Sitting of 5 May 1982

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

    Falkland Islands
    The following questions stood upon the Order Paper:
    Mr. Canavan: To ask the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement about the situation in the Falkland Islands.
    Mr. Cryer: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on negotiations over the Falkland Islands.
    Mr. Neubert: To ask the Secretary of State for Foreign and Commonwealth Affairs when next he expects to meet Secretary Haig to discuss the Falkland Islands.
    Mr. Aitken: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the Falkland Islands situation.
    Mr. Trippier: To ask the Secretary of State for Foreign and Commonwealth Affairs what has been the progress in negotiations with the Argentines over the Falkland Islands.
    Mr. Speaker: Mr. Canavan.
    The Secretary of State for Foreign and Commonwealth Affairs (Mr. Francis Pym): May I ask the hon. Gentleman to await my statement at 3.30 pm? That also applies to questions 8, 9, 10 and 19.
    Mr. Speaker: Will those hon. Members whose questions are to be answered await the statement of the Foreign Secretary?
    Mr. Cryer: Certainly, to help the House, Mr. Speaker.

    Middle East
    Mr. Campbell-Savoursasked the Secretary of State for Foreign and Commonwealth Affairs whether he will list those persons and organisations with whom Lord Carrington held discussions in Jerusalem during his recent visit to the Middle East.
    The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hurd): During his visit to Israel from 30 March to 1 April my right hon. and noble Friend Lord Carrington met the President, Prime Minister, Defence Minister, the Speaker and other Members of the Israeli Knesset. Lord Carrington also visited the Weizmann institute of science.
    Mr. Campbell-Savours: Is it not significant that the then Foreign Secretary was prevented by the Israeli authorities from meeting Mayor Shakaa of Nablus and Mayor Khalaf of Ramallah? If the noble Lord had met them, does the right hon. Gentleman recognise that he would have found two very civilised representatives of West Bank thinking, not Palestinian terrorism as they are being presented in the Western press? Will he protest to the Israeli Government about the treatment of those two mayors and about the lack of civil rights in the West Bank under Israeli jurisdiction?
    Mr. Hurd: The hon. Gentleman is not quite right. The idea was that the Deputy Under-Secretary of State who was with Lord Carrington, Sir John Leahy, should meet a number of West Bank personalities. He could not meet all those whom he wished to meet, but he had useful conversations with two of them.
    Mr. Walters: Quite rightly, the attention of the House is concentrated on the Falkland Islands. Does my right hon. Friend agree that the principle of self-determination, which we all uphold, is just as valid when applied to the Palestinians and that there will be a grave danger of war, and certainly no chance of lasting peace, unless that principle is recognised?
    Mr. Hurd: I agree with my hon. Friend about the dangers in the Middle East and about self-determination.
    Mr. Hooley: Will the Minister convey to Mr. Begin that a Bantu-style arrangement, under which 1¼ million Palestinian Arabs are third-class citizens, is no more acceptable in the Middle East than it is in South Africa?
    Mr. Hurd: My noble Friend Lord Carrington went over that ground thoroughly with Mr. Begin. I do not think that there is any doubt about our position.
    Mr. Lawrence: Is not the self-determination that we are talking about the self-determination of the Palestinian Arabs, not the self-determination of the Palestinians taking their orders from the PLO in Beirut?
    Mr. Hurd: We are talking about the right of the people in the occupied territories to determine their own future—a right which so far has not been granted.

    Dictatorships (Government Policy)
    Mr. Soleyasked the Secretary of State for Foreign and Commonwealth Affairs whether he will review the policy of Her Majesty's Government towards those Governments which are dictatorships, following the invasion of the Falkland Islands by Argentina.
    Mr. Pym: The policy of Her Majesty's Government towards all foreign Governments is kept under constant review.
    Mr. Soley: Does the Foreign Secretary accept that it is high time that Britain and the West in general developed foreign policies that demonstrate beyond reasonable doubt that we support democracies and oppose authoritarian dictatorships?
    Mr. Pym: At the present time we are showing good evidence of doing just that.
    Mr. Wilkinson: In reviewing the Government's policies towards countries which are under dictatorial rule, will the Government address themselves to the problem of

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    the Eritrean people who are fighting against the armed might of the Ethiopian regime, which is backed by the Soviet Union? Will the Government also give assistance to the friendly Government of Somalia next door?
    Mr. Pym: I shall consider what my hon. Friend has said about those two countries.
    Mr. Alexander W. Lyon: Does the Foreign Secretary accept that his conversion against the dictatorship in the Argentine was a bit late? Does he further accept that when the present troubles are over it might be better if the Foreign Office were to review our relationships—particularly in regard to selling arms—with dictatorships around the world, especially those in Latin America, as the issue has now obviously changed?
    Mr. Pym: There are degrees in everything, and it is difficult sometimes to draw a precise dividing line, but I think the House knows to what the hon. Gentleman is referring. I certainly do. Obviously, there may be a review of our relationships with some countries when the present particularly unfortunate incident is over. I shall keep in mind what the hon. Gentleman said.
    Mr. Robert Atkins: When my right hon. Friend carries out that review, will he make it clear to all who read any report that emanates from it that Conservative and Labour Governments have sold arms to the Argentine? Will he also make it clear that members of the previous Labour Government were responsible for selling two type 42 frigates and a number of Canberras to the Argentine Republic and that many of them—particularly the right hon. Members for Brisol, South-East (Mr. Benn) and for Lanark (Dame Judith Hart)—were involved in the decision when it was taken?
    Mr. Pym: It is fair to say that Conservative and Labour Governments have always kept their policies on the sale of arms under constant review. All applications for the sale of arms are considered on their merits. That policy applied to the previous Labour Government, as it does to the present Government. Sometimes things work out helpfully and at other times they work out otherwise. The subject is constantly under review. Undoubtedly, many countries have supplied arms to the Argentine in the last 10 or 20 years.
    Mr. Clinton Davis: Is it not a fact that the Chilean junta is as bloodstained as the Argentinian junta? Why do the Government continue to enjoy friendly relations with the Chilean Government, especially as that Government have not offered a word of apology to the British Government for their assaults upon the freedom of British citizens in Chile?
    Mr. Pym: Our policy is to have normal relations with Chile and other countries, consistent with British interests. In so doing we have left the Chilean Government in no doubt that their record on human rights has given rise to a great deal of concern here.

    Latin America (Diplomatic Representation)
    Mr. Foulkesasked the Secretary of State for Foreign and Commonwealth Affairs what representations he has received regarding the level of United Kingdom diplomatic representation in Latin America.
    The Minister of State, Foreign and Commonwealth Office (Mr. Cranley Onslow): None, Sir.
    Mr. Foulkes: Should we not learn from recent events that it is important to keep in touch with the views of the people and Governments of the countries in this vast continent? Will the Government reconsider their decision not to have ambassadorial representation in Nicaragua?
    Mr. Onslow: We have no plans to change the present arrangement whereby Her Majesty's ambassador in San Jose is accredited to Managua. The ambassador and his staff have made several visits to Nicaragua this year.
    Mr. Bill Walker: Does my hon. Friend agree that British representation in Latin American countries in the past has been largely through our trading links and that we have a good record of trading, other than arms trading?
    Mr. Onslow: I am grateful to my hon. Friend for what he said. Perhaps I may take this opportunity to pay a tribute—which I hope the whole House will endorse—to the staff of our missions throughout Latin America for the way in which they are carrying out their task in the current difficult circumstances.
    Mr. Clinton Davis: I accept and endorse what the Minister has just said about our diplomatic staff. Does he agree that there have been dramatically changed circumstances in Latin America, for obvious reasons, since the Government declared their policy with regard to ambassadorial status in Nicaragua in particular? Does he further agree that it is important, in view of those changing circumstances, to have somebody on the spot all the time?
    Mr. Onslow: I know that some members of the Select Committee on Foreign Affairs have expressed concern about the subject. If the Committee has specific recommendations to put to me when it completes its report on the visit to the area, I shall be willing to consider them.
    Sir Anthony Kershaw: I understand my hon. Friend's reservations about this particular embassy, but will he bear in mind that the annual cost of the embassy in San Jose is rather less than one torpedo?
    Mr. Onslow: I am sure that all relevant factors will be borne in mind.
    Mr. Spearing: Irrespective of the formal position concerning accreditation, does the Minister agree that it might be possible to have a permanent British presence in some of the smaller capitals at relatively low cost and so get the advantage of a listening post, which occasional visits cannot give?
    Mr. Onslow: If it should seem to be of advantage to set up the kind of mini-mission that the hon. Gentleman suggests, we shall give favourable consideration to the idea.

    Nuclear Disarmament
    Mr. Norman Atkinsonasked the Secretary of State for Foreign and Commonwealth Affairs if he will make it his policy to support any meeting between President Reagan and President Brezhnev with a view to assisting nuclear disarmament.
    Mr. Pym: Yes, Sir. We support any direct contact between the Heads of the Governments of the two major nuclear Powers which seems likely to promote agreement on balanced and verifiable reductions in nuclear arms levels.
    Mr. Atkinson: Does the Foreign Secretary agree that the current situation demonstrates just how precarious world peace is? Therefore, does he recognise that now is the time for him to exert leadership in Europe by mobilising opinion among our friends on the Continent behind the early commencement of the strategic arms reduction talks, a possible October meeting between President Brezhnev and President Reagan, and to go all out to ensure the success of those talks in the way that he is now suggesting?
    Mr. Pym: Yes, we are strongly in support of those talks. They will have our full support, but they are primarily for the two super Powers. The instability in the world at the moment and the issue that is occupying so much time in the House demonstrate the need for deterrence, which means an adequate capability to deter anyone from going to war in the first place. That is a very important element. That is why in arms control it is important that reductions, which everybody wants, should be balanced and verifiable.
    Mr. Chapman: Does my right hon. Friend know whether it is the intention of Presidents Reagan and Brezhnev to attend the United Nations second special session on disarmament in June? Does he agree that that is the appropriate forum in which the two Presidents can put forward constructive proposals for balanced multilateral disarmament? Does my right hon. Friend also welcome the fact that our Prime Minister will be attending those talks?
    Mr. Pym: I understand that the President of the United States has indicated his readiness to go. We do not yet know about President Brezhnev. My right hon. Friend the Prime Minister has indicated her intention to be present. I hope that that answers my hon. Friend's question.
    Mr. George Robertson: Is the Secretary of State aware of the strength of support on the Labour Benches for the sort of summit meeting that is being talked about here? May we hope that Her Majesty's Government, during the important preparatory sessions for such a summit meeting, will use their influence to make sure that major initiatives are taken to reduce the present level of armaments in the world?
    Mr. Pym: Yes, we shall certainly take all those important points fully into account. At the same time, we must appreciate that the build-up of arms on the other side of the Iron Curtain still continues, and we have to be sure all the time that we have the capability and the equipment with which to negotiate. If we were not adequately protected, and if our deterrence were not adequate, there would be little incentive for those on the other side of the Iron Curtain to negotiate with us. We have very much in mind the points that the hon. Gentleman has made.

    Afghanistan
    Mr. Temple-Morrisasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the relations between Her Majesty's Government and the Government of Afghanistan.
    Mr. Hurd: Her Majesty's Government do not regard the Karmal regime as a Government and therefore do not deal with it as a Government.
    Mr. Temple-Morris: Does my right hon. Friend agree that it is difficult to have normal relations with
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    Afghanistan when the authorities insist on detaining, without any proper charge, Mr. Pinder-Wilson, who is an archaeological academic with a very genuine interest in Afghanistan? Will my right hon. Friend tell us what Her Majesty's Government are doing to obtain his release and will he inform us of his condition?
    Mr. Hurd: It is true that the security authorities have detained Mr. Pinder-Wilson since 28 March, and they have given no details of charges against him, despite repeated requests by the British consul. The consul has seen him once, but only one consular visit has been permitted. We are continuing to press for proper access by the consul and for details of any charges against Mr. Pinder-Wilson.
    Mr. Ron Brown: If it makes sense to have negotiations about the Falklands, does it not make sense also to have negotiations about Afghanistan? President Karmal has suggested that he will send the troops out of his country provided that he can get certain guarantees. Should not that offer be taken up? If we are talking about world peace, does that not matter, or does militarism cloud every mind in the House? I do not think that it does, but surely——
    Mr. Speaker: Order. The hon. Gentleman has asked his question.
    Mr. Hurd: The hon. Gentleman follows these matters with some care. Therefore, he must know that last year we, together with our European partners, put forward a peace plan for Afghanistan, but it must depend upon the willingness of the Soviet Union to withdraw its Army from that country.
    Mr. Nicholas Winterton: As Mr. Pinder-Wilson's niece lives in my constituency I have a deep interest in this matter and have communicated with my right hon. Friend about it. Is it possible to bring pressure to bear upon the Afghan authorities through the Soviet Union, which has considerable influence in that country?
    Mr. Hurd: We are trying every way that we can, and I shall certainly consider what my hon. Friend suggests.

    Ireland (Continental Shelf)
    Dr. Edmund Marshallasked the Secretary of State for Foreign and Commonwealth Affairs what was the outcome of the meeting held during April with officials of the Government of the Republic of Ireland concerning the delimitation of the continental shelf between the United Kingdom and the Republic.
    The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Malcolm Rifkind): The meeting between officials which took place in London on 16 April made further encouraging progress towards agreeing the composition and terms of reference of the arbitration tribunal. Another meeting has been scheduled for June.
    Dr. Marshall: As there have been at least nine such meetings since the beginning of 1980, cannot Ministers inject some urgency to produce an early and clear outcome to the talks so that, for instance, fishing vessels and submarines may know in whose territorial waters they are sailing?
    Mr. Rifkind: The terms of reference and composition of the tribunal are complex matters, but we hope that the arbitration process will be signed during this year.
    Sir Peter Emery: In considering the problem, will my hon. Friend draw to my right hon. Friend's attention the recorded broadcast of the Prime Minister of Eire on BBC television last night, which was massively unhelpful to Britain's position in solving the problem of aggression in the Falkland Islands and would be considered by some to be a stab in the back?
    Mr. Rifkind: Those matters do not arise out of the question, but I am sure that my hon. Friend's views are shared by many hon. Members.
    Mr. George Robertson: In discussing the continental shelf between Ireland and Great Britain, does the Minister feel that relations have been injured by the recent incident involving a submarine and a fishing boat? Why did the submarine not know that it was snagged in the nets of a fishing boat until the fishing boat had gone 11 miles backwards? Why did it take so long for the British Government to admit responsibility for the incident?
    Mr. Rifkind: The incident to which the hon. Gentleman refers is a matter of concern. However, it is appropriate to address such questions to my right hon. Friend the Secretary of State for Defence.

    Belize
    Mr. Robert Atkinsasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on Her Majesty's Government's current relations with Belize.
    Mr. Onslow: Her Majesty's Government enjoy excellent relations with Belize, which became a member of the Commonwealth on attaining independence in September 1981.
    Mr. Atkins: Does my hon. Friend agree that now more than ever the threat to Belize from Guatemala should be taken fully into consideration? If so, does he share my view that the policy of keeping British forces in Belize, which cost a mere £4·4 million and are wanted by the Belize authorities to protect their interests, should be pursued with vigour? Will he assure me that they will stay there for as long as is necessary?
    Mr. Onslow: The British garrison remains in Belize. No decision has been taken on a date for its withdrawal. We hope that in due course the new Government in Guatemala will have discussions with Belize over the dispute with a view to achieving a final and peaceful solution. However, the new Government have so far shown no disposition to do so, and there are no clear signs as to how the new junta will approach the territorial dispute with Belize.
    Mr. Healey: Will the Minister give the House an assurance, which I am sure both sides wish to hear, that there will be no question—I put it precisely—of withdrawing the British forces presently protecting Belize until it is clear to all that there is no current military threat from Guatemala?
    Mr. Onslow: The present heightened tension in that hemisphere as a result of the Falklands crisis will be carefully considered by the Government in any decision about the presence of the garrison.
    Mr. Healey: That reply is totally unsatisfactory. I ask, for the second time, a specific question, which it should
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    not be difficult for the Government to answer. Indeed, a refusal to answer or an attempt to evade the question will have the most damaging consequences for stability in that area. Will the Minister give an assurance that the Government will not withdraw the forces presently committed to the defence of Belize until everyone is satisfied that there is no further threat from the Government of Guatemala?
    Mr. Onslow: I repeat that no date has been set for withdrawal. The factors mentioned by the right hon. Gentleman are obviously relevant to any decision that we may take.
    Sir Frederic Bennett: Is it not highly relevant in the context of events in the Falkland Islands that, immediately after the invasion of the Falkland Islands by Argentina, Guatemala stepped up its articulate demands for gaining Belize? I ask my hon. Friend not whether he is prepared to give a date but whether, if the British troops remain in Belize, there will be no lack of universal acceptance by the House of full efforts and determination to ensure that it is not let down at the last moment.
    Mr. Onslow: We have no intention of letting Belize down. We are watching closely and listening carefully to what is being said by the new regime in Guatemala.
    Mr. Healey: I regret to have to come back to the issue, but I have the support of many hon. Members on both sides of the House in doing so. As the Minister will know, many of us believe that the crisis in the Falkland Islands arose because the Government gave a false signal to the Argentine Government. Unless the Minister can give a specific answer to the specific question that I put to him, he is in danger of giving another false signal. I appeal to him again to do so.
    Mr. Onslow rose——
    Sir Bernard Braine: And close that brief.
    Mr. Onslow: I have no intention of giving any false signals, even to those who wish to see them.
    Mr. Cormack: Does my hon. Friend accept that the only answer that the House needs is a simple "Yes"?
    Mr. Onslow: I am well aware of the mood of the House. I do not know why the House does not understand me.

    Palestine Liberation Organisation
    Mr. Edwin Wainwrightasked the Secretary of State for Foreign and Commonwealth Affairs whether he has any new information on the Palestine Liberation Organisation's attitude towards Israeli sovereignty.
    Mr. Hurd: There have been a number of statements from PLO leaders on the subject of Israel's right to exist as an independent sovereign State, but, taken together, these statements have been neither clear nor consistent. In the contacts that we maintain with the PLO at official level, we urge it to state explicitly that in the context of a settlement it would be prepared to accept Israel's rights.
    Mr. Wainwright: Is the Minister aware that on 12 January this year the political adviser to Yasser Arafat said that there was no hope of any deal being made with the Israelis and that the Arabs intended to consider the matter from the vantage point of there being no such

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    arrangements for making peace with Israel? If that is true, what are the hopes for arriving at some solution to this delicate problem?
    Mr. Hurd: We can all swap quotations. I have a series of quotations from Mr. Arafat which tend to point the other way. It simply adds up to the conclusion that I drew, which is that, sadly, the statements of the PLO on this subject have been neither clear nor consistent.
    Mr. Nelson: Is it not significant that the PLO said that it will consider sympathetically any revival of the Fahd plan, which offers the first prospect of Arab agreement on an exchange of territorial concessions for the security and recognition of the State of Israel? Is there not a better prospect of a way forward being found through a revival of the Fahd plan than through a continuation of the Camp David talks?
    Mr. Hurd: My hon. Friend is right. The PLO has given indications of that kind. We would like the PLO to state explicitly that if Israel recognised Palestinian self-determination, it would be prepared to accept Israel's right to exist.
    Mr. Moyle: Does the right hon. Gentleman agree that the Palestine Liberation Organisation's diplomatic position is severely handicapped by its unwillingness to make the statement that he has just urged it to make? Is he aware that if he continually urges the PLO to make that statement, he will have the Opposition's support?
    Mr. Hurd: I am grateful to the right hon. Gentleman for his comments.

    Anglo-Israeli Relations
    Mr. Lathamasked the Secretary of State for Foreign and Commonwealth Affairs whether, following his predecessor's recent visit to Israel, he will make a statement on the steps which he proposes to take to improve relations between the United Kingdom and Israel still further.
    Mr. Hurd: One of the results of my right hon. and noble Friend Lord Carrington's visit was to strengthen relations between the United Kingdom and Israel. The forthcoming official visits of the Israeli Deputy Prime Minister and Minister of Agriculture and the Minister of Industry and Trade, will provide further opportunities for discussion. We have also proposed, and the Israeli Government have accepted, the idea of holding talks at senior official level.
    Mr. Latham: Lord Carrington's visit was obviously overshadowed by the subsequent crisis in the Falkland Islands, but is my right hon. Friend aware that the visit was well received in Israel and did a great deal to improve relations? When the further problems with which we are all concerned have, I hope, receded, will my right hon. Friend give as much attention as he can to improving relations further?
    Mr. Hurd: My hon. Friend is right. If we are to play an effective part in helping things forward in the Middle East it is important that we should have a continuous and friendly dialogue with Israel.
    Mr. Ron Brown: Does the Minister consider it appropriate at this stage to invite representatives of the PLO and Israel to an informal meeting in London to
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    discuss the basic issues in the Middle East? Does he further agree that that is the only way in which we shall resolve the fighting in that part of the world? If there is to be a solution, clearly the Government have the responsibility, just as they do in the Falklands, to put forward certain initiatives. Will they do that?
    Mr. Hurd: The hon. Gentleman suggested that we should invite Israeli and PLO representatives to a meeting in London. We could invite them, but neither would come.

    Sinai (Israeli Withdrawal)
    Mr. Lennox-Boydasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement concerning the Israeli withdrawal from Sinai.
    Mr. Pym: We warmly welcome the Egypt-Israel peace and the successful completion of the Israeli withdrawal from Sinai. It is a most important step forward on the path to a comprehensive peace and we particularly admire the determination that the Israelis have shown in carrying it out.
    Mr. Lennox-Boyd: In recognising that this is a most important step forward, does my right hon Friend agree that the time is now right for the Government to persuade the Government of the United States to have a much clearer policy on the West Bank than in the past, consistent with the right to full autonomy for the inhabitants on the West Bank?
    Mr. Pym: Yes, I think that that would be helpful. I have not yet had any discussions on this with Mr. Haig or anyone in the United States Administration. I have not yet had time for a conversation with them on that subject, but I shall bear in mind my hon. Friend's comments.
    Mr. Roy Hughes: Does the Foreign Secretary appreciate that at the same time as Israel was withdrawing from the Sinai it was building new settlements on the West Bank? I saw for myself that the Palestinians there were very badly treated. Does the right hon. Gentleman agree that the only real, lasting hope of peace in the area lies in a mutual recognition by the two sides of the right of Israel to exist and for the Palestinians to be allowed to decide their own destiny?
    Mr. Pym: I have a great deal of sympathy with what the hon. Gentleman says. We obviously deplore recent incidents of violence and bloodshed, because that can only make more difficult the creation of a climate of trust and confidence, which is an essential preliminary for a negotiated settlement. However, I have noted what the hon. Gentleman said.
    Mr. Cyril D. Townsend: Has my right hon. Friend's attention been drawn to a report in Le Monde dated 28 April, which reported Mr. Begin as suggesting that the West Bank could not be annexed by Israel as it is already part of Israeli territory? Will my right hon. Friend make it clear to the House that that is not the view of Her Majesty's Government?
    Mr. Pym: Will my hon. Friend be kind enough to repeat the question?
    Mr. Townsend: Has my right hon. Friend's attention been drawn to a report in Le Monde dated 28 April, which reported Mr. Begin as saying that it was impossible for Israel to annex the West Bank as the West Bank already

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    belonged to Israel? Will my right hon. Friend make it perfectly clear that that does not represent the view of Her Majesty's Government?
    Mr. Pym: I have not seen that report. It has not been brought to my attention this morning. However, I do know that the whole issue of the West Bank is obviously the central part of the dispute. I hope shortly to be able to devote a good deal more of my time to dealing with that issue. The Government's position is to do whatever we can with our European partners to help in this matter.
    Mr. Home Robertson: Does the Foreign Secretary agree that any improvement in our relations with Israel will be difficult while Israeli forces remain on the West Bank, in Syria and in the Lebanon?
    Mr. Pym: I see nothing but difficulties in the whole of that area. What the hon. Gentleman says is true, but there are other features of the problem that are equally difficult to deal with. I think people all round the world are trying to find a way forward in this dispute. I agree with the hon. Gentleman about the difficulty.

    Namibia
    Mr. Hooleyasked the Secretary of State for Foreign and Commonwealth Affairs when he expects an agreement on the independence of Namibia to be reached between the contact group and the other parties.
    Mr. Onslow: The Western Five hope to resolve the outstanding issues in time for implementation of the United Nations plan to begin during 1982. This would mean that a ceasefire would come into effect this year, together with the deployment of the United Nations transition assistance group and the start of the process leading to elections. Actual independence for Namibia would follow some time in 1983.
    Mr. Hooley: In the light of the Government's current sensitivity on the issues of aggression and self-determination, will they now show a greater sense of urgency on South African aggression against Angola, which continues day by day, and on self-determination for the people of Namibia, who have waited 16 years for that?
    Mr. Onslow: The whole purpose of the Government's exercise is to put an end to that state of affairs. The hon. Gentleman might like to know that we have received a memorandum indicating SWAPO's views on the proposals in phase 1. We look to the current meeting of the Foreign Ministers of the front-line States in Dar-es-Salaam for an authoritative response to our proposals. We shall then make proposals on how to take negotiations forward, once we have had time to study the authoritative responses of the parties, and do not intend to waste time in that process.
    Mr. Eldon Griffiths: Has my hon. Friend had an opportunity to meet Mr. Dirk Mudge during his current visit to London? Is he aware that those of us who have recently been to Namibia know that the people who suffer most from SWAPO are the indigenous minorities, such as the bushmen, and that those who benefit most from the South African presence, curiously enough, are precisely those ethnic minorities whose future could be at risk unless the matter is handled with great delicacy?
    Mr. Onslow: I hope to meet Mr. Mudge tomorrow. I look forward very much to discussing with my hon. Friend his findings during his recent visit to Namibia.
    Mr. Alexander W. Lyon: When the Minister listens to claims such as those made by the hon. Member for Bury St. Edmunds (Mr. Griffiths), will he remember the sort of claims made by similar people about Rhodesia, and will he bear in mind that Dirk Mudge is no more than the Bishop Muzorewa of Namibia?
    Mr. Onslow: It is not likely to help my discussions with anyone if I make prejudgments of that kind.
    Mr. Wilkinson: Has my hon. Friend seen reports in the press that about 500 Cuban personnel have been withdrawn from Angola? Are they military or civilian personnel, or persons who in any way supported the SWAPO incursions into South-West Africa?
    Mr. Onslow: I have seen such reports, but I suggest that my hon. Friend should address his question to the Cuban Government rather than to me.

    Arms Sales
    Mr. Skinnerasked the Secretary of State for Foreign and Commonwealth Affairs whether he will raise at the next meeting of the European Economic Community Foreign Ministers the question of stopping arms sales to Fascist-style regimes; and if he will make a statement.
    Mr. Hurd: Individual countries in the European Community have their own policies on the export of arms. However, the hon. Member will be aware that Community members have now banned the export of all arms to Argentina.
    Mr. Skinner: That does not answer the question on the Order Paper. Does the Minister agree that it is a scandal that the Common Market countries are making a killing out of what is taking place in the area of the Falkland Islands? Is it not a fact that it was almost certainly a French missile that sank HMS "Sheffield" yesterday? Is it not true that British missiles are being fired on British troops? Is it not time that the Government gave an unequivocal commitment that they will stop selling arms to Fascist-style regimes in the world and called upon our so-called Common Market partners to do the same?
    Mr. Hurd: I simply repeat, in answer to the hon. Gentleman's question and his supplementary question, that Community members have now banned the export of all arms to Argentina.
    Mr. Marlow: Will my right hon. Friend deal not only with the sale of arms from Europe to Fascist-style regimes but with European policy on the sale of arms between Facist-style regimes—notably the sale of arms by Israel to the Fascist regime in Argentina? Can he assure the House that this has now stopped?
    Mr. Hurd: We raised this with the Israeli Government and received assurances from them that they would enter into no new contracts for the supply of arms to Argentina, nor would they speed up delivery under existing contracts.
    Mr. Donald Stewart: As we now have the sad experience of coming under fire from weapons and vessels that we have supplied, will the Government give a guarantee to cease the supply of arms to all South American countries, and in particular will they reconsider the sale of Harrier jets to Venezuela?
    Mr. Hurd: As my right hon. Friend said a few minutes ago, we look carefully at all applications for the supply of

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    arms, and in particular refuse requests where we think that the equipment in question could be used to suppress human rights in the country concerned.
    Sir Bernard Braine: While I agree that there should be a tightening of controls, if not a ban, on the export of arms to authoritarian regimes, particularly those that threaten their neighbours, will my right hon. Friend give the House the assurance that it requires and say that if a small democracy such as Belize is threatened by such a country, we shall stand by it?
    Mr. Hurd: I think that my hon. Friend will have heard the comprehensive answers that have already been given.

    United Nations (Disarmament Session)
    Mr. Chapmanasked the Secretary of State for Foreign and Commonwealth Affairs if he will report further progess on the preparations for the United Nations special session on disarmament in June.
    Mr. Hurd: The final meeting of the preparatory committee for the special session is taking place in New York. The spring session of the Committee on Disarmament in Geneva ended on 21 April and a report of its work will be submitted to the special session. Mr. Frank Judd, the director of Voluntary Service Overseas, and a member of the national executive of the United Nations Association, has agreed to accompany the United Kingdom delegation as an independent adviser in liaison with British non-governmental organisations.
    Mr. Chapman: I am grateful to my right hon. Friend for that information. As he knows that it is the fervent wish of millions of people that the special session should be successful and produce practical measures to bring about multlateral disarmament, will he give an assurance that the Prime Minister will lead the discussions, with a view to obtaining international agreement on banning the manufacture, as well as the stockpiling and use, of all chemical weapons?
    Mr. Hurd: As my hon. Friend knows, the Prime Minister has said that she intends to lead our delegation at the beginning of the United Nations special session. We have paid great attention to the possibility of making progress on the chemical weapons question and we have tabled proposals—which we hope will be helpful—for dealing with the main obstacle of verification. We hope that all those concerned will look favourably on our proposals, so that we can make progress.
    Mr. James Lamond: What have the Government done as a result of the agreement reached at the last United Nations special session on disarmament in 1978?
    Mr. Hurd: Both the last Government and this Government have tried to take every opportunity to help the negotiations between Governments. They are the only possible basis for progress on arms control and disarmament. The first and second special sessions can encourage, stimulate and spur on, but ultimately agreement is reached only by negotiation between Governments.
    Mr. Henderson: Does my right hon. Friend agree that progress towards disarmament will be greatly aided if peace-loving nations are freed from the fear of aggression
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    by countries that do not believe in democracy and if the United Nations has the ability to insist on the implementation of resolutions, such as resolution 502?
    Mr. Hurd: My hon. Friend is absolutely right and I entirely agree with him.
    Mr. Norman Atkinson: Why do the Government practice dual standards in such matters? Why do they oppose, as a matter of principle, the proliferation of nuclear, biological or chemical weapons, but believe in the proliferation of conventional weapons, because they believe in arms sales?
    Mr. Hurd: We have answered many questions on conventional arms sales. When friends in the Third world or elsewhere come to us saying that they have established a need for a new piece of equipment, we encourage them to buy British instead of Russian or French. That seems perfectly reasonable. However, we must deal with the tensions and disputes that create the demand for arms.

    Argentina
    Mr. Dykesasked the Secretary of State for Foreign and Commonwealth Affairs if he is satisfied with the workings of the European Economic Community ban on Argentine imports to all member States.
    Mr. Onslow: Yes, Sir. The solidarity that our Community partners showed so quickly and effectively has been an essential element in the international pressure on Argentina to withdraw from the Falkland Islands. The ban, which affects about a quarter of Argentina's exports, will have a serious impact on Argentina's economy in the absence of an early political settlement.
    Mr. Dykes: Is my hon. Friend entirely satisfied that the ban is working fully and effectively in all respects? With 12 days to go before the renewal date, does he anticipate that, unfortunately, it will have to be renewed?
    Mr. Onslow: We have no reason to suppose that the ban is not working effectively, although obviously its full effects will be felt only with time. If the situation requires, my right hon. Friend the Foreign Secretary w ill ask his colleagues in the Community to renew the ban when he sees them on 8 and 9 May.
    Mr. Skinner: Will the Minister confirm that, notwithstanding the initial statement from the Common Market countries, it will be necessary—quite apart from the question of a renewal date—for many of the Common Market countries to pass the appropriate legislation to enforce the ban, as reported in the communiqué? Is it not a fact that some of the Common Market countries are very hesitant about enforcing the ban by such legislation?
    Mr. Onslow: If we think it necessary to ask the Community countries to take action to implement the ban fully, I hope that they will not hesitate to pass the necessary legislation.
    Mr. Marlow: Since the battles that we are fighting in the South Atlantic are being fought on behalf of all our Community partners, and since they accept that, wall my hon. Friend ask them whether they are prepared to make a substantial contribution from the Community budget towards fighting everybody's battles? I am sure that they would be only too happy to comply.
    Mr. Onslow: I am sure that my right hon. Friend the Foreign Secretary will note my hon. Friend's views.

    Poland
    Mr. Greenwayasked the Secretary of State for Foreign and Commonwealth Affairs what recent steps he has taken to persuade the Polish Government to terminate martial law in Poland.
    Mr. Rifkind: I refer my hon. Friend to the statement by my right hon. Friend the Member for Spelthorne (Mr. Atkins) on 5 February. These measures were designed to persuade the Polish authorities to lift martial law, release those detained and resume a genuine dialogue with the Church and Solidarity. The demonstrations in Poland over the weekend are further evidence that the continuation of martial law is unacceptable to the Polish people. We are continuing to make our views clear to the Polish authorities whenever appropriate opportunities arise.
    Mr. Greenway: May I thank my right hon. Friend for his reply and underline his recognition of the fact that the Polish people showed their distress at the appalling situation imposed on them by the Jaruzelski regime over the weekend? Will the Government continue to do everything possible to make the Polish regime lift martial law and to set the Polish people free once more?
    Mr. Rifkind: My hon. Friend is correct. Last week the Polish Government announced the release of some detainees and some relaxation in the conditions of martial law. However, my hon. Friend and the House will have noticed that only yesterday aspects of martial law were reintroduced, which must be a matter of great concern to the people of Poland and to the West. We shall take every opportunity to impress upon the Polish Government our concern that a genuine dialogue should be reintroduced and that martial law should be removed.
    Mr. George Robertson: Will the Minister accept that few of those who saw the television pictures showing the military action taken against the civilian demonstrators in Poland over the weekend were anything other than horrified? Despite the Government's preoccupation with other matters, will they ensure that the views of the British people are fairly reflected and that the Polish Government understand our outrage?
    Mr. Rifkind: The hon. Gentleman is correct. The large number of people who turned out to demonstrate on the streets of Warsaw on May Day showed the strong support that Solidarity retains. Only last week I met the Polish ambassador to the United Kingdom and impressed on him the fact that the British Government saw the removal of martial law, the beginning of a dialogue with the Polish people and the release of all detainees as necessary preconditions to the resumption of full and normal relations between this country and Poland.
    Dr. Mawhinney: Is my hon. Friend aware that many, if not all, of those of Polish descent who live in this country are unable to telephone their relatives in Poland? Will he make representations to the Polish Government to have the telephone link re-established?
    Mr. Rifkind: We shall certainly do all in our power to enable those in the United Kingdom who wish to maintain contact with friends or relatives in Poland to do so. My hon. Friend will know that the matter is ultimately within the control of the Polish authorities.

  EUROPEAN COMMUNITY

    Common Foreign Policy
    Mr. Knoxasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on progress towards a common European Economic Community foreign policy.
    Mr. Hicksasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on progress towards a common European Economic Community foreign policy.
    Mr. Hurd: In the London report on political co-operation agreed in October 1981 during our Presidency, Foreign Ministers of the Ten reaffirmed and strengthened their commitment to consultations on foreign policy questions and agreed on measures to improve the speed and efficiency of political co-operation. The swift and effective action by our partners following the invasion of the Falkland Islands by Argentina is a striking demonstration of the solidarity which co-operation in foreign policy has made possible and which is an important pressure on Argentina to withdraw from the Falkland Islands.
    Mr. Knox: Does my right hon. Friend agree that the events of the last few weeks have emphasised the importance and necessity of having a common EEC foreign policy?
    Mr. Hurd: Indeed. This is an increasingly important factor in the world, and we are working hard to keep the Ten together.
    Mr. Hicks: Do not these developments, not only in the South Atlantic, but in the Middle East, emphasise the need for a continuing common foreign policy, so that we do not always find ourselves in the situation of having to respond to international developments?
    Mr. Hurd: I think that that is right. We are working in that direction, and that is why we have strengthened the machinery. However, the machinery is not much good unless there is a continuing political will.
    Mr. Christopher Price: What is the policy of the EEC Foreign Ministers towards help, both military and otherwise, for the military dictatorship in Turkey, which invaded a Commonwealth country in respect of which Britain has solemn treaty obligations to protect yet did absolutely nothing whatever about it? If Turkey either harmed the rest of Cyprus or invaded the Greek islands, would Britain go to her aid, in concert with the other EEC countries?
    Mr. Hurd: Turkey is a member of the North Atlantic Alliance. We are keen that she should remain so and keep in the closest touch with us. Questions about Cyprus are a different matter, but as to internal developments in Turkey, we have noticed with satisfaction the timetable for the return to democracy.
    Mr. Jim Spicer: Does my right hon. Friend accept that the quite disgraceful way in which the Irish Government broke ranks with our partners in the Community constitutes a major setback to all our hopes for such a common foreign policy?
    Mr. Hurd: The Irish Government joined the rest of the Ten in the practical measures against Argentina, which

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    have played a big part in securing support for Britain. We think that the Irish Government made a mistake yesterday and that the line they took could be a hindrance to getting the peaceful settlement that we and they want.
    Mr. Heffer: Has the right hon. Gentleman taken note of the statement by Chancellor Schmidt, who has suggested that we should be moving towards a ceasefire? Has he also taken note of today's speech, reported on the Tapes, by the Foreign Secretary of Denmark? Do not those, and the views of other countries, clearly indicate that while they are happy to support economic sanctions, they are not prepared to support an all-out conflict, which could perhaps get worse and lead Britain into something much more unfavourable?
    Mr. Hurd: We understand the concern that our friends express and share the view that we need to move towards a peaceful settlement. I think they understand that as part of the movement towards a successful settlement, the solidarity of the European Ten is of enormous importance.

    Political Co-operation
    Sir Anthony Meyerasked the Secretary of State for Foreign and Commonwealth Affairs whether, to achieve increased political co-operation within the European Economic Community, he will propose specific measures to improve consultation and concerting of policies in other than economic matters.
    Mr. Hurd: As I have already indicated, the London report on political co-operation, agreed in October 1981, contains a number of measures designed to improve the working of political co-operation. These are being carried out.
    We are also discussing a number of proposals for improving co-operation between member States and within the Community in a variety of ways. As my hon. Friend knows, there is also already excellent co-operation on anti-terrorism.
    Sir Anthony Meyer: Is it not clear that membership of the Community is the readiest weapon in the hands of the British Government to help them achieve their political objectives? But is it not equally clear that this membership poses a corresponding obligation not to place too great a strain on European Community solidarity and also imposes an obligation upon us to support, when the time comes, the vital national objectives of other members of the Community?
    Mr. Hurd: My hon. Friend is right. These obligations lie upon all member States, and we are doing our best to make that clear.
    Mr. Pavitt: Is the Minister satisfied that there is sufficient co-ordination between the political advances made in the Community and those of the Council of Europe? During his visit to Strasbourg last week, was the right hon. Gentleman aware of the motion on Turkey put forward by the Socialist Group of 21 countries, and does he take that into consideration in his negotiations on political matters with the Ten?
    Mr. Hurd: Yes, we try to keep the two in harmony as far as we can. There was a good discussion on Turkey between Ministers in the Council of Europe last week, in which the Turkish Foreign Minister played a helpful part.
    Mr. Bill Walker: When my right hon. Friend discusses co-operation with his Common Market partners, will he remind them that the EEC represents about half of the world's democracies and that what we are doing in the Falklands is defending democracy and the rule of law?
    Mr. Hurd: I think that our partners clearly understand that when they act to support us they are not simply doing us a favour but are supporting principles of international law that are extremely important for them as well.
    Mr. Hooley: Is the Minister aware that political co-operation among Western European countries is perfectly feasible without the Treaty of Rome and that the United Kingdom's relations with other European countries were happier, more constructive and more productive before we joined the Community than since?
    Mr. Hurd: If the hon. Gentleman and his friends believe that, they are living in cloud-cuckoo-land. The fact is that political co-operation has been painfully and slowly constructed on the basis of the Community.

    Budget
    Mr. Spearingasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement concerning current negotiations within the European Economic Community concerning adjustment of the British contribution to the Community budget.
    Mr. Pym: The Foreign Ministers of the Community had a thorough discussion of the budget problem on 27 April and are agreed on the need for an urgent solution. The next discussion of this subject may take place during the meeting already planned for 8 and 9 May. I have been continuing to press for a settlement which will be fair for Britain and fair for the Community too.
    Mr. Spearing: Will the right hon. Gentleman give an assurance that Britain will accept nothing less than the existing arrangements, preferably for a period of four rather than three years? In any consideration of political co-operation, is it not important that acceptance of our requirements as fair and just should be the first step to be taken by our so-called partners?
    Mr. Pym: It is a pity that the arrangement agreed in 1980 did not endure longer. I should also like to negotiate a longer arrangement this time. I cannot say whether that will be possible, but my predecessor worked for that. Indeed, I have worked for that since taking office and will continue to do so. However, we shall have to see how the discussions go.
    Mr. Stokes: In any discussions on the budget or wider aspects, will my right hon. Friend remind our EEC partners that after the last war it was British forces who liberated all those countries? We expect their support now that we are trying to liberate British territory.
    Mr. Pym: My hon. Friend's remarks are perfectly true. However, we are grateful to the member States—I have expressed our gratitude to them—for the support that they have given us over the issue that is now causing us so much immediate difficulty. They came to our assistance positively and speedily and that has been very helpful.
    Mr. Guy Barnett: Will the right hon. Gentleman give an assurance that the United Kingdom's bargaining position has not been circumscribed by concessions made

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    in the negotiations on trade sanctions against Argentina? Will he further assure the House that the massive farm price increases that the Government agreed to last week were not the result of a deal made during the sanctions negotiations?
    Mr. Pym: The action in the Falkland Islands and the help and support that we have received from the Community is not in any way associated with the budget or the mandate. In the meetings that I have had none of the Community Ministers suggested that that was so. Therefore, the hon. Gentleman can have confidence.

Falkland Islands
Mr. Speaker: Statement, Mr. Secretary Nott.
Mr. Harry Greenway: On a point of order, Mr. Speaker.
Mr. Speaker: Order. I will take points of order after the statements.
The Secretary of State for Defence (Mr. John Nott): With permission, Mr. Speaker, I should like to make a further statement about the Argentine attack on HMS "Sheffield". In the statement I made to the House late last night I provided an outline of the attack on HMS "Sheffield" and of the loss of one of our Sea Harriers and its pilot. The pilot was Lieutenant Nicholas Taylor. His next of kin have been informed, and the whole House will, I know, wish to join me in expressing sorrow and deepest sympathy with his family.
It is entirely right that the House should now have as full an account of the attack on HMS "Sheffield" as I am able to give today. The House will understand why it will be necessary for me to repeat some of the details I provided last night.
At about 3.30 London time yesterday afternoon HMS "Sheffield" was attacked by Argentine Super Etendard aircraft which launched Exocet missiles. HMS "Sheffield" was some 70 miles off the Falklands enforcing the total exclusion zone, together with other elements of the task force. One missile missed the ship; the other hit her amidships. The resulting explosion caused a major fire. Although attempts were made to extinguish the fire for nearly four hours, with the assistance of fire-fighting teams from other ships in the area, it eventually spread out of control. At about 7 pm London time the order was given to abandon ship. Ships of the task force in the area picked up survivors, and the latest information I have is that about 30 men are still missing. A further number sustained injuries, and they are being well cared for under medical supervision. We have no further details of casualties at the present time. The ships are still engaged on operations and I know that the force commander will provide further information just as soon as he is able to do so. All the next of kin of the ship's company are being informed. The thoughts of the whole House are with them at this sad time.
Mr. Denis Healey: I associate the Opposition with the Secretary of State's tribute to the courage of the Harrier pilot and the crew of HMS "Sheffield" and we extend our sympathy to the families of those who gave their lives in defence of a principle which is regarded by all right hon. and hon. Members as one of great importance.
Is there any truth in reports in the American press and on American television that a major naval engagement is proceeding in the South Atlantic? May I also revert to an issue of great importance for the future that I raised yesterday? I think that the right hon. Gentleman will concede that the Argentines knew the position of our task force yesterday and that, therefore, its position on Sunday when the attack on the Argentine cruiser took place no longer needs to be concealed from the House or the world.
I hope that the right hon. Gentleman will find it possible to give us a better idea of the distance between—[HON. MEMBERS: "Why?"] I will explain why in a moment. I hope that the right hon. Gentleman will give us a better
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idea of the distance between the point where the engagement took place and the task force. If he is unable to do so, right hon. and hon. Members and foreign countries are bound to take his silence as implying that the decision to attack the cruiser was taken by the submarine commander without reference to the commander o f the task force—perhaps because, as the Secretary of State suggested yesterday, the submarine commander was unable to communicate with the task force commander.
If that were the case, it argues that there is a serious handicap in political control of our forces, at a time when, as the House agrees with the right hon. Gentleman, we must always use minimum force under political control to achieve the diplomatic objective.
Mr. Nott: I appreciate the right hon. Gentleman's opening comment. Many men are missing and have probably died defending principles that the right hon. Gentleman said that he thought were supported by the House. I much appreciate those words.
We have no knowledge of any naval battle going on in the Atlantic at present. I am aware that there have been reports from American sources that one is taking place. I cannot be sure, but we have no reports and I did check on that quite recently. [HON. MEMBERS: "Not sure?"] I am sorry, but it is impossible at a distance of 8,000 miles to require our task force commander to communicate with London repeatedly during the day.
On the question that the right hon. Gentleman asked yesterday about the distance, I see no reason why we should not be able to provide that information within a few days. There is no reason to conceal it. We think that HMS "Sheffield" may have been detected by an Argentine reconnaissance aircraft. We cannot be sure, but we think that that may have been the case and perhaps that was the reason why the attack with Exocet missiles was successful. That underlines the fact that we must not, on any account, put our ships at hazard by giving information prematurely, but I certainly do not want to conceal from the right hon. Gentleman information that can be safely announced.
On the right hon. Gentleman's final question, I made it clear yesterday that every action by our foces in the South Atlantic is taken within strict political control and authority. The actual decision to launch a torpedo was clearly one taken by the submarine commander, but that decision was taken within very clear rules of engagement that had been settled in London and discussed by the Government. As I made clear yesterday, we regarded the "General Belgrano" as a threat to our forces and we could not conceivably have had any lesser rules of engagement than those which we issued, which were to allow our 'ships to defend themselves, as a fleet.
Mr. Alan Clark:: Does my right hon. Friend agree that the loss of a ship is a dreadful thing for the Royal Navy and that whatever declamations of national purpose and heroism may be made, and with which I fully concur, nothing can make up for the personal, terrible grief and sense of loss of the next of kin? Will he assure the House that wherever it is humanly possible the next of kin will hear of such events before the news is released to the agencies? Would it be possible for an officer to visit the next of kin in every case to assure himself that no immediate personal hardship arises and to explain to the next of kin their entitlement to pensions and other benefits?
Mr. Nott: As my hon. Friend says, it has been a dreadful event. An organisation has been set up to process all casualty information and there are sub-units in naval bases that receive information and inform the next of kin of men of the Royal Navy. Next of kin are normally informed by selected officers from local establishments, preferably by a home visit but by telephone if essential. This is done as quickly as possible after information about casualties has been received from the task force. I entirely agree with my hon. Friend that the procedures are very important and where possible should be done by personal contact.
It would be much appreciated by the Royal Navy and, of course, by the next of kin if those who are involved in this tragic event could be given some privacy by the media in the next few days. [HON. MEMBERS: "Hear, hear".] I ask that only because of certain problems which have arisen today.
Mr. David Steel: My colleagues on the Liberal Bench would obviously wish to be associated with the expressions of sympathy from the Government and the official Opposition to the relatives of those lost in this terrible disaster.
Will the right hon. Gentleman accept that this incident, together with the sinking of the Argentine cruiser, gives added urgency to the need to seek an effective diplomatic solution to the dispute? Is it the case that consideration had been given to supplying HMS "Sheffield" with a stretched version of Sea Dart with updated tracker radar, and was that one of the casualties of the defence review?
Mr. Nott: I am most grateful to the right hon. Gentleman for his initial comments about the tragedy. He is right, of course: we want a diplomatic solution. We shall continue to strive for it. My right hon. Friend the Foreign Secretary will make a statement on that subject in a moment.
The "Sheffield" was armed with Sea Dart missiles of the latest type. The missiles are an area air defence weapon. They can be used, but not very successfully, against incoming missiles of a particular type. They are primarily for engaging incoming aircraft on an area basis. That was the principal defence of the "Sheffield". We do not know why the Sea Dart system did not successfully engage the aircraft. It is possible that the aircraft came in very low under radar cover, but there was nothing in the equipment of the ship which differed in any way from the normal complement of weapons on our type 42 destroyers.
Mr. Geoffrey Johnson Smith: As the battle goes on, more and more of us are concerned about the presentation of what happens. Leaving aside whether the statement last night was necessary, what should be of more immediate concern to my right hon. Friend within his total command is the extent to which we should be briefed in future through television by the Ministry of Defence in the way that it has done. I am sure that my right hon. Friend would agree that much of that briefing is for the benefit of the press who are incapable of taking shorthand. Perhaps it might be better to review those arrangements.
Mr. Nott: I am not entirely clear to what my hon. Friend refers. The Ministry of Defence spokesman briefs the press every day when there is an incident. He gives a purely factual account of what has arisen. I think that my
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hon. Friend must be referring to all sorts of other briefings which are given by other people. The Ministry of Defence briefing is a purely factual one. It never contains opinions and that is how we wish to keep it.
Several Hon. Members rose——
Mr. Speaker: Order. There is a further statement to follow. I propose to call three more hon. Members from either side on this statement and then move on to the second.
Mr. Martin Flannery: Is the Secretary of State aware that the disaster to the "Sheffield", a ship which has immense ties with the city of Sheffield, has resulted in a great groundswell of desire, not only in Sheffield but much further afield, for peace negotiations? Is the right hon. Gentleman aware that telegrams have come to Sheffield city council from many factories and to hon. Members representing Sheffield constituencies? Is he further aware that this afternoon in the city there will be an ordinary council meeting at which the leader of the council will move a resolution in which he asks, on behalf of the council, for peace negotiations through the United Nations? Does the right hon. Gentleman not agree that the insistence that no negotiations will take place as long as those troops are on the Falklands is now a brake against the struggle for peace? Is it not time for that to be quashed and for Britain to go to the United Nations to discuss the whole question of a peaceful solution through negotiation?
Mr. Nott: Of course there is a desire for peace—that desire is widespread in the country. It is shared by all my right hon. and hon. Friends. We want to obtain, as soon as we possibly can, a diplomatic settlement to the problem. However, I hope that the right hon. Member for Leeds, East (Mr. Healey) will forgive me if I repeat a very fair and reasonable comment which he made this morning on the BBC "Today" programme.
The right hon. Gentleman said:
"It would not be to Britain's advantage to agree to a ceasefire unless we were clear that we had a negotiating process which would get the Argentines off the islands."
That is the general view of the whole House. It is not shared by every hon. Member, but it is the general view of the House, and I share it.
Mr. Peter Griffiths: Does my right hon. Friend agree that the most appropriate memorial to the brave young men who lost their lives in HMS "Sheffield", the home port of which is in my constituency and whose loss has brought tragedy to the city and to my constituents, would be to carry through the enterprise for which they gave their lives as quickly as possible and with as little further loss of life as may be possible? Does he agree that the quickest way in which that could be done would be for the Argentine Government to agree to remove their troops from the Falkland Islands?
Mr. Nott: I entirely agree with my hon. Friend. As I said yesterday, the way in which the conflict can be ended straight away is for the Argentines to agree to implement resolution 502. If, in the next few days, the Argentines do not challenge our ships and men and do not threaten them, and if they cease entering the total exclusion zone, no casualties can arise. But the way to solve the conflict is for the Argentines to abide by the United Nations resolution.
Mr. Jack Dormand: In answer to my right hon. Friend the Member for Leeds, East (Mr. Healey), the Secretary of State said that there were difficulties in maintaining communication between the task force and the Government. I fully accept that there must be real difficulties in doing that, but the Secretary of State then went on to say that there was full political control of the decisions of the task force. Some hon. Members are extremely concerned about the way in which the decision was taken on the firing of two torpedoes. Is there not some inconsistency there which requires explanation?
Mr. Nott: I shall give an example to the hon. Gentleman of what I meant. When our ships are engaged in extremely dangerous operations in which they are subject constantly to attack, they frequently—and rightly—impose on themselves radio silence. Unless the ships are maintaining radio silence, their position can be detected. Therefore, there will be periods when, for very good operational reasons, we are not in contact with all our ships. That was the type of example that I was trying to give. The communications with the task force by satellite and by other methods are excellent and are more than sufficient for us to pass political directives and political orders to the commander but sometimes there may be delays for the sort of reason that I have given.
Sir Frederick Burden: While we are pursuing every effort to bring about a diplomatic settlement of the dispute, is it not evident that the Argentines at this moment are determined to deploy all the military strength that they can against our task force? Therefore, should we not recognise that fact and no longer talk about using minimum force against an enemy who is prepared to deploy his greatest strength against us but use our strength as cleverly as possible to bring the dispute to an end and bring the Argentines to the diplomatic table?
Mr. Nott: When we say that we wish to pursue minimum force, that does not mean in any way that we are asking our forces to hold back on the pursuit of their objectives, nor in any way does it suggest that they are not totally free to defend themselves against attack and, when they are threatened, to attack the enemy first. They are not
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required to hold back in any way. I agree with my hon. Friend that the aggression started on the Argentines side. Since then they have continuously reinforced the islands, which they are required to leave by resolution 502. Before the "General Belgrano" was sunk—I understand the strong feelings in the House about that incident, which I share—it threatened the security and safety of our men and ships. In that situation it would not have been possible for us to ask our forces to hold back in defending themselves.
Mr. Allen McKay: Will the Secretary of State give us some information on political control, which has been exercising the minds of many people outside the House? Will he assure the House and many people outside that political control does not slow down any defensive action that the fleet may take in its task, taking into consideration the fact that HMS "Sheffield" was a type 42 anti-aircraft destroyer, built purely and simply as any anti-aircraft destroyer and the fact that radar picks up the planes many miles before they come into firing range?
Mr. Nott: I can give the hon. Gentleman that total assurance. There is nothing in any directives that we have given which can in any way hazard our ships, which are confronted with a difficult task.
Sir Patrick Wall: Is not the loss of HMS "Sheffield" a clear indication that we have now reached the missile age? Is my right hon. Friend aware that the only effective defence against sea-skimming missile s is Sea Wolf? Will my right hon. Friend press ahead as a matter of the utmost urgency with lightweight Sea Wolf and see that that weapon system is installed in most of our ships?
Mr. Nott: I share my hon. Friend's concern about the development in missiles. As he knows, we have made the radar tracker for the lightweight Sea Wolf a major priority in our programme. I agree with my hon. Friend. On; of the factors that perhaps has led to us not having anti-missile missiles as fully on our ships as I should like is that the Soviet Union and its Warsaw Pact allies until recently were not deploying sea-skimming missiles. That is one of the reasons why, in retrospect, we have not moved forward as fast as we should.

