on an Industry Bill over the years I have spoken against the Government's proposals simply because on the whole the pumping of taxpayers' money into industry by the Government has not helped very much and has not seemed to create jobs, either. I do not believe in the largesse of taxpayers' money being the right policy for industry or even the policy that industry wants, although my hon. Friend the Minister of State was right to say that throughout their three years in office the Government have been concentrating on getting the framework right—trying to get the economy and inflation right—and then letting industry get on with its job.
  The hon. Member for Whitehaven (Dr. Cunningham) made a very partisan speech underlining what he saw as the disasters, but he knows the pluses and successes there have been in productivity and the more realistic manning levels that had to come some time. Generally, industry is now in very much better shape and, when we come out of the recession, there will be enormous gains, in addition to a great many new jobs.
  I support the new slant adopted by my hon. Friend. He said that the Department of Industry was determined to direct more of its aid to helping and encouraging new industries than propping up old ones. I am certain that is right. It is not a partisan point. Over many years, Governments of both major parties have tried, perhaps understandably, to keep older industries going by pumping money into them, but they have failed to concentrate sufficiently on new industries. We now have a Minister responsible for information technology. We are beginning to see procurement policies and to recognise that the Government have a role—an interventionist role—in procurement and helping new industries to start. I have always supported such an approach. I hope that more procurement can go to smaller firms. It has been a mistake for too much procurement to go to big industry. It is right that we should be looking to the new firms rather than propping up the old.
  My main reason for welcoming the Bill—unlike the attitude I have taken to most Industry Bills—is that it is aimed principally at giving financial powers to the Government to continue the successful loan guarantee scheme. The Government are to be congratulated on introducing the scheme against the advice, the opinion, and even the wishes, of the greater part of the political establishment, the Whitehall establishment, and even the City establishment, which initially thought it unnecessary. It has, in fact, been very successful. More than 2,000 loans have been made to small firms that would not otherwise have received them. Without such loans, one must assume that half of those firms, the new firms, would never have started, while the other half, those already established, would not have been able to expand.
  I believe that the hon. Member for Whitehaven recognises that the measures to help small firms have been constructive. I would go further, again not in a partisan sense, and say that the climate for capital and for loans for small businesses is better than ever. That may not be a high compliment. The climate in the past has been very bad. There is now a much better climate for new and small businesses and for the important sector of expanding
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  businesses. A firm, in its second and third stages of development, will create even more jobs than the start-up business.
  We can be glad that the loan guarantee scheme has been so successful. It has enabled small firms that could not give personal security to the banks to obtain loans. I hope that Ministers within the Department of Industry will consider raising the upper limit of the loan guarantee scheme. This, at £75,000, is very low. The scheme provides loans for the very tiny firms. The fact that it has been successful should give the Government confidence that the limit could be safely raised to £250,000, or even £500,000 in areas of high unemployment. I should certainly like to see it raised to £250,000. For the firm that is increasing the number of employees from 50 to 100 or from 100 to 150, the sum of £75,000 gets it nowhere in terms of buying new plant or setting up a new factory. It is suitable only for the start-up or very tiny firm.
  We should be bold enough to say that the upper limit will be raised. We must not fall into the trap of saying that it is a pilot scheme only and that it must continue to be reviewed. One can go on taking its pulse for ever. Sometimes it is better to be bold, which would be the case if the upper limit were raised. The money is there. If the Bill becomes law, it will be possible under the Industry Act to provide these loans.
  I favour this form of intervention. It is not throwing money at industry and it is not increasing the PSBR, so it is not damaging economic policy. It is not increasing public expenditure. The only increase in public expenditure arises from bad debts, but I understand that the bad debts under the loan guarantee scheme are very small. The money is genuinely for loans which, of course, will be repaid. We are not punting the taxpayers' money. The hon. Member for Thornaby is right when he supposes that I disapprove of that. On the other hand, I approve thoroughly of the loan guarantee scheme for the reasons that I have given.
  I welcome the Bill. I hope that there will be a response about the expansion of the loan guarantee scheme in the very near future.
  11.31 pm
  Mr. K. J. Woolmer: I sought some measure of judging the usefulness of the Bill. I support the Bill as it stands, but I wish to draw the attention of the House to the reality of the industrial policy or lack of industrial policy of the Government not only in their administrative and policy actions, but in terms of finance.
  The Bill will hardly lead to an increase in the finance available. It really adjusts the limits to keep pace with inflation. That needs to be kept in perspective.
  Conservative Members have claimed that there will be an increase in spending on industry or a concentration on new technology industries. I remind the House that, as the Treasury and Civil Service Select Committee pointed out in a recent report on the public expenditure White Paper, Government assistance to industry will suffer severely. Following the disasters being imposed on the housing programme, real spending on industry by the Government will fall by 13 per cent. over the three years to 1985. In this financial year it is due to fall in real terms by 3 per cent. to 4 per cent.
  Table 2.4 on page 12 of volume 2 of the public expenditure White Paper spells out what has happened to Government spending on scientific and technological

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  assistance in the year that has just ended. We see that it was reduced by about 50 per cent. Although Ministers make great public play about certain new aid schemes, the total of Government aid to industry is diminishing rapidly. We should not accept the argument that the spectacular and highly publicised announcement of one grant of assistance is any substitute for a real industrial policy or willingness on the part of the Government to aid industry.
  If I may supplement the remarks of my hon. Friend the Member for Whitehaven (Dr. Cunningham), we should consider what is happening to small businesses. Despite all the trumpeting about assistance to small businesses, bankruptcies and insolvencies are at record levels. For every firm that is helped into existence by the Government, one or two are throttled out of existence?
  The most recent information available is in British Business for 16–22 April. Seasonally adjusted, bankruptcy figures increased in 1981, and in March this year they increased on last year's high figure. Insolvencies rose by virtually 100 per cent. between March 1980 and March this year. So in the past two years, let alone three years, of Conservative Government, liquidations have doubled.
  Therefore, while individual pieces of assistance to small firms may seem convincing to Conservative Members, and while there may be the occasional small business man who is pleased with particular pieces of legislation, small firms are being massacred, along with many of our medium-sized and even some very large firms.
  I do not pretend for one moment that an industrial policy can substitute for, or make good, the overwhelming effects of economic policies that are plainly wrong. No amount of industry aid schemes can make up for the interest rate levels that have been imposed on business, nor for the problems caused by the value of sterling. In the industries that I can help to represent because of constituency concerns—the textile and clothing industries—the effects of high interest rates and the value of sterling far outweigh any assistance that could be given through sectin 8 schemes. Those two problems of Government policy are having serious effects.
  We have experience of three section 8 schemes introduced by the last Labour Government, two in the wool textile industry and one in the clothing industry. In their own way, on a modest scale, they were extremely successful. Over their lifetime they brought to the industries aid of almost £40 million. Yorkshire and Humberside, in my own region, benefited by about half of that assistance.
  Those schemes enabled capital investment to be made in the textile and clothing industries to stop their decline and start them rising again. One of the beneficial consequences was that the fall in employment in those industries levelled out, but since this Government came to office there has been a catastrophic decline in production, jobs and investment. Since 1979, capital expenditure in the textile and clothing industries has approximately halved. Production and jobs have fallen by massive amounts, as have export markets.
  If the Government are prepared to reconsider selective industry schemes, I hope that they will look again at industries such as textiles and clothing. I differ from the hon. Member for Bromsgrove and Redditch (Mr. Miller), who said that all the emphasis should be on new industries and not on old ones. That shows a misunderstanding of industry.
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  Most major industries include many good firms with a substantial future. To write off major industries, such as textiles and clothing as if they were old industries and to say that all the money must be put into whizz-bang modern technological industries shows a complete misunderstanding. Most technological progress is put into place in existing industries through new processes, designs and products.
  In Yorkshire and Humberside people in textile and clothing would take it extremely amiss if it were suggested that industries employing more than 600,000 workers were old industries to be written off on the basis that any Government that wanted to put money into industry should put it into new industries with a future. The textile and clothing industries have a real future. That is evidenced by the willingness of the French, Belgian and Italian Governments to produce industrial schemes for textiles and clothing. I press the Minister, as I have pressed him before, despite the Government's past reluctance, to get involved in industrial schemes. In the textile and clothing industries employers and unions work closely together. They are willing to work closely together to produce coherent industrial policies. The Government should work with them to produce policies that will raise investment from the present disastrously low level of £100 million a year.
  We write off old traditional industries, which employ hundreds of thousands of workers, at our peril. The textile and clothing industries will employ large numbers of workers long into the future. I urge the Minister to reconsider whether section 8 schemes could include textiles and clothing. The three schemes that we have had so far have demonstrated the potential.
  A great deal more than money is needed. We need a positive industrial policy. We need a trade and industrial policy with teeth. We need back-up from a Department that is willing to combine trade, planning and industrial policies. I look forward to the return of a Labour Government pledged to an industrial and trade policy that will once again offer real hope for the clothing and textile industries of Yorkshire.
  11.42 pm
  Mr. D. N. Campbell-Savours: My hon. Friend the Member for Batley and Morley (Mr. Woolmer) has clearly laid out the Opposition's commitment to planning. He will note that the Social Democratic Party's contributor to the debate, the hon. Member for Thornaby (Mr. Wrigglesworth), rejected that policy. That will be of great interest to many people outside the House. It is remarkable that he ventured to give unqualified support to the Bill yet failed to mention that, according to "The Government's Expenditure Plans 1982–83 to 1984–85" at table 2.4, "Industry, Energy, Trade and Employment", the Department of Industry's allocation to regional and general industrial support is to be reduced in 1982–83 to £534 million as against £807 million for the previous year.
  Although the Government insist that the Bill will aid manufacturing industry, there is no evidence to support that view. The Bill in no way extends the amount of money that is to be given. It only raises the limits. I am sure that the hon. Member for Thornaby wishes to qualify his statement. His unreserved support will not be well received in the Northern region, where he and I have constituencies that are in difficulties because of the Government's policies.

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  There is nothing new for any of us in the Bill. No amount of massaging of the statistics will help any of us. Following the Government's decision to re-draw the assisted area status map and to exclude from that map many parts of the country that are desperately in need of support, regional assistance has become less important to many of us. The effect of regional support in my constituency now is minimal. Competition from other parts of the United Kingdom with a greater level of regional assistance is so intense that we can no longer attract the industry necessary to generate employment. It is deplorable that the Government have failed to respond to the real needs of the parts of the country that repeatedly in the last three years have made representations about their problems.
  The great and famous halcyon days for our regions under Labour Governments have gone. I can remember the period under a Labour Administration when footloose industry was available, when there was full employment in the South, and when manufacturing industry and the industrialists of the South took decisions that had a direct and real benefit for regions such as that which I represent because they recognised the value of the regional assistance, which no longer exists.
  It is deplorable that the Government have removed from us that right and incentives. The effect of the Government's strategy is to reinforce the attraction of areas in the South. The hon. Member for Surrey, North-West (Mr. Grylls) should note that the article in British Business based on research by the Department of Industry's own researcher, Mr. Ganguly, clearly states that in the year 1980 the South-East attracted 35 per cent. of all new business starts and the Northern region 3 per cent.
  That statistic is a key indicator of what is happening in the national economy. I hope that the hon. Member for Surrey, North-West will take the point made by my hon. Friend the Member for Whitehaven (Dr. Cunningham) and agree that the statistics should be updated.
  The statistics are based on VAT registration returns. Customs and Excise should be able to furnish the up-to-date position so that we can measure the effectiveness of the Government's policy in the regions and the incidence of small business starts.
  The article says:
  "The biggest proportionate loss in the year"—
  in terms of deaths of industries—
  "was in the northern region, covering Tees-side, Durham, Northumberland and Cumbria. With 5,500 deaths and 4,200 births, this region had a net loss of 1,300, about 2 per cent. of its total stock."
  I do not suggest that the numbers of company deaths is a measure of the effectiveness of the Government's policy. I do not believe that that is so, particularly in relation to small businesses. I believe—and Mr. Ganguly puts it well—that
  "If risk-taking is indeed the norm, then arguably a region declines over the time not because of a higher rate of business failure, but because it is not sharing in the concomitant, growth … On this hypothesis, the higher the rates of innovation the greater chances of success and the more active the small firm section, the greater the chances of achieving the higher rates of innovation."
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  We should concern ourselves not with the number of small business deaths, but with the number of small business births. In the Northern region we are not getting our fair share of these births.
  I extended the research by Mr. Ganguly to try to calculate the number of company births per head of population. In the South-East, with the lowest level of unemployment, in 1980 there was one company birth for every 415 people. In the South-West the figure was 447, in East Anglia 522, in the East-Midlands, 524, in the West Midlands, 525, in Yorkshire and Humberside 574, in the North-West 575 and in Wales 603, which answers the intervention by the Secretary of State for Wales. From the Government's statistics, based on 1980 figures, it is clear that Wales is not getting its share of small business in the same way as other parts of Britain.
  If I were to produce a more damaging statistic, it would be to compare the number of unemployed persons per company birth in each region. The Northern region has one of the lowest numbers of company births per head of population. There are 751 people for every company birth, yet it has some of the highest unemployment in the United Kingdom. Built into the Government's strategy on small business start-ups must be the fact that the incidence of starts in the Northern region as a percentage of the population is the third lowest, apart from Scotland, which is marginally less, and Northern Ireland. I hope that the Government will take the opportunity to answer the point tonight, because their industrial strategy, we are told, is to put right the economy and to make small business responsible for reacting in the conditions for growth that they tell us they will create. It is not working in that way.
  A meeting was convened some weeks ago by the Department of Industry in Manchester at the Westlands hotel in my constituency. The Minister will recall that the objective of that meeting has been exercised in many parts of Britain—to consult, to find out what the problems are and perhaps to modify Government policy to help small businesses. A representative of my office attended the meeting to take notes of the submissions made by representatives of business in my constituency. I do not claim that this is a factor peculiar to Workington. The comments made at that meeting would be similar to comments made anywhere in Britain where small business people are asked to comment on Government policy.
  I do not wish to attribute any of the comments, for obvious reasons. An ex-managing director of a company said:
  "When I ran into financial difficulties and discussed the matter with CoSIRA and others, they could not understand the bank's attitude. I had been told to reduce my overdraft within 1 week—this was an amount of £10,000. This was impossible, therefore, I had to look for a buyer for the company. The bank eventually brought the receivers in and it was sold … Immediately the overdraft was increased three times at interest rate ¾ per cent. over base rate. The attitude of bankers to small businesses is wrong."
  The Minister will know that this is just one comment from one regional consultation. I have many more. I accept that notable advances have been made with small businesses, but there is great reservation among small business men about the attitude of the banks, certainly in the regions. Instead of holding consultations on the wide issue of Government policy as it affects small business, the Minister would do well to identify banking as a problem and to set up some regional consultations to deal with the problems.

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  The Minister will find that every hon. Member has heard business men complaining about the attitude of banks and the way in which they favour businesses that do not operate in the national interest because they do not generate wealth. They may be funding businesses that have no effect upon wealth production because they do not produce goods. The contribution of the regions should be in the form of an expanding manufacturing sector. That is how this country will generate wealth to fund the social wage that we spend so much time in this House talking about and which we have spent most of today debating in the form of the public expenditure programmes for the current year.
  My own view is that the reflation of the economy is the only way in which we can resolve the problems that confront us. I referred to the innumerable small business incentive measures that have been introduced by this Government, but there is a feeling in industry that unless the Government reflate in a sensible way—not in the moderate and conservative way that is proposed by Social Democratic Members—that will create demand within the economy, there is little chance of people getting back to work.
  The Treasury and Civil Service Committee report, which was published only two or three weeks ago, within the contraints of public expenditure currently being pursued by the Government, said that the 2½ per cent. economic growth forecast that the Treasury has made are based on precarious assumptions. It said that unemployment would not fall if the Government were to pursue the strategy that they are currently pursuing. Of course, that strategy has led to closures in my constituency. Last week there were heavy redundancies at Spillers in Maryport, a town where unemployment is nearing 30 per cent. At that firm half the jobs were lost. Out of 310, 150 jobs were lost last week. The effect on Maryport will be devastating, because people there have nowhere to go to find work. I quoted previously statistics for the relative abilities of different parts of the country to generate small business enterprises. If the Government do not react in the way that I suggested to the statistics that I gave, there is little hope for the people of Maryport in the coming months and years. The Government should pay special attention to reflating the economy by way of public expenditure, and certainly in the construction industry, because of the high unemployment among building workers.
  I end with one small measure that the Government can take, and it is related to this debate. For all the incentives that the Government believe that they retain for those of us with development area status in West Cumberland and other parts of the country, we are now competing, as a steel closure area, with other parts of the country that can offer rate relief to the little, footloose industry that is available, and to the small businesses that wish to start up. In the absence of adequate rate support grant to enable the funding of rate relief to industry, we are finding it difficult to compete with other regions and other communities that have money for rate relief. I ask the Government to consider including in the RSG allocations in the coming year a component that would provide rate relief for small business start-up enterprises. That would act as an additional incentive. Although it is not a substitute for a reflation of the economy, it would allow us to compete with other parts of the country on a more favourable basis.
  I have tried briefly to outline the problems, as I see them. I only hope that this Government do something.
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  There are people in my area who believe that, unless this Government act swiftly, there will be no work for many of them for years. I cannot believe that the Government would wish to leave behind them a legacy similar to that left behind by a Conservative Government in the 1930s.
  12 midnight
  The Under-Secretary of State for Industry (Mr. John MacGregor): I shall endeavour to be brief in summarising and closing the debate, first because the hour is late and we shall have plenty of opportunity in Committee to go into the details of some of the schemes and other points that have been raised, and, secondly, because the Bill concerns only section 8 of the Industry Act. Therefore, it concentrates on specific areas. Now is not the time for a large-scale review of economic and industrial policy. After all, we have done that endlessly over recent weeks in connection with the Budget debates, public expenditure debates and so on.
  However, I hope that you will allow me, Mr. Deputy Speaker, to make one or two comments on the remarks of the hon. Member for Whitehaven (Dr. Cunningham), who spoke widely on the subject. It was noticeable that the hon. Gentleman did not address himself to any of the underlying problems facing the economy. He quoted a range of statistics, but he did not address himself to the reasons why we have had to grapple with great problems in the economy over the past two or thee years.
  The hon. Gentleman did not take into account the impact of the world-wide recession. I have spent two days in Stockholm at a meeting of OECD Ministers that was concerned with regional policy. The American, Japanese, Australian, New Zealand and many European Governments were represented. One of the most distinctive things about our discussions, which were informal, was that everyone commented on the impact of the world-wide recession on regional and traditional policies and on the general difficulties of countries in dealing with their industries. That was a universal view.
  The hon. Member for Workington (Mr. Campbell-Savours) referred to the halcyon days when there were many footloose industries. I do not think that he has taken into account the impact upon all economies of the two major oil crises and the enormous increases in oil prices during the 1970s that have occurred since those days to which he referred that have made a big difference to the overall economic situation.
  Dr. John Cunningham: Whether there is a world recession is not in dispute. We acknowledge that there is a world recession. There is all the more reason, therefore, to have an industrial strategy that helps us to counteract its impact.
  Mr. MacGregor: I shall happily come to that question. When the hon. Gentleman quotes figures of increasing bankruptcies and of lower levels of investment, he should realise that they are occurring all over the world.
  We are having to deal with those situations after years of economic and industrial decline. The prescriptions that the hon. Gentleman put forward were the prescriptions that have failed in the past. The increasing uncompetitiveness of British industry throughout most of the 1970s has been caused by the enormous increase in unit labour costs compared with our major competitors overseas. The increase in unit labour costs which is a major cause of our

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  increasing uncompetitiveness, and with which we have had to deal, was most apparent from 1975 to 1980, for most of which period the Labour Government were in power. Unfortunately, dealing with overmanning has caused rising unemployment, but on the other hand it has enabled many of our uncompetitive industries to become competitive again and leaner and fitter. High wage costs unrelated to increased production are also responsible for some of the difficulties that we have had to face. Over the past 12 months the signs are that many of them are beginning to come right. That must be the way in which we should tackle our economic future.
  The declining profitability and lower return on capital over many years have caused the situation to which the hon. Gentleman drew attention. I shall refer later to the small engineering firms investment scheme. Something that has struck me as I have looked at the need for that scheme is that in the earlier years many engineering firms throughout the country, including the West Midlands, have not been investing in the way that they need to invest to remain competitive. One reason has been the decline of our car industry during precisely the years when the hon. Gentleman's Government were in power.
  Many Opposition Members have mentioned the need for planning and heavy reflation. The Government are having to deal with many past mistakes in planning and in major Government intervention. Our constantly higher levels of inflation than those of our major competitors was the other major factor in our economic decline.
  The hon. Gentleman talks of the need for an overall strategy. The strategy of our general economic policies which are tackling all those problems must be right. Section 8 schemes play only a small part in the general strategy.
  Mr. Woolmer: The Minister referred to mistakes from previous planning exercises. Under a Labour Government the two selective section 8 schemes in the wool industry were most successful. Why will the Minister not consider a further scheme for the wool textile industry?
  Mr. MacGregor: I shall come to that.
  The hon. Members for Whitehaven and for Workington and others called for reflation. The hon. Member for Batley and Morley (Mr. Woolmer) referred to the damaging effect of high interest rates on the textile industry. High interest rates have had a major impact on many industries. With the massive reflation that the Opposition call for, interest rates would go through the roof.
  I talk a great deal to people in industry all over the country. There is much greater support from industry for our overall strategies than for anything that the Opposition have called for. Industry most wants to see success in our policies in dealing with inflation and interest rates. Reflation on the scale that the Opposition call for would put us in precisely the reverse direction.
  I agree with the criticism of my hon. Friends the Members for Bromsgrove and Redditch (Mr. Miller) and for Surrey, North-West (Mr. Grylls) of the speech of the hon. Member for Whitehaven. I am grateful to my hon. Friend the Member for Surrey, North-West for saying that we are getting the framework right and letting industry get on with the job. In overall strategic terms, that is the appropriate answer.
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  My hon. Friend the Member for Bromsgrove and Redditch referred to the small engineering firms investment scheme. I shall not go into the reasons why we introduced it; he knows them well. The intention, as in all section 8 schemes, is to draw out investment that would not otherwise be made. I am conscious of the low level of investment in the engineering industry in the past two years, particularly among small firms.
  Mr. Stanley Orme: For the past 20 years.
  Mr. MacGregor: That is exactly the problem that we are trying to deal with.
  Mr. Orme: The failure of private enterprise.
  Mr. MacGregor: That certainly is not the case.
  In view of those levels of investment and the difficulties for small engineering firms at a time of recession in affording the investment, we believe that the scheme is cost-effective and generous to create additional investment.
  I asked this afternoon for the figures for applications. The scheme was announced only three weeks ago. We are operating it from the West Midlands regional office, as we recognise the scheme's importance to the West Midlands. As of today, we have had 335 applications from small engineering firms. Just under one-third have come from the West Midlands. That shows that the scheme is in demand, will be widely supported and will do a great deal of good.
  Dr. John Cunningham: Did the Minister say "applications" or "inquiries"?
  Mr. MacGregor: Applications. That shows how well targeted the scheme is.
  My hon. Friend the Member for Bromsgrove and Redditch talked about total expenditure under section 8 and on the regional development front compared with expenditure in other areas in which we are trying to create additional investment, such as science and technology. Some of the figures that my hon. Friend the Minister of State quoted in respect of regional development come within section 7 expenditure and will therefore be more selective than the blanket regional development grants about which my hon. Friend was talking. It is worth considering the various ways in which the Government are encouraging new investment expenditure nationally. About £220 million is being spent under the Science and Technology Act 1965 this year, and that has been an expanding programme under the Government. We believe that that is the correct direction in which to expand.
  The small engineering firms' investment scheme is not included in the figure of £80 million. Last year well over £6,000 million went on encouraging investment through capital allowances under the tax system. In considering grant figures, we tend to forget that much of our investment is encouraged through tax reliefs and capital allowances. The tax forgone is well over £6,000 million. That is a significant sum nationally as well as for the regions that are assisted by regional development grants.
  I noted that the hon. Member for Thornaby (Mr. Wrigglesworth) concentrated on the need to get industries competitive and to bring down inflation and interest rates. That is precisely the policy that we are pursuing. I hope that he will agree that much of the work that must be done to get industry competitive must be done by industries and

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  work forces working together and not, as his erstwhile colleagues seem to think, by Government. The export performance of many industries at a time of serious world recession is a success story. They are working successfully to regain a creative competitiveness.
  My hon. Friend the Member for Surrey, North-West explained what he would like to see done in enabling small firms to take greater advantage of public sector procurement. I am examining what more we can do to help in that direction. I shall be happy to discuss with my hon. Friend on other occasions anything further that can be done in that respect.
  Mr. Wrigglesworth: Does that include the defence procurement budget? The hon. Gentleman will be aware that proposals have been made by industry with a view to helping small firms in a number of ways. Does he have any input from the Department of Industry on that?
  Mr. MacGregor: From the Department of Industry? Does the hon. Gentleman mean from the Ministry of Defence? We are examining public sector purchasing generally in relation to small firms. It is rather early for me to say anything positive.
  Mr. Wrigglesworth: As the hon. Gentleman knows, the Ministry of Defence procurement budget is substantial and has a major impact across broad sections of industry. I am anxious about the apparent lack of input in the past on the part of the Department of Industry into the thinking of the Ministry of Defence on the procurement budget.
  Mr. MacGregor: I have noted what the hon. Gentleman says. These matters are discussed with Ministry of Defence Ministers.
  My hon. Friend the Member for Surrey, North-West talked about the loan guarantee scheme. I can give him the latest figures, which were announced yesterday. They are well up on the figures that my hon. Friend has. At the end of March there were 3,351 loans under the scheme, which means that in the past month another 650 loans have been added to the scheme, which has now reached a total value of £113·7 million. As my hon. Friend rightly says, that is additional bank lending going to small business start-ups and existing businesses who would not otherwise have got that additional lending. I am grateful for his continued support for the scheme.
  It is interesting that just over half of the loans are now going to existing businesses, and just under half to new businesses. Again, just over half goes to manufacturing, with the remainder to construction, retail and other service industries. The scheme is continuing to provide a useful service for small businesses. I shall have a word to say about the role of the banks later in response to the hon. Member for Workington.
  I do not think that there is any case whatever for the statement of the hon. Member for Batley and Morley that the Government are neglecting the textile and clothing industries. This is not the occasion to be talking about the tough stance that we have taken over the multi-fibre arrangement, but that is undoubtedly one of the ways in which the Government have been doing all that they can to secure the best interests of that industry. We have no proposals for any new schemes in this direction. It is important to look at any proposal for a scheme to ensure that taxpayer's money is spent thoroughly cost effectively. I believe that we shall achieve that under the small engineering firms investment scheme.
  Mr. Woolmer: The clothing industry, which employs over 300,000 workers, had in total only just over £13 million under this scheme. I urge the Minister to say that, if those industries were to put forward sensible schemes, he would be willing to consider them. I suggest that £13 million for over 300,000 workers in that industry is a small and modest scheme and was unproductive.
  Mr. MacGregor: There are several other schemes to encourage new technology, new products and processes in industry as a whole, which are open equally to the textile and clothing industries.
  The hon. Member for Workington spoke about the statistics of small businesses. It is important to get the whole argument into the correct perspective. First, the figures to which he drew attention, which we were keen to see published in British Business, are the first real attempt to try to analyse exactly what is happening among the self-employed and small businesses in terms of births and deaths. So far there are only one year's figures to go on. They relate to 1980.
  It is difficult to say that one can build up a complete picture at this stage out of that. However, I can assure the hon. Gentleman that it is our intention to go on with that work. Later figures are not available to enable the 1980 analysis to be repeated. The hon. Gentleman cannot use the 1980 figures to attempt to assess the impact of the Government measures on small businesses. The 1980 figures must, after all, demonstrate what happened in the years previous to 1980. The main range of measures which we have introduced have been introduced since that period.
  Inevitably, the effect of the measures to encourage small businesses will take time to build up. We are trying to reverse the trend in what many of hon. Members feel is a sector which has been neglected for some considerable time. I do not expect dramatic and immediate results. We shall see a gradual build-up. Already, as one goes round the country, one can see a greater entrepreneurial spirit beginning to develop among many people who are now contemplating setting up on their own. Management buyouts are another interesting example of the change that is coming about because of the climate that we are trying to induce. I certainly would not try to draw any conclusions from the 1980 figures.
  Mr. Campbell-Savours: Will the hon. Gentleman tell us why it is impossible to update those figures? If they are based on VAT registrations, surely the Treasury must have updated figures on the number of additional firms that are registered as being liable to VAT, because VAT operates on three-monthly accounts.
  Mr. MacGregor: A proper analysis of the figures must be made when they are all in. However, I remind the hon. Gentleman that the Civil Service went on strike in 1981 and, therefore, not all the VAT figures are in. There clearly is difficulty in trying to update the figures very quickly, but we intend to do so. A picture can be built up only over a period of years.
  I hope that the hon. Gentleman will forgive me if I do not go into the details now, but perhaps we can discuss them in Committee. However, the hon. Gentleman compared the number of small businesses being set up in the North with the number being set up in the South and South-East. I hope that he will forgive me for saying that he betrayed the attitude of a typical planner and statistician

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  in looking at figures and calling on the Government somehow to reverse that position. He must recognise that we are discussing small businesses that depend on an entrepreneurial spirit, and on the ideas, efforts and enterprise of individuals. I do not know the hon. Gentleman's area as well as he does, but in areas that contain the heavy traditional industries that are in decline it takes time to build up the entrepreneurial spirit that has existed for many years in other parts of the country. That may be a major challenge in regions such as his. I pay tribute to organisations such as the Tees-side Small Business Club, which is endeavouring, with increasing success and great effort, to build up that spirit. Therefore, the hon. Gentleman must take that underlying factor into account.
  Many people criticise the banking system, but the hon. Member for Workington overdid it. I know nothing about the case that he raised, but it is easy to pick examples and to draw the wrong conclusions. There must be many cases in which applications for bank loans are correctly turned down. Therefore, we must look much more carefully at the proposition before drawing any conclusions. However, both generally and in relation to small businesses, there have been enormous improvements in the attitudes of the banks in the recent past. That is beginning to show in the number of schemes that they are introducing and in the substantial number of loans that they are directing to the small business sector. The loan guarantee scheme has played a very helpful part in creating that new climate.
  The hon. Member for Workington made an extraordinary comment when he criticised the banks for making loans to service the service sector because it did not create wealth. Throughout the United Kingdom and in all advanced economies the service sector will play an increasingly important part in creating jobs. I refer the hon. Gentleman to tourism in his area. Many people in Merseyside say that they would like more effort to be directed to a resurgence of the service sector, instead of concentrating purely on the manufacturing sector. Therefore, the hon. Gentleman made an astonishing comment, and I hope that on reflection he will realise that it was not a fair criticism of the banks.
  Above all, in his closing remarks, the hon. Gentleman reflected his misunderstanding of what is required if we are
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  to achieve an economic recovery when he called for a very substantial reflation. That is not what industry is calling for. It wants a modest recovery so that there is not the overheating that has so often occurred in the past. Above all, it wants to see success in reducing Britain's inflation to a level below that of the average level of our competitors. It also wants a reduction in interest rates. The hon. Gentleman's prescription would have the opposite effect. Of course, anyone could produce unlimited schemes for more expenditure by the taxpayer. However, industry is not calling for that. We must consider the effect of such an approach on industry as a whole and especially on successful industries.
  The Bill gives us the opportunity to undertake the expenditure on a number of the schemes that my hon. Friend the Minister outlined. The hon. Member for Whitehaven asked what was new about the approach. My hon. Friend the Member for Surrey, North-West answered him fully when he spoke of the new slant. The emphasis in our schemes is on new technology and the Bill's emphasis is on small businesses. I am glad that my hon. Friend the Member for Surrey, North-West supports the Bill, because without it we should be unable to continue with the schemes for small businesses that are so successful. Therefore, I hope that the Bill will gain the support of the House.
  Question put and agreed to.
  Bill accordingly read a Second time and committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

  INDUSTRY [MONEY]
  Queen's Recommendation having been signified—
  Resolved,
  That, for the purposes of any Act of the present Session to raise the limits imposed on the Secretary of State's financial assistance to industry under section 8(7) and (8) of the Industry Act 1972, it is expedient to authorise any increase in sums paid out of money provided by Parliament or into the Consolidated Fund attributable to provisions of the Act of the present Session—

  (a) increasing the sum of £600 million specified in section 8(7) of the Industry Act, 1972 to £1,900 million and substituting for the sum of £250 million so specified the sum of £200 million;

  (b) increasing from £5 million to £10 million the sum specified in section 8(8) of the Industry Act, 1972.—[Mr. Ridley.]