Falkland Islands
3.53 pm
The Secretary of State for Foreign and Commonwealth Affairs (Mr. Francis Pym): My right hon. Friend the Secretary of State for Defence has just spoken about military aspects of the situation. I should like to add my own tribute to the courage of the crew of HMS "Sheffield" and of the Harrier pilot and my deep sympathy to the families.
The military losses which have now occurred on both sides in this unhappy conflict emphasise all the more the urgent need to find a diplomatic solution.
The House will wish to know that since my return from the United States on Monday I have remained in the closest possible touch with Mr. Haig. As I reported to the House yesterday, we are working very actively on ideas put to us by Mr. Haig, including some advanced by the President of Peru. Yesterday afternoon, after my statement, I sent a constructive contribution of our own to Mr. Haig. He is taking this fully into account. I shall be in touch with him again later on today.
I want to tell the House that a vital ingredient of the ideas on which we are working is an early ceasefire and the prompt withdrawal of Argentine forces. I can assure the House that we are sparing no efforts in the search for an acceptable solution in line with the principles which we have stated on several occasions.
The points which were put to me in New York by the Secretary-General of the United Nations are also receiving our very careful attention. I have been in touch with Mr. Perez de Cuellar about this since my return from New York and will continue to keep in close contact with him.
There are many points of similarity between the Secretary-General's thinking and the points we are pursuing with Mr. Haig. Indeed, Mr. Perez de Cuellar's helpful ideas seem certain to be reflected in the basis of any solution which we may be able to achieve.
I can assure the House that any obstructionism there may be will not come from our side. Although it is we who have been the victims of aggression, it is also we who are working tirelessly and constructively for a peaceful solution.
Mr. Denis Healey: I thank the right hon. Gentleman for making the statement. I hope that he will not hesitate to make further statements whenever he has further information to give us. I thank him particularly for his opening words. We all feel that if military escalation continues in the way in which it has done over the last few days, more lives—both Argentine and British—than there are inhabitants on the Falkland Islands could be lost. That underlines the paramount necessity of achieving a diplomatic solution.
The right hon. Gentleman referred to the ideas of the American Secretary of State. Will he confirm reports that the American Secretary of State has asked for a two-day ceasefire so that the diplomatic possibilities can be further explored? If so, what response have Her Majesty's Government given?
I particularly welcome what the right hon. Gentleman said about the United Nations Secretary-General. He was a great deal more forthcoming than yesterday, when he was more forthcoming than last Thursday. I see that the United Nations Secretary-General is reported in today's
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edition of The Times as saying that the suspension of the peace initiative by Mr. Haig had created a diplomatic vacuum which only the United Nations could fill.
As the right hon. Gentleman will know, that has been the view of Her Majesty's Opposition for some time. I understand that the Argentine Government have already agreed to accept the good offices of the United Nations. I appeal to Her Majesty's Government to do the same. Any doubts that they might have had at one time must have been removed by the Secretary-General's statement yesterday, when he insisted on the full implementation of resolution 502, which requires the Argentine forces to leave the Falkland Islands.
I was particularly glad to hear the Secretary of State for Defence endorse my words this morning that the ceasefire must depend on agreement on a negotiating process which will get the Argentine forces off the islands. That is an important distinction from the demand that has been made occasionally, that the ceasefire cannot take place until the Argentine forces have left.
I take this opportunity to ask the right hon. Gentleman again a question that many hon. Members on both sides of the House thought was unsatisfactorily answered by the Minister of State, the hon. Member for Woking (Mr. Onslow), earlier today. The hon. Gentleman was asked by hon. Members on both sides of the House to give a firm assurance that the British forces now committed to the defence of Belize would not be withdrawn until the threat from Guatemala was seen to be removed. If the right hon. Gentleman could give us that assurance, it would do much to allay the fears that our behaviour may be misinterpreted by the Government of Guatemala in the same way as our behaviour was misinterpreted before the Argentines invaded the Falkland Islands.
Mr. Pym: I thank the right hon. Gentleman for what he said at the beginning of his intervention. I very much appreciate his remarks. I fully realise that we both share the strongest desire to achieve a negotiated settlement, if that can be done.
The right hon. Gentleman referred to the possible suggestions by Mr. Haig for a two-day ceasefire. A ceasefire must be a part of any negotiated settlement that involves a withdrawal. That is an area that is and always has been part of the discussions. I am sure that it is helpful that I am in close touch with the Secretary-General. He has offered his good offices both to the Argentine and to the United Kingdom. I have responded in that sense. The Secretary-General has not put any definite proposals to me, but we have shared our ideas and I am responding to the ideas that he sent recently.
The right hon. Gentleman referred to reports of the suspension of the diplomatic mission by Mr. Haig. There has been no such suspension. Perhaps the right hon. Gentleman was implying that in some way Mr. Haig's efforts had come to an end. That is not so. It is clear that they began a new phase when the Argentine rejected the proposals that had been put forward earlier. I am certain that it is helpful that Mr. Haig's efforts are continuing.
I do not agree that the vacuum to which the right hon. Gentleman referred can only be filled by the United Nations. I am not worried about how the vacuum is filled so long as it is filled. I have told the House all along that I believe that Mr. Haig's efforts are the most hopeful basis for a settlement, but I do not exclude anything else, and certainly not the efforts of the United Nations. That is why

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I talked to the Secretary-General personally. He is in touch with both our Government and the Argentine Government. We hope that that will make a contribution. As I said in my statement, the principles and the basis upon which we are all talking have many aspects in common.
We have no plans at present to withdraw our forces from Belize. The right hon. Gentleman can be assured that his worries about the neighbouring States are the prime consideration in the Government's mind relating to what we do in connection with our forces there.
Mr. Healey: The right hon. Gentleman's statement on Belize did not carry matters further forward. I hope that he will reconsider the matter and take the opportunity later to give an explicit assurance, for which many hon. Members on both sides of the House have asked.
It has been widely reported that the United Nations Secretary-General has put forward proposals both to the British and to the Argentine Governments not on a substantive solution of the crisis, but on ways in which negotiations might be carried forward. It is also reported that he has asked the British and Argentine Governments to respond to those proposals today. Will the right hon. Gentleman confirm those reports? Will he assure the House that the Government will take the initiative in responding and will not hide behind the possible refusal of the Argentine Government to respond as was the case with Mr. Haig's earlier proposals?
Mr. Pym: There is no question of our hiding behind anything or waiting for someone else to refuse or reject. There has been no time when I have not been looking constructively for a way forward. I am in close touch with the Secretary-General and I am responding to the outlines about which the right hon. Gentleman spoke. Nevertheless, I still believe that the work that I am doing with Mr. Haig is most likely to produce a result, but no door is closed.
Mr. Healey: In answer to my earlier question, the right hon. Gentleman said that no proposals had been made by the Secretary-General. Now he tells us that proposals have been made. I do not blame him for not disclosing them. The matter requires to be kept under diplomatic privacy, but, if proposals have been made, the Opposition would wish the right hon. Gentleman to make a positive response without delay.
Mr. Pym: No formal proposals have been put to me. They were ideas. I am not sure what words to choose. The Secretary-General is receiving a response from me. I do not know what the Argentine Government are doing. I am in close touch with the Secretary-General and I am responding to him. That is the most helpful reply that I can give. It is the most positive position that I can be in.
Mr. Speaker: Order. At Question Time I gave an undertaking that I would call first the five hon. Members who waited for replies to their questions addressed to the Foreign Secretary.
Mr. Dennis Canavan: How many more lives must be lost before the Government fully realise that there cannot be a purely military solution to the crisis? If the Government are seriously intent on a long-term peaceful solution, why do they not comply with the increasing demands from some Opposition Members, and
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demands being made nationally and internationally, for an immediate ceasefire and for the United Nations, not the United States, to act as a mediator?
Does the right hon. Gentleman agree that, if that is not done, the crisis is in danger of escalating into a full-scale blood bath, which no one will win, and that Britain will find itself increasingly isolated?
Mr. Pym: Of course, we would like an immediate ceasefire and an immediate withdrawal. The Argentine is under an obligation under resolution 502 to withdraw its forces. At present, however, it shows no sign of doing so. Indeed, the reverse is true. A withdrawal must be established in the first place. That is what we must achieve.
I am working with all the strength that I can muster to find a solution, notwithstanding the fact that we are the victim. We are suffering from the act of aggression. It is the Falkland Islands that have been invaded. There seems to be no desire on the other side—we have seen very little—to come to an agreement. I am doing everything that I can, because, like the hon. Member for West Stirlingshire (Mr. Canavan) and everyone everywhere, I want a settlement. However, the Argentine must withdraw its forces.
Mr. Michael Neubert: Is it not clear that, although the 8,000 miles between Britain and the Falkland Islands gave time for negotiations, the indivisibility of sovereignty allowed little scope for such negotiations? Just as the worsening weather in the South Atlantic vas undoubtedly a factor in the timing of the Argentine invasion, so the prolonging of negotiations indefinitely without the withdrawal of Argentine troops consolidates Argentine aggression. In those circumstances, does my right hon. Friend agree that the most effective negotiating weapon that is available to us is likely to be the legitimate exercise of force?
Mr. Pym: I note carefully what my hon. Friend has said. I should infinitely prefer, as I am sure would [he House, that the Argentine troops left the islands under a peaceful umbrella rather than have to be driven out by force. If we can possibly achieve that, I believe that everyone will be immensely relieved. We do not know whether that can be done, but I shall leave no stone unturned in an attempt to achieve it.
Mr. Bob Cryer: Will the right hon. Gentleman confirm that resolution 502 does not give carte blanche to the Government for any military action, but calls for the cessation of hostilities and the negotiation of a peaceful resolution to the dispute? Do not the Government recognise that escalation of military activity could result in the deaths of Falkland Islanders—the very people we claim to be defending? Does the right hon. Gentleman not realise that, as military action goes on, the Government seem to look less and less for a diplomatic settlement and more and more for a military one in what seems to many people to be a tragic and misguided escapade?
Mr. Pym: That is not true. The resolution also calls for a withdrawal. That is the part that the hon. Gentleman did not mention. I think constantly of the islanders. They are suffering at the moment under the heel of the invader, whom they did not want and did not invite and who intends to impose upon them a way of life and Government that

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they do not want. It is in their defence that we have taken the steps that we have. Of course they are suffering. Any invaded country suffers. There are too many invaded countries in the world at the moment. We have the islanders very much in mind. It is to their rescue that we have devoted all our efforts for which we have received the support from our friends all around the world.
Mr. Jonathan Aitken: I warmly welcome my right hon. Friend's constructive communications with the Secretary-General of the United Nations. Does he agree that there still remain formidable problems in communicating with the Argentine junta as its leaders have so far shown themselves to speak with divided, contradictory and, at times, incoherent voices? In those circumstances, will my right hon. Friend be exceedingly cautious about negotiating terms for a ceasefire or anything else until the Argentine has shown, by its deeds, that it is withdrawing its troops from the Falklands?
Mr. Pym: Yes, I shall show appropriate caution. I shall also show appropriate enthusiasm. There is no doubt that it is exceedingly difficult to negotiate with the Argentine, as the construction of the Government there is such that sometimes the decision of the President or of the Foreign Secretary is easily overthrown—sometimes in the middle of the night. It is not easy to negotiate with them. Nevertheless, I shall continue to bear in mind, as I believe I have all along, the factors to which my hon. Friend referred.
Mr. D. A. Trippier: In view of the events of the past few days, is it correct to assume that the former initiatives that were taken by Mr. Haig are now interlinked with those pursued by the Peruvians?
Mr. Pym: The proposals that were produced by the United States a week or 10 days ago but which were turned down by the Argentines are now over. Since then, a number of Governments have produced ideas. The ideas on which we are now working are a combination of United States proposals and proposals from the President of Peru. It is a mixture.
Several Hon. Members rose——
Mr. Speaker: Order. I propose to call three more hon. Members from each side and then to move on.
Dr. David Owen: Is the Foreign Secretary aware that we strongly support his insistence on linking any early ceasefire with the prompt withdrawal of Argentine forces, no doubt with phased withdrawal of British forces from the Southern Atlantic as well?
Will the right hon. Gentleman give a little more detail about the activities of the Peruvian Government? Is there any chance of the Peruvians actually putting down proposals rather than going into a formal Security Council debate?
Does the right hon. Gentleman recognise that many people in the world now expect some clear indication of the British Government's long-term position? Will he come forward with a positive welcome for the concept of trusteeship councils?
Mr. Pym: I am grateful for the right hon. Gentleman's first remark.
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Some proposals that originated entirely in Peru have now been, as it were, absorbed in the other negotiations designed and thought up by the United States. I have made a constructive contribution to the latest suggestions, and I hope that out of them will come a proposition with some chance of success. I cannot say more than that at this stage. The United States Secretary of State is in close touch with Peru. I think that working in that way, through them and the friends of the Argentines, may be a good way to negotiate with the Argentines.
As to the long term, Her Majesty's Government have an open mind about what might be the ultimate solution. The United Nations trusteeship concept is most certainly one of the possibilities and may eventually prove to be a highly suitable one. Whether it will match the needs of the situation later, I do not know, but I would not exclude anything. I think that I can give a reasonably positive response to the right hon. Gentleman on that, but that is in no way to prejudge the matter. It is certainly among the concepts that can be considered.
Mr. Norman St. John-Stevas: Will my right hon. Friend reiterate from the Dispatch Box that it was in support of our diplomacy that the overwhelming majority in the House supported the dispatch of the task force to the South Atlantic and that that resolution still holds good? I congratulate my right hon. Friend and wish him well in his efforts to secure a diplomatic solution to the crisis, as that is what the overwhelming majority of people want—not an escalation of violence.
Mr. Pym: I am grateful to my right hon. Friend for what he said. The strategy must be seen as a comprehensive goal. The diplomatic activity, the economic pressure, the task force and the military pressure are all part of the same process of bringing pressure to bear on the Argentines to secure, one hopes by peaceful means, the withdrawal that everybody wants.
Mr. Donald Stewart: I should like to associate my hon. Friend the Member for Dundee, East (Mr. Wilson) and myself with the expressions of sympathy for those who lost their lives in the recent action.
Does the Foreign Secretary accept that the dispatch of the task force, combined with diplomacy, which was wholly justified, seems to have come to an end as a police action, and that the next stage must be negotiation or all-out war? In those circumstances, and in view of what he said in answer to an earlier question about the eventual settlement of the dispute, will the right hon. Gentleman confirm that he will continue to press for negotiation and a ceasefire concurrently with the removal of Argentine troops from the Falkland Islands?
Mr. Pym: I am grateful for what the right hon. Gentleman has said. I assure him that I shall certainly continue those efforts. As for the long term, that should be negotiated and discussed around the table with the parties involved and others in whatever forum is thought best at the time. My immediate concern—and I believe it is the immediate concern of the House—is how to reach a position in which such negotiations are possible. That requires withdrawal and a ceasefire. It requires peace again. However difficult it may be, I am doing everything possible to try to achieve that.
Sir Frederic Bennett: In view of all the remarks about principles today, will my right hon. Friend

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reclarify for the benefit of all of us the principles which, in his view and ours, morally justify our intervention? I understand them to be, first, the self-determination of the people of the Falkland Islands and, secondly, that in this day and age acts of unprovoked aggression shall not succeed. The two are linked, but they are not necessarily the same. I say that in view of the remarks of the Deputy Leader of the Opposition, who compared the number of casualties with the number of Falkland Islanders. That may have relevance to the first principle, but it has none at all to whether in this day and age acts of unprovoked aggression shall be allowed to succeed.
Mr. Pym: We are in business to prevent a military dictatorship and an undemocratic Government from imposing on a smaller country, by aggression and invasion, a type of government that the people of the smaller country do not want. The principles that moved Members of the House are set out in the United Nations charter in the principles of democratic rights and so forth. I think that people throughout the world understand very well what this is all about.
During my recent visit to the United States, I went out of my way to emphasise time and again that this was not just a British problem but one in which many other countries had an interest, particularly the democracies and the small countries, many of which are fearful enough already. If we could achieve success in this case, one hopes by peaceful means, I believe that the world would heave a sigh of relief and that, for the ensuing few years at least, it would be a more peaceful, stable and less fearful place in which to live.
Several Hon. Members rose——
Mr. Speaker: Order. It has become clear to me that, to be fair to the larger parties as well as to the minority parties, I shall have to call two more hon. Members than I had intended from each side to enable me to achieve a balance.
Mr. A. J. Beith: Is there now any prospect that, with the help of the United Nations Secretary-General and perhaps the Peruvian Government, the real holders of power in the Argentine junta may be brought into the deliberations, as Mr. Costa Mendez clearly had his authority to negotiate a settlement cut from under his feet at a crucial moment?
Mr. Pym: I am not in a position to answer that question competently, but the signs are that the junta makes up its own mind with the generals and admirals and anyone else it cares to consult. I can only hope that a positive answer will be forthcoming if we can reach a stituation in which proposals can be put to the Argentines.
Mr. Ian Lloyd: The House and the country clearly wish my right hon. Friend well in any negotiations that he thinks it worthwhile to undertake and which do not prejudice our fundamental national objectives, but is it not preferable that we should recognise, sooner rather than later, that, failing a negotiated settlement, the task force will not be able to achieve its objectives unless the Argentines are not capable of operating missile-carrying aircraft from any runway within striking distance of the carrier fleet?
Mr. Pym: Naturally, the military aspects are being considered in great depth, and possible plans are being prepared. That is entirely right, because we have a task
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force operating in the South Atlantic. But let us at present concentrate our minds on trying to achieve a peaceful settlement, which is what the House wants.
Mr. Frank Dobson: Does the Foreign Secretary agree that there have been serious shortcomings in the conduct of Britain's foreign affairs in that, having set out to build up military pressure and at the same time to seek a diplomatic solution to the problem, the Government found themselves building up military pressure at a time when the Haig initiative had collapsed and the Government had failed to make arrangements at the United Nations or anywhere else for another mediator to be on hand?
Mr. Pym: I can only say to the hon. Gentleman that, without military pressure, there would be no chance whatever of an Argentine withdrawal.
Mr. Nicholas Winterton: Does my right hon. Friend agree that the brave men and women of our Armed Services in the task force are shouldering the burden for the whole world in upholding law and order? Does he realise that the longer negotiations continue, the greater will be the danger to them? Has the Argentine junta or any of its representatives given any indication at all that it is prepared to withdraw from the Falkland Islands in accordance with part of Security Council resolution 502 which, I remind the House, was passed, with much support for us, a month ago?
Mr. Pym: On the latter point, there has been all too little indication so far. On the former point, I do not see our diplomatic efforts as in any way conflicting with what is happening to our task force. The task force has its operating instructions and is doing its job as best it can. That in no way conflicts with the diplomatic efforts that we are making. I hope that that reassures my hon. Friend.
Mr. Nigel Spearing: Is it not now opportune for the United Nations and its members to act under article 41 of the charter and to impose much greater economic sanctions on the Argentine? Unless that is done—and, I hope, subsequently lifted—why should the Argentines now agree to a negotiated settlement?
Mr. Pym: I suppose if they come to the conclusion that it is in their interest. Of course, it would be helpful if the United Nations passed such a resolution, and if that resolution were than carried out, but I doubt whether that would happen.
Mr. Eldon Griffiths: As my right hon. Friend appeared to imply that a temporary cessation of hostilities might form part of the current proposals, will he assure us that the British Government will agree to no ceasefire if its only or main effect would be to reduce the military pressure on the Argentine and enable the Argentine to consolidate its illegal occupation of the islands?
Mr. Pym: As I said earlier, arrangements for a ceasefire are part and parcel of a withdrawal. I certainly have in mind what my hon. Friend said.
Mr. Healey: I thank the right hon. Gentleman again for the frank way in which he has answered questions, and I hope that he will not hesitate to come back to the House. I thank him, too, for the increasing emphasis that he is placing on the United Nations. I say, once again, that there is a risk that, unless we take an early initiative within the

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United Nations, we may find that our action is pre-empted by representatives in the Security Council whose interests are by no means as benign or well-informed as our own.
Finally, the Opposition will wish to keep under consideration the proper date on which the House should have another debate on the matter. If we reach a view on the matter, I hope that it will be supported by the Government.
Mr. Pym: I thank the right hon. Gentleman for his supportive remarks. The fact that the House of Commons has broadly the same desires can do nothing but help the operations, both diplomatic and military, that are in hand at present. I am not convinced that another initiative by us in the United Nations would help. It is a possible option, but at the moment we have resolution 502, which has to be, but has not yet been, carried out. I have to bear in mind carefully how it is to our best advantage and to the advantage of securing a peaceful settlement to take any further initiative in the United Nations. Nevertheless, I am most grateful to the right hon. Gentleman for what he said.

Business Committees
4.23 pm
Mr. John Roper: On a point of order, Mr. Speaker. I wish to raise a matter on Standing Order No. 43. I make it clear at the outset that I do not wish to challenge your unfettered freedom to nominate whoever you consider proper to a Business Committee. However, I raise this issue in the light of the nominations that you have made to the Business Committee on the Employment Bill, which appear in the annex to the Votes and Proceedings today. I submit that, in making further nominations to the Business Committee, you might consider the precedents of your appointments to Business Committees in the last Parliament, when you attempted to ensure that the representation on Business Committees reflected the "composition of the House".
I realise that paragraph 2 of Standing Order No. 62, which refers to the "composition of the House" in the appointment of Committees by the Committee of Selection, does not apply directly to Business Committees, but I submit that, in exercising your unfettered discretion in appointing Business Committees, you should consider the representation not only of the Government and of the official Opposition but of the remainder of the House.
170 It is my understanding that if the conventions followed under Standing Order No. 62 were to be applied by you in making your nominations to a Business Committee of seven Members, as you have done today, there would be representation on such a Committee not merely from the Government and the official Opposition but also from the remainder of the House.
Without in any way wishing to challenge your appointments, I ask you to bear those points in mind in making further nominations to Business Committees.
Mr. Ron Leighton: Further to that point of order, Mr. Speaker. Is there any logical reason why the Social Democratic Party should have any representation on this Business Committee? I ask that not only because so few of its members have been elected as Social Democrats, but because on Second Reading the Social Democratic Party voted for the Bill and supported the Government. That, at least, is what I think happened. Fifteen Members voted for the Bill, five voted against, and five abstained. The broad mass of the party supported the Government, so what possible right does the party have to a seat on the Business Committee?
Mr. Speaker: I am grateful to the hon. Member for Farnworth (Mr. Roper) for giving me notice of his point of order. There is substance in the hon. Gentleman's contention that a case can be advanced for the smaller parties to be represented on the Business Committee of seven hon. Members. However, I should make it clear that while Standing Order No. 43 places the responsibility of nominating the Business Committee on the Speaker, it has never been the practice of the Chair to invite hon. Members to serve on that Committee, but rather to accept an assurance that the membership proposed to him is agreed both as to names and party composition. I understand that discussions are now proceeding through the usual channels on this matter. There is agreement about minority party representation, but disagreement about which hon. Member should be nominated for the Committee. I shall look into the matter.
Mr. Roper: I am very grateful to you, Mr. Speaker. I hope that you will look into this matter further to ensure that, as far as possible on Business Committees, there is a fair representation of all parts of the House.
Mr. Speaker: I shall do my best, although it is a little late in the present case.

Local Authorities (Restoration of Democratic Rights)
4.27 pm
Mr. Bob Cryer: I beg to move,
That leave be given to bring in a Bill to enable local authorities to make decisions according to local need; and for connected purposes.
Although I realise that the tragic affair of the Falkland Islands overshadows matters at present, it is nevertheless true that the Government can be criticised in other ways, which we need to point out and remedy by means of legislation.
Since 1979, the Government have hounded local authorities in a continuing and vicious attack, particularly those local authorities that are Labour-controlled. However, Tory-controlled authorities have also been affected. In Bradford, the leader of the Conservative group, as well as the leader of the Labour group, helped to launch a campaign to keep local government local.
There is no reason why local government should have been attacked in this way, especially over expenditure. I quote:
"At the end of each year local government expenditure has invariably been only 1 or 2 per cent. off target—a far better record than that of central Government".
Those are not my words, but the words of George Jones, Professor of Government at the London School of Economics, and John Stewart, Professor of Local Government Studies at the University of Birmingham. In The Times of 14 August 1981, they said:
"No Official Secrets Act protects local authorities. Their committees work in public. Detailed decisions are published in a way that would be inconceivable to central government. Local authorities are close to their citizens and very visible. The hidden operations of central government present the real dangers of inefficiency and waste.
Local government control of expenditure since 1975 has been better than that of central government."
If we accept the need for a balance between a framework of central Government legislation and the rights of local authorities to respond to the electorate that put them in power, clearly that balance has been savagely kicked aside by the gauleiter of Marsham Street, the Secretary of State for the Environment, backed by the political zombies on the Government Back Benches.
My Bill will repeal those sections of the Housing Act 1980 that give council tenants the right to buy, the right to a discount, and the right to a mortgage. It will enable local authorities themselves to determine whether to sell houses in the light of the needs of the area. Thousands of couples are in need of a home and the compulsory selling of a house will not remove one person from the massive waiting lists that have been built up under the Tories. Private tenants have no right to purchase and the Minister is satisfied by the voluntary arrangements that prevail there. Voluntary arrangements should be allowed to each local authority and my Bill will enable this to take place.
Secondly, my Bill will repeal that section of the Local Government, Planning and Land Act 1980 that enables the Secretary of State to control to an unacceptable, unreasonable and undemocratic degree direct works departments. It is for the local authority to decide the area of operation of direct works departments, which frequently provide the best system of apprenticeship and which are subject to the control of the elected representatives of the area. Indeed, in Bradford, on local government
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reorganisation in 1974, the local authority inherited council house maintenance in Keighley carried out by two private enterprise contractors, both of whom were a byword for inefficiency and one of whom went bankrupt. The then Conservative-controlled local authority instituted a direct works department to remedy the deficiencies of private enterprise—deficiencies which included small private enterprise contractors being squeezed out entirely by the greed of the two monopolist contractors. Brad ford is now under Labour control and I am confident that Labour will maintain that control after the elections tomorrow
Local authorities should be allowed to develop direct works departments free from the bureaucratic restrictions imposed by Tory Governments.
My Bill will also restore the needs element to the rate support grant so that cash aid from Government will go to those areas that are in the greatest need. It should be made absolutely clear that any rate increases imposed by any local authorities have been forced on them by rate support grant cutbacks imposed by Government.
Money from central and local government supports basic services, such as social services, including meals on wheels, education, cleansing, refuse collection, care for the elderly and care for the very young. Money from Government to local authorities should be increased to help generate jobs and cut the cost of swelling dole queues. My Bill will provide a means of doing this.
There are so many oppressive sections of Tory legislation that affect local government to repeal that I cannot possibly encompass them within the framework of a modest Bill such as this. But I can remove the threat of the courts and district auditor from councillors who are simply carrying out their duty by providing that, if expenditure is authorised by a duly convened full council meeting of a local authority, which is properly lawful under statute, that will prevent a district auditor imposing a surcharge on councillors or referring the matter to a court, as a district auditor did in the recent Camden case.
If people are dissatisfied they have the remedy of the ballot box and, as Lord Justice Ormrod commented, such matters should be judged there, not in the courts. Local authorities are the only elected bodies apart from this House and they should be free from any oppressive action, as opposed to supervisory action, by any district auditor.
Similarly, my Bill will prevent any attempt to allow the Comptroller and Auditor General access to local authority books. The permanent secretary at the Department of the Environment, for instance, might well be tempted to use his powers under the Exchequer and Audit Departments Act of 1866 to control local authorities through his ability to monitor the Comptroller and Auditor General.
Finally, there is one area of concern that has not been subject to statutory provision so far, and that is the area of nuclear-free zones. Over 100 local authorities have declared their areas to be nuclear-free zones, but this declaration does not have any statutory backing. Under my Bill local authorities will have the right to suspend the movement of nuclear materials through their areas or to give authority for such passage subject to such conditions as they may impose.
As Jones and Stewart, the two academics I mentioned at the beginning of my speech, said in 1981,
"There is a need for new policies which will maintain and increase the strength of local government."

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Labour is committed to democracy in local government and the first step to defend local services is to keep Labour in charge of local authorities in tomorrow's election.
Question put and agreed to.
Bill ordered to be brought in by Mr. Bob Cryer, Mr. David Stoddart, Mr. Robert Kilroy-Silk, Mr. Dale Campbell-Savours, Mr. Jim Marshall, Mr. Alexander W. Lyon, Mr. A. W. Stallard, Mr. David Winnick, Mr. Reg Race, Mr. Ken Eastham, Mr. Eric S. Heffer and Mr. Dennis Skinner.

Local Authorities (Restoration of Democratic Rights)
  LOCAL AUTHORITIES (RESTORATION OF DEMOCRATIC RIGHTS)
  Mr. Bob Cryer accordingly presented a Bill to enable local authorities to make decisions according to local need; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday next and to be printed. [Bill 121.]
Orders of the Day
  Finance Bill

    (Clauses 18, 22, 29, 65, 71, 75, 117 and 128 and Schedule 10)
    Considered in Committee [Progress 27 April]
    [MR. BERNARD WEATHERILL in the Chair]

    (Clauses 18, 22, 29, 65, 71, 75, 117 and 128 and Schedule 10)
      Clause 128

        REDUCTION OF NATIONAL INSURANCE SURCHARGE
        The Chairman: The only group of amendments today is amendment No. 30, with which it will be convenient to take amendments Nos. 24 and 25.
        4.36 pm
        Mr. Peter Shore: I beg to move amendment No. 30, in page 95, line 42, leave out '2½ per cent.', and insert '1½ per cent.'.
        All our debates so far on the Finance Bill have been overshadowed by the events in the South Atlantic and today's debate takes place against a background that is exceptionally sombre, so I shall say nothing further about this today except to acknowledge the obvious fact that it takes an exceptional effort of concentration for all hon. Members to examine with the care they deserve the various provisions of the Finance Bill. Nevertheless, it is our duty to do so, for the conduct of economic affairs, of which the Finance Bill forms so important a part, though it lacks the tension and compelling drama of the events in the Falklands, is and will continue to be the major focus of concern for our people throughout the life of this Parliament.
        So on this the last day of the debate in the Committee stage on the Floor of the House we have chosen the subject of the national insurance surcharge. There will be no surprise that we have thought it right to move this amendment, which, as the Committee will recognise, seeks a further and larger reduction in the national insurance surcharge than the 1 per cent. cut in this year's Budget which is now embodied in clause 128 of the Finance Bill.
        In the first speech that I made as Shadow Chancellor in the House, in January 1981, I urged a cut in the national insurance surcharge and since then it has been persistently advocated by the Opposition Front Bench. In last year's Budget a reduction in the surcharge was part of a five-point programme which we pressed upon the Chancellor, and on Report on 14 July 1981 we moved a new clause which would have reduced the national insurance surcharge from 3½ per cent. to 2½ per cent.—precisely what the Government 12 months later are proposing.
        A year ago the Chief Secretary turned us down and now, I understand, he is proposing what we then urged upon him. The fact is that in this matter, when it comes to assisting British industry, the Government's measures are both too little and too late. Whether or not we succeed in persuading the Government to accept our amendment, on this year's precedent at least we have the possibility that

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        in next year's Budget, if the Chancellor and this Government are still here to present one, they will accept in 1983 what they find unacceptable in 1982.
        In any event, it is right to debate the proposed cut in the national insurance surcharge for several reasons. First, it is the only substantial measure to affect industry in this year's Finance Bill. Secondly, it is the only measure that directly connects with one of the fundamental problems of the British economy, its loss of price competitiveness. Thirdly, the Government's proposal contains certain puzzles that we have a duty to explore.
        Although this is the only substantial measure to affect industry in this year's Budget, there are a number of other measures ranging from aids to small firms, to capital allowances, to installation of teletext receivers and viewdata adaptors. In scale, these can only be properly described as trivial.
        There are two measures that are a little more substantial, of which the measure announced to assist industry with energy costs is the first. To me and to most hon. Members on both sides of the Committee it is a continuing scandal that Britain, the only country in the Western world self-sufficient in energy, should price its energy sales to large energy users at higher rates than those paid by its Continental and American competitors.
        Last year the Government made some concessions after the NEDC discussions and this year they have added a little more. However, when we recall the number of major industries whose fortunes depend crucially on the cost of their energy supplies—that includes large sections of the chemical industry, the paper industry, aluminium smelters and others—the sums announced are small.
        For presentational purposes, the Chancellor in his Budget speech decided that it was better to present the cost of his package at £250 million, over a two-year period—last year as well as this. This avoided the embarrassment of revealing just how little was provided in the 1982 Budget. I was interested to read the comments of the Chemical Industries Association, and specifically of its deputy director, Dr. Peter Kaudle. He said that the paucity of the Chancellor's package on energy cost was shown when one considered that he needed to add last year's claimed saving of £170 million to that of this year to arrive at the figure of £250 million.
        Thus there was a package of £80 million to assist heavy users of energy in this year's Budget. This is not a minor point. The Committee will remember the recent annual report on last year by ICI. That showed that it had certainly not recovered from the enormous setback when, for the first time in the history of that enterprise, it went into deficit in the previous year.
        The only other package of any size designed to assist was related to the construction industry. Few industries need more assistance than the construction and building industries. Again, on this the Chancellor was misleading when he told the House during his Budget speech:
        "our new public spending plans provide work for the construction industry in 1982–83 worth about £10¼ billion—an increase of 14 per cent."—[Official Report, 9 March 1982; Vol. 19, c. 750.]
        That was misleading because, as the Chancellor well knew, the year 1981–82 saw a disastrous fall of no less than 11 per cent. in that industry, as compared with 1980–81. Anyone who thinks that he can draw comfort from the difference between an 11 per cent. fall and a proposed 14 per cent. increase should be reminded that the 1982–83 figures are in cash terms and make no allowance for
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        inflation. In other words, the Chancellor was announcing, in his rather curious way, a substantial fall on the depressed output of 1980–81.
        That apart, the construction package was minor. As Mr. Owen Luder, the president of the Royal Institute of British Architects, said:
        "The Chancellor has made a series of small gestures which at the very most would generate 10,000 jobs."
        That from an industry that now has some 400,000 unemployed.
        Therefore, it is not through these and other minor aids to industry that any noticeable effects on output can be anticipated. The national insurance surcharge is the only measure that can be expected to have any noticeable impact. We shall see in a moment just how much impact that is likely to be.
        The importance of the national insurance surcharge is that it relates directly to one of the most important problems of British industry, its loss of competitiveness. At this point, I can anticipate Conservative Members wanting to rise to their feet with the usual question why the Labour Government introduced the national insurance surcharge in 1976. The answer is that at the time of its original announcement, and, more relevantly, at the time of its introduction in April 1977 and its further increase in October 1978–2 per cent. to begin with and 3½ per cent. later—British industry was, in international terms, more competitive than it had been for at least a decade before.
        4.45 pm
        I checked the exchange rate of the pound against the basket of currencies on the appropriate date. Taking 1975 as 100, when the national insurance surcharge was introduced in April 1977, the index stood at 80·7. When it was increased from the original 2 per cent. to 3½ per cent. in October 1978, the pound stood, against the basket of currencies, at 80.2 per cent.
        Mr. Richard Needham: Will the right hon. Gentleman accept that the national insurance surcharge is a tax on jobs? Does he accept that when he and his Government introduced it unemployment was rising, not falling?
        Mr. Shore: I do not deny that it is a tax on jobs. The point that I am making, which is a fair one, is that when we judge the impact of a tax it is sensible to look at the overall effect of competitiveness, because that is what it is all about. There are different ways of raising tax. If we are using a tax—which I agree is a tax on jobs, and increases costs—at a time when the exchange rate is, by all historical standards, highly competitive, we can hope to do it with far less damage to our trade position than we would in other circumstances. It may have other adverse effects.
        The Chief Secretary to the Treasury (Mr. Leon Brittan): Does the right hon. Gentleman agree that, first, the level of the pound is not the only test of competitiveness? Secondly, does he agree that apart from that, whatever the comparative merits of the situation now or then may be, and whatever the position in 1977 may have been, unemployment was rising then—although it fell later—and, other things being equal, the effect of the tax that the right hon. Gentleman's Government introduced was to be a tax on jobs? What was the point of it?
        Mr. Shore: The increase in unemployment had broadly stabilised before the introduction of the tax. I remember this well. Unemployment rose rapidly in 1975 and the first part of 1976. I feared greatly that unemployment would rise further in 1977 but it did not. For whatever reasons the Committee may, in retrospect, wish to deduce, unemployment was on a falling trend at the time of the general election.
        Mr. Chris Patten rose——
        Mr. Shore: I do not think that we need a debate. I am trying to make what I hope is a common-sense point. It seems to be difficult to get a few simple points across.
        Mr. Patten rose——
        Mr. Shore: I am trying to answer the point made by the Chief Secretary. I had begun to do so, and I was going on to make a further point, which is highly relevant. The right hon. and learned Gentleman correctly pointed out that there were other factors that influenced cost. Therefore, we have to look at their totality. I agree with that, but there are two additional points, which I hope will reinforce my central point.
        Against the basket of currencies at the date when the national insurance surcharge was introduced, taking 1975 as 100, the pound was at about 80 both in the spring of 1976 and at the time that the further increase of national insurance took place in 1978. When I urged the Chancellor a year ago to cut the national insurance surcharge, the pound stood against the basket of currencies at 99·2—in other words, at a level 25 per cent. higher than it was when the surcharge was introduced, and, indeed, about 25 per cent. higher than it was when it was increased.
        Today, although the pound has eased against the basket of currencies, it is well above the level—12 per cent. or so—that obtained in 1977 and 1978. The comparison of the pound against the basket of currencies is not the full measure of the loss of competitiveness in British industry during recent years. As we all know, the pound, particularly in the past three years, has reflected both the high interest rate resulting from the Government's monetarist policies and the fact that Britain has moved into surplus as an oil producer. The pound has gone higher than it might otherwise have done if it was simply reflecting international perceptions of our real competitiveness.
        If one takes 1975 as 100, the relative unit labour costs and international competitiveness of the United Kingdom has moved from just on 90, when the surcharge was introduced in April 1977, to 96 when it was increased in October 1978, to no less than 140 when I urged the Chancellor to cut the national insurance surcharge last year. As the House well knows, our competitiveness on the same index today stands at approximately 130—a 30 per cent. loss. That is the appalling measure of the loss of competitiveness.
        Mr. Dennis Skinner: Another way of illustrating my right hon. Friend's point about the relationship between the basket of currencies then, the state of the pound now and competitiveness is what has happened as a result of the exchange rates across the whole range of currencies now. There have been bankruptcies and liquidations on a massive scale in the last two or three years of the Tory Government. About 8,600 bankruptcies and liquidations occurred last year. That is a direct result of our uncompetitiveness and bears out my right hon. Friend's point admirably.
        Mr. Shore: My hon. Friend the Member for Bolsover (Mr. Skinner) is absolutely right. He anticipates my acknowledgement of that by only a single sentence. I was about to make one or two additional points to those that have been so properly made.
        The loss of competitiveness is the main reason for the disaster that has struck British industry and the British economy during the past three years. The measure of that is the fact that no fewer than 20,000 firms have gone into liquidation since May 1979. Our manufacturing industry is still about 20 per cent. below the output levels reached in the summer of 1979. Our gross domestic product is about 6 per cent. below what it was when the Government took office, and that is now almost exactly three years ago.
        Mr. Brittan: Before the right hon. Member for Stepney and Poplar (Mr. Shore) proceeds, will he answer my question? Even if the right hon. Gentleman is right in saying that the position was so much better in 1977, what was the point in introducing in 1977, and subsequently nearly doubling, a tax which would have the effect of increasing industrial costs and thereby reducing competitiveness?
        Mr. Shore: Two things were happening at the same time. First, there was the usual problem of the need for an increase in revenues. The second problem was to do that in a way that did not affect the competitiveness of British industry. That competitiveness was increasing because the pound was floating and floating down. Many hon. Members complained about that at the time.
        Mr. Brittan rose——
        Mr. Shore: No, I am sorry, I will not give way.
        The right hon. and learned Gentleman should be a little more modest about himself and his contribution. The only point of my debating what happened in 1976 is to squeeze what juice there is from the past which would be helpful in understanding the present. I am trying to explain to the Committee why I think that it is important, given what has happened to the exchange rate and to competitiveness in British industry, that we should do something positive about one measure which can operate directly upon it.
        The right hon. and learned Gentleman seeks constantly to put the arguments aside and invite me to look upon what happened five years ago in very different circumstances. I am prepared to do that only to the point that is relevant. In his smug arrogance he must not think that what he has to say is of great concern to me or that I am worried about his popping up and down at the Dispatch Box, because I am not.
        I want to go on to say something more directly to the Chief Secretary. As I have just given the appalling summary facts of the situation in Britain, I expect him to tell us how splendidly we are doing. Of course, he will find some statistical evidence which will give him—but not the sceptical House and industry—some cause for hope and comfort.
        I understand that the Chief Secretary reads Mr. Sam Brittan, although he tells us that he does not always agree with him. I thought that Mr. Sam Brittan said all that needs to be said about the Chief Secretary's continued raiding of statistics to support his somewhat unconvincing optimism. Yesterday, he summed up the situation as follows:
        "The economy has fallen off Mount Everest and climbed up Box Hill."