  Chief Constables (Powers)
  Motion made, and Question proposed, That this House do now adjourn.— [Mr. Boscawen.]
  12.25 am
  Mr. Fergus Montgomery: I shall not delay the House for long because we are already in the early hours of Thursday morning. I am grateful for the opportunity to raise this subject on the Adjournment.
  I must declare an interest. My wife is a councillor on the Greater Manchester council and also a member of the police committee. Consequently, she is well aware of the attacks that have been made on our chief constable, Mr. Anderton. No one would doubt that he is controversial or that he has a strong personality, but he is an excellent chief constable who started as an ordinary constable and worked his way up through the ranks. He has become chief constable because of his great ability. He commands enormous loyalty from the police force for which he is responsible and he has the respect and admiration of the vast majority of the citizens of Greater Manchester. My wife feels so strongly about the attacks that have been made on the chief constable that she launched a petition supporting him and the Greater Manchester police. She has had no difficulty in getting people to sign the petition.
  It is not only in Greater Manchester that we have this situation. Other areas of the country are also affected. We have the case of Lady Simey and the chief constable of Merseyside. There are also problems in London.
  Not so long ago chief constables were the silent, invisible men in British public life. Today, they are very much in the front line of the highly political debate on law and order. No chief constable in his right mind wants to get involved in a political debate. Unfortunately, chief constables have been drawn into this matter by the new breed of Left-wing politician who is all too prevalent on police committees today.
  I have been given a document from the "Campaign for Criminal Justice". The chairman of that organisation is the hon. Member for York (Mr. Lyon). The document was sent to all Labour members of police authorities in July 1981. That was just after the county council elections when the Labour Party gained control of a large number of county councils and, consequently, police committees. The document states:
  "The traditional view, expressed by successive Home Secretaries, is that the law does mean that chief constables are immune from control of policing policy, save that you can refuse to provide them with equipment or you can ultimately sack the chief constable. In fact you are, in our view, entitled to go much further. Under section 12(2) the chief constable must provide you with a report on 'such matters as may be specified in the requirement' (of the police authority) 'connected with the policing of the area'. That power is so general as to allow you to ask for any report on policy and to discuss it. After the discussion the chief constable may refuse to do as you wish but if the discussion takes place in public and your request is seen to be reasonable, he would have a difficult job in persisting. If there were a succession of disputes so that you lost confidence in the chief constable, you can sack him. We are urging you to adopt a more aggressive use of these powers."
  That is an interesting document, because it would appear to incite police committees to control chief constables by asking for continual reports connected with the policing of the area, thus preventing the chief constable from getting on with his job. This continual harassment of
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  a chief constable by asking for continual reports could be used as a constant source of criticism of him and as a means of undermining his authority and responsiblility.
  I do not believe that is a proper and correct interpretation of section 12(2) of the Police Act 1964. I hope that my hon. and learned Friend will confirm that when he replies to the debate. There is also the suggestion that chief constables should be put on the spot by having discussions in public. That could constitute unfair pressure and be prejudicial to the public interest.
  The document goes on to quote what it calls
  "a new breed of assertive chief officers who spurn political control only to indulge in politics."
  That is a very sweeping allegation, and it should be substantiated by the people responsible for sending out this document. In any case, it is clear that the activities of Labour members of police committees, encouraged by the document, can only lead to chief officers being even more suspicious of political control and aware of the need to defend themselves against political attacks.
  Finally, there is the dangerous suggestion that Labour councillors should choose to assert their powers and give first priority to community policing. No matter how valuable that may be, it is always put forward as the panacea for all the problems, but it ignores the fact that the problems are different from area to area. The problems in Devon and Cornwall are nothing like those in Central London, Merseyside or Greater Manchester. Therefore, it does not leave to the discretion of a chief constable his right to determine policies and to decide the priorities.
  On BBC's "Question Time" last month, Mr. Ken Livingstone was one of the panel. He admitted openly that he was seeking nothing less than what he termed the operational control of the London police. This would no doubt ensure that Livingstone and his political cohorts had the legal right to refuse permission to the police to enter entire areas of London to deal with riots which might well have been fomented or even led by other politicians of the extreme Left, and London would then have its "no-go" areas.
  Ken Livingstone has already launched a number of savage personal attacks on Sir Kenneth Newman, who recently was designated Commissioner of Police of the Metropolis. I find it amazing that these attacks should have been launched six months before Sir Kenneth takes up his new appointment, and I find it nauseating that he should be smeared by Mr. Livingstone with allegations of disgraceful police behaviour in Ulster during the time that he was chief constable there, but this seems to be the order of the day from the militants in the Labour Party.
  I also have a leaflet that has been issued by the Liberal Party in the Manchester area. As with all Liberal pamphlets, there is an enormous emphasis on broken pavements, because the Liberals are very good at drawing attention to such matters, but the pamphlet also has a great deal to say about law and order. It quotes from Labour's militant parliamentary candidate for Liverpool, Wavertree, who is reported as saying:
  "I don't want the police to protect capitalism; I want the police to be accountable to the Labour Movement. I want the police to be instruments of socialism."
  The name of the Labour candidate is Mr. Derek Hatton. I think that he has let the cat out of the bag. We now know the true aim of the far left towards the police.
  I return to the subject of the chief constable of Greater Manchester. On 5 April, the hon. Member for York had

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  an Adjournment debate, to which my hon. and learned Friend the Minister of State replied, on police accountability. The hon. Gentleman said:
  "Therefore, the postion in Manchester at a recent meeting of the police authority is a little surprising. The chairman of the police authority asked the chief constable certain questions about a policing operation at Laurence Scott. He was told by the chief constable that he had no right to ask the questions. Under section 12, in my view the chief constable was without the law. In those circumstances, he was acting illegally."—[Official Report, 5 April 1982; Vol.21, c. 803.]
  I regret to say that the hon. Member for York got his facts wrong. As I said in my opening remarks, my wife is a member of the Greater Manchester council and of the police committee. She has kindly let me have a copy of the documents that were sent to members of the police committee. On 25 February, the clerk to the police authority wrote to the chief constable saying:
  "The Chairman and Labour Members of the Police Committee have asked me to convey to you a request for the submission of a written report to the next meeting of the Police Committee on 5th March on the recent police operation at Laurence Scott and Electromotors Ltd., Openshaw."
  In a letter of 1 March, the chief constable said:
  "I think you know perfectly well that there are considerable political overtones to the questions 'authorised', as you put it, by the Chairman of the Police Committee. He has acted only on behalf of the Labour Group which, in my opinion, within the context of Police Committee business, is, to put it bluntly, irregular. His duty is to the whole Police Authority and on this particular matter he has not yet consulted either the Magistrates or the political opposition."
  The dispute referred to was at the Laurence Scott factory and the problem at the time was that the Labour Party—this is the crux of the matter—accused the chief constable of over-reacting and having more policemen there than was necessary. One also has to take into account the fact that if there had been public disorder, if there had been personal injury and if there had been criminal damage, this would have had serious effects in the area. There would no doubt have been criticism of the chief constable for not having sufficient policemen there. He was therefore in a no-win situation.
  To revert to the correspondence, I believe that the chief constable was right to act in the way that he did. He is answerable to the whole police committee which consists of Labour, Conservative and Liberal county councillors and magistrates. His purpose is not to serve the party that happens to control Greater Manchester at this time. There has been a great deal of publicity on the issue. There have been allegations about the high-handedness and arrogance of the chief constable. I believe that a wrong impression was given. I hope that I have tonight corrected the record. In Mr. Anderton we have in Greater Manchester a man of great ability who deserves 100 per cent. backing in his fight against crime.
  People are far more concerned about tackling crimes of violence and burglaries than with the political machinations of the controlling Labour group on Greater Manchester council. The principal role of any chief constable is to maintain and uphold law and order in society. Sir Richard Mayne, who was the first commissioner in 1829, stated that
  "the primary object of an efficient police force is the prevention of crime, the next that of detection and punishment of offenders if crimes are committed. To these ends all the efforts of the police must be directed. The protection of life and property, the
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  preservation of public tranquillity and the absence of crime will prove whether those efforts have been successful and whether the objects for which the police were appointed have been attained."
  In attaining these objects, a great deal depends on the approval and co-operation of the public. This is dependent on the degree of esteem and respect in which the public hold the police. I believe that we have the best police force in the world and that the police in this country do a difficult and, at times, dangerous job. They are entitled to maximum support.
  That brings me back to the question of police authorities. Their duties and responsibilities are to maintain an adequate and efficient police force in their areas and to ensure that the money voted is wisely spent. Their job should be to work with the chief constable and the police force and not to spend their time sniping. I hope that my hon. and learned Friend will stress the high calibre of our chief constables and police forces and his abhorrence of militant Left Wingers, who seek to control the police for their own political ends.
  12.37 am
  The Minister of State, Home Office (Mr. Patrick Mayhew): I am grateful to my hon. Friend the Member for Altrincham and Sale (Mr. Montgomery) for offering us this opportunity once again to consider the powers and the position of chief constables. I am particularly glad to see in his place my hon. Friend the Member for Dudley, West (Mr. Blackburn) who, as the House knows, has special knowledge of the police service deriving from his long service in the Liverpool city police and before that, in the Royal Military Police. That is a special knowledge and experience from which the House derives much benefit.
  It is a tradition in this country that the authority of the police should rest as far as possible on the broad basis of the consent and active co-operation of all law-abiding people and not on the possession of special powers that set them apart from the ordinary citizen. But, of course, there are some duties which, if they are to be entrusted to the police and adequately performed by them, do require the grant of special powers.
  The powers of the police in enforcing the law derive from their status as holders of the office of constable. As holders of this office, chief constables have no greater powers in enforcing the law than do other members of their forces. Since these powers are original to all constables and not delegated, the chief constable may not order another constable to exercise them on his behalf in any particular case; he may only give general directions as to the circumstances in which their exercise is appropriate.
  This was illustrated in a recent case. The House of Lords dismissed an appeal by the Central Electricity Generating Board from a judgment of the Divisional Court refusing to direct the chief constable of Devon and Cornwall to instruct his police officers to remove persons obstructing the board's works. Lord Justice Lawton said that the application showed a misconception of the powers of chief constables. They commanded their forces, but they could not give an officer under their command an order to do acts that could lawfully be done only if the officer himself, with reasonable cause, suspected that a breach of the peace had occurred, or was imminently likely to occur or an arrestable offence had been committed. The chief constable could not give unqualified orders to his men to remove those who were obstructing

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  the board's work. Any orders he gave would need to have qualifying words to the effect that those obstructing should be removed if, but only if, there was a breach of the peace or an imminent likelihood of one or an unlawful assembly formed.
  This vividly illustrates the unique position that the police and chief constables within the police hold under our system of policing. It is a unique system. It is admired throughout the free world and it calls for great qualities of discretion and wisdom, especially from chief constables who have the duty to direct and control the police forces under them. It is the key to the system that political control is intended to be avoided. We succeed in avoiding political control over our police forces by this curious and unique, but successful, system whereby the chief constable has the discretion to command and direct his force and police authorities have their own separate powers under the Police Act. The Home Secretary, who has the overall responsibility, for which he in turn is accountable to Parliament, of promoting the efficiency of every police force in England and Wales, has his part to play in this diversified structure of control of policing in this country.
  Accordingly, the immediate decision as to the exercise of police powers in an individual case is the sole responsibility of the particular officer concerned. General direction to his force, and the formulation of force policies within which his officers exercise individual discretion, are the responsibility of the chief constable. I gladly take up my hon. Friend's invitation to pay tribute to the high quality of those officers—and dedicated officers they are—who command our police forces.
  As is the case with every discretionary power conferred by law, every act purporting to be in the exercise of the discretion conferred on constables or chief constables is subject to review by the civil courts. It is also, of course, equally subject to the criminal law.
  This concept of individual and independent decision within an enabling framework of law is reflected in the chief constable's wider role—his statutory responsibility under the Police Act 1964 for directing and deploying his force.
  The decision how and when to deploy his officers is one for the chief constable. The Royal Commission acknowledged the need for chief officers to be operationally independent. I said recently in the House on an occasion to which my hon. Friend the Member for Altrincham and Sale has already referred, and I repeat tonight, that under our system there is no room for political interference from central or from local government, whether it be from the Left wing, the Right wing or the Centre. That is of cardinal importance. Impartiality, which demands independence from political control, is fundamental to our policing arrangements.
  Mr. John G. Blackburn: I visited the Manchester police force 12 months ago and was very impressed by the quality of one of the finest chief constables in the country, Mr. Anderton. Will my hon. and learned Friend confirm that it would be a breach of regulations for any police officer to be affiliated to any political party? In that fact we have the independent strength of the police service.
  Mr. Mayhew: I am glad to acknowledge my hon. Friend's tribute to a distinguished chief constable, and certainly to endorse what he said about the impropriety of active political participation by a police officer.
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  Neither the police authority nor my right hon. Friend may direct a chief constable to institute proceedings in a particular case, direct him to deploy his force in a particular way, or direct him to desist from a particular operation.
  But the chief constable is not making his decisions in a vacuum. In exercising his professional judgment he must act within the law and in addition must have regard to such guidance as my right hon. Friend may issue in the exercise of his own statutory responsibility to promote the efficiency of every police force in England and Wales. The national dimension to policing—the adoption of uniform standards and techniques—was identified by the Royal Commission in 1962 and has become increasingly important.
  For example, there are statutory regulations on recruitment, which are supplemented by guidance on selection procedures. There is guidance that stems from the activities of the Police Advisory Board, such as its recent working party on the special constabulary. Guidance is also issued from time to time on such matters as crime prevention and on handling particular problems, such as juvenile delinquency. The results of research are also made available to chief constables.
  Her Majesty's inspectors have an influential role in encouraging good practice. There are many different ways in which chief constables are made aware of, and are influenced by, national policies. Chief officers meet to discuss particular operational issues, and an individual chief constable will doubtless have regard to guidance formulated on such occasions.
  No less important is the local dimension, which featured in the speech of my hon. Friend the Member for Altrincham and Sale. The chief constable is accountable to his police authority for his policies. This accountability ensures that the police keep in touch with the needs and wishes of the community. The chief constable looks to his police authority—containing elected representatives of the local community to the extent of two-thirds of its number, the remainder being local magistrates—for advice and guidance, because only with public support can the police be fully effective.
  My right hon. Friend has consistently encouraged police authorities to provide a forum for discussion of general policing questions. A police authority may wish to discuss, for example, the local response to a particular crime problem or the effect of past operations. In this regard it may call for a report from the chief constable on matters connected with the policing of its area.
  But the present arrangements will work satisfactorily only if police authorities and chief constables understand and respect each other's role and responsibilities. While we expect police authorities to take account of the chief constable's independence in enforcing the law—indeed, it is vital that they should do so and not seek to erode it—equally, chief constables should accept the police authority's legitimate concern in the overall policies and the overall cost of the force. We cannot legislate for good working relationships. But if this partnership is to work effectively to control crime and maintain a peaceful community, there must be mutual respect and confidence. That is what the public expect.
  A wise chief constable—happily they are wise in this country—will not wish to confine his consultations to his police authority and will consult more widely. Lord Scarman's report highlighted the need for this, and my

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  right hon. Friend wishes to see better arrangements generally made for a two-way flow of information and support between the police and the community. This will not inhibit operational decisions by chief constables. Rather, we believe, it will assist both the chief constable and the police authority in carrying out their statutory responsibilities.
  It is not for me to comment on the police operations during the industrial dispute at the premises of Laurence Scott and Electro Motors Limited, Openshaw, to which my right hon. Friend has referred in respect of the unhappy differences that arose from it between the distinguished chief constable of the police force concerned and the police committee. Nor do I intend to comment on those differences. The deployment of his officers on those occasions was a matter for the chief constable alone. There, as elsewhere, the police had a duty to maintain the peace and to prevent criminal offences. The police do not take sides in industrial disputes. I understand that the chief constable is satisfied that the scale of the police operations was no greater than was necessary to ensure that his duty under the law was effectively discharged.
  Nor do I intend to refer to the Labour Party document to which my hon. Friend referred. That document is a matter for the members of the Labour Party who drew it up. Reticence must not be taken to imply endorsement. A call for aggressiveness as an attitude to be adopted by the members of the police authority towards the chief constable seems to me regrettable advice in the context in which it was given.
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  The Government are satisfied that the statutory framework of the 1964 Act is sound. With a reasonable approach and mutual understanding it works well. The point in the document about sacking a chief constable could, indeed, give rise to misunderstanding. A police authority can dismiss a chief officer under the discipline code—that is for an offence—or call upon him to retire, only in the interests of efficiency. That power is subject to the approval of my right hon. Friend the Home Secretary and has never been invoked since the passing of the 1964 Act. The consideration would be the efficiency of the force in the long-term.
  We should remember that vital to our system is the need for mutual understanding and a reasonable approach from both sides. The independence of chief constables from political control is fundamental and the dangers of undermining it are so obvious that I do not need to restate them here tonight. But chief constables do not operate in isolation. Their discretion is exercised within a framework of constraints compatible with the traditional principles of policing in this country: that the police must act with the full consent of the community; that police forces are locally based—drawn from the community but not apart from it; and that the Government, through my right hon. Friend, have a primary duty to maintain law and order. The Government believe that our constitutional arrangements for policing in this country are sound, and that we have a structure in which all parties can, and should, work together to promote full public support and enhance police effectiveness.
  Question put and agreed to.
  Adjourned accordingly at seven minutes to One o'clock.

TRADE
  Aerolineas Argentinas (Insurance Cover)
  Aerolineas Argentinas (Insurance Cover)
NORTHERN IRELAND
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AGRICULTURE, FISHERIES AND FOOD
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FOREIGN AND COMMONWEALTH AFFAIRS
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DEFENCE
  Mr. Thomas Griffiths
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  Liverpool (Property Development and Conservation)
TRANSPORT
  M4 (Re-alignment)
  M4 (Re-alignment)
DUCHY OF LANCASTER
  Magistrates
  Magistrates

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

POWs in Italy: Pay Deductions
Lord Clifford of Chudleigh: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they agree that the deductions from the pay of an army lieutenant prisoner of war in Italy amounted to 86 per cent. before the ration allowance was credited and 74 per cent. after it was credited and why none of these deductions were refunded, as in other countries, but paid into the Treasury.
The Minister of State for Defence Procurement (Viscount Trenchard): My Lords, the noble Lord was kind enough to send me his calculations but I fear we cannot agree his figures. An army lieutenant prisoner of war in Italian hands in 1942 and 1943 would have been liable to a deduction of not more than 44 per cent. of his gross pay after crediting the special allowance. During 1941, before the special allowance was increased, the deduction from his gross pay would have been 54 per cent. Refunds were made after release in accordance with the policy of refunding monies which had not been paid by the Italians. The only record of credits to the Treasury refers to the transfer of the residue of an RAF Suspense Account after the bulk of the account had been dispersed in accordance with policy.
Lord Clifford of Chudleigh: My Lords, while thanking the noble Viscount for that reply, may I ask him three supplementaries? First, will he accept and publish the signed affidavits of officers who have kept detailed accounts of what happened? Secondly, will he accept that those of us "old lags" who remain are a fairly sceptical lot and the only reason why we are carrying on this fight for retrospective justice is that we were so incensed by the working group report, with its inaccuracies and nasty innuendos? Lastly, has the noble Viscount's attention been drawn to the statement made by the Ombudsman, Sir Cecil Clothier?
Viscount Trenchard: My Lords, I will certainly look at any evidence that any individual officer ex-prisoner wishes to submit to us. We have done so in a great number of cases; but such are feelings on this subject that I feel it is only right and proper that officers who suffered captivity should have any opportunity that they can to develop their individual feelings and figures. I quite accept that the "old lags", as the noble Lord calls himself, are a sceptical lot, and I also
536
accept that they are highly incensed. I believe that the working party report was more a problem of language than indeed of accuracy in main essentials as to policy. So far as the Ombudsman is concerned, he has not investigated this case because it is outside his terms of reference, and in advance of any investigation I do not think anyone can express an opinion.
Lord Mayhew: My Lords, may I ask the noble Viscount whether it is not a fact that substantial injustice was done to a large number of ex-officers and, instead of allowing this unhappy matter to drift on, should not the Government make perhaps a modest ex gratia payment to the benevolent funds of the three Services in order to help ex-prisoners in need?
Viscount Trenchard: My Lords, I have noted that the noble Earl's unofficial committee—I do not think he is here today—have moved their emphasis from the carrying out of policy to the question of policy and to the question of whether the benevolent funds could be augmented. I have asked the noble Earl, with most of the noble Lords in this House who have expressed an interest in this matter, to come and look at the question of the policy, which we now seem to be talking about, next week at the Ministry of Defence. I should like to be guided by that meeting and by their views after that meeting.
Lord Campbell of Alloway: My Lords, may I ask my noble friend the Minister whether, in the course of his investigations into this affair, he has discovered any act or any omission which in his judgment constitutes maladministration on the part of the Government at any time? If so, is it such an act as in his judgment warrants the setting up of any inquiry?
Viscount Trenchard: My Lords, I thank my noble friend for that supplementary question. The answer is that neither I nor two other Ministers who have looked at this, nor my officials, have had any case made out and substantiated to demonstrate that the policy which I have described very often in this House was not carried out. Therefore, the answer is that no cases have been made out, and indeed one member of the noble Earl's committee, Captain Bracken, who put forward what he made clear was an illustrative claim, has agreed with my officials that that claim cannot be substantiated. So at this time no evidence of maladministration is available. It now remains to discuss the question of policy of those long years ago.
Lord Elwyn-Jones: My Lords, was there not an earlier reference to the Ombudsman—though not in relation to this specific matter—of a complaint by a number of officers and men, I think, in the Royal Air Force who were held in a concentration camp? It was found in that case that there had been maladministration, and compensation was duly paid.
Viscount Trenchard: My Lords, I am not aware of the particular case to which the noble and learned Lord refers, but I will certainly research it. However, in this case I can assure him that no evidence has been established in any individual case which shows that the policy was not carried out. I should like to make

537
clear that at this distance in time it is impossible to prove that in every individual case an officer who did not fill in a claim form for refund according to the policy did not get his due. It is impossible for me or anyone else to prove that there were not cases of people who did not claim and did not get their due.
Lord Molloy: My Lords, may I help the Minister by pointing out—
Several noble Lords: No! Question!
Lord Molloy: My Lords, is the noble Viscount aware that the campaign referred to by my noble and learned friend Lord Elwyn-Jones, on the question of the RAF officers who were in a concentration camp, was initiated by the late Mr. Airey Neave, and that I had the great privilege of assisting him in it? I am sure that, with the knowledge which the noble Viscount would gain in the archives of the Foreign Office or the Treasury, he might be able to get to the facts of the case to help him in his endeavour.

NATO and Arms Reduction Proposals
2.44 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 were the conclusions of the discussions between defence Ministers at NATO's nuclear planning group on 23rd and 24th March, particularly regarding President Brezhnev's offer to freeze the number of Soviet nuclear missiles in Europe and the initiation of talks this summer between the USA and the Soviet Union on the reduction of their stockpiles of strategic weapons.
Viscount Trenchard: My Lords, at the last meeting of NATO's nuclear planning group Ministers noted that the various Soviet proposals for a freeze on intermediate range land-based nuclear missiles would perpetuate the Soviet monopoly in such missiles, because not a single SS20 would have to be destroyed, while NATO would be prevented from deploying any such weapons. Ministers also expressed strong support for the United States' commitment to negotiate an equitable and verifiable agreement on strategic nuclear weapons with the Soviet Union. A copy of the full text of the communiqué has been placed in the Library.
Lord Brockway: My Lords, is the Minister aware that many of us will find the earlier part of his Answer disappointing? Is he aware that, when the peace mission initiated by the Quakers went to the Soviet Union in January, we urged unilateral action by the Soviet Government and had discussions with the authorities about it? Is it not the case that President Brezhnev has now proposed three unilateral actions: first, a freeze of present Soviet nuclear weapons in Europe; secondly, a suspension of the planned replacement of the old SS missiles and, thirdly, a reduction
538
of Soviet nuclear weapons in advance of any agreed East-West plan? Is it not desirable that we should seek offers of hope, rather than to reject these proposals out of hand?
Viscount Trenchard: My Lords, I am aware of the visit to Moscow, of which the noble Lord was a member, and I am also aware of the suggestions that he made —and I am very glad that he did—for unilateral action by the Soviet Union. I think that only the third of his points—namely, the offer of a reduction—can really come under the heading of a unilateral gesture. That will be discussed, and is being discussed, in the talks which have started in Geneva, and, so far as talks on strategic weapons are concerned, they will start this year.
Lord Peart: My Lords, would the Government agree that it might be helpful to make a positive response to President Brezhnev's offer as a stimulus to negotiations to reduce—which we all want—the terrifying stocks of nuclear weapons on both sides of the Atlantic? May I ask whether the Government have noted the emergence of the freeze movement in the United States, led by such distinguished figures as George Cannon and Robert McNamara, and whether or not they will lend their support to that movement?
Viscount Trenchard: My Lords, so far as positive responses or positive moves are concerned, I should like to draw the noble Lord's attention to the proposal of President Reagan, which is supported absolutely fully in the communiqué of the NATO nuclear planning group, which I would ask him to look at in the Library and which was, for short, called the zero option. That offered to holdup the whole of the Pershing 2 and cruise missile modernisation plan, if the Soviet Union would destroy its SS20s and other missiles. We have no such missiles at the present time. So that, so far as responses are concerned, I think it is true to say that NATO and the Americans have taken the initiative. I think it is because we are negotiating from a position of strength that we are beginning to get—and I am glad that we are—replies and responses from the Soviet Union. So far as the peace movement goes, we have, of course, noted the peace movement in the USA. I would merely say in relation to that, and to the peace movement in this country, that I think we are all in the peace movement, but I believe that most of us feel that the cause of peace will be best served by multilateral disarmament with proper verification.
Lord Boyd-Carpenter: My Lords, does not Mr. Brezhnev's so-called offer, which is applauded by the noble Lord, Lord Brockway, amount to no more and no less than a proposal to perpetuate Soviet superiority, both in nuclear and in conventional weapons, for a long time to come?
Viscount Trenchard: My Lords, to be generous, I would add to what my noble friend has said that the third point made by the noble Lord, Lord Brockway, would indicate a slight lessening of that Soviet preponderance.
The Earl of Onslow: My Lords, is my noble friend aware that the peace movement's success in the Soviet Union was very heavily stamped upon by Russian secret policemen rugger tackling its advocates when unfurling banners saying "Soviet nuclear disarmament"? Does this not slightly show that the peace movement is only against us and is not against the Soviet Union?
Viscount Trenchard: My Lords, I am not an expert on rugby in the Soviet Union.
Lord Mayhew: My Lords, may I ask the noble Viscount to explain to the House the reasons given by the Americans for adjourning the negotiations on these weapons for two months against the wishes of the Russians? May I also ask him whether or not he agrees that the reasons given were surprisingly insubstantial?
Viscount Trenchard: My Lords, I had not understood, as the noble Lord suggests, that the adjournment of the talks—I gather that in nearly all permanent talks there are adjournments—was entirely a USA proposal. I note that the noble Lord is not nodding. However, I can assure him that the adjournment, perhaps because the United States likes its Easter recess, as we do, though to a greater extent, has no other significance than that. The talks, in spite of the problems in Poland and elsewhere, are on and will continue on, subject to a short adjournment.
Lord Jenkins of Putney: My Lords, is the noble Viscount aware that what seems to be happening on both sides is that somebody makes an offer, the other side ignores it and makes its own offer, and that the other side then ignores that offer? Would it not be a good idea on some occasion actually to respond to an offer?
Viscount Trenchard: My Lords, I think it would be an excellent idea if the Soviet Union were to respond to some of the suggestions we have made to stop tilting the balance against us to the degree that they have over recent years.
Lord Brockway: My Lords, regarding the second part of the Minister's original Answer, may I ask him whether any date has now been fixed for the strategic talks between the USA and the Soviet Union and whether he has any information about a response from America to Mr. Brezhnev's proposal that he should meet President Reagan in the autumn after the renewed United Nations Assembly on Disarmament?
Viscount Trenchard: My Lords, no date for the commencement of the START talks has been announced, but it is believed, and wished, by the United States that they should begin this year. I cannot give any further information on the possible meeting between President Reagan and Mr. Brezhnev.

Municipally Funded Companies
2.52 p.m.
Baroness Gardner of Parkes: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are satisfied with the formation of municipally funded companies, such as the Greater London Enterprise Board, in view of the involvement of ratepayers' money and the danger of its total loss.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin): My Lords, the Government are aware that a number of authorities have formed companies of this kind. It is for each authority to satisfy itself that it is acting within its powers, that its expenditure is soundly based and that it does not misuse ratepayers' money. The authority is answerable to its electorate as well as to its auditor.
Baroness Gardner of Parkes: My Lords, I thank the Minister for that reply Would he confirm that he is aware that the power which enables the GLC to spend this money is provided under Section 137 of the Local Government Act 1972, which enables the expenditure of a 2p rate product to be put to this use? Would he also confirm that in the case of the GLC this amounts to approximately £40 million? Can the Minister tell me whether other authorities in the country receive the same amount of money from a 2p rate or whether the expenditure available of £40 million for this purpose is unique? And in particular, in view of the Minister's recent consultative paper on local authority aid to industry, which would limit the spending under Section 137 to areas of greatest need, can the Minister inform us when there will be a decision on that point and whether he will consider placing a ceiling upon expenditure of, say, £10 million or a 2p rate, as at the moment it is such an unlimited amount?
Lord Bellwin: My Lords, where do I begin? So far as the sum of £40 million which is available to the GLC, using Section 137 of the 1972 Act, is concerned, my understanding is that my noble friend is right. My noble friend also asked me whether this is unique. In that this is the authority which has the largest budget, I think it is correct to say that this is the greatest sum available to any authority. I do not know of any other authority which approaches that figure. My noble friend's point as to whether or not, under the proposals in the consultation paper, one should put a ceiling on such a levy is something which we shall have to think about, in just the same way as we are being messed by very small authorities to consider putting a floor upon it. As I am sure my noble friend knows, there is the other side to it. I understand the anxiety which my noble friend has expressed. It is one with which I am sure everybody is concerned. We shall have to watch carefully what transpires.
Lord Avebury: My Lords, is there not a contradiction between the professed concern of the Tory Party for the freedom of local government to take its own decisions and the constant slight sniping and barracking against individual decisions of local authorities, in particular the Greater London Council, that we see in this House?
Lord Bellwin: My Lords, I should have thought that everybody in the country who is interested in the reputation and standing of local government is concerned about the possibility that any authority, whichever it may be, might bring into disrepute the whole of local government by an abuse of the powers which they have. All I said in answering my noble friend was that we must watch this, as we shall watch any other authority which may be taking advantage of some power that may lead them into perhaps irresponsible expenditure. However, at the end of the day the decision as to whether or not it is irresponsible will rest with the electorate and with the auditor.
Lord Orr-Ewing: My Lords, is my noble friend aware that the ratepayers of London have been sorely tried by profligate expenditure since Mr. Ken Livingstone took charge of the GLC? And has he considered that private financial institutions are ready to subscribe money and that it is unnecessary to depend upon public money taken from ratepayers? Has my noble friend also considered asking the GLC to consider the private supply of money for viable enterprises, which will create jobs, rather than always relying on the sorely tried ratepayers?
Lord Bellwin: My Lords, I have to say to my noble friend that in so far as I understand the intention of this proposal and, indeed, of like proposals by other authorities which are contemplating setting up organisations of this kind, the objective is to involve private funding as well as municipal funding. In other words, it is to pump prime; it is to encourage involvement. If it is that, I am sure my noble friend will be pleased to see that it transpires. The concern is that it would become not that but something which would be entirely municipal. Then the concern of ratepayers, wherever they may be, would be very real.
Lord Ponsonby of Shulbrede: My Lords, would the Minister confirm in the first place that he is aware that the Greater London Council took legal opinion with regard to the establishment of the London Enterprise Board and that that legal opinion was favourable and, secondly, that the proposals in his own consultation document would in no way limit the proposals which the GLC have made under Section 137? Finally, I wonder whether the Minister is aware that the GLC enjoys a good relationship with the London Enterprise Agency, which is a sub-committee of the London Chamber of Commerce, and that there is a very good relationship with private enterprise over this proposal?
Lord Bellwin: My Lords, I hope I did not suggest that the setting up of this body was other than within the vires of the GLC. I have no reason to suspect that it is not, nor did I say so. With regard to the question the noble Lord put to me about the GLC's good relationship with the London Enterprise Board, I have no reason to doubt that it is good. So far as I am aware it is. Nor is there any objection to the principle of what is proposed to be done. My noble friend Lady Gardner is concerned that the sums involved in this case are so very large in terms of the money available to the GLC that they should be spent responsibly. As I understand it, that was really the thrust of her concern.
Lord Byers: My Lords, I wonder whether the Minister will make it clear that there are two separate organisations here. One, with whose founding I was concerned, is the London Enterprise Agency which, as the noble Lord said, is an organisation backed by the private sector, particularly for helping small businesses; secondly, there is the Greater London Development Board, which is the child of the GLC. These are two separate organisations working together.
Lord Bellwin: My Lords, I am glad to confirm that is so. The London Enterprise Agency is doing excellent work which I think would be applauded by everyone in this House.
Lord Morris: My Lords, would my noble friend not agree that in all matters relating to the relationship between the Government and the governed, at whatever level, the spirit of the law is infinitely more important than the letter of the law?
Lord Bellwin: Would that it was always so, my Lords.
Baroness Gardner of Parkes: My Lords, in view of my noble friend's comment that "pump priming" is desirable, would he say that the cost of £1 million estimated for setting up the bureaucratic machinery to operate the GLEB in its first year comes within that category of "pump priming", without creating an additional job at that price?
Lord Bellwin: My Lords, I do not know whether the figure mentioned by my noble friend is correct. If it is correct, it is something that would trouble me very much. As a London ratepayer nowadays. indeed it does trouble me.

Council Houses: Construction Policy
3.1 p.m.
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 what consideration is being given to increasing the numbers of council houses being constructed in order to reduce waiting lists.
Lord Bellwin: My Lords, it is for individual local authorities to decide how much they spend on council house building and how much on other ways of helping those in housing need. As I am sure the noble Lord will agree, waiting lists are a far from accurate indicator of housing need, but one way of helping to reduce waiting lists is to enourage people to buy their own homes under the various low cost home ownership schemes which the Government are promoting.
Lord Molloy: My Lords, is the noble Lord the Minister aware that recent figures reveal that we have now reached the lowest level of house building for

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nearly 60 years? Is this not a crass absurdity when one notes the number of unemployed skilled craftsmen from the construction and building industry? Would the noble Lord not further agree that there is certainly a need for the housing list system to be more accurate and to give proper assistance to local authorities so that their planning can be made a reality? None of these will come true unless the Government change their policy and stop harassing local authorities in regard to building homes, but rather help them in providing them.
Lord Bellwin: My Lords, as to the question of waiting lists and their validity, and what the Government should do to help them become more realistic, clearly this is something that one can think about, but I doubt very much whether local authorities will welcome any intervention by Government to do that. I am glad that through his Question the noble Lord, Lord Molloy (who I know has much experience in this field) recognises the point that I made in my original Answer: that waiting lists are not the accurate guide that some would think they are.
As to the noble Lord's other point about building, I will have to refer him to the general housing scene as such and point out that there is now available to local government, if they wish to use it, money for building council houses or for doing whatever else they consider is right in their individual authorities, to an extent that has not been readily available for a long time. For example, I understand that the total resources available for 1982–83 are one-third above the estimated outturn expenditure in 1981–82.
What must really concern us in housing is that there is provision generally of the types of accommodation needed. This is where the emphasis must be placed—on sheltered housing, on one and two bedroomed units —because there is an imbalance in our housing stock which those who understand this subject, as the noble Lord does, consider to be a matter of great concern; just as there is concern about the state of housing and the need to repair and improve it, and the need to bring back into an occupational state the thousands of empty houses which exist. This is all part of the whole housing debate.
Baroness Birk: My Lords, interested though I was by the Minister's gracious little speech about housing, may I ask whether he is aware (when he talks about the waiting lists and agrees with my noble friend Lord Molloy that they are not always accurate) that the AMA has estimated the shortage of dwellings by taking not just the waiting list but also the number of houses which are in short supply and the number of people who are really in need, as being 362,000 in 1981? At the present rate of performance, this shortage will rise to 500,000 in 1986. Is the noble Lord the Minister further aware, as I am sure he is, that in spite of what he was saying generally about housing imbalance, council housing cannot really be expanded when, according to the Government's expenditure White Paper, there will be a 20 per cent. housing cut between 1982–83 and 1983–84?
Lord Bellwin: My Lords, I do not know whether the
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figures which the noble Baroness quotes from the AMA are right or wrong. What I do know is that I cannot see why a debate on housing should be confined to council housing.
Baroness Birk: Because the Question was, my Lords.
Lord Bellwin: I think it should be on housing as a whole. In any case, the question of the total housing scene is surely something that must be of concern in any question on building. It is not just building that is the answer to our problems. How can we be so obsessed with the number of council houses as part of the housing problem when we refuse, as the noble Baroness did in her question, to address ourselves to the other points I made, on the condition of houses throughout the country and the empty dwellings which there are?
Baroness Birk: My Lords, with great respect, may I draw the noble Lord's attention to the fact that the Question related to council houses. I was keeping to the Question.
Lord Orr-Ewing: My Lords, will my noble friend confirm that there are large numbers of council houses which have been empty for more than a year? Am I right in thinking that 4,000 of these empty houses are in the GLC area? Is it not essential, where there is an urgent housing shortage, that these empty houses should be brought back to profitable and satisfactory occupation?
Lord Bellwin: My Lords, the total number of empty houses throughout the country is many, many thousands. As to the exact number in any one area, clearly I cannot know at this particular moment in time. However, I am glad that my noble friend has raised the point because it confirms what I myself was trying to say; that this must be a matter of great concern.
Lord Molloy: My Lords, it is not true to say that we on this side of the House—or the Labour Benches anyway—are obsessed with council housing. What concerns us gravely is those people who can only afford to rent a home. If we in this Chamber all accept that the basis of a decent society is the provision of a decent home, then the Government want to shift themselves and give aid to local authorities (and not just to half of them) to build homes, so that we can set forth on the royal road to progressively building a good society in which people are housed decently and can realise their own dignity.
Lord Bellwin: My Lords, if the noble Lord, Lord Molloy, and those who think as he does, were so concerned about those who wish to rent their homes, then I suggest they would have adopted in the past and will adopt in the future a different attitude from that which they have adopted in respect of the private rented sector.
Lord Glenamara: My Lords, is the noble Lord, Lord Bellwin, aware that he has answered every possible question on housing except that on the Order Paper?

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Is he aware that the simple fact remains that large numbers of our fellow men depend upon council houses, and that council house building is now at the lowest level for more than half a century? What are the Government going to do about that situation?
Lord Bellwin: My Lords, to simply talk of numbers is to ignore the fact that in terms of total aggregate throughout the country today there is a surplus of houses over households. That is something that one must face up to if one wants to look at housing as a whole.
Lord Pitt of Hampstead: My Lords, is the noble Lord the Minister aware that the statement he has just made was made in 1956, and that it is still not true? It is true only in an aggregate form. The question of distribution and the question of the areas in which houses are required is much more important than the aggregate.
Lord Bellwin: My Lords, I need no reminding that there are situations in individual areas which require attention and dealing with in a way different from other areas. That does not take away from the fact that what I have said about the totality of housing is correct.

The Falkland Islands
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Belstead will, with the leave of the House, repeat a Statement to be made in another place on the Falkland Islands.
Port of London Bill
Read a second time, and committed to an Unopposed Bill Committee.

The Public Sector: Privatisation and Efficiency
3.10 p.m.
Lord Beswick Lord Beswick rose to call attention to the consequences of the Government's policy of privatising publicly-owned companies and the importance of concentrating on a positive policy to secure maximum efficiency in the public sector; and to move for Papers.
The noble Lord said: My Lords, the Motion I beg to move gives to the House an opportunity of considering all the implications of the Government's policy of privatisation, and it seeks to stimulate thinking on the positive policy needed to ensure maximum efficiency and satisfaction in the public sector. My Lords, I am only too sorry that current policy does not allow us to devote all the Motion and all the debate to the positive forward possibilities, but, in my view and that of my friends, this Administration has chosen to pursue a policy which is as prejudicial to the economy as the choice of the title "privatisation" is offensive to the literate and aesthetic sense. Over Easter I pondered
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over this charge of prejudice and whether it really was uniquely justified, or whether it did not invite a yah-boo debate that Labour was as bad in its time. I have lived through all this history, and maybe the House will bear with me if I set out some of the facts.
Labour nationalised civil aviation, but the Act establishing BOAC was piloted by that staunch Conservative, Sir Kingsley Wood. Public ownership of the gas undertakings was recommended by that most successful private entrepreneur, Mr. Geoffrey Heyworth, chairman of Unilever. We nationalised the Bank of England, but even the noble Lord, Lord Boothby, voted for that. We nationalised coal, but only 32 years after the Tories said it should be done; it was in 1919 that Mr. Bonar Law said:
"on behalf of the Government I confirm that we are prepared to carry out the spirit and letter of the recommendations of the Sankey report".
These recommendations were for public ownership.
If we come to more recent times, it was private and not public ownership which brought Rolls-Royce to bankruptcy, and the noble Lord, Lord Carrington, can tell us the part he played in the public take-over. As for British Leyland, it is denounced as a burden on the public, but again it was private and not public ownership which starved it of investment and practically brought it to breakdown.
My Lords, I go into the past only to put the present into perspective and to seek to show that it should be possible to discuss public enterprise without excessive prejudice. Let us look at the facts of today. It is a fact that the Government have been selling off public property at below market value. They are selling off the growth assets brought to profitability by public enterprise and public investment. I am tempted to head the list of valuable public assets sold with the aircraft carrier "Invincible", but for various reasons I shall not pursue that line of thought.
I shall, however, put in the list the 171,400 local authority-owned houses sold off by Government demand between 1st April 1979 and 30th September 1981. The noble Lord, Lord Bellwin, said proudly on one occasion that £526 million had been realised by the sales of those properties. When I put down a Question asking for the estimated market value of the same properties, I was told on 29th March that it was no less than £2,640 million. The noble Lord suggested that the disparity was not an unduly large amount for what he called the desirable state of home ownership. Actually, I think he was being less than fair to his own case, for I am sure the figure he gave included an element of loans outstanding to the local authorities. But, even at a more modest estimate of a £4,000 discount per house, it means that some £685 million of public assets have thus been dissipated in that 18-month period. Home ownership is, I think, a desirable thing, but a less prejudiced approach would have found a more cost-effective way of encouraging it than that. How can there be satisfactory estate management and a reasonable rents policy if properties are sold off at historic costs and books have to be balanced by rents charged on houses mostly built under current loan terms? If we turn to industrial property disposed of under privatisation, the percentage discounts are less but the total assets are enormous.
And it is not only the matter but the manner of

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disposal which bears the marks of prejudice. When this subject came up at Question Time the other day, the noble Lord, Lord O'Brien of Lothbury, intervened. I am sure he was trying to be helpful to the Government, for I know him to be a helpful person, but he said that, from his experience—and we know that his experience in these matters is unsurpassed—sometimes the share issue price may be pitched too low and sometimes it is pitched too high. Of course, the noble Lord was right, but he only served to emphasise the fact that, under Government policy, in what are virtually forced sales the price has always been pitched too low, to ensure a speedy sale. In any case, I was not on that occasion seeking to criticise the pricing of those shares but the scale of reward to the City institutions concerned The £12,200,000, paid out to the City institutions in the case of British Aerospace and the other three companies was out of all proportion to the useful services actually rendered. Those City houses had added not one pennyworth of real wealth to the nation. And, of course, the £12,200,000 in fees is not the total cost of the paperwork of privatisation. Other costs are incurred by the companies themselves, and a great diversion of time and energy is caused.
Then, if we look at the most recent case—that of the flotation of Amersham International—we recall the scenes at the Stock Exchange, the standing on the chairs and tables selling the shares. This was not a case of wider share ownership; half the shares were sold off that first morning, and those dealers made more in the morning than productive workers at Amersham International would make in months.
I believe these things are wrong. They are wrong in themselves, and they are even more evil and damaging in the part they play in the undermining of morale and a proper motivation in that large part of the national activity upon which the nation as a whole depends. I have said before, and I say again, that the Government have seriously undermined the morale of the public service in Britain, and I challenge the Minister to deny it.
Let me give some of the more obvious pieces of evidence. First there is the case of British Gas. We discussed it to some extent yesterday. It has bettered every target set for it, it pays a proper dividend on capital. Far from borrowing from the Government, it actually lends to the Government, and there is a £100 million loan outstanding at the moment. It is not a burden on the Exchequer, but over a three-year period it will actually pay some £1,300 million in levies. Yet, the chairman of that organisation has to report to his workforce that they are under attack. As Sir Denis Rooke put it in his message to his workforce, it is "incomprehensible and unfair". What a way to run a country when the leader of one of the most successful and largest undertakings in our society has to say that!
Or take another highly successful organisation—the Central Electricity Generating Board. They were subject to a study in depth by the Monopolies and Mergers Commission, which for thoroughness makes those stockbroker studies of private companies look like tea-time gossip. After that study, and with all the benefit of the hindsight which the noble Lord, Lord Cockfield, was decrying quite properly the other day,
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the commission were unable to fault the management in any major particular.
The report stated:
"Although … we have been critical in certain respects, we wish to record … we were impressed with the evident ability and dedication in their work. … They take a justifiable pride in the technical efficiency and security of the Board's system".
What a wonderful opportunity for an unprejudiced responsible Minister to have echoed that praise and get even more effort out of the board and their workforce by words of encouragement? Any chairman of a properly run company, or the captain of a football team, would have done just that. But in this case the chairman of the CEGB felt compelled to say—I quote from a paper given to the Policy Studies Institute—
"there was a noticeable lack of enthusiasm among Ministers for the discovery that a major public enterprise could be found to be efficiently run with the staff well motivated".
All he had from the Secretary of State for Energy, said the chairman of the CEGB, was a "bureaucratic departmental letter".
Since that talk at the Policy Studies Institute the chairman of the highly profitable CEGB has been told that his appointment will not be renewed. None of the elementary procedures of succession has been followed. No successor has been named and the board ate concerned and confused. I wonder if the noble Lord, Lord Bellwin, will say whether he considers that this is a fair, sensible or efficient way to run our affairs. Given time I could give other examples of other individuals, respected and reputable, entrusted with the responsibility for our great publicly-owned concerns but who are upset and frustrated by the attitude of the present Government. However, maybe I can do no better than to quote the industrial editor of the Financial Times, who summed it up in a main article on 7th April. He said:
"They"—
that is, the chairmen—
"feel so battered by a hostile Government [that] none of them is naive enough to believe that any organisational reforms would change the Prime Minister's overriding personal distaste for everything they and their industries stand for".
We are, indeed, in the presence of a personal distaste; not a considered economic strategy but something narrower, less pleasing and less constructive. As against that less than constructive approach, the Motion before the House calls attention to the importance of concentrating on a positive policy designed to secure maximum efficiency. I am hoping that the Minister will not only comment on the suggestions which I shall put forward but will give us the benefit of his own thinking.
At the head of my list of constructive suggestions is the need for a proper atmosphere, an atmosphere encouraging and stimulating, in which to work. I put it at the head of my list, but I shall consider it more fully when I have dealt with some of the factors that can help create that atmosphere. One factor is the public sector's relation to Parliament. In much earlier days I was all for greater power for Parliament in these affairs. Even now I would say that major issues of policy, the decisions which significantly affect the economy and society as a whole, are matters on which the view of Parliament must be heard and must ultimately prevail. But, below those major issues, the less

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Parliament has to do with industrial management the better.
When opinion generally accepted that day-to-day matters were not appropriate to the Floor of the House, the idea of the Select Committee developed. In the Select Committee I think we would all agree that the innate maturity of an MP prevails over party point-making. But for various reasons I doubt whether the Select Committee is the solution we want. For one thing I doubt whether the qualified MP really has the time to study in depth the detailed problems of an advanced modern industry. This would be even more true if ever we became a single-chamber Parliament.
There are some questions, those affecting employee relations and consumer relations, which the Commons Select Committee may be specially fitted to pursue. But I believe that other machinery and other means might be developed to ensure that the contribution of both workforce and consumers could better be heard. A more radical development of employee participation might give much more satisfaction and enable a much more effective contribution than through the procedure of a parliamentary committee. Moreover, experience suggests that there are those in the workforce, at all levels, who are more likely to stick to the facts if they are speaking in the presence of their colleagues rather than in the ear of a politician.
As for the consumers, we ought surely to give more satisfaction there too, by the strengthening of the consumer council authority. Moreover, if, as proposed, there are to be more part-time members on the boards, then there should be scope for both workforce and consumer representation. Given corporation boards with wider part-time representation and with the executive committees below them, there could be quite adequate check on management without obtrusive intervention from a sponsoring department. We should be, so far as I can make out, although I would much like the opportunity to study it further, very near the two-tier systems in France and Germany and their experience appears considerably happier than ours.
Of course I can detect noble Lords opposite or the right honourable lady in another place saying, "What about the financial discipline exercised in the private sector by the magical opinion of the City, or the ultimate dread threat of bankruptcy?" My admiration for the industrial judgment of the City does not pass the bounds of moderation. And when I recall how private companies have been rescued by the state or by the lifeboats launched by the Bank of England, and when we see in recent experience just how easily those operating as a limited liability company can hand over their debt obligations to the receiver and then start up in business again the next week, I am not convinced that the threat of bankruptcy is such a superb discipline. However, I agree that in the public sector, above the direction of the respective boards, and above the structure of producer and consumer representation, there should be a mechanism capable of checking, occasionally in depth, the efficiency of an organisation and the soundness of its forward planning.
There are those who say that the Monopolies and Mergers Commission could be such a body. I am ready to be convinced, although I have reservations. One also hears of the Public Enterprise Analytic
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Unit now taking shape in the Treasury, and the Minister will probably tell me if I have the name aright. It, too, could be an effective instrument given the right directive and the sympathetic atmosphere within which to work. The fearful question is whether under this Administration they will be given the right directive. That same Financial Times article which I mentioned earlier paints an alarming picture of what might be. I quote the Finantial Times article:
"The CPRS will be checking up on the Treasury which will be monitoring the individual departments which will be monitoring the individual industries. And that will be as well as efficiency audits by some of the part-time directors, more efficiency audits by the Monopolies and Mergers Commission and regular inquiries by the Public Accounts Committee and parliamentary Select Committees".
That sounds exaggerated, but a Government which are picking out the profitable growth assets in the public sector and selling them off below market price will seem to many to be capable of even that nightmarish intervention. I very much hope that the Minister will take the opportunity of saying clearly what the new Treasury machinery means and I hope he will tell us that it will be instead of, and not in addition to, present intervention devices.
For myself, I see merit in an idea of a unit, maybe in the Treasury, but independent in structure and composition, with responsibility for the whole of the public sector, not only for efficiency audits as necessary but for the whole of the sector's financial planning. They would be the bankers of the sector. They would take the investment requirements right away from the PSBR. It is surely increasingly evident that to lump all productive investment in the same PSBR column as administrative expenses is a nonsense. It makes as much sense as a housewife justifying borrowing to buy a new hat by claiming that it is the same as borrowing to buy a house.
If we extract those payments made to certain industries for specific social purposes, there is no reason why the public sector as a whole should not be self-supporting financially and show a positive return on investment. Provided that the profitable bits are not sold off, the sector as a whole could make an increasing contribution to the national budget. If I am told that external borrowing needed for planned development, say, for the sinking of a new pit, makes it that much more difficult for the Treasury to raise money to meet a budgetary deficit, then I suggest that they should look again at all the millions of pounds that have gone abroad to finance overseas industry since exchange controls were lifted.
Given the right attitude and a sympathetic approach, much that is hopeful can be done to further the efficient development of the public sector. I hope that the Minister who is to reply, who has himself a very practical experience in these problems of public administration, will be able to tell us something helpful of the Government's intentions about the composition of boards, their relationship to departments and to Parliament and the role of this new Treasury unit, the proposed mechanism of monitoring and financing, and their way of dealing with the anomaly of PSBR restraints.
But then I return to the point that I put at the head of my list—the need for the right atmosphere within which to work. No organisational change can mean

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an improvement unless there is the right motivation. Of course, we must avoid the path that leads to the over-centralised collectivism of the Eastern bloc. Of course, we want the maximum of decentralised and delegated authority. Of course, we must secure all the benefits of constructive democracy within industry. A healthy suspicion of large-scale organisations is not a bad thing, but the personal distaste for everything they stand for, as the Financial Times phrased it, is something different altogether.
In support of the first part of my Motion, I would say, cut out the Poujadist prejudice and stop this wasteful process of selling off public assets at a cut price. As for the second part of my Motion, I have put forward some ideas which I hope are worth discussing, here and outside. To those ideas may I add some words that I recall from that book of H. G. Wells, The Work, Wealth and Happiness of Mankind. Wells wrote this:
"A man's guiding and satisfying idea of himself is what Jung calls his persona".
Wells went on, and we recall that he was writing over 50 years ago:
"the continually more centralised economic society, of mankind is dependent upon the harmony … of millions of personas".
The persona of service is the persona of harmony and hope. It can flourish in the public sector especially though not of course only. We need to encourage that persona, not to frustrate it. My conviction is that if we stopped this squabble of private versus public sectors, we have in Britain today a unique opportunity of developing precisely that type of persona which the modern world so badly needs. My Lords, I beg to move for Papers.