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        That is not had, is it? It saves us an awful lot of trouble going over the Chief Secretary's carefully selected indicators and tortured figures.
        Far from torturing figures and selecting evidence, I thought that I would let the Committee know the latest state of play as the CBI sees it. The Press Association tape says:
        "In stark contrast to the optimism from the Government about an economic recovery the CBI says in its survey published today: 'There is still no evidence of any noticeable recovery in activity being under way. Demand is stagnant and nine out of ten firms are short of orders. Looking ahead, only a very slight increase in orders and output in the next four months seems likely.'"
        The national insurance surcharge reduction at least addresses directly the problem of competitiveness. A cut from 3·5 per cent. to 2·5 per cent. is far from impressive. Its effects are further weakened by excluding the whole public sector from the benefit of the reduction. What appears on the face of it to be a reduction of £1,000 million in national insurance surcharge payments in 1982–83 is in part illusory since public sector employers are forced to forgo other forms of Government assistance, equivalent to about £360 million this year. Therefore, we are talking of the sum of £640 million. That will have inevitably only a minor effect on trade competitiveness, on the cost of living, on job creation and even on assisting the appallingly low level of profitability from which the whole of British industry is suffering.
        As the House will note, our amendment proposes to substitute in clause 128(1) the figure of 1·5 per cent. for the proposed 2·5 per cent. That would mean a reduction of two percentage points—more than half of the national insurance surcharge. We did not follow through the amendment as the Government have done with their proposed change in subsection (2) in order to give the full year's benefit of what we proposed as from 2 August. Obviously, if the Government were, by some strange chance, to accept our major amendment, we should have no difficulty in accepting an appropriate Treasury amendment to subsection (2).
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        In proposing a 2 per cent. cut in national insurance surcharge, we would have no intention whatever of seeking a discriminatory clawback from the public sector. We are talking about a genuine reduction of about £2,000 million this year and of roughly £2,400 million in 1983–84.
        I asked the Chancellor of the Exchequer for an estimate of the effect of his proposed cuts in the national insurance surcharge, but my request was turned down for the usual reasons. However, using the Treasury model, we can give a broadly accurate estimate of the effects not only of the Government's proposals but, more relevantly, of our own. They are worth while. We should gain 2½ per cent. in trade competitiveness, reduce the cost of living index by about 0·75 per cent., create 50,000 new jobs in two years, assist profit margins in public and private industry and, after the first year, place a burden on the PSBR not of £2,000 million but of just over £1,000 million.
        To the extent that the Chief Secretary is disciplined by his own worries about the size of the PSBR, I think that his experience in the last two years must surely have taught him that it is unwise to invest too heavily in that particular indicator. In the first full year the Government foresaw a PSBR of about £8½billion and ended up with £13½ billion. Last year they estimated a PSBR of about £10½
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        billion—that was what the Chancellor told us in his Budget speech—and within four weeks it was already down to about £8½ billion.
        Why figures have to be revised so dramatically in so short a time I do not know, but, taking the two years together, surely they give no confidence whatever for using the PSBR as one of the two major regulators or measures of the economy. We have to contrast them with the real world of numbers of people out of work, the amount of investment and the rate of inflation. I was about to mention the size of the balance of payments—exports and imports—but that is still rather concealed by the inability to get up-to-date statistics. When there are those real indicators, why on earth the Government should pay so much obeisance to indicators of proved lack of reliability I do not know.
        If the cost of what we are proposing is an additional £1,000 million on the PSBR, I cannot see why the Chief Secretary should have any objection whatever, because it is well within his margins of error of the last two years.
        I do not wish to over-estimate or over-stress the importance of the national insurance surcharge. What we have proposed is undoubtedly worth doing. We have the support of the CBI, which also calls for a 2 per cent. cut in the national insurance surcharge, as well as several other measures to assist our terribly depressed industry.
        At this point I ask the Chief Secretary to clarify the Government's thinking on the point to which I alluded a short time ago. Why have the Government decided to claw back the benefit of the national insurance cut from the public sector? I can accept that central Government and local government costs do not enter directly into exports and into trade—they have an indirect effect of course—but it is at least plausible for the Government to argue that the trading sector of British industry should have a priority in a national insurance surcharge reduction.
        What I cannot understand is why the nationalised industries—many of which are in a trading situation, and many of which are earning money in direct exports or import savings—should be denied this particular benefit. I am right, am I not, in saying that the nationalised industries are not to have the benefit of the cut in national insurance surcharge but are to have a corresponding adjustment of their external financing limits or whatever the regulatory mechanism may be?
        What on earth is the justification for not assisting British Steel through a cut in the national insurance surcharge? What possible justification is there for not extending a national insurance surcharge cut to British Airways, which faces massive international competition on nearly all its operations? How on earth can the Government discriminate—if they have—against BNOC while the benefits of a national insurance surcharge reduction are available to its oil company competitors?
        Unless the Government can give convincing reasons when the Chief Secretary replies, we must conclude that once again we have an example of ideological hostility to the publicly owned industries—the same hostility as is expressed in the privatisation schemes that the Government are still hell-bent on pursuing.
        I turn to the economic problems to which the measure—the proposed reduction of national insurance surcharge—should relate. I have already said that we have suffered a major loss of competitiveness of no less than.50 per cent. We have, moreover, just over 3 million registered unemployed. The outlook for the economy is for

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        only the most modest upturn, and even that is seriously in doubt. Against that background, the Government's proposals—their £640 million cut, given only to private sector firms—are almost irrelevant. National insurance surcharge plays its part in competitiveness but there are, as I have said and debated with the Chief Secretary, many other factors also involved.
        Last year, the Government placed their main emphasis on reducing interest rates. The only good news in the Chancellor's 1981 Budget was the reduction of minimum lending rate from 14 per cent. to 12 per cent. That was abandoned a few months later. Today we still have MLR—or rather its equivalent—at 13 per cent., and we know that every 1 per cent. increase in interest rate is equivalent, in cost terms, to about £350 million to £400 million a year for British firms.
        The Government still remain imprisoned by their own monetarist doctrines. Although sterling M3 has ceased to be the single guiding light, the doctrine of monetary target, supported by unstated exchange rate target, is still at the heart of their economic policy, and it is that which has prevented what is essential for the revival of our economy—a cut in interest rate and the achievement of a much more realistic and competitive exchange rate for the pound. Yet those are only the start of a policy for revival.
        We need interest rate and exchange rate policies which will serve the interests of our industry, but we shall need much more than that if we are to escape from the disasters of the last three years. We shall need active intervention on the supply side of the British economy. We shall need the reintroduction of exchange controls. We shall need a far more active policy to encourage British exports and import replacement.
        We recommend to the Committee our amendment on the national insurance surcharge, in the full knowledge that it is only a first and minor step in the large task of reconstruction of the British economy that has still to be undertaken.
        Mr. Kenneth Lewis: The right hon. Member for Stepney and Poplar (Mr. Shore) said that last year he had pressed the Government to reduce the national insurance surcharge. Conservative Members also did that and we like to believe that we had some influence with the Government. We were pleased when they reduced the surcharge by one point. It just goes to show the right hon. Gentleman that this is a Government of good works. Although they may come to those good works slowly, they get there gradually with a little prodding from time to time by Conservative Members and perhaps a little help from others among the Opposition.
        There is no doubt that the national insurance surcharge is a tax on labour and therefore a tax on employment. It is a bad tax, but the right hon. Gentleman and his hon. Friends cannot speak today other than with their tongues in their cheeks, because they introduced the tax and compounded the problem by increasing it. Conservative Members are well aware that when any Government bring in a new tax that tax can become bedded down. When that tax is increased, it becomes bedded down even more and it is then much more difficult for any Government to reduce or to remove it. Despite that, I wish that in the Budget the Government had removed the surcharge tax——
        Mr. Needham: They should have done.
        Mr. Lewis: My hon. Friend says that they should have done. I can say only that the Government did not then know that they had saved £2 billion on the PSBR. If they had known that, perhaps they would have removed the tax. Their arithmetic was not correct, although it is perhaps better for my right hon. and learned Friend the Chancellor's arithmetic on the PSBR to be right after he introduces his Budget than to be right before, because at least he will have the benefit of more money in hand than he originally believed he would have.
        Mr. Needham: Can my hon. Friend tell the Committee what he means by "right"? My right hon. and learned Friend the Chancellor got his arithmetic wrong, although perhaps in the right way.
        Mr. Lewis: I presume that my right hon. and learned Friend the Chancellor will be glad to have found £2 billion that he did not expect to have. Of course, perhaps Treasury officials knew about it before the Budget.
        The tax is especially bad at this time. If it is not reduced during this Parliament, assuming and hoping that we can bring down unemployment, we could arrive at a position where a future Government would actually be adding to the tax in order to take inflation out of the system again, which is why it was originally introduced. We would then be adding to a tax that was already too high. Our objective must be to reduce the national insurance tax to a proper level and to have no surcharge, so that we are not faced with a surcharge that has built into it an increase which was meant to be temporary, which should have been temporary, and, therefore, which we hope will be required only for another two years, or even less.
        Anyone who runs a business knows that when one calculates a salary one must add the charge for national insurance. As wages rise with inflation each year, the national insurance charge increases. Not only must employers consider whether they can take on extra labour, but in recent years this surcharge has created a situation in which many businesses, especially small businesses, have laid off workers. The increase in the national insurance charge, including the surcharge, for the entire work force has meant—some business men have calculated it deliberately—that a small business man can get rid of two or three workers and by saving the wages of those workers pay the national insurance charges for the rest of his employees.
        5.15 pm
        That practice is bad and still goes on in many parts of industry. Although, therefore, it was a considerable help for my right hon. and learned Friend to reduce the surcharge by his Budget, I hope that it will be possible in the next Budget for the Treasury to consider removing the surcharge. If my right hon. and learned Friend the Chief Secretary says that that will not be possible, he should examine how this national insurance tax—for that is what it is—is organised. At the moment, the employer must pay a flat amount on his entire wage bill. Would the Treasury consider arranging for the tax to be based, as income tax, on a lower level, a middle level and a higher level, or at least on two levels, so that there is perhaps a 6 per cent. and a 12 per cent. rate? The 6 per cent. rate would be charged on a salary of up to £50 a week, or half the national average pay, and the 12 per cent. rate on a salary beyond that.

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        That would mean that the employer would pay half the national insurance rate for lower-paid workers, which includes the young. It would encourage employers to employ young people. As we have heard from time to time in the House, some youngsters are paid too much and we do not employ enough of them because their wages have been pushed up by wages councils. They are being priced out of jobs. Young people are finding it difficult to obtain jobs. Employers are deterred from taking on new people in skilled jobs or in apprenticeships because they look at the salary that they must pay and then the national insurance rate, including the surcharge.
        If the Treasury cannot remove the tax altogether, perhaps it will consider remodelling it. I should be somewhat dismayed if the surcharge were to continue into the next Parliament, because it might become permanent. Certainly if there is a change of Government, which I do not anticipate, the Labour Party will do exactly what it did on the last occasion, which was to increase the surcharge to the same level as when the previous Labour Government left office. We should not risk that possibility, and we should get rid of the tax during this Parliament. If we do not get rid of it, we should at least recast it so that it will help employers to take on labour.
        Unemployment is increasing. It will not decrease, other than marginally, for the next 12 or 18 months. It is important that we provide a stimulant for new jobs. This is a payroll tax. It is a bad tax. I hope that my right hon. and learned Friend will see that it is destroyed before the end of this Parliament.
        Mr. Richard Wainwright: I am happy to follow most of the trenchant speech of the hon. Member for Rutland and Stamford (Mr. Lewis) against the entire national insurance surcharge. In spite of its desiccated title, this tax is surely a highly suitable subject for debate on the Floor of the House. Any tax that raises about £3½ billion in a full year by taxing jobs should be thoroughly thrashed out when there are more than 3 million unemployed and some estimable forecasters are predicting 4 million unemployed in a few years' time.
        I speak to amendments Nos. 24 and 25 in the names of my right hon. and hon. Friends in the Liberal-Social Democratic Party alliance. The amendments are associated with our amendment to schedule 17 that is to be discussed in Standing Committee. Together they provide not only for the abolition of the national insurance surcharge but for the repeal of the National Insurance Surcharge Act. That is an important part of our case. We are anxious to extract what in technical jargon is called the utmost announcement effect of our proposals.
        Employers who are considering taking on apprentices and other workers will then know that the tax is to be ended and that the statute enabling it to be levied is to be repealed. Therefore, their decisions will not be made a nonsense by the Government in a year or two again putting up the surcharge, which is what so often happens in our Box and Cox, Punch and Judy system of Government. However, I must make it clear that in repealing the Act and abolishing the tax there will need to be some temporary clawback from the public sector's tax reduction.
        There is widespread distaste for the tax in most parts of the House. The hon. Member for Rutland and Stamford is a witness to that. On 8 December last year, during our debate on the White Paper on public expenditure, the right hon. Member for Chelmsford (Mr. St. John-Stevas) said:
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        "The best thing would be to reduce—or, better still, abolish—the national insurance surcharge".—[Official Report, 8 December 1981; Vol. 14, c. 780.]
        Earlier, on 28 October 1981, during a debate on the Government's economic policies, the hon. Member for Staffordshire, South-West (Mr. Cormack) said:
        "to phase out the national insurance surcharge would not amount to a craven volte face by the Government, any more than it would produce paradise and plenty tomorrow."—[Official Report, 28 October 1981; Vol. 10, c. 926.]
        It is not difficult to see why there is this widespread distaste for the tax. It is undoubtedly an ally of increasing unemployment. The right hon. Member for Stepney and Poplar (Mr. Shore) gave some expected effects of the reduction that he proposes as shown by the Treasury model. The CBI has estimated the number of jobs that are likely to be created in due course—although not immediately because there is bound to be a time lag—if its proposals for a further 2½ per cent. cut are adopted. It estimates that if NIS is abolished from next year the benefit will be an extra 200,000 jobs after approximately two years. Although we all know that unemployment is slow to respond to any fiscal change, and does so only in relatively small measure, 200,000 jobs are surely a boon not to be ignored.
        It is important to bear in mind the cost to the Revenue. For that reason we accompany our proposal for abolition with a temporary clawback from public sector employers. The net cost to the Revenue of the Liberal-SDP proposal for abolition, with temporary retention of clawback, is similar to the cost of the Labour Party proposal for a reduction and at the same time dispensing with clawback. It is a nice question which of those two courses is the more helpful at present.
        I accept that clawback is discriminatory. I should not want to see it going on for many years. However, we maintain that the psychological effect of announcing the repeal of the surcharge Act would be well worth the suffering and disadvantages of clawback for, say, two or three years, in order to keep the initial cost within bounds.
        We estimate that if clawback of the benefit of abolition continues during the next 12 months from the nationalised industries and from central and local government, the cost of abolition in 1983–84 would be about £2,240 million and in a full year £2,676 million. That is certainly within the borrowing requirement calculations that we put forward when Budget judgment was being discussed. We believe that could well be carried, especially in the light of more recent revelations of a much smaller public sector borrowing requirement than the Chancellor of the Exchequer was using in his pre-Budget arguments.
        We do not regard clawback as a desirable continuing feature. To claw back a tax relief from the nationalised sector that has been granted to the rest of industry is an act of hostility if it is protracted. For example, in the Government's proposals the external financing limits for nationalised industries will be reduced by about £92 million in respect of clawback. For that to continue for a substantial time would be a most undesirable precedent. Nationalised industries would be entitled to ask what would happen if corporation tax were reduced at some time in the future. Would we be told that nationalised industries must not expect any benefit from that? BNOC and other profit-making nationalised industries might feel that that benefit would be clawed back from them. We therefore regard clawback as a strictly temporary measure, simply to keep the cost within bounds.

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        We have had cited in the debate support from the CBI for a substantial reduction leading to abolition, but I should like to refer also to the attitude of the TUC. The right hon. Member for Stepney and Poplar did not introduce that aspect. The attitude of the TUC is, to Liberals, a matter for regret. In its economic review for 1982 it accepts that the national insurance surcharge is not a good tax and that it should be reduced or abolished, but it firmly prefers a reduction in the rate of VAT from 15 per cent. to 12·5 per cent. It is, therefore, only fair that the Committee should be aware of an alternative tax reduction proposal that comes from an important if not wholly representative source.
        5.30 pm
        I take issue with the TUC's judgment. Although a reduction in VAT at a similar cost to the Revenue would help to reduce the general level of prices, it would do very little immediately to increase the number of jobs. I would have hoped that the TUC would have felt a greater responsibility towards the unemployed, even though temporarily out of union membership, than going straight away for a reduction that would largely be to the benefit of the consumer.
        Our proposal is that this surcharge tax should be abolished and that clawback should remain from the nationalised industries for one year, and perhaps for two years from central and local government. We believe that the surcharge Act should be repealed so that employers who may be considering the possibility of taking on additional people, especially young people, would know that the threat of being taxed for providing jobs would have wholly disappeared.
        Mr. Needham: I agree with my hon. Friend the Member for Rutland and Stamford (Mr. Lewis). I do not think that the Opposition have many credentials for proposing the amendment, as they originally introduced the surcharge.
        One wonders why it was called the national insurance surcharge. I believe I am right in saying that it does not go into the national insurance fund, but rather into the Consolidated Fund. Why on earth call it a national insurance surcharge if it in no way ends up to the benefit of the recipients of that fund? Perhaps at some stage the Opposition will give us an answer.
        I take the point made by the right hon. Member for Stepney and Poplar (Mr. Shore) that unemployment may or may not have been rising in 1977. At any rate, it levelled off and the pound at that time was more competitive. But surely the right hon. Gentleman would agree that it does not alter the fact that as a tax on jobs it would not benefit employment. North Sea oil was not that far away on the horizon in 1977, and surely this was a tax that sooner or later would affect employment and competitiveness.
        I feel I have some right to bring this matter to the attention of the Committee, as I am one of those who must pay national insurance surcharge in order to retain the levels of employment in the companies that I help to run.
        I am absolutely certain that my right hon. and learned Friend had no intimation that the outturn of the PSBR would be £2 billion less, although the CBI felt that it might be considerably less than the £10½ billion estimate. But given that my right hon. and learned Friend had had
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        foresight, would he have been prepared to reduce the national insurance surcharge even further than he did? He may well say that that was last year and that one must look at the PSBR for this year, but having got it wrong in the right way perhaps he could have taken a risk in that direction.
        I must be honest with my right hon. and learned Friend. There are those of us in industry—I am afraid to say that the feeling is widespread—who have some doubts whether members of the Treasury Front Bench have a real understanding of the problems of industry.
        I congratulate my hon. Friend the Member for Grantham (Mr. Hogg) on his promotion to behind the Front Bench. No doubt it will not be long before he hops another step forward, and deservedly so. However, my hon. Friend is on the way to becoming a learned gentleman rather than an industrial gentleman. One of the concerns among people who have spent their lives in industry is whether the Government have a feel for the needs of the manufacturing base, particularly compared with our major competitors such as Japan, Germany and France who seem to be able to work together towards an industrial strategy rather better than us.
        Mr. Chris Patten: Will my hon. Friend say something about the industrial experience of members of the Opposition Front Bench?
        Mr. Needham: I cannot say much about that, but they look like men who have spent many years on the factory floor. No doubt they will have an opportunity later to explain their industrial experience.
        Mr. Robert Sheldon: I suppose I ought to respond. Admittedly, it was a number of years ago, but not only was I an engineer but for a few years I was also a machine shop manager.
        Mr. Needham: I am grateful to the right hon. Gentleman for answering my hon. Friend's point. That does not alter the fact that the right hon. Gentleman should have opposed the introduction of the national insurance surcharge in 1977.
        I come back to what I was saying about industrialists, some of them now former industrialists, who backed the Government before the general election. I am afraid that some of them must feel like so many of those Italian noblemen who were invited to dine with the Borgias. They eagerly looked forward to the sumptuous party, but not many of them were around the next day to say how wonderful it had all been.
        Mr. Douglas Hogg: That is not actually very funny.
        Mr. Needham: I am grateful to my hon. Friend for his sedentary intervention. The lack of novelty in what I say does not alter the fact that the Treasury Front Bench should not confuse a summer vacation job in the meat department of Harrods between law exams, or a quick trip around a factory in their constituencies, with a basis for an understanding of industry.
        What is happening to those who run our manufacturing base? They are beset by a lack of competitiveness, which has not only been the fault of managers paying their workers too much. Manufacturing industry is constantly reviled for overpaying its workers. I shall not go into what the Government have done with their pay policy, but we are reviled for overpaying our workers. If that is the case,

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        why are British industrial wages among the lowest in the industrial world? Perhaps it is because the rise in the value of the pound has had something to do with competitiveness.
        The value of the pound now compared with our inflation rate and those of our competitors, as my right hon. and learned Friend well knows, has massively undermined the competitive base of British industry. It has had two other consequences. Good companies as well as bad have gone to the wall. We should not forget that. Let me give my right hon. and learned Friend a personal example. One of the companies in which I am involved manufactured attractive trays for the German market. The hon. Member for Workington (Mr. Campbell-Savours) was involved in the same sort of industry——
        Mr. Jack Straw: Knick-knacks.
        Mr. Needham: The hon. Member for Blackburn (Mr. Straw) may think it amusing, but that industry created jobs, obtained orders and got exports. They were beautiful knick-knacks that were well received in the German market. However, as a result of the change in the exchange rate, which was the equivalent of 20 per cent. increase, and the inflation rate in Britain, we lost the orders. We were no longer competitive. Six months ago, when the pound had depreciated to some extent, we received inquiries from the German customer once more. However, we were no longer in the tray business. Those whom we had employed were unemployed. It is impossible simply to turn on a tap that has been permanently turned off.
        As my right hon. and learned Friend the Chief Secretary knows, the result has been an undermining of the economy's capacity for reflation. The companies no longer exist. For example, Lansing Bagnall started the recession with about 200 subcontractors. I believe that 27 of them have now gone out of business. Some of them were general engineering companies that could be replaced, but others were specialist companies that made particular parts for Lansing Bagnall. They cannot be replaced. Last year, Lansing Bagnall's output was 33 per cent. of that in 1979. At the beginning of this year there was a slight upturn. My right hon. and learned Friend may say that it was more than that, but in Lansing Bagnall's case it was slight. Its order book increased from 33 per cent. to 40 per cent. and it immediately started to run into production difficulties because of a lack of available capacity among its suppliers. British industry has slimmed down and returned to some sort of profitability on a lower base. However, any chance of a major increase in output will run up against immediate constraints.
        The question of productivity is crucial to this debate. We are told that productivity in Britain, or lack of productivity, has been caused by overmanning. Of course there is some truth in that, but if our wage rates are half those of our competitors we can live with some overmanning. It is important to ask what effect overmanning has on productivity and how much demarcation disputes, shoddy work, strikes and poor management affect productivity. Lectures on overmanning, demarcation disputes, shoddy work, failure to deliver on time, strikes, and poor management are trotted out year after year and month after month by those who, by and large, have no experience of industry.
        We are now told that a bracing new climate has led to an increase in productivity that has not been seen in Britain
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        for 100 years. I am prepared to accept that there has been some change in the attitude of British industry, although I do not know how long it will last. I accept that dead wood has been removed. However, it should be remembered that the companies that remain are the leaner, fitter and more successfull companies whose increases in productivity are anyway probably higher than the national average. Productivity is affected not only by overmanning, demarcation and all the other hackneyed phrases, but by plant utilisation, the building up of stocks, proper marketing and greater confidence in the fact that regular orders will flow. Above all, higher profits are required.
        The profit base is being restored but is still pitifully low and, compared with our competitors, is virtually non-existent. When a company starts to lose profitability, its first step is to cut areas that are crucial to its future. Training goes straight out of the window. As it is hot needed immediately, nothing is done about it. Investment is cut and the plant is run for longer. Research and development is cut because it cannot be afforded. Recruitment stops. A company will concentrate less on marketing and packaging and will try to cut corners. All those elements are more important to increasing productivity and the success of a company than the lectures that we are constantly given on wage rates, overmanning and so on.
        5.45 pm
        How can my right hon. and learned Friend the Chief Secretary help to reduce industry's costs? The CBI rightly said that we must reduce industrial costs and help demand within industry. That cannot be done too quickly because, as my right hon. and learned Friend might say, inflation would return, with all the other problems involved. The abolition of the national insurance surcharge is the most sensible and effective answer. In the outturn of the public sector borrowing requirement we saw that that could have been done. It is all very well for my right hon. and learned Friend and his colleagues constantly to cajole and sometimes bully industry. It is always being told, "Yoke a risk, be an entrepreneur, have a go, put your money where your mouth is—although you have borrowed up to the hilt". However, although my Government are meant to represent private industry, their response to taking a risk is, "Oh, if it is £500 million more on the PSBR, how will it affect the City, what will the gnomes of Zurich do, what will happen to the interest rate? Oh no, we cannot take a risk with £500 million out of £115 billion".
        Those of us in private industry are told to get out into the market. We are told, "Do not pay your men any more, but get on with the job". The idea of this Government taking a risk can be likened more to Sir Charles Villiers' last year at British Steel than to most entrepreneurs in Britain. I hope that we shall hear less oratory, cajoling and lecturing and receive a little more assistance. It would be very nice if that could be done by abolishing the national insurance surcharge today.
        Mr. David Winnick: I shall be interested to see whether the hon. Member for Chippenham (Mr. Needham) joins us in the Lobby at the end of the debate. He would be very welcome. There is always much to be said for combining one's words—which we approve of—with one's vote. However, we shall see.
        Mr. Skinner: He will back Maggie.
        Mr. Winnick: My hon. Friend is somewhat cynical, but I shall let that pass.
        Mr. Skinner: I bet that I am right.
        Mr. Winnick: Although the Falkland Islands conflict dominates politics at the moment, the issues under debate will be with us for a long time. Given the state of British industry, we must all be concerned about any assistance that can be given to revitalise industry. Before the war the then Governor of the Bank of England, Montagu Norman—whose name will be familiar to many hon. Members—gave evidence to an inquiry and, after admitting that unemployment was deliberate policy in certain economic circumstances, refused to accept that there was anything that the Bank could or should do to safeguard workers in industry from the effects of such policies. This Government often give the same impression. They say that their policies are necessary and that it is too bad for the casualties of such policies, the unemployed. They say that there is nothing that they can or should, do.
        Despite great pressure from both sides of industry and from the Opposition, Ministers have until now refused to accept the need to reduce the national insurance surcharge. I see from the press that at a meeting earlier this year—described as well-attended—of the Tory finance committee, the director general of the CBI said that industry was expecting a cut in the national insurance surcharge in the Budget. I very much doubt whether the cut that has taken place is one which the CBI will consider sufficient.
        In another statement the CBI said that it would prefer the abolition of the surcharge and that, failing that, it would like a reduction to 1½ per cent. It is asking for the reduction proposed in the amendment moved by my right hon. Friend the Member for Stepney and Poplar (Mr. Shore).
        It is nice for the Labour Opposition to be in agreement with the CBI on occasions. I am sure that that joint approach from the CBI and the Labour Benches will have some impact on industry; it certainly ought to. Understandably, hon. Members have referred, as a debating point, to the fact that a Labour Government introduced the surcharge and increased it. I was not in the House at the time, but, in fairness, I must say that had I been here I should have voted with the Labour Government. I shall not pretend otherwise, but I find it difficult to believe that my colleagues were full of enthusiasm at the time for the national insurance surcharge.
        However, the situation was different then and I do not believe that, if unemployment had been anywhere near the present level and if industry had suffered in the way that it has undoubtedly suffered in the past three years, Labour Members would have followed Ministers into the Lobby to introduce such a surcharge. One has to accept that present circumstances are quite different.
        The hon. Member for Chippenham was right when he spoke about the devastating effect of the exchange rate. The level of the exchange rate in the past two to three years has undoubtedly done far more damage to industry than the national insurance surcharge. The exchange rate has been responsible for many of the job losses that Britain has suffered recently.
        Mr. Skinner: Not all of them.
        Mr. Winnick: By no means, but the exchange rate has undoubtedly had a very negative effect and been responsible for a great deal of unemployment.
        Manufacturing industry pays nearly two-fifths of the surcharge. In a reply given on the Floor of the House in February the Secretary of State for Industry said what we all knew—that there had been a drop of about 16 per cent. in manufacturing output since the Government took office. I well remember the Government's first Budget. The then Secretary of State for Industry—now the Secretary of State for Education and Science—spoke of "galvanising industry". I well remember the word "galvanising". We have not seen much galvanising of industry, but we have seen much undermining of British industry and a resulting loss of jobs for our constituents.
        It is understandable that the effects of the exchange rate, the national insurance surcharge, and so on, have had the greatest impact on manufacturing industry. In a reply yesterday about unemployment, the Secretary of State for Employment said that since the Government took office there had been an increase in unemployment of just under 118 per cent. That is disturbing enough, but in the West Midlands—in many respects the heartland of the manufacturing and engineering industries—the increase in unemployment has far exceeded 118 per cent. In my own travel-to-work area unemployment has risen by nearly 240 per cent. since May 1979. We find the same picture in other travel-to-work areas in the West Midlands. Unemployment has increased substantially and by more than the national average since the Government came to office.
        We have to consider what can be done to increase the number of jobs. The hon. Member for Colne Valley (Mr. Wainwright) said that the TUC put more emphasis on reducing VAT than on a reduction of the national insurance surcharge. The TUC may or may not be right, but in the absence of a reduction in VAT a cut in the surcharge will undoubtedly help to create more jobs.
        The present level of unemployment must be substantially reduced. I asked the Prime Minister about unemployment in my area and all that she had to say in a written answer was that she was concerned about the creation of soundly based jobs, but that that depended on
        "the ability of industry and commerce to meet more effectively the needs of consumers at home and abroad."—[Official Report, 4 May 1982; Vol. 23, c. 19.]
        Those are mere platitudes and cliches which do not come to grips with the devastation and tragedy that have occurred in so many parts of the West Midlands in the past two or three years. A reduction in the national insurance surcharge would help industry to compete more effectively with overseas companies and would also assist the construction industry, which has also suffered so much from Government policies.
        Many of us are appalled that the Budget and the Finance Bill accept as inevitable the present level of unemployment and the fact that it will remain at that level for some time. Indeed, the Budget accepts that unemployment will increase substantially in the next year. We wanted a different sort of Budget and Finance Bill. We wanted measures to achieve what the Opposition and the TUC have been pressing for—a degree of reflation, a substantial reduction in unemployment and an incentive to employers to take on labour. No one can say that the Bill will do anything to reduce unemployment substantially.
        Mr. Skinner: It is not supposed to.
        Mr. Winnick: My hon. Friend is right, and he has highlighted the basic weakness of the Bill and all the previous Finance Bills introduced by the Government.
        Mr. Skinner: The reason why I said that the Budget is not supposed to reduce the numbers on that pile of human misery known as the dole queue is that the Government set out from the beginning, in 1979, to shift the balance away from those who work for a living and towards the boss class. They have succeeded in that aim by putting 3 million to 4 million people out of work. The Budget is a continuation of that policy. The Government want employers to fill the coffers of the Tory Party at the next general election, as they did last time. Indeed, the Tories hope to get even more this time. That has been the aim of the policy in all their Budgets.
        Mr. Winnick: No one can deny that the creation of unemployment has been deliberate Government policy. The hon. Member for Bath (Mr. Patten) is amused by that, but surely he will not suggest that when the policies were put forward in 1979 and 1980 Ministers believed that they would reduce unemployment. They are not that stupid. They understood that the policies would increase unemployment. They argued that that was the only way to defeat inflation and to make industry more competitive. We strongly disagree.
        It is easy for hon. Members to talk in the House about unemployment, but, as we have said before—it needs repeating and emphasising—we should not underestimate the anger and frustration that unemployment has caused in many places throughout the country. However much we may be concerned about unemployment, it is easier for us than for those who are directly affected. The misery and frustration of the unemployed are bad enough, but there is also the psychological damage, because they do not know for how long they will be unemployed. There are people of our own age group who understandably say to themselves "Will I ever be able to find another job?"
        The Budget and the Finance Bill are to be condemned because they do not offer any way or hope of releasing our fellow citizens from the misery of unemployment. We have talked about the 1,800 Falkland Islanders. I should be the last person to condone the aggression that took place. Their rights are important, and that dispute has to be resolved, but what about the elementary rights and the human dignity of those on the dole queues? We should not forget them, but, unfortunately, the Budget and the Finance Bill offer no guide.
        6 pm
        I do not suggest, any more than my right hon. Friend the Member for Stepney and Poplar would suggest, that reducing the surcharge further, along the lines suggested in the amendment, will resolve the problems of unemployment. There is a need for a more competitive exchange rate, for selective import controls and for planning agreements. I know that we shall not carry many Conservative Members with us, but those are the types of measures that would substantially change the position in British industry.
        I noticed that a recent article in The Guardian, written by a member of the Social Democratic Party, was very pessimistic about Labour's plans. What is interesting about that article is that, even on the most pessimistic assessment, Labour's plans for jobs would substantially reduce unemployment. The article argued that there would be disadvantages such as inflation and the rest of it——
        Mr. D. N. Campbell-Savours: And an incomes policy.
        Mr. Winnick: —although inflation has increased substantially under the present Government. The Government boast about the fall in inflation, but they have reduced it only to what it was when they came to office.
        Mr. Skinner: Not quite.
        Mr. Winnick: My hon. Friend says "Not quite" bat very nearly. That is nothing to boast about, and it has been achieved at the expense of so many of our fellow countrymen who are unable to find work and may not get work for a long time.
        The Guardian article accepts, as most people will have to do, that Labour's plans for jobs, whether on an optimistic or pessimistic assessment, will do far more substantially to reduce unemployment than anything that we are likely to see from the Government. But we should take whatever assistance we possibly can. Although I mentioned the need for substantial measures, if reducing the surcharge further—the surcharge is undoubtedly a form of tax on jobs—will help to reduce unemployment and will provide more opportunities at least that is a move in the right direction. We shall support any measures that will reduce the present level of unemployment and allow people to earn their living, as the more prosperous do.
        The Government will never be forgiven for bringing back mass unemployment—a form of curse which many believed would never return to our shores. The Finance Bill does nothing to undermine mass unemployment, but accepts that unemployment will increase more. For those reasons, the Bill is certain to be condemned.
        Mr. Chris Patten: I welcome this opportunity to talk about the iniquitous national insurance surcharge. The debate has given us the opportunity to talk about some of the problems of British industry and to listen to the admirable bouncy speech about the entrepreneurial spirit delivered by my hon. Friend the Member for Chippenham (Mr. Needham).
        Mr. Straw: It will be printed in Labour Weekly.
        Mr. Patten: I am afraid that that is probably the only place where it will be reprinted, although it might be put in some of the Wiltshire papers which I am sure will want to carry copious extracts from it.
        The debate also gives us the opportunity to touch upon one or two issues which go to the heart of some of the mole interesting and intellectual arguments about the Government's strategy. I think we can start on a note of agreement. We are all agreed that if we set on one side criteria such as ease of collection and certainty of collection, the national insurance surcharge is a rotten tax. I think that point is conceded by the right hon. Member for Stepney and Poplar (Mr. Shore) who was, of course, an adornment of the Government who introduced the surcharge.
        I did not care much for that rather Jesuitical part of his speech in which the right hon. Gentleman tried to say that the national insurance surcharge was not a rotten tax when it was first introduced. At an earlier stage in his distiguished career, the right hon. Gentleman was director of the Labour Party research department. I am well acquainted with the type of speech that he made. I have had to write similar speeches myself in the past. It was the sort of speech where one tries to justify anything and

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        everything one's party has ever done. It is debating stuff for women's advisory committees, although not the more intelligent women's advisory committees. I should like to excise that remark.—[Interruption.] My hon. Friend the Member for Grantham (Mr. Hogg) says quite rightly that I am not referring to the women's advisory committee in my constituency. The right hon. Gentleman's speech would have been better served if he had not made those remarks.
        It is also pleasant to hear the surcharge denounced by those who in an earlier alliance were party to the increase in the surcharge in 1978. One might say that the national insurance surcharge was one of the fruits of that alliance, although perhaps not one of the more attractive fruits.
        I have looked through the Hansard reports of the early debates on the surcharge. It is interesting to note how perceptive were the comments of my right hon. and hon. Friends. If one examines the speeches in those debates, one finds a roll of honour of the Treasury Front Bench today. Some of the leading lights of the present Administration made admirably perceptive and trenchant speeches denouncing the surcharge on all the usual grounds. I do not want to trouble the Committee by quoting those speeches extensively.
        Mr. Campbell-Savours: Please do.
        Mr. Patten: That would not serve anyone's interests, and certainly not my own.
        It is worth recalling the arguments we made in Opposition about the surcharge. The one thing we did not do, bearing in mind the unhappy history of commitments on the selective employment tax, was to pledge ourselves to abolish it. Apart from that, we made it clear that we were not wildly keen on the surcharge.
        The most robust and comprehensive denunciation of the surcharge was the representation on the Budget made by the CBI in January last year. The CBI said that the surcharge lowered British competitiveness, worsening our balance of payments by, in effect, levying a tax on exports but not on imports. It pointed out that the national insurance surcharge raised prices because it was a labour cost. It said that the surcharge was a tax on jobs and therefore increased unemployment because employers would not take on new workers so that they would not have to pay the tax. The CBI said that the surcharge squeezed profits and therefore reduced investment. The CBI did not point out, as it could have done, that, because of the surcharge's effect on industry's cash flow, it obliged companies to go out and borrow money and therefore, at least in a sense, had an effect on interest rates.
        The CBI concluded:
        "It would be difficult to devise a more damaging tax on business."
        It went on to say that it was interesting how often temporary expedients, which were, if I may borrow a phrase from another debate, introduced in lieu of public expenditure cuts, turned into permanent features of our tax system. That point was admirably made by my hon. Friend the Member for Rutland and Stamford (Mr. Lewis) in his characteristically wise speech.
        We were all pleased that the CBI's pleadings and arguments this year at least made some dents in the Treasury's armour. I welcome the step, the excessively cautious step, that the Government took in cutting the
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        national insurance surcharge in the Budget, but, in all fairness, one or two things should be said in the Government's favour. There was the extra ½ per cent. cut from August for one year on top of the 1 per cent. cut that also starts in August. That means that this year the national insurance surcharge will be cut by almost as large a figure as if we had made a cut of 1 per cent. over the whole 12 months.
        The Government are entitled to point out the combined effect of national insurance contribution rates and the national insurance surcharge. For a couple of years they have shielded employers from increases in the national insurance contribution rates. The combined effect of the national insurance surcharge and the national insurance contribution has fallen in real terms. I suspect that it has also fallen in cash terms. Why, despite all that, were the Government not able to go further? They were not able to go further because of the PSBR, which was the restraint in the first place that obliged the former Chancellor of the Exchequer to introduce the surcharge.
        As my hon. Friend the Member for Chippenham knows, I am not an unqualified supporter of the primacy of the PSBR in economic management. I believe that one or two other things, such as jobs, prices and output, are more important. I recognise that those who believe that the PSBR is the maypole of economic policy must have been delighted when they discovered a couple a weeks ago that last year the PSBR had been £2 billion less than they thought it would be a couple of months before. That must have come to them as the sort of shock that pools winners get—"East Surrey man wins £2 billion". We know the story.
        We are also told that the good news—or bad news if one thinks that we should borrow more during a recession—will continue. Yesterday, Mr. Wilkinson, the economics correspondent of the Financial Times, reported:
        "The Treasury is still trying to find out why borrowing last year undershot the target by £2 billion representing almost a quarter of the £8·6 billion borrowed.
        Although the full reasons for this remain obscure, officials are cautiously optimistic that a number of beneficial effects will carry through into this financial year."
        Perhaps the cautious optimism about 1982–83 will turn out to be justified. I would not put too much money on that, because presumably the people who are forecasting the figures for 1982–83 are the people who forecast last year's figures. Therefore, perhaps that would not be an ideal bet.
        Nevertheless, the Treasury may be right. I appreciate that the PSBR is conceivably one of the things that gives it cause for whistling at the moment, as well as the forecast for inflation and the first stirrings of industrial recovery. The inflation forecasts do look extremely encouraging. Large parts of British industry are potentially more competitive than they were. That may start to show through as output picks up a little, although not enough to make much of a dent in unemployment.
        If we want output to pick up more, if we want to make a bigger dent in the deplorable unemployment figures, and if we want to demonstrate that we are on a different path from the one that we have trodden for the past decade or more, we need to do two other things. Recently, the Financial Times said that those two things were without precedent in British economic history. The first thing that we have to do is to——
        Mr. Skinner: Resign.
        6.15 pm
        Mr. Patten: I am grateful for the hon. Gentleman's urbane comment. Perhaps he would like to make a more serious intervention. Since I have been in the House, I have come to realise that the hon. Gentleman is an important part of the British constitution, like the ravens in the Tower of London. If he wants to intervene in my speech, I shall be happy to let him intervene intelligently.
        Mr. Tim Eggar: That would be difficult.
        Mr. Patten: I appreciate the difficulty.
        If we are to get on to the more impressive path, the first thing that we need to do is to encourage a revival led by investment, although markets are depressed and there is little demand. The second thing that we need is a shift of real income from wages to profits without industrial turmoil.
        As Professor Alan Budd said the other day, the first of those things is more difficult than we would like because the company sector is likely to be running a deficit of about £1 billion over the next year. Professor Budd said that that would lead to greater borrowing by companies. He was therefore cautious about the prospects for recovery. He said that the prospects for this year were delicately balanced, because recovery depends on stock building and further investment when consumer spending is as flat as it is and when companies are still borrowing heavily.
        The second development relates to pay, to which I have referred. We do not believe that, as the threat of redundancy diminishes, people will try to make up for the real wage cuts that some of them, particularly in the private sector, have suffered since the end of 1980. There has been, it is said, a permanent change in attitudes. If so, I wonder why at the same time it is argued that we cannot give people more money to help industry for fear that it will feed straight through to pay. I wonder whether the fact that we have always placed such a low priority on our pay bargaining system, both in our analysis of Britain's problems and in our attempts to solve them, will help us, when we need to do so, to create a more responsible and sensible pay bargaining system that ensures that we can expand sufficiently to make a real cut in unemployment.
        Mr. Needham: Did my hon. Friend see the article in The Times on Nye Bevan by the hon. Member for Bedwellty (Mr. Kinnock)? The hon. Gentleman said that Mr. Bevan had made clear that the only way to secure full employment was to make sure that there was a proper plan for wages. Is it not strange that, after that lesson has been given so many times, it has still not been understood in many parts of the House, not least by Opposition Members?
        Mr. Patten: I do not believe that the late Mr. Bevan would have talked about national economic assessments. He had too much respect for the English language. He would have been inclined to call a spade a spade. It is profoundly difficult to encourage people to accept something if one is not even prepared to say what it is.
        Mr. Winnick: Leaving aside the difficulties that sooner or later all Governments get into when trying to apply what many people consider to be wage restraint policies—they are wage restraints if we have respect for
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        the English language—does the hon. Gentleman accept the argument, certainly from the Left, that there has been little distribution of wealth in Britain?
        I am sure that he knows the figures. One per cent. of the population owns 25 per cent. of all private wealth, 5 per cent. own about 50 per cent. and 50 per cent. own about 5 per cent. I accept that the hon. Gentleman does not believe that that should be condemned in any way. Nevertheless, the fact remains that no incomes policy or wage restraint, so much favoured by the Social Democrats and the rest, would change the distribution of private wealth.
        Mr. Patten: The hon. Gentleman is tempting me to spend a long time travelling along a different boulevard. Even if we redistributed wealth in the way that he favours, it would make little difference to the economic prospects for the country. I doubt whether Mr. Scargill would wake up in the morning as an enthusiastic supporter of wage restraint and wage policies if we pursued the course advocated by the hon. Gentleman. In the social contract, time and again we have witnessed the Government giving to the unions and not getting in return as much as they or we might like. That was the case with the social contract under the Labour Government.
        The Chairman: I hesitate to interrupt but I do not think that this matter has a great deal of relevance to the amendment, interesting though it is.
        Mr. Patten: I apologise, Mr. Weatherill. I was tempted by the question of the hon. Member for Walsall, North (Mr. Winnick) and the occasional barracking of his hon. Friend the Member for Bolsover (Mr. Skinner).
        The national insurance surcharge is relevant to the strategic issue with which I am dealing: whether there will be a revival led by investment and pay. The Government should be attempting to put more money into industry's pockets so that it can rebuild stocks. It would then have more to invest and could create more jobs. That would help with the first strategic objective that the Financial Times said had no precedent in Britain.
        It may be argued that pay restraint would be less likely if we put more money back into industry. I suggested earlier that it is a little illogical to take that view as we argue that there has been a sea change in attitudes that is both the consequence of and the justification for the depth of the recession that we have been through in the past few years. If it is believed that giving industry more money immediately feeds through to excessive pay settlements, I argue, as I did last year, that cuts in the national insurance surcharge should be used to encourage responsible pay bargaining.
        Dr. Brian Mawhinney: I have been listening to my hon. Friend with great care and with my customary admiration. Does he recall that in 1977 some of our colleagues promoted the idea that it would be possible to establish a forum of the various economic interests in the country——
        Mr. Skinner: Another quango.
        Dr. Mawhinney: —at which issues, such as national insurance surcharge and jobs, might be discussed? Does my hon. Friend believe that it would be a good idea to resurrect that idea, or at least to dust it off?
        Mr. Patten: I do not want to strain your generosity by following that point too far, Mr. Weatherill. I agree with

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        what my hon. Friend suggested. It is easier to run a comprehensive and coherent policy for the public sector if there is some method for discussing and agreeing a criterion that would underpin pay settlements in the private sector.
        I return to the only risk of making large cuts in the national insurance surcharge. There is a risk of a small increase in the public sector borrowing requirement. That is not as great as the total cost of cutting the national insurance surcharge because of the effect on economic activity. Moreover, the effect would be temporary rather than permanent, because of the effect of economic activity. One tiny risk might be involved this year. If, as some hon. Members argued during the debate on the Budget Statement last year, the national insurance surcharge had been cut by 2 per cent., the Chancellor would almost certainly have hit his public sector borrowing requirement. That is the amount of the risk if the figures given by the Treasury model are correct. The increase would have been £1 billion rather than £2 billion. "East Surrey man wins." That is the scale of the risk that my right hon. and learned Friend would have run.
        Bearing in mind what can be accomplished by cutting the surcharge, that is the type of risk that the House should be prepared to run. It is the type of risk that the Chancellor should be prepared to run. I realise that he will not do so tonight, but I hope that he will keep an open mind about further cuts in the surcharge later in the year.
        Mr. John Horam: The interesting thing about the debate, as the hon. Member for Bath (Mr. Patten) said, is that all the speeches have been good. We have not yet heard from the Treasury Bench. That may reduce the average a little. It could increase it remarkably if some of the amendments put forward by the Labour Party or the alliance were accepted. That may not happen.
        The hon. Member for Chippenham (Mr. Needham) made an especially good speech. He went to the heart of the matter when he said that the Government appear not to have understood the needs of industry. The hon. Gentleman has experience of industry. Perhaps slightly lightheartedly, he went on to say that that might be as a result of the lack of industrial experience on the Treasury Bench. Apart from the Financial Secretary and the Minister of State, the Treasury is devoid of such experience. One must go fairly low down the batting order to find any industrial experience. That is a poor show.
        The same is true of the Labour Party. If the other Establishment party replaced the Conservative Party on the Treasury Bench tomorrow, with the distinguished exception of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), the new Treasury Bench would be equally devoid of direct industrial experience.
        There is a wealth of talent on the Back Benches of each party, but the hon. Member for Chippenham and the hon. Member for Workington (Mr. Campbell-Savours) never seem to get promoted. It is always the barristers or the boys from the back room of the research department who get the job. That is a great pity. It may be dawning on the hon. Member for Chippenham that if his party goes on as it has been, while the Labour Party is the party of the trade unions, the Conservative Party will be the party of the City
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        of London and the Bank of England. That leaves a convenient niche for the alliance as the party that understands industry.
        Mr. Needham: Does that mean that the SDP is to be the party of big business?
        Mr. Horam: I do not know who would be occupying the Treasury Bench if the alliance were in Government today, but my own industrial experience is certainly considerable.
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        Mr. Brittan: In view of the well-known business experience of the right hon. Member for Crosby (Mrs. Williams), the unrivalled business experience of the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) and the exemplary business experience of the right hon. Member for Plymouth, Devonport (Dr. Owen), is the speech to which we are listening to be interpreted as a personal plug for the advancement of the hon. Member for Gateshead, West (Mr. Horam)?
        Mr. Horam: I should not be averse to that interpretation, as I certainly have more industrial experience than my colleagues. Nevertheless, I do not underrate the experience of my right hon. Friends. My right hon. Friend the Member for Glasgow, Hillhead (Mr. Jenkins), for example, has direct industrial experience, as have my right hon. Friend the Member for Plymouth, Devonport (Dr. Owen) and others of my colleagues.
        Mr. Straw: Will the hon. Gentleman give way?
        Mr. Horam: No, I am not taking a further point from a barrister.
        Mr. Straw: The hon. Gentleman ought to do so. He is misleading the Committee.
        Mr. Horam: I have no intention of doing so, and I did not mislead the Committee. The hon. Member for Blackburn (Mr. Straw) has no grounds for intervening in this debate. I understand that his experience, like that of the Chief Secretary, is of the legal kind.
        Mr. Peter Bottomley: Will the hon. Gentleman give way?
        Mr. Horam: As an alliance Member, I must be fair to both sides. I did not give way to the hon. Member for Blackburn, so I should not give way to the hon. Member for Woolwich, West (Mr. Bottomley).
        Mr. Bottomley: On a point of order, Mr. Godman Irvine. Would it be in order in a subsequent speech to read out the hon. Gentleman's experience in industry, which he has presumably already registered?
        The First Deputy Chairman (Mr. Bryant Godman Irvine): That is not a point of order.
        Mr. Horam: To put the record straight, I should make it clear that I established my own company, which was extremely successful, with a 90 per cent. export record. That is more than can be said for any Conservative or Labour Member here today. As I seem to have stirred up a hornet's nest, perhaps I should leave the matter there.
        It is important to place the national insurance surcharge in perspective. The Government now argue, on general economic grounds, that things are getting better, and no one is more adept or diligent at that game than the Chief