The Falkland Islands
3.36 p.m.
The Minister of State, Foreign and Commonwealth Office (Lord Belstead): My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Secretary of State for Foreign and Commonwealth Affairs. The Statement is as follows:
"With your permission, Mr. Speaker, I shall make a brief statement on the Falkland Islands.
"My right honourable friend the Prime Minister told the House yesterday that I would be travelling to Washington tomorrow to discuss with Mr. Haig our reactions to the latest Argentine proposals. I do so, I believe, with the support of the whole House.
"Any negotiation which is concluded satisfactorily must deal with certain critical points: in particular the arrangements for Argentine withdrawal; the nature of any interim administration of the islands, and the framework for the negotiations on the long-term solution to the dispute for which the United Nations resolution calls. We put to Mr. Haig, when he was in London, ideas which we believed would commend themselves to the House and accord with the wishes of the islanders. He subsequently took them to Buenos Aires. The latest Argentine proposals—despite Mr. Haig's
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efforts—still fail to satisfy our essential requirements in certain important respects relating to these points. They reflect continuing efforts by Argentina to establish by her aggression and her defiance of the UN—a defiance continued and aggravated by her reinforcement of her invasion force—what could not be established by peaceful means.
"These are some of the main issues I shall be discussing with Mr. Haig, and I shall of course have some ideas of our own to put forward.
"We continue to keep in close touch with our friends. In particular, I was glad that a meeting of Community Foreign Ministers could be arranged yesterday under the auspices of the Belgian Presidency and that Ministers were able to attend despite the inevitably short notice. I took the opportunity to thank them personally for their support and to explain the situation to them. They reaffirmed their support for us, emphasising the importance of securing the implementation of Security Council Resolution 502, their hope for a peaceful solution and their gratitude to Mr. Haig for his efforts.
"Since I last reported to the House, messages from the Falklands suggest that the islanders are still able to leave if they wish: a further party of 30 are on their way to Montevideo. Most of those leaving appear not to be permanent residents of the islands.
"The most recent contact with the 15 remaining scientists and wildlife photographers on South Georgia through the British Antarctic Survey was at 4 p.m. yesterday our time. I am happy to report that all were safe and well and in good heart.
"I shall continue to keep the House informed on my return".
My Lords, that is the Statement.
Lord Shackleton: My Lords, I should like to thank the noble Lord. I think that the first thing we would all want to do in your Lordships' House is to wish the Foreign Secretary success and give him our support in the mission that he is undertaking.
Several noble Lords: Hear, hear!
Lord Shackleton: My Lords, there is little further that we need say at this moment, other than to reiterate the fact that the Government have had the unstinted support of the Opposition parties on this matter. I should also like to repeat, notwithstanding certain anxieties many of us have had about the American attitude, a tribute to General Haig for the gruelling and tremendous efforts he has been making. He must have shown great endurance and great courage to have tackled these pretty horrific negotiations.
I suppose it would be right to say that among the options and the ideas that the Government may be putting to the American Government again is the possibility of a United Nations administrator. But I would say that my own view is entirely that of the Government: that the latest Argentina proposals still fail to satisfy our essential requirements, and still fail to provide any reasonable guarantee for the islanders.
It is worth reiterating, for those who are not themselves entirely convinced that the Government are

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following the right policy, that the efforts that are being made by the Argentine to establish her aggression and her defiance of the UN by reinforcing her forces, which aggravates the previous crime, are such that we simply cannot allow them to go without firm action and firm support for the efforts of the Government in seeking a peaceful solution. Now is no time to weaken our posture.
Lord Gladwyn: My Lords, we too should like to thank the Minister for repeating this Statement. I am sure also that the Foreign Secretary will leave on this important mission with the goodwill of the entire House behind him. We only hope that he will come back with a satisfactory solution. But would the Government not agree that if an armed clash with the Argentine forces, which however necessary and however successful—and I repeat, however necessary and however successful—would have some very unfortunate consequences, is to be avoided, they will have to give some general indication of the sort of eventual peaceful settlement which they contemplate, and how and where negotiations to this end would be conducted? I hope that I have interpreted what was said at the beginning of this Statement as meaning in effect that the Government accept that view.
Would they not further agree—this is perhaps a rather more contentious point—that they should no longer insist on the wishes of the islanders being "paramount", if by this phrase—
Several noble Lords: Oh! No!
Lord Gladwyn:—if by this phrase is meant their ability if necessary by a simple majority, to render inapplicable and hence to veto any solution emerging from discussions, perhaps under a neutral or a United Nations' chairman, as I think the noble Lord, Lord Shackleton, suggested, which might be held by us at any rate to protect their essential interests? Of course if by "paramount" is meant that the interests of the islanders should be fully safeguarded, I think there would be no dissent from the use of the term.
Lord Belstead: My Lords, I am grateful to both noble Lords for their response to my right honourable friend's Statement. I should like first of all to thank both noble Lords for the good wishes to my right honourable friend the Foreign Secretary. They are typical of the support given by the noble Lord, Lord Shackleton, throughout this matter from the Opposition Front Bench and by noble Lords from all parts of your Lordships' House. I should also like to thank the noble Lord, Lord Shackleton, for the context in which he set the possibility of any United Nations participation. I think in response that it is worth pointing out that when this crisis began we immediately went to the Security Council; that was the first thing that we did. We were indeed of course very grateful for the response of world opinion and the terms of Security Council Resolution 502. Our primary objective, therefore, remains the full implementation of that Security Council resolution. The methods, of course, are open for discussion.
When the noble Lord, Lord Gladwyn, asks me: does the view which he expressed in his first supple-
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mentary question accord with what has been said early on in my right honourable friend's Statement, the answer is simply, yes. The noble Lord was exactly interpreting what the Statement says. When the noble Lord asks me about the wishes of the people of the Falkland Islands being paramount, the answer of the Government is that our view remains the same on this issue: the wishes of the people of the Falkland Islands must be paramount. This can only be discovered and expressed by those people if there is withdrawal from the Falkland Islands of Argentine forces and the return of British administration.
Lord Aylestone: My Lords, while endorsing what the noble Lord opposite and the Leader of the Liberal Party have said, may we add our few words of best wishes to the Foreign Secretary in this difficult task. We hope for a speedy and successful solution to the discussions, but we are concerned immediately about the Falkland islanders, British subjects, who are still on the islands. We hope that, however long term discussions may be about any future sovereignty of those islands, the views of the islanders will be fully canvassed before any final decision is taken, and of course that Parliament will be informed.
Lord Belstead: My Lords, the noble Lord, Lord Aylestone, to whom I am also grateful for his response, asks about the welfare of the islanders. May I add to what I have said previously, that Her Majesty's Government have asked the International Committee of the Red Cross to inquire about the welfare of the islanders. We understand that the Argentine Government have now told the ICRC that they do not see a need for the International Committee to visit the islands at this stage. We remain in close touch with the International Committee of the Red Cross on this matter.
Lord Alport: My Lords, can my noble friend give any indication as to the nature of the citizenship of the 1,800 people who are on the Falkland Islands? Are they long-term residents? How many were born there? How many went there during their lifetime?
Lord Belstead: My Lords, if I may, I shall reply to my noble friend in more detail by letter, because I have not got the details to answer that question. The information I have, if I may repeat what I said in my right honourable friend's Statement, is that the latest group of inhabitants of the islands who have come to Montevideo are almost all—in fact, maybe all—not permanent residents of the islands.
Lord Jenkins of Putney: My Lords, is the noble Lord aware that, while all of us will wish the Foreign Secretary every success in his endeavours, the almost unconditional support that he has received from the Opposition Benches is not entirely reflected in the country? Is he further aware that the note of questioning which the noble Lord, Lord Gladwyn, introduced into his question just now was a welcome development? Is it not the case that the Foreign Secretary must bear in mind, when he deals with this matter, that the Falkland islanders have been misled over a period by

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the impression which has been given to them by successive Governments that we have both the will and the intention to maintain a permanent force located in the South Atlantic? Is it not the case that we have no such intention, and the negotiations must take place with that in mind?
Lord Belstead: My Lords, as I understand the noble Lord, he says that the parliamentary support for the Government which has been shown in both Houses is not reflected in the rest of the country. I must, without more ado, refute that allegation. The noble Lord, Lord Jenkins, although often we disagree, is I think fair in the comments that he makes, and I am sure he would agree that Her Majesty's Government are acting in good faith. Through Mr. Haig's efforts progress has been made, and as the Statement has explained we are building on this. We have in the forefront of our minds the need not to jeopardise such progress, and I cannot at the moment say more in detail about that. However, I think the country is very well seized of the issues which are at stake and I believe it would be the overwhelming view of the people of this country that the hands of our forces should not be tied from taking any actions which may be necessary for the safety, survival and, if it comes to it, the ultimate success of this matter in the interests of this country.
Lord Morris: My Lords, bearing in mind the legal and moral right and duty one has to defend oneself, may I ask whether my noble friend would agree that for anyone to suggest, least of all the Argentinian junta, that the progress of the British task force is an act of war, is nothing if not a monstrous impertinence?
Lord Belstead: My Lords, I agree with my noble friend Lord Morris that under Article 51 of the United Nations Charter we are acting legally in doing what we feel we have to do.
Lord Mayhew: My Lords, has the Minister's attention been drawn to an admirable leading article in the Daily Telegraph this morning which shares the objection of the noble Lord, Lord Gladwyn, to the use of the word "paramount" to describe the wishes of the inhabitants? It says:
"Of course … the inhabitants' … wishes are uppermost. There are now seen to be other matters of at least equal, if not greater, importance".
Is the noble Lord aware that that view of the Daily Telegraph is very commonsensical and is widely shared by people who have the interests of the inhabitants closely at heart?
Lord Belstead: My Lords, I accept that the noble Lord is speaking in absolute good faith and with the wish to support the best interests of this country, but I have nothing to add to what I have already said in answer to that question.
Lord Glenamara: My Lords, while fully endorsing what my noble friend said in wishing the Foreign Secretary well, may I ask whether the Government have considered another option which I have not heard mentioned throughout all the discussions on the
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Falklands? In view of our great success in the last two decades in granting independence to very small communities in the Caribbean and the Indian Ocean, may I ask whether the Government have considered the possibility of granting independence to the Falklands, provided there could be built into the instrument of independence a threefold pact subscribed to by Britain, the Argentine and maybe the United States guaranteeing independence permanently, guaranteeing aid to develop the resources of the islands and guaranteeing a scheme for immigration to the islands from the Argentine and elsewhere? By doing that, we should be satisfying the United Nations demand that we decolonise the islands and we should also be ensuring that the islanders did not come under Argentine rule. After all, if the Isle of Man can govern itself, surely the Falkland Islands could.
Lord Belstead: I shall certainly draw the attention of my right honourable friend to that suggestion, my Lords. As the House is well aware, we are at the moment in the process of putting proposals through Mr. Haig and, as my right honourable friend the Prime Minister stated in the House of Commons yesterday, it is better not to get the wires crossed while that particular action is going ahead.
Viscount Montgomery of Alamein: My Lords, would my noble friend agree, while recognising that the views of the islanders are certainly very important, that British views in general may not always coincide with the views of the islanders and that British long-term considerations and our overall policy, not only in the South Atlantic but in Latin America as a whole, should be taken into consideration?
Lord Belstead: I repeat, my Lords, that we are acting in good faith, that progress is being made and that we are building as best we can on that. This afternoon I really cannot go further than that.
Baroness Gaitskell: My Lords, may I ask the Minister how we are to reconcile our views on this issue with Mr. Haig's efforts and American feelings in this matter?
Lord Belstead: Once again, my Lords, the proposals which were put to Mr. Haig from Buenos Aires were Argentine proposals. There were aspects of those proposals which Her Majesty's Government have felt it was not possible to accept. We have now put, or are in the process of putting, proposals to Mr. Haig, and that of course is the purpose of my right honourable friend's visit to Washington tomorrow. I do not think that at the moment, in these difficult and delicate matters, we can go further than that.
Lord Orr-Ewing: My Lords, when peace has been secured, could the Government emphasise that Britain has a unique capability to develop the potential—not just in the fishing field but in the underwater mineral sphere—over the next 30 years of the areas around the Falkland Islands and that we should be happy to be associated, after peace is secured, with the Argentine and perhaps others in bringing that potential to fruition, thus improving the lot of the Falkland Islands and the general wealth of that area?
Lord Belstead: I am grateful to my noble friend for asking that, my Lords, because it enables me to underline the third of the three points with which the Government believe that any negotiations that are to be concluded satisfactorily must deal; namely, the framework of the negotiations on the long-term solution to the dispute for which the United Nations resolution calls.
Lord Shackleton: My Lords, I am tempted to answer what is turning into a debate, so many points have arisen. I have a number of points I should like to make, but at the moment we are concerned to express our support.
Lord Belstead: I am grateful to the noble Lord, my Lords, and, if the House will not think me evasive or unhelpful, I think there is little else I could add this afternoon to my right honourable friend's Statement.

The Public Sector: Privatisation and Efficiency
Debate resumed.
3.57 p.m.
Lord Tanlaw: First, my Lords, I owe an apology to the noble Lord, Lord Beswick, because, due to unforeseen circumstances, I had very short notice to prepare for this debate. The noble Lord, Lord Bellwin, may consider this to be an intervention which I started on Monday in dealing with the Armitage Report, developed in far greater detail in debating the Oil and Gas (Enterprise) Bill, and now—as some noble Lords will be gratefully concluding—am ending with a debate on privatisation. This subject was discussed in considerable detail—and with some force from the Labour Benches—yesterday, and it would be unproductive to go over the whole area again. But, for the sake of noble Lords who were not in the Chamber yesterday, I wish to restate the Liberal view, which is simply that we are against nationalisation, that we are against monopolies and that we have based our policies for many years on those facts.
This debate enables me to ask a question I have wanted to ask since I first stood for Parliament in 1959. Another candidate at that time, the Socialist—he was a democratic Socialist—was very keen on Clause 4, which is for the public ownership of all means of production, distribution and exchange. As we were both standing for an agricultural constituency, I asked him where his party stood on the nationalisation of land and, in particular, farms. Because that occurred so long ago I cannot remember his answer in detail, but it was basically to be on the same lines as those in the Eastern bloc countries. However, I have never heard a proper argument put forward by the Labour Party for the nationalisation of land and farms, and this debate might provide an opportunity for some speakers to develop that and to produce reasons for it. My view is that Western agriculture flourishes and will continue to flourish so long as agriculture in the Eastern bloc countries is run on the lines it is run today.
Lord Stewart of Fulham: My Lords, if the noble Lord wants a really authoritative case for the nationalisation of land, he should read a volume called The Green Book which was published by the Liberal Party in 1922.
Lord Tanlaw: That was a bit before my time, my Lords, and I thought that by talking about 1959 I was going back far enough. I assure the noble Lord that that volume did not belong to anything produced by the Young Liberals, of whom I am still one.
I come to the wider question. We are talking about privatisation, and the noble Lord, Lord Beswick, has put a case against it. I should like to hear from the noble Lords on those Benches as to what is the motivation for nationalisation? Is it just Clause 4?—in which case that is a very easy answer. If it is more than that, if it is for efficiency or for some other reason, I shall be very pleased to hear the argument developed. We in the Liberal Party have always had a different approach to this question—wider share ownership—and that is why, as I said yesterday, we do not oppose this aspect of the Oil and Gas (Enterprise) Bill. I do not want further to embarrass noble Lords on the Labour Benches, but we did ask some straight questions about compensation for pension fund managers and others who have bought shares in good faith. If a Labour administration took over, what compensation, if any, would there be, and on what basis would it be made? I am still waiting for a clear-cut answer to that. If that is Labour Party policy, it is only fair for the people involved—many of whom are working people—to have an answer.
From these Benches we have also developed the idea of profit sharing. This is a point which I fear enters into the area of taxation, which is outside the sphere of the debate. But why have successive Governments always refused to alter the taxation rules in order to encourage profit sharing? It is very difficult to do that in any company, small or large, without creating non-benefits for those with whom one wishes to share the profits.
We have also previously raised—I mentioned it yesterday—the question of worker directors. This is another, more constructive, approach towards getting workers and management working together in harness in a company, whether it he nationalised or non-nationalised. I am still awaiting a reply from the Government on this suggestion in relation to the Oil and Gas (Enterprise) Bill, but we shall work on that in Committee.
We also want to see, instead of nationalisation, more incentives being given to co-operatives in farming districts, so that small farms can co-operate in using the same machines. This, too, is an area of taxation that has not been touched in order to encourage such co-operation. Briefly, those are the kind of points that have from time to time been made from our Benches and have certainly been developed in another place.
I want to come back to the question of nationalisation and profits. The noble Lord, Lord Bruce of Donington, in a most forceful speech, said that some nationalised industries made profits. Indeed they do. But the question is, where are the dividends? Who gets the dividends? The dividends do not go to the people.

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The shareholders, so-called, of a nationalised industry are the public—you, me and everybody else. If such industries make profits the dividends go into the Treasury; they do not go to the people who support those particular industries. That is why I feel that when it comes to answering this point there remains a great deal to be desired.
As I have from time to time said from these Benches, the accountability of companies in the public sector is not satisfactory. The shareholders, the general public or indeed Members of Parliament, have little, inadequate, access to full accountability of what is going on inside the companies. There is no annual general meeting similar to that in a private sector company.
The noble Lord, Lord Beswick, mentioned the Public Accounts Committee. It is my understanding that the civil servants who give evidence to the committee go into training three months before they meet the Members of another place, who possibly have only as much notice and as much briefing as I have had in order to make my intervention today. For three months civil servants can practise the answers to all the questions that they are going to be asked, so as to divulge only the minimum amount of information. I am not being hostile to the Civil Service. I fully understand why civil servants do this, but this is not a good method by which to extract information on where taxpayers' money has gone, or is going, in a public enterprise. I am very sorry to hear that Her Majesty's Government of the day still want to keep this system going. I believe that time and time again we shall, when it is far too late, discover a ghastly muck up, such as that which involved the Crown Agents, because there has been inadequate supervision and inadequate access to information on what has been going on inside a public sector company.
So much for the accounts, which is not a very interesting subject, but one in which the Government have interested themselves enormously, in the sense that they have based their policy on monetarism and, presumably, some working knowledge of accounts. I again remind the House that there are only 18 Members of another place who are qualified to read a balance sheet. So if a cover up is required in a public enterprise, the odds are in favour of those who wish to cover up, rather than those who wish to uncover—
Lord Beswick: My Lords, the noble Lord has put some questions that are quite irrelevant to what I said. Would he be kind enough to comment on what I did say on this subject?
Lord Tanlaw: My Lords, I said that I was going to be fairly brief, but the noble Lord did mention the Public Accounts Committee and nationalised industries.
Lord Beswick: My Lords, I went on at some length—as the noble Lord will see when he reads my speech—putting forward alternative proposals for dealing with precisely the problems that the noble Lord is discussing.
Lord Tanlaw: My Lords, I fully heard those remarks, but we have not yet heard from the Government on these views; so it is a little difficult to put my own view. Unless the noble Lord, Lord Beswick, thinks, somewhat
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unfairly, that I am being far too critical of his speech or of the nationalised industries, I should like to give my personal reason for opposing the nationalised industries. The problem is that they have become far too big, and they thus require management techniques that are not easily available on either side of the Atlantic. When a corporation, be it General Motors or the Ford Motor Company, or a large organisation, such as the National Coal Board, acquires a certain dimension, it needs a new type of management which can be found only in very exceptional men. This is a point that has not been looked into by management specialists. It is the size of the nationalised industries that has created some of the problems to which I have been referring regarding the accounts and some of the problems which the noble Lord, Lord Beswick, wishes, as much as I do, to cure.
In the chairman of nationalised industries the country has been served by a most remarkable band of businessmen. They have been prepared to give up large monetary sums and careers of one kind or another to undertake what I believe to be most unenviable tasks. Not only do they have to deal with problems such as I have described but they are subject to constant interference from Government departments or changes in Government policy. They also have to confront the media at a moment's notice, and get on with their business at the same time. The noble Lord, Lord Kearton, is an example of the kind of people of whom this country should be proud. There are not many people of this capability, even at international standard, who can run a business in the kind of efficient way that the noble Lord has done. There are others, too, whose names are all known to your Lordships.
We should look more carefully into the question of reducing the size of some of the nationalised industries, so that they are more easily managed. One cannot rely on easily getting men who are big enough to run them. I speak as the chairman of a small private engineering company that has dealings with nationalised industries, but there are areas of investigation which I find very difficult to get clear. I have in mind British Rail, for instance. There must be a need to improve the investigation into the working of British Rail Engineering. This is a big engineering company, which I believe runs without any cost structure at all, and with very few costing procedures. It is producing goods without the full knowledge of what they cost. I might be completely wrong on this; I hope to goodness that I am; but the difficulty is that I cannot be proved to be wrong. This is an area in which perhaps further enlightement will come from this Government.
I think, too, in terms of the Coal Board. Is it not time to question the policy instigated by the noble Lord, Lord Robens, regarding the uniform price of coal? Is this not a time when we should again consider whether, if coal is to be used as an effective energy source for industry, the price can be variable? Surely prices must be much lower than they are at the moment if coal is to retain its position as a source of energy for the next ten years, which are vital for this industry. I come back again to the Gas Board, and I ask whether the noble Lord, Lord Beswick, has read my speech of yesterday. If he has not, I am not going to take trouble to remind him this afternoon, but the point is that we are against monopolies, as I

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said at the beginning of my speech, and it is most unfortunate that the Gas Board has been a monopoly. It is also unfortunate, I feel, that it is putting forward a case against the Oil and Gas (Enterprise) Bill in order to maintain its monopoly. Its opposition in this area is unfortunate because the arguments are definitely weak when it comes to the benefits to the consumer. I think, in particular, that what was meant by the noble Earl, Lord Lauderdale, and the noble Lord, Lord Polwarth, yesterday was that the lack of exploration to know what really is the extent of our gas reserves is putting us all in a much more difficult position to develop an integrated energy policy.
I believe—I hope like the noble Lord, Lord Beswick—that in fact the nationalised industries are not perfect. I also think that they need to be looked at again quite objectively and quite without the force and fervour which was put forward by the noble Lord, Lord Bruce of Donington, yesterday, quite rightly for political reasons; because what is far worse than nationalisation and far worse than privatisation is de-nationalisation and de-privatisation.
I want to end up, my Lords, by saying that what has broken the back of British industry today has not been nationalisation itself: it has been nationalisation and de-nationalisation, and then re-nationalisation. Are we not entering again into this same era, with the same arguments put forward from the Conservative Benches and the same forceful arguments put forward from the Labour Benches? Are we not going again into this ping-pong game in which our whole economic future is at stake? Therefore, when the noble Lord, Lord Beswick, and the noble Lord, Lord Bruce of Donington, say that they want to deprivatise, what is this going to mean? Is it going to mean the re-nationalisation of BNOC? I cannot see any argument for this, not for political reasons but for the sake of the industry as a whole.
4.13 p.m.
Lord Boyd-Carpenter: My Lords, I hope the noble Lord, Lord Tanlaw, will not think me discourteous if I return to the subject-matter of the debate and do not follow him in his entertaining canter round the outer perimeter of the subject; but I must correct him on two questions of fact on which he made statements which I think he himself, on reflection, will realise were unfair.
In the first place, in a reference to profit-sharing, the immediate relevance of which to this debate I myself (it is no doubt my fault) found it a little difficult to follow, he said it was remarkable that no Government had taken steps to help taxation-wise with the development of this admirable activity. If the noble Lord will look at the Finance Bills of both 1979 and 1980 he will see that the present Administration, in successive Finance Bills, granted increased tax concessions in respect of payments made by companies to their employees as part of a profit-sharing scheme. So I hope he will feel that on this point he owes Her Majesty's Government some apology.
Secondly, I am bound to say that I took somewhat amiss, as a former chairman of the Public Accounts Committee, his very slighting reference to a body which, leaving aside from the time I was involved in it, I believe has done enormous public service. To say
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that because civil servants treat the Public Accounts Committee seriously—and, of course, he is quite right, they do; they spend a good deal of time preparing to appear before it, and that is right and proper—the members of the committee are incapable of dealing with them, is simply not borne out by the experience of this committee, whose reports seem always to be accepted by successive Governments of every party and which have indeed resulted in very substantial savings in public funds.
Of course, when the noble Lord talked of briefing he entirely overlooked the fact that both the chairman of the Public Accounts Committee and his colleagues have the enormous advantage—it is perhaps a greater advantage than is enjoyed by any other Select Committee at Westminster—of being supported, briefed and informed by the Comptroller and Auditor-General, with his staff of between 400 and 500 very able officials who are working inside the departments throughout the year. I would be very surprised if any noble Lord (and there are a number) who has had an experience similar to mine in serving on the Public Accounts Committee did not find his derogatory reference to that committee as something only to be excused by invincible ignorance.
Lord Tanlaw: My Lords, I apologise to the noble Lord and to the House if I appeared to be derogatory of the Public Accounts Committee. I was not being derogatory: I was merely saying that the civil servants had a better hand of cards than those whose duty it was, like the noble Lord, to interrogate them.
Lord Boyd-Carpenter: My Lords, I can only leave the matter to be judged by those who have actually either participated in the gatherings or read the reports and seen the action of successive Governments. I see my noble friend Lord Reigate here. He was a colleague of mine for many years on that body, and he can confirm this. I hope that when the noble Lord reads his own speech in Hansard tomorrow he will feel that he owes something of an apology to that succession of people who have worked on that committee over the years, to the great benefit of the national finances.
Now, my Lords, I come to the essence of the debate, which is, of course, the speech of the noble Lord, Lord Beswick. Lord Beswick adjured us quite a number of times (I did not actually count them) to avoid prejudice. In rebuking prejudice, the noble Lord seemed to show the same expertise that Satan has in rebuking sin, because his own speech manifested that particular quality quite continuously. Of course, for a very creditable reason the noble Lord, Lord Beswick, looks at the nationalised industries, I will not say through red but through rose-tinted spectacles, because in my own experience over the years the noble Lord (he will allow me to say this) was, with the possible exception of Sir Derek Ezra, the most successful chairman of a nationalised industry of whom I am aware—and I am glad the noble Earl, Lord Longford, agrees with me.
It is natural, when one has made, as did the noble Lord, Lord Beswick, a great success of an extremely difficult task, that he feels somewhat genially disposed to the area in which his triumphs took place. But I would ask the noble Lord, when he criticises my noble friends, and indeed, I think, personally my right honour-

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able friend the Prime Minister, for their alleged antipathy to the nationalised industries, to realise the contributions which he and his colleagues make to that attitude. So long as it remains the policy of the party to which the noble Lord belongs to increase the area of nationalisation, so long as Clause 4 continues to be part of the Labour Party constitution, it is quite inescapable that those who do not share that view should find it necessary to draw public attention to the defects of the system of public ownership in industry.
I am sorry that the noble Baroness, Lady Gaitskell, has left the Chamber, because I meant to say, and I will still say, that I have always had the greatest admiration for the courage and persistency of her late husband Hugh Gaitskell in his gallant efforts—gallant but, alas!, unsuccessful—to rid the party opposite of the incubus of Clause 4. But, my Lords, while it is the reiterated policy—not a matter of Clause 4, but the statements of Mr. Michael Foot and his putative successor, Mr. Benn—to increase the area of nationalisation, it really is inevitable that there will be criticism. It really is not good enough for the noble Lord to say, "If you make this criticism it is hard on the morale of people who are doing an excellent job in running these industries". So far as I know, none of the attacks is directed at the personal qualities of individuals. I myself have been chairman of a body which ranked sufficiently as a nationalised industry to enable me to be a member, as was the noble Lord, Lord Beswick, of that interesting body, the Chairmen of Nationalised Industries Committee.
It is the criticism of the system of public ownership which is relevant. Let me say that I have never taken a doctrinaire view on this, a view that there should be no industry in public ownership. I believe, on the contrary, that some public utilities such as rail, electricity and gas which operate on a monopoly and on a non-competitive basis on the whole are probably best handled in public ownership. I can confirm that that has been my attitude by reminding your Lordships that some 27 years ago I got myself into great trouble with my own party when, as Minister of Transport, I refused to press the de-nationalisation of road haulage to a point involving the break-up of the national road haulage network. I had a rough time with the 1922 Committee, as one or two noble Lords may recall; but my view prevailed and I was very glad when, as I ventured to prophesy, the party opposite when they came to power left the status quo as far as road haulage was concerned and we arrived at an overall, non-doctrinaire, pragmatic solution. So I have reasonable credentials for saying that I do not take a doctrinaire view.
Let us analyse the basic problems of the nationalised industries. I think the first and the most difficult problem that those who run them have to face is the knowledge—or the thought—on the part of their workforce that they cannot be bankrupt. Of course that may be wrong; but so far they have not been bankrupt. In the private sector, even the most forceful of trade unions does not wish to push either disruption of production or excessive wage demands to the point that they put that company out of business; because they will destroy their own jobs in the process and this is a salutary restraining force. In the nationalised sector
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this is not so. It is difficult—and I do not want to mention names or examples—to envisage anywhere in the private sector having to deal with a union like ASLEF. So in the management of those industries there is not the same power of resistance to excessive demands as there is in the private sector. That is one of the reasons why many people in the trade union movement are very fond of the public sector, because they feel they have a freer hand there.
Secondly, there is the lack of feeling among those who manage the industry that their personal position and livelihood depend upon the industry being profitable. I know that they do their best and I am not making any reflection on their zeal and enterprise; but they are not subject to the same compelling disciplines as those who operate in the private sector and who say: "If we fail to run our company over any period of years at a reasonable profit, not only will the company fail but we shall be out of a job". This discipline does not exist in the public sector. That is a pity.
There is then the problem of the consumers. In the private sector, on the whole, if a consumer does not like the product of a particular company, he can withhold his custom and say, "Very well, I can go elsewhere". Faced with a public monopoly, he, on the whole, does not have that option. It has been sought to compensate for this weakness by setting up various aspects of consumer protection and representation and some of these have been quite successful. When I was at the Civil Aviation Authority I set up the Airline Users', Committee and I was fortunate enough to enlist the noble Baroness, Lady Trumpington (as she now is), as its chairman, I need hardly say that it was a highly effective, not to say aggressive body.
There are areas where even the protection of a consumer organisation does not exist. I have been in correspondence with my noble friend Lord Bellwin about the absence of any such machinery in the water industry. My noble friend, with the loyalty to those he represents which he always shows, has endeavoured to satisfy me that there is adequate representation in that industry because the water authorities contain in their membership nominees representing local authorities. Certainly, my experience has been that those gentlemen, once appointed to the authority, develop a sort of loyalty to the authority of which they are a member and cease to be effective representatives of the conflicting interests, in many cases, of the consumers, so that one does not get the balance of forces which is present where there is an organisation, on the one hand, and representatives of the consumers on the other. There is the additional fact that they are not elected to represent consumers; they are nominated by local authorities. My own experience in the area in which I live is that no one has the faintest idea of who they are or how to approach them. Therefore, there is great weakness there which did not exist in the days of the old water companies.
So there are very real and fundamental difficulties about the nationalised industries. How are we to resolve them?—because I agree very much with the noble Lord, Lord Beswick, that we want to consider how to improve them. I have two suggestions to put forward. One follows up the remarks I made in reply to the noble Lord, Lord Tanlaw. I like very much the proposal that the Public Accounts Committee should be

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given full authority to investigate the nationalised industries' finances. I am told that there has been objection in another place that this would inhibit their freedom of operation. I am extraordinarily sceptical of that and I will tell your Lordships why.
When I was chairman of the Public Accounts Committee we considered—and the noble Lord, Lord Robbins, will remember this—extending the scope of the Comptroller and Auditor-General and of the Committee to the finances of the universities. We were treated to the most superb mass of evidence from the most distinguished persons in the academic world demonstrating to their own complete satisfaction that were accountability to the Comptroller and Auditor General and the Public Accounts Committee over the universities to be established, then academic freedom in this country would come to an end. There were only one or two academics who saw a little further than that and who saw that a little expert accountancy and financial advice would be helpful to the universities—and so it proved. Therefore, one gets sceptical of those who say that if they have to account for public monies, this will inhibit them in doing the job that they ought to do.
The other point that I would make is that all Governments should seek to limit the interference—not by Ministers, which is limited, if only because Ministers have very limited time—but by civil servants in their departments. In certain departments, it is the practice of civil servants to make inquiries and to put points of view to the nationalised industries concerned ostensibly in the name of their Minister—although on one or two occasions in my own experience I have checked with the Minister and found that he had taken no such initiative. A strict instruction in departments that nationalised industries are not to be harassed with inquiries or demands without the express authorisation of the Minister would be of great assistance to those who have to run them.
I listened with a certain wry amusement to the noble Lord, Lord Beswick, when he said that the present Government's policy had done much to undermine the morale of the boards of the nationalised industries. I wonder whether he recalls—I recall, for I was on the non-receiving end of it—the events of the winter of 1975–76 when the review body on top salaries, under our late and very much lamented old colleague, Lord Boyle, came out with recommendations for increases in the remuneration of Ministers, of senior officers of the armed forces, senior civil servants, judges and the boards of nationalised industries. The Government of the day, of which the noble Lord was a supporter-I am not sure whether he was a member but he was certainly a supporter—granted these increases, or some of them, to all the other categories, but not a penny to the boards of the nationalised industries. This was said to be the result of a compromise arrived at in the then Cabinet in deference to the views I believe of the present Leader of the Labour Party.
Lord Beswick: My Lords, may I say to the noble Lord with great kindness, because I should like to thank him for his previous references, that I was not a supporter on that occasion; I was a victim.
Lord Boyd-Carpenter: My Lords, that helpful
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intervention only increases my sympathy with the noble Lord because so was I. I think that I can take it from the information that he has now given the House that he wholly agrees with me in the criticism that I am making of the then Government. It was a deplorable thing and had the result in the body in which I was concerned that by the time it had been remedied we had over 100 subordinate officials below board level who were being paid more than members of the board. That is an indication—it is now in the past—of some of the things that have been wrong.
On the more major issues, I believe that as some industries will plainly have to remain nationalised they should be given much greater freedom, including greater freedom on such matters as pay and remuneration, and should not be subjected to interference by civil servants but subject only to directions on major issues of national importance made by Ministers personally.
I come finally to the point which the noble Lord, Lord Beswick, made. He dislikes the privatisation—I agree with him in disliking the word—which is taking place. It is a matter of judgment how large or small the public sector should be. The party opposite, as I have said, are committed to increasing it. My right honourable friends were elected on the basis of reducing it. We believe that by reducing it, by putting more of our industrial effort into an area where the salutary forces of competition and incentive operate more fully, we are greatly improving the working of the national economy.
I agree with the noble Lord in one criticism that he made. I think that one or two disposals have been made at prices which were quite unnecessarily low. I believe that when a Government dispose of public industrial property—I leave aside the separate question he raised about local authority housing—they should get as good a price for it as they can. I hope that my noble friend will say that with further disposals, which I hope are coming, greater efforts will be made perhaps by seeking the aid of people of better judgment in the City than were available on some of these other occasions. I hope that the Government will try to see that they get a better price for these assets. I agree entirely with the noble Lord that public property, when it is sold, should be given a fair price.
Regarding local authority housing, I differ from him. I happen to believe that socially home ownership is one of the most valuable and stabilising influences in our society. As, after all, local authority tenants have been subsidised in their rents for a great many years, there does not seem to me any great difficulty in principle in subsidising them when they become house owners.
We are indebted to the noble Lord for introducing this debate. This is a problem of great importance to our economy. I believe, subject to the minor criticisms that I have made, the Government are on the right lines. I am sure that we shall all listen with the greatest of interest to the full statement that I know my noble friend will give at the end of the debate.
4.35 p.m.
Lord Taylor of Gryfe: My Lords, before discussing the subject which has been introduced today by the noble Lord, Lord Beswick, I feel it right perhaps to correct

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two points made by the noble Lord, Lord Boyd Carpenter. In his criticism of the public sector he described British Railways, for example, as a monopoly. Anyone who has been involved in British Railways will accept that they operate in an extremely competitive environment. The Inter-City services are certainly faced with the competition of the airways. The National Bus Company run inter-city services also against British Rail. In the market for freight, British Railways have to price themselves competitively in order to survive and get traffic.
The second point I want to make is that the noble Lord was somewhat unfair in his suggestion that in the public sector there was a too soft attitude in relation to employees and employment because no industry can go bankrupt in the public sector. The strict application of the external finance limits in the nationalised sector has had a very severe disciplining effect in this area. If one looks at the number of employees in British Rail or in the coalmining industry British Railways reduced the number of their employees from 500,000 to 325,000 inside 10 to 12 years, which suggests that there is not necessarily a view in the industry that they must maintain employment as a first obligation. In fact, they have a continual battle against the external financial limits which are established by the Government—and rightly so.
Lord Boyd-Carpenter: Will the noble Lord allow me to intervene? I know that he has great experience in this matter. I think that he was on the board of British Rail, Scotland at one time. But will he not accept that recent events, such as the ASLEF strike, are almost inconceivable in an industry in which those fomenting that strike would know that if it were carried on on the same basis in such a private sector industry they would all be out of a job and the firm closed down?
Lord Taylor of Gryfe: My Lords, I am not sure that the same difficulties have not arisen in some of the private industries. The ASLEF dispute is something that I would not want to discuss today. But I make the general point that there has been a substantial reduction in employment in many of the nationalised industries and they had to slim down in the same way as private industry in order to meet competitive circumstances.
I welcome this opportunity to discuss the present situation in the nationalised industries, for two reasons: first, I have on the Order Paper a Motion for a short debate in the financing of nationalised industries, which is a subject in itself and a very important one. Secondly, I believe that if there is one area in which the Social Democratic Party has a distinctive and useful contribution to make it is in relation to the nationalised industries.
The trouble about about the two main parties, despite the reasonable statements that have been made by the noble Lords, Lord Beswick and Lord Boyd-Carpenter, is that they are both prisoners of their own prejudices in this matter. We have to accept that if the Labour Party are returned to power at the next election, they are committed to a massive dose of nationalisation or re-nationalisation. Indeed, in
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the public prospectuses which are now issued by the de-nationalised companies there is a statement to the effect that this share is at risk because of the commitment of an alternative Government which may re-nationalise, and shareholders are entitled to take that into account. Not only does it appear in the public prospectuses, but it also appears in the Labour Manifesto. So we shall be faced with re-nationalisation on a massive scale.
In addition, there will be a further group of industries which embrace the so-called commanding heights of the economy. I suspect that the noble Lord, Lord Beswick, recognises this, that such a policy can contribute little towards solving the nation's economic problems. It is a policy that is irrelevant and irresponsible. By the same token, the Conservative Government seems to believe there is something inherently wrong with state enterprise and something inherently virtuous about the private sector. This leads them to conclude that the selling off of successful nationalised industries will make some substantial contribution to the nation's welfare. I do not believe it.
There are good and bad practices in the state sector, as the noble Lord, Lord Boyd-Carpenter, said. I recall discussing with a Clydeside shipbuilder, following the nationalisation of shipbuilding, how he was faring. He said: "This year I have had to build into my costings £900,000 for centralised charges from the new state-owned organisation." I am happy to say that that situation has now been corrected under the new chairmanship and new direction, and the industry is no longer so centralised. It is now based in Newcastle instead of Mayfair. I had the pleasure the other morning of calling on Ian MacGregor at an early hour in his new headquarters on the South Bank of the river, where there will be 170 people employed as against the 1,000 people who were formerly employed in the old central headquarters at Grosvenor Gardens. I believe the nationalised sector is trying to get this right.
The problems of nationalised industries are many. They usually operate on annual budgets and cash limits imposed by the Treasury, when many of their development programmes require long-term investment strategies. They are upset occasionally by uneasy relationships with Ministers, particularly after there has been a change of Government.
Similarly, performance in private industry is uneven. There are excellent companies in the United Kingdom: ICI, GEC, Pilkington, Sainsbury, Marks and Spencer, and so on. But in the past few years there have been many examples of companies going to the wall as a result of bad management and failure to respond to the changing climate of competition. The affairs of ACC, which are featured in the newspapers these days, bring no credit to the private sector. That is why the Social Democrats take the view that the appropriate basis for a healthy economy must rest on a mixed economy with the acceptance that a well-managed and reasonably financed public sector should be encouraged alongside an efficient and enterprising private industry.
There are sections of nationalised industry which should be sold off—for example, British Transport Hotels are quite peripheral to the basic business of British Rail. On the other hand, British Rail are pressed to dispose of their property assets, which have a

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growth potential for the future financing of the British railways system. The British Railways Property Board, of which I am a member—and I declare an interest—contributed £72 million last year to BR finances to help to cover the deficit. If there is a continual pressure on British Rail to sell off these property assets in a weak market, they may square the books for this year but they will be destroying the prospects for future revenues to finance the British Rail network.
At the moment they are in fact, in order to meet immediate cash requirements, selling off properties with a long-term growth potential and five-year rent reviews which could help to finance the railways 15 or 20 years from now. It is that kind of pressure and that kind of strategy which I believe is damaging to the nationalised industries and also damaging to the total economy of the country. I believe we should take the whole discussion about nationalised industries—and here I commend the very reasonable approach of the noble Lord, Lord Beswick—out of the straitjacket of doctrinaire policies and give some of the nationalised industries a chance.
The present Government were elected on a promise in their document called The Right Approach to the Economy; and I quote from that as follows:
"We aim to protect the management of the nationalised industries from constant Whitehall interference.".
Perhaps that text should appear on the desk of every sponsoring Minister, alongside the wise words of Herbert Morrison, who in 1933 wrote these words:
"A mischievous and not too competent Minister could easily ruin any business undertaking if that were permitted, while a weak and inefficient management would protect itself from public criticism by spreading the story that there is too much Minister in the running of this show'."
This is always an uneasy relationship. The Minister has three important duties. First he must appoint a competent chairman and a good board. Secondly, he must give that board clear-cut policy objectives. Thirdly, he must assess the performance of that board but not on a day-to-day supervisory basis. Appointing chairmen seems to be one of the greatest problems of the present Government. May I suggest a job specification? He should have a good track record; he should be responsive to his consumers and his customers; he should have a good PR sense, so that the public know what he is about; he should be able to understand and live with his Ministers and to accept policy directives; he should understand the Treasury and not be bored by endless committee sessions; and, above all, he should command the respect and support of his workforce.
Too often, chairmen—and again reference was made to this by the noble Lord, Lord Beswick, today—do not know until within days whether they will be reappointed or not. Sir Derek Ezra goes in a few weeks but so far no appointment as his successor has been made public. Sir Peter Parker, I think, has 18 months to go and Michael Edwardes, I believe, goes some time in the autumn. The chairman of the CEGB, Mr. Glyn England, was available but was not reappointed on 2nd April when his contract expired on 8th May. Businessmen who serve the public sector are entitled to be treated in a manner that enables them to plan their future. I do not know whether Mr. England's declared membership of the Social Democratic Party
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had anything to do with that dismissal. I hope not, for the Minister should note that ICI were not inhibited by the political affiliations of their new chairman. Indeed, reference to ICI prompts a comparison. When they recently appointed a chairman they had a choice of three distinguished contenders. That is the difference between the private and the nationalised sectors. There were three vice-chairmen of ICI who could all have filled the role, and had prepared themselves to fill the role, as chairman. Yet we have several important nationalised industries which are responsible for very large investments with no chairmen in sight. That is bad business. It creates uncertainty and diminishes efficiency.
The Government have recently announced that the nationalised industry boards will, in future, be smaller but with more non-executive directors. I welcome this as a general principle, but I would counsel the Government not to establish a uniform pattern for all industries. They are widely varied and they may have to be diversified in their board structure and control in order to fit in with the environment in which they operate.
The Sunday Times stated recently:
"Boardroom structure is important, but if you look at Matsushita, GEC or ICI you find structures change to suit personalities or different trading climates. There is no universal formula. That Whitehall thinks there is, merely shows its lack of contact with business management".
Perhaps the difficulty in recruiting chairmen for nationalised industries has something to do with the numerous controls and constraints which have now been imposed on these industries by the Government. I have been involved in the nationalised sector, but I spend most of my time on the boards of private sector companies. In the latter, we make our decisions, we carry them out and we stand or fall by the results.
Compare that, my Lords, with the nationalised industries of which British Rail, with which I am familiar, is a fair example. It has a good chairman and a competent board, including distinguished non-executive directors. The technicians—and this is the process of decision-making—and the planners prepare their investment programme and take it to the board. They approve it and then they take it to the sponsoring department. The sponsoring department has a team of economists who examine the programme. They then take it to the Treasury, who, in turn, have a team of economists who examine that same programme; and, since it frequently has to go to a Cabinet Committee, the Minister then asks for options. The whole process then goes into reverse and you again go back to the board and ask for policy options on that investment. That is the kind of frustration which makes it difficult for a leader in private industry to fit into this kind of environment. I understand that this is being looked at and that the right honourable genetleman Mr. Patrick Jenkin, the Secretary of State for Industry, has just announced,
"the strengthening of business expertise' in Whitehall to assist the monitoring process".
On top of these tiers of decision-making that I have just mentioned, British Rail and others are now to be subject to the Monopolies and Mergers Commission for a full-scale management audit. On top of this, the Treasury is now recruiting a cheap six-man unit

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of economists to monitor the performance of nationalised boards. They will get monthly reports, mainly cash flows, and systematic quarterly reports and will then make an extensive annual review jointly with the sponsoring Ministries, which have parallel teams doing exactly the same jobs. On top of this, at the end of the day, you have two Commons Select Committees—the Select Committee on Nationalised Industries and the Public Accounts Committee—monitoring their activities.
What are the non-executive directors of nationalised boards supposed to be doing, if they are not checking investment programmes and monitoring performance against these programmes? That is their duty. What is happening is that their responsibilities are now being diminished. And what is the expensive chairman supposed to be doing? He is too busy attending investigations, inquiries and committees galore to have time to run the industry which is his basic responsibility.
I should have thought that a Government of businessmen would have devised a much less crippling structure. No private business could live within that bureaucratic maze. If the Government are serious about safeguarding these great national assets, they will have another look at the structure and control. The Government have a responsibility for these industries. They are of great importance to the economic well-being of Britain. They are responsible for 8·3 per cent. of the total labour force of the United Kingdom and 16·6 per cent. of our total annual fixed investment. Their annual output exceeds £18 billion or 11 per cent. of the total GDP. Their expertise is internationally recognised by their export performance and by their retention by overseas Governments as consultants in railway planning, major power station projects, coalmining and so on.
Let us be a little more proud of these national assets. They are responsible for a healthy partnership which is helpful to private industry and GEC, BICC, Plessey and the construction companies, like MacAlpines and Wimpey, can all testify to the value of that relationship. In the interests of Britain, let us stop this arid debate between the Conservatives, who want to sell all that is profitable, and the Labour Party, who seek to re-nationalise and embark on new areas of nationalisation. Let us examine the structure of these industries and improve it. Just as private industry has had to slim down and become more competitive, there is room for similar disciplines in the state sector.
My advice to the Government is to stop tinkering, stop the threat of selling off as the price of success and examine how other countries, such as France, have taken the state sector out of politics. Go for good and able management and give them a stable financial base with a balance of equity as well as loan capital, which would help to induce the disciplines of the private sector. The Social Democrats are committed to a mixed economy, and would look at these problems pragmatically and without prejudice, free from the confrontational climate which, in these days, is crippling our economy as well as these industries.
4.58 p.m.
Lord Underhill: My Lords, may I say what a pleasure it is to follow the last noble Lord's very thoughtful and
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constructive speech—except for two or three parts. I think it proves that he should still be where his heart really is, with those who stand firm on the policies which he is trying to explain. Also, may I apologise to the noble Lord, Lord Bellwin, if I am not in my place when he rises to speak, but I have another prior enagement in this House.
The noble Lord, Lord Boyd-Carpenter, referred to the Government's election policy as being one of seeking to reduce public ownership. As he is only one of two Conservatives who are supporting the Minister, I thought it might be useful to find out just what is the Government's policy. The Conservative Party's manifesto never leaves my brief case. Frequently, one has to ask Ministers the basis of their policies and they say that it was in the manifesto. I am not one of those who believe in manifesto politics. I do not believe that the electors rush to our manifestoes to see what we are after. But, having said that, manifestoes are a general statement of our desires and of what we wish to achieve.
What does one find in the election manifesto of 1979? There are very limited proposals to deal with public ownership. The shares in British Aerospace have already been sold, and I think it will be agreed that some profit has accrued. The National Freight Corporation was in the Transport Act 1980. I think it was difficult for the Government to find a purchaser, and, but for the internal moves by previous employees to get finance from the banks, that might still be in public hands. No action was taken to deal with British Shipbuilders. Reorganisation has been partly successful, but the Government will find it very difficult to carry out that part of their election policy.
Their election policy also proposed the relaxation of licensing regulations to allow new bus and other services to develop: hence the Transport Act 1980. We all agree that the development of inter-city express coach services has been achieved, a point which has already been mentioned by the noble Lord. This means that they are in competition with British Rail. But very little, if anything, has been achieved in starting new bus services. Where new services have been granted, they are in competition with existing public services and are creaming off some of the routes. This is what we said would happen. Nothing has been done about looking at the possibility of an integrated transport policy, which I suggest can be achieved only if there is a solid base of publicly owned transport.
There was also a proposal to restrict the powers of the NEB to the administration of temporary holdings which would be sold as circumstances permit. What has happened is that the Government have mutilated the NEB which was starting to develop as a very useful economic planning instrument. It is the Labour Party's policy to restore the position. Reference has been made to the bankruptcies of Rolls-Royce and British Leyland, which were saved by public ownership. Despite what has been said about private industries having to go under, nobody would have permitted either of those two great concerns to go under. Public assistance had to be brought in. Incidentally, it was public assistance which saved the British computer industry; namely, ICL. Turning to the BNOC, the only reference to it in the Conservative Party's election manifesto was that they would undertake a complete review of its activities. There was nothing in their

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manifesto about the Bill which we discussed yesterday which affects BNOC and Britoil. There was nothing in that manifesto about the development of private gas suppliers, nothing about the proposal to sell off the Gas Corporation's showrooms, nothing about preventing the Gas Corporation from having any participation at all in the sale of gas appliances. The Government did not set out their full intentions. I believe that there would have been public concern if they had fully spelled out not only the points I have mentioned but other items which were not in the manifesto but to which I shall refer. There was nothing in the manifesto about their general doctrinaire attitude: to destroy as much as possible of public ownership.
But what did the manifesto say about those concerns which the Conservative Party, if they formed a Government, did not propose to deal with? We read on page 15:
"We want to see those industries that remain nationalised running more successfully and we will therefore interfere less with their management and set them a clearer financial discipline in which to work".
Let us see exactly how that declaration has been borne out. There was nothing in the manifesto about Cable and Wireless. We know what happened there. There was nothing in the manifesto about British Airways. That Act has already been passed. However, the Government would find certain difficulties over carrying out the sale of shares in British Airways. There was nothing in the manifesto about the Government's proposals for interfering—and I deliberately use the word "interfering"—with telecommunications, whereby private interests will be allowed to use the telecommunications network. And there are fears of even further development. There was nothing in the manifesto about the possibility of private interests creaming off some of the best parts of the Post Office in some of the big conurbations, thereby imperilling the national network of the Post Office. There was nothing about British subsidiaries. I agree so much with the noble Lord, Lord Taylor of Gryfe, in what he said about the compulsory sale of British Rail properties.
These are instances, time and time again, of what the Government have attempted to do or have done. They have done it for immediate cash receipts. This will imperil future possible assets which will appreciate, as property assets will appreciate—a point which we made when the Transport Bill was being discussed in this House in 1981, but to which the Government paid no attention. Sealink has not been disposed of, although the Government have powers to do so. I would remind the Minister of the promise which I think he made to me, that Sealink will be disposed of only as one complete unit: shipping and harbours combined. I believe they will have difficulty in carrying out that promise. There was nothing in the manifesto about the possible sale of the British Transport Docks Board. If that sale is carried out, it will destroy the possibility of a national ports authority, which we regard as vitally necessary. That is another reason why we deplore the abolition of the National Ports Council. All these are instances of what the Government have done, most of them outside their own manifesto.
I ask a simple question of those who know more
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about financial matters than do I: what will happen if all these interests are floated at the same time, or within a few months of each other? Surely the position, if one does not like the words "asset stripping", will be one of giving people very valuable things on the cheap. No regard has been paid in what has been done to the effect on the national networks: the bus service, the NBC, Telecom, gas. I would remind noble Lords that the Government even went so far in the Local Government Act 1981 as to instruct the new town corporations to dispose of some of their properties in order to bring back to the Treasury certain finance. Again this was a short-sighted attitude of disposing of properties which will be valuable public assets in the future.
Of course we all want efficiency. When one listens to certain Ministers one imagines that there is no efficiency at all in the publicly owned industries. However, quite a number of tributes are paid not only to the efficiency but to the expertise and to the research carried on in the nationalised industries. We want there to be a development towards more efficiency, but that does not mean mutilation to secure it.
Reference has also been made to competition. If one took this argument to its logical conclusion, that competition is the solution to every problem, we should be in a devil of a mess. Then we might start introducing it into such bodies as the police force. Heaven help us if private security companies are involved! As has been mentioned, British Rail are having to compete with other transport interests. So far as energy is concerned, we have gas, oil, coal—all competing for custom. Nobody has ever suggested that there should be any interference with the National Coal Board. I wonder why? I wonder why there has been no proposal from the Conservative ranks for action to be taken regarding the National Coal Board?
We had a long debate concerning reliance upon market forces. That has been carried further by what the Government are doing in their so-called privatisation policies. What are the reasons? It is partly because of the Government's anti-public ownership attitude. It is also because of Treasury pressure to obtain immediate funds to reduce the PSBR—a short-sighted policy because, as other noble Lords have mentioned, it means immediate cash but the loss of possible long-term benefits. Another factor is that the Government wish to reduce the number of civil servants, irrespective of how that reduction is to be achieved.
Most of the Acts in which the Government have dealt with public ownership give considerable powers to the various Secretaries of State. Minister after Minister comes to the Dispatch Box and in all sincerity says that Ministers will act responsibly, will act reasonably. However, as I have said on previous occasions, it is the words and the powers which are given in the Act which matter. The fact is that many important matters will be determined by negative instrument and not by affirmative discussion. The Government even went further. Was it really necessary to deal with the Forestry Commission and sell off certain forestry lands? Everybody agrees that the Forestry Commission has been a most successful undertaking.
I have been trying to ascertain what exactly will be

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the financial position in respect of the Government's decision to give design work valued at £2,000 million from the road construction units to some 15 consultants. It is very difficult to find whether at the end of the day the Government will not find that they are paying more. This is a case where I believe the decision was taken solely to reduce the number of civil servants.
Why have the Government decided to interfere with Ordnance Survey, which has served this country so well? There is no reason at all why we should mess about with Ordnance Survey.
Lord Davies of Leek: They are the best in the world, my Lords.
Lord Underhill: I agree, my Lords. Also, we shall shortly be debating in this House another Transport Bill. I will not weary your Lordships with all my points but here are just two of them. First, the testing of heavy goods vehicles and passenger service vehicles will be taken out of the Ministry sector and transferred to the private sector, when every single body among the operators, both private and public, opposes this proposal. Secondly, we find that the Government, having made the position of Express Coach Services successful under their 1980 Act, are now going to propose that the express coach services of the National Bus Company shall be taken away, again lessening the ability of the National Bus Company to carry out its other services.
I would like to take up (but time does not allow) what the noble Lord, Lord Boyd-Carpenter, said about Clause 4. I have the actual terms of Clause 4 in my pocket, because it is on a membership card of mine. It is often misinterpreted by many people. What my friend Hugh Gaitskell was endeavouring to do was not abolish Clause 4 but to set it out with an explanatory note in a more modern context.
Lord Boyd-Carpenter: Very funny, my Lords.
Lord Underhill: Well, we can have a debate on that at another time—but at the moment I am dealing with the Government's policies, although I thought I should mention that point in the light of what was said by the noble Lord, Lord Boyd-Carpenter.
Lord Boyd-Carpenter: I should leave it, if I were you.
Lord Underhill: Other countries do this much better than we do, particularly countries in the EEC. They seem to be proud of their public industries. Why can we not adopt the same attitude? I will ask a question. Why is it that no one has suggested that we should interfere in the Bank of England, which is a publicly-owned institution? Why is it that most of the EEC countries have the bulk of their banking either in state, municipal or co-operative hands? We have only 2½ per cent. of our banking in public hands in any form.
I believe we have to get away from the Government's attitude, which is dogmatic. Somehow, we have to lift the morale of the public industries. A few months ago we had a debate, again led by my noble friend Lord Beswick, on the general attitude of Govern
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ment Ministers to the publicy-owned industries, when he detailed numerous vicious attacks and unfair comments. We must help to lift the morale in public industries. As has been mentioned, there will be changes in the chairmanship of some nationalised industries. I hope that the Government will appoint people who believe in the principle of the public industry they are going to be asked to run, and that they will not be appointed with a view to forming subsidiaries with the intention of disposing of them outside the public interest. I believe that would be fatal.
We must ensure that the publicy-owned industries are not creamed of their more remunerative parts and left with the less remunerative sections which must be carried on in our various networks. We must also develop through the trade unions greater worker involvement in the publicly-owned industries. I welcome the debate we are to have on the financing of public industries, because I believe it is important that a higher proportion of investment in some of our publicly-owned industries should be gathered from within the industry if there is no possibility of gaining investment from the market. We ought to distinguish between investment for capital purposes and that for revenue purposes.
So far as I am concerned, the Labour Party also stands strongly for a mixed economy. We have recognised that time and time again. First of all, as democrats we believe in consumer choice, and one cannot have consumer choice unless one has a mixed economy. We have challenged the Government time and time again, saying that they give lip-service to a mixed economy and then within a few hours bring forward another proposal to mutilate or damage another public industry. We ought to challenge the Government over what are their criteria and where they stop. Most of the Government's actions and statements seem to imply that all public investment, no matter whether commercially or socially desirable, is an undesirable thing. We challenge that view, and that was the main point of the debate led by my noble friend Lord Beswick in what I consider to be a most helpful and constructive speech.
5.16 p.m.
Lord Wynne-Jones: My Lords, I am very grateful to my noble friend Lord Beswick for having introduced this important debate, because it gives us an opportunity to discuss what we frequently try to sweep under the carpet—that is, the whole question of how we are concerned with the economy and indeed the whole social character of our country. My noble friend Lord Beswick has called attention to the consequences of the Government's increasing policy of privatisation and the importance of concentrating on a positive policy to secure maximum efficiency within the public sector.
Since 1945 this country has steadily—with ups and downs, but on the whole steadily—pursued a policy of moving towards a more publicly controlled economy. Sometimes we have moved fast and sometimes we have moved slowly. But this has not been a matter which has been decided by one party or another. One party may have wished to go forward fast and the other party may have wished to go forward more

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slowly. As the noble Lord, Lord Boyd-Carpenter, admitted in his own speech, he himself was prepared to move in the direction of public ownership.
Lord Boyd-Carpenter: My Lords, if the noble Lord, Lord Wynne-Jones, will allow me to say so, what I said in fact was the complete opposite. It was that I was not prepared to move further in the direction of private ownership.
Lord Wynne-Jones: My Lords, if the noble Lord, Lord Boyd-Carpenter, considers that to be the opposite, then I find his use of the English language somewhat strange. I would have said that he was saying exactly what I said, only slightly modifying the emphasis.
It is quite clear that no Government since 1945, until 1979, was prepared to put forward avowedly a complete reversal of policy. We are not dealing now with a state of affairs where a Government are trying to improve things or modify things—not at all. The Government today say that they are deliberately and avowedly moving back and reversing what has been done over a period of 35 years. Incidentally, we are going back to much before 35 years ago, because it was a Conservative Government, not a Labour Government, that produced central electricity generation in this country. Now we have a Conservative Government saying that they want to go back. Do not let noble Lords say they no do not intend to go back, because of course they do. Perhaps I may quote what was said in another place in a debate the other day:
"I believe on principle that where competitive private enterprise can operate profitably, the State should stay out of these operations. Only where social conditions necessitate the maintenance of a public service should State-owned corporations exist".
Is that what is intended by the present Government? because that is what one of their supporters is saying. Is that what they mean? Do they mean that they are going to disintegrate the whole of our nationalised industry structure? And where do they stop? It is no good just nodding the head, because it is perfectly clear from the statements made in debates in the other place this year, that it is the policy of the present Government to destroy everything that is publicly owned. It is their deliberate intention to pull the whole structure down.
One does not have to believe that a nationalised industry is perfect. The noble Lord, Lord Beswick, has very clearly indicated that; the noble Lord, Lord Taylor of Gryfe, also indicated it. Of course, it is too much to ask the present Government to be rational; but if they could be, if they for one moment could concentrate their minds instead of waving their swords and flags, they might be able to look at the state of our nationalised industry and try and see where they could improve it. That is the reasonable thing to do. I think there is no one on these Benches who would oppose such an investigation into how to run nationalised industries; we would welcome that. But, my Lords, that is not the proposal that comes forward from the Government; not at all. On the contrary, every proposal made is one of disintegration and pulling down what has been carefully, systematically and often very successfully, built up.
My Lords, I speak as one who believes in a socialist
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society. I believe completely in a socialist society; oh, but I do, it is no good the noble Lord waving his head. I do believe in a socialist society.
Lord Boyd-Carpenter: If the noble Lord misunderstood my gesture, I was expressing sympathy.
Lord Wynne-Jones: Well, a nod is as good as a wink to a blind horse. My Lords, I am a socialist because I believe that we can only get liberty, we can only get the full development of the personality, under socialism. I am convinced of that, and it is why I am a socialist. But that does not mean that I want to nationalise everything. That is not what is meant by socialism.
I spent a short time, but a very profitable time, many years ago in the Soviet Union. I was in Leningrad, Moscow, Tiflis, and I saw quite a lot. What interested me very much was that the big things they did remarkably well; the little things they did very badly. For example—others will confirm this—almost everywhere you go the plumbing is quite deplorable, but the construction is good. When it comes to the minor things, things are bad. The reason for that is that they have concentrated on the major things; in my opinion they made a mistake. But who am I to judge how another country runs its affairs? I think they made a mistake in not allowing the private individual to run the very small businesses, like shoe repairing, plumbing and things of that sort, because in the end the minor businesses, in my opinion, are not properly controlled from the centre; they are more easily undertaken on the local and small scale.
But that does not apply to our big nationalised industries. Our nationalised industries should not be broken down, should not be sold off; and that is not in the interests of any individual but in the interests of the whole community. It is madness to do it.
My Lords, this Government are so obsessed with the idea of what they term "privatisation" that they want to privatise education, they want to privatise medicine, they want to privatise every type of industry in the country. It would not surprise me if they got the bright idea to privatise the army and navy next. They will do anything to pursue their dogma because they are obsessed with this idea of privatisation. They do not worry about the consequences for you and for me. They will destroy not only our nationalised industries, they will destroy our education service, they will destroy our National Health Service, they will destroy everything which over the past 35 years has been built up as what we call the welfare state. All that will be privatised. "Oh, yes", they say, "we would not dream of doing such a thing. Did not we say that we would never touch it?" But they have already started touching it; they have already got to work on it, and it is happening under our very eyes at the present time.
May I make one or two further observations. It was said by a well-known writer, writing on political matters before the last war:
"Liberty in the capitalist epoch has been conceived of almost exclusively as the absence of restraints. It is seldom thought of as the presence of opportunity".
It is the presence of opportunity which matters to people. That is the real freedom that we all want; it is the freedom to learn, the freedom to study, the freedom to think and to do the things which we want to do;