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        Secretary. Indeed, he started somewhat prematurely 12 months ago to try to talk up the economy. Now he finally has something to talk about. I concede that some of the indicators are looking a little better than they did 12 months ago. The inflation situation looks slightly better, the output forecast is a little better, there have been improvements in productivity and the position of interest rates is rather better.
        The Chief Secretary's great advantage has been the ability to make comparisons with the situation 12 months earlier. To recast his brother's analogy, which was also used today by the right hon. Member for Stepney and Poplar (Mr. Shore), the Government, having climbed down from the peak of Everest, have now marched up Box Hill. The Chief Secretary can therefore make comparisons with the vale of tears which lies between Everest and Box Hill in his extrapolations to try to prove that the economy is improving. Given that comparison, things certainly look rather better, because nine months or a year ago there was despair and devastation in the British economy, as there largely is today.
        The upturn, in so far as it exists, is extremely slight and fragile. For example, the Government forecast in the Red Book that output will increase by about 1½ per cent. this year. That was put in rather tentative terms in the Budget Statement, but a month or so later the Government can be confident of an increase of 1½ per cent. Indeed, it might even be 1¾ per cent. In terms even of the average performance of the British economy or of the economies of other countries since the war, however, 1½ per cent. is minuscule. The Government are confident of achieving that growth this year and the forecast suggests 2½ per cent. growth next year, but that will be the peak of the mini-boom.
        If we achieve only 1½ per cent. this year, 2½ per cent. next year and even perhaps 2½ per cent. the following year before turning down into the next recession, unemployment may stop growing and stabilise for a while during this relative boom period, but it will not be reduced and at the end of the boom it will continue to march upwards to well over 3 million in 1984–85. The reality is that the Government have not been able to achieve a revival of output which has any significant prospect of actually reducing the real level of unemployment in the economy. If that is so, the prospects are indeed grim not just for the immediate future but for three, four or five years to come. That is the really worrying prospect.
        Moreover, as the hon. Member for Bath said, the fragile, tender plant of 1½ per cent. output growth this year is greatly threatened and highly dependent upon de-stocking. It will not receive much boost from Government expenditure, capital or current, in the course of the year. Consumer demand is likely to be fairly flat and the deepening recession in the United States and difficulties in the world market mean that we shall have to fight against a general world recession. All of this will make it difficult for the United Kingdom to achieve even that modest revival of output. Like the hon. Member for Bath, I should like to see an investment-led revival, but, frankly, I am not choosy. I should just like a revival, even if it is not investment-led or not ideal. That is what industry wants, but it is not getting it from the Government.
        Even on inflation, which the Chief Secretary and his colleagues so much like to talk about, the record is not good. Certainly we are now returning to the kind of level that the Government inherited and the trend is now
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        downwards as it was upwards then. I accept that that is the factual position and that it is some kind of achievement, although the Everest in between was rather high. While we have been making that progress, however, other countries have not stood still, and they are now beginning to show inflation rates which represent a substantial improvement on those for which we aim. We need to know the Government's real position on this. Perhaps the Chief Secretary will address his mind to this when he replies to the debate.
        If the Government achieve an inflation rate of perhaps 8 or 9 per cent. in due course, which will be quite an achievement, given the institutional framework of this country, will they rest content with that? Or, as I sometimes suspect is the wish of the economic advisers, do the Government intend to screw us down even further to perhaps 4 or 5 per cent.? The pain and cost involved in that may be extraordinarily great. Perhaps the Chief Secretary will enlighten us about whether the Government intend to continue giving top priority to inflation at all stages of the game, with a view to achieving ever lower levels, or whether they are prepared to rest content with a substantial improvement and then give priority to other matters such as the level of demand of industry, industrial products, and so forth.
        We should also know how the Government propose to deal with expansion if it is achieved. That is the real problem for the Government. They can achieve inflation rates of the kind that they have achieved with demand as flat as it now is and the economy as down as it has been for the past two or three years, but what happens when expansion comes? Do the Government have a policy to deal with the increase in wages which may flow from that, perhaps not in the current wage round but the next? The hon. Member for Bath made a number of relevant comments about pay bargaining.
        The alliance is examining many different ideas on this issue. It is central to the debate, but the Government have not addressed themselves to it. In my frequent discussions with industrialists, it rings very true when I tell them that the Government have a policy for recession and for keeping down inflation in the present circumstances, but that they have no policy for expansion. The Government do not have a policy to deal with the inflationary consequences in pay and in other respects of having a substantial and sustained increase in output. So far they have kept the economy on the bottom, which they cannot do for ever.
        Mr. Campbell-Savours: How does the hon. Gentleman respond to the comments of the Cambridge group last week about the Social Democrats' proposed reflation of the economy, suggesting that there would be no reduction in unemployment in that programme?
        Mr. Horam: A reduction in unemployment would be extremely difficult in any reflationary programme. That is the problem with reflation. General reflationary measures are disappointing when it comes to reducing unemployment, as I think hon. Members on all sides will concede. Indeed, the Government argue that they are barely worth taking because unemployment is so high. The Government maintain that it is better to carry on as we are than to take such action. The general reflationary measures which, to some extent, the Labour Party has advocated, although it goes too far, and which we have advocated, together with

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        the special employment measures which we, uniquely, have advocated, give us the chance to reduce unemployment by 1 million over a couple of years. That is a modest but achievable aim.
        Dr. Mawhinney: The hon. Gentleman asked my right hon. and learned Friend whether it was the Government's intention to settle for an inflation rate of about 8 per cent., which he said would be quite an achievement, or to press for about 5 per cent. Which would he prefer, and why?
        Mr. Horam: I have argued for almost a year now that at this stage in the economic cycle we should take a balanced view. We should not give top priority to a counter-inflation policy, although we should seek to continue to control inflation. We should give top priority to reviving industrial demand. That is the balanced approach that would best serve industry.
        I shall end on the third leg of the Government's argument about the improvement in the economy. It involves productivity and the better utilisation of labour which has taken place during the recession. It is true that many less-efficient plants no longer operate, and that has been good for the economy. It is also true that there has been a lot of demanning, which again has been good for the economy. However, that alone does not provide a basis for expansion and growth. For that we must have a revival of demand on a substantial and sustained basis, and that is what we do not have from the Government.
        It is also true that in this general increase in productivity, which I welcome, many good firms have gone to the wall. The policy is a crude one. Clearly, better firms survive, but that does not always happen. It depends on their market situation, their short-term cash flow, and matters of that kind. Many good firms have gone to the wall as well as many inefficient ones, and those that remain have found that it is a matter of sheer survival. Many industrialists have told me that to survive they have had to cut out investment and product research, which would have led to growth in five or 10 years' time. They had to do that to keep the business going, and that action will be reflected in future performance. It is against that background that we must view the Government's boast about improved productivity.
        I agree with those who argue for a substantial cut in the national insurance surcharge, or its total abolition. I am happy to join members of the Liberal Party in tabling the amendments in this connection. I hope that the Government will give them serious consideration, although I suspect that we shall be disappointed again. Although the effects on unemployment of either abolishing or substantially reducing the national insurance surcharge have been exaggerated, frankly I do not believe that it would have a big effect on unemployment. Some time ago I read an article in the The Times by the hon. Member for Bath in which I thought that he placed rather too much reliance on its effect on unemployment, but it would be a good step in terms of keeping down industrial costs and generally helping profitability, thereby keeping down prices, and certainly it is something that the CBI wants.
        The CBI said very clearly what sort of Budget it thought would be good for industry, long before the Chancellor of the Exchequer produced his measures. It advocated what the Labour Party advocates, and that is a cut of about 2 per cent. in the national insurance surcharge, together with
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        other measures such as derating and not increasing duties on items such as whisky, with which I do not agree. It proposed a range of measures which went well beyond the Government's package.
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        The Government would do well to listen more consistently and sensibly to what the CBI says. Since its new director general took over, it increasingly represents the real views of industry. In many ways the CBI is a disparate group, because it covers all kinds of industrial and commercial enterprises. Nevertheless, it represents the true views of industry.
        Mr. Derek Foster: Does the hon. Gentleman share the CBI's preference for cutting back revenue expenditure on public expenditure in favour of increasing capital expenditure? Is the Social Democratic Party's policy well developed on that issue?
        Mr. Horam: I should not favour a reduction in current expenditure, because we can ill afford it, but in any case it is rising, because of high unemployment. However, I believe that we can afford an increase in capital expenditure, as I have advocated both here and elsewhere.
        The Government would do better to get away from their obsession with the intermediate targets, the PSBR, and the money supply figures. Instead, they should look at the real economic objectives of output, prices and unemployment. That is what they have not done. They argue that they have concentrated on intermediate targets, because they are easy to influence. However, the history of the past three years disproves that. From time to time they have taken measures, such as the doubling of VAT in their early months, which ran counter to sensible economic policy.
        In the interests of industry, the Government must get away from giving priority to inflation at all times and in all circumstances. Industry wants a balanced approach which will minimise the shocks of the economic system and produce as level a growth of demand as we can achieve. That is what we should give industry, and in that context the reduction or abolition of the national insurance surcharge is an appropriate step.
        Mr. Peter Bottomley: I listened with remarkable care to the moderate speech of the hon. Member for Gateshead, West (Mr. Horam). I do not want to spend much time on his industrial experience, except to say that in the reference books there is no mention of it. There is a bit about market research for a bunch of "smarties", or Rowntrees. The hon. Gentleman talked about a commodity company, which may have been the export business of which he spoke. If commodities amount to industrial experience, then many commodity traders probably have dirtier hands than I thought. If, on the other hand, he has more substantial industrial experience, I wonder why he does not publicise it when he describes himself.
        Mr. Horam: The hon. Member for Chippenham (Mr. Needham) based his industrial experience on selling knick-knacks abroad. I certainly think that Rowntrees is a substantial industrial company. It may deal in confectionery, but that does not make it any less an industrial company. I was involved in marketing as well as in market research. Indeed, I had the pleasure of helping to introduce to the world the "After Eight" thin mint. That had a remarkable product success. If its success could be

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        achieved by other companies, their profitability would be assured. The point is that, whatever part of the market a person is in, whether confectionery or cars, it is still a matter of selling products. In addition, starting a new company represents a background of industrial and commercial experience which very few Members on the Government side can match.
        Mr. Bottomley: If I may deduce from that that the hon. Gentleman has been engaged in the industrial battle, I think that I should award him the medal of the chocolate soldier. My experience in industry is slightly greater than his, but I will not boast about it. Our job is to talk here as politicians, I hope with our feet on the ground. I do not think that anybody should feel disqualified because he is an hon. and learned Gentleman, a right hon. and learned Gentleman, a doctor or anything else.
        I think that we should return to this matter on some future occasion and try to get a broader representation of Members with industrial experience, not just those who are directors of companies or even full-time convenors.
        Turning to the national insurance surcharge, again following the point made by the hon. Member for Gateshead, West, I do not think that there is a clear choice between continuing to reduce inflation and seeing more effective demand in the economy. I am not one of those who supported the CBI's pre-Budget submissions saying that the important thing was to get as large a reduction as possible in the national insurance surcharge. I listened and spoke to a number of representatives of the CBI during the months before the Budget. I asked each of them, after they had made the point about the national insurance surcharge, what pay increase they had given their employees the year before and what had determined what that pay increase should be. It turned out that in nearly every case they had given a pay rise substantially in excess of the underlying increase in either profitability or output per employee.
        I remain unconvinced that reducing the national insurance surcharge substantially will have no effect on the level of pay settlements. I believe that pay claims cannot be influenced directly, but that the level of pay settlements can. I would follow the line that was thrown out, I think, by my hon. Friend the Member for Bath (Mr. Patten), that perhaps it would be right to make further reductions in the national insurance surcharge in line with more realistic pay settlements. I believe that there is a trade-off, but I do not believe that reducing employer costs or the payroll job tax by 3½ per cent. or 3 per cent. immediately would have no effect on pay settlements.
        It is obvious that, given half a chance, pay settlements will start rising instead of continuing to fall gradually. I believe that the Government ought to recognise that getting the level of pay settlements down requires acceptance by a large number of people involved in pay settlements. That is a matter not just of the unions and employers but of the underlying sense of fairness and acceptability of the majority of the working people. For that, as my hon. Friend the Member for Peterborough (Dr. Mawhinney) said, there should be some kind of open discussion of the underlying issues as they affect job tax, the national insurance surcharge, the chances of getting down inflation and prices and of increasing opportunities for employment and demand.
        Mr. Needham: As I understand it, my hon. Friend said that a reduction in the national insurance surcharge would
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        have an effect on pay settlements. Has he got anything other than anecdotal evidence for that? All the advice that is being given to me, certainly by the CBI, which has discussed this matter at great length within its committees, both regional and at the centre, is to the effect that there is no evidence whatever that a reduction in the national insurance surcharge would have any impact on pay settlements.
        Mr. Bottomley: That is an important point. I think that the argument starts from a different point and ends up roughly in the same muddle. I shall say why I think it is a muddle.
        Many pay settlements have been struck on the ground of what firms could afford. Much of the talk we have heard about the growing sense of reality has been tied to particular industries or companies within industries—for example, British Leyland. Employees have accepted pay offers substantially below the level of inflation, and certainly below the level of inflation at the beginning of the year for which the pay settlement is made, because they have been convinced that the people they are working for cannot afford to pay more. Indeed, many of the pay settlements, even at half the inflation rate, have been in businesses and industries which have been associated with a large number of redundancies. So the pay increase, even though it has been at 5 per cent. with inflation at 10 per cent., has been paid for by the loss of people's jobs. That is incontrovertible.
        If we make it possible for firms to have more money we want to see it go into investment. We can only take it on trust when the CBI says that if there were a reduction in the national insurance surcharge the money would be used for capital investment, building up stocks, research and development or other good things. It asserts that it would not be used to increase the level of pay settlements.
        That is the kind of assertion which we have seen disproved by the actions of employers both in the public sector and, mainly, in the private sector during a number of re-entries from pay restraint during the past 20 years. We have seen firms forced to settle pay claims at higher levels year after year until the Government called a halt, or, in this present recession, conditions have made it sensible for people to accept reality.
        When the CBI says that it will not allow any extra reduction in the national insurance surcharge to go through to pay, my answer is that it is not within its control. It has not shown that it can stand out against pay claims which are pushed to the limit of what business can afford. There may be a number of industries, businesses, or industrialists, such as the hon. Member for Gateshead, West and my hon. Friend the Member for Chippenham (Mr. Needham), who say that this extra 1½ per cent. or 3½ per cent. will stay in the business, that it will be invested to create new jobs and we shall see the results in two or three years. I do not believe that most employers have the strength of mind or the industrial strength to stand out against many of the pay claims which are pushed to the limit.
        It needs only a few employers to give way for the general level of the pay round—accepting that we are not having a formal policy that ties everyone to a particular limit—to become part of received wisdom in the months that follow.
        Mr. Needham: Now that the national insurance surcharge is to be cut by 1 per cent., has my hon. Friend

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        any evidence to suggest that the claims or the settlements have gone up by 1 per cent? Why does he believe that, when it comes to settling claims, the unions and the management would take this into account? It is much more likely that, as my hon. Friend says, they would take into account the general level of profits and trading activity and what is happening in the area as a whole. There is nothing but anecdotal supposition on his part to suggest that one leads to the other.
        Mr. Bottomley: The burden of proof is the other way round, as my hon. Friend knows perfectly well. Let me sum it up in a complicated way. If a reduction in the national insurance surcharge means that there is more money within the business, there is more money available for pay, for other things, or even for profit. I think that can influence the level of pay settlements. My hon. Friend asks for causal proof that within the last month or two months there has been a link with settlements. I shall not offer it to him because it would be purely anecdotal.
        Mr. Frank Hooley: The real point, surely, is that the vast majority of employers do not consult or inform their work force about the economic realities of the business. If the hon. Gentleman does not believe me, he should note what his right hon. Friend the Secretary of State for Employment said the other day. He said that two-thirds of employers make no attempt to inform their work force of what is going on and the reality of the company's commercial position.
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        Mr. Bottomley: I am sure that the hon. Member for Sheffield, Heeley (Mr. Hooley) is right about the majority of employers. I should turn it the other way round and say that the majority of employees work in businesses where they have organised management, whether in the public or private sector. Many more ought to be doing what the hon. Gentleman is arguing for.
        I declare a family interest in what my father-in-law does in the Industrial Society in trying to get the idea of briefing groups, sharing information and proper, effective consultation into nationalised industries and large private industries. That shows the way ahead. It is a far more effective way than some of the plans we see from Europe or from the Labour Party. I cannot criticise the plans of the Conservative Party as I am not sure what our plans are on this important subject.
        I think that the level of pay settlements makes it possible to reduce the national insurance surcharge further. The problem is how to reconcile competing claims for extra resources. There was an earlier intervention about wage restraint. I would argue that the most effective way of restraining the real earnings of those at work is to go on with the kind of messy pay settlement system that we have apparently grown to live with in the past 25 years. So much concentration on nominal pay increases—the number of extra devalued pound notes that we get in our pockets each year—has taken our eye off the main chance, which is the opportunity to be more effective, more efficient and more productive, and to have a high level of output. There is no point in having higher productivity without higher output, for there will just be higher wages for those at work and a lower standard of living for a growing number of people.
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        During the past five years or so, many people have increased their standard of living, if they have a job, but a vast number of people have had their real standard of living cut by 50 per cent. or more as they have lost the chance of employment. The Government ought to get from the TUC, after some reasonable period of notice, not a fixed list but an idea of those who are seen as the priority cases for special treatment during the forthcoming 18 months.
        It is important that both the Government and the Labour movement, defined broadly, should get away from the idea of considering a special case a month without any notice. If we are concerned, for example, that the nurses deserve more than the rest of us, let us try to say that a year in advance of the nurses' pay claim coming up. We can then, up to a year and a half in advance, ask other groups in industry or in the service sector who are in normal trade union negotiations—not so much the small business people or the wage councils, but organised labour—to say who the special cases are. We do not have to set the limit for them under any kind of formal wage policy, but we should try to develop a consensus that, over the next 18 months, certain people need to be treated with more generosity, consideration or equity than the rest.
        If we introduce such a policy, we can bring down the general level of inflationary pay settlements. That would meet the point made by my hon. Friend the Member for Chippenham and would demonstrate that a substantial reduction in the national insurance surcharge would not lead to a new spiral of inflationary pay settlements. Getting rid of inflationary wage settlements is what the Government have been trying to do for the past three years, with limited success in the first two and a half years. They are having slightly more success now, but there is no guarantee that it will be permanent. I use the word "permanent" to describe any period that runs past the next general election. It is easy to manipulate many other parts of the economy, but pay settlements are rather larger than that. My hon. Friend the Member for Bath referred to the level of demand in the economy. I wish that the House discussed more dynamic economics. Instead of trying to look at a static State economy, which may be necessary if the economy is not growing, we ought to see what effect different levels of inflation will have on the public sector borrowing requirement.
        If my right hon. and learned Friend the Chancellor, when he gives his Budget judgment, would say what the impact on the PSBR would be if the general level of pay settlements, or of inflation, were 1 per cent. higher or 1 per cent. lower than the figure in his Budget judgment, many more of us would be able to look at the different levels of demand that would appear to be associated with different levels of inflation. These are strongly linked one way or another with the level of pay settlements during the year.
        There are effectively only two ways of achieving more jobs. One is by taking people out of the work force by reducing the number of years that we work during our working lives, giving perhaps two years of training to each young person leaving school and bringing the age of retirement down, working fewer weeks per year and hours per week.
        The second way is by getting greater effective demand. That is not altered much by £1,000 million on the PSBR, although it contributes to the potential level of effective demand. What is far more important, given Britain's

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        trading position in the world, is our level of competitiveness. Although that can be affected by a 1 per cent. extra reduction in the national insurance surcharge, it is affected far more by the underlying realities of production.
        Mr. Austin Mitchell: And the exchange rate.
        Mr. Bottomley: And the exchange rate, as the hon. Member for Grimsby (Mr. Mitchell) says. The hon. Gentleman once sent me a three-page letter after I had accepted a one-sentence interruption from him. I must get round to reading the other two pages.
        What matters even more is what has started to happen to British Leyland during the past 18 months, with more cars produced per employee instead of the worsening ratio for the first five years of State intervention.
        The Government are approximately right in the reduction that they are proposing in the national insurance surcharge this year. Nobody believes that the ½ per cent. extra reduction for the eight months of this year will be put back. That is a figment of anybody's political imagination. They should say under what conditions they would reduce the national insurance surcharge by an extra 1 or 2 per cent.
        Only when the Government are willing to put these ideas forward months, if not a year, in advance will we have the kind of response from Parliament and, behind Parliament, the kind of discussions and considerations by people in industry, the service sector and the nationalised industries that will make it possible for us to match our ambition with our actions. Too many outside Parliament have ambitions and actions that are inconsistent and we end up with an economy with a lower growth, higher Government spending and a lower standard of living than we ought to be able to achieve.
        I hope that the Government will at least read this debate and will consider how they can bring more people outside the House into considering the issues that we have been raising this evening.
        Mr. Campbell-Savours: When the hon. Member for Woolwich, West (Mr. Bottomley) suggests that the level of pay settlements may be directly determined by the amount of money made available to employers, in this case by a reduction in the surcharge, he perhaps misunderstands to some extent what is happening on the shop floor in industry. As I see it, what is far more a determinant is the ability of industrial workers to identify short-time working and the threat that short-time working means to their employment. Although in many ways the two are linked, to many people on the shop floor they are not. If they are on short-time working they believe that their jobs are threatened and that they should take reduced settlements. It is not a view to which I subscribe, but I shall not go down that route today. It is not the right analysis to make.
        If this debate, and other debates, are to be an indication to the House of the feelings of members of the Finance Bill Committee this year, the Government may be in trouble. I have not looked at the appointments to the Conservative Benches in the Finance Committee but it is obvious that throughout the four major debates all but one or two speakers have on occasion bitterly criticised the Government's economic strategy. It would be interesting
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        to review the appointments to see whether those same people have been appointed to the Committee. I cannot believe that that is possible.
        Mr. Straw: My hon. Friend the Member for Workington (Mr. Campbell-Savours) is being customarily over-generous to the Government. It is difficult to name one Conservative Back Bencher who has spoken in fulsome support of the Government in Committee on the Floor of the House. The Treasury Front Bench are now stranded without support. If they have support, it certainly is not visible in the House.
        Mr. Campbell-Savours: When we examine those lists we may find that many hon. Members who have been appointed have not spoken in the debate but have been appointed because they are known to be loyal to Government strategy and in many cases not too willing to express dissent and to argue against its thrust.
        The hon. Member for Chippenham (Mr. Needham) made an extraordinary speech. He was bitterly critical of the Government. When he addressed his remarks directly to the Chief Secretary I understood him to be saying that there are too many lawyers in the Treasury and not enough people who have dirtied their hands in the industrial workplace. He was appealing for a shake-up on the Front Bench and the introduction of hon. Members who understood the problems in industry.
        Mr. Richard Wainwright: Does not the hon. Member think that the hon. Member for Chippenham (Mr. Needham) was also implying his displeasure in that pungent speech at the fact that no members of the Cabinet represent the real industrial areas of Britain, quite apart from their lack of personal qualifications?
        Mr. Campbell-Savours: I believe that the Chief Secretary has an industrial constituency in the North-East. I am told that part of it is industrial. It is not for me to say how precisely he is advocating the views put to him by his industrial constituents.
        Mr. Straw: Before the election, the Chief Secretary claimed to understand exactly his constituents' interests. He argued for increases in public spending and called for Whitby and Cleveland to be made a special development area. Since the election male unemployment in Whitby has risen from 9 per cent. to 34 per cent. and the hon. Gentleman has sent the Whitby trades council letters saying why Whitby cannot be a trade development area.
        Mr. Campbell-Savours: I am sorry that the Chief Secretary is not here to defend himself. I am sure that the members of the Labour Party in that part of the country will note the comments of my hon. Friend the Member for Blackburn (Mr. Straw) with great interest. They may wish to write to him.
        The contributions of the hon. Member for Bath (Mr. Patten) are always enlightening. They have substance but he always takes us down the incomes policy road and drops us when it comes to a real presentation of his demands. One day he might outline to us in detail what kind of incomes policy he wants. He has criticised the national economic assessment proposed by the Labour Party. He is clearly at variance with the position of his own party on free collective bargaining. He should entertain the House with a more precise expression of his beliefs.

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        7.15 pm
        During the last debates, particularly those on the national insurance surcharge, it emerged—as it did last year when we discussed related matters—that the hon. Gentleman believes that because the measure was introduced by a Labour Government we have no right to criticise it. However, as my hon. Friend the Member for Walsall, North (Mr. Winnick) so accurately said, that has no basis in truth. Very different conditions existed in the late 1970s when Labour was in Government. There can be no better example than the fact that unemployment has gone up to 2½ times what it was in the latter days of the Labour Government. There has been an 18 per cent. reduction in manufacturing output and a 6 per cent. reduction in GDP; energy prices have soared as a proportion of total manufacturing costs. At the same time, investment in manufacturing industry has declined. By no stretch of the imagination can Conservative Members criticise our proposition in the new conditions of industrial recession created by the Government. When the Minister replies he should address himself to the truth and not to the myth of the argument that has been repeatedly used during the past few weeks.
        That is not only my view, but a view which is adequately reflected in CBI News. On the front page of edition No. 3 for 12 February 1982 the CBI outlined the four priorities for immediate action which have been referred to by my hon. Friends this evening. In case hon. Members have forgotten what they were, it may be worth looking at those four priorities and contrasting them with the Budget.
        Under the heading "Budget: CBI calls for business boost", CBI News said:
        "The need for the disproportionate burden on business to be removed in order to encourage growth and create jobs is made in the CBI's Budget representations to Sir Geoffrey Howe. Calling for a 'winning Budget', the CBI gives four priorities for immediate action: Reduction in the national insurance surcharge by 2 percentage points".
        have a one percentage point reduction.
        "A 15 per cent. cut in the rates paid by businesses by introducing 15 per cent. derating to put business on equal footing with domestic ratepayers".
        It did not get that; it got the prospect of escalating rates next year as local authorities fight hard to retain this year's level of services—a considerable reduction on the level of services provided in former years. It then called for
        "A reduced interest costs burden and more competitive exchange rates".
        There has been a marginal reduction of interest rates-a 1 per cent. reduction which no one can guarantee will remain long-term.
        Some CBI members are seeking a form of intervention on interest rates to help some industries on a wider and broader basis than currently exists under the European cheap money provisions that have been arranged with the European Community. There has also been a marginal change in the exchange rate—perhaps more than a marginal change—a reduction from $1·88 to the pound to $1·80 to the pound in the period from 12 February to today, 5 May.
        The article went on to ask for
        "New productive investment in the public sector, starting with worthwhile projects totalling £250 million in 1982/83 and building up to £1,000 million in 1983/84".
        Under one interpretation of the Budget package, it could be said that £90 million was provided, but that is nothing like the £250 million that was asked for in the article.
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        There was then a request for "more competitive industrial energy costs, abolition of empty property rates and the introduction of mothballing relief for business premises, abolition of the four month delay in paying regional development grants, a cut in the harmful effects on enterprises and smaller businesses of the capital gains and capital transfer tax and no further rise in excise duties".
        Is it not strange that, of the five minor areas to which I have referred in the last section of the CBI's general demand, the only concessions received were in relation to our old friends the CGT and the CTT? They were referred to at length in the debate last week and I do not wish to labour them now.
        Hon. Members will have received, as I have, the brief from the British Paper and Board Industry of 12 March. Referring to the concessions on energy prices in the Budget, it states, in regard to electricity:
        "The load management proposals will generally only benefit those industries which have the ability to interrupt their processes and/or have self-generating capacity. The paper industry uses a continuous process and in general does not have surplus generating capacity. Therefore, the load management proposals will only be practical for a very small number of mills who purchase 6 megawatts of electricity or more. The proposals are of no value to the great majority of high energy-intensive mills which will remain at a disadvantage of up to 20 per cent. in electricity costs compared with their Continental competitors. On heavy fuel oil, the Chancellor has been apparently unable to reduce the heavy burden of £8 per tonne excise duty which is at least double that of our EEC competitors. This costs the industry about £6 million and we still feel it is an unjustified impost. This, together with the fact that prices on the Continent are generally lower anyway, places the industry at up to 20 per cent. disadvantage in oil prices with its Continental competitors."
        Therefore, in that very important area of additional aid to manufacturing industry, the Government sought not to give way. Indeed, we all know where the £6 million went. It went in the various concessions which were given at the wrong end of the CBI demand—the concession on CTT and CGT, which have absolutely no impact on industrial regeneration in Britain. The proposition that it can have an impact is a myth perpetrated by Conservative Members only to protect their own friends.
        It might be interesting to consider why the CBI lobbied for the national insurance surcharge reduction. It says that 27·2 per cent. of all NIS receipts to the Treasury come from its members or the people that it seeks to represent. I should have thought that that sector more than any other in the British economy should be singled out for special aid by any Government in times of recession. Indeed, it would be the greatest beneficiary.
        It is interesting to consider the views of Sir Raymond Pennock, the former conference president of the CBI. He had a very pertinent point to make in reference to the reduction. He said that, for the company that he represented, the benefit would be to the tune of £9 million, and that he could give a personal undertaking that the money would find its way back directly into manufacturing investment. So there is a prominent British industrialist promising the Government to invest in manufacturing and thereby help to reduce the current high levels of unemployment.
        On 2 February, The Sun said that the surcharge was a tax on jobs at a time of record unemployment, when firms were being starved of investment by the recession and by penal interest rates on borrowing.
        On 27 January, The Times said that the Tory Party could unite behind the growing consensus for a moderate

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        package containing a substantial cut in the national insurance surcharge to assist industry. But that request was not to be conceded.
        On 9 November, The Daily Telegraph said that the Prime Minister had correctly argued in debate that British industry's competitiveness was hampered by excessive national overheads imposed by Government. The national insurance employers' surcharge was one of those overheads which also reduce employment. Its abolition should be a high priority, it said.
        The CBI may not have gone as far along the road to reflation as the Labour Party has been demanding in the House, but it has demanded more than £2 billion in reflation. The Budget may prove to be negative, in the sense that no additional resources are being channelled into the economy in real terms.
        Credit should be paid to the CBI for the very successful exhibition that it staged at Centre Point in London three weeks ago. I know that it was attended by some Members of this House. Certainly the hon. Member for Rochdale (Mr. Smith) was there, and I am sure that he would agree with my conclusion that the "Can You Make It?" exhibition was a major way for industrialists to seek to attract new work for their enterprises.
        If additional resources are to be made available at any time in the future for the support of industry, the Treasury would do well to consider the effort made by the CBI at that exhibition, and be willing to fund similar enterprises in other parts of the country—perhaps even in the Northern region, in which my own constituency and that of my hon. Friend the Member for Bishop Auckland (Mr. Foster) fall.
        Many of us feel that one of the problems is that our industrialists are unable, for whatever reason, to identify the work and business orders which should come the way of British manufacturers. As a result, much of the work is funnelled abroad, often because overseas competitors are sophisticated enough to be able to take advantage of the arrangements for purchasing that exist within the United Kingdom.
        7.30 pm
        The Association of Independent Businesses, which represents many small businesses, had this to say about the Budget and the Government's actions in support of small business:
        "The length and depth of this recession have severely stretched the resources of existing independent businesses, in many cases to breaking point as rising insolvency and bankruptcy statistics demonstrate, yet the Budget assumes only a minor economic upturn by early 1982 and postpones any revival. The Government appears to be relying on a slow-down in destocking and extensive personal dissaving to maintain even current low levels of demand. Neither effect will substantially ease the position of industry in the short term, nor will the planned decline in Government expenditure on goods and services.
        On the wider Budget issues, the Association fears that given the problem of lack of demand faced by many existing businesses the Budget may prove too deflationary and the implementation of the financial strategy too long for many independent businesses."
        It is interesting that those comments come from an organisation supported by many Conservative Members. It represents the strand of business thinking that exists on the Floor of the House, certainly among many Back Benchers. It is hard to understand how such an organisation, which would claim to reflect Conservative views in many areas, has been utterly dismissed by the Government. The problems and anxieties of small businesses are not being dealt with at the Dispatch Box.
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        There is a duty on the Government to respond in a way that is beneficial to their interests. They employ people and the economic and industrial argument is about jobs. Our people are desperate for jobs and the Government must respond.
        Mr. Andrew F. Bennett: I listened to most of the debate a few days ago on the double taxation of unemployment benefit, and I have listened to mast of today's debate. It is surprising that the Government have not found any Back Bencher to support either of those measures. It is an interesting illustration of the way in which the Government have lost the support of many of their Back Benchers. The attacks during the debate on unemployment benefit came from the Tory wets, which seems to be a common occurrence in the Chamber.
        It is also interesting to note that, although around Christmas it was suggested that the wets would mount a formidable challenge to the Government's policy, a few minor appointments to either ministerial office or the Whips Office have caused the challenge to fizzle out almost completely. In last week's debate a mere handful of Conservative Members followed us into the Lobby and it appears that tonight none of them will do that.
        Mr. Peter Bottomley: I am supporting the Government's proposals today.
        Mr. Bennett: I am sure that the Government will be very pleased about that. It is rather a turn-up for the books.
        Any tax on jobs at present time is obscene. Our crying need is for jobs, and anything that makes job creation a little more difficult should be removed. The hon. Member for Chippenham (Mr. Needham) suggested that there was a change of mood in the workplace and a new spirit abroad. The new spirit that he envisages is not the one that I experience when I talk to workers in my area. The spirit that is abroad in my area is a fear of redundancy. It means that on some occasion people are cowed into not taking industrial action or not pressing for extra wages. Faced with the fear of unemployment, more and more resentment is building up, and sooner or later it will bubble over. We shall have as many problems as we had before.
        If we wish to have a new spirit in industry we must change the attitudes that have been instilled into people for almost 30 years. The idea in the days of full employment was that we had to reduce the number of workers in particular jobs, that machinery should be brought in and that ways should be found so that one person could do the work of two or three. That was thought to be much more efficient. Those ideas came not only from management, but repeatedly from workers who wished to agree with them because it gave them more and more income.
        That made perfectly good sense as long as we had full employment and when the person who was made redundant could find an alternative job. However, now that the growth in the labour market has ceased, we must have completely different attitudes. The failure of the Labour Government up to 1979 was that they did not manage to create new jobs as fast as the demand, but the number of those in employment rose steadily until about May 1979. It is only since May 1979, when the Conservative Government came to office, that the number of employed has started to fall. Against that new background we must find ways in which two people can

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        be employed where one person was employed before. It is important that should we remove attacks on jobs such as this measure.
        I regret that on many occasions during the period of full employment people gave up their jobs because of mechanisation, which supposedly introduced greater efficiency, but which did not work. I served on a local authority that had the idea of getting rid of the old road sweepers with their brushes. There was great enthusiasm for bringing in a new mechanical sweeper which would do the work of six people with one man driving it. In practice, it saved six sets of wages and just about paid for the new machine. However, when we examined the job two or three years later, we found that the machine provided a less efficient service. The mechanical sweeper failed to clean the pavement and had to steer its way round parked cars, so that a much less efficient job was done.
        In many instances mechanism was brought in on the basis that it gave individuals higher wages and was more efficient. We must now examine that process carefully to see whether we can bring about greater efficiency by employing more people rather than by using machines which may not do as efficient a job as the individual. To do that, we must get rid of measures such as this job tax.
        I support the amendment and the argument that we should be much more competitive. It will do a little to reduce inflation and might create about 50,000 jobs, but I should have preferred a more selective measure. I accept that the measure is selective, but it is selective in the worst possible way. The Government are reducing the surcharge for private firms, but leaving it on the public sector. That is a doctrinaire approach and is not based on logic.
        I hope that the Minister will explain why the North-West Electricity Board, which has people successfully designing a domestic electricity system for Saudi Arabia, will not get the benefit of the reduction in the surcharge. A private company attempting to win the same sort of export order, where the work is done in Britain for a foreign buyer, would get the benefit. That is illogical.
        The success of many of our nationalised industries and public enterprises in winning orders from abroad to provide valuable services in the countries buying the product, and thereby providing jobs in this country, is not referred to often enough. It is amazing that the Government can take the view that such operations will not benefit from the removal of the surcharge.
        Local authorities carrying out their own repairs and maintenance on houses or building new council houses will not benefit from the removal of the surcharge, but if they employ private contractors to do the work there will be a benefit in the price. That is crazy. The Government should remove this selectivity between the private and public sectors.
        Different criteria for selectivity should be applied. The amendment should contain more selectivity. I know that there are difficulties in framing amendments; but I should have liked to see the abolition of the surcharge where employees are involved in training within industry. This should apply both to those doing the training and to those receiving it. We should do all that we can to encourage industrial training. To do that as one of the steps would have been logical. I suggest complete abolition in that area, while retaining the surcharge for other areas, if possible at a slightly higher level.
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        I should like more to be done to induce companies to take on the long-term unemployed. Those of my constituents who are unemployed tell me that time after time when they go after jobs the companies exercise a preference for the individual who was most recently in work. The person who has been out of work for 12 months finds that he is at a disadvantage compared with the person who has been out of work for only a short time. We should give 100 per cent. exemption to those firms taking on new employees who have been out of work for more than 12 or even 18 months. The measure should be used in that way.
        I deal next with regional policy. The Government's regional policy on Greater Manchester, and particularly my part of it, has been disastrous. In tabling the amendment consideration should have been given to abolishing the surcharge in those parts of the country where unemployment is high and to redressing the effects of the Government's decision to remove intermediate status for areas such as Stockport. That is an amazing decision which the Government appear determined to push forward. They are removing an incentive to industry to come to Stockport. I am sure that my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) appreciates that there is a similar problem in Tameside. Reduction of the advantages for industry in those areas has been a major blow to reducing unemployment.
        Mr. Campbell-Savours: My hon. Friend makes an interesting point. It is worth noting that the Conservative Party manifesto stated:
        "We do not propose sudden, sharp changes in the measures now in force."
        That referred to regional strategy. The Opposition can honestly suggest that the Government have done the opposite to what they said they would do in 1979.
        7.45 pm
        Mr. Bennett: If the electors of Stockport had been told by the Conservative Party that the area would lose intermediate status, the Government would have received even less support. If people in Knutsford, where many of those involved in running industry in Stockport live, had been told that Stockport would lose its intermediate area status, there would have been much more criticism than there was during the election campaign. Many of those people are extremely bitter about the decision. The amendment should have been more selective and proposed the reintroduction of some of the advantages.
        The people of Stockport are bitter. They have done a great deal to make the town attractive to industry. They take advantage of the fact that Manchester has a first-class international airport close to Stockport, that it has first-class road and rail communications and that to the south and east of Stockport there is extremely attractive countryside. There has also been a long tradition of skilled labour in the area. Despite all those advantages, when Stockport tries to attract industry the loss of intermediate status means that industry is attracted to other areas, in some cases where there is lower unemployment than in Stockport.
        The Government should have made this a selective measure. I believe that eventually there should be abolition, but in the interim the measure should be used to encourage companies that go in for training, to encourage firms that offer a fair deal to the long-term

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        unemployed and to encourage firms to move to areas of high unemployment rather than continue to develop in the more prosperous areas.
        I support my hon. Friends, but I hope that the phasing out of this jobs tax can be done more selectively.
        Mr. Geraint Howells: I support the amendment tabled by my hon. Friends and hon. Members in the Social Democratic Party. The alliance is working as a team to do its utmost to abolish the national insurance surcharge.
        I have listened with interest to hon. Members on both sides of the Committee and I honestly believe that the majority are worried about the plight of industry, unemployment, small businesses and the self-employed. Most have spoken about the effect that the national insurance surcharge will have on the nationalised industries.
        I refer to the private sector. I have the privilege to represent a constituency with a high proportion of self-employed—probably the highest in Britain. Many are small business men, who form the backbone of the rural economy. I am proud of our record. More than 30 per cent. of the people in my constituency are self-employed.
        Less than 10 per cent. of my constituents work in manufacturing industry. The remainder work in the service industries. In some parts of Cardigan and Ceredigion unemployment is as high as 25 per cent. It was 25 per cent. under the previous Administration. I am not proud of the record of the present Government because very little has been done to alleviate the problem that has existed in the Teify valley in my constituency for the last 10 or 15 years.
        We in the Liberal Party have said for many years that the small business sector has an important part to play in the United Kingdom economy. It can contribute towards encouraging enterprise. We have also advocated positive discrimination in favour of small firms and would like to see that sector prosper for the benefit of the community as a whole. So highly do we rate that sector that we have pressed for a Minister representing small businesses to have a seat in the Cabinet so that he or she could defend that sector's interests at the highest level.
        During our agreement with the Labour Government in 1978, we pressed the then Prime Minister, the right hon. Member for Cardiff, South-East (Mr. Callaghan), to have a Minister in the Cabinet to look after the interests of the self-employed. Fortunately, our leader persuaded the then Prime Minister to appoint a member of the Cabinet to look after those interests. Today, it is well recognised that the Liberal Party did more for the self-employed and small businesses in six months than the two major parties have done during the last 50 years.
        We also feel that with their special skills and enterprising ideas those sectors could contribute towards making industry as a whole more competitive. We have many small businesses in Britain. The self-employed can also play a major role. We also believe that one of the most important functions of the small business sector is to employ labour. However, we find that in recent years small firms have lost ground as a source of employment. Indeed, their share of total employment has halved since 1935.
        That is not true of other countries. For example, I understand that, based on population, West Germany has 40 per cent. more small firms than we have. That is a wonderful achievement for the West German
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        Government. We have lost an important opportunity somewhere, and with the collapse of heavy industry surely it is now time to make good our neglect by aiming to develop the small business sector rather than stifling it.
        That sector has for many years been troubled by many problems, ranging from high interest rates to complex and time-consuming paper work. One factor in particular has inhibited the small employer from taking on additional staff—the iniquitous tax on jobs, the national insurance surcharge. I have already said that I have a high percentage of self-employed and small businesses in my constituency. Another fact about which I am not so happy is that in Ceredigion we also have pockets of unemployment, in some districts ranging between 20 per cent. and 25 per cent. of the adult population registered as able to work. Many of those who make up these sorry figures are young people, some of them highly skilled and well-educated, who, despite their best efforts, have failed to find jobs either in Ceredigion or elsewhere in Wales or the United Kingdom.
        I want to see a revived small business sector full of enterprise and vigour that is prepared to employ some of those young people. But until we relieve it of some of the financial burden unnecessarily placed on it by Government, we shall get nowhere.
        I have talked to many small business men who tell me that they have the will and the work. They see plenty of labour around them, but they simply cannot afford to take it on. Abolishing the national insurance surcharge would be one vital step towards easing their burden, and one that the Government should not hesitate to take.
        There are many options open to the Government that could help the self-employed and small business men. Mention has already been made of risk capital. It is time that we gave risk capital to some of our youngsters. I am talking not about firms that employ 100 or 200 people, but about the small man who employs two, three or five people in a rural area. Help should be given to those small businesses that would give of their best if only they were given the right encouragement and incentives by the Government of the day.
        I again declare my interest, which is a tradition in the House. As a farmer, I know that many thousands of us take on labour. In my view, many more people could be employed on the land if the Government of the day gave the right incentives and encouragement to agriculture.
        Liberals and members of the alliance believe in small businesses and their importance as employers. We would like £250 million put towards providing advice and venture capital for both smaller businesses and co-operatives. I have emphasised time and time again the importance of the small business sector to the economy in Wales; the wellbeing of that sector is essential for our survival.
        A recent study has shown, however, that throughout the country generally small businesses are shedding labour, mainly as a result of Government policies that have made life difficult in a number of ways, ranging from the national insurance surcharge to the new sick benefit regulations. Our aim is to help the small business men and the self-employed, to get rid of unnecessary bureaucracy and to give them sufficient confidence to take on more labour.
        These are just a few of the suggestions that Liberals are proposing to deal with the present crisis, but in the long term, if we want a stable economy with bright employment prospects, there must be a permanent prices and incomes

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        policy—not one cobbled together in haste as a panic measure, but one that will ensure a fair deal for everyone. Only then can we look forward to a period of industrial peace and prosperity.
        We have the labour, we need it, but we cannot afford it. It is therefore time for the Government once again to see what help they can give to our small business men and the self-employed. They need the Government's help, and it is time that the Government did something for them.
        8 pm
        Mr. Hooley: Much of our debate on the national insurance surcharge has turned on industry's problems. That is only right, because industrial problems are at the core of the economy's difficulties. It is also right to discuss, in effect, a payroll tax at a time of massive and sustained unemployment.
        The excitement over the Falklands crisis has obscured the fact that this month unemployment has again exceeded 3 million. That is only the official figure. It is generally reckoned that the true figure is 3·5 million or 4 million. In any discussion of such a payroll tax we must consider its impact on industry and on industry's problems. In that respect, the Government's record is bizarre. There has been a fall in industrial output of nearly one-fifth in the three years in which the Conservative Party has been in office, and there has been a catastrophic fall in industrial investment year on year. I do not know whether there is any serious evidence that industrial investment will pick up in 1982.
        Bankruptcies are running at a record rate. A short time ago it was reported in The Guardian that the figures were at an all time high. In 1980 our gross national product fell by 2 per cent. In 1981 it fell by a further 2 per cent. and it is now said that there may be a modest increase of 1·5 per cent. In other words, there have been four strides back and possibly one or one and a half faltering steps forward.
        One serious indictment of the Government is that although major industrial firms find themselves in trouble every day, reporting lower profits or collapsing altogether—as is the case in Sheffield—and although that has been happening for two or three years, the banks are recording record profits. Indeed, so high were their profits that even the Government had to introduce a special windfall tax. The state of affairs was so grotesque that the Conservative Benches would not tolerate it. Ultimately, the mass unemployment that has been directly generated by the Government's policies must be the most serious indictment.
        To the extent that the national insurance surcharge is a tax on jobs—as the CBI has argued—a lightening of that burden will be welcomed if it has a serious effect on mass unemployment. The reduction proposed by the Government does not go far enough. Indeed, I am not sure whether our amendment goes far enough. Nevertheless, it is clear that with more than 3 million out of work and looking for jobs which, for the most part, do not exist, there is no case for retaining a severe payroll tax on industry, which represents a burden of £1 billion or £1·5 billion.
        In Sheffield alone, unemployment has trebled since the Conservative Party took office. In May 1979 unemployment stood at about 4 per cent., or about 12,000 people. The figure was far too high even then, but it has now
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        increased to 12.6 per cent. and nearly 37,000 are unemployed in Sheffield. To the extent that the national insurance surcharge contributes to that and makes it more difficult for industry to take on workers, there is a powerful case for reducing it, or abolishing it altogether.
        The industrial collapse and the calamity that have hit British industry in the past three years must be attributed directly to Government policy. We have seen a sustained, deliberate regime of high interest rates—which are still high despite the slight reductions in the past few months—that discourages the investment and borrowing necessary for a modern industry. The outflow of capital has been deliberately encouraged by the removal of exchange controls, and in the past few years since their removal billions of pounds have flowed out of the country and created jobs overseas. The money should have been invested in the United Kingdom, thus creating new jobs for our workers.
        It is a common complaint that industry will not invest, develop or expand unless it can see markets for its products. That argument is not unreasonable, but where will those markets come from while the Government continue to pursue a savage and classic deflationary policy, although dressed up in the fancy nomenclature of supply economics, monetarism and so on? For the past three years the Government have been pursuing the deflationary policies of which the country, alas, became all too aware in the inter-wars period and which applied in the post-war period with precisely the same effects as now, of falling output and investment and a massive rise in unemployment.
        It is interesting to note that the same policies, applied by President Reagan and his Administration, are producing the same effect and will have a catastrophic result in the coming months and years on the world economy. Indeed, the Common Market countries are profoundly worried by the American Administration's behaviour. That is not surprising, because the course of America's economy has become the mirror image of that being followed by this Government in deflating our economy, in destroying industrial output and British industry, and in making it more difficult for firms to survive.
        In addition to modifying or doing something about the national insurance surcharge, one might have expected the Government to take other steps to relieve British industry's problems, but, far from doing that, they have imposed extra burdens. The crackpot sick pay scheme is completely unnecessary and will create administrative difficulties for industry. It will place extra burdens on administration, will require extra pay calculations to be made, and will lead to further difficulties for personnel departments. The small businesses about which the Government pretend to be concerned will be worst hit.
        It could be argued that organisations such as the Central Electricity Generating Board, the British Gas Corporation, ICI and Ford have computerised arrangements to deal with sick pay for those who are off work for a few weeks. Small businesses, however, will not have the capacity to handle the problem efficiently without extra paper work, extra difficulties and possibly arguments if there are problems about entitlement to sick pay and the length of time that someone is off work. All that, for what purpose? The Government have not given any rational reason for removing the payment of sick pay from the accepted State administered system, which has worked for decades, and