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not the liberty to boss people about and to make vast profits on the Stock Exchange. That is not liberty in the sense that a socialist thinks of liberty. He thinks of it in terms of personal liberty; the liberty of the individual to grow up, to have his children grow up the way he wants them to.
Sometimes, in talking about these things, I find people saying, "Oh, well, of course in other countries where you do not have private enterprise dominating the whole of your production then you do not get the inventiveness, you do not get the innovation". Inventiveness and innovation occur everywhere. They are not the particular prerogative of any certain country or society. But at least one can say that under a socialist society there would be no inhibition on it, whereas there can be elsewhere. Of course, it is true that even when you get this inhibition, even when you get these restraints, the human spirit can be big enough to break out of it.
I was thinking earlier today as to what I might be saying, and I suddenly recollected that in 1980 the Noble Prize for Peace was awarded to Senor Perez Esquivel. Is it not fascinating to think that an Argentinian less than two years ago received the Nobel Prize for Peace?—and he received it because of the work which he did throughout South America in organising a campaign for human rights. He was imprisoned by the Argentinian Government in 1977. They released him on condition that he was virtually unable to speak to anyone else and in particular he, as a Catholic, is not allowed to approach the Pope. However, that is an example of the triumph of the human spirit under the most shockingly repressive conditions. I think that one should not link genius, innovation and courage to any particular organisation. I would not for one moment claim that capitalism has not produced its heroes and its great people. But I would say that the time is now for us to march onwards.
Viscount Massereene and Ferrard: My Lords, before the noble Lord sits down I should like to ask a question. As he thinks that the socialist economies of the world are so efficient, why is it that the private economies of the world have to feed the socialist world? If we take Russia as an example, we find that before the Bolshevik revolution she had a private economy and she was the greatest exporter of grain in the world.
Lord Sandys: Order, order!
Viscount Massereene and Ferrard: My Lords, today she is the greatest importer. That is the point.
5.31 p.m.
Lord Oram: My Lords, when I read the Motion which has now been moved by my noble friend Lord Beswick, I was prompted, as apparently my noble friend Lord Underhill was prompted, to turn to the Conservative Manifesto for the 1979 election. Unlike my noble friend Lord Underhill, who apparently keeps it in his briefcase, I have been wearing it next to my heart for the past few days. In addition, I have another document which I am wearing even closer to my heart for good reason and that is the Labour
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election manifesto for the 1945 election. I should like, for a few moments, to contrast those two documents.
The Labour manifesto of 1945—and I hope that noble Lords will take an opportunity of re-reading it—clearly put before the electorate what it was proposing to do about the nationalisation of basic industries. The policy was clearly stated about the nationalisation of coal, of all forms of national transport, of gas, of electricity and steel. I recall—because I was a candidate in that election—that a great deal of the campaigning in that election concerned putting before the people of this country very clearly the case why the nation should take into its possession the basic industries upon which the economic health of the country depended. My party having overwhelmingly won the election, the Attlee Government proceeded to act in accordance with one of the clearest mandates that any Government have received from any electorate. In other words, we told the people what we were proposing to do. We got their approval and we acted accordingly.
What a contrast I would suggest there is with the 1979 manifesto of the Conservative Party. My noble friend Lord Underhill enables me to make a shorter speech than I might otherwise have done because he has spelt out systematically the fact that in that manifesto there was no reference to a large part of the privatisation measures which the Government are now undertaking. He did so in great detail and I will just summarise the situation.
There was no reference to British Airways; there was no reference to transport; there was no reference to Cable and Wireless; and there was no reference to the privatisation of gas or of oil. There was no suggestion that the Conservative Government had received a clear mandate in the last election for doing what they are now doing. But, of course, as soon as they were in power, they set about selling off all the profitable sections of the nationalised industries. The list grows longer month by month of profitable parts of nationalised industries being sold off to private owners. I believe that soon we will be in a situation where all that will remain in the public sector will be those industries which are recognised on all sides, except by, perhaps, the noble Lord, Lord Tanlaw, as being essential to the economy, but which from their very nature, for a variety of reasons, cannot be run at a profit. Moreover, because they cannot be run at a profit by private enterprise, it is necessary that the state should operate them because they are essential for the wellbeing of the community.
I accept that that is one of the very good criteria for public ownership. It was illustrated—as I think my noble friend Lord Beswick and someone else pointed out—a few years ago, when a Conservative Government nationalised Rolls-Royce. It was inconceivable—and all were agreed—that Rolls-Royce should be allowed to disappear; but it was beyond the capacity of private enterprise to run it at a profit. Therefore, it had to be taken over by the state.
In a recent debate before the Easter Recess we heard the noble Lord, Lord Marsh, with his considerable experience of public transport, explaining that in no major city in the world could private enterprise run the transport system at a profit. He was rebutting an absurd suggestion from a noble Lord opposite in that

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same debate that even parts of London Transport should he sold off to private enterprise, which struck me as an illustration of the extremes to which ideological fervour for privatisation can lead.
Lord Bellwin: My Lords, will the noble Lord give way? In fact, the noble Lord, Lord Marsh, was rebutting that only in an observation which he made when he said that he wondered who would in fact want to buy it.
Lord Oram: My Lords, it was in the context of a statement by the noble Lord, Lord Marsh, that it was a public responsibility to run transport in major cities. That was quite clear and I am sure that the noble Lord, if he recalls the speech in more detail, will agree.
Early in the debate the noble Lord, Lord Tanlaw, said, in turning to these Benches, that he would like to hear the case for nationalisation. He was present, I think, to hear the speech by his noble friend, or his noble colleague in the alliance, Lord Taylor of Gryfe, who I thought put forward a magnificent justification for a major sector of public industry.
Lord Tanlaw: My Lords, perhaps I may interrupt the noble Lord because I think that he was referring to me. The noble Lord also said that there was a great case against renationalisation which, I think, was the main tenor of his speech.
Lord Oram: My Lords, a major part of the noble Lord's speech was a justification for the existing nationalised sector. I suggest to the noble Lord, Lord Tanlaw, that if he wants to read the case for nationalised industry, he would do well to read Lord Taylor's speech tomorrow and perhaps sort out between the two allied parties just where they stand in these matters.
I would add only one or two general principles to the case that we heard from a very experienced public transport man, the noble Lord, Lord Taylor. I believe that there is an overwhelming case for public ownership of the extractive industries—the mining industries—because the public have a vital interest in the efficient exploitation of national material resources. It is also important to have a balance between the interests of one generation and those of another, and I believe that that can be achieved only by a publicly responsible body. Here I echo the words of the noble Lord, Lord Boyd-Carpenter, who agreed that in common services—such as power, transport and water—there is a case for nationalisation. I would suggest that this is because the product is largely uniform, the demand is pretty well universal and the optimum technical area of operation is usually a very large one. I think that all these considerations build into the case, which I see that the noble Lord accepts, for that kind of industry being within the public sector.
I also believe that where an industry requires enormous sums of investment—it may well be beyond the power of private investors to assemble the requisite amount—there is a strong case for the public to own those industries, because it is only public institutions which can guarantee their viability. Where the prices of a product of an industry—this applies to coal, transport, steel and others—enter very much into the general cost of living—and pricing policy of those
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products is important from the point of view of the general cost of living—there, too, I believe that the industries themselves are an essential element which the Government of the day alone should be enabled to exercise.
Broadly speaking, those were the criteria upon which the nationalisation programme of the 1945 Labour Government was based. It is those principles which in my view, are now being quite recklessly abandoned—doing damage to our national assets to such a degree that it will be extremely costly and extremely difficult for a future Government to repair the damage that is being done.
In terms of the reorganisation of industry, I believe that it will be the verdict of history that the 1945 Attlee Government was the most constructive Government that we have known, certainly since the war. Equally, it will be the verdict of history that the Thatcher Government will have been the most destructive Government that we have known. Yet there is a sense in which the Attlee Government's programme of nationalisation contained the seeds of its own destruction. I have said before in this House—in fact, quite recently—that I have some severe criticisms of the methods—not the principle and not the basic policy of nationalisation —which the Attlee Government undertook, which I believe were open to criticism. The noble Lord, Lord Skelmersdale —who I see in his place—yesterday did me the honour of quoting a remark somewhat similar to those that I am about to make. I am glad that he pays such close attention to my speeches; I am sure that it does us both good.
In my view, there have been two causes of concern about the way nationalised industry has progressed over the last 30 years, and they were, indeed, spelt out by my noble friend Lord Beswick. These are in relation to worker participation and in relation to consumer control or influence over their operations. Whereas the Government ensured that the ownership of these industries was transferred to the public—and it was done in a straightforward programme of nationalisation—not nearly sufficient was done in the enactments or has since been done in administration to make the public conscious of their new role as a proprietor of industry. Neither the workers nor the consumers have been encouraged to participate in the decision-making—in the affairs of the running of the industries—to the extent which I think was desirable.
In saying these things I cannot be accused of being wise after the event. Rather, if I am to be accused of any sins, it is that I am saying, "I told you so"; because I can go back 30 years to a pamphlet which I wrote and which I entitled, The People's Industry, which put forward the criticisms—particularly in terms of worker participation and consumer participation—of what were called the Morrisonian pattern. I believe that that method made insufficient attempt to democratise industry. I believe that a great problem which we now face is how to democratise industry, both nationalised and private. It seems to me that within the nationalised industries there is still a confrontation between the bosses and the workers. Insufficient of an integration of interests has come about as a result of what we have done.
In other words, I am saying that although the nationalisation programme was one which I whole

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heartedly supported, we missed an opportunity at that time of introducing industrial democracy, which has eluded us ever since. I should like to take a specific example, reverting to my title, The People's Industry. If British Airways had been the people's airline—as it could and should have been—no doubt Mr. Freddy Laker would have been deprived of the phoniest of his publicity stunts. It is that state industry which should be the people's industry and the people should be conscious of it as belonging to them, and they should be conscious of being able to influence the running of its affairs.
I conclude with one example of the privatisation which has been going on, which is significantly different. I refer to the case of the National Freight Corporation. That enterprise was sold off, not as the other sectors of industry have been to a new alien set of owners, but was sold off to the existing management and workers. Let me make it clear that I am very far from accepting that there was a case for hiving off the National Freight Corporation from the public sector. But I am of the view that if it was to be hived off, then the method that was adopted in that case was far preferable to the sale of shares on the Stock Market, which was the method adopted in the privatisation of, for instance, Amersham International or Cable and Wireless. At least the National Freight Corporation is now in the hands of its employees. It is now socially owned. It is now in common ownership.
I would love to enter the debate between my noble friend Lord Underhill and the noble Lord, Lord Boyd-Carpenter, as to the content of Clause 4 of the Labour Party. It is different from what the noble Lord, Lord Boyd-Carpenter, seems to think it is. It is common ownership which is quoted, and there are many forms of common ownership. One of the forms of common ownership which hopefully will succeed is the method that the National Freight Corporation is now adopting. It is too soon to say whether it will be successful; it is too soon to say whether it will develop into a good example of a worker-controlled institution. But I believe it is possible, and I certainly wish them well.
I could offer—not this evening but on other occasions—detailed suggestions which might help its democracy, because I believe there is a danger that it can develop into a new kind of élite; an élite of the management. I hope it will not. I shall be watching it, as I hope others will, to see whether it progresses along acceptable lines. If it does succeed, then I believe it could be a good prototype for other hivings-off. Not hivings-off to private ownership but hivings-off to other forms of social ownership. Co-operatives have been mentioned. As noble Lords may know, that is a cause particularly close to my heart. For example, there is no reason why British Rail Hotels should not be still attached to the parent body, but in a different form of ownership and operation which gives a great deal of control to those who work in the body.
I believe that all these things—and that is an example—need a great deal of further thought by all parties. When I was until recently chairman of the Co-operative Development Agency encouraging the development of co-operatives, I found support for
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those ideas in all parties in the House. I think that we can approach not the basic industries but peripheral parts of the industries from this point of view. I would hope that by some such means—and particularly by the means which my noble friend Lord Beswick spelt out so clearly involving consumers and workers in the control and operations of the nationalised industries; all those things are worthy of great study—we can try to get this public sector out of this silly game of football that we have been playing with it, particular if we look at the history of the steel industry—sometimes in, sometimes out of the public sector. We must bring that to an end.
Surely the time has come for us to recognise two truths. The one obviously the Government are far from accepting but they may learn, and that is that there is the positive need for a very large public sector of industry as a basis upon which success can be achieved in other parts of industry. Secondly, as I have mentioned in one or two connections, there is the need to find ways and means of bringing the workers and consumers into the control of the undertakings in which they work, and we should not rely, so far as the public sector is concerned, so exclusively as we have done in the past on monolithic state organisations. We should diversify. We should make use of the great variety of methods of public and social ownership which are available to us. In my judgment, they have been sadly neglected ever since the Second World War.
5.55 p.m.
Lord Boardman: My Lords, like other noble Lords who have taken part in this debate, I am grateful to the noble Lord, Lord Beswick, for enabling us to discuss and debate this issue which is so critical to such a large part of our economy. May I follow the noble Lord, Lord Oram, on two points. He referred to the Government policies on privatisation as being disastrous, with possibly the one exception of the National Freight Corporation. I waited with interest for him to give perhaps just one example, or a few figures, to show any case where the privatisation that has so far taken place had been adverse, or could come in any way under the description of disastrous. In fact, if he looked at the record—I am sure that my noble friend replying will illustrate this—he will see that there have been great successes in the advances that have already been made.
Lord Oram: My Lords, would the noble Lord allow me? I made the point that the sectors of industry which are being sold off are those which are clearly profitable. Clearly, therefore, they are successful either nationalised or privately owned; but it is reducing the nationalised sector to a position of great difficulty.
Lord Boardman: My Lords, perhaps I may come on to the other part of it later in the remarks that I shall make. The noble Lord also, following the noble Lord, Lord Underhill, made some play about the Conservative manifesto not spelling out the various parts of privatisation that we have achieved. Let me say that I believe that we were much too modest. In electoral terms there certainly can be no advantage in nationalisation. Indeed, it defeats me why the Labour Party have adhered to that El Dorado, as they have looked upon it

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in many cases, as they have. I would endorse what my noble friend Lord Boyd-Carpenter said in the absence, then, of the noble Baroness, Lady Gaitskell, when my noble friend paid a very fitting tribute to the work that was done and the brave and courageous way in which the late Hugh Gaitskell fought against Clause 4. I was glad to hear my noble friend put it so eloquently.
Nationalisation is shown by the opinion polls to be of decreasing popularity. It is disliked by all the consumers. It is hated by taxpayers who pick up the bill. Those who work in the nationalised industries are convinced that they are having a raw deal. I feel that we were modest in not claiming in our manifesto to do all the things which the Government are now so well doing. Of course, many of the criticisms made of the nationalised industries I believe to be unfair. There is a wide criticism of anyone who works in a nationalised industry. I believe that this is quite unjustified. I had some experience as a Minister responsible for many of the nationalised industries, and I have found that their qualities, skills, dedication and so on are in general no less than in the private sector. But what is different is the environment within which they work, the system. It is that which encourages an attitude which contrasts their performance with that in the private sector.
I make no apology for wishing to see the extension of privatisation going as far and as fast as it reasonably can. I believe that the consumer resents the lack of choice that he gets from so much of the public sector supply industries, and resents the escalation of prices, when prices in the public sector have on average risen at twice the rate of those in the private sector. I do not necessarily blame the Government of the day, nor do I blame those industries. I am sorry—perhaps I should say that I do not blame the industries of the day for some of that price escalation. Much of it is a result of Government intervention distorting the policies. The Chancellor of the Exchequer said that prices were increased when the Government wanted money and were pegged or subsidised when they wanted votes, and the nationalised industries have had to bear the burden of the criticisms that have come on such occasions.
The problem is not so much one of ownership as of monopoly. Because of the power of a public monopoly, the costings—I am speaking particularly in the pricing field—are done the reverse way; the industry thinks of the profit, or reduced loss, it aims to achieve, and then works back to find out what price it must charge the consumer to endeavour to achieve that result, and insofar as it fails to do so, that may be a measure of its inefficiency. Either way, it has no fear of competition, no fear of the shop next door. There is within the public monopoly no incentive to cut costs, or very little such incentive. There is very little inducement to invest. Indeed, there is a positive resistance often to investment in that it may be claimed to reduce manning levels and cause redundancies.
Successive Governments have attempted to monitor the performance of public sector industries and they have had mixed successes. The present Government are making further advances along that path with their monopolies and mergers inquiries and with the extra surveillance that will now come from the Public Accounts Committee. I endorse what my noble friend Lord Boyd-Carpenter said about that com-
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mittee, of which I had the privilege of being a member for a number of years. I found that the way in which it analysed and investigated the cases which came before it—the few, of course, which could be analysed in depth—was an effective discipline. Perhaps the main lack is that following the report of the Public Accounts Committee, more is not done to show that the faults disclosed have been put right and that those at fault have suffered the penalties they would suffer in other sectors of society.
Despite attempts at various ways to monitor performance, no one has yet found an answer to making the public sector effective and efficient in a way that it competes with market forces. There has been reference to ministerial interference, and it is interesting to consider to what extent Ministers should get involved in the management of a business, or indeed to what extent Parliament should be involved in interfering with the management of nationalised industries. There is a strange contrast between, say, the National Health Service, about which the Secretary of State is questioned almost daily about minute details—for example, why hospital beds were not provided with certain types of blankets, or whatever the question might be—yet with regard to the nationalised industries, the Minister's power to interfere and his responsibility to answer are extremely limited. A Minister's only really effective way is to issue a direction, unless he is able to achieve his end by persuasion.
It is interesting, too, to consider what changes, if any, should be made to achieve the right balance. Inevitably there tends to be considerable duplication; the department concerned will be building up its own models while the industry is building up its models. A great deal of time is spent by both parties doing that, after which they do not agree and then they all get together and do a third set of models to try to find which is the right one and what is the right line to pursue. When I had some ministerial responsibility for the steel industry, my first move was to say to the late Lord Melchett, who was then chairman of the British Steel Corporation, "You are building models and have a number of staff doing that and trying to predict what will happen. My department is doing the same. They never agree and a great deal of time is spent trying to reconcile them. I am prepared to accept your models, your view, if you will honestly tell me, as I know you will, what your predictions and so on are, and I will call off those who are harassing and haranguing you and making your task more difficult". We agreed that we would work on that basis and we moved quite a long way in that direction.
As for natural monopolies—gas and electricity distribution, the railways, the postal services and the like—there are particular problems in that it is impossible to create effective competition, although more could be, and indeed is being, done. The Government, by allowing telephone installations in the home—it was previously a nonsense that the private sector should have been excluded from that activity—and by arranging delivery services which will compete in some areas with the postal services are moves in the right direction, but a lot more could and should be done.
For example, could not British Rail consider Pullman cars? The noble Lord, Lord Tanlaw, referred yesterday to British Rail using part of their track for private

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purposes. There is a great deal of scope for the development of such activities, particularly for some of those industries which must, in the main, be natural monopolies. And even with a natural monopoly we are entitled to query whether a publicly-owned monopoly is necessarily more efficient than a privately-owned but publicly regulated monopoly, as works effectively, for example, in the United States, though I recognise of course that there are considerable problems to achieving such a fairly dramatic change.
Nevertheless, there can be no excuse for allowing the large monopolies to continue to hold what I call their peripheral activities, those things which are not essential to their main line business. The noble Lord, Lord Taylor, referred to British Rail Properties resisting the sale of a number of their properties. I wonder what yield those properties were returning. I imagine it was a fraction of the yield on the cost of the money they were borrowing.
Lord Taylor of Gryfe: The properties of British Rail are not based on borrowed money, my Lords. BR do not borrow money in the market to finance their property portfolio; they are in possession of those properties and sites. It is a question of the future development of those sites as a source of revenue for keeping the railways going.
Lord Boardman: Yes, my Lords, and I understood the point the noble Lord made, but he referred to the revenue being generated by those properties being available for the further exploitation of the railway system in the years to come. I imagine that the properties which have been realised had a yield of 3 to 6 per cent., while British Rail were borrowing at a rate greatly in excess of that. Those are sums which are leading companies in the private sector, which are having to borrow money at high rates of interest, to look through their portfolios to see which of their low-yielding properties and assets should be divested. I call that a sensible course, one which it would be right for British Rail to follow.
Why should the National Coal Board, for example, have large sums of money invested in builders' merchants? Is that not right outside their main line activity and should not those funds be deployed in their main business Such peripheral activities are often starved of cash because the funds are required for, say, a new mine or the like, with the result that the peripheral activities tend to get run down, yet they still hang on to them.
I have some personal experience of that kind of situation in that nine years ago I persuaded the National Coal Board to sell its brickworks. It was not easy to persuade the board, and I had to see the unions as well as the coal board in order to persuade them that it was better that the proceeds should go into developing coal mines rather than be left in building bricks, which had nothing to do with mining coal. The brickworks had been starved of money. Nine years later a company of which I am chairman acquired a company which had bought a number of the brickworks. The brickworks have had vast sums of capital invested in them, and are probably the most efficient in Europe. They are making a contribution to the national economy that could never have been expected of them had they
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remained as part of the National Coal Board.
On these occasions the objection put forward by the industries concerned, influenced very much—and understandably so—by the unions, is that any sale-off will inevitably create redundancies. If sales-off must inevitably create redundancies, that is a complete admission that there has been overmanning. In the private sector the cash pressures, in particular those in the past couple of years, have forced companies to look through their portfolios to see what they had which was peripheral to their main line of business, and then to realise those peripheral undertakings. Indeed, many of these transactions have been achieved with the help of management buy outs and the like, and I congratulate the Government on making that possible. I hope that my noble friend will be able to assure me that the public sector are being required to look through their portfolios just as keenly to see whether they contain anything which can well be returned to the private sector so as to provide cash for the expansion of the main line business. I think that my noble friend and other noble Lords will be surprised to find the extent of the bits and pieces lying around in some of these big industries.
With regard to the noble Lord's second point, about securing maximum efficiency from the businesses in the public sector, as I have already said, there is clearly a limit to what can be done. Here businesses fall into two categories. There are those which are subject to market forces. Examples are the British Steel Corporation and British Leyland, and I congratulate in particular the management of the British Steel Corporation and Mr. Ian MacGregor on the progress that has been made. A noble Lord opposite referred to morale being low, but I believe that since nationalisation morale in the British Steel Corporation has seldom been higher than it is today. This is a matter on which to offer considerable congratulations to the management.
Similar remarks are applicable to Sir Michael Edwardes and to British Leyland, but I am sure that both chairmen and both their boards would accept that they have a very long way to go before they can produce a return on the capital employed comparable with that which would be expected by the Treasury and which would have to be achieved in the private sector. It was my noble friend Lord Boyd-Carpenter who said that he doubted whether either business would be helped by its workforce knowing that there was no possibility of its going bankrupt, and that I believe is a handicap under which the managements have to exist.
In regard to those elements of the public sector that have a natural monopoly and which are not subject to market forces, I find it difficult, indeed impossible, to give the complete answer, but I would suggest that there are various things that must be done. First, as I have said, I believe it necessary to have a sale-off of their peripheral activities, to clear out those activities and let others manage them, so that the industries can get on with their main-line business. Secondly, I suggest that major use should be made of the increased powers of the Monopolies and Mergers Commission, and I am sure that the Public Accounts Committee will also use its powers to look at elements within these industries.

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Further, we should encourage private competition so far as it is practicable, and the telephone system is one example to which I have already made reference. I believe, too, that every effort should be made to break up the big monopolies into smaller profit centres, smaller accountable units. While they would not be competing with one another, they would provide a very much better focus for management if they were broken up, instead of being grouped together in one vast organisation, with centralised accounts.
I suggest, too, that further use should be made of international comparisons, and these should be widely published. I accept that, whether we like it or not, we have a mixed economy, and to those noble Lords who, like myself, believe that public ownership is not helpful to our economic prosperity, I would say that we should do all that we can to reduce it in all possible areas. Those noble Lords opposite who believe that further nationalisation and public ownership is a good thing must be prepared to accept the electoral consequences of that view, because I do not believe that the public agree with them.
6.16 p.m.
Lord Molloy: My Lords, I want to follow in particular the last point made by the noble Lord, Lord Boardman, in which he exalted the present Government, this businessman's Government, for their many achievements. It slipped his mind to remind us that never in the post-war years have bankruptcies been so numerous as they have been since the present Tory Government took over. Never before has inflation been created by any Government whatsoever to the extreme extent that this Tory businessman's Government has inflicted on the British nation. Never since the time of the last depression have there been 3 million of our fellow countrymen on the dole until this Tory Government of businessmen and businesswomen took over. The noble Lord was also a little upset—
Viscount Massereene and Ferrard: My Lords, may I interrupt the noble Lord?
Lord Molloy: Yes, surely, anytime.
Viscount Massereene and Ferrard: My Lords, although there are today 3 million people unemployed, we are now proportionately employing more people than we were in the early 1950s, when there were 350,000 to 400,000 unemployed. The population has gone up considerably since then.
Lord Molloy: Well, my Lords, that is about the lamest excuse that I have ever heard in my life, and if this Chamber believes that, it will believe anything. The fact is that when people find themselves faced with an ugly, irrefragable truth, which is devastating, they jump up and make silly statements. I am very glad that the noble Lord, Lord Boardman, did not fall for that one. I could not entirely agree with the noble Lord when he rebuked my noble friend Lord Oram because he said—and I think that he was right in what he said—that the Conservative Party did not include in its manifesto proposals on what it would do with British public assets. I must say to my noble friend
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Lord Oram, do you really expect that from the Tories? In a society built on greed and avarice, which must go back to the 'thirties and to the time of the old-fashioned Tory Party, a society in which there will be a couple of million, or perhaps even more, unemployed, does one expect transparent honesty in any Tory Party manifesto? Let us take the manifesto of Mr. Edward Heath. He won the election on a single phrase: "We will cut prices at a stroke". I will give way to any Tory noble Lord opposite who will say that I am wrong in claiming that that was an untruth and that no prices were cut.
Lord Boardman: My Lords, perhaps the noble Lord will recall that that alleged quotation was not in the manifesto.
Lord Molloy: If it was not in the manifesto, where then was it? Why were they posted about? Why were the leaflets created? And who in the Tory Central Office at the time of that election distributed that quotation from the leader of their party? It seems that in the upper echelons of the Tory Party they do not even mind deceiving themselves; and as for the British nation, that is a bit of trivia that can be led up the garden path and deceived at any time.
What else has been remarkable about this debate is that everyone has at some time had something good to say about public ownership. Indeed, there were one or two noble Lords opposite who even claimed authorship for their party of certain forms of public ownership—and that, of course, is perfectly true. But one has to look at the difference as to why we on these Benches, as socialists, thought that public ownership was important. It was something new, like democracy. Democracy is something comparatively new. In the history of mankind it is the great dictators who have ruled, and ruled for centuries. It is the great landowners who carried on their vulgar, appalling and terrible way of life—like in the Soviet Union; like, indeed, in our own country.
How difficult it is to understand how, in the discussions on the 1832 Reform Act, which tried to get the then Tory Party to stop children of six years of age going into the iron ore factories and down the pits, there was an economic argument. "If", said Conservative spokesmen, "children have to wait until they are 10 years old before they can work in the pits and mines and in iron ore factories, look at the loss of labour. The economic facts will not allow it; there will he a terrible crash". In short, what they were saying in those days—and they have not changed much—was that the efforts of child labour were building the so-called British Empire, and if you did away with child labour the whole economy would collapse. Of course, we know that for the load of rubbish it was.
Therefore, as mankind has progressed, so one can see what has happened in the United States, even. I ask noble Lords opposite to take note of this, and perhaps the noble Lord the Minister will reply to it. More than any other nation outside the Soviet bloc, the greatest piece of nationalisation and public ownership of land is in the United States of America. And when you have a look at some of the other Western European countries you see that the principle of public ownership has moved along there, in its role of bringing about

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public social advance, to a greater extent, even, than it has in our own country.
At this stage I want to say that I disagree, too, with those extremists who want to nationalise everything they can lay their hands on. Every barber's shop shall not have a wavy pole but a Union Jack running down from it! I do not belong to that ilk. On the other hand, I think there are equally dangerous people who think the other way—one or two of them seem to be members of the present Cabinet—and that is indicated by the selling off of British publicly-owned assets. The very mention of public ownership—municipal ownership, nationalisation—horrifies them. If they had their way, would they denationalise their own systems? As we went from street to street, would we pay a private toll? Would they de-nationalise the sewer systems of our great nation? It would cause a lot of dirt if they did! Are they going to de-publicly-own every little issue that is vital to the goodness of our society? Are they going to do away with the public health inspector? Are they going to do away with all these wicked controls that make sure that we have a proper, civilised society?
I do not agree with either of those two extremes, but it disturbs me that this Government just will not learn. There has been more unemployment since the war under this Tory Government; there have been more bankruptcies; more businessmen, as well as workers, have suffered in a most tragic way under this Government of businessmen than under any other Government since the war. That cannot be denied. There are many other things as well, because when you are talking about businessmen going bankrupt by the hundred every week, when you are talking about 3 million people being on the dole, it is not just the figures alone. It is the misery within the family, the agony within families—indeed, sometimes the quarrelling among families—that these appalling Tory policies create, as well as the economic damage.
My Lords, like my noble friend Lord Wynne-Jones I believe in some form of sensible co-operation, because I do not think that the communal need and private greed should be in constant war with each other, which was the system before. Otherwise, what will happen is what happened between the wars—and many of us experienced it. Of course there was deprivation; of course there was appalling housing; of course there were workhouses; of course there were no nationalised mines or nationalised railways—that terrible word! And nothing was done about it. As Parliament did then, Parliament now, under Toryism—and this is the grave danger—may well revert to that ancient, useless role of being a public mourner for private crimes.
Now I should like to turn to why some of us believe that some great industries have to be publicly-owned—not merely for the economic future, and not even for the economic improvement, which has been massive. If I had had time I should have liked to go into the great technological advances that there have been in the publicly-owned industries on a wide variety of subjects. We had the simple little matter under wicked public ownership of taking the filthy dust out of the air of the pits where men laboured and then, under those previous Tory Governments, where children laboured. That
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alone saved something like 5,000 or 6,000 lives in a few years. The death toll in the pits dropped dramatically because of some simple changes, because at this time nationalisation meant that there was a parliamentary responsibility. These are the things which we believe are terribly important, and we hope the House will understand.
There is another thing which I find totally and wholly repugnant under the theme which has been advanced by various Members on the other side today. It grieves me to think that in our modern, civilised society the prototype of the successful man is not the scientist, is not the inventor, is not the surgeon, is not the scholar, but is the financier and the gambler with massive social "pull". These are the people who have been elevated to among those who make a real contribution to society today. Therefore, I say that what nationalisation did for us—and this is why it was always in our thoughts—was to help us to escape from poverty. The public ownership of the mines, the public ownership of the railways and the public ownership of the steel industry all helped to make that massive contribution, so that millions of the citizens of our country could escape from poverty. In so doing, of course, we created full employment, which this Government have also destroyed. Just as surely as they have destroyed the publicly-owned industries, so unemployment will reach the high heavens in figures. This is something they ought to take very seriously.
One would think that they would have this in mind when in their manifesto they speak in the terms in which they do speak of what is publicly-owned. I will tell your Lordships what they did mention. They mentioned in their manifesto, or their spokesmen said, that our defences would be sure. If it were not so serious, that would be a joke. They also mentioned how they would concentrate on law and order. I do not know what has been happening in our great cities with frustrated youth. These are the things they should concentrate on and not on absurd doctrinaire issues of trying to get rid of the valuable parts of what is publicly owned. Can any noble Lord opposite tell me how many public drains there are in Manchester, Swansea or London that they are going to "flog off"? They will not do that; there is not much money in that. The whole art must be not even adherence to any political or religious principle, but rather how much money can we make for our friends?
I submit that the youngsters in our universities and our great cities are realising this and know well that many of them walked to school from a state-built council house into a state-owned school, taught by wicked state teachers; and when they were ill they had the wicked National Health Service to turn to. They realise these things when they become 16 or 17, and when they see the policies of this Government they realise that something must be done to change them. I hope they will have more sense than to use violence in the streets and will wait until they are 18 and use the power of their democratic vote to get rid of this appalling, reactionary and, above all, inefficient Government. That is the great crime of this Government: they are inefficient. For them to be worrying now about selling off priceless assets of the British economy is a total disgrace.
When they look at these great industries—and I hope

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that this is appreciated on the Benches opposite for I must say that it is appreciated by many efficient, big businessmen who depend on their great customers like the National Coal Board, like British Rail and the steel industry—they do not say, "We don't want orders from wicked nationalised industries". In the old-fashioned working-class phrase, they say to themselves, "Not on your nellie!" Because efficient business men know that many of the great publicly-owned industries are their source for building up their own industries. I believe that from this sort of thing flows something else. From the efficiency of these great industries there flows the wherewithal with which we have been able to construct our social furniture, and that is the link, the link between the socially owned industries and the social furniture of a decent society.
I want to say, in conclusion—and I am hoping that this will not horrify noble Lords opposite—that I am a believer in planning and logic, a great believer in both. I want to see planned co-operation between both sectors. I am not one of those people who believe that there is no room for the private sector. That is an absurdity. Equally, I am not in favour of inefficient publicly-owned industries. Much could be done to make them even more efficient. Let us not forget the hundreds of thousands of men and women who work in these industries and who are very proud to work in them.
Some of them are old enough to realise what a magnificent change there has been in at least their conditions of work. They are not satisfied with the speed of industrial democracy, but in the conditions under which they sell their labour there has been a great improvement; and, because of that improvement in the public sector, the private sector has been compelled to follow. That is a sort of competition that they are not too fond of.
If we can get a new feeling, a new spirit and not an arid, continuous debate; if we can get something along the lines of the contribution we had from my noble friend Lord Beswick, who led this debate in an admirable way, and the superb contribution of the noble Lord, Lord Boyd-Carpenter, I believe that that is the intelligent way to go forward. Why should we not have the best of all worlds—the best of the publicly-owned sector and the best of the private sector? In that way, we shall restore the health of the economy of our country. When we have done that we shall move forward to enrich the lives, not of any sector or group but of all the people of our land.
Viscount Barrington: My Lord, before the noble Lord sits down, will he agree that whether or not democracy is a new thing, it is a very old word? It is an older word than "Tory". It was coined in 500 BC. The word "Tory" was not in use in the year 1500 AD, and in those days it applied to certain Irish ragamuffins who wanted to defend their own rights against the landlords. Simply on this point of words, would the noble Lord agree that democracy is an old idea?
Lord Molloy: My Lords, democracy is an old idea, but it was not a democratic process. There is something else which I could tell your Lordships is ancient—phrases like, "Love your neighbour" and the parable of the Good Samaritan. We have lots of churches,
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lots of bishops, but we are not moving towards those principles, either. The nearest thing which has been put in the principles—
Several noble Lords: Order!
6.36 p.m.
Lord Davies of Leek: My Lords, we are indebted to my noble friend Lord Beswick for having raised this issue. I think it is obvious—and it was pointed out by my noble friend Lord Molloy—that we cannot go on for general election after general election leaving big or little businesses in a quandary, they not knowing what the next Government are going to do. If every five years massive changes are to be made in certain sections of British industry, it is conducive neither to efficiency nor, if one wants to use the word, to profit. Profit should not always be the yardstick—as I shall prove as I go along—on whether an industry should be under public ownership.
The word "nationalisation" seems to have an ugly connotation. It is not not very euphonistic. If people have a musical ear they may not like it; but "public ownership" will be a little softer on the ears of the more delicately attuned individuals. I am worried about the consequences of this policy over the years. The unreality (with respect to the Prime Minister) of her statement on the progress or non-progress of the economy is, to me, absolutely amazing. At least when Nero burned Rome and fiddled, he could read the music. I do not think that this lady can read the music.
While the right honourable lady attacks the nationalised industries and gathers up all the points, what do we see? She keeps telling us that every day—like M. Coué in my youth—things are getting better. In January 1980, when unemployment stood at 1·4 million, the right honourable lady's "New Year Message" was beautiful. It was:
"There were signs of a new spirit of co-operation, of a more realistic approach to our problems. Let this spirit rise high, for it will signify that our country is on the way forward to prosperity".
That was printed in the Conservative News of January 1980.
One year later, in January 1981, the numbers of unemployed by now had gone to 2·4 million. Nevertheless, again we had this wonderful magic formula while the old fiddle played the tune:
"We are absolutely on the right track and people know it and feel it".
That was the Financial Times on 2nd January. Nine months later—the gestation period—in October 1981 the number of unemployed were 2·9 million. At the Tory Conference the lady got a rousing welcome—bless her!
"We are winning through. We are within an ace of success."
That was a quote from The Times of 17th October 1981.
But by January 1982 everybody knew that unemployment would be above 3 million—but not this undaunted iron lady. A New Year message:
"This year 1982 has all the signs of being one of the great opportunities for Britain, if only we have the courage and determination to succeed."

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The Conservative News printed that in January 1982. While all this was going on we were confronted with a pessimistic outlook in industry, on the Stock Exchange and—more important—with the ordinary people. Nevertheless, the Chancellor of the Exchequer now came in helping and the right honourable Mr. Geoffrey Howe said that he hoped that the defeat of inflation would be his New Year message and that there were now clear signs of our success.
When the Government came into power inflation was 10·3 per cent. It is not even down to that level at the present moment. While that has been going on, public ownership increased because it was said that it would help industry. Valuable nationalised industries are being threatened on the grounds that private enterprise is better than public ownership. The noble Lord, Lord Beswick, yesterday in an excellent and constructive speech, as was that by the noble Lord, Lord Taylor of Gryfe (who is not in his scat at the present moment), pointed out that there was nothing wrong with some of these industries. They made a profit. In some cases they made vast profits. Nevertheless, they were hived off.
There are three ways that this Government have approached these industries. One, a successful public enterprise is sold either in part or in whole. Two, when a public industry is not doing well enough to be sold off entirely then any part of it that is profitable or ancillary to the enterprise is sold. For instance, British Rail are being compelled to sell all its cross-Channel ferries and hotels—anything that will help to make it a profit. Then it is said that they have to charge the present prices for train fares, otherwise a profit cannot be made. They forget entirely that the profitable parts have been hived off.
We have reached a new formula in economics—socialisation of the losses and privatisation of the profits. We take from the Post Office just the areas around the towns. But the old country postman has to walk 20 or 16 miles a day to deliver a 10p. letter—or a 151/2p. letter these days—at an old farmhouse. He still has to trudge through the hills and the woods and by the streams to deliver the letters. No private company wants to take that part of the delivery and supply of communications. This is the sad fact about avaricious Conservatism. I am not blaming the whole of the Conservative Party for being avaricious; but I do not think that they look at this enough in depth.
The third point is that private operators are encouraged to compete in the most profitable areas of the activities of the publicly owned businesses. In the case of British Airways or the National Bus Company, they are allowed to cream off the best traffic, leaving public enterprise to operate the essential less profitable routes. These are the facts. It should not have been done whatever political colour the party in power happened to be.
Now the programme is proving difficult because of the slump. British Airways are an example of this. Naturally, the proposed sale of British Gas Corporation showrooms was the piece de resistance for the trade union movement. After a one-day strike and industrial action was threatened, the Government get a Bill through Parliament, changing the national industries into a company, and then under the Com-
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panies Act the relevant Ministers take the opportunity to sell their shares. Half the shares, for instance, of British Aerospace were sold off in this way. Cable and Wireless have already had shares sold.
I want to point out the danger here. This is with regard to oil, and both sides of the House should look at this in regard to the Falklands crisis. We inherited treasure—oil—in the North Sea and Clemenceau's famous words in the 1914–18 war were:
"A drop of oil is worth a drop of blood."
We only won World War I and World War II because we had access to oil supplies.
I accuse this Government of not having looked in depth at the military security of Britain by hiving off the British National Oil Corporation. That oil should be in the hands of the British people's representatives—namely, the Government of the day in power. God forbid that this lesson should be learned in the Falklands crisis! They have hived off that oil without any control of the private entrepreneurs who get the shares in the oil. They can sell their oil anywhere in the world where they wish. We have no control over the destiny of that.
There are five major oil fields which are now pretty well on the verge of being sold off by a Government which are facing for the first time since World War II the problem of the defence of this little country. In the defence of this country with the Navy that they have cut down, I cannot understand them. I am not a military fanatic. They have cut down and undermined our security by letting this rich source of oil he used and be parted from the power of the British Government. This is the truth. I think that the Conservative Government and the Cabinet should think twice about it at the height of this crisis.
I shall refer to another example. I shall not tell all the facts about this, but I know them. Why did we sell British Aerospace, and what has happened to it? British Aerospace was created in 1977 when four major aircraft manufacturers combined. That proved to be one of the most successful nationalised industries in Britain. The selling off of British Aerospace could lead to the collapse of British avionics. What else could happen? That has made a danger now to our military strength. Private firms and others will be under pressure to be seconded to the United States of America. This will reduce the action of British Aerospace in producing valuable military aircraft and other equipment. I shall go no further than that, but I should like a reply in writing if the Government disagree with what I am saying.
In other words, I accuse the Government of taking two vital sections of the British people's assets. One, the God-given success in the North Sea oil fields. Two, in selling off British Aerospace, which was one of the most successful industries in the world, and not considering the influence of that on British defence—or having not thought about it. Was all this discussed by the Cabinet with military people? Did they call in military commanders and aviation commanders when aerospace and when oil was being moved? Did they know Churchill's attitude to the oil problem in the days of the 1914–18 war or in the 1939 War? We won it on a sea of oil and today I accuse the Conservative Government, who are brave, successful and patriotic people—there is a roll of honour in this building to the

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men who have sat on those Benches over the years and who gave their lives—of thinking so much of the aridity of profits that they did not look into the problem of British security when they dealt with the selling of oil in the North Sea and mucking about with British Avionics and aerospace. I have been speaking for only 14 minutes.
A noble Lord: It seems longer.
Lord Davies of Leek: I have listened, my Lords, to some other speeches which have taken half an hour.
In January 1980 British Petroleum and the National Enterprise Board were instructed to sell off; then the National Research and Development Corporation through the British Technology Group and Aerospace, in February 1981. That was not enough. Cable and Wireless were sold off—all valuable for communications. As to the National Freight Corporation, agreement was reached and they could not move quickly enough on 18th January 1982 to get rid of that. They formed a consortium of management, staff and pensioners and, as my noble friend Lord Oram pointed out, a new formula was introduced here that might in the future prove successful. He spoke about the management and people working in the British Freight Corporation.
I have mentioned British Rail and I shall not reiterate that, but there are further plans for the British Transport Docks Board and the National Coal Board. There is one part of it which they tried to privatise. I happen to know about the mining industry—the levels. They tried to sell those to private enterprise—some people call them "foot rails". Open-cast mining is more and more given to private enterprise. There might be a case for that—I repeat that there might be a case—but it should be looked into in depth.
I now come to the last little point I want to make. Yesterday and today this House had to face the hard facts of the kind of world in which we are now living. I was going to deal with gas, but the House has listened carefully to many speeches and I think I should finish in the next minute. I really believe we should reassess and step hack from putting into private enterprise oil, and particularly British Aerospace. I interrupted during the debate on oil and pointed out the position of Venezuela—and I suggest that people read. It is not so long since I was in the country. For years the Venezuelans have tried to get control of the oil. They have done it, and they have done it with a democracy. They own the oil and they have the oil now for the people. For years it was exploited and for years they were treating. Today a drop of oil is worth a drop of blood, and no Conservative Government with sense would privatise our oil wells.
6.54 p.m.
Lord Cledwyn of Penrhos: My Lords, earlier today I thought that the shadow of our debate yesterday on the Oil and Gas (Enterprise) Bill would rest on today's discussion, but that has not been the case. We have in fact had a most interesting debate on a subject of great public importance and interest and I should like to add my own tribute to my noble friend Lord Beswick for initiating the debate and for the stimulating speech with which he opened it. I am personally grateful also
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to my old friend Lord Boyd-Carpenter for his tribute to my noble friend. The noble Lord, Lord Boyd-Carpenter, was himself a most successful chairman of the Civil Aviation Authority and he made a temperate and most helpful speech, although he would not expect me to say that I agreed with every detail of it.
This area which my noble friend has chosen as a subject of debate is one of which he has great personal knowledge and experience. I thought he made out his case well and did so without prejudice, with common sense and with moderation. He made a number of important proposals, and I hope that the Government will have taken note of his recommendations and that possibly the noble Lord the Minister, when he comes to reply, will be able to comment on some of those suggestions.
My noble friend posed two questions: namely, whether sufficient is being done to encourage the public sector to be efficient and whether there is merit in denationalising or privatising the public sector in whole or in part. There is an element of ideology on both sides of this argument. One must recognise that in all truth, and I will return to it in a moment. But the chief consideration of course must be the public interest, and this means the interest of the whole population and not a section of it.
Is what is being proposed by the Government in dissecting, quartering and stripping selected parts of the public sector, in the best interests of the great majority of the British people at this time? That is the question before us. For my own part, I have always been, and remain, a strong believer in the mixed economy and in maintaining the right balance between public and private ownership. In the period since the end of the last war, a number of major industries have been brought into public ownership. That was consistently opposed by the Conservative Party, but I believe that in each case what was done was in the public interest.
The state of the railways before the war, and the state of the coal industry before and after the war, made public ownership of those industries essential at the time. There would have been great public unrest had the Labour Government not come into power in 1945 and carried out these important tasks. Furthermore, the need to bring electricity and gas to all parts of the country—to the cottage as well as to the factory—made it vital to bring them under some form of national control. That was done; and we would not, for example, have had rural electrification if we had relied on the old dispensation.
I recall that when I was a parliamentary candidate in the 1945 election—and I still have the manifesto engraved on my heart since I learned it off by heart at the time, because I was a very inexperienced public speaker—the cottages of Anglesey had earthen floors; and our old friend Clement Davies had conducted an inquiry into tuberculosis in Wales and had found that the incidence was higher in Anglesey than anywhere else. There was no piped water, no electricity and no gas. The roads were poor. Private industry had failed to bring these things to the people of this country. These are the facts that noble Lords opposite must accept them. Council houses were built to house the people and water was brought to those houses and others by way of a public undertaking. Gas and electricity

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came; all these provisions were made, and, thank God! tuberculosis was removed because of the National Health Service.
So we have an enormous debt of gratitude to our former colleagues the Ministers, and indeed to Clement Attlee, who brought these things about. I am sure that no reasonable noble Lord opposite would oppose what I am now saying. I am pointing out that millions of our fellow citizens enjoy services today which they would not have had, had it not been for some form of public ownership. It is a remarkable story.
Like my noble friend, I do not argue that the administration of these public industries has been perfect. I take the view, personally, that there has been too much centralisation; a falling-off and a decline of local accountability and control. Great power in any sphere has unattractive features and it is essential that there should be democratic control of public industry. As one noble Lord pointed out, the consumers' interest must be protected. But in their enthusiasm to make this point, the opponents of the public sector must bear in mind that it is, even so, subjected to greater scrutiny than private industry at all levels. The structure of publicly-owned industry needs to be investigated regularly—and in this I agree with the noble Lord, Lord Taylor of Gryfe—so that the public who own it can be satisfied that it is being run as efficiently as possible in their interest.
In the final analysis, Parliament itself has the last word about public industries. One of the least satisfactory things about the Oil and Gas (Enterprise) Bill is the lack of parliamentary control. That reveals the weakness in the Government's thinking and in their general attitude. There is, and must be, public accountability in the public sector and the machinery of accountability must be overhauled and oiled from time to time. But it seems that when the Government de-nationalise, they do not lay down adequate procedures for accountability. This is the criticism of the Bill, and it is a criticism that is made not only by members of Opposition parties, but by a member of the noble Lord's own party, as he will know if he read the reports of the Second Reading debate and the subsequent debates in another place.
The Conservative Government told British Gas two years or so ago that it must raise gas prices by 10 per cent. in real terms. I think that the action of the party opposite on gas has really been indefensible. It was they, during the premiership of the noble Lord, Lord Home of the Hirsel, who set up the British Gas Corporation and gave it the powers. The Government themselves, and not the public industries, are responsible for recent increased electricity and gas prices. It is not a happy story, and high-flown charges against the public sector of inefficiency and the need to curb monopoly ring very hollow, when we really get down and look at the facts.
As my noble friend Lord Oram said, one of the misfortunes of the post-war period is that the public sector has become, as he called it, a political football. This has tended to sap the confidence of the management and of the public which it seeks to serve. The chairman of British Gas made his annual statement recently, and what he said illustrates the frustration and sense of unfairness which exists. This is what Sir Denis Rooke,
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the chairman of British Gas, said:
"1980–81 is likely to be remembered as the year when it seemed that British Gas was under attack from every direction. What does seem incomprehensible and unfair is that we should be under attack when we have again demonstrated that British Gas, left to itself, is doing a responsible and efficient job. At a time when many industries are suffering the effects of the general economic recession, British Gas continued to provide the service its customers want and prepared for growth in the future. The popularity of gas was shown by the fact that we added nearly a ¼ million more customers and there are now more than 15½ million gas users."
These are the facts, and I think that the Government and noble Lords who are members of the party opposite should be prepared to pay a tribute to the people who are responsible for this achievement.
In his speech, my noble friend listed some of the industries which were nationalised by Conservative Governments, and I think this is a point that needs to be stressed. He mentioned the Act setting up BOAC, promoted by Sir Kingsley Wood. There was the Continental Shelf Act 1964, passed when the noble Lord, Lord Home, was Prime Minister; and, of course, there is the British Gas Corporation for which he was responsible. There are other cases, like Rolls-Royce and British Leyland, where Conservative Governments have been obliged to use public money, quite properly, to save important private companies which had come to the verge of bankruptcy or, indeed, had nearly toppled over the verge. They were, in effect, nationalised. Against that background, it is difficult—certainly difficult for me—to understand how some members of the party opposite can be so virulent in their attacks.
My noble friend referred to the Financial Times of 7th April, which described the chairman in the public sector as battered by hostile Government. It really is not good enough and it is inflicting lasting damage on the nation. It makes for polarisation as between those who work in the public sector and the Government. It does not do the public sector any good and, if I may say so—and here I am giving a word of advice to the noble Lord and his noble friends—it does not do the Conservative Party any good, because they, after all, can govern only with the consent of the people, and the people include those who work in the public sector who make an invaluable contribution to our national life.
I turn to another point and to the speeches made by the noble Lord, Lord Tanlaw, on behalf of the Liberal Party, and the noble Lord, Lord Taylor, who remains a friend and who was until recently a noble friend. They referred to the policies of the Labour Party. I am going to be generous to the noble Lord, Lord Taylor, and will not make too much reference to his speech, because I do not want to lose his friendship. But I would say to both noble Lords that we do not yet know what will be the contents of the Labour Party's election manifesto. These matters are still under discussion. I suggest to the noble Lords that they look with care at their own manifestoes, because they seem to be lacking in any information on anything of substance. Of course, when they are published we shall be glad to look at them in the most friendly way and to debate them, if necessary, with the noble Lords. It would give me great personal pleasure—
Lord Tanlaw: My Lords, this is not the moment to

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discuss or exchange manifestoes. If the noble Lord has not read our manifesto and expresses ignorance in this debate, that is his problem, not mine. I know my manifesto and I am sure that the noble Lord, Lord Taylor, knows his, and we make very strongly clear what our position is.
Lord Taylor of Gryfe: My Lords, I very much welcome the suggestion that we should be prepared to debate our manifesto. Unfortunately, although in this House we have 36 Members, we have not yet been afforded one day in which to sponsor a debate of that kind.
Lord Cledwyn of Penrhos: My Lords, I am bound to say that, so far as I am concerned, that is a red herring drawn across the theme which I am seeking to develop. So far as the noble Lord, Lord Tanlaw, is concerned, he is quite wrong when he says that they have published their election manifesto. There is no Liberal election manifesto. There are broad generalisations, in which the Liberal Party are expert, but, so far, there is no detailed election manifesto—that is what we are waiting for—in his party, in the noble Lord's party or in our own party. But our business, at the moment, is not to criticise the election attitudes of opposition parties, but to scrutinise the policies of the Government in power. That is our job and that is what I am trying to do.
I believe, also, that we have a special function in this House as opposed to another place, in that we are in rather a detached position. Therefore, it becomes our duty to look rather more carefully at the way in which the nationalised industries are working at the present time. We must keep a balance between the public and the private sectors, and I think we have probably got it about right. There may be some industries which need to be nationalised again, but that depends on the merits of the case at any given time.
The state already controls what our old friend Aneurin Bevan called "the commanding heights of the economy" and it is misleading to say, as is often done, that our public sector is much larger than that of our partners and friends in Europe. That is not so. Most countries like our own have just about the same range of public ownership industries, state railways, state fuel and power, state posts and telephones, state airlines, state broadcasting and social services as we have in this country. So it is quite wrong to say that somehow or another we are way out on the left and in a strange and alien position. We are not in a strange and alien position—and I speak as one of the ancient inhabitants of this country.
What must be pointed out in this debate is that we fall behind some countries in a constructive appreciation of some industries; for example, in subsidies to maintain a first-class railway system. I personally think that Peter Parker and his colleagues, who are making an imaginative effort to give us a railway that we can be proud of, have been treated disgracefully from time to time. It is in this context that we must consider the words of the Secretary of State for Energy regarding the Government's policies; namely, that they are seeking sensible candidates for release from state ownership. Those are the words of Mr. Nigel Lawson.
It is appropriate to ask what is meant by sensible
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candidates for release from state ownership. The sensible candidates are those which make a profit. You do not need to be a prophet to draw up the list. Any accountant will do it for you, just by looking at a profit and loss account. So as this unworthy process gathers pace, some will make a great deal of money, the public will be worse off and the public sector which remains will have an even more difficult struggle. The selling off of a profitable, or a potentially profitable, part of British Rail, namely, Sealink ports and shipping services, is a classic example of this miserable policy. I think my noble friend Lord Davies of Leek mentioned this point.
For 150 years in, for example, the ports of Dover, Holyhead, and Harwich the ships and the railway have been inextricably related to each other. For the first time the Government propose to cut off the ships. We have only one or two ships running in Holyhead. The Government are going to cut them off and sell them to a private concern which will have no interest in Wales or Anglesey, or in the future of Holyhead or the people who work there. It is monstrous that this should even be contemplated. The Government are not acting in the public interest. They are the captives of dogma. What they should be doing—what we should all be doing at this time—is conducting the most searching inquiry into this whole area in an unprejudiced spirit.
Here are some questions. What should be the balance between the public and the private sector? What role should the state play? What have been the achievements and shortcomings of public enterprise, and what are the obligations of private enterprise to the public? What can we learn from other countries? And, finally, what should be our objectives for the future? Instead of that, we get bits and pieces of legislation which undermine public morale.
The problems of our country are complex and profound. We all wish to see them resolved, whichever Government are in power. What are these problems? They are unemployment, to which my noble friend Lord Molloy referred, lack of investment, slow or nil growth, inflation. The question in this debate is whether privatisation will help to solve those problems. They are fundamental problems with which the Government should be grappling. Will the Government's hostile attitude towards the public sector ease our difficulties? Of course not. They will become more intractable. What we need to do is to increase confidence in the public sector and the confidence of those who work in it. A little inspiration and a little vision would not come amiss.
Sixteen days ago a great fleet was assembled in a few days. The spirit of the men who sail in her shows what public enterprise can do. It was not private enterprise which assembled the fleet. The fleet is public enterprise. The great achievements of our men, here and abroad, have been publicly stimulated and inspired. If we could infuse industry on both sides with the spirit which assembled this fleet and which inspires the men who sail in her, our community would be transformed in a very short time.
7.15 p.m.
Lord Bellwin: My Lords, this is the first speech which I have made in three years at this Dispatch Box—the