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        placing an extra administrative, complex burden on industrialists. There is no benefit to the worker or to industry.
        The same story can be told about training. To achieve the same amount of training as in the past 10 or 15 years—under legislation introduced by Conservative Governments—greater efforts will have to be made by private industry to replace the mechanism and administrative effort of the industrial training boards. They are largely being destroyed. Industry will either have to carry extra burdens and administrative work and replace the effort made by the training boards, or training will slump disastrously. The latter is the more likely. Given the arrangements for sick pay and training, extra burdens, complications and difficulties are being created for industry. In the light of the CBI representations on the national insurance surcharge and related matters, I should have thought that the Government would want to make industry's path easier.
        The remedies for our industrial ills lie in two directions. First, there must be encouragement for a sustained high level of investment in capital, plant, research and marketing. It is often assumed that investment involves simply putting in new machinery, but the most important investment is sometimes that in research into new products and their marketing.
        One of the curiosities of the Prime Minister's speeches about competitiveness is that she does not seem to recognise that in modern industry competitiveness is not a question of cutting wages and forcing down living standards. The most competitive countries in the world, including West Germany, the United States, Sweden and to some extent Japan, have not forced down wage levels, and their competitiveness has depended on sustained high levels of industrial investment. In this country the prospects for such investment have been damaged and almost destroyed by the Government's policies on interest rates, energy costs and so on.
        It may be argued that, whatever we do on taxation and charges such as the national insurance surcharge, industry cannot be compelled to expand or invest if it decides that that is not worth while. In that case, the alternative strategy is sustained and massive investment in the public sector—in public corporations, local government, housing and over a wide range of necessary and productive operations that will not only create jobs, but increase our national wealth and general standard of living.
        There are enormous possibilities in public investment. It is not public spending in the crude sense—not the spending of taxpayers' money for the sake of it—because public corporations, local government and so on are major customers of private industry. Local government purchases about £6 billion worth of goods and services a year from the private sector. If local government activities are expanding, that will be of direct benefit to the private sector, because the demand for its goods and services will also increase.
        A curiosity that I have not seen resolved by economists is that, although we talk of expenditure on housing as if it is public expenditure, most of the activity takes place in the private sector, because much house building, even municipal housing, is carried out by private contractors. Therefore, an expansion of the housing programme will be of direct assistance to the private construction industry.
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        The House-Builders Federation has made that clear in numerous documents that it has sent to me and, no doubt, to other hon. Members.
        In terms of competitiveness, which the Government continually say needs to be increased, and stimulating overall economic activity, there is a powerful case for public investment, which will not only assist the public sector, but will be of direct and immediate benefit to the private sector.
        The national insurance surcharge is a tax on jobs and should be abolished, but I am not sure that even that will solve our industrial problems. That will require a fundamental and drastic change in the overall economic strategy.
        8.15 pm
        Mr. Brittan: Clause 128, which various sections of the Opposition have sought to amend, gives effect to one of the central proposals of the Budget. As my right hon. and learned Friend the Chancellor of the Exchequer made clear in his Budget Statement, our prime purpose this year is to help private commerce and industry to help itself, by cutting its costs.
        Our proposal on the national insurance surcharge is in the mainstream of that policy. It has been widely welcomed as the one measure which industry wanted most. It should directly reduce the costs of employing labour in the productive private sector by about £640 million in the current year. It is the largest single measure announced in the Budget to reduce industry's costs.
        The clause is designed to reduce the rate of the surcharge from 3½ per cent. to 2½ per cent., with effect from 2 August 1982, and it provides for an extra reduction of half a percentage point in respect of liable earnings paid on or between 2 August and 5 April 1983. In all, it will provide employers during 1982–83 with broadly the equivalent benefit as they would have gained if a I per cent. reduction had been in force throughout the current year.
        The reduction in the surcharge is the largest single measure in the Budget to assist industry, but the right hon. Member for Stepney and Poplar (Mr. Shore), who is not in the Chamber, did less than justice to the Budget by seeking to denigrate and minimise the impact, effect and importance of some of the other measures put forward by my right hon. and learned Friend the Chancellor of the Exchequer.
        I will list only some of the more important measures announced in the Budget. Small firms and enterprise are being encouraged for the third successive year, the construction industry can expect to benefit in the current year from tax and expenditure measures totalling about £240 million and industry's fuel bill will be reduced by more than £160 million as a result of the measures announced by my right hon. and learned Friend on gas and electricity prices.
        I believe that, overall, the Budget achieves the right balance between across-the-board assistance, in the form of the reduction in the national insurance surcharge, directed towards reducing the cost of employing labour, and specific measures to assist industry. The balance is correct, but we are concerned not only with balance, but with the total extent, and the extent of the reduction of the national insurance surcharge is the subject of clause 128.
        Of course it is possible for right hon. and hon. Gentlemen to mention figures of assistance to industry,

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        whether in the form of a reduction in the national insurance surcharge or any other form, which would be more substantial and include larger figures than those put forward by my right hon. and learned Friend in his Budget Statement. Naturally it sounds more attractive and a greater assistance if bigger figures are mentioned. But the Government's strategy does not seek to lead us out of our present difficulties by way of reflating to the maximum possible extent.
        In a recent debate the right hon. Member for Stepney and Poplar, who apparently cannot be with us, was candid enough or was prised open enough to admit that there was no limit to the amount of borrowing and that, therefore, it was open to him to suggest a figure, whether £8 billion or more, of extra money which could be borrowed to finance extra public spending, extra cuts in taxation or anything else one would care to mention. One felt inclined to ask, if borrowing was not a constraint and did not matter, why stick at whatever figure the right hon. Gentleman last alighted on in his competitive bid to reflate the economy in a painless way?
        The truth is that there are constraints, there is a price to pay and there is such a thing as a proper balance. The borrowing on which the Government embark, which derives from the combined effects of what they spend and the revenue they receive, must be funded and the effect of that funding is crucial for interest rates. If it is not adequately funded, the impact on inflation is likely to be substantial.
        We do not accept that there are no such limitations. It is a matter of judgment exactly how far one goes, but a general balanced packet of measures on a scale which would not impose excessive strains on interest rates was the right one.
        The right hon. Member for Stepney and Poplar made much of the circumstances in which the national insurance surcharge was introduced by the Labour Government. I agree with my hon. Friends who said that it does not lie in the mouth of any member of the previous Government to complain about the national insurance surcharge and to call for its reduction. It will not do for the right hon. Gentleman and Labour Members to say that it was all right to introduce the national insurance surcharge at 2 per cent. and increase it to 3½ per cent. because at that time Britain's competitiveness was better and the exchange rate was different from what it had been.
        The right hon. Gentleman failed to answer—and he was not prepared to give way when I tried to put it to him a third time—a simple point which must follow from that line of argument. No one has sought to defend the tax. No one has sought to suggest that it is anything other than an increase in costs for industry. No one has sought to suggest that it does anything but make employment levels lower than they otherwise would be. In effect, the right hon. Gentleman said that none of that mattered because the level of the pound was different from what it is today. I would have preferred to say in the presence of the right hon. Gentleman that that is an absurd allegation.
        Mr. Robert Sheldon: I apologise for the absence of my right hon. Friend the Member for Stepney and Poplar (Mr. Shore). He went to a meeting and was not aware that the debate was likely to come to such an early end.
        Mr. Brittan: I hear what the right hon. Gentleman says on that point. The argument of the right hon. Member for Stepney and Poplar is absurd. If he says that the tax is a bad tax, that it increases costs and does harm to employment, he cannot suggest that it was appropriate to introduce it in April 1977 and to increase it in October 1978.
        If we examine the relevant years, we see that from the first quarter of 1974 to the second quarter of 1977 unemployment increased from 621,000 to 1,450,000. It had more than doubled. Whether it was likely to go down slightly as it did, that was the legacy and the record that the then Chancellor of the Exchequer faced in April 1977. Unemployment had doubled. That was regarded by the Labour Government as a serious matter. At that moment to proceed to put a tax on employment in the form of the national insurance surcharge was completely indefensible. If it did not stop unemployment going down slightly, on the argument that the right hon. Member for Stepney and Poplar has put to the Committee today, it must have prevented if from going down more.
        Therefore, according to any view of the situation, the fact that the right hon. Gentleman thinks that the relevance of the different levels of the pound is so important does not justify putting a massive tax on the employment of labour as the Labour Government did in 1977; still less does it justify what happened in October 1978 when the Labour Government increased the tax.
        The figures between the second quarter of 1977 and the fourth quarter of 1978 show that cost competitiveness, which is what matters, declined by about 14 per cent. Therefore, faced with the decline in cost competitiveness, what did the Labour Government do with a tax that their current spokesmen regard as representing an increase in costs and as undesirable? They virtually doubled the level of the national insurance surcharge. [Interruption.] I know that it is painful for Opposition Members to have those facts thrust down their throats.
        Mr. Austin Mitchell: It is history.
        Mr. Brittan: It is history but it is history that denies the Opposition any jot or tittle of right to complain about the inadequacy of the reduction in the surcharge introduced by my right hon. and learned Friend.
        I shall refer to some of the specific points that the right hon. Member for Stepney and Poplar raised with regard to the tax and its reduction before I come to the question whether it would be feasible—or desirable—to make the changes that are suggested in the amendment. The right hon. Gentleman alighted upon the clawback. I am not ashamed or embarrassed in any way by the clawback because I believe that it was absolutely justified. It involved a saving to the Exchequer of over £300 million, which made it possible to give assistance to industry that otherwise would not have been possible. To concentrate this assistance on the private productive sector of industry was absolutely right.
        The right hon. Gentleman said that the Government consistently discriminated against nationalised industries or were hostile to them. The position of the nationalised industries is simple. They will have their national insurance surcharge reduction in the same way as anyone else. The effect is that their costs will be reduced and their borrowing needs as a result will be lower than they would have been otherwise. Their external financing limits will be reduced to reflect that.

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        What those who seek to say that there has been discrimination against the nationalised industries fail to recognise is that the control of nationalised industries is control of borrowing. If there is a reduction in the need to borrow, it is right that there should be a reduction in the amount that those industries are permitted to borrow.
        I cannot say that the record of the nationalised industries in the handling of pay, for example, is such that——
        Mr. Peter Bottomley indicated assent——
        Mr. Brittan: I see my hon. Friend nodding. I cannot say that the industries' record makes one feel that one should make a special exemption—which is what it would be—in the face of the consequences in the public sector of a reduction in the national insurance surcharge.
        Mr. Richard Wainwright: Will the Chief Secretary assist the Committee further—first, by giving any estimated figure for the nationalised industries that will benefit from the reduction that will be clawed back and, secondly, by saying for how many years he expects the process of clawback to go on?
        8.30 pm
        Mr. Brittan: On the hon. Gentleman's second point, with regard to the measures announced in respect of the coming year, as with all fiscal measures, what we do in future years remains to be seen. With regard to the approximate extent of the nationalised industries' benefit, the figure that comes to mind off the cuff is £100 million to £120 million—about one third of total public sector clawback.
        Mr. Shore: I apologise to the right hon. and learned Gentleman for not being present at the beginning of his speech. May I press him on his reasoning about not making the reduction available to the public sector? He has given some explanation of his reasoning about nationalised industries, in so far as they are borrowers from the public purse. I am not sure how far that argument stands up with regard to those nationalised industries that are not borrowers but contributors, such as British Gas and British Telecom.
        Can the right hon. and learned Gentleman enlighten us on how he relates that doctrine to companies in the public sector? Some of them, such as British Leyland, are borrowers, as we all know. Have they also had benefit withdrawn? Is the case the same with BNOC and others?
        Mr. Brittan: The answer is simple. Those firms that are treated as being within the public sector borrowing requirement are receiving the treatment and those that are not within it are not. The right hon. Gentleman will know that some companies, such as British Leyland, are not treated as being in the public sector borrowing requirement for national accounting purposes because the external financing limits do not apply to them. Government assistance is given in a different form.
        I turn now to the suggestion that there should be a larger or a total reduction. It is a question of the general financial framework within which one must operate. The proposed abolition of the national insurance surcharge would cost a further £1½ billion in the current year or £3 billion next year. Even the more modest reduction of a further 1 per cent. that is advocated by the Opposition would cost an additional £1 billion in 1982–83, rising to nearly £2 billion next year. I know that the Opposition are not fond of
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        running tallies, but it must be pointed out that these proposals come on top of Opposition amendments to clauses that have already been debated. Before this, Labour spokesmen have urged the Government to adopt amendments that would cost some £3¼ billion in a full year.
        I concede that the Liberal and Social Democratic Parties have not scored such a high tally in the proposals that they have advanced. Nevertheless, Opposition Members who are proposing so substantial an increase can only do so within the context of a suggestion that the limitation of borrowing does not matter. That has been suggested frequently by the right hon. Member for Stepney and Poplar, but I and my right hon. and hon. Friends regard it as wholly unacceptable.
        Reference has been made to the change in the estimate of the public sector borrowing requirement for 1931–82 that occurred between the publication of the Red Book on Budget day and 22 April. Those revised but still approximate figures were published and showed a PSBR lower by some £2 billion.
        A number of propositions deriving from that have been advanced. The first is that if one gets it wrong by £2 billion and if one got it wrong by several billion in the other direction the previous year, the whole thing is not worth bothering about and we should ignore the public sector borrowing requirement. The second is a slight variant on that. It is not that we need not bother about the PSBR, but that in some sense we can carry forward and spend an extra £2 billion the following year.
        I suggest that neither proposition stands much scrutiny. First, it has always been known by anyone who tries to be even mildly versed in these matters that with a residual such as the public sector borrowing requirement between two extremely large amounts the accuracy of any estimate is bound to be limited. The right hon. Member for Stepney and Poplar smiles and nods, for all the world as though that were a revelation. If it is a revelation to the right hon. Gentleman, I can only say that it is for want of reading the Government's own publication, the Financial Statement and Budget Report, which not only refers to the fact that there can be discrepancies but actually quantifies their average size. That being so, simply to say that the whole thing does not matter is not a rational response.
        The alternative proposition, that the PSBR matters but that there is £2 billion to spare, is also not a correct analysis. One must first examine the estimate of £9½ billion for the PSBR for 1982–83. I accept that there are those who believe that on any view that is too low a figure. The argument for a change in the estimate, however, at least takes it for granted that £9½ billion might be the right figure but suggests that a change should still be made because of the reduction in the 1981–82 figure. That does not follow unless one believes that the present estimate will be proved fallacious. Although, as has been made clear, the exact components of the £2 billion reduction in the PSBR reported on 22 April as the latest estimate have not yet been analysed, the information that we have provides no evidence or reason to believe at this stage that the £9½ billion estimate will prove to be too high.
        Mr. Campbell-Savours: That is even worse.
        Mr. Brittan: Whether that proves to be the case will depend upon the factors that led to the reduction in the borrowing requirement in 1981–82.

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        I give one illustration. Clearly there is a difference if we are talking about genuinely higher tax receipts rather than merely about the timing of expenditure payments as between late March and early April. Therefore, to say at this stage that there will be less borrowing than is anticipated in the £9½ billion estimate is not justified. Certainly it is not a basis for changing the central decision in the Budget relating to relief for industry—the national insurance surcharge reduction.
        Mr. Robin F. Cook: I am sure that every member of the Committee will agree that it would have been much more valuable had we discovered the undershoot during the year 1981–82, when it would have been possible to take advantage of the underspending that happened then. Is the Chief Secretary really saying that there are no savings from that underspending, not even in respect of presumably reduced interest payments which will occur in respect of that financial year and which are now available for this year?
        Mr. Brittan: No. I am saying that in 1981–82 there was indeed a reduction which was not apparent, compared with the original estimate of the public sector borrowing requirement. That came to light only in recent weeks. That is true, but it does not mean that one has something that one could take advantage of by spending more or taxing less for 1982–83, because we are concerned with the amount of money that we will have to borrow in 1982–83. That is what has to be funded, and if it is not funded it will lead to the increase in the money supply and inflationary pressures resulting from that.
        It is for those reasons that I say to my right hon. and hon. Friends that I see no reason to alter the basic judgment of the Chancellor of the Exchequer that, within the context of a Budget designed to assist industry, not by massive reflation but by a responsible degree of assistance, consistent with the total level of assistance, the balance that has been set is the right one. I therefore advise the Committee not to accept the amendment.
        Mr. Robert Sheldon: We have had a good debate. It is interesting to note that all who have spoken have agreed with the amendment, and it will be interesting to see how many will actually vote for the amendment to which everyone seems to be speaking. My hon. Friends the Members for Walsall, North (Mr. Winnick), for Workington (Mr. Campbell-Savours), for Stockport, North (Mr. Bennett), and the hon. Members for Rutland and Stamford (Mr. Lewis), for Chippenham (Mr. Needham), for Bath (Mr. Patten), for Gateshead, West (Mr. Horam), for Colne Valley (Mr. Wainwright) and for Cardigan (Mr. Howells) all agreed with the amendment, and no one spoke against it.
        The refuge that the Chief Secretary took in opposing the amendment was twofold: first, that as the Labour Government introduced the change we could not speak against it, even in circumstances which five years later are manifestly different from those which attended its introduction; and, secondly, that as we had proposed a number of other amendments to the Finance Bill which would cost money, it would be impossible to carry out this policy because it would involve spending all this money. The right hon. and learned Gentleman has used that
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        argument frequently. I must take him up on it, because it is becoming a bit of a bore, and he is failing to convince even his so-called supporters on the Benches behind him.
        The Opposition do not have the choice of a Finance Bill. It is not for us to devise one. We have to take the one that the Government provide for us. We do not even have a choice of altering it to suit our priorities—taxing a little more here and taxing a little less there. The reason is that we, as an Opposition, cannot propose increases in taxation. However, by various amendments we can show our priorities and try to obtain, not our legislation, but a form of legislation which is a little closer to that which we wish to achieve.
        The point was put best by Iain Macleod, speaking as an Opposition spokesman. I recall it well, because he set out the matter clearly and fairly in the Finance Bill Committee on 13 May 1969, when he said:
        "The question of cost is always an inevitable problem for Oppositions. An Opposition of any party, in putting their point of view before the House in any year, would put forward commitments which they recognise in total are more than they could meet if they were in power."
        "It is only fair to make that point, and it is not made for the first time. But it is right to press individual points one by one."
        8.45 pm
        He went on to say:
        "I am not committed to the Chancellor's approach in the Budget any more than I am committed to his arithmetic, but if I were faced by a position in which I wanted to make the sort of reduction which I am now commending to the Committee, I would have preferred … a switch"—
        that is, to obtain the money in other directions.
        "I think that is an honourable answer to the question of cost, which is always a difficult one for an Opposition."—[Official Report, 13 May 1969; Vol. 783, c. 1285.]
        To save time, if the right hon. and learned Gentleman makes the same point, may I take this rebuttal as read?
        The hon. Member for Rutland and Stamford said, and everybody who spoke subsequently agreed, that the national insurance surcharge is a tax on jobs and has many disadvantages which offset any advantages that a Chancellor of the Exchequer may find in it. It has two features that have made it attractive to Chancellors of the Exchequer, both Labour and Conservative. The first is that it is an easy tax to impose and a cheap tax to collect. The legislation is simple, quick and certain. The amounts of revenue raised can be calculated easily and with accuracy and a few lines in the Finance Bill produce revenue immediately.
        The other advantage is that it has little short-term effect on the retail price index. It takes time to work its way through the price of any article that it affects—time that can extend up to 18 months.
        We know the disadvantages of the surcharge. They include the fact that it is imposed upon exports but not upon imports. There is no system, nor can one easily be devised, for rebating the tax on exports, and the tax does not affect imports, which have no employment costs in them. It is in that respect the very reverse of value added tax, which is charged on imports and there is relief on exports.
        The surcharge is also harsh in its effects on the manufacturer. In the payment of value added tax, several months are allowed for settlement for each quarterly return after the goods are sold. The surcharge, on the other hand, has to be paid immediately, frequently well before the product is made, let alone sold. Whereas value added tax commonly helps cash flow—the trader normally

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        accounting for value added tax after receiving payment from his customer—the national insurance surcharge is usually made before payment is received, and for many manufacturers long before it is received.
        Mr. Richard Wainwright: The right hon. Gentleman is right in saying that, with comparative legislative ease, enormous sums are raised by the surcharge. He spoke of its all being done by a few lines in the Finance Act. Does he agree that there had to be a National Insurance Surcharge Act in 1976 to set the whole thing in motion?
        Mr. Sheldon: I am talking about increases subsequently and even the reduction that we are seeing in the Finance Bill tonight. The question that we ought to ask ourselves is why successive Governments accepted this particular tax. The situation in 1966 and 1967 was as described by my right hon. Friend the Member for Stepney and Poplar (Mr. Shore). Industry at that time was very competitive and it had a number of advantages, not the least of which was the introduction of stock relief and the fact that so few companies were paying corporation tax. Therefore, the burdens upon industry were far different from burdens that industry is facing today.
        Also, at that time it was becoming widely understood that our European employer competitors had substantial payments to make for the social services enjoyed by their employees. In the United Kingdom, on the other hand, most of the social services were being paid for through general taxation and it was felt that this modest move would raise the necessary revenue. Revenue is largely what it is about, and the surcharge was introduced long before North Sea oil added £6 billion to the revenue enjoyed by the right hon. and learned Gentleman the Chancellor of the Exchequer. The burden on industry then was far less then than it has now become. In particular, the terrible agonies of British industry which now need to be relieved were not felt at that time. The agonies can be reduced by the means proposed in the amendment.
        Mr. Brittan: If that is so, will the right hon. Gentleman explain why in 1978 his Government almost doubled the rate of the national insurance surcharge, when between its introduction and the near doubling cost competitiveness had declined by about 14 per cent.?
        Mr. Sheldon: The right hon. and learned Gentleman seems unable to grasp the fact that industry was not screaming out in the way that it screamed out to the Chancellor of the Exchequer in Birmingham only a few days ago. I shall deal with the way in which the Government are being looked at by their former close friends in industry.
        The particular problem is that of the nationalised industries. The advantages that are being given, or the disadvantages that are being removed, apply to the private sector. The private sector will be able to take on more employees if it improves its finances, but the public sector, if the proposal were not reversed by means about which the Chief Secretary has told us, could be in a similar situation. It would be able to take on more employees and improve its finances in the same way as the private sector. The only possible conclusion is that this is one more instance of the venom that the Government have for the nationalised industries.
        The Chancellor said in his Budget Statement that this was a Budget for industry and jobs. I wish that he had
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        thought about jobs and industry three years ago. We might then not have had the Budgets of 1979, 1980, and 1981, which were anti-industry and jobs. They were the Budgets that brought about the 3 million unemployed, and a decrease in industrial and manufacturing productivity of 16 per cent. Three years ago the Chancellor was thinking not about a Budget for industry and jobs, but about money supply and the way in which its control would cure all our ills.
        Mr. Campbell-Savours: My right hon. Friend should be addressing the right hon. and learned Member for Cleveland and Whitby (Mr. Brittan). It is interesting to note that in his constituency unemployment has gone up in those precious three years from 10·4 to 23·6 per cent. It is interesting that the Chief Secretary should conduct his case from the Dispatch Box in the way that he has done today.
        Mr. Sheldon: I must bow to the knowledge of my hon. Friend on industrial matters and employment in the constituency of Cleveland and Whitby. Those who have seen unemployment rise in this way have a great deal of responsibility for the actions that they took to help bring it about.
        Three years ago the Chancellor thought that control of the money supply would lead to the control of inflation. Therefore, we had the money supply expanding at the rate of 56 per cent. and manufacturing industry contracting at the rate of 16 per cent. I must ask what the soothsayers of money supply say about that. Professor Patrick Minford was one of the two economists who only a few weeks ago was praised by the Prime Minister at Question Time. He has come up with his solution to our economic problems. After mentioning the money supply and dealing with it as the solution to our problems, he is turning his attention to the Monopolies and Mergers Commission and asking that it should examine trade union practices. That is the latest outpouring from one of the right hon. Lady's economists.
        Another of those econornists who believed in money supply, Professor Milton Friedman, was not praised by the Prime Minister. I assumed that it was an oversight. It took me some time before I found out why her favours had been withheld. I thought that it was accidental, but I discoverd that he had said on 16 February that the
        "performance of the British economy under Mrs. Thatcher's rule had been terrible."
        That is no surprise to anyone here. He then went on to say that Ministers were to blame for much of the increase in unemployment that had taken place. All those people who supported the policies on which the Government came to office are deserting the Prime Minister one by one. The right hon. Lady has not even a hard core left, unless it is Dr. Walters in her office.
        We cannot fail to respect the distinguished speech ma de by the hon. Member for Chippenham. The hon. Gentleman pointed out that the Front Bench should do less cajoling, less lecturing, and listen more to what is going on in the real world. We find that the wets, Labour Members, even the monetarists, are all united in condemning the economic management of Britain.
        In his Budget speech the Chancellor of the Exchequer said that it would be a Budget for industry—a Budget for jobs. The House rightly welcomed the way in which, after three years of Tory misrule, he had started to turn his attention from nonsense to fact, from fetish to reality. The reality is grim enough. On 25 February Sam Brittan said:

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        "Now look at manufacturing. Here the word 'slump' or even 'depression' seems more appropriate than 'recession'''
        With levels of manufacturing output down 16 per cent., I do not think that he overstated the case.
        The continuous miserable optimism that we hear from Treasury Ministers, which has been sustained since January last year, is treated with derision in the regions of Britain. The Chancellor's expectation for the future is met with contempt. He encountered that first-hand when he spoke to the Birmingham chamber of commerce in the presence of the president of that organisation. On 27 April 1982 the Financial Times reported:
        "Mr. John Black, President of the Chamber, said Government policies were the main reason for the failure of many well managed companies. The loss of capacity could lead to a surge of imports once demand improved. It appears here in the Midlands that people in the South-East, and that includes Members of Parliament"—
        he must have been referring to Conservative Members of Parliament—
        "really have little idea of what is happening in Birmingham and how extremely serious the situation is. Recession was severe. Unemployment had doubled in the West Midlands in the past 12 years. The Chamber's membership of more than 4,000 companies was largely small companies of which 70 per cent. employed fewer than 50, just the ones this Government is supposed to help. They had put the Government in office but were asking what it was doing for them."
        The answer is "Nothing at all". The article continues:
        "There was pleasure at Government efforts to reduce inflation, but nevertheless, however much we recognise the need to achieve that objective, the determined inflexibility with which this has been pursued at a time when world demand has been seriously curtailed, has had a disastrous effect on companies in the Midlands. Many old established, well-run and properly managed companies have gone for ever. I make no apology for saying that it was not necessarily because their products or marketing strategy were bad, but rather they failed to a major extent as a result of Government policies. The Government might create a leaner, fitter industry but Mr. Black wondered where the big companies would turn for the small but essential subcomponent products once the economy picked up. He told the Chancellor it was right to refer to the large number of companies coming into being, but this was no more than a reflection of what happened in previous recessions. Such companies could not meet requirements of larger ones in an economic boom."
        That is about as strong an indictment as one can get from someone who speaks on behalf of small companies. He is not alone in this. Hamish MacDonald, the retiring president of the Manchester chamber of commerce, whom I know well, has said much the same thing. I have been able to quote him in the past.
        Today we have heard that the CBI see the Government's optimism in precisely the same light. According to the tape, it said:
        "In stark contrast to optimism from the Government about an economic recovery, the CBI says in its survey published today that there is still no evidence of any noticeable recovery in activity being under way. Demand is stagnant. Nine out of 10 firms are short of orders."
        9 pm
        It is a wretched business when the Chancellor of the Exchequer and others carry on making speeches of the kind referred to by the hon. Member for Chippenham, lecturing everybody in the House and outside, when everybody outside the House and most people within it know what is happening in the various regions of the country and that the position is not in accordance with what the Government are saying. The Government have
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        been talking about the upturn since January of last year, when the then Financial Secretary said that the corner had been turned. We have been waiting for it ever since.
        As we know, good small firms are closing down—firms which deserve to continue. The Chancellor of the Exchequer ought to find no solace in the fact that small firms in the Midlands, frequently employing about 50 people, are closing down and being replaced by someone encouraged by the Chancellor of the Exchequer and having a flyer with his redundancy money.
        A number of firms are setting up to sell machinery overseas. According to the Financial Times of 9 March 1982:
        "The flood of second-hand machine tools resulting from the recession in Britain has provided a rich source of exports for Hulberts, a family-owned West Midlands company, which specialises in reconditioning machinery before selling it abroad."
        That is what is happening. There is a growth of new organisations setting up to demolish and strip factories of machinery for which no use can be found here but which finds a ready sale overseas. These are not old or inefficient companies selling their old machinery for junk. They are companies which ought to be thriving, but which are selling their expensive modern equipment to firms in other countries which are more able to make use of it than can be made of it here under the present Administration.
        What makes the national insurance surcharge reduction so necessary is the mood of unease which is marching across British industry and is reflected in the comments of those whom I have quoted.
        One of the keys to recovery is investment. In this respect the Chancellor of the Exchequer is right. Investment in manufacturing industry ought to be higher. I am not sure what investment is recorded by the figures produced nowadays. Pub decorations have been defined by the courts as "plant and machinery". That is nonsense, and it needs to be put right at some stage.
        It is not only with the poor level of investment about which we should be concerned. In a stagnant or declining economy, plant is frequently purchased to improve efficiency without increasing output. The extra goods cannot be sold, so the investment provides not further expansionary opportunities but an increase in unemployment. That leads to the basic dilemma in industrial life under a Conservative Government.
        How can we get companies to buy more machinery, which needs more people to work it, if the first and major preoccupation of companies is to preserve their very existence? How do we get full employment without an expansionist economy, without expansion-minded firms? What happens instead is that hand in hand with mismanagement go collapsed expectations.
        It may be that the engine of confidence provided the major industrial expansions in the post-war years. In terms of industrial decline, the damage done to those expectations is greater than any we have ever known. The feeling that persisted until recently was that we were a vigorous country with expanding industry, sure of itself, able to plan and to create the wider opportunities ahead. The recreation of that confidence will be one of the greatest tasks facing any Government. To recreate the mood of expansion in a people who have retreated into caution and doubt is a major task of Government and one that this Government have failed even to recognise.
        We shall be voting for our amendment tonight because we believe that it is one of the most important ways of

        231
        helping to reduce unemployment. We regard it as a priority that overrides all others in our national life. For us "priority" is what the word means—a policy for reducing unemployment which comes before all others.
        It is now clear that the Labour Party is the only party represented in the House which seriously believes in the commitment to return to full employment. It was a Liberal, William Beveridge, who, in his report "Social Insurance and Allied Services", published in November 1942, made his assumption the maintenance of employment, but it was Arthur Greenwood who, as Labour Minister without Portfolio, set up the Committee under Beveridge, and it was Sir William Jowitt, the Labour Paymaster-General—one of my many distinguished predecessors as Member of Parliament for Ashton-under-Lyne—to whom the report was submitted.
        In that monumental report, which established the structure of the Welfare State, Beveridge's central assumption was the maintenance of high employment. He said that the Welfare State proposals would be impractical if they had to apply to men unemployed by the million or even by the hundred thousand. His second assumption was that the only satisfactory test of unemployment is an offer of work. That test breaks down in mass unemployment. A further assumption of the Welfare State was that there should be an announced determination to use the powers of the State to reduce unemployment, and he pointed out that the worst form of waste—even worse than overmanning in the Civil Service or elsewhere—was unemployment.
        Finally, Beveridge pointed out that it should be possible to end unemployment lasting for more than 26 weeks. That was in 1942. That led to the full employment White Paper of 1944, which has been repudiated by the Conservative Party and modified by other parties. It is a great shame to them and a dishonour and disservice to the nation that such an important commitment should have been withdrawn at such a critical stage in our national life.
        We have had many distinguished speakers in the debate, but I must select the hon. Member for Chippenham, who called for less oratory, less cajoling and less lecturing from the Front Bench. He asked Ministers whether they knew what was happening in industry today. The hon. Member for Bath said that we should look to jobs, prices, output and to real things that we can measure, not to something that forms part of the Government's theology. The hon. Member for Rutland and Stamford had his doubts as to what the Front Bench knew about industry and what is happening today.
        The position today is that many people, even Tory industrialists, now realise that nothing—literally nothing—good can come from the Government's policies to counterbalance the horrifying damage to industry recklessly carried out by the Government. No one, however malicious, could have done more harm to our industrial structure, and the damage that is being done to British industry is without parallel. In those circumstances, the amendment, further to reduce the national insurance surcharge, is a necessary requirement for which we shall be voting tonight.
        Question put, That the amendment be made:—
        The Committee divided: Ayes 82, Noes 140.

        Division No. 137]

        [9.10 pm

        AYES

        Alton, David

        Archer, Rt Hon Peter

        Anderson, Donald

        Atkinson, N.(H'gey,)

        232

        Beith, A. J.

        Kerr, Russell

        Bennett, Andrew(St'kp'tn)

        Leighton, Ronald

        Booth, Rt Hon Albert

        Lewis, Ron (Carlisle)

        Brocklebank-Fowler,C.

        Lyons, Edward (Bradf'dW)

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

        McDonald, DrOonagh

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

        McKay, Allen (Penistone)

        Campbell-Savours,Dale

        Maclennan,Robert

        Cartwright,John

        Magee, Bryan

        Clark, Dr David (S Shields)

        Marks,Kenneth

        Cocks, Rt Hon M. (B'stolS)

        Millan, RtHonBruce

        Concannon, Rt Hon J. D.

        Mitchell, Austin(Grimsby)

        Cook, Robin F.

        Mitchell, R. C. (Soton Itchen)

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

        Morris, Rt Hon C. (O'shaw)

        Cryer.Bob

        Oakes, RtHon Gordon

        Cunliffe,Lawrence

        Penhaligon,David

        Dalyell, Tam

        Race, Reg

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

        Roper,John

        Dean, Joseph (Leeds West)

        Sheldon, RtHon R.

        Dormand,Jack

        Shore, Rt Hon Peter

        Dubs,Alfred

        Skinner,Dennis

        Dunn, James A.

        Snape, Peter

        Eadie,Alex

        Soley,Clive

        Eastham, Ken

        Spriggs, Leslie

        Ellis, Tom (Wrexham)

        Stoddart,David

        Evans, loan (Aberdare)

        Straw,Jack

        Fitch,Alan

        Wainwright,E.(DearneV,)

        Fitt,Gerard

        Wainwright, R. (ColneV)

        Foster, Derek

        Walker, Rt Hon H.(D'caster)

        George, Bruce

        Watkins, David

        Grant, John (Islington C)

        Wellbeloved,James

        Hamilton, W. W. (C'tralFife)

        Welsh,Michael

        Harrison, RtHonWalter

        Whitlock,William

        HomeRobertson,John

        Williams, Rt Hon Mrs (Crosby)

        Homewood,William

        Wilson, Gordon (DundeeE)

        Horam,John

        Winnick, David

        Howells,Geraint

        Wrigglesworth,Ian

        Hoyle, Douglas

        Young, David (BoltonE)

        Hughes, Robert (Aberdeen N)

        Hughes, Roy (Newport)

        Tellers for the Ayes:

        Jenkins, Rt Hon Roy (Hillhead)

        Mr. George Morton and Mr. Frank Haynes.

        John,Brynmor

        NOES

        Aitken,jonathan

        Dean, Paul (NorthSomerset)

        Alexander,Richard

        Dover,Denshore

        Ancram,Michael

        Dunlop,john

        Arnold,Tom

        Dunn, Robert(Dartford)

        Aspinwall,Jack

        Fairgrieve,SirRussell

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

        Faith, MrsSheila

        Baker, Nicholas (N Dorset)

        Fenner, Mrs Peggy

        Banks,Robert

        Fletcher-Cooke,SirCharles

        Beaumont-Dark,Anthony

        Goodhew,SirVictor

        Bendall,Vivian

        Goodlad,Alastair

        Benyon,Thomas(A'don)

        Gow, Ian

        Berry, Hon Anthony

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

        Best,Keith

        Griffiths,Peter Portsm'thN)

        Bevan,DavidGilroy

        Gummer,JohnSelwyn

        Biggs-Davison,SirJohn

        Hamilton, HonA.

        Blackburn,John

        Hamilton, Michael(Salisbury)

        Boscawen,HonRobert

        Haselhurst,Alan

        Bottomley, Peter (W'wich W)

        Hawkins,Paul

        Boyson,DrRhodes

        Hawksley,Warren

        Braine,SirBernard

        Heddle,John

        Bright,Graham

        Hicks, Robert

        Brinton,Tim

        Higgins, RtHon Terence L.

        Brittan, Rt. Hon. Leon

        Hill,James

        Brooke, Hon Peter

        Hogg,Hon Douglas(Gr'th'm)

        Brown, Michael(Brigg&Sc'n)

        Holland,Philip(Carlton)

        Bruce-Gardyne,John

        Hordern, Peter

        Budgen,Nick

        Howell, Ralph (NNorfolk)

        Butcher,John

        Hunt, David (Wirral)

        Cadbury,Jocelyn

        Jopling, RtHon Michael

        Carlisle,John(LutonWest)

        Kaberry,SirDonald

        Carlisle, RtHon M.(R'c'n)

        Kitson.SirTimothy

        Chapman,Sydney

        Knight, MrsJill

        Clarke,Kenneth(Rushcliffe)

        Knox, David

        Cockeram,Eric

        Lawrence, Ivan

        Cope,John

        Lawson, Rt Hon Nigel

        Cranborne,Viscount

        Lester, Jim (Beeston)

        Crouch,David

        Lewis, Kenneth (Rutland)

        233

        Lloyd, Peter (Fareham)

        Roberts, Wyn (Conway)

        Lyell, Nicholas

        Sainsbury,HonTimothy

        McCusker,H.

        Shaw, Giles (Pudsey)

        MacGregor,John

        Shaw, Michael(Scarborough)

        MacKay, John (Argyll)

        Shelton,William(Streatham)

        Major,John

        Sims, Roger

        Marland,Paul

        Speed,Keith

        Marlow,Antony

        Speller,Tony

        Mather,Carol

        Spicer, Jim (WestDorset)

        Maude, RtHon Sir Angus

        Stainton, Keith

        Mawhinney,DrBrian

        Stanbrook,lvor

        Maxwell-Hyslop,Robin

        Stanley,John

        May hew, Patrick

        StradlingThomas,J.

        Mellor,David

        Thatcher, Rt Hon Mrs M.

        Meyer,SirAnthony

        Thomas, Rt Hon Peter

        Miller,Hal(B'grove)

        Thompson,Donald

        Mills,Iain (Meriden)

        Thorne,Neil(IlfordSouth)

        Miscampbell,Norman

        Townsend, CyrilD, (B 'heath)

        Moate,Roger

        van Straubenzee, Sir W.

        Morris,M. (N'hamptonS)

        Viggers,Peter

        Mudd,David

        Waddington,David

        Murphy,Christopher

        Wakeham,John

        Needham,Richard

        Waller,Gary

        Nelson,Anthony

        Walters,Dennis

        Neubert,Michael

        Watson,John

        Newton,Tony

        Wells,Bowen

        Page, Richard (SW Herts)

        Wheeler,John

        Patten,John (Oxford)

        Wickenden,Keith

        Percival,Sirlan

        Wilkinson,John

        Pollock,Alexander

        Winterton,Nicholas

        Prentice, RtHon Reg

        Wolfson,Mark

        Price, SirDavid (Eastleigh)

        Renton,Tim

        Tellers for the Noes:

        Rhodes James, Robert

        Mr. Ian Lang and Mr. Tristan Garel-Jones.

        Roberts,M. (CardiffNW)

        Question accordingly negatived.
        Amendment proposed: No 24,page 96, line 3, leave out
        ';but with respect to earnings'
        Question put, That the amendment be made;—
        The Committee divided: Ayes 22, Noes 137.

        Division No. 138]

        [9.20 pm

        AYES

        Alton,David

        Mitchell, R. C. (Sotonltchen)

        Brocklebank-Fowler,C.

        Penhaligon, David

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

        Roper,John

        Cartwright,John

        Skinner,Dennis

        Ellis,Tom (Wrexham)

        Wainwright,R.(ColneV)

        Fitch,Alan

        Wellbeloved,James

        Grant, John (IslingtonC)

        Williams, RtHon Mrs (Crosby)

        Horam,John

        Wilson, Gordon (DundeeE)

        Howells,Geraint

        Wrigglesworth,Ian

        Jenkins, Rt Hon Roy (Hillhead)

        Lyons, Edward (Bradf'dW)

        Tellers for the Ayes:

        Maclennan,Robert

        Mr. A. J. Beith and Mr. James A. Dunn.

        Magee, Bryan

        NOES

        Aitken,Jonathan

        Bendall,Vivian

        Alexander,Richard

        Benyon,Thomas (A'don)

        Ancram, Michael

        Berry, Hon Anthony

        Arnold,Tom

        Best, Keith

        Aspinwall,Jack

        Bevan, David Gilroy

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

        Biggs-Davison,SirJohn

        Baker, Nicholas (NDorset)

        Blackburn,John

        Beaumont-Dark,Anthony

        Bottomley, Peter (W'wich W)

        234

        Boyson,Dr Rhodes

        Mather,Carol

        Bright,Graham

        Maude, Rt Hon Sir Angus

        Brinton,Tim

        Mawhinney,DrBrian

        Brittan,Rt. Hon. Leon

        Maxwell-Hyslop,Robin

        Brooke, Hon Peter

        Mayhew,Patrick

        Brown, Michael(Brigg&Sc'n,)

        Mellor,David

        Bruce-Gardyne,John

        Meyer,SirAnthony

        Budgen,Nick

        Miller,Hal(B'grove)

        Butcher,John

        Mills, lain (Meriden)

        Cadbury,Jocelyn

        Miscampbell,Norman

        Carlisle, John (Luton West)

        Moate, Roger

        Carlisle, RtHonM. (R'c'n)

        Morris, M. (N'hamptonS)

        Chapman,Sydney

        Mudd, David

        Clarke, Kenneth(Rushcliffe)

        Murphy,Christopher

        Cockeram,Eric

        Needham,Richard

        Cope,John

        Nelson,Anthony

        Cranborne,Viscount

        Neubert,Michael

        Crouch,David

        Newton,Tony

        Dean, Paul (NorthSomerset)

        Page, Richard (SWHerts)

        Dover,Denshore

        Patten, John (Oxford)

        Dunlop,John

        Percival,Sirlan

        Dunn,Roberte(Dartford)

        Pollock,Alexander

        Fairgrieve,SirRussell

        Prentice, Rt Hon Reg

        Faith, MrsSheila

        Price, SirDavid (Eastleigh)

        Fenner, Mrs Peggy

        Renton,Tim

        Fletcher-Cooke,SirCharles

        Rhodes James, Robert

        Garel-Jones,Tristan

        Roberts, M. (Cardiff NW)

        Goodhew.SirVictor

        Roberts, Wyn (Conway)

        Goodlad,Alastair

        Sainsbury,HonTimothy

        Gow, Ian

        Shaw, Giles (Pudsey)

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

        Shaw, Michael (Scarborough)

        Griffiths, Peter Portsm'thN)

        Shelton.William(Streatham)

        Hamilton, Hon A.

        Sims, Roger

        Hamilton,Michael(Salisbury)

        Speed, Keith

        Hampson,Dr Keith

        Speller,Tony

        Haselhurst,Alan

        Spicer, Jim (WestDorset)

        Hawkins,Paul

        Stainton,Keith

        Hawksley,Warren

        Stanbrook,lvor

        Heddle,John

        Stanley,John

        Higgins, RtHon Terence L

        StradlingThomas,J.

        Hill,James

        Thatcher, RtHon Mrs M,

        Hogg.HonDouglas(Gr'th'm)

        Thomas, Rt Hon Peter

        Holland,Philip(Carlton)

        Thompson,Donald

        Hordern, Peter

        Thome, Neil(IlfordSouth)

        Howell, Ralph (NNorflk)

        Townsend, CyrilD(B'heath)

        Hunt, David (Wirral)

        van Straubenzee, SirW.

        Jopling, RtHon Michael

        Waddington, David

        Kaberry,SirDonald

        Wakeham,John

        Kitson,SirTimothy

        Waller, Gary

        Knight,MrsJill

        Walters, Dennis

        Knox, David

        Watson,John

        Lang, Ian

        Wells,Bowen

        Lawrence, Ivan

        Wheeler,John

        Lawson, RtHonNigel

        Wickenden,Keith

        Lester, Jim (Beeston)

        Wiggin,Jerry

        Lewis, Kenneth (Rutland)

        Wilkinson,John

        Lloyd, Peter (Fareham)

        Winterton,Nicholas

        Lyell,Nicholas

        Wolfson,Mark

        MacGregor,John

        MacKay, John (Argyll)

        Tellers for the Noes:

        Major,John

        Robert Boscawen and Selwyn Gummer.

        Marland,Paul

        Marlow,Antony

        Question accordingly negatived.
        Clause 128 ordered to stand part of the Bill.
        Bill (Clause 18, 22, 29, 65, 71, 117 and 128; and Schedule 10), reported, with amendments; to lie upon the Table.