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first, of, I think, several thousands if you count each amendment in legislation as one—on behalf of the Department of Industry and the Treasury, and I must say it is a very rough scene in which I find myself. I think I ought to go back to quiet, gentle matters such as rent, rates, housing and things of that kind. They seem to me to be a much easier ride than we get here.
I thank the noble Lord, Lord Beswick, for introducing the topic. I found his speech interesting and I shall read it carefully. I shall try to respond during this speech to a number of the points which he made, as I will to a number of points made by other noble Lords who have spoken. The topic has certainly proved to be a very lively one. The Government do not in any sense disagree with the second sentiment in the Motion of the noble Lord, Lord Beswick. He said much about atmosphere. I wish, though, he had said rather more about the efficiency part of his Motion. No doubt he will expect me to respond to that part of his Motion in a little more detail. The fact is that we see privatisation—I agree entirely about the word "privatisation", but I am waiting for somebody to come up with a better one, and when they do I shall be glad to use it—in its widest sense as part of a positive policy to secure maximum efficiency in the public sector and an improved use of resources in the economy as a whole.
Let me therefore deal with the Motion in two parts, and consider first the need to secure greater efficiency in the public sector. The need to improve performance is self-evident and the problem must be faced. There is much room for improvement. Much of public sector spending is manpower related. In fact, pay accounts, I understand, for some 30 per cent. of total public expenditure. The need to keep the wages bill under control is therefore critical, and this year the provision for total public sector pay has consequently been held to 4 per cent. There is also an essential need to keep down the number of public employees. In this respect we have had marked success. I do not intend tonight to go into the detail, but if any noble Lord wishes me to do so I will gladly give more information about it.
Within Government we are continuing our reviews and scrutinies of the cost effectiveness of Government activities. Sir Derek Rayner is continuing to give valuable assistance to us. As a result of work already done by him, the Government have taken firm decisions which will secure £110 million a year in recurrent savings and £28 million in one-off savings. In addition, we are continuing our efforts to improve financial management in Government, which is closely linked to increased efficiency. In particular, we intend to strengthen internal audit, to extend work on output measurement and to develop and extend the use of management accounting. These are themes which are taken up in the context of the trading public sector, particularly the nationalised industries.
It has to he said that, looked at in aggregate—and I shall qualify that in a moment—the recent performance of the nationalised industries in terms of the return they have earned on their investment or their productivity and wage costs has not been good. The noble Lord, Lord Taylor of Gryfe, wants us to be proud of the nationalised industries, and where they
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are retained in the public sector I entirely endorse that. We, too, want the same thing. But we shall all be more proud of them the more efficient they are. I have not heard any speaker among the many who have spoken today say other than that he wants there to be a more efficient form of operating in the nationalised industries. There is no quarrel about that. Therefore I want to say a little more on that subject, because I think it is constructive and important.
I say straight away that it would be wrong to see the nationalised industries as a homogeneous group when in fact they are very varied in their nature. Some are monopolies; others operate in highly competitive international markets. Some are in the forefront of new technology; others serve traditional and shrinking markets. Some are in manufacturing. Some are in service industries. Some are highly capitalised; others are labour intensive. If their nature has been varied, so has been their performance.
For most nationalised industries, employment costs per unit of output rose significantly faster than the national average, and it is no good our not wanting to know of these figures if we are serious (as I believe everyone who has spoken is) about wanting things to be done better. We must be prepared to look at the statistics; they are not the whole story and the philosophies I will come to in a moment. The statistics show that employment costs per unit of output rose significantly faster than the national average over the period 1970 to 1981. They rose by 14 per cent. in telecoms, 27 per cent. in coal, 33 per cent in gas, and 18 per cent. in electricity. For public corporations as a whole, pay in 1970 was roughly in line with the national average, but by 1981 had risen to 15 per cent. above the norm for manual workers and to 8 per cent. above for non-manual workers.
Where productivity is concerned, some of the major nationalised industries achieved relatively fast increases in labour productivity compared with the United Kingdom economy as a whole during the 1970s. But, in most cases, this improvement occurred because the industries were capital intensive or because, being network industries, additional demand could be met by the existing fabric without a proportionate increase in labour input. In labour-intensive industries, on the other hand—and here, surely, is the test—productivity increased less than the national average.
That the industries have had a chequered performance goes without saying, but let us look at the implications of events. First, there is the extent to which the industries have placed burdens on the Exchequer. There is no doubt that this has been a heavy burden to bear. Total external finance for the nationalised industries since external finance limits were introduced in 1976–77 has been no less than £141/2; billion; that is nearly £21/2 billion a year. Not all of this was paid in grant. Some was borrowing on commercial terms, but, nevertheless, it still has to be financed at a cost to the PSBR if not to the taxpayer. Over a longer period, total nationalised industry capital write-offs and grants since the Second World War have been no less than an astonishing figure of £40,000 million when revalued to current prices. The noble Lord, Lord Oram, and other noble Lords spoke proudly of the 1945 Government and how it moved us into this direction. Much of it I understand and do

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not disagree with, but certainly there has been a price to pay in financial terms of the kind I have just mentioned.
Of course, I would not deny that some of this burden on the Exchequer has been the specific result of the policies of successive Governments—for example, the maintenance of uneconomic services or, on occasions, price subsidies. But the figures are an uncomfortable reminder that with nationalised industries, as elsewhere, it is an illusion to suppose that uneconomic services can be provided without cost. They do not come free and the industries must realise that their own performance has been at least partly responsible —and let me put it at no more than that.
Lord Beswick: My Lords, before the noble Lord leaves that point, will he at least be good enough to give some figures of the returns which have been paid by the publicly-owned industries on the capital so invested?
Lord Bellwin: My Lords, I wonder if the noble Lord, Lord Beswick, will allow me to continue. I have listened patiently for four hours to every word that has been said. I would like to continue and to pick up any points later. If I miss any point and the noble Lord would like me to comment upon it at the end of my remarks or later, I will try to do so.
Lord Beswick: My Lords, I must say to the noble Lord that he gives a completely wrong picture if he just totals up investments without giving the return on that investment.
Lord Bellwin: My Lords, I will cover that ground later. The fact is that there is a clear responsibility which rests on the Government to foster maximum efficiency in those industries which it "owns" on behalf of the nation. I was glad to see that the noble Lord, Lord Beswick, was concerned about this in the phrasing of his Motion. I entirely agree on the need for a positive policy to secure maximum efficiency. So what are we doing?
We believe that the key is to help the industries help themselves. Over the past year or so the record of British Steel shows what management and workers can achieve. My noble friend Lord Boardman referred to this. Other industries are now facing up to their problems in the same way. The tools we are using are a mixture of the old and the new. On the one hand, like our predecessors, we have continued with the framework of financial control set out in the 1978 White Paper on nationalised industries. This includes external finance limits (first introduced in 1976–77), investment approvals, financial targets and performance aims—all of which were the policy of the previous Government and remain the policy under this Government. We have continued to subject investment programmes to careful scrutiny in the light of the requirement that they should earn at least a 5 per cent. real rate of return—again, as set out in the 1978 White Paper. On the other hand, we are introducing improvements in the handling of our relationship with the nationalised industries, in the extent of external scrutiny and, at the same time, opening them up to market forces.
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This brings me to a number of points made by the noble Lord, Lord Beswick. He advocated, in particular, a more radical development of employee participation. The Government fully agree that this has an important part to play in encouraging communications between management and workforce in both directions. Benefit in terms of improved understanding on both sides can be considerable. In this the Government have, for example, given their full support to the work of the Rail Council which was set up by British Rail management and which comprises both management and workforce. Indeed, it has occasionally been attended by Ministers. We regard this as a worthwhile and helpful development. But arrangements for improved participation and communication are bound to vary according to the circumstances of the industry concerned. It would not therefore be right to seek to impose a uniform system on all industries—nor indeed did the noble Lord suggest that it would be.
We entirely share the view that nationalised industry consumer councils should be as effective as possible. To this end we issued a consultation document at the end of last year, seeking comments by the middle of March. It put two options for reform; a strengthening of the councils within the existing statutory framework and a reduction in the number of councils and bringing them together on a sectoral basis. The Government are now considering the responses they have received.
Let me say a word about the vexed question of relations between the Government and the nationalised industries which was referred to by a number of noble Lords. On 15th March, the Secretary of State for Industry made an announcement in another place about the improvements in handling the relationship with the nationalised industries. There is no need for me to repeat the details of that announcement now, but the general emphasis was the need for improved understanding of industries as commercial enterprises and on reinforcing the pressures within the industries for efficiency.
In particular, the Government will be working with the industries on stated objectives; to provide a clear framework for their operations on broad structures to place maximum stress on the need to secure improved efficiency. For its part, the Government will be strengthening business understanding in Whitehall. This is not to say the Government are attempting to "second guess" the industries' business judgment; there is an important distinction to be made between monitoring the industries in their expenditure of public resources and interference in their commercial management. I am talking of the need for scrutiny rather than intervention.
I hope that the noble Lord, Lord Beswick, will accept that assurance in answer to his criticism that the nationalised industries are suffering too much interference from within Whitehall. We cannot ignore that both the taxpayer and the Government are bound to have an interest in the nationalised industries' use of public funds and in their consumption of national resources. That interest is bound to be all the greater where industry makes heavy demands on the Exchequer and where competitive forces are weak. But it is in no sense our policy to attempt to run the industries as businesses from Whitehall. On the contrary, we

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fully accept that responsibility for day-to-day commercial decisions must lie with the managements of the industries themselves.
This leads me on to two further points raised by the noble Lord, Lord Beswick. First, I was grateful for his welcome for the principle of part-time non-executive directors. As my right honourable friend the Secretary of State for Industry made clear in another place on 15th March, such directors should help to bring in a wider degree of experience, and secure an improvement in the overall efficiency of the business. We shall be discussing the question of board composition with the chairmen of the industries with these thoughts in mind. But it would be difficult to carry this principle further, as the noble Lord suggests, by proposing, as a matter of Government policy, greater use of part-time workers in the labour force. There may well be a case for this in some industries, but this is a good example of an issue which needs to be left to the managements of the industries concerned. While board appointments are made by the Secretary of State, this is not of course true of other appointments. A centralised Government guideline would be regarded by the industries as interference of just the kind the noble Lord has properly deplored.
The noble Lord also referred to the progress that has been made in following up the policies announced by my right honourable friend on 15th March, drawing attention to an article in the Financial Times. In fact, I think the same article was referred to by a number of noble Lords; it was dated 7th April. This was in connection with the analytical staff of the Treasury and other departments to expose the industries to regular efficiency audits and to subject them to more monitoring and performance assessment. They have all been cited as examples of a greater Whitehall desire to take over the running of the nationalised industries. But this is the wrong interpretation, and if I heard the noble Lord correctly I would have to disagree with him about this. Whitehall will only be able to take a broader and longer-term view of the industries as businesses if it can succeed in improving its understanding of how they operate. That must require more expertise on the part of the Government and the provision of more information on the part of the industries. So this two-fold approach provides, I submit, by far the best guarantee against short-term ad hoc decisions which damage the industries' business interests, and which I would have thought everyone would deplore.
The noble Lord, Lord Beswick, mentioned in particular the new public enterprise analytical unit to which I have just referred, and he endowed it with sinister objectives. I hope he will feel somewhat reassured by what I have said. The unit will consist of a small number of economists and accountants, but, I stress again, to scrutinise and advise on issues related to the nationalised industries, and it is being paralleled by a number of moves to strengthen business expertise in other departments.
Lord Beswick: My Lords, if the noble Lord will allow me to intervene, I think he is misunderstanding what I said. I was not attributing any sinister motive to the
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unit. I was, in fact, welcoming the possibility of it doing a useful job. I was asking for an assurance that this would be instead of, and not in addition to, the other monitoring mechanisms.
Lord Bellwin: My Lords, I am grateful to the noble Lord for that. If he feels, as I certainly do, that this is a good thing, then I welcome what he says. If he wants me to go more into what their function will be, I will have to come back to him on that on a later occasion.
I think I should mention here, if I may digress briefly, a point raised by the noble Lord, Lord Taylor of Gryfe. He expressed concern that this unit would duplicate the work of the proposed new non-executive directors. Quite the opposite is the case. Strengthened business expertise within Whitehall is something that we surely ought to welcome. I think it will improve understanding of the nationalised industries. But I do assure him that this is not in any sense an alternative to improved concern with efficiency matters. The two are, in my submission, complementary; one is not a substitute for the other. Might I also say this to him on his point about improving the succession for chairman, which I thought was a very interesting comment. The Government are very well aware of the importance of this, and we hope to see procedures for planning succession improved in the future. I think this is something everyone would want to see. It has to be done differently from the way it is done now. We are very seized of this point.
While the industries remain in the public sector, cushioned from the full impact of market disciplines, there will always be a need for an externally imposed discipline, a review of efficiency, which forms something of a surrogate for market forces. The Government, therefore, believe that regular and thorough efficiency audits are essential. We legislated in 1980 to provide the Monopolies and Mergers Commission with the powers to do this job. Their scope is wide. They can appraise, and have appraised, the effectiveness of management, the adequacy of planning and control systems, and the use of resources of the business. These are the factors which ultimately determine the performance of any industry, whether in financial terms, or in terms of the quality of service provided to the customer.
While scrutiny is important, it may not always be sufficient to provide a direct incentive to management. Much of that must come from within the industries themselves. The Government can, however, set the right conditions, and that is what we are embarked upon doing.
In the field of communications, last year's Telecommunications Act included major powers to reduce the statutory monopoly enjoyed by both British Telecom and the Post Office. On the telecom side in particular, competition will provide by far the best environment for new technology to flourish, to the benefit of both the consumer and the economy as a whole. Project Mercury, set up by a consortium of private sector companies, has now been licensed as art alternative network, while we are opening to competition the area of attachment to telecommunications systems. The Government are committed to removing statutory constraints on private generation of

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electricity as a main business. Private generation as a secondary business already makes an important contribution to the supply of electricity, in particular to industry. And we intend to build on the considerable progress that has already been achieved, with further measures of this kind aimed at injecting a degree of competition to statutory monopolies.
The efficiency of the public sector is a prime focus of concern and will continue to be. But your Lordships must recognise that, however good the arrangements, it is still very much more difficult to set conditions conducive to efficiency in the public sector than in the private. The public sector will always be influenced ultimately by Government backing, implicitly or explicitly. This is why a cardinal tenet of the Government's policy is to return public sector activities to the private sector wherever possible.
I clearly understand the considerable ideological difference that exists on this issue. I have to smile when I hear noble Lords opposite always referring to the Conservative beliefs as being those of dogma and obsession whereas their own beliefs they refer to as ideology. Well, that is just another way of putting it. The fact that there are differences on this matter is clear, and I accept that; I think we all do.
I want to turn now to the question of returning whole industries and activities to the private sector. This is a policy which, as has been said, has been exemplified by the recent sales of shares in British Aerospace, Cable and Wireless, Amersham and the National Freight Company. In doing so, I shall try to deal with the points raised by the noble Lord, Lord Beswick, in particular, as they relate to the objectives of privatisation and the means by which assets are sold. The primary objective is to open up new areas to the full impact of market forces, to increase the power and responsibility and absolute ability of management to ensure that the customer receives value for money. In the context of industry it means that they are free to choose their own strategies and to make the decisions necessary to put strategy into effect. Their responsibility for failure is sharpened, but so also is their freedom to reap the benefits of success. The promotion of efficiency and responsibility is the most important effect of exposure to market forces by privatisation.
There are three important subsidiary objectives. The first is wider share ownership. In one sense this can be achieved by the sale of shares, whether it be to individual investors or institutional investors. Either has the effect of widening the basis of financing away from the Government. But privatisation also provides an opportunity for employees to take a role in their own company. A great deal has been accomplished in this respect. Since 1979 no less than 90,000 employees have so far taken up shares under preferential arrangements introduced when publicly owned shares have been offered for sale. In addition, the Government have sold, as has been said, the whole of the National Freight Company to a consortium of managers and employees.
Secondly, let me point to increased consumer choice. The monopolies and consumer interests are not necessarily consistent, and it is an important part of the Government's thinking that customers should have the freedom to choose their products rather than be
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presented with little choice. I have already described what we have done in this respect.
A third subsidiary strategy is the reduction in the burden of expenditure on the public sector, and this acts in two ways: both through the proceeds from sales of assets—which reduce the public expenditure planning total—and through the removal of any future borrowing requirements from the PSBR. Both are important to our policy of restraining monetary growth.
The means by which privatisation is achieved is bound to vary from case to case. I have already referred to one aspect when talking about contracting out in local authorities, not so much today as in the past. I have referred to that matter quite frequently at this Dispatch Box, as I am sure your Lordships know. In industry, in the majority of cases—BP, British Aerospace, Cable and Wireless and Amersham—it involves the sale of shares by means of a public issue, where necessary turning statutory corporations into Companies Act companies beforehand. To date, all sales have involved fixed price issues, but the Government do not rule out sale by tender where the circumstances are right. Elsewhere, management has purchased the company—as with the National Freight Company. But there may also be circumstances where placement with institutional investors offers the best option—as, for example, with the sale of the Government's minority shareholding in the British Sugar Corporation.
I think that I should comment on one or two other observations made by the noble Lord, Lord Beswick, and in particular the price at which assets have been sold. He claimed that the Government have been underselling these assets. To the extent that his argument was based on the net asset value of the companies concerned, then, as I think he would expect, I would disagree with him. Company net assets are not directly linked to market price, as the noble Lord knows, and it is by no means unusual for shares to be sold at below the net asset value to which they correspond. British Aerospace shares were sold at a price corresponding to roughly half the company's estimation of its net asset value. But at the time of the British Aerospace flotation GKN's market value discount, for example, on company net assets was 71 per cent; Lucas's was 66 per cent. and Tube Investments 58 per cent.—all higher than the British Aerospace market price discount.
The noble Lord, Lord Beswick, of course also argues that assets have been sold below their market price. There have, indeed, been over-subscriptions for each of the main share sales so far—British Aerospace and so on. The shares have also been traded at a premium. However, I should point out two matters. First, it is by no means unusual for new private sector share issues to be over-subscribed. The recent examples include Cambridge Electronics in June 1981, which was six times over-subscribed, and Exco International in November 1981, which was 62½ times over-subscribed. Secondly, it is easy on pricing questions to be wise after the event, especially where a company's shares have not previously been traded at all. I would respectfully submit that it is wrong to take the price at which a relatively small volume of shares have been traded as an indication of

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the price at which a major shareholding could have been sold.
I am tempted—but I do not think that with the passage of time I should—to go into a great deal more detail. The noble Lord, Lord Davies of Leek, was, I think, somewhat carried away by at least the volume of Lord Molloy's speech. I think he tried to out-Molloy Molloy.
Lord Davies of Leek: My Lords, will the noble Lord give way? I do not want that ridiculous answer. I object to that. I asked a serious question. As regards the selling of the oil assets of this British nation, was there a discussion with the Defence Committee before such action was taken? It is a real question for both sides of this House and it is not to be dealt with in that flippant way.
Lord Bellwin: My Lords, I am sorry that the noble Lord feels that I am being flippant with him. He would surely agree that he is frequently as flippant as anyone in your Lordships' House although in the most good-natured of ways which I, for one, always respect. I am sorry that he feels upset by what I have said. Certainly I did not wish that. If I upset him, then I apologise unreservedly. That was not the intention of what I was saying and I am sorry about it.
However, what I was trying to say—moving to what the noble Lord has said—as regards British Aerospace is that he would not expect me, I am sure, to agree with him in any way when he said that the sale could lead to the collapse of British avionics. I disagree with him entirely, and that he must accept from me. The fact is that British Aerospace was the first nationalised industry to be privatised by an offer of shares to the public. The process was novel and complex and the details took some sorting out and we had to be fairly cautious. The noble Lord, Lord Beswick, smiles. I am sure that he knows the history of that better than I do, and probably better than most people do.
In the event, the disposal was a success and British Aerospace has prospered since the flotation. Pre-tax profits last year were £71 million compared with £65 million forecast in the prospectus. The company has had considerable success in winning contracts and launching new products. Its selection as the largest sub-contractor on the Intelstat space project, and in winning the development contract to supply the United States Navy with a new trainer aircraft, are just two examples, and I am sure that the noble Lord, Lord Beswick, will be as pleased as anyone about that.
I would be the first to say that this success cannot be attributed to privatisation alone. But we are convinced that the fact that ownership of the company has been returned to the private sector will lead to a more efficiently managed enterprise as time goes by. The need to keep up dividend payments and the company's market reputation is a rather better incentive to the company's management and workers than Government financial targets.
I am tempted to refer to other situations, but I think that I shall not do so in view of the time. I have spoken long enough. However, I should like to make
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some observations on the comments made by individual noble Lords. Referring again to the noble Lord, Lord Davies of Leek, certainly this Government never said at any time—no one has ever said and no one could expect—that we could turn round, certainly in the time that we have been in office, an economic scene and situation of the kind that we took on when we came to office. We never said that. I do not want to become as political as some of your Lordships opposite have become in today's debate. However, the fact is that we never said that. What we did say, and what we continue to say, is that as time goes on the correctness and the success of the policies that we espouse and are practising will be shown very clearly in all the categories to which noble Lords have referred.
As regards the remarks of the noble Lord, Lord Wynne-Jones, who I see is not in his place, I shall not rise, as I was so tempted to do while he was speaking, to the reasons he gave for being a socialist. I would differ entirely with him on his references to what leads to liberty, but then perhaps this is not the occasion for that, even though he obviously felt that it was.
I was deeply grateful to my noble friend Lord Boyd-Carpenter for what I think everyone said was a really splendid speech which was thoughtful, reasoned and fair. Let me just say to him that when he talked about accountability, and the fear that there is sometimes in what we are trying to do to encourage and bring about more openness in accountability, I can only say that my own experience from many years of working in the public sector in the way in which I did, is that I never at any time have had the slightest inhibitions about anything and everything being open and available to everyone concerned. If anyone wanted to come in and create new rules to make it more so then that was fine because that is what it is all about. We said that we would not only be happy to do that but we would learn something as well. Therefore, I am pleased that he referred to that point and am grateful to him for what he said.
I also want to thank my noble friend Lord Boardman for his support. Frankly, I felt rather sad about the contribution from the noble Lord, Lord Molloy. I do not want to be as abusive as he was—I am bound to say that—but it was certainly not the kind of speech that I have heard in three years in your Lordships' House. It was more notable for its volume than for the constructiveness of its content. But I shall, perhaps, be more charitable than the noble Lord and say nothing more about it. I think that that is the best that I can say of it.
I hope that the noble Lord, Lord Beswick, will forgive me for not going into detail. Before I conclude perhaps I should comment on his point about the return on investment. For nationalised industries as a whole the rate of return on investment has been significantly below that for the private sector since the mid-1960s, and has not been significantly above zero since 1972. The coal, steel and rail industries in particular have produced negative rates of return throughout the period since 1972, even after allowing for subsidiaries. If the noble Lord would like me to expand on that and to give more detail, then, as I think he knows, I shall certainly do so. He will tell me when he winds up in a few moments. He knows that I will do that, as I always try to do in every case.

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I thank the noble Lord, Lord Beswick, for introducing the debate. It is right that we should talk about these things. As the noble Lord, Lord Cledwyn, said at the end—and I very much appreciated his speech—I, too, think that we are looking here for a balanced approach and we are not seeking, on the grounds of dogma or anything else, to take a particular line. We believe that we shall achieve much more by going down the road that we have set down in our policies of privatisation. But we are not saying that this applies to everyone. I entirely agree with my noble friend Lord Boyd-Carpenter on that. We are looking for the best way of doing things in the interests of the people we are all serving. That is where the Government stand on this whole matter.
7.52 p.m.
Lord Beswick: My Lords, the House has been discussing a problem which is of some considerable importance for the country, and it is one which, in a democratic nation like ours, we shall have to consider very carefully—I hope we shall consider it carefully—before decisions are taken about the constitution of the next Government at the next general election. I do not propose to make another speech. I should just like to thank the noble Lord, Lord Bellwin, for his reply. I have a reservation as regards his final figures. I must say that I thought they were an exercise in uselessness. I refer to the total returns on total investment. If we are to treat these matters seriously, of course, things must be broken down much more than that. But I accept that he was just reading out the piece of paper that he had been given. I thank the noble Lord for the speech he made.
I should like to thank all other noble Lords who have taken part in this debate and for the kindly personal references which some felt they were able to make. My Lords, I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

Civil Aviation (Amendment) (No. 2) Bill [H.L.]
7.54 p.m.
The Earl of Kinnoull: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(The Earl of Kinnoull.)
On Question, Motion agreed to.
House in Committee accordingly.
[The Lord Murton of Lindisfarne in the Chair.]
Clause 1 [Repeal of S.15 of 1949 c.67]:
The Earl of Kinnoull The Earl of Kinnoull moved Amendment No. 1:
Page 1, line 10, leave out subsection (2) and insert—
("(2) In consequence of subsection (1) the following enactments are hereby repealed, namely—

(a) in Schedule 16 to the Employment Protection Act 1975. paragraph 5 of Part IV; and

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(b) in part I of Schedule 3 to the Civil Aviation Act 1980. the words "Section 15" in the entry relating to the Civil Aviation Act 1949 and the whole of the entry relating to the Employment Protection Act 1975.")

The noble Earl said: This amendment is a purely drafting amendment. As the Bill stands, it is incomplete as to including repeals to existing legislation which are consequential to the Bill. I am grateful for the guidance given on this matter by my noble friend's department, and I apologise to the Committee for the initial discrepancy in the drafting of the Bill. With that short explanation, I beg to move.
On Question, amendment agreed to.
Clause 1, as amended, agreed to.
Clause 2 [Short title]:
Lord Ponsonby of Shulbrede Lord Ponsonby of Shulbrede moved Amendment No. 2:
Page 1, line 14, end insert—
("(2) This Act shall come into force on the appointed day.
(3) In this section "the appointed day" has the meaning given by section 10 of the Civil Aviation Act 1980.")
The noble Lord said: In the Second Reading debate I indicated to your Lordships that I thought it was inappropriate for the Government to lend their support to the noble Earl's Bill. I do not at this hour wish to go over the speech that I made on that occasion. That speech was concerned with why the trade union movement did not wish to see Section 15 repealed.
Your Lordships will have noticed that there is no indication in the noble Earl's Bill as to when it should come into force. As noble Lords will know, the repeal of Section 15 of the Civil Aviation Act will automatically come into force on the appointed day defined by the Civil Aviation Act 1980. I would suggest to the Government that the proper thing for them to do would be either to lend their support to my amendment or to withdraw their support from the Bill. I say this because I think that the good standing of Government is involved here, and it demands that they, in fact, should follow that course of action.
Since the Second Reading debate I have managed to obtain a copy of the TUC report of the meeting held on Tuesday, 3rd November, at 3 p.m. at the Department of Trade, to which I referred on that occasion. This report records a number of matters referring to the civil aviation industry. Item 16 of that report, headed "Terms and Conditions", reads:
"The TUC argued against the repeal of Section 15. It was particularly useful in ensuring that foreign airlines, such as Middle Eastern airlines, operating in Britain provided reasonable terms and conditions. The Parliamentary Under-Secretary said that he would look into that interesting point, but also noted that Section 15 would not in fact be repealed until BA was privatised".
The clear understanding of the TUC from that was that Section 15 would not be repealed until British Airways was privatised. In the circumstances, I feel that the Government can do no less than support this amendment. I beg to move.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne): I am afraid that the members of the TUC who attended the meeting to which the noble Lord has referred came away from that meeting with a mistaken impression as

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to what was in the minds of my right honourable and honourable friends whom they saw on that occasion. As I understand it—and I was not present at that meeting, but I have made further inquiries as to what took place—my right honourable friend the then Secretary of State for Trade said that the Government had no plans to repeal Section 15 ahead of the provision already provided in the 1980 Act. That was and, indeed, remains the case.
But, of course, that does not prevent the Government from supporting a Private Member's Bill which seeks to achieve that purpose. The fact of the matter is that in principle we support the idea of the repeal of Section 15, and we certainly see no reason in the present circumstances why a Bill, such as the one proposed by my noble friend, should not be brought forward in your Lordships' House and maybe passed through the other place.
I wish to dispel any suggestion that my right honourable or honourable friends gave an undertaking that the Government would not support Private Members' legislation to this effect. Certainly they said, quite properly, that the Government themselves had no plans to hasten the repeal of Section 15, but they did not give the undertaking in the terms that have been suggested.
The Earl of Kinnoull: I am grateful for my noble friend's confirmation of a confirmation he gave on Second Reading. I hope that that convinces the Committee anyway that the point that the noble Lord, Lord Ponsonby, has raised should not be accepted. I am sorry this misunderstanding has arisen. As to the point that the noble Lord, Lord Ponsonby, made on timing, I deemed this amendment, as I saw it, to be a wrecking amendment. I advise the noble Lord that this repeal would take place on Royal Assent. I think I am correct, but, if I am incorrect in that, I shall write to the noble Lord.
This is a wrecking amendment. We discussed at length the principle of the Bill. It is a simple Bill. I do not intend to go through all the arguments that the noble Lord made and I attempted to make on Second Reading. It is a serious Bill. It is supported by industry, and I would advise the Committee to reject the amendment.
Lord Ponsonby of Shulbrede: The noble Earl has referred to this amendment as a wrecking amendment. Of course if the Bill was passed into law as it now stands, there is in fact no date set in the Bill for the Bill to come into operation.
Lord Trefgarne: I hope I can dispel the noble Lord's fears. I am advised that the Bill comes into force on Royal Assent. Therefore, if the Bill is passed as presently drafted, Section 15 of the 1949 Act would indeed be repealed when this Bill receives Royal Assent, if it does.
Lord Ponsonby of Shulbrede: I thank the noble Lord for that advice. However, I must say that I consider the Government's attitude on this particular Bill devious. The noble Lord, Lord Trefgarne, has said that it is all right for the Government to support
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this Bill as it is a Private Member's Bill, although if this had been a Government Bill it would not be all right because they have already committed themselves that Section 15 will be repealed on the day nominated in the Civil Aviation Act 1980. I must say that I find that not a good principle of government. I should like to test the feeling of the Committee on this amendment.
8.3 p.m.
On Question, Whether the said amendment (No. 2) shall he agreed to?
Their Lordships divided: Contents, 4; Not-Contents, 19.

DIVISION NO. 1

CONTENTS

Bishopston, L. [Teller.]

Ponsonby of Shulbrede, L. [Teller.]

Evans of Claughton, L.

Winstanley, L.

NOT-CONTENTS

Baker, L.

Lindsey and Abingdon, E.

Bellwin, L.

Loudoun, C.

Boardman, L.

Lyell, L.

Cathcart, E.

Murton of Lindisfarne, L.

Crathorne, L.

Napier and Ettrick, L.

Denham, L.

Sandys, L.

Drumalbyn, L.

Skelmersdale, L.

Faithfull, B.

Trefgarne, L.

Glenarthur, L. [Teller.]

Young, B.

Kinnoull, E. [Teller.]

8.11 p.m.
The Deputy Chairman of Committees: As it appears that fewer than 30 Lords have voted, in accordance with Standing Order No. 54 I declare the Question not decided; and, pursuant to the Standing Order, the House will now resume.
House resumed.

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