  Social Security
  9.32 pm
  Mr. Brynmor John: I beg to move,
  That an humble Address be presented to Her Majesty, praying that the Supplementary Benefit (Claims and Payments) Amendment Regulations 1982 (S.I., 1982, No. 522), dated 6th April 1982, a copy of which was laid before this House on 7th April, be annulled.
  The prayer relates to the fuel-direct scheme which is operated when a recipient of supplementary benefit is in debt to a fuel board and, with the agreement of the board, a supplementary benefit officer is empowered to determine that part of the claimant's benefit should be paid directly to the board which, in return, agrees not to disconnect the claimant's supply.
  The amount deducted from a claimant's benefit for the reduction of the debt owed to the board is equivalent to 5 per cent. of the single householder rate, rounded up to the nearest 5p. That means a maximum of £1·20 at current rates, but a higher amount can be deducted where there is a disregard.
  The second part of the deduction is an estimate of the full weekly cost of a claimant's fuel consumption, except when he pays through a prepayment meter. In practice, the supplementary benefit officer accepts the estimate made by the fuel board on the basis of the claimant's past level of consumption.
  Taken together, the deductions could amount to a considerable sum and could exceed 25 per cent. of the normal requirements element applicable to the person being assessed. If that happens, the person being charged must consent to such deductions. The person being charged has no right to insist upon this. It is the prerogative of the officer.
  The regulations amend regulations which came into force only last November. Even in supplementary benefit terms, those regulations have had a shorter life than most without being amended. The regulations make three changes. First, and most important, they provide that the amount to be deducted to reduce the debt shall be equal not to 5 per cent. as at present, but to 10 per cent. of the single household rate. According to the press handout of the DHSS, that rate is £2·40 a week at the moment.
  The Under-Secretary of State for Health and Social Security (Mr. Tony Newton): As a result of an unhappy mathematical error in rounding, that is the wrong figure; it should be £2·35. That should be put on the record.
  Mr. John: I am delighted that the Under-Secretary of State has done so because the figure before me is £2·35 but as my calculations are so often wrong I hesitated to put them against the press handout of the DHSS. In future, I shall be less timid when crossing swords with the DHSS.
  Where deductions are made in respect of more than one fuel—gas and electricity—they are tied to 5 per cent. of the single household rate in respect of each of them.
  The second change provides for adjustment of the amount deducted in respect of current consumption if the original estimate either exceeds or falls short of the actual cost. The third change can best be described as a tidying operation. It concerns disregard of either the claimant or his partner.
  I wish to deal with a number of points. I shall take them in reverse order of importance, starting with the queries and finishing with the outright opposition to the scheme.
  236
  First, what effect will the housing benefit scheme have on the new scheme? Housing benefit is being transferred from supplementary benefit and is being made a benefit in its own right. The fuel-direct arrangement can be made only where the amount of the supplementary benefit exceeds the amount to be deducted. For those claimants who are not in debt in respect of housing but are in debt in respect of fuel and paying fuel-direct, the effect of paying housing costs through housing benefit rather than through supplementary benefit may take them outside the ambit of the benefit.
  I give as an example a claimant who receives £15 a week supplementary benefit, of which £10 a week is for housing costs and £8 is a fuel-direct deduction. If £10 is deducted from £15 to leave £5 net, no fuel-direct deduction can be made in that case because the amount of deduction exceeds the amount of benefit when the housing element is taken away. That element will be taken away by the Social Security and Housing Benefits Bill, which is now in the other place. What will happen in such a case? Will an alternative arrangement be made? The claimant's financial position will not have altered in any way. If the fuel board does not have the guarantee of repayment, there is a danger that disconnection will loom large in its mind. What system do the Government envisage for that circumstance?
  My second point concerns the right to a fuel-direct arrangement which, at the moment, is left to the discretion of the DHSS officer. When claimants are in debt with fuel, they prefer to go on to the direct system but they have no right at the moment to insist. It is a matter for the discretion of the supplementary benefit officer.
  There are a few cases, albeit only a few, in which a claimant has made a request for a fuel-direct arrangement, the fuel board has been happy to go along with that request, but the benefit officer has refused the request on the grounds that it is in the interests of the claimant to learn to budget. I accept fully that that is probably the predilection of a couple of antediluvian officers in the Department.
  Mr. Andrew F. Bennett: That may be the attitude of one or two officers. There is also evidence that some officers, because of the manual system that they must use, are reluctant to increase the direct payments beyond a certain level. That has applied on the housing side in the past but it also appears to apply to fuel debts. Officers have said that they will agree to a total of £100 and no more. Will my hon. Friend press the Government to make it clear that they do not subscribe to that principle?
  Mr. John: I shall press the Government to subscribe to that principle. The Government should either give a right to a fuel-direct arrangement or at the least they should give a right of appeal when there has been a refusal by a supplementary benefit officer.
  There is poor liaison at some points between the fuel boards and the DHSS. The Child Poverty Action Group has provided a document called "Fuel Debts and Hardship" in which it talks about the
  "delays in administration at the beginning and end of 'fuel direct' arrangements."
  The Department is often late in payment, as a result of which the fuel board threatens disconnection.
  The Under-Secretary of State for Energy said that arrangements had been made for improved liaison with the

  237
  welfare authorities. I hope that the Minister understands that, for reasons that I shall set out in more detail later, that means better staffing at the DHSS offices than in the past.
  My next point has been made by the Electricity Consumers Council and the CPAG. When low income consumers appear to incur excessively high fuel costs, there should be some arrangements whereby they are offered energy advice and possibly a home energy audit to see that their fuel expenditure is the most suitable for their needs and means and is the most economic. I hope that the Minister will comment on that.
  The House has every right to take the strongest exception to the way in which the Minister once more has waived the requirement of referring the regulations to the Social Security Advisory Committee. I remind the House that under section 10(2)(a) of the Social Security Act 1980 the Secretary of State is permitted to waive the requirement for referral if it appears to him
  "that by reason of the urgency of the matter it is inexpedient so to refer the proposals".
  That is what the Secretary of State has done on this occasion.
  In a written answer on 7 April the reason given by the Under-Secretary of State was:
  "We are making these regulations now as a matter of urgency to assist in putting the changes into effect as soon as possible so that the new provisions may help with large fuel bills resulting from the past winter."—[Official Report, 7 April 1982; Vol. 21, c. 399.]
  However, the provision for fuel direct payments already exists. The amending regulations double the rate at which the amount owing is repaid. That does nothing to help those who have accumulated large fuel bills. Therefore, I beg leave to question whether the reason given by the Secretary of State stands up to even the most modest scrutiny. Should not the SSAC have been consulted first about a step that will cause extra hardship to the claimants who have, in any event, on that level of income, to scrape to make ends meet? The urgency of the matter may have been caused by something different. The urgency may have been to get some of the fuel boards to remove the debt ceilings that they have been operating. Whether that was the quid pro quo is open to doubt.
  At any rate, we must notice not only the way in which the Secretary of State has dealt with this matter as a non-emergency but the fact that he tacitly admits the total inadequacy of the emergency fuel help that was provided by the Government during the winter.
  It would not be so bad, and we might take the Secretary of State's exemption of this at face value, had we not the previous week had the Child Benefit (General) Amendment Regulations about payments for school leavers, which were also laid by the Secretary of State without previous reference to the Social Security Advisory Committee. I wonder whether there is a campaign by the Government deliberately to devalue the Social Security Advisory Committee by constantly circumventing it.
  Mr. Jim Craigen: The Minister is probably afraid of the kind of advice and recommendation that it would give.
  Mr. John: Yes, that is implicit in what I said about the Government trying to devalue the committee. At the very
  238
  least, if what is intended to be an exceptional course becomes a matter of course, the Act itself is in danger of being devalued.
  On debt ceilings, I believe that the doubling of the rate of repayment is the result of a deal done with the electricity supply industry whereby boards which currently operate a debt ceiling, limiting the size of debt for which they are prepared to accept a fuel-direct arrangement as an alternative to connection, will cease to do so. If that is so, a number of points arise.
  First, the maintenance of a debt ceiling is in any event totally contrary to the spirit of the code of practice on fuel debts and disconnections agreed in 1976 between the fuel boards and the DHSS. Therefore, it should not have been necessary for the DHSS to "buy" the disappearance of that practice with a measure that will increase hardship for claimants.
  Secondly, even if we accept that that was the intention, how good a bargain was achieved by doing it in this way? How many electricity boards were still imposing a fixed debt ceiling at the time when the agreement was reached? I know of only one definite example—the South of Scotland electricity board. If there are more, I hope that the Minister will tell us.
  Thirdly, exactly what is the force of the fuel industries' agreement to remove the remaining limits on the size of debt for which they are prepared to consider a fuel-direct arrangement? The practice of some electricity boards has been not to impose a direct ceiling but to consider each case on its merits. In other words, it does not necessarily follow from the removal of a fixed ceiling that the fuel boards will be prepared in every case to allow a fuel-direct arrangement as an alternative to disconnection.
  I press the Minister to give an assurance today that when the fuel industries say that they will remove the remaining limits they mean that in every case in which a fuel-direct arrangement is possible it will be permitted as an alternative to disconnection.
  The question of two debts instead of one arises when a person consumes both gas and electricity and has a fuel-direct arrangement for one supply. The new arrangements have provided no real disincentive to running up debts as they are repayable by 5 per cent. only.
  Will the Minister clarify the intention of new paragraph (2B) of the amending regulations, which provides for adjustments in the amount deducted for current consumption? No doubt the Minister has the text before him. I cannot see why this provision was necessary, as regulation 4 of the Supplementary Benefit (Determination of Claims and Questions) Regulations 1980 already provides for a review of a determination. The new paragraph therefore seems to spell out a power which already exists rather than adding any new power. If that is so, is it wise for the Government constantly to add to their printing costs by printing otiose provisions?
  It is important, not that the benefit officer may review the amount deducted for current consumption, but that he should do so at regular intervals. At present, he merely has a permissive power. We would like that power to be mandatory, compelling him to review the arrangement at regular intervals.
  We say that for two reasons. They are contradictory, but each is represented among the people whom we are discussing. The first case is where a fuel board overestimates a customer's current consumption. It means that an unnecessarily large amount of money will be

  239
  deducted from the benefit, and the family will have to suffer unnecessary hardship as a result. Indeed, some people suspect that some fuel boards deliberately overestimate the element for current consumption so that they can more quickly get payment of the debt, which is the first element, not the second, in the deduction. If there were a regular review, the payment could be adjusted downwards if there had been an overestimate. If the power is only permissive, the claimant may endure many months of hardship before the review is carried out. I hope that the Minister will consider the matter, and, if it is necessary, we shall not criticise him for amending the amendments fairly quickly.
  Mr. Andrew F. Bennett: One problem for my constituents is that they receive a bill and are startled when they see how high it is. They find it difficult to pay, and they have to adjust the amount of gas or electricity that they will use, but the board still insists that the calculations will be based on what they have just used, not on what they will use in the next quarter, taking into account their difficulties in paying the first bill.
  Mr. John: Certainly. Of course, that is estimated on past performance. I am asking for a mandatory review so that when the pattern of consumption is changed the amounts can also be adjusted and unnecessary hardship avoided.
  The second phenomenon that I want to bring to the Minister's attention is the claimant who increases consumption once he is on a fuel-direct payment. The Policy Studies Institute, in its book "Fuel Debts and Hardship", gave examples of that. People are under the impression that the DHSS has taken full responsibility for the fuel bill in return for weekly deductions. Whatever the reason, it is essential that, where actual consumption exceeds the estimate, action should be taken to prevent further debt from accumulating and to avoid the adjustment which my hon. Friend the Member for Stockport, North (Mr. Bennett) has just mentioned.
  Whatever the reasons why it should be done, I suspect that the power is permissive because of the problems in the DHSS in dealing with the fuel-direct system. In my view, there has been understaffing in the DHSS offices for this line of work. It has led to poor liaison with the fuel boards and a failure to take action when actual consumption is out of line with the estimate. For example, it is reported that, in some offices in north London, understaffing is so bad that at times every person working on fuel-direct work has been taken off it to attend to the general needs of the office. I hope that the Minister will assure us that, where this scheme is amended, there will be adequate staff to deal with it, and that there will be regular adjustment of deductions for current consumption.
  I hope that my hon. Friends will join me in dividing the House on these regulations and thereby show our concern and opposition to the additional hardship for claimants that is involved in this measure.
  It is interesting to note that the Department of Health and Social Security has given absolutely no reason for saying that in its opinion the present rate of deduction for repayment of fuel debt is too low. We know that it is tied to the cost of living and is automatically adjusted for inflation. Therefore, the House is entitled to an explanation of why the Secretary of State has decided to double the rate of deduction. The fact is—we all have to
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  face this—that the increased rate of repayment will place an increased strain upon the budgets of claimants who already find it extremely difficult to manage on what is by any standards a very low income. The danger is that a larger deduction in respect of fuel debt may satisfy the fuel boards but will merely transfer the indebtedness away from fuel into other fields in which the recipient of social security is equally obliged to purchase.
  All of us who know something about Northern Ireland are concerned about the Payment for Debt Act and we do not want that Act or its equivalent, in whatever guise, to be transferred to the rest of Great Britain, because it has been the cause of great misery and does not serve the purposes for which it was intended.
  The root cause of the problem is not how quickly the people who run into debt repay the money; the root cause is that the Government by deliberate policy have raised fuel prices in recent years by far more than the rate of inflation. I need mention only the rise in gas prices, which last year was 26 per cent. and which in each of the past three years has been 10 per cent. above the rate of inflation. I believe that this is something which on any view is misguided but which bears more harshly on low-income families than on the generality of the population.
  The family expenditure survey in 1979 showed that the poorest 20 per cent. of households spend about 11½ per cent. of their income on fuel, whilst the richest 20 per cent. spend only 4 per cent. The problems of poor families are exacerbated by the fact that in many cases they cannot afford loft insulation and many other fuel-saving measures. This is compounded by the fact that mans of them live on council estates where in fits of aberration the local councils have had district agreements with the electricity board to install central heating which in many cases nobody can afford to turn on for anything like the period for which they are intended to run to warm the house. It may have been cheap for the council to install but it is a matter of great hardship to run it thereafter.
  If the Government are going to pursue the policy of increasing fuel prices artificially in order to get some notional return on capital they really must provide adequate financial help for low-income families who have these fuel problems. This they have signally failed to do and this has meant that in many cases families that are neither profligate nor wasteful have got into debt when they are in receipt of social security because of this Teal and arduous problem of fuel cost. It is essential to tackle the problems of fuel policy and fuel poverty rather than to treat the symptoms of the problem through repayment.
  The higher rate of repayment now to be demanded will be a significant extra sum for the family on supplementary benefit to find out of its weekly budget. I believe that it will prove a great social hardship. The Government have given absolutely no reason why it is being imposed. That is why I hope that my hon. Friends will join me in voting against the regulations.
  10 pm
  Mr. Reg Race: The regulations are deceptive, because, to an untutored eye, all that they apparently do is to increase the deduction for fuel debts from £1 to £2·35. However, there are other principles involved, and what matters to people who have fuel debts is the total amount of deduction from their benefit. The

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  Government are proposing to more or less double the amount that is taken from benefits to pay off an existing debt.
  The regulations are silent about something that we must discuss, which is the way in which, in addition to that sum, there is a figure that represents so-called current consumption.
  Another problem that arises from the method by which the fuel-direct scheme is operated is the way in which an individual claimant can sign away his or her rights and agree to pay more. Some of the agreements to pay more are staggering in their complexity, as are the amounts that individuals agree to pay off.
  I refer the Minister to a case in my constituency, which shows that there is a major problem. It was drawn to the attention of his predecessor, the hon. Member for Wallasey (Mrs. Chalker), in 1981. We exchanged correspondence, but the subject bears repetition.
  Ms Burnell Jacobs, a constituent of mine, lives in an all-electric first-floor council flat in Haringey. She ran up a bill of £861·69 with the Eastern electricity board. The board said that it would reconnect her only if a payment of £600 in cash was made to it, plus a payment per week of £21 under the fuel-direct scheme.
  Ms Jacobs had two children, one of four years, and one of 15 months who had just come out of hospital with a chest infection. Her electricity supply had been disconnected by the electricity board and the local authority could not provide any form of portable gas heating because it was on the first floor and was regarded as a fire risk. The social services department gave her two gas lights and a single gas burner camping stove. Application was then made to the DHSS local office for a single payment to clear some of the outstanding electricity debt to get her back on to supply. Initially, this was turned down on the ground that
  "She had alternative forms of heating and lighting."
  That was the two gas lights and the single gas burner camping stove provided by the social services department.
  The decison was made not by the local office but by the regional office of the DHSS and was appealed against. The Under-Secretary wrote to me on 12 May 1981 about the case, and eventually an appeal tribunal awarded a single payment of £647. With the agreement of my constituent a fuel-direct deduction of £24·10 a week was made from her supplementary benefit to pay for her current consumption and her existing outstanding debt after the single payment had been made.
  Of the payment of £24·10 a week that Ms Jacobs had to sign away from her benefit, £23 was for current electricity consumption. When that was investigated by the excellent Tottenham advice bureau, run by the local authority, it was found that the annual consumption rate that that £23 represented was no less than 100 per cent. over the previous two years' consumption. An outrageous amount was being demanded by the electricity board through the local office, and it was agreed to by the claimant because that was the only way that she could get back on supply.
  That case outlines some of the worst problems of the fuel-direct scheme. Nevertheless, I applaud the scheme. It is basically a good scheme, but it should be improved drastically, and our job tonight is to see that it is.
  Mr. Peter Bottomley: Because this is a non-partisan issue—or some elements of it are—can the hon. Member for Wood Green (Mr. Race) say whether what he has reported appears to be a general approach by the board? Is the implication of his figures that this person had not paid for fuel for over a year?
  Mr. Race: The woman had been paying money to the electricity board. She had run up a debt over a period of time. However, her consumption over the previous 12 months was not excessive for her flat. It was high, but not abnormally so. At that time, what I have said appeared to be the general approach of that electricity board.
  We must ask ourselves who is in charge of the fuel-direct scheme on the ground. Is it the local office? I asked the local office that dealt with the case. I have good relations with it, and I think that it does a good job. It did not see itself as being in charge of the fuel-direct scheme. It said that it merely implemented the electricity board's demands. Therefore, I went to see the regional manager of the Eastern electricity board. He is an excellent man and deals well with complaints that I raise with him. He told me that it was not the job of the Eastern electricity board to act as a social service. If there were a problem, he said, the Department of Health and Social Security had to make representations about it.
  The difficulty facing claimants under the fuel-direct scheme seems to be that the electricity board may make excessive demands in order to recoup its outstanding amounts from individuals as rapidly as possible, the local office of the DHSS does not see it as being within its powers to make representations to reduce the claims from the board, and the claimants, who may have been disconnected and who want to get back on to supply as quickly as possible, will agree to almost anything to have that supply restored, particularly if they have children or an aged relative in the house.
  The House must build into the system a method of overseeing those deductions from benefit to ensure that they are not excessive and to ensure that the total deduction is not excessive.
  My hon. Friend the Member for Pontypridd (Mr. John) correctly said that the burden of debt is simply shifted on to somebody else—the rent, the rates or the hire purchase is not paid. We all know that that is true. Therefore, my plea to the Minister tonight is, first, that he should withdraw the regulations, because they increase hardship. The near doubling of deductions for debt payments matters to people who are on a low rate of benefit.
  Secondly, for heaven's sake let us have a real look at the fuel-direct scheme to ensure that the policies that I have outlined in this case, which were reflected in others in my locality, do not occur again.
  We must have a fuel-direct system which is fair, which can be appealed against, and which reflects the real needs of claimants. If we do that, claimants will have good cause to say that the House of Commons has done a good job and to thank it for that. If the Minister is not prepared to make that kind of investigation, perhaps it should be done by the Social Security Advisory Committee. Here is a classic area in which the SSAC should look at the administration of fuel-direct payments. It can do that if it wishes to do so. Perhaps the Minister ought to encourage it to do so. If we can get some urgency and some action, claimants will get a better deal, and that is what we all want.
  10.10 pm
  Mr. Peter Bottomley: Two or three points ought to be made in the debate in the hope that people outside will pay attention to what we say.
  I do not disapprove of the regulations. I think that it is reasonable for the weekly amount to go up to 10 per cent. It is important to remember the people who are not covered. When hon. Members talk about the transfer of debts from fuel to some other area, I am reminded of the people who have to rely on paraffin or coal for their heating. There is not the opportunity to build up debts with the coal merchant, because payment has to be made in cash in advance of delivery. That is different from gas and electricity consumption, where the problem arises in having to meet quarterly accounts. There are other occasions when problems arise because of prepayment meters being broken into, either by the family concerned or by people from outside. We are talking about specific fuels, electricity and gas, and almost without exception the problems are concentrated on those two fuels.
  I find it worrying that so many families find themselves with over a year's fuel debts before getting help to settle those debts. I should like to think that our fuel boards have the initiative to contact families or to take action which brings matters to a head within, say, a period of a quarter and a half. Families should not be allowed to accumulate debts covering periods exceeding six months.
  When people are allowed, as in the example that has been given, to run up debts of over £800, and when the current consumption is about £10 a week, it would appear that about 15 months' debts have accumulated. That is letting a family—especially one on supplementary benefit—get into far more difficulties than it can reasonably be expected to get out of.
  I recognise that the fuel boards have difficulties and that many hon. Members take a rather strong line, as I do, over fuel disconnections. They have to try to find the appropriate commercial way, through the two pressures that are being applied. That is their job. They should not expect to get paid and get a round of applause as well.
  Whenever I have had to take up fuel problems with the fuel boards or with the Department of Health and Social Security, there has been a good response. One recognises that there may be variations from locality to locality or as between different members of staff. It may be a question of the other pressures on the office at the time, but, even in the most difficult cases, I have found the authorities reasonable, and usually it has been possible to come to some kind of arrangement.
  I am concerned about the liaison between the fuel boards and the DHSS office. On occasions I have found that when people have tried to go on to a fuel-direct system, the buck seems to have been passed from the electricity board to the DHSS and vice versa. That often arises when a family has been on the fuel-direct system for two years, has come off it, has not managed to organise its own budgeting, and has then found it difficult to go back on to the fuel-direct system.
  I recognise how difficult it is to have arrangements which discourage people from relying unnecessarily on the fuel-direct system. If that happens, the DHSS office becomes rather like a bank running standing orders or regular payments for people on supplementary benefit. It would be preferable to have the system that is operated in Germany and France, where almost every family has a
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  bank or giro account so that there can be automatic payments on the day that the supplementary benefit arrives. That has the same effect as the fuel-direct scheme, but it does not require too much work by the DHSS office. We are obviously a long way from that, because nearly 40 per cent. of British families do not have savings accounts either with the National Girobank or with another bank. We must try to move towards a scheme where families can make their own fuel-direct payments, as long as they make sure that the money leaves their account on the same day that the bill comes in.
  We should have more privatisation—I hate the word—in analysing what is happening in this area. We should not always rely upon the Social Security Advisory Committee. We should take a leaf out of the example that was set by the Family Fund, where an independent charity was asked to administer the fund on behalf of the Government. If we wanted an analysis of the position on the ground without relying entirely on the DHSS, we could ask the Child Poverty Action Group to conduct a survey. At the moment it obtains evidence on a limited basis, but it should have Government funding to monitor the effects of changes in such regulations and to check how widespread are the examples given by the hon. Member for Pontypridd (Mr. John). We shall find that there are cheaper ways of conducting surveys which will help both the Government and hon. Members to monitor the effects of regulations.
  Mr. John: The hon. Member for Woolwich, West (Mr. Bottomley) will recognise that, under section 10, the statutory obligation laid on the Minister to refer such regulations to the Social Security Advisory Committee can be avoided only in certain cases. Does he agree that it is an unhealthy development that the Minister should certify that the latest two cases have a priority which does not match up to the realities of the position? For example, is there anything in the regulation that is so helpful to the beneficiary that it should be laid before the House before the advice of the advisory committee has been obtained?
  Mr. Bottomley: I do not agree at the moment, but I look forward to my hon. Friend's speech. The point that I was trying to make—which was not the one made adequately by the hon. Gentleman—was that we should use outside experts to monitor the changing effects of regulations on fuel prices. I hope that the Government will consider using outside bodies—not necessarily commercial bodies, although I have no political objection to that—to find out what is going on. Many outside bodies have the sort of expertise that is not only useful in briefing Members of Parliament and the Government, but can be used for following up the effects of the regulations.
  A useful point was made about energy advice. I wish that that advice had been available to many local authorities which carried out the wrong form of building, let alone the wrong form of heating. It is acceptable to install electric heating in a house or in a low-level block of flats because it is possible to switch to an alternative form of heating, but in the local authority buildings in my constituency it is impossible to install alternative heating.
  I wish to re-emphasise and appeal for early action to help not only the families concerned but those in contact with them, such as the supplementary benefit offices, the fuel boards and the local community networks. The more that they are aware that early action is important and that

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  fuel debts can be kept down by voluntary action by the families and useful intervention—not busybodying—by those who can give them formal or informal advice, the more we can reduce this sort of problem.
  The payment of fuel bills is a major problem and will continue to be so. We must ameliorate it as much as possible and take every opportunity to make the lives of those on supplementary benefit with high fuel bills as easy as possible. We should remember that those on supplementary benefit do not have large disposable resources, which is why it is important to ensure that fuel payments are not added to their debts. We must ensure that the level of the fuel-direct scheme is kept as low as possible by trying to reduce the level of debts.
  10.20 pm
  Mr. Andrew F. Bennett: I support my hon. Friends in their Prayer to have these regulations annulled. They are called
  "The Supplementary Benefit (Claims and Payments) Amendment Regulations 1982."
  That does not tell us much about them. It would have been much better had the Minister arranged for a note to be stuck on the top saying "Stand and deliver, pay up quick regulations." That is what they are about.
  The Minister should also look at the back page which gives the price of 75p for a copy of the regulations. I do not expect many claimants to buy a copy, but many welfare rights and other groups will buy an up-to-date set, particularly as the regulations amend earlier regulations that are only six months old. The Government should look at the way in which the price of regulations is imposed on bodies that do not have much in the way of resources to pay for them. This may not be a problem with the general run of regulations which go to public bodies and to solicitors who can afford to pay for them, but a lot of the work in this area is done by organisations that work on a shoestring and to put a price of 75p on these regulations is unfair.
  The real problem of fuel debts was brought about by the gas and electricity boards. I am appalled at the amount of time spent trying to solve a problem that the boards created themselves. Thirty or 40 years ago, when people on the whole had lower incomes, very few got into difficulties meeting their fuel bills. That was because a larger proportion paid for their fuel before it was consumed. They used oil, paraffin or coal and bought it as they went along.
  In those days, gas or electricity was in most cases paid for through a prepayment meter. It was the enthusiasm with which the gas and electricity boards ripped out prepayment meters that created the problem. The boards did that for two reasons. They wanted to cut down their collection costs and they were worried about the number of meter robberies. I accept that those problems existed, but this enthusiasm for ripping out the meters was the real cause of the present problem. If the boards had retained the meters and converted them to take tokens that could be destroyed as they were inserted in the meter, most of the problems would have been solved and we would not need to spend so much time on this issue.
  Mr. Race: Is my hon. Friend aware of the recent happy change in policy by some electricity boards? They are
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  bringing back prepayment meters, particularly in households where there has been a history of fuel debt. Does not this show that our pleas for a more rational approach are having some success?
  Mr. Bennett: Yes. I am willing to pay tribute to some of the boards, certainly in the North-West, that I know have started installing prepayment meters. However, the simple action for the Government is to tell the boards that they have no sympathy for their problems of collecting money until the boards install prepayment meters to the same extent as they did in the 1960s. Only when the boards have played their part by doing that can the Government bring forward these regulations.
  I do not believe that the gas or electricity boards have done enough work on the development of destructive tokens and making such tokens available so that they can be purchased at local corner shops and a wide variety of places. If that was done they would solve many of their problems.
  The Government are allowing the boards to continue making life difficult for those on low incomes, particularly by allowing them to push forward with standing charges. A section of the regulations should stipulate that people on supplementary benefit should have their standing charges met direct—not from existing benefit but from extra benefit. I can see no justification for the standing charge anyway, but it is extremely harsh for someone on a low income such as supplementary benefit. Quite often, such people make savings, cut back and do without necessary fuel but still find that they are being penalised by the standing charge.
  I have constituents who have incurred heavy winter bills because it was necessary and who for the two summer quarters have tried to make do with virtually no heating at all. Even so, they find that a substantial standing charge will be applied by the gas or electricity boards. The Government ought to be doing something about that. If they cannot stop the boards from imposing a standing charge, they ought to provide some money.
  It is deplorable that the Government did not put this matter to the Social Security Advisory Committee before they introduced the regulations. It seems that the Government are reluctant to take notice of the advisory committee. The committee made 14 recommendations to the Government in its first annual report, and it looks as though the Government might implement four or five. They have not taken a great deal of notice.
  In the new Social Security and Housing Benefits Bill the Government propose a special price index for housing. We now know it as the "Rossi index". They will take that into account in future because they believe that housing costs work differently from general costs in the RPI.
  Why do not the Government introduce a special index for fuel costs—perhaps the "Newton index"? Taking into account the standing charge and the extra that the fuel board have had to impose as a result of Government policy, fuel charges in the last two years have gone up catastrophically for most individuals. I therefore believe that the Government ought to consider such a special index.
  Mr. John: My hon. Friend will remember that we pressed the Government not necessarily for a separate fuel index but for an index covering the lowest 25 per cent. economically so that fuel that accounts for a much higher

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  percentage of a poor family's income should be adequately weighted in the RPI rather than struck as an average as at present.
  Mr. Bennett: I accept that. The Government ought to introduce this index and give extra money in the supplementary benefit.
  In a way, these regulations are almost that sort of index. The Government are really saying "We recognise that, as part of your needs, fuel has doubled from 5 per cent. to 10 per cent. Because of that, we shall allow the boards to recover the money that much sooner". In a sense they are admitting that this is an extra cost in the needs of someone on supplementary benefit. In fact, they ought to increase the benefit to take that into account. It is, therefore, important for the Government to come forward with a positive policy and to put some extra money in people's pockets before finding quicker ways of taking it out of their pockets.
  The Government have been warned several times that the Social Security Housing Benefits Bill will reduce flexibility for many claimants. They will not receive their rent money. It will be paid direct. Therefore, the choice of being a week or a fortnight in arrears with one's rent will be removed from many individuals.
  When it first talked about that change, the Supplementary Benefits Commission recognised that it would mean a loss of flexibility. It said that it was worth it so long as some extra money was provided. The loss of flexibility to borrow from the housing department means that in order to ensure that their children have clothes to attend school or food to eat, more people will be tempted to dip into the money that should be set aside to pay their fuel bills. As a result of Government policy, and the Social Security and Housing Benefits Bill, the problem of fuel debts will increase. Therefore, the Government must carefully consider the ways in which—within the next 12 months—they can raise the general level of benefit to take into account the loss of flexibility.
  Like my hon. Friends on the Front Bench, I believe that people should have the right to insist on fuel-direct and that that should not be left to the discretion of individual offices. I hope that the Minister will make it clear that he does not accept the principle found in some offices that an extra case will not be put on the list for fuel-direct until a case has been taken off it. Such a practice is most unfortunate.
  Many of my constituents manage to obtain, in effect, a fuel audit. When the electricity and gas boards are contacted, they will often send someone to advise on what can be done to reduce a high bill. Often I could give that advice. Indeed, a social worker could often give the necessary advice. Often, the individual concerned can work it out. However, because people are caught by the low income from supplementary benefit, they have not got the small capital necessary to improve the situation. They have not got the money for an insulation scheme, and the local authority sometimes will not install one. They sometimes find that they cannot change the heating system because they have not got the capital to buy the appliance necessary for more efficient heating. Often, council tenants cannot move from a high-fuel-cost dwelling to a low-fuel-cost dwelling. The Government should pay more attention to that problem.
  The Government should make it possible for people to obtain more capital so that they can change the heating
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  system or install insulation or they should make it easier for them to move out of expensively heated accommodation within a local authority area into cheaper accommodation.
  Mr. Race: Is not the crux of the matter that it is often not the claimant's fault that he has run up high fuel bills, but that of the construction or design of the dwelling? Presumably such accommodation was designed when energy prices were lower and those responsible did not consider an individual's ability to pay high fuel bills.
  Mr. Bennett: I agree with my hon. Friend. Tenants often live in blocks of flats built in the late 1960s when it was thought that fuel would be cheap. Such tenants are committed to living in a block of flats when they would prefer to live in a semi-detached house with a garden. They are also committed to a high-cost heating system—often an electric under-floor heating system—and would like to get away into a semi-detached council house with an old-fashioned fireplace. They would prefer to burn coal and know that if they were to run short, there would be much more chance of scrounging something else to burn.
  Under this Government, the chances of being able to move from a block of flats into the older type of council houses has been reduced. Instead of encouraging people to move from those older council estates and to buy houses elsewhere, big discounts have encouraged people to buy houses on a council estate. That means that those in the blocks of flats are stuck with accommodation that they do not like and a heating system that they do not like and cannot afford.
  We need to make it possible for people to have a fuel audit on their home and if they are advised to move or to change their heating appliances the Government must make that possible and not condemn those people to live in accommodation that they do not like and face bills that they cannot afford. The regulations say "Pay up or else". I beg the Government to take them away and come back with a realistic and helpful policy for those in need.
  10.35 pm
  Mr. Jim Craigen: Like my right hon. and hon. Friends, I hope that the regulations will be turfed out. They do nothing to help those on supplementary benefit; they merely speed up and increase the rate at which fuel boards are paid outstanding debts.
  I shall tease the hon. Member for Woolwich, West (Mr. Bottomley). It seemed to me that he suggested that if we all had bank accounts the problem would be solved, because everyone could pay for gas and electricity through standing orders. The hon. Gentleman also referred to the need for outside experts, but the Child Poverty Action Group was worried recently that its funding would be in jeopardy. That is a strange contrast with the hon. Gentleman's call for more outside experts.
  Gas and electricity prices have risen considerably during the Government's lifetime, and they are penalising not only those on supplementary benefits, but those on low incomes who have to meet the increased costs.
  I accept what the hon. Member for Woolwich, West said about the management procedures of the fuel boards. Some of my colleagues and I raised that matter when we met officials of the South of Scotland electricity board last year. The system for keeping a close watch on the buildup of debts does not always work, and my experience of

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  local DHSS offices convinces me that problems are caused not by a lack of will but by pressures that distract staff from their work on the fuel-direct scheme, especially when a crisis crops up in the office.
  I suggested to the SSEB last year that it needed to improve its liaison system with the DHSS local offices. I hope that there have been improvements, because early warning systems are desirable for the fuel boards' accounting procedures and for those on supplementary benefits.
  There is a staffing priority that must be borne in mind. I thought about intervening when my hon. Friend the Member for Pontypridd (Mr. John) referred to the need for adequate staffing. The Government are reducing the DHSS staffing complement. Things are moving in the wrong direction.
  I understand that home energy advisers are thin on the ground, because the fuel boards do not employ many staff on that work. Such advisers need the judgment of Solomon, because they are dealing with systems that are often inoperable because people cannot afford to run them. Under-floor heating systems in some multi-storey blocks of flats have long been switched off because they are far too expensive. In many modern properties, as well as older houses, the major problem is dampness and the cost of keeping such houses properly heated is considerable.
  The regulations do nothing to improve the position of those on supplementary benefit or of meeting the problem of the low paid. The Government must address themselves to minimising, if not reducing, energy costs and increasing the financial support to those on supplementary benefit.
  10.40 pm
  The Under-Secretary of State for Health and Social Security (Mr. Tony Newton): I am aware that this is an important subject. If any further evidence were needed, the past winter would have brought that home not only to the poorly off, about whom we are talking, but even to those of us who are relatively well off who have had a shock when the winter fuel bills arrived. That makes one even more conscious of the problems which have been the subject of the debate. For that reason, if for no other, I welcome the opportunity that the Prayer and the regulations that we have proposed have given us to debate these matters.
  The Government are open minded on the subject and genuinely seek ways to bring about further improvements. I am grateful for the constructive suggestions that have come from both sides of the House.
  The intention behind the regulations is to bring about a genuine improvement in the arrangements for assisting people on low incomes to cope with the difficult problems that arise when fuel debts are run up. In saying that, I wish to emphasise a point that has been implicit in the debate but has not been brought out as fully as I would have liked. The regulations, which are not just an isolated piece of bright DHSS thinking—an idea on its own—need to be seen in the context of the significant package announced by my hon. Friend the Under-Secretary of State for Energy on 29 March following long discussions with other organisations, including the fuel boards, and arising from the report "Fuel Debts and Hardship."
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  I should like to quote from my hon. Friend's statement in Hansard the details of the changes that were being proposed. He said:
  "Arrangements for repayment of debt—the industries will now take the initiative"—
  this fits in with a point made by my hon. Friend the Member for Woolwich, West (Mr. Bottomley)—
  "and offer a repayment arrangement before disconnection. Determined efforts will be made to contact consumers and increase take up of repayment arrangements.
  Large accumulated debts—arrangements for repayment over a reasonable period will be offered.
  Prepayment meters"—
  this point was raised by the hon. Member for Stockport, North (Mr. Bennett)—
  "prepayment meters will be installed on request, where safe and practical. All requests will now be recorded; there will be no arbitrary refusals. The industries will investigate technical alternatives to traditional slot meters."
  Whatever may be said about the past—many hon. Members on both sides of the House would have reservations about the extent to which policy for a long time moved away from slot meters—that represents a significant move back in the direction which the hon. Gentleman wanted.
  "'Fuel-direct' scheme—the industries have removed all limits on the size of debt accepted for this scheme (except for one board which is about to do so)."
  Mr. Andrew F. Bennett: Is the Minister quoting from Hansard or is he giving the current position?
  Mr. Newton: I am quoting from Hansard. The board in question was the South of Scotland electricity board. That matter has now been resolved. From the inspirational nods I see around me, I am persuaded that I have the correct position on that matter.
  I return to the quotation:
  "Welfare authorities—improvements to the 'fuel-direct' scheme have been agreed with DHSS. Subject to Parliamentary approval these should be introduced shortly. Arrangements have been made for improved liaison with the welfare authorities."—[Official Report, 29 March 1982; Vol. 20, c. 25.]
  There is a final section which deals with disconnection of tenants for landlords' debts which may also help but which I shall not quote.
  It is in that context that our proposal needs to be seen. Taken as a whole, not least in the light of the comments that hon. Members have made in calling for some of those steps, I can legitimately claim that, looked at as a whole, it represents a significant step in the right direction.
  The regulations are the DHSS's contribution to a wider package. The hon. Member for Pontypridd wondered whether the background was a deal with the electricity boards. When politicians talk about deals, somehow an aura of disapproval is cast over the situation. The electricity and gas boards have certain duties to their consumers at large. The DHSS has clear responsibilities for the interests of less well off people. The word "deal", which I would not want to dispute, shows that we have been party to negotiations and agreements that have produced a more sensible and satisfactory situation for the interests involved.
  Mr. John: Do I understand the Minister to be assenting to my central proposition that, in order to budge the obduracy of the South of Scotland electricity board, regulations that double the amount that may be deducted from benefit for supplementary benefit beneficiaries have been brought before the House?
  Mr. Newton: I am not accepting any such tendentious language. I am saying that there has been a process of negotiation and discussion with the fuel boards, which has achieved a sensible and useful package in the interests of consumers at large and of relatively poor consumers.
  I should also like to comment on what the hon. Gentleman said about the Social Security Advisory Committee. I have been spending a good deal of time in the last few days looking at one or two other changes that we hope to make to supplementary benefit regulations—not in this context, but in others—against a background of some pressure, because we wish to make sure that the SSAC has the fullest opportunity to consider them. I ask the hon. Gentleman to accept that what has happened in this case, and also in the child benefit case, on which the hon. Gentleman touched, does not in any sense reflect our desire to bypass or undermine the work of the SSAC. On the contrary, we attach great importance to it. We shall look forward to having the SSAC's report on the regulations.
  We used the urgent procedure because, against the background of the last winter, the high bills that arose because of it and the SSAC's wish to see the limit on debt ceilings accepted for fuel-direct systems removed, we felt that it was important to get the package as a whole, including the removal of debt ceilings, into force before this winter's fuel bills started to arrive. I put that in the context of what I have said about negotiation and discussion rather than a disreputable deal.
  That is the reason for the urgency. Otherwise, there would have been a serious risk of continuing the fuel debt ceilings in circumstances that would have led to more disconnections than we or anyone would wish as this winter's fuel bills began to arrive. That is sensible and right.
  Mr. John: I want to confirm one fact. Is it right that only the South of Scotland electricity board was operating the fuel-direct ceiling at the time and that the other boards, since the November regulations and the 5 per cent. limit, have not been operating those ceilings?
  Mr. Newton: I was coming to the hon. Gentleman's point. I understand that London also had a limit and that other boards had levels that were used as guides to the grade of officer in the fuel boards who considered the cases. However, the result of having that guide was that sometimes it was used as a limit instead as being used as an indication that the case should be referred to the next grade of officer. Therefore, partly for practical reasons and, in the case of some boards, partly for other reasons, the effect of the limit on the debt ceilings accepted for the fuel-direct scheme was still quite substantial.
  The abolition of the limits will be embodied clearly in the joint statement of intent agreed between the fuel boards and the DHSS.
  The Government attached great importance, genuinely and in no sense as an attempt to dodge the SSAC, to bringing the proposals into effect before the winter's fuel bills arrived.
  As the hon. Member for Pontypridd accurately pointed out, there are two elements in the regulations. First, there is the increase in the amount that can be deducted for a single fuel debt from 5 per cent. to 10 per cent. It has not emerged as clearly as I had hoped in the debate that the 10 per cent maximum already applies to cases in which
  252
  two fuel debts arise, because 5 per cent. can be deducted for each debt. The only change, therefore, is that in future it will be possible for the 10 per cent. maximum to be applied to cases in which there is only one debt instead of only where there are two.
  The other changes are relatively limited. I do not wish to underestimate their significance, but it is also possible to overdramatise them. In this context, I emphasise the safeguards that are contained in the regulations.
  First, there is no question of this change applying to existing fuel-direct cases, by which I mean those which existed when this provision came into effect on 28 April. For them the position remains the same. The deduction for an existing debt cannot suddenly be raised from 5 per cent. to 10 per cent. Secondly, it is implicit in what I have just said that the maximum deduction for debt remains at 10 per cent. Finally, taking account both of the deduction for debt and of the deductions related to current consumption, to which the hon. Gentleman referred, the maximum total deduction for both purposes remains at 25 per cent. of the claimant's basic benefit unless he agrees to more. It is important to recognise that the principal safeguards on the total amounts that could be taken remain clearly in place under the proposed regulations.
  Mr. Race: We appreciate some of the actions that the Minister is taking, but why does he not remove the provision that more than 25 per cent. can be deducted if the claimant agrees? Surely that is a means of selling something to get back money for fuel, which should not be allowed.
  Mr. Newton: The hon. Gentleman raised this matter in the context of a particular case on which he apparently corresponded with my predecessor but which I have not had the chance to study. Therefore, I do not feel that it would be sensible to comment on that case. When I return to the Department, which is more likely to be tommorrow than tonight, I shall ask for the correspondence so that the general point arising from it may be examined again. I understand the hon. Gentleman's concern about this matter.
  I shall try to deal briefly with the points raised by Opposition Members about housing benefit. It is certainly true that if a person is on supplementary benefit only by virtue of housing costs, the introduction of housing benefit will take that person off supplementary benefit and the question of the fuel-direct scheme will not then arise. Similarly, in the not quite so clear-cut situation that the hon. Member for Pontypridd described, problems could occur. All I can say at this stage is that I note what the hon. Gentleman has said. It will, of course, be necessary to bring in further regulations in relation to the housing benefit scheme in due course, and the House will have the opportunity to consider those regulations when they are introduced.
  Many of the points that were raised in the debate—I hope that I shall be forgiven if I do not comment on them individually—related to liaison between local officers and the fuel boards, implicitly to liaison between local officers and welfare rights groups, staffing problems in local offices, administrative delays, and so on. In answer, may I say that part of our purpose in all this, including the changes in the arrangements for deductions in respect of current consumption, is to help to improve the administrative arrangements and the flexibility with which

  253
  we deal with claimants' cases. I do not say that what we are doing tonight will produce an immediate dramatic improvement. I simply ask right hon. and hon. Members to accept that we are determined to do what we can to improve the situation. We see these regulations as part of the effort to do that, and, in particular, to improve the flexibility with which adjustments are made to cope with the kind of difficulties that several hon. Members have mentioned.
  As always, when one presents a limited measure of this kind, which no one pretends is or is intended to be a complete solution to the wider problems which have emerged from speeches, there is a risk that one will convey a sense of complacency. We are in no way complacent about the problem of fuel costs, fuel debts, and the difficulties created for people by the rises in fuel prices. I recognise and, to a significant extent, share some of the anxieties which have been expressed. We shall continue to look for ways in which to help further where we can. Many hon. Members have mentioned the need for review, monitoring and keeping in touch with outside bodies. We shall be very concerned to do that. Indeed, I am having a meeting with some of the main national bodies later this month, when we shall discuss some of these matters.
  Ministers in the DHSS have to bear in mind three matters. First, against the background of the general rise in energy costs, there must be a limit to the extent to which any Government can protect any section of the community from some adverse effects. The whole community is suffering from the rise in energy prices, and it would be foolish of me to pretend that it was possible to protect any part of the community completely from those effects, much as we might wish to do that.
  Secondly, there is always the question of judging priorities. To extend the generous heating help that we give through additions to many people now on supplementary benefit, amounting from next November to over £300 million a year, to those on rent and rate rebates, for example, would cost another £300 million. That is the amount, if it were available, that one has to weigh against other claims within the sphere of social security, let alone other spheres. We cannot overlook that in our anxiety to help.
  Finally, we must be convinced that what we propose is consistent with the general desire to bring about an economy which inflates less fast and produces more national income from which everything else has to come.
  Mr. John: I have listened to the Minister's moving remarks about not being able to help, but the Government forced the British Gas Corporation and the other fuel boards to raise prices by more than the level of inflation. Do they not recognise that they have a duty to protect the poorest in those circumstances?
  Mr. Newton: The Government's recognition of the problem is reflected—this is the only figure that I shall use in the rest of my speech—in the increased help with heating additions and fuel schemes generally from £116 million in 1979–80 to more than £300 million in 1982–83. The heating additions have been increased in real terms, not just kept pace with inflation, under the improvements introduced by the Government.
  We shall carefully monitor what we are proposing tonight in co-operation with the boards and with other
  254
  bodies representing claimants, and if we are convinced that there are ways in which we should make further changes to improve things still further, we shall be ready to do so.
  I see this as an admittedly modest but undoubtedly useful measure in an attempt to help people trying to cope with the problem of fuel debts. I invite the House to support us. I hope that the Opposition will not, in the context in which I have put these measures tonight, press their Prayer to a vote.
  Question put:—
  The House divided: Ayes 41, Noes 109.

  Division No. 139]

  [11.00 pm

  AYES

  Archer, Rt Hon Peter

  Hoyle,Douglas

  Berth, A. J.

  John,Brynmor

  Bennett,Andrew(St'kp'tn)

  Leighton, Ronald

  Booth, Rt Hon Albert

  Lewis,Kenneth(Rutland)

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

  Lyons, Edward (Bradf'dW)

  Campbell-Savours,Dale

  McCartney,Hugh

  Clark, Dr David (S Shields)

  McDonald,DrOonagh

  Cocks, Rt Hon M.(B'stolS)

  Morris, Rt Hon C. (O'shaw)

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

  Morton,George

  Cryer.Bob

  Powell,Raymond(Ogmore)

  Dalyell,Tam

  Prescott,John

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

  Race,Reg

  Dean,Joseph (Leeds West)

  Skinner,Dennis

  Dormand,Jack

  Snape,Peter

  Dubs,Alfred

  Walker,Rt Hon H.(D'caster)

  Eastham,Ken

  Whitlock,William

  Evans,Ioan (Aberdare)

  Winnick,David

  Hamilton, W.W. (C'tralFife)

  Young,David (Bolton E)

  Harrison,RtHonWalter

  Haynes,Frank

  Tellers for the Ayes:

  HomeRobertson,John

  Mr. Allen McKay and Mr. Lawrence Cunliffe.

  Homewood,William

  Howells,Geraint

  NOES

  Alexander,Richard

  Griffiths,Peter Portsm'thN)

  Ancram,Michael

  Gummer,JohnSelwyn

  Aspinwall,Jack

  Hamilton,HonA.

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

  Hamilton,Michael(Salisbury)

  Baker,Nicholas (NDorset)

  Hampson,DrKeith

  Beaumont-Dark,Anthony

  Haselhurst,Alan

  Bendall,Vivian

  Hawkins,Paul

  Benyon,Thomas (A'don)

  Hawksley,Warren

  Berry,HonAnthony

  Heddle,John

  Best,Keith

  Hogg,HonDouglas(Gr'th'm)

  Bevan,David Gilroy

  Holland,Philip(Carlton)

  Biggs-Davison,SirJohn

  Hordern,Peter

  Blackburn,John

  Hurd,RtHonDouglas

  Bottomley,Peter (W'wichW)

  Jopling,RtHonMichael

  Boyson,DrRhodes

  Kitson,SirTimothy

  Braine,SirBernard

  Knight,MrsJill

  Bright,Graham

  Knox,David

  Brinton,Tim

  Lang,Ian

  Brooke,Hon Peter

  Lester,Jim (Beeston)

  Bruce-Gardyne,John

  Lloyd,Peter (Fareham)

  Buck,Antony

  Lyell,Nicholas

  Budgen,Nick

  MacGregor,John

  Cadbury,Jocelyn

  MacKay,John (Argyll)

  Carlisle,RtHon M. (R'c'n)

  Major,John

  Chapman,Sydney

  Marland,Paul

  Clarke,Kenneth (Rushcliffe)

  Marlow,Antony

  Cockeram,Eric

  Mather,Carol

  Cope,John

  Maude,RtHon Sir Angus

  Cranborne,Viscount

  Mawhinney,DrBrian

  Dover,Denshore

  Maxwell-Hyslop,Robin

  Dykes,Hugh

  Mayhew,Patrick

  Fairgrieve,SirRussell

  Mellor,David

  Faith, MrsSheila

  Meyer, SirAnthony

  Fenner,MrsPeggy

  Miller,Hal(B'grove)

  Fletcher-Cooke,SirCharles

  Mills,Iain(Meriden)

  Garel-Jones,Tristan

  Moate,Roger

  Goodlad,Alastair

  Morris, M. (N'hamptonS)

  Gow,Ian

  Mudd,David

  255

  Murphy,Christopher

  Shaw,Michael(Scarborough)?

  Nelson,Anthony

  Shelton,William(Streatham)

  Newton,Tony

  Speed,Keith

  Page,Richard (SWHerts)

  Speller,Tony

  Price,SirDavid (Eastleigh)

  Stanbrook,Ivor

  Renton,Tim

  Stanley,John

  Rhodes James, Robert

  Stevens,Martin

  Roberts, M. (Cardiff NW)

  Stradling Thomas.J.

  Roberts, Wyn (Conway)

  Thatcher, Rt Hon Mrs M.

  Sainsbury.HonTimothy

  Thomas,RtHonPeter

  Shaw,Giles (Pudsey)

  Thompson,Donald

  Thorne,Neil (IlfordSouth)

  Wilkinson,John

  Townsend, Cyril D,(B'heath)

  Williams,D.(Montgomery)

  Waddington,David

  Wolfson,Mark

  Waller,Gary

  Watson,John

  Tellers for the Noes:

  Wells, Bowen

  Mr. Robert Boscawen and Mr. David Hunt.

  Wheeler,John

  Wickenden,Keith

  Question accordingly negatived.

  Development Board for Rural Wales
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lang.]
  11.10 pm
  Mr. Tom Hooson: These are deeply worrying times for the people of Mid-Wales. We have fears that the Development Board for Rural Wales is about to be undermined in its widely admired efforts to strengthen the economy and society of the most rural parts of Wales. We fear that the total loss of assisted area status for most of the area will occur from 1 August.
  Although a delegation of the Powys county and district councils, Members of Parliament and the DBRW is shortly to be received by the two Secretaries of State concerned, those for Wales and for Industry, the fact that Welsh Office officials are already refusing to meet the DBRW in connection with any industrial projects not initiated prior to 30 April raises the suspicion, which my hon. Friend the Member for Montgomery (Mr. Williams) and I share, that an unfavourable decision has all but been made.
  It is most disconcerting to see such evidence of the Welsh Office jumping the gun. I hope that when my hon. Friend the Under-Secretary of State for Wales replies he will undertake to seek the reversal of that administrative decision. Execution before trial comes better from Lewis Carroll's Red Queen than from my right hon. Friend the Secretary of State for Wales.
  I have been reading and listening to my right hon. Friend's comments about Mid-Wales with mounting alarm. He has been sedating us for a total loss of regional aid. I want to fasten on to a fallacy that he keeps repeating. I first saw it in a report in the Western Mail on 30 September 1981. He was quoted as saying that the Government would be looking at development area status for Mid-Wales but could do this only in relation to similar policies in neighbouring English counties. He said that in making their review the Government would have to see whether there were any specific measures suited to attracting business into this area.
  My right hon. Friend's fallacy is that the review of regional aid should be wholly based on percentage unemployment statistics. Nothing but the will of the two Secretaries of State concerned with the review of the Welsh area requires any such mechanical approach. The correct terms of reference are as quoted in a letter to me dated 12 February 1981 from my hon. Friend the Member for Cardiff, North-West (Mr. Roberts). He said that the review would embrace
  "all the circumstances, actual and expected, including the state of employment and unemployment, population changes, migration and the objectives of regional policies."
  That is not a formula that absolves the Secretary of State for Wales, who obviously has primary responsibility for protecting the peculiar interests of Wales in dealing with ministerial colleagues, from responsibility for decisions about areas in Wales. In that connection he has very considerable duties towards Mid-Wales.
  Gaul was divided into three parts. So is Wales, and a Secretary of State for Wales who failed to minister to the need of the most sparsely populated part of Wales could not sustain his authority as Secretary of State—certainly not with the people of Mid-Wales.
  Having established ministerial responsibility, I come to the special characteristics of Mid-Wales. Mid-Wales is by
  258
  all normal measures a freak area. No one is better aware of how impossible it is to apply normal statistical measures to it than my right hon. Friend when he allocates the rate support grant, particularly to Powys. The freakishness arises directly from the exceptional sparsity of population, which creates many burdens in maintaining a viable society.
  Each of the three districts in Powys has an average population of 0·2 persons per hectare—only one-third the level in Gwynedd and Dyfed. The five districts in the area of the Development Board for Rural Wales were deliberately chosen because they stand out as suffering from problems of inadequate population. No English county comes close to these problems—certainly none that is near to Offa's Dyke. The most sparsely populated county in England, Northumberland, has 0·6 persons per hectare.
  There is a fashionable American word at the moment—even-handedness. Let us hear no more about even-handed appraisals of Welsh and English areas when we are light years from comparing like with like across the border.
  It is precisely because of the peculiar and potentially grave problems of Mid-Wales that special regional bodies, culminating in the DBRW, were established. It is no accident that only one comparable rural area has been recognised by the establishment of a special social and economic agency—the Highlands and Islands Development Board. Most of the Highlands area is due to retain development area status under existing plans, while most of Mid-Wales will lose it. Is there one law for the Scots and another for the Welsh? If there is, what will the Welsh Secretary of State do about it? The factors that justify the special status of the HIDB area are precisely the same as those of Mid-Wales, but so far the Scottish claims have been argued more effectively within the Government.
  I want to make another Scottish comparison, since the Government seem determined to make numbers their magical touchstone on this issue. Percentage unemployment is now worse in Mid-Wales than in the Highlands and Islands Development Board area, and the gap is steadily worsening.
  In 1979, when the proposed changes in assisted area status were announced, Mid-Wales had lower unemployment statistics than the Highlands—7·1 per cent. versus 9 per cent. By now, not least because the prospective loss of investment incentives has gravely weakened the DBRW's appeal for new employers, the two areas have reversed positions. In 1981 the DBRW area had 12·1 per cent. unemployment, while the Highlands and Islands area had 11·6 per cent. By March 1982 the DBRW stood at 12·9 per cent., against the Highlands' 12 per cent.
  There is strong evidence that the DBRW has already been damaged. In his report for 1980–81 the able chairman of the DBRW, Mr. Leslie Morgan, quoted his predecessor's report of the previous year as saying:
  "It will not be easy to maintain momentum at the spanking rate of the first three years. The slow-down of the economy, high interest rates and the impending loss of regional aid over much of Mid-Wales make the task formidable."
  Mr. Morgan commented:
  "So it has proved to be".
  He pointed out that the
  "DBRW's responsibilities in reversing a century of decline cannot be accomplished quickly. Obviously, withdrawal of aid after only a limited recovery would be a blow."

  259
  Occupancy rates for DBRW factories show the increasing problems that Mr. Morgan and his colleagues are facing. The board now has 168,000 sq ft of empty space in 18 factories in Powys alone, and has not yet let the 200,000 sq ft vacated by BRD in the constituency of my hon. Friend the Member for Montgomery. Closures and impending closures will leave unoccupied over 200,000 sq ft of the factory floor space built in Powys by the board. The need to provide investment incentives simply to utilise the existing investment in bricks and mortar and to sustain some promising trends must be clear from the statistics.
  I have time to cite only some of the points that we wish to develop with Ministers, but I wish to end by trying to be helpful to my right hon. Friend. We need assisted area status not only for all the reasons that I have given or implied but because without it we shall lose our claim to European funds, although not necessarily for section 4 tourism. However, if such a blinkered statistical approach by the Government is inevitable, surely the alternative is to promise us an amendment to the legal powers of the DBRW to enable it to make loans and grants, as the HIDB is allowed to do in Scotland. We in Mid-Wales expect my right hon. Friend the Secretary of State for Wales to serve Mid-Wales just as well as the Secretary of State for Scotland serves his nation.
  11.21 pm
  The Under-Secretary of State for Wales (Mr. Wyn Roberts): My hon. Friend the Member for Brecon and Radnor (Mr. Hooson) has made it abundantly clear why he sought this debate on the Development Board for Rural Wales tonight. He has spoken with some candour, but I know that in this he is motivated only by concern for the welfare of his constituents and of the people of Wales living within the area covered by the development board. I welcome the opportunity to make some comments on his speech and I hope that what I say will put matters into perspective and will serve, to some extent at any rate, to reassure him.
  First, I must say that the important issue of assisted area status must be examined in a much wider context. There is a real risk of regarding the granting of any particular level of assisted area status as an instant solution to the problems of an area. It simply is not so. Industrial development in Mid-Wales—as any other area—can only come when national economic circumstances are right and our policies are designed to bring that about.
  There is also the need for confidence from investors who see in an area the right sort of environment, potential work force and encouraging local policies which makes places such as Mid-Wales a good place in which to live and work. In this context the activities of the Development Board for Rural Wales are, and will continue to be, very important.
  The board can look back on a period of considerable achievement. In 1977 it inherited 104 factories, of which only 32 are vacant. Those factories are already providing 4,750 jobs. In addition, there are 59 factories and six extensions under construction or approved for building. When completed and occupied, board factories will provide opportunities for about 6,600 jobs in Mid-Wales.
  The board has an impressive record of factory letting. Before 1977 factories were let at the rate of five a year.
  260
  Since then the rate has been about one a week. So far in 1982, factories have been allocated at around 10 a month, almost all to new or expanding ventures.
  The board has told my right hon. Friend that it wishes to maintain its basic policy, but to extend and diversify its employment-creating activities, with participation by the private sector. He has broadly endorsed this strategy, which requires collaboration with other bodies, and will be important in developing the Mid-Wales economy. Indeed, I am happy to take this opportunity to announce that my right hon. Friend has given approval to the board to commission a major study costing £50,000 of the economic potential for the development of Aberystwyth harbour and its environs. This is a study that is supported by the local authorities and the Wales Tourist Board.
  I fully understand the concern and anxiety in Mid-Wales about assisted area status. My right hon. Friend the Secretary of State has received representations from both the Development Board for Rural Wales and Powys county council on this matter. Indeed, my right lion. Friend met Powys county council last summer. It made it clear to him at that time its deep anxiety.
  As my hon. Friend said, my right hon. Friend is to meet the county council very shortly, together with my right hon. Friend the Secretary of State for Industry. My hon. Friend and other hon. Members may well be present. I am sure that they will take the chance to put these points to him again with even more vigour. So I can assure my hon. Friend that when we reach the point where decisions are taken the arguments for Mid-Wales will be known and appreciated by everyone concerned.
  But perhaps I can remind my hon. Friend of the background to this whole question. As he will know, following the 1979 review of the assisted areas the Government's policy is now to concentrate regional aids on those areas facing unemployment on a large scale with severe problems of structural decline.
  We did, however, appreciate that in some cases, where changes would be drastic, a time for adjustment was needed. Hence, we decided that where areas were to be double-downgraded—Mid-Wales was one of these—the downgrading should take place in two steps; the first from August 1980 and the second in August 1982. We also decided to have a special review of the areas due to be double-downgraded before the final step was taken.
  Let me say at once to my hon. Friend that this review is now in progress and that no decisions have yet been taken. My hon. Friend the Minister of State, Department of Industry has told the House that the results will be available later in the spring. That is still the position—no decisions have yet been taken.
  My hon. Friend raised the question of administrative action in regard to the submission and processing of applications for selective financial assistance. It needs to be appreciated that under the provisions of the Industry Act 1972 offers of assistance cannot be made in an area which has ceased to have intermediate or higher status. It will be clear that this immediately poses problems in terms of the handling of applications in the weeks and months leading up to the date when an area may lose its assisted status.
  In principle, it is open to the Department to accept applications up until the very last day; indeed, in the letter which was sent to more than 120 firms in rural Wales more than a year ago we said that we would continue to accept applications right up to 1 August, the date on which subject to the review now in hand—I stress that—the areas

  261
  concerned will become non-assisted. In the same letter, however, we called attention to the time taken to process applications and said it would
  "be most advisable for any such applications to be sent to the Welsh Office no later than 31 March 1982".
  We sent this letter, as I say, more than a year ago to 120 firms employing 11 or more employees in the areas of Wales which might lose their intermediate status on 1 August 1982. A copy of this letter was sent to the Development Board for Rural Wales. In the light of this, I really cannot believe that anyone directly involved can have been in doubt about the vital importance of submitting applications for selective financial assistance well before the cut-off date. The three Departments administering selective financial assistance were anxious to avoid difficulties and embarrassments which would result from the continued acceptance of applications right up to the cut-off date—applications which could not possibly be processed properly in time for offers of assistance to be made before 1 August. It was therefore decided to announce a firm date by which applications would have to be submitted. That date was 30 April, a whole month later than the date by which companies had been urged last year to put in their applications.
  This prudent administrative action in no way pre-empts the final decision. It is without prejudice to that decision. I really cannot accept that the Development Board for Rural Wales has had the ground cut from under its feet by this Government action or that there has been what my hon. Friend called "jumping the gun".
  Of course there is a relevance with regard to status in connection with tourism. My hon. Friend rightly referred to the importance of tourism in Mid-Wales. That is an unquestionable fact. The tourist board will continue to promote, and give advice on, the development of tourism facilities throughout Wales. However, I recognise the concern that has been expressed in many quarters that if assisted area status is lost, the tourist board's ability to give financial assistance for individual tourism projects under section 4 of the Development of Tourism Act 1969 will also disappear from Mid-Wales.
  My right hon. Friend has noted the representations which have been made as to the considerable importance of this assistance to rural areas generally and Mid-Wales in particular, and this will be very carefully considered by the Government in the context of the review.
  My hon. Friend also referred to the link between assisted area status and aid from the European regional development fund. It is quite true that if areas do become "white"—that is, no longer assisted—they will no longer be eligible for ERDF receipts. Again, this is one of the matters which will be taken into account in the course of the Review, but its importance should not be exaggerated. To put that matter in perspective, I should say that while figures are not available for the area of the DBRW itself, the take up of ERDF aid within the county of Powys since 1975 has been slightly less than £2 million.
  Mr. Delwyn Williams: I am grateful to my hon. Friend for giving way. Is he aware of the British Tourist Authority's annual report for 1980, which says inter alia that it will concentrate tourist grants on development areas? If that is correct, and if Mid-Wales loses its development status, it will be positively discriminated against by the tourist bodies.
  Mr. Roberts: I have told my hon. Friend that the future of grants under section 4 is under consideration by the Government. It is a matter for my right hon. Friends the Secretary of State for Wales and the Secretary of State for Trade.
  The debate has been very much in the context of Mid-Wales as a whole. I can understand why that is so, but I think it is important to keep in mind that we are talking about a very wide and varied area and that within it there is considerable diversity and a wide variety of problems. For example, there are 10 travel-to-work areas in Mid-Wales, which, if the proposals for downgrading are implemented, would lose assisted area status. The rate of unemployment in these currently—these are the April figures—varies from 6·4 per cent. in Carmarthen and 8·8 per cent. in Brecon up to over 14 per cent. in Newtown, Welshpool or Llandeilo.
  I recognise the special problems in Newtown. The development of Newtown is an important element of our strategy for Mid-Wales and I accept that the numbers and rate of those unemployed are too high. Indeed, unemployment in Newtown has risen by 48 per cent. over the past 12 months as compared with 16 per cent. in the DBRW area as a whole. There is no doubt that the 400 redundancies at BRD Newtown last summer were a significant factor in this, and the situation will not be made any easier by the 150 notified redundancies due to occur later this year at Dowty Seals. I know that my right hon. Friend the Secretary of State will take note of these worrying problems.
  Provision for the DBRW has been maintained at its previously planned level of cash provision and has risen from £7·5 million in 1980–81 to about £9 million in 1982–83 in line with the inflation factors set by Her Majesty's Government. This is a considerable achievement at a time of stringent public expenditure constraints. The level of provision for 1983–84 has yet to be decided, but we shall wish to take account of the Board's record and plans and also the effect of any change in assisted area status.
  Another feature of the board's approach to its tasks to which I should like to draw attention is the imaginative and thrusting promotional activities which it undertakes with such valuable results. I know that the board feels that these campaigns have contributed greatly to its success in letting factories.
  A good example was the board's rail-borne travelling exhibition—the "Mid-Wales Experience"—which provided a showcase for over 150 Mid-Wales companies, as well as for educational and tourism attractions. In the course of 18 days, the exhibition train visited 10 English locations and was visited by over 25,000 people. A very large number of business and tourist inquiries were received—some thousands—and there have been 132 firm industrial inquiries so far. I believe that these results speak for themselves and contradict the somewhat pessimistic view taken of the board's future and that of Mid-Wales by my hon. Friend.
  It is not only the economic sphere upon which the board makes an impact. Social measures, such as its programme of grants, are sustaining and improving the fabric of life and culture throughout the board's area, from the smallest village to the largest town.
  Possibly the best way to perceive the board's overall effect on Mid-Wales is to look at population trends. The traditional picture of rural Wales has been of an area

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  suffering from depopulation, an area from which the young people have departed, leaving an increasing proportion of people over working age. Indeed, when the board was established it was envisaged that one of its major tasks would be to attempt to combat all the problems associated with such a scenario.
  This picture is no longer true. The 1981 census results showed that over the past decade there was an overall population growth in the board's area of about 8 per cent., highlighted by the growth in Newtown. This is much higher than in the industrial areas of Wales and is exceeded in England by only one region. Furthermore, while the rest of Britain has experienced a growth in the proportion of the population over working age, the proportion has not increased in the board's area. Indeed, the working age population of the board's area has increased by more than in the rest of Wales and Great Britain. I believe that the board has contributed in no small way to these trends.
  I have been speaking only of board activities which have the effect of directly and visibly creating
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  employment. Of course it should not be forgotten that the board has a unique and varied range of powers, functions and activities which it has used to remarkably good effect, albeit in less visible ways. To take only two examples, although there are many more, the board's business advisory service has been instrumental in the creation of well over 300 jobs. Secondly, the board's recently established home and small factory based garments knitting industry in south Ceredigion should in 'time provide the equivalent of 300 further full-time jobs.
  It is demonstrable therefore that the board is successful in providing jobs in Mid Wales, and substantially I hope that I have reassured my hon. Friend to some extent that the final decision has not yet been taken on assisted area status—
  The Question having been proposed after Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at twenty minutes to Twelve o'clock.

TRADE
  Imports and Exports
  Imports and Exports
  Laker Airways
  Laker Airways
  Falkland Islands
  Falkland Islands
  HMS "Edinburgh" (Salvage Contract)
  HMS "Edinburgh" (Salvage Contract)
  Import-Export Statistics
  Import-Export Statistics
ENERGY
  Domestic Supplies (Standing Charges)
  Domestic Supplies (Standing Charges)
HOME DEPARTMENT
  Naturalisation and Registration Fees
  Naturalisation and Registration Fees
  Nationality Division
  Nationality Division
  "Short, Sharp Shock"
  "Short, Sharp Shock"
  Metropolitan Police (Protective Overalls)
  Metropolitan Police (Protective Overalls)
  Vigilante Groups
  Vigilante Groups
  Repatriation (Baggage Allowances)
  Repatriation (Baggage Allowances)
  Psilocybe Mushroom
  Psilocybe Mushroom
NATIONAL FINANCE
  Information and Publicity Services (Dispute)
  Information and Publicity Services (Dispute)
  Secret Service
  Secret Service
  Job Creation (Cost)
  Job Creation (Cost)
  Value Added Tax
  Value Added Tax
  Departmental Staff
  Departmental Staff
  Public Expenditure
  Public Expenditure
WALES
  Home Improvements and Insulation Grants
  Home Improvements and Insulation Grants
  Health Authorities (Co-ordinators)
  Health Authorities (Co-ordinators)
  Lleyn Peninsula Sheep
  Lleyn Peninsula Sheep
  Village Schools
  Village Schools
  Textile Industry
  Textile Industry
EMPLOYMENT
  Wider Opportunity Courses
  Wider Opportunity Courses
  Information Technology Centres (Training)
  Information Technology Centres (Training)
  Waltham Forest
  Waltham Forest
  Public Bodies (Departmental Assistance)
  Public Bodies (Departmental Assistance)
  Females
  Females
  Youth Opportunities Programme
  Youth Opportunities Programme
  National Dock Labour Board
  National Dock Labour Board
  North-East Lancashire
  North-East Lancashire
  Unemployment Statistics
  Unemployment Statistics
  North-West Norfolk
  North-West Norfolk
  Manchester
  Manchester
EUROPEAN ECONOMIC COMMUNITY
  Negotiations
  Negotiations
ATTORNEY-GENERAL
  Civil Proceedings (Delays)
  Civil Proceedings (Delays)
  Mr. Phillip Sealey
  Mr. Phillip Sealey
SOCIAL SERVICES
  Supplementary Benefit
  Supplementary Benefit
  National Health Service
  National Health Service
  Prosthetics Industry
  Prosthetics Industry
  Community Care
  Community Care
  Patients (Treatment Costs)
  Patients (Treatment Costs)
  Consultants (Training)
  Consultants (Training)
  Doctors
  Doctors
  Hospitals (Waiting Lists)
  Hospitals (Waiting Lists)
  Birth Control
  Birth Control
  Playgroup Facilities (Cost)
  Playgroup Facilities (Cost)
  Social Security Advisory Committee (Recommendations)
  Social Security Advisory Committee (Recommendations)
  Legal Aid Assessment Office (Closure)
  Legal Aid Assessment Office (Closure)
  Cot Deaths
  Cot Deaths
  Psilocybe Mushroom
  Psilocybe Mushroom
  Mentally Handicapped Persons (Staff Training)
  Mentally Handicapped Persons (Staff Training)
INDUSTRY
  Co-operative Development Agency
  Co-operative Development Agency
  Job Creation (Cost)
  Job Creation (Cost)
  Small Firms Loan Guarantee Scheme
  Small Firms Loan Guarantee Scheme
  Post Office
  Post Office
TRANSPORT
  Driving Licences and Tests
  Driving Licences and Tests
  M63 (Cheadle Heath-Portwood)
  M63 (Cheadle Heath-Portwood)
  Review of Rail Finances
  Review of Rail Finances
  Severn Bridge
  Severn Bridge
  Mersey Docks and Harbour Company
  Mersey Docks and Harbour Company
  Transport Subsidies
  Transport Subsidies
EDUCATION AND SCIENCE
  School Leavers (Academic Qualifications)
  School Leavers (Academic Qualifications)
  University Research
  University Research
  Polytechnics and Colleges of Further Education
  Polytechnics and Colleges of Further Education
  Universities (Industrial and Commercial Links)
  Universities (Industrial and Commercial Links)
  University Lecturers
  University Lecturers
  "How to Win Sponsors and Influence People"
  "How to Win Sponsors and Influence People"
  Overseas Students
  Overseas Students
FOREIGN AND COMMONWEALTH AFFAIRS
  El Salvador (Elections)
  El Salvador (Elections)
  Indonesia
  Indonesia
  Gibraltar
  Gibraltar
  Falkland Islands
  Falkland Islands
  South Lebanon
  South Lebanon
  Middle East
  Middle East
  Israel
  Israel
  Helsinki Agreement (Madrid Conference)
  Helsinki Agreement (Madrid Conference)
  Syria (Ministerial Visit)
  Syria (Ministerial Visit)
  Cyprus
  Cyprus
  Laos
  Laos
  Namibia
  Namibia
  Passports
  Passports
DEFENCE
  Argentina
  Argentina
  Jurby Bombing Range
  Jurby Bombing Range
  Isle of Man (Low-flying Aircraft)
  Isle of Man (Low-flying Aircraft)
  Army Training (Canada)
  Army Training (Canada)
  Boarding School Allowances
  Boarding School Allowances
  Defence Equipment Programme
  Defence Equipment Programme
AGRICULTURE, FISHERIES AND FOOD
  Royal Botanic Gardens, Kew
  Royal Botanic Gardens, Kew
  Fishing Industry (Aid)
  Fishing Industry (Aid)
  Council of Agriculture Ministers
  Council of Agriculture Ministers
  Food and Drink Labelling Regulations
  Food and Drink Labelling Regulations
  Agricultural Land
  Agricultural Land
  Psilocybe Mushrooms
  Psilocybe Mushrooms
SCOTLAND
  Glasgow (Housing)
  Glasgow (Housing)
  Greater Glasgow Health Board
  Greater Glasgow Health Board
  Council House Rents
  Council House Rents
  Glasgow (Population)
  Glasgow (Population)
  O-level Candidates
  O-level Candidates
  Carruthers (Financial Assistance)
  Carruthers (Financial Assistance)
  Crime Statistics
  Crime Statistics
  Young Offenders
  Young Offenders
  Criminal Proceedings (Statistics)
  Criminal Proceedings (Statistics)
  Unemployed Persons (Voluntary Work)
  Unemployed Persons (Voluntary Work)
  Psilocybe Mushrooms
  Psilocybe Mushrooms
  Housing (Edinburgh)
  Housing (Edinburgh)
ENVIRONMENT
  Welwyn and Hatfield
  Welwyn and Hatfield
  Sheffield
  Sheffield
  Outer London Boroughs
  Outer London Boroughs
  Inner London Boroughs
  Inner London Boroughs
  Urban Development Corporation and International Garden Festival (Liverpool)
  Urban Development Corporation and International Garden Festival (Liverpool)

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

Stubble Burning: Penalties for Offences
Lord Monson: 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 when they intend to implement the National Farmers' Union's recommendations for increasing the penalties for offences under the straw and stubble burning by-laws.
The Parliamentary Under-Secretary of State, Home Office (Lord Elton): My Lords, we shall bring forward an amendment to the Criminal Justice Bill, which is at present in another place, which will increase the maximum fine for such offences to £500.
Lord Monson: My Lords, I thank the noble Lord, Lord Elton, for that reply, which certainly indicates a step in the right direction. If the proposed £500 maximum fine proves this year to be inadequate as a deterrent, will the Government undertake, before the 1983 harvest, to implement the higher penalties recommended in such a public-spirited fashion by the NFU, bearing in mind that irresponsible stubble burning causes not only acute distress to sufferers from bronchial complaints but can also be a cause of serious road traffic accidents?
Lord Elton: My Lords, the maximum of £500 should be seen in the context of the fact that £1,000 is, generally speaking, the maximum fine that magistrates can exact for any offence, and therefore the maximum must be seen in relation to that and not destroy the deterrent effect of other penalties. As to a greater deterrent, I know that the National Farmers' Union has considered a three-year ban on straw burning rather in the manner of the loss of a licence. That would be given further consideration, not least by my noble friend Lord Ferrers, if circumstances showed that that was necessary; but that is by no means certain.

Law of the Sea Conference
2.38 p.m.
Lord Brockway: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will make a statement on the conclusions of the Law of the Sea Conference.
The Minister of State, Foreign and Commonwealth Office (Lord Belstead): My Lords, the conference adopted the draft Convention on the Law of the Sea and related documents at the end of its Eleventh Session in New York on 30th April. Unfortunately, it was not possible, despite intensive efforts in which the United Kingdom participated, to reach a consensus on the deep sea mining provisions and the texts were therefore put to a vote. One hundred and thirty countries voted in favour of the convention, four opposed it and 17 abstained, including six members of the European Community and most members of the Eastern European Group. The United Kingdom delegation abstained, in keeping with our long-held view that, to be of maximum value, the convention should be generally accepted.
Lord Brockway: My Lords, would not the Minister agree that this is a disastrous outcome? Is it not the case that in March 1981 all Governments agreed to finalise the convention, including the United Kingdom and the United States of America when it was under the Carter Administration? Is it not the fact that under the Reagan Administration there have now been introduced the amendments which have caused this decision? Why on the final convention did the United Kingdom not take the attitude it took in March 1981?
Lord Belstead: My Lords, I do not agree with the noble Lord, Lord Brockway, that this is a disastrous outcome. We are now in the position where a text has been adopted. The convention will be open for signature in the autumn, and then for ratification afterwards. We shall be looking very carefully at the texts to see what line the United Kingdom should follow in the future. So far as the merits of the convention are concerned, although consensus could not be achieved on the deep sea mining texts, the convention does contain a number of provisions which could be of benefit to us.
Lord Caradon: My Lords, would the Minister not agree that the reactionary attitude taken by the present Administration in the United States has led to this breakdown after more than a decade of consistent and agreed negotiations? Is it not therefore particularly distressing to us in this country that our delegation should in the end have abstained on a matter in which we should have been taking a positive and constructive part throughout?
Lord Belstead: My Lords, I have explained why we have abstained. So far as the attitude of Her Majesty's Government is concerned for the future, that is to say signature and ratification, the attitude of the United States and indeed of other Governments will be an important factor which we shall have to take into account in reaching our decisions.
Lord Elwyn-Jones: My Lords, in the meantime, will compliance with the convention be expected from the diverse countries concerned, or is it to be a free-for-all?
Lord Belstead: My Lords, in the meantime, the convention does not come into effect until it is ratified.
Lord Elwyn-Jones: Is it to be a jungle, my Lords, a free-for-all, with exploitation of the seabed by whoever gets to it first? Is that the state of affairs with which we are landed?
Lord Belstead: Not entirely, my Lords. Among the texts adopted on 30th April was a resolution to protect the preliminary investments made by Western and other countries in the period before the coming into force of the convention. We shall be examining our future policy on deep sea mining in the light of that resolution.
Lord Wynne-Jones: My Lords, does the Minister agree that the position in regard to this convention resembles the position in regard to an earlier convention about endangered species? Was it not our failure to ratify that earlier convention that made it extremely difficult for this country to take action on endangered species? This country should be taking a lead, because the whole of the development of the oceans is something in which we are vitally interested. Would the Minister agree that it should be done—in fact, it must be done—under proper international control?
Lord Belstead: My Lords, I agree with the noble Lord that there are aspects of the convention as it stands which are very much of interest to Her Majesty's Government. In addition to provisions about the continental shelf and the right of navigation, there are indeed environmental provisions relating, for instance, to the rights of coastal states to take action against people who pollute, and provisions for the conduct of marine scientific research. I repeat, however, that we must now look very carefully at the texts, which are not yet in a composite form—when they are, they will be put in the Libraries of both Houses—before we decide what our policy should now be.
Earl De La Warr: My Lords, does my noble friend agree that the long-term wealth of the world will depend on the existing mining companies, who have all the expertise, being given sufficient protection to encourage them to invest their money? Does he agree that there may be no other way of exploiting that wealth unless this protection is given to these great companies?
Lord Belstead: It is important, my Lords, because of the point raised in my noble friend's question, that the resolution to which I referred was adopted as part of the texts on 30th April, to protect preliminary investments made by Western and other countries in the period before the coming into force of the convention.
Lord Brockway: My Lords, is it not a fact that the Governments of the United States, United Kingdom and West Germany all passed legislation some time ago for their own deep sea mining? Is the noble Lord aware that the Soviet Union has now done the same? Is there not a great danger, unless the convention is signed, that there will be confrontation between the West and the East regarding the oceans of the world? Does that not deny the United Nations commitment, supported so eloquently by the Bishops'
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Bench in this House, that the oceans should be the common heritage of mankind?
Lord Belstead: My Lords, I am aware that the countries which the noble Lord mentioned have passed legislation, as have we; we have passed the Deep Sea Mining (Temporary Provisions) Act 1981. Having said that, we do not accept that interim national legislation or any agreements concerning interim arrangements made with other countries having similar legislation are contrary to international law. I am advised that the legislation we have enacted and any agreement which is reached with other countries also having deep sea mining legislation would not challenge the principle that the mineral resources of the deep seabed are the common heritage of mankind.

Council Housing: Measures to Maximise Use
2.48 p.m.
Baroness Elliot of Harwood: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they are taking to ensure that better use is made of the existing stock of council houses and that the number of empty dwellings is reduced.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin): My Lords, the Government have put forward a wide range of measures to encourage local authorities to make better use of their existing stock of houses and flats. Empty properties can be sold at a discount; the subsidy system penalises a high level of voids; and the report, Reducing the Number of Empty Dwellings, published last year, detailed a large number of methods authorities could adopt for the purpose. Our priority estates project and community refurbishment schemes are demonstrating how run-down estates can be turned round and once more made attractive places in which to live. Those are but a few of the steps we are taking in this field, to which my right honourable friend the Secretary of State for the Environment attaches great importance.
Baroness Elliot of Harwood: My Lords, while I thank my noble friend very much for that admirable reply, which said a great many of the things I hoped the Minister would say, may I ask whether he would also agree that the demand for housing has changed in the last 10 years or more, in that the demand today is for the modernisation of older houses, making them fit for living in, and then the opportunity given to the people wanting houses to buy them rather than rent them?
Lord Bellwin: Yes, my Lords, I agree with my noble friend. There have been changes of the kind that she mentions, just as there is also a very great need for many one-and two-bedroomed units.
Lord Wallace of Coslany: My Lords, is the noble Lord aware that the noble Baroness said that he gave a very fine reply? It sounds very nice, but the legislation coming before this House and measures taken by the Government on local government finance inhibit local authorities in making progress in housing. The Government's obsession with selling council houses is having a reverse effect when it comes to finding accommodation for people who need it.
Lord Bellwin: My Lords, I do not on this occasion want to move too far from the Question, as we did the other day when we were talking about housing; but I would not agree with the noble Lord, because the fact is that, if they wish to make this matter a priority, local authorities now have great access to funds from capital receipts. These will enable them to do anything that they may wish to do in this case.
Baroness David: My Lords, will the Minister agree that, at 2·1 per cent., local authorities have proportionately the lowest percentage of empty dwellings of all the tenure sectors? Those figures came from the first report of the Environment Committee
Lord Bellwin: My Lords, I think the problem is that there is such wide variation. There are very many authorities which have the kind of percentage to which the noble Baroness refers, but there are some authorities where the proportion is just short of 10 per cent. of their housing stock, and that is where the great problem arises.
Lord Davies of Leek: My Lords, is the noble Lord aware of an excellent article in Lloyds Bank Review on the deindustrialisation of Britain, and is he also aware that this deindustrialisation, too, is having an effect? Council houses as well as private houses stand empty because there is no employment in an area. What grants are given for council houses that have remained empty for a long time and which often are vandalised by the type of people who seem to be around these days?
Lord Bellwin: My Lords, I hear what the noble Lord says, and I am quite sure that what he describes is a contribution to the situation, though it is not by any means the major contribution. I strongly commend anyone who is interested in the question of how to reduce the number of empty dwellings to read the publication Reducing the Number of Empty Dwellings which was issued recently. When I read it, I was most fascinated by the constructive suggestions that were being made, and I commend the publication to anyone who is really interested in this matter.
Baroness Fisher of Rednal: My Lords, does the noble Lord the Minister agree that local authorities have great difficulties regarding the improvement and modernisation of what we call the inter-wars stock? Does he also agree that many local authorities are facing grave difficulties regarding post-war stock?—that is, those properties built in the late 1960s, involving system building and concrete structures. These local authorities have a very serious problem, which is not at present adequately covered by Government grants.
Lord Bellwin: My Lords, the noble Baroness raises a very fair point: that the type of dwellings built under the systems to which she refers are a very real headache. However, it is surprising that, in the main, and so far as I am aware, such dwellings do not comprise the majority of houses that are empty. What we ought to be concerned about are the houses that are more run down and which have been empty for over a year. In some areas several hundred dwellings have been empty and in the case of seven authorities there have been over 1,000 dwellings empty for over a year. Such dwellings are not usually the type to which the noble Baroness refers. The houses that I have mentioned form the major part of the problem, but I do not deny that what the noble Baroness says is in itself correct.
Baroness Faithfull: My Lords, can my noble friend the Minister say which local authorities are going back on their policy of buying old property with a view to building new estates, but have not now the money to do so? Are such authorities reversing their policy to any great extent, putting the houses in order, and shelving their old plans?
Lord Bellwin: My Lords, it is very difficult to be specific, and I should prefer not to be so now. I know that there are some authorities that adopt the attitude to which my noble friend refers, but, in regard to the situation as a whole, the latest figure is 92,000. It was 100,000; so there has been some improvement, in that it has come down to 92,000, though that is bad enough. It is a question of the policy that individual authorities want to adopt. The point that my noble friend raised and the point that the noble Baroness, Lady Fisher of Rednal, raised are right in themselves as part of the overall problem, but one has to go beyond that to see where the situation lies. There is much scope for doing more, not least in terms of selling some of the properties at low prices to people who want to make homesteads and themselves improve them. I think that there is a lot of scope there.

South Africa and International Sporting Bodies
2.55 p.m.
Lord Orr-Ewing: 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 eight of the 11 Motions which have been moved in various international sports bodies during the years 1966 to 1980 to prevent South Africa taking part in international sport were moved by the Soviet Union or Soviet bloc states.
Lord Belstead: My Lords, I regret that the information requested by my noble friend is not available. The international sports federations are independent. Indeed, we are committed to doing what we can to uphold their autonomy. Our knowledge of what

1161
resolutions have been passed, and of the details, is therefore necessarily incomplete.
Lord Orr-Ewing: My Lords, do not these facts, which appeared in The Times on 19th April, show clearly that the Soviet Union is using these well-meaning sporting bodies to propagate its own strategic plans to disrupt relationships within the free world?
Lord Belstead: My Lords, I would hold no brief for Russian motives in pursuing their policy. For ourselves, we adhere to the provisions of the Gleneagles Agreement.
Lord Molloy: My Lords, does the noble Lord agree —and this is a vital, important question to Government and Parliament alike—that we all know what goes on in the Soviet Union, in Poland, and in South Africa? In the Government's view, is South Africa regarded as a free country?
Lord Belstead: My Lords, I repeat that so far as sporting contacts are concerned—which are the subject of the Question of my noble friend Lord Orr-Ewing—we adhere to the provisions of the Gleneagles Agreement, which requires us to take every practical step to discourage sporting contacts with South Africa, because South Africa is the only country where racial discrimination is institutionalised by law.
Lord Wynne-Jones: My Lords, can the noble Lord tell the House which country tried to prevent participation in the Moscow Olympic Games?
Lord Belstead: My Lords, the position of Her Majesty's Government is I think relevant to the supplementary question of the noble Lord, Lord Wynne-Jones. In the special circumstances of the Russian invasion of Afghanistan two years ago, we advised sportsmen and sporting bodies not to participate in the Moscow Olympics.
Lord Paget of Northampton: My Lords, can the noble Lord tell us whether there are any Jews to be found in the Russian sports teams?
Lord Belstead: That is a question that I cannot answer, my Lords.
Lord Elwyn-Jones: Does anti-semitism in the Soviet Union justify apartheid in South Africa?
Lord Belstead: My Lords, on behalf of the Government, I deplore both policies.

The Falkland Islands
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon, my noble friend Lord Trenchard will, with the leave of the House, repeat a Statement on the Falkland Islands which is to be made in another place. This will be followed by my noble friend Lord Belstead repeating a second Statement on the Falkland Islands.

Inland Transport
2.58 p.m.
Lord Lucas of Chilworth Lord Lucas of Chilworth rose to call attention to the problems in inland transport, with particular reference to the economic and social consequences of traffic congestion on the roads and in big cities, and to the need for balanced, efficient and economically viable rail and road transport systems which do not place excessive burdens on taxpayers or ratepayers; and to move for Papers. The noble Lord said: My Lords, in moving the Motion standing in my name on the Order Paper, I should like to extend a welcome to my noble friend Lord Cayzer, whom we are pleased to see included in this afternoon's list of speakers. I am sure that your Lordships look forward to hearing his contribution to our debate.
From time to time we have had debates on various aspects of transport, and I hope that this afternoon we shall not be seduced too far along the line of lorry weights contained in the Armitage Report, which we discussed just one month ago under an Unstarred Question put down by the noble Lord, Lord Underhill. I accept, of course, that much in Armitage is very germane to the subject-matter, but I think we could very well leave lorry weights out of our debate. I also hope that in the discussion that is going to follow we will not be tempted to pre-empt any discussion which we might have in a very few weeks' time on the content of the 1982 Transport Bill.
Transport always evokes emotion in the breasts of most people, and I think that this is really quite understandable since transport costs form the third largest portion of the average family's expenditure—third only to food and housing. In the 1980 Family Expenditure Survey the proportion of total expenditure devoted to transport rose from 12.2 per cent. in 1960 to 14.6 per cent. in 1980. That is £16.15 weekly. Housing is at £16.50, and food at £25.15. Of that amount—that is, that £16.15–81 per cent., £13 worth, is spent on the purchase of motor vehicles, spare parts, maintenance and the running costs; whereas of the total on transportation, only about 0.7 per cent., 79p, goes on rail fares, and 1 per cent., £1.10, is spent on bus and coach fares. So the scenario of transportation costs in a family budget is fairly large.
The survey reveals quite easily that spending on transport rises steadily with income, and public transport spending is related directly to the income of the households. About £1 a week is spent on bus and rail fares in households on half the average income, while those households with twice the average spend £3.50 or more. It is revealed in those statistics that it is in fact the richest households which spend more on rail than on buses. At all income levels to twice the national average, bus fares are about double those of rail.
Since the poorest families use the less well subsidised services, the bus services (subsidised last year to about £430 million), and the richer use the rail services (subsidised to about £800 million) one is tempted to suggest that the subsidy policies currently operating need some kind of rethink. It might be argued—and I believe there is in fact a case for such an argument—that if transport subsidies are necessary to assist poorer families and others (such as old-age pensioners, the

1163
disabled and others in that category) a greater part of such subsidy might be found from what one might call the social element of the budget, rather than the transport share. There is, I believe, a direct relationship between transport needs and social habits. If in fact we saw a dramatic change in either, then I believe we would have most serious problems which it would be difficult to find solutions to this afternoon, anyway.
In an ideal situation, transport might well be considered to be the most universally needed of all services—that is, taking people to work, to school, to play; goods to be moved, and so on. In our society we depend absolutely on this transport element. Without it we would grind to a halt. So what one then suggests is that there should be adequate resources to meet the transport needs—transport by whatever mode we employ.
My noble friend the Minister will almost undoubtedly say, "Yes, that is so, and that is exactly what is being done now". He could say that there are other pressing needs, such as education, health, defence and so on, that all must take their share and a balance has to be struck. I am suggesting this afternoon that the balance is not fairly struck.
Perhaps I may turn first to the road situation. There is no doubt that with some 20 million-plus vehicles on the road, rising to some 25 to 27 million over the next five years, if traffic flows are to be improved, congestion reduced and the environmental effects of traffic made better, it does not matter from whatever source that intrusion is (whether it is car, lorry or motor-bike) the road system has to be improved. To an extent—and a comparatively small extent, really—the system must be enlarged as well as improved, and, of course, the two are not quite the same. Unhappily, for a variety of reasons—mostly that there are not sufficient funds available—new road construction budgets have been consistently cut over the past 10 years. Nevertheless, the same does not apply to the road-user. The road-users are now paying, in the year 1982–83, some £9,250 million in taxation terms, while the forecasted expenditure on road construction and maintenance amounts only to some £2,600 million. I am suggesting that this is not a fair balance, not a fair return.
When we discussed Armitage last month we talked about some aspects of the roads and my noble friend Lord Bellwin described the Government's proposals contained in the White Paper Policy for Roads (Cmnd. 8496); and he particularly emphasised the by-pass programme. He then said that by-passes make a significant contribution to the general environment where this is affected by motor traffic. It would be unrealistic not to congratulate the Government on having some 225 by-pass schemes currently in preparation and construction. There are 100 new ones this year. In fact, I believe the department have announced a further 22 on top of the 100; and there are another 125 to be started by 1985. One has to hope that this forecast will at least be maintained. Where the White Paper in fact says that these 125 schemes are to be started by 1985, I am tempted to ask my noble friend whether he means before or in that year.
There is, on the larger scale, a slowly improving network of motorways and major trunk roads, and I
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believe that any neglect in speeding that road building and road improvement programme will prove to be an almost insurmountable obstacle in the years ahead, when we are looking for a recovery in our manufacturing industries. Whether or not we like it, currently the bulk of freight is carried by road, and it is essential that the major routes from manufacturing centres to the ports be completed. Welcome as the by-pass programme is, this cannot be any substitute for the major programme; and in that programme now there are so many gaps that it almost negates the value of the whole potential of the network. In particular, one has to look at the A.1/M.1 eastern link, the M.40 Oxford—Birmingham, the M.20 through to the Ashford-Maidstone road and (near, I must confess to my own heart), the M.3/M.27 Basingstoke-Southampton link which must replace the outdated Winchester Bypass.
To those who suggest that cutting concrete driveways through the country is detrimental to the environment, I can only suggest that there must be a balance between the environment and the commercial needs of the country. I do not think it is fair to suggest that motorways are necessarily detrimental. They can open up the way for people to enjoy what we term the environment, the countryside. Without such major road construction, without the opening and completion of motorways, some people—and I have described in my earlier remarks that the bulk of people move around in private motor-cars—would be denied the opportunity to reach those places. Certainly I think that road construction could be dealt with in a manner more sympathetic to the environment. I do not believe that motorways need be quite as detrimental to the eye as are some of them.
In this connection, the White Paper in paragraph 24 briefly describes the possibility of introducing new financing methods for construction. It is my understanding that a number of private enterprise companies have put forward projects in principle to the department and that these would be projects largely in addition to anything that may be in the governmental building programme which may be aided by European fund contributions. Yet after some five months—and I am thinking particularly of the M.25—there is still no firm decision from the department on whether the principle of that policy is going to be acceptable. Even were it decided this afternoon, another 18 months could very well pass by before implementation, and private capital can find an avenue for its resources quickly and the opportunities could be lost. I believe that there is a need for the department to exert greater urgency in looking at these rather different and perhaps somewhat radical methods of financing roads.
I wonder also whether, in fact, in the whole area of road construction we have the planning procedures right. It seems to me that they take an inordinate time and raise the ultimate cost of the roads out of all proportion to their value. One asks oneself particularly: is it really necessary or profitable—I am not talking in monetary terms—to allow what I call the professional objectors to move from public inquiry to public inquiry posing precisely the same arguments area after area and, at the end of the day, representing only the minority?—because it is essentially only the minority groups who attend public inquiries. From that, no one should infer that I am suggesting

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that minority groups should not have a fair say. But I think that we might look at who takes advantage of the system and what great value there is in the system.
There is just one other aspect on roads that I should like to touch on and to bring up to date the position since the 1980 Act, when there was deregularisation of the licensing laws with regards to the coach and coach operating. I believe that there has been a significant improvement in passenger travel by coach. Although there were at that time opponents to the scheme, and it is fair to say that only the best of the operators have stayed in the business—notably the National Bus Company have done extremely well—that is not to deny that liberalisation has been worthwhile. Nevertheless, I believe that public transport in rural areas remains an unsolved problem to which we should direct our energies at an appropriate time.
I turn now to the railways. Here I am sad to say that there is an altogether different and perhaps less happy situation. I have no doubt in my mind that the railway industry is a continuing business of great importance to this country. I believe that it has to be sustained and nurtured. I have never sought to suggest in any of our earlier debates that rail should not carry freight. I believe that rail should carry freight. There is an immense amount of freight which is only transportable through the railway system and I believe that a good deal more could be carried by rail. I hope that in the reorganisation plans that British Rail have in hand further and much greater effort will be made to secure on competitive terms a proper share of the freight business so that those assets which represent the strength of the railway system are not left idle. I do not believe that any encouragement toward the greater use of rail by either passenger or freight operator should be secured by punitive taxation on other forms of transport. It seems to me that a far better way to attract that business is by being better than the alternatives and notably the best selling feature is the rate per tonne or the fare.
British Rail made a loss of some £37 million last year, and the chairman describes the year as "good". He says in the chairman's commentary at the beginning of the annual report:
"The achievements of 1981 reflect our determination to reshape the railway in the recession. A year of quickening productivity and of hardening priorities for change. … We have maintained business control with sound financial management under the most difficult trading conditions. British Rail can indeed show a track record of meeting its overall financial targets over the last five years".
I think that that is an encouraging statement from the chairman. However, he then says that there is a forecast loss of some £165 million for the current year, almost half of which, £70 million, is the result of disputes and strikes.
The Government in their turn have agreed in principle to some £680 million worth of investment funding for electrification and modernisation. One can understand some Government hesitancy while modernisation of working practices remains an outstanding issue. As we have said before in so many areas of industry, it is the customer who meets the wage bill, nobody else.
Both the rail policy statement which the British Rail
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Board published in March 1981 and the annual report set out clearly the options open to British Rail. While there cannot be total agreement over the whole range, it is not unreasonable to remind your Lordships of the opening paragraph of that policy statement:
"A crucial decision has to be taken soon about the future of British Rail. British Rail must prepare to take either the path of progress by re-equipment and modernisation or that of decline through a gradual but deliberate rundown of the system. We cannot continue as we have in the past. We are reaching the dividing of the ways".
I believe that to be absolutely true. They talk about modernisation, but it has to be a modernisation of equipment and working practice.
I turn—because it is contained in the British Railways report and it is part of inland transport—to the current discussion regarding the Channel fixed link. Your Lordships are well aware of the history going back to the 1980s and the re-emergence in 1975 of proposals which were set aside by the then Labour Government. It was in 1978 or early 1979 that new proposals came about. We are talking here of something approaching a £1½ billion investment programme. Notwithstanding the Government's view on this, I fail to see how the Government will not be attracted into some kind of funding.
I have come to the conclusion that I would not be in favour of a fixed link. If there were one there is no doubt it has to accommodate both road and rail traffic without which I believe that there would be a total imbalance. Having got so far as the Channel, I feel obliged to say something briefly about the port service. I am disturbed to read reports of a possible dispute here over the current working practices which are enshrined in the 35 year-old dock labour scheme. I cannot feel—as I do with some of the agreements in the railway system—that a 35 year-old agreement is such a sacred cow, is so sacrosanct, that it cannot be changed, that it cannot be altered, to meet the needs of today's society.
Having got therefore to the ports, perhaps I could say a brief word on the inland waterways. With now some 1,000 miles of cruising waterways and some 350/ 400 miles of commercial waterways, there is undoubtedly a significant contribution that the inland waterways system can make in the whole of what we so often call an integrated transport system.
I also want to speak on public transport systems and congestion in our major cities. The obvious example is London Transport. I believe that London Transport is only that much more important in that its problem is that much bigger than in many of our other major cities. I have to say in the background of the recent court cases that one is tempted to suggest that in a professional business such as transport, transport might well be thought to come outside the realms of a political football. Rather than describe to your Lordships in whole the various schemes that have been put forward, I commend to you the evidence given by the chairman and chief executive of London Transport to the Transport Committee in the other House on 3rd February of this year. There is a very good case for leaving the politician to decide the general policy to be obtained through a transport system and then leave it to the professional to get on with it, ensuring that that political element does not enter into the day-to-day running.
There is no doubt that if we take a bird's eye view of the whole financing of public transport, be it London Transport, the railways or the Natioanl Bus Company, all of which receive subsidies, there should be a case made for a one-for-one type subsidy. That is, one unit of income is provided by the operating company, half a unit is provided by the central Government and the other half by the authority which is served by the undertaking.
We have one of the most expensive public transport systems in the Western world in London and that cannot be right. It discourages people from coming here and it discourages our own people from using it. Eventually we will find that much of the commercial and business activity of our major cities will decline because of the lack of public transport and the expense of it.
I feel that I have outlined in the four major areas the general scene as I see it. I hope that we will have a most interesting debate and I shall look forward to hearing what my noble friend the Minister has to say about the many topics which are undoubtedly going to arise. I beg to move my Motion for Papers.
3.27 p.m.
Lord Underhill: My Lords, the House will be grateful to the noble Lord, Lord Lucas of Chilworth, for opening this debate. He has opened it in a very comprehensive manner and I am certain that he will understand if, through lack of time, I do not follow him on many of the points that he has raised. As he has said, the subject is very wide. A number of the issues were dealt with in debates over the past 12 months. We have debated the transport policy, congestion in Greater London, and the Armitage Report. The points that the noble Lord raises do to a great extent open up the whole question of transport policy.
All noble Lords will have experienced congestion and the problems that it brings; not only in tailbacks of traffic on roads but the problems in our towns and cities. We all realise that congestion causes delays. There are increased transport costs and waste of energy resources. This has a great effect on the environment and the lives of people and frustration is caused. I agree completely with the noble Lord that we must have a balance between the economic advantages, the convenience of road transport and environmental needs.
I should like to pose the question which I put in the debate on Armitage: it would be interesting to know whether or not the Department of Transport has an environmental section which is able to look at all aspects from an environment angle and, if so, the size and nature of that department. As I said in the debate on Armitage—and I agree with the noble Lord—I am not opening up the question of heavy lorry weights in this debate this afternoon.
The lorry is with us. The private car with its flexible means of travel is with us, and we all recognise that road traffic is indispensable for the movement of both people and goods. There is need for an adequate road system which will meet the needs of the private car and of road haulage; but we must keep in mind that, no matter how many by-passes are constructed, at some point vehicles have to come off the
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motorways and major roads into the conurbations. That is where tailbacks form. We have lorries which have to deliver and pick up goods in narrow streets, often with very poor access. There is obviously a need for the improvement of our roads in many towns, but I believe your Lordships will agree that there must be a limit to road development in our urban areas.
First, there is the question of the cost involved and, secondly—I was going to use the word "inconvenience" but that is putting it rather mildly—there is the upheaval in people's lives and the need for rehousing people if there are schemes for great massive urban roadways. Therefore, while there must be some development, there must be some sense of balance. Also, travelling around in the last few months, one realises the cutbacks in expenditure and grants for local authorities and the need for maintenance of our roads, particularly in urban areas. Potholes are a danger not only for two-wheeled vehicles but for motorists, and we should not have to face that problem in addition to congestion. Maximum attention must be given to traffic management schemes such as special bus lanes, parking facilities, parking controls, urban clearways, one-way systems, temporary flyovers and so on. All these things have their benefits in our urban areas.
In the debate on the congestion in Inner London considerable stress was laid by many speakers on illegal parking and inadequate enforcement. That problem is still with us and has to be dealt with. Since that debate I attended a Greater London Council seminar on the question of wheel clamps, and I noted that the Metropolitan Police were 100 per cent. in favour of the introduction of wheel clamps on an experimental basis in certain parts of Greater London. I was pleased to note that in the other place the Under-Secretary of State for Transport, Mrs. Lynda Chalker, said that a very good case was made out and that she will have further consultations to see whether an experiment can be conducted in one area. I shall be interested to learn whether those consultations have been carried out or whether we shall hear something when the Transport Bill comes before your Lordships.
Traffic restraint measures, however, are not the complete answer. Many towns need adequate parking, particularly the larger ones, but parking provision ties up very costly land and, even more seriously, encourages additional car traffic, which adds still further to the congestion.
There are two other aspects I should like to touch on. There have been some very interesting developments in the provision of shopping precincts in many of our towns, where streets are closed to all traffic. These are encouraging and are appreciated by everyone. Many shopkeepers at first disliked them but soon realised that they are a great advantage to them. But if we are to develop shopping precincts there must be adequate public transport facilities nearby or provision for nearby parking.
Provision must also be made in our towns, to an extent which very few have at the moment, for cyclists. Very few stores and public buildings have facilities for cycle parking but there have been some very encouraging developments on cycle routes in some towns which I hope will be considered. I do not cycle now but for many years I was a very active cyclist; and when I

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paid a visit again this Easter I was, as I always am, impressed by the provision of the Netherlands. Not only do they have special cycle paths in their towns and along main roads but they also have them on cross-country routes.
As to the development of cycle paths in this country, which I believe we ought to look at, I would remind your Lordships that I took part in a protest ride against cycle paths in the mid-1930s, and I would do so again if they are not of the proper width, if they contain concrete joins which hump every few yards, if there are weeds all over them, if dogs are allowed to be walked on them and if mothers are allowed to wheel babies in prams along them or if they run into garage forecourts. Cycle paths, yes; but they must be of a proper kind. When new roads or improvements are being undertaken it would be worthwhile if the department would consult with the cycling bodies to see if a start can be made on provision of cycle paths. It is something we rarely discuss in this House, and I am glad to have the opportunity to mention it.
Most of us are car drivers and we all recognise that the private car provides a flexible means of travel, but its usefulness is often dictated by traffic conditions. I would suggest that it is not realistic to proceed on the basics of completely unrestricted road traffic growth, which could reach the total of 25 million vehicles or more as time goes on.
The 1980 Census figures showed that 50 per cent. of the households in this country have no car; and that is not the whole problem. In most of the households which have a car there is only one car and only one member of the household has access to it during the working day. Half the population still hold no driving licence, and those who are affected are mainly women, children, the elderly and those less well-off. This is bad enough in the towns, but for many in the rural areas it means that they are stranded and their lives are very restricted.
We cannot ignore this. The noble Lord, Lord Lucas, said that we must direct our attention to the problem of public transport and the bus in rural areas at some other time. I believe we must direct our attention to it in this debate, because so many people are affected by it. The noble Lord urges the need for a balanced, efficient and economically viable road transport system. I would go much further and say that we must have a safe, efficient and comprehensive transport system to move people and goods, and which ensures the best use of resources, provides a network of services throughout the country, meets social needs at fares which people can afford and safeguards the environment and the quality of life.
Such a transport system cannot be based on market forces. To do so would mean that many people would have an inadequate service and others would be bereft of any transport at all. Reliance on market forces would inevitably mean an unco-ordinated system which would not make the best use of energy resources and would not meet social needs. I must ask: have the Government a transport policy? Very shortly we shall have another Transport Bill—the third since this Government have been in office—but is there a transport policy other than one of privatisation based on political dogma? There seems to be no indication of a transport policy.
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We cannot look at one mode of transport in isolation from another. We often talk of an integrated transport system, but I believe the time has come when this should become a reality and not just a slogan, not just words. That means there is a case for a national transport authority—not to be a bureaucratic set-up, but an authority that will exert the maximum influence over the co-ordination and development of all transport, passenger and freight, including local transport services.
All noble Lords will recognise that rail is more economic of energy than road, and is the safest means of transport. I hope that in this debate we shall not get involved in the rail versus road argument, because that is a sterile one. What we need to do is to look at this subject on a national and co-ordinated basis. We want efficiency, but I suggest that if passenger transport has to be run on purely commercial lines the result will be chaos. There will be restriction of services, pricing will push even more people onto the roads and that will aggravate still more the problem of congestion, which the noble Lord mentioned, which will be harmful not only to transport users but to the community as a whole. I make the assertion that the only possible way to make the maximum provision is by public transport.
The noble Lord, Lord Lucas, has urged that no excessive burden must be placed on taxpayers and ratepayers. This depends on what one means by the word "excessive". We find that some countries do this much better than we do. The noble Lord said that we have the most expensive public transport system. What we know is that we have a transport system which receives less public financial support for its rail system, or for its transport systems in the capital and in the major towns, than any other country in Europe. That has been stated time and time again in this House. So a viable system of public transport must receive grants from central and local government.
There is need for a national network of bus services, because only a network can provide cross-subsidisation so that the better and more remunerative routes help to finance the less remunerative routes. That is the only way to get transport into the sparsely populated and rural areas. That is the only way to ensure that people with no access to a car have a means of transport in those areas.
The noble Lord referred to the 1980 Act, with its provision for a relaxation of licensing. I believe that that will make things more difficult. Agreed—there has been a development in express coach services, which I readily admit, and it was stated by the noble Lord that, to a great extent, the National Express services led the way. Let us keep in mind, because there is a Transport Bill coming before your Lordships, that that development was made possible because of the flexible position which the National Bus Company could adopt in the development of its coach services, which enabled cross-subsidisation by other parts of its network. Take that away from the National Bus Company, and you spoil their opportunity of having a network of bus services.
Very few new operators are operating normal stage routes under the 1980 Act. Those that have come in have come where we said they would, which is on the remunerative routes. There are examples, which the Minister knows only too well, of where, because

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of the intervention of other operators on the best routes, the network has had to cut out some of its routes in the more sparsely populated areas.
There is a need for the introduction of a sensible system of route licensing, and the basis for local authorities to be able to give financial assistance to their public transport systems must be clearly laid down. That is why I repeat that the law, and the ability of local communities to do what they want in order to help their people with public transport, must be made absolutely clear.
Before I close, may I refer to the position of the railways, to which the noble Lord, Lord Lucas, paid a considerable amount of attention. I accept that most passengers and freight are conveyed by road, but does anybody visualise Great Britain without a railway system? If it is agreed that we cannot visualise it, then, for Heaven's sake!, we must surely have a railway system which is an efficient and proper one. A railway system which is dithering around is of no use to anyone.
We must also keep in mind that, although the majority of passengers are conveyed by road, the railways carry some 2 million passengers each day in 18,000 trains, and that without the railways in the South-East, London commuters would be in a desperate position. Many noble Lords will know of the great benefit from the Inter-City trains. If I have any criticism, it is—and I agree with the noble Lord—that many people are priced out of travelling on Inter-City trains. They would like to do it, and I hope that British Rail may be able to take a look at this aspect.
I am as concerned as the noble Lord about industrial relations on British Rail. But I prefer to say nothing about that subject, except that the co-operation between the unions and British Rail has been of vital importance in the last 18 months. I hope that both sides appreciate that the future of British Rail depends, to a great extent, on both the unions and British Rail securing an understanding.
I understand that the Secretary of State is likely to authorise a review of British Rail. I hope that we may hear from the Minister about that. I trust that it is to ensure adequate investment for British Rail, because if we believe that there must be a railway system in Great Britain, and that it must be efficient, it must be realised that we cannot continue with a situation where some 60 per cent. of the electric and diesel units are between 20 and 30 years old. But despite that, in the last year, 90 per cent. of trains arrived at their destination not more than five minutes late. If we want track renewal, if we want electrification and if we want the development of lightweight units, there must be adequate investment in British Rail.
Most freight will continue to go by road, but we need to develop as much as we can both our waterways and our railways for the maximum transfer of freight. The railways are particularly suited to the long-haul bulk traffic, and also to the movement of containers by their Freightliner system. I believe that the encouragement given to industry by the Section 8 grants for rail sidings should be developed on the lines that Armitage suggested, even extending grants to 60 or 80 per cent.
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where that is desirable. There should be a development of trans-shipment depots to link trunk roads with railways, as well as a development of break bulk depots, in order to avoid the biggest lorries adding to the congestion by delivering or picking up in many of our narrow roads.
May I conclude by saying that over the last 20 years there have been the Geddes Committee, the Foster Committee, the Armitage inquiry, various consultation papers and White Papers, as well as numerous Transport Acts. I believe that all the information we want is available. What we now need is action, with imaginative schemes of traffic management and enforcement; adequate investment for road construction programmes, with by-passes of towns and villages made a priority; adequate investment in the railways; effective co-ordination of road, rail and all other transport modes and the maximum development of efficient public passenger transport.

The Falkland Islands
3.48 p.m.
The Minister of State for Defence Procurement (Viscount Trenchard): My Lords, with the leave of the House, I will now repeat a Statement which is being made in the other place by my right honourable friend the Secretary of State for Defence. The Statement runs:
"With permission, Mr. Speaker, I should like to make a further statement about the Argentine attack on HMS "Sheffield".
"In the Statement I made to the House late last night I provided an outline of the attack on HMS "Sheffield" and of the loss of one of our Sea Harriers and its pilot. The pilot was Lieutenant Nicholas Taylor. His next-of-kin have been informed—and the whole House will I know wish to join me in expressing sorrow and deepest sympathy with his family.
"It is entirely right that the House should now have as full an account of the attack on HMS "Sheffield" as I am able to give today. The House will understand why it will be necessary for me to repeat some of the details I provided last night.
"At about 3.30 London time yesterday afternoon HMS "Sheffield" was attacked by Argentine Super Etendard aircraft which launched Exocet missiles. HMS "Sheffield" was some 70 miles off the Falklands enforcing the total exclusion zone, together with other elements of the task force. One missile missed the ship; the other hit her amidships. The resulting explosion caused a major fire. Although attempts were made to extinguish the fire for nearly four hours, with the assistance of firefighting teams from other ships in the area, it eventually spread out of control. At about 7 p.m. London time, the order was given to abandon ship. Ships of the task force in the area picked up survivors, and the latest information I have is that about 30 men are still missing. A further number sustained injuries, and they are being well cared for under medical supervision. We have no further details of casualties at the present time. The ships are still engaged on

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operations and I know that the Force Commander will provide further information just as soon as he is able to do so. All the next-of-kin of the ship's company are being informed. The thoughts of the whole House are with them at this sad time."
My Lords, that is the end of the Statement.
Lord Peart: My Lords, I thank the noble Viscount for repeating the Statement which has been made by his right honourable friend. The whole House deplores the tragic loss of life on HMS "Sheffield" and also the loss of Lieutenant Taylor. Our thoughts and prayers are with our troops and their families. May I ask the Minister whether he agrees that, with this escalation, the conflict has entered a new and more serious phase? Would he further agree that more urgent steps to achieve, first, a cease-fire and, secondly, a diplomatic settlement must be taken urgently? Will the Minister also indicate whether the Government have responded constructively to the United Nations Secretary-General's initiative and whether this will include support for a good offices committee? Will the Minister further confirm that the use of minimum force remains the firm policy of the Government and that we adhere to the terms of Resolution 502 in every particular?
Lord Mayhew: My Lords, may I associate my noble friends and myself with the expressions of sympathy for next-of-kin, so well expressed by the noble Lord, Lord Peart, and by the noble Viscount? Is the noble Viscount aware that the admiration of my noble friends and myself for the Navy is entirely undiminished at this time? May I ask the noble Viscount whether he agrees that if HMS "Sheffield" had been equipped with the stretched version of Sea Dart, with the new radar tracker, it might well have survived this attack? May I ask him why it was not so equipped? May I also ask the noble Viscount whether he is entirely satisfied that the Exocet was fired from a high level by a Mirage, and not from a low level, which might perhaps explain the failure to intercept the missile? Finally, may I ask the noble Viscount to restate the circumstances in which Her Majesty's Government have authorised attacks on Argentine ships and aircraft and to confirm that the policy of minimum force remains absolutely valid and that no attacks will be authorised in Argentine waters or on the Argentine mainland?
Viscount Trenchard: My Lords, I thank both noble Lords for their observations, for their sympathy, which Her Majesty's Government share, and for their admiration of the Royal Navy. I do not think that Lord Peart's description of the conflict entering a new and more serious phase is the complete picture. My right honourable friend has never underestimated what a formidable task lay in front of the task force. When an aggressor has already committed aggression, it is not easy to put matters right by the military route.
That takes me straight to the point raised by both noble Lords. There will of course be no diminution of our efforts down the route to try to obtain peace. In a little while my noble friend will be repeating a
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short Statement by my right honourable friend the Foreign Secretary in the other place. If, therefore, I could leave the questions put by the noble Lord the Leader of the Opposition on the state of the peace moves, both in relation to the United Nations and elsewhere, until my noble friend repeats the Statement, I should be grateful.
Both noble Lords have asked that we should continue to use the minimum force necessary. As on previous occasions, both I and my right honourable friend have given that assurance. But we have also said that our first duty in the face of Argentine aggression must be to protect our own task force which is engaged on objectives for which your Lordships have given us support. We shall be guided not just by Resolution 502 but by Article 51 and our clear communications to the Argentine Government in relation to the action which we shall find it necessary to take if there are any threats to our task force.
The noble Lord, Lord Mayhew, asked me a number of technical questions which I do not think it would be your Lordships' wish that I should go into in detail today. However, I am prepared to say that the ships of the task force are equipped with complementary antiaircraft weapon systems—including, importantly, Sea Wolf and Sea Dart on different ships. It is in fact believed at this stage of reporting—and reporting is restricted at the moment due to the necessity for both wireless silence and priority for other military messages—that a reconnaissance Neptune aircraft from the Argentine, which was sighted earlier in the day, must have given the Etendard aircraft—not the Mirages but the Etendard aircraft—more or less the position of the task force, because the attack was a low level, not a high level, one. Thus, the radar on our ships was not able to pick up the aircraft early enough for the use of the Sea Dart system, the range of the air-launched Exocet missiles being in excess of 35 miles. That is the information which we have. I would also mention, for the information of the House, that our belief is that the Argentines only have five of these aircraft which are capable of delivering the Exocet air-launched missile.
Lord Kennet: My Lords, today we lament our dead, as yesterday we lamented theirs. Would the House be about right in thinking that the number of dead on both sides is now approaching one-quarter of the number of the Falkland Islanders and that the number of fighting men down there whose lives are at risk is about ten times the number of the Falkland Islanders?
Viscount Trenchard: My Lords, I do not know whether the House would want me to debate the theme behind the two supplementaries of the noble Lord, Lord Kennet, but aggressors very often start with relatively small aggressions. Surely history shows us that, if aggressions are not resisted, they are likely to continue both there and in other parts of the world. So I want to say to the noble Lord that the number of the Falkland Islanders—which is, of course, relatively small, though I have not had the time or the mental agility to check his statistics—who did not want to be occupied by a foreign power has, I think, only very small relevance in relation to the resistance to aggression.
4 p.m.
The Lord Bishop of Norwich: My Lords, is the noble Viscount the Minister aware that on these Benches there is also agreement with the statement made by the Leader of the Opposition concerning deep sympathy for the relatives of those of our men who were killed yesterday? Is the Minister also aware that on these Benches there is a strong sense of support in prayer for all that the Government are seeking to do both to maintain justice and to work for peace in this area? We are engaged in principles which are real ones and are in opposition to aggression. Is the Minister further aware that there is strong Church prayer support for all that Her Majesty's Government are seeking to do in these very difficult days?
Viscount Trenchard: My Lords, I thank my noble friend the right reverend Prelate for those most noble sentiments. The House will have noted the sentiments expressed from my noble friend's Benches, including those by the most reverend Primate, on the importance of the two principles which we are upholding.
Lord Renton: My Lords, while joining in the hope that there will one day be a permanent cease-fire on honourable terms, may I ask my noble friend Viscount Trenchard whether there is not a danger that a temporary cease-fire will enable the Argentinians to repair runways and redeploy their forces to their advantage, and that therefore a temporary cease-fire would be to the temporary advantage of the Argentinians and to our disadvantage?
Viscount Trenchard: My Lords, I thank my noble friend for those questions. I believe that the right honourable gentleman the Shadow Foreign Secretary made remarks on the radio this morning, if I heard him correctly, which were very much in line with my noble friend's sentiments. Any cease-fire at the current time, with the Argentinians still in occupation and without a guarantee that they will remove themselves, would amount to game, set and match to the Argentinians.
Lord Jenkins of Putney: My Lords, may I add—
Lord Chalfont: My Lords, may I ask the Minister—
Several Noble Lords: Order!
Lord Chalfont: My Lords, may I ask the noble Viscount the Minister can he say whether the attack on HMS "Sheffield" was an isolated incident or whether it was part of a general naval military engagement which was going on at the time? In that context, will he assure the House that there will not be too obsessive a concern with the principle of minimum force? If we are at war with Argentina—whether declared or otherwise—perhaps it is time for some of the more time-honoured principles of military engagement to come into operation. Does the noble Viscount not agree that the principle of minimum force is more appropriate to internal policing that to a war with a foreign power? Finally, will he assure the House that this one military reverse, tragic through
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it may be, will not result in the failure of nerve or of national will?
Viscount Trenchard: My Lords, I thank the noble Lord, Lord Chalfont, for those observations and questions. The incident on the day in question was isolated in that area of the total exclusion zone, although the shooting down of the Harrier over the Falkland Islands was going on more or less at the same time. But there can be no doubt whatever that in recent days there has been a sustained offensive, and it has been quite clear from the movement of their forces that Argentinian commanders have been under orders to attack our task force in every appropriate way.
I take the noble Lord's point in relation to the balance necessary when it comes to the question of using minimum force. I assure him, as I have assured the House before, that the guides and rules of engagement which the commander has do really allow a balance to be struck. As the noble Lord, Lord Hill-Norton, said yesterday, they take account of the massive power and range of modern weaponry, where chances cannot be taken. I take the noble Lord's third point in its entirety.
Lord Jenkins of Putney: My Lords, may I say something—
Lord Davies of Leek: My Lords, can the noble Viscount the Minister—
Lord Morris: My Lords,—
The Lord Privy Seal (Baroness Young): My Lords, I do not think that we can have two noble Lords from the Opposition on their feet at the same time. I believe that the noble Lord, Lord Jenkins of Putney, was first. Perhaps we can then hear from my noble friend and then from the noble Lord, Lord Davies of Leek.
Lord Jenkins of Putney: My Lords, I am grateful to the noble Baroness for settling a minor dispute between two Members from this side of the House. Is the noble Viscount aware that all of us, whatever view we may take of this lamentable affair, share the expressions of sympathy which have been given by my noble friend on the Front Bench on this matter, in all three respects? First, I believe we all share his regret and sincere sympathy for those who have suffered; those who have died, those who have been wounded, and the relatives of both. His other two important requests were for a cease-fire and for simultaneous peace negotiations. These two issues seem to go together. There is a growing feeling, not only in this House but outside this House and throughout the world generally, that we should proceed along these lines. May I ask the noble Viscount specifically, is it not the case that there these two tragic affairs demonstrate what weapons experts all over the world have been telling us: that we have now reached the point where offensive weapons are so severe that there is no effective defence against them? If this goes on, shall we not have further casualties on both sides, and is it not time to call a halt?
Viscount Trenchard: My Lords, I will not repeat the sentiments which have been expressed on all sides of

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the House. I will leave to my noble friend, after he has repeated my right honourable friend's Statement, the question of the follow-up of the peaceful route and the cease-fire. I have already made a note in relation to the problems of the cease-fire at a moment when the Argentinian aggression has succeeded, and does occupy the Falkland Islands. So far as the general point about armaments made by the noble Lord, Lord Jenkins of Putney, is concerned, the lesson that I draw is that we must make more sure in the future that potential aggressors do not think they can get away with it.
Lord Morris: My Lords, may I ask my noble friend whether Her Majesty's Government will do everything in their power to rebut the unfortunate suggestion that somehow Her Majesty's Government or indeed Her Majesty's loyal forces are unnecessarily and wilfully escalating military conflict?
Viscount Trenchard: My Lords, we are redoubling our efforts to get the situation properly understood and to get the interpretation of our sinking of the Argentinian cruiser in a threatening attack force into perspective. It is regrettable that the world as a whole, not reading the detail of all our Statements, has given undue attention to our declaration of the exclusion zones and has failed to observe the absolutely clear warnings that we gave the Argentinian Government, on more than one occasion, that any threat to our task force would be met with the appropriate action. We are redoubling our efforts to get that understood abroad as well as at home.
Lord Davies of Leek: My Lords, is the noble Viscount—
Several noble Lords: Order!
Lord Davies of Leek: My Lords, I thought that the Leader of the House said that I was to speak next.
Baroness Young: My Lords, I did in fact suggest that. There are so many noble Lords who wish to intervene in this debate, but if the noble Lord, Lord Davies of Leek, who I believe was next, will give way to the noble Lord, Lord Hill-Norton—and I know that the noble Lord, Lord Shackleton, also wants to get in—I think there will be time for everyone else, provided they confine their remarks to question form.
Lord Hill-Norton: My Lords, I am grateful to the noble Baroness, the Leader of the House. I respect the Minister's wishes not to become technical. However, there is one point of a technical nature about which I feel obliged to enquire of the Minister. Can the noble Viscount say (and I am not seeking operational information which should not be disclosed) whether decoys were used which should, if used, have seduced the Exocet missile from its target? May I ask him a question of a quite different nature? In order to preserve a sense of proportion, both in the public debate and in the debate in your Lordships' House and in another place, will he confirm that the Government weighed up the risks of ships being sunk and aircraft being shot down—and these will not be the last
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—and deemed them acceptable before sailing the task force, in the light of the aim they seek to achieve.?
Viscount Trenchard: My Lords, with regard to the noble and gallant Lord's first question, at this stage we have no information as to whether HMS "Sheffield" used the chaff decoy system; that is one of the unanswered questions at this stage. As far as the weighing of the risks is concerned, I can assure the noble and gallant Lord that the Chiefs of Staff and Ministers debated these long and very carefully. We did not underestimate the problems that exist; nor did we underestimate the air power of the Argentine, which is the particular item in question at the moment.
The noble and gallant Lord gives me the opportunity to say that after this event it is the view of all concerned that the objectives of the task force, if peace moves do not overtake them, can be achieved. We have always made clear that there may well be casualties and sacrifices in achieving this aim.
Lord Davies of Leek: My Lords, I should like to ask the noble Viscount if the nation is going to be told whether under international law we are now at war or not at war. Secondly, it is not fair to commanders on the spot unless we come under international law in incidents like those that are now happening. We must give the Government unity of approach at the moment, but the Government owe it to us, the Opposition, and to the public to state where we stand now under international law. We cannot go on pussyfooting by means of little announcements by civil servants and others. The Government are responsible, and they should make any particular announcement.
Viscount Trenchard: My Lords, neither side has in the old-fashioned way declared war on the other. I am not a lawyer, but I understand that the majority of lawyers today take the view that we are not at war but that hostilities are being carried out under Article No. 51 in self-defence, which has been described many times before.
So far as the effect on those taking part in the actions is concerned, I can assure the noble Lord that the principles of the Geneva Convention have been and will be adhered to in every respect.
Lord Shackleton: My Lords, I am grateful to the noble Baroness for her conduct of a difficult situation with the acquiescence of the House. If I may ask the noble Viscount one or two questions, first of all, has he any information—I do not know if it has been published—as to whether HMS "Sheffield" is still afloat and whether there is any prospect of towing her back? I may say that this is infinitely less important than the loss of life, on which the views of the House are identical.
I thank the noble Viscount for giving rather more information than we have sometimes had; this is very valuable indeed. He has made a statement that the ships are still engaged on operations. I do not expect him to say what is involved, but would he agree that we ought to understand that this may mean that there will be further operations of a kind which lead to loss of life? Would he also accept that, operating as we are, strictly within the terms of the United Nations, in

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self-defence, under both Resolution 502 and Article 51, we are not there simply to defend the Falklands, important though that is, but to uphold international law, and that there are much wider issues than simply this particular exchange?
Would he agree with me, therefore, that, tempting though it is, it is quite futile to equate the numbers of people who live in the Falkland Islands with our losses? This is not a numerical exercise. I hope, therefore, that the noble Viscount will continue to give all the information he can. The noble and gallant Lord yesterday referred to the range of missiles. We have always been aware that Exocet was a very dangerous weapon. Would the noble Viscount agree that it is not really very possible to answer questions about the defences of "Sheffield", since it is apparent that she was not equipped with the latest Sea Wolf and other equipment of that kind. Would he also confirm that this makes clear that the "Belgrano" incident was part of a wider operation against the task force and that those who believed—and the Government must carry some responsibility for somehow allowing it to be thought—that sending the task force down there would lead to a bloodless solution of the problem were not living in the real world?
Viscount Trenchard: My Lords, the latest information I have is that the "Sheffield" is still afloat. I cannot say more than that. But she has been very badly burnt and almost certainly burnt out. So far as future operations are concerned, I think I have already made clear that the Government do see the possibility—we shall try to make sure that casualties are the minimum on both sides—of further casualties taking place.
I entirely take the noble Lord's point about international law. I have tried to leave those questions until my noble friend makes his Statement. On the question of the Exocet, I must say again that our ships do have a combination of defences; they cannot all be on each ship; they should be able to deal with both aircraft and missiles, but that does not mean that they will do so on every occasion, particularly if a low-flying aircraft has by some means or another already learned where the target is.
With regard to the noble Lord's point about making clear that the Argentinian operations have been part of a wider operation, I hope that the Government have done that, but I thank the noble Lord for making it clearer still. It must be abundantly clear that the operations over recent days are all part of a major Argentinian offensive, the alleged results of which they have taken great pleasure in announcing on their television and in their media, including the claim of the destruction of 11 Harriers and the claim of serious damage to "Hermes" and other major ships. This surely cannot leave in any doubt, by their own words apart from their own deeds, that the orders of the Argentine commanders are quite clear, and that is that they are to do as much damage as is possible to the British task force.
Baroness Young: My Lords, there are so many noble Lords who wish to ask questions, may I suggest that we take my noble friend Lord Glenkinglas, who has
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been trying to make his point for some time? Then the noble Lord, Lord Soper, then perhaps my noble friend and the noble Lord, Lord Molloy, would ask their questions. Then I suggest we move on to the next Statement.
Lord Glenkinglas: My Lords, would my noble friend not agree, while it is nearly 40 years since we were at war or in some state rather like it, that perhaps it is unfair both to himself and to his right honourable friend if this House, while it enjoys the opportunity of having immediate contact with the Ministers concerned, does not impose on itself a self-denying ordinance by letting the Ministers get on with their jobs and not expecting them to make Statements to this House on every possible occasion? Would my noble friend perhaps also agree that there is a risk—and I have seen it twice already today, and I am not going to go further—of his giving some operational information away which could be very damaging to our interests?
Viscount Trenchard: My Lords, a heartfelt "brief-free", "Thank you" for the first part of my noble friend's supplementary. I can assure him that the information that I have given to this House and that my right honourable friend has given to the other House has, on every occasion, been checked and cross-checked with the Services to make sure that we do not give more information than is helpful to the position of our task force.
Lord Soper: My Lords, is the Minister aware that the Free Churches would want to be associated with the words of condolence and sympathy that have already been offered to those who have suffered in the present conflict? Is he further aware that there is widespread disagreement within the Churches, and that it would be totally wrong to assume that the concept of the "just war" is generally held by those who profess the Christian faith? Finally, is he aware that there is unanimity, so far as a person such as I am can try to discover it, as regards the peremptory need for a temporary cease-fire, if nothing more profitable than that, in order that the principles that have invigorated much of the discussion, and the principles which have underlaid many of the attitudes towatds this concept can, in fact, have freer play than is possible within the general environment of armed violence? Therefore will he press forward with some kind of attempt to prepare a cease-fire, a moratorium even for the shortest of time, in order to give licence and opportunity for other principles to take their place within the solution of this problem?
Viscount Trenchard: My Lords, I shall leave the noble Lord, Lord Soper, to continue the debate within the Church on moral grounds; on that I would not claim to be an authority. But I have noted the many statements from a number of right reverend Prelates which do not entirely agree with the noble Lord. So far as a temporary cease-fire is concerned, I think that I have covered this question on more than one occasion. But the difficulties of a temporary halt in operations have been made very clear by my right honourable friend the Prime Minister in the other place a week

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or more ago. The objections are still the same—namely that to leave the aggressor in possession of his prize, as he sees it, and to call a cease-fire while he is in possession, is probably not to push forward a final settlement which ensures that aggression does not pay and that his troops withdraw. Having said that, I leave it to my noble friend to make it entirely clear that this does not mean that at all times we are not taking every opportunity to push forward the peace movement. But when you are dealing with a dictator and an aggessor I believe that the chances of getting peace on terms where aggression is not seen to pay, are very much higher if our will is not deflected.
The Earl of Dudley: My Lords, I should like to ask the Minister a question. However, before I ask the question, because of its nature I should like briefly to say that as a father of three half-Argentine children with an Argentine mother, including my son and heir, I naturally deplore the loss of life on both sides. Nevertheless, I should like to ask the Minister whether he would seriously consider that, if the Argentine air capability does pose a more serious threat to our task force than his earlier reply appeared to indicate, if it does pose a serious threat to our servicemen and to possible loss of life—which I believe it does—will he undertake that this capability will be reduced by all possible means even if that means taking some risks with public opinion?
Viscount Trenchard: My Lords, I thank my noble friend for making those points. I do not think that we have underestimated the air capability and I would point out to my noble friend that previous air attacks which continued throughout a whole day were very effectively repulsed and Argentine aircraft were shot down and they were unable to press home their attacks. Nevertheless, we must not underestimate the particular capabilities of these five aircraft that they possess and we shall not do so. I have temporarily lost the last point that my noble friend made; I do not know whether he wants to make it again?
The Earl of Dudley: My Lords, the point was that, whatever action should be taken, it should be taken without regard to public opinion.
Viscount Trenchard: My Lords, I think that I have said enough on the delicate balance which we are trying to achieve.
Lord Molloy: My Lords, is the noble Viscount aware that there is another dimension that we must always keep in front of us—namely, that the Argentine aggressors now occupying the Falkland Islands have a political and social way of behaving which is as totally alien to the Falkland islanders as it is to these British islands? Is he also aware that the grave dilemma that we face is how to see to it that freedom and right as we understand them are established without the massive use of force and the horrid loss of life? Would it, therefore, not be possible for Her Majesty's Government to consider asking the United Nations that, if the Argentinians withdraw and go back to their country, we will not occupy but that a United Nations force and administrators should occupy the Falkland Islands
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and the issue can be decided by the people who live there—namely, the Falkland islanders?
Viscount Trenchard: My Lords, if I may, I shall leave my noble friend to deal with Lord Molloy's point which can be dealt with better after his Statement. I would merely say that my noble friend will be aware of the need to be sure of enforcement of any settlement of the kind, or near the kind, that he suggests.
Lord Belstead: My Lords, with the permission of the House I shall repeat a Statement being made in another place by my right honourable friend the Secretary of State for Foreign and Commonwealth Affairs. The Statement reads as follows:
"My right honourable friend the Defence Secretary has just spoken about military aspects of the situation. I must, however, add my own tribute to the courage of the crew of HMS "Sheffield" and of the Harrier pilot and my sympathy to the families.
"The military losses which have now occurred on both sides in this unhappy conflict emphasise all the more the urgent need to find a diplomatic solution.
"The House will wish to know that since my return from the United States on Monday I have remained in the closest possible touch with Mr. Haig.
"As I reported to the House yesterday, we are working very actively on ideas put to us by Mr. Haig, including some advanced by the President of Peru. Yesterday afternoon, after my Statement, I sent a constructive contribution of our own to Mr. Haig. He is taking this fully into account. I shall be in touch with him again later on today.
"I want to tell the House that a vital ingredient of the ideas on which we are working is an early cease-fire and the prompt withdrawal of Argentine forces. I can assure the House that we are sparing no efforts in the search for an acceptable solution in line with the principles which we have stated on several occasions.
"The points which were put to me in New York by the Secretary-General of the United Nations are also receiving our very careful attention. I have been in touch with Sr. Perez de Cuellar about this since my return from New York and will continue to keep in close contact with him.
"There are many points of similarity between the Secretary-General's thinking and the points we are pursuing with Mr. Haig. Indeed, Sr Perez de Cuellar's helpful ideas seem certain to be reflected in the basis of any solution which we may be able to achieve.
"I can assure the House that any obstructionism there may be will not come from our side. Although it is we who have been the victims of aggression, it is also we who are working tirelessly and constructively for a peaceful solution".
My Lords, that is the Statement of my right honourable friend.
Lord Stewart of Fulham: My Lords, the House will be grateful to the noble Lord for repeating the Statement, which we have followed with interest and with

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hope. Those of us on this side of the House will very much want to be associated with the opening phrases of the Statement which pay tribute to the courage of the crew of HMS "Sheffield" and of the Harrier pilot, and with the expressions of sympathy with their families.
I think that the noble Lord, and indeed the Government as a whole, will agree that we on this side of the House have given our support to the Government's conduct of affairs in this unhappy and terrible business. But the noble Lord will also know that there is one aspect of the Government's conduct about which we have felt disquiet and to which I think it would be right for me to draw attention now and on which to put one or two questions to the noble Lord. It is whether the Government are giving full weight to the need to involve the United Nations in this business. For example, I notice that the Foreign Secretary says in his Statement, after mentioning Mr. Haig's proposals and those of the President of Peru:
"I sent a constructive contribution of our own to Mr. Haig";
whereas, in reference to the Secretary-General of the United Nations he says no more than:
"I have been in touch with him … and will continue to keep in close contact with him".
There does not seem to be the same positive and constructive approach towards any help that might be obtained from the Secretary-General as towards Mr. Haig's proposals. I am not sure that that emphasis is quite the right one.
I should like to refer to two other phrases in the Statement:
"an early cease-fire and the prompt withdrawal of Argentine forces".
Perhaps my own experience in office makes me unduly sensitive about the use of words, but I take it that there is no substantial difference between "early cease-fire" and "prompt withdrawal". We have generally assumed that the two go together. I can appreciate that there might be technical difficulties about withdrawal, particularly after what has happened to the airstrip. But I take it that the Government are clear that they will not be tricked in any way on this and that any settlement must involve the certain, complete withdrawal of the Argentine forces.
With regard to a cease-fire, I take it that the Government have given some thought to what our task force would do in the circumstances of a cease-fire, and what it would mean for them. It may be possible for the Government to tell us something of their thinking about that.
The noble Lord may remember that yesterday I asked whether we had made any approach to the Secretary-General of the United Nations for him to set up a good offices commission. I believe—I am not certain of this—that the Argentine Government have made such an approach. I think it is most important that we do not get outrun in approaches to the United Nations by other nations which are not necessarily all too well disposed towards our interests. The Government must watch this. In conclusion, may I remind the noble Lord of the points raised in the recent question by my noble friend Lord Molloy, which his noble colleague in effect referred to him.
Lord Mayhew: My Lords, this Statement appears to my noble friends and myself to be rather more positive and hopeful than earlier Statements of the same kind made recently by Her Majesty's Government. It is informative about the machinery of negotiations, but it is not informative as to what those negotiations are about. It tells us that there is similarity between the Secretary-General's thinking and the points that the Government are pursuing with Mr. Haig. If we knew one of them, we would have some clue about the other. But as we know neither, it does not really inform us very much more about what we know already.
I note that the Statement says that a solution to be acceptable must be:
"in line with the principles which we"—
Her Majesty's Government—
"have stated on several occasions".
The House will be aware that on one or two of these principles—for example, the principle that the wishes of the Falklanders should be not merely extremely important but actually paramount—my noble friends and I have questions, and we have questioned this in this House. We note the word "cease-fire" and note that an early cease-fire and the prompt withdrawal of Argentine forces is something the Government are working on. I suspect that the Government will be very strongly pressed internationally for a cease-fire without the prompt withdrawal of Argentine forces, and I should like to make it clear that my noble friends and I would regard a cease-fire which allowed the resupply and reinforcement of the islands as totally unacceptable.
On the other hand, it may be that a temporary ceasefire, with a ban on resupply and reinforcement, would not be so obviously contrary to the interests of what we are attempting. My noble friends and I have given support to the Government in their search for a peaceful solution. We are glad to note this catalogue of, I think, increased activities in the search for a peaceful solution, and we wish the Government every success in that endeavour.
Lord Belstead: My Lords, I am grateful to both noble Lords for their response to my right honourable friend's Statement. The noble Lord, Lord Stewart, asked whether the Government are giving full weight to the need to involve the United Nations. We told the Secretary-General last night that the Government are considering the ideas that came up when my right honourable friend saw Senor Perez de Cuellar on 2nd May. The United Nations Secretary-General has not described these ideas as being formal proposals or a United Nations plan. This is what distinguishes the Secretary-General's initiative from the initiative which is also being taken by the President of Peru and Mr. Haig.
It would be wrong—I have to say this with regret to the noble Lord, Lord Mayhew—for my right honourable friend, or others on his behalf, to say what these ideas are of the United Nations Secretary-General. But I should like to make it clear to the noble Lord, Lord Stewart, that my right honourable friend welcomes the Secretary-General's concern and intends to keep in close touch with him. We must consider carefully the

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relationship between the United Nations Secretary-General's ideas and those put forward by Peru, on which we are also working urgently. My right honourable friend will very shortly be giving the Secretary-General a fuller indication of our thinking.
The noble Lord, Lord Stewart, asked me about the juxtaposition in the Statement of "an early cease-fire" and "a prompt withdrawal of the Argentinians", and adjured the Government not to be tricked in a matter of this sort. Although we deeply regret the tragic losses on both sides, our basic objective remains unaltered. This is to secure the withdrawal from the Falkland Islands of the occupying Argentine forces, as called for by Security Council Resolution 502. Our operations will be suspended as soon as this objective is secured.
The noble Lord reminded me that the Argentines had, so it is said, called for the setting up of a good offices committee in the person of the United Nations Secretary-General. I would simply say that for a country which has shown no regard whatever for a mandatory resolution of the United Nations then to turn to the Secretary-General of the United Nations and say that it wishes to see in his body a good offices committee set up, is almost an insult to the organisation of the United Nations. For our part our view about this—and we absolutely agree with Her Majesty's Opposition and others of your Lordships in this matter—is that what is important is that the United Nations Secretary-General is very active in this matter, and we are keeping, as I have said, in very close touch with him.
Finally, may I just say that the noble Lord, Lord Mayhew, made the point that an international ceasefire without withdrawal would be unacceptable. Yes, I have said on behalf of the Government that that is the case, and so also, if I may add it, is the precondition which is still being put by the Argentines that for any negotiations to take place the result of those negotiations would already have been decided in the Argentines' favour. That will not do either if a just solution is to be reached.
4.41 p.m.
Lord Aylestone: My Lords, is the noble Lord aware that from these Benches, while firmly continuing our support for Her Majesty's Government, we agree with the Foreign Secretary's Statement when he says that a diplomatic solution is now so very urgent? May I say to the noble Lord, also, despite what was said by an earlier speaker on the previous Statement, that in our view world opinion is extremely important. While every detail of any negotiations cannot perhaps be divulged, it would nevertheless be of great value to world opinion and to ourselves if it was made clear what is, or is not, negotiable at the moment by both the Argentine junta and by our own Government.
Lord Belstead: My Lords, we can on our side only make clear what is, and what is not, negotiable. We would be ready, as we have said many times, to enter into negotiations, but on the lines of Security Council Resolution 502.
The Earl of Halsbury: My Lords, my question is based on the proposition that our performance in
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shooting wars is rather more distinguished than in shouting wars. We too easily allow ourselves to get bawled out. What steps are Her Majesty's Government taking to implement the request made previously by the noble Lord, Lord Shackleton, that we should give some publicity to the legality of our own case for sovereignty over the Falkland Islands? There is a case—I am only an amateur; I will not say how strong it is—and what are Her Majesty's Government doing to let the world know that we have a strong legal case for sovereignty over the Falkland Islands?
Lord Belstead: My Lords broadcasts by the BBC to Latin America in Spanish have been increased, but, as I reported to your Lordships' House yesterday, there is a problem with jamming by the Argentines so far as that is concerned. However, broadcasts by the World Service of the BBC in English are, I am advised, unaffected in this respect. It is also relevant to the noble Earl's question that as from 30th April the telegraph and telex links to the Falkland Islands have simply been severed by the Argentines. We are making it our business to ensure that despite this the islanders still receive truthful accounts of what is happening. We are making full use of the facilities of the BBC to this end.
Lord Brockway: My Lords, may I ask the Minister whether he is aware how much we all welcome the concern which the Government have shown to secure a diplomatic solution of this issue? In the Minister's speech detailed reference was made to the negotiations with Secretary Haig and with the head of state of Peru. Is the Minister aware that all of us welcome those negotiations? But was not the reference to the United Nations much less definite? Is not the United Nations the international authority to which we should look for a solution of this problem?
Is it not the case that when the Secretary-General met our Foreign Secretary he detailed to him proposals for a solution of this problem? First, a cease-fire; secondly, a withdrawal of the forces on both sides; and, thirdly, as I mentioned yesterday, a United Nations presence in the Falklands and negotiations. Has the Foreign Secretary made a response to those actual proposals which have been made by the Secretary-General of the United Nations?
Lord Belstead: My Lords, I have made it clear in supplementaries that the United Nations Secretary-General has not described his ideas as being formal proposals or a United Nations' plan, although he is clearly now very active in this matter and we are in very close touch with him. But there really is a problem which I would ask the noble Lord, Lord Brockway, to face, and that is that for the Secretary-General to make headway in this matter it is necessary for him to take the Argentine Government and the United Kingdom Government with him in spirit and in fact, and it is extremely difficult for the United Nations Secretary-General to do that when the Argentine Government is simply flouting a mandatory resolution of the organisation of which the United Nations Secretary-General is the secretary.
Lord Hankey: My Lords, are the Government aware that a very great number of people admire the efforts

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which the Secretary of State for Foreign Affairs is making to achieve a diplomatic solution? But have the Government any reason to think that the Argentine Government is going to withdraw from the Falklands as a result of the efforts which are being made? The ordinary man only has the press and the radio to go on, and there does not seem to be any indication that that is likely to happen. Is it not necessary to regard diplomatic and military pressure as a whole, and is it desirable that we should hold back our efforts around the Falklands in military, naval, and air terms, letting the weather get steadily worse and perhaps the diplomatic weather, looking around all the nations of Europe and elsewhere, getting no better? Should we perhaps not be having grave philosophical doubts about the doctrine of using minimum force? Might there not be very soon a case for taking the maximum force on this and settling the question jolly quickly?
Lord Belstead: My Lords, I think that we must continue to take military, economic, and diplomatic action in this matter, but that we must do one more thing—and I hope that both my noble friend Lord Trenchard and I have made it clear this afternoon in our Statements on behalf of our Secretaries of State—and that is that we are ready at all times to enter into proper negotiations on this matter. We are ready to use the good offices of the President of Peru and Mr. Haig, and also the United Nations Secretary-General, but it has got to be for fair and just negotiations.
Lord Raglan: My Lords, it appears that not the least of the difficulties which is faced by the Government and Mr. Haig and the Secretary-General of the United Nations is that it is not clear who is in charge of the Argentine Government. Would the Minister kindly say how much of an obstacle this characteristic of the Argentine Government is to a negotiated solution?
Lord Belstead: My Lords, the United Nations Secretary-General, as I made clear, is in contact with the Argentine Government, as indeed he is in contact with us, and also the Peruvian proposals were put to the Argentine Government, as they have been put to us. The Peruvian proposals of course were turned down by the Argentine Government. There is a Government there all right; it is just that their policies are not policies at the moment which are leading towards a just and peaceful negotiation and solution of this problem.
Lord Monson: My Lords, despite the commendable efforts of the Secretary-General, would the noble Lord not agree that the United Nations is not in the last resort an objective or impartial body? Too many of its component nations have their own axes to grind, and it would therefore be extremely unwise to place excessive reliance upon that organisation.
Lord Belstead: My Lords, I do not think that the Statement I have made today shows excessive reliance. It shows that the United Nations Secretary-General is very active in this matter, and we are, as I believe is proper, in close touch with him.
Lord Kaldor: My Lords, is the noble Lord aware—
Baroness Young: My Lords, I think we have had a very long time on both Statements. We are also conducting an important debate this afternoon, so perhaps it would be right just to take the noble Lord, Lord Kaldor, but after his question to move on and for Lord Tordoff to continue with the debate.
Lord Kaldor: My Lords, is the Minister aware that the BBC News Service announced at 9 o'clock last night that at 10.45 they would transmit on the programme Newsnight an interview given to the BBC by the Foreign Minister of the Argentine? In the event, that interview did not form part of the programme. I should like to know, first, whether the noble Lord was aware of that, and, secondly, whether he knows of any reason why it did not form part of the programme.
Lord Belstead: My Lords, I understand from the noble Lord, Lord Kaldor, that it was thought by those watching television that there would be a transmission of the Foreign Minister of the Argentine on television in this country, and then the Foreign Minister of the Argentine did not appear. I should think that was a very appropriate solution.

Inland Transport
Debate resumed.
4.51 p.m.
Lord Tordoff: My Lords, as perhaps the only Member of your Lordships' House not to have taken part in that discussion on the Falkland Islands—
The Lord Chancellor (Lord Hailsham of Saint Marylebone): Oh?
Lord Tordoff:—together with the noble and learned Lord the Lord Chancellor, as he reminds me, perhaps we may now resume the debate on the Motion moved by the noble Lord, Lord Lucas. I welcome this opportunity to take part in a broad and wide-ranging debate on the subject of transport in the United Kingdom. It is a difficult subject, primarily because it is one about which everybody knows something.
It is easy to discuss specific items—we could spend a long time discussing the merits of seat belts and probably an even longer time discussing the merits of the M.25—but to tackle the question of transport on a wide-ranging scale, as the noble Lord has invited us to do (almost on the basis of political philosophy) is exceedingly difficult. The reason for that is that we can talk of planning, integration and co-ordination—the noble Lord, Lord Underhill, took us somewhat down that track—but when we think about those matters, what we mean is having an integrated, co-ordinated and planned transport system which will take us personally from our homes to anywhere in the country at any time of the day or night, and preferably free.
I regret that the noble Lord, Lord Mottistone, is not in his place at the moment. I remember that

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during the debate on the situation of London Transport, raised on a Bill in the name of the noble Lord, Lord Underhill, a few weeks ago, Lord Mottistone, very rightly, in reply to something I had said, pointed out that the cost of private motoring was very high. It is indeed a very expensive way of getting around, if one is prepared to cost one's motor-car travel in a proper way, and I am sure that if we all had a cost accountant at our elbow we should put in the cost of borrowing the money to buy the car, taxes, maintenance and so on.
In practice, we do not look at it that way; we tend to look at the cost of an individual journey based on the variable costs of the petrol we use for that journey. That is at the heart of many of the problems of passenger transport in this country; we always think of the marginal cost of an individual journey. In other words, we think of the price per gallon of the amount of gasoline we shall use to go from A to B, and we tend to compare that with the cost of any other form of transport that is available to us, setting aside the convenience factor, which is always there, in being able to get into your own motor-car outside your own house and go to wherever you want to go.
I should perhaps declare an interest. As many of your Lordships know, I work for a subsidiary of a multinational oil company. What I have explained is also a problem in terms of the pricing of gasoline in this country. Because it appears to be the major cost in any journey, any increase in the price of gasoline appears to be very significant in terms of one's cost of living, whereas in fact an increase of 2p or 3p in the price of gasoline represents a very small proportion of the total cost of running a motor-car.
There is no doubt that to run an efficient transport system is essential for a developed, civilised and industrial society. It is also true that it is the duty of the Government to ensure the provision of that sort of transport system. I submit, however, that it is not necessary for them to provide that directly, and I shall develop that point as I go along because it is in contradistinction to some of the remarks of the noble Lord, Lord Underhill.
Transport is important for the other things which depend on it, not transport for its own sake. It is important in terms of our ability to travel to work and to go shopping. I nearly fell into the trap into which the noble Lord, Lord Underhill, fell earlier in that I almost referred to our wives going shopping. When he was talking about cycle tracks, he said something about the need to stop women wheeling prams. I caution him that certain ladies inside and outside this House will have his guts for garters if he goes on saying that sort of thing, and properly so. It is important, as I was saying, to get our children to school, to enable us to go on holiday; and it is important that we have transport to keep in touch with our friends and relatives. It is interesting, having gone through that list, to note that all those things refer to passenger requirements. I shall refer to freight later.
Even on the passenger basis, it is an incredibly complex network and there are no simple solutions. Indeed, there is no global solution, in my view, which will answer all the problems of transport in Britain. The noble Lord, Lord Underhill, went too far down that track; I do not think the possibility of the total planning of the system is available to us. It is too
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complex for that. In the '50s and '60s many of us—not thinking just about transport but many other factors too—had the vision of a great computer being constructed into which one could feed information, and all the answers, about the future and planning requirements, would come out by pressing the right knobs. We went through a period when people talked about garbage in and garbage out, and it was said that what was wrong with the great computer was that we were not putting in the right sort of information.
Many of us in industry today recognise that that sort of planning is a fantasy. However good the information, however good the model and however large the computer, one cannot predict the future, and that applies to transport as well as to many other facets of our industrial life. One need only look at the discontinuities that can be caused from time to time. The one which stands out in everybody's mind is the increase in crude oil prices in 1973 as a result of the activities of OPEC. Who now would dare predict what the price of crude oil will be a year from now, let alone in five years from now? That is the sort of basic data one would need to have to make that sort of planning and in predicting a reality.
We have moved, certainly in industry—and I believe the Government are now moving that way—into what we describe as scenario planning, where we postulate a certain range of possibilities and try to ensure that we optimise the possibilities within that range. When we try to do that in something as complex as the transport system of this country we must be a little more humble than we have been in the past; and the idea of having a great, planned transport system begins to go out of the window. At the same time I do not believe that we can have total freedom in the system, because that leads to anarchy and indeed to a disruption of the road services in particular through the kind of chaos that we find in many of our inner cities.
The point that I am getting round to, if your Lordships follow me, is that many of the solutions to the problems must be found locally. This is a dimension which perhaps has not entered into the debate so far. The more that we can push down the problems to the lowest level of local government, the more that we can involve within the local government context a variety of private enterprises, the better the chance we have of producing some kind of answers to the great questions that beset us.
Clearly there are some things which central Government must look after. I have in mind, for instance, the main trunk road network, the motorway network—and I dissent from few of the things said so far on that subject—and the rail network in terms of the Inter-City traffic. Certainly the Liberal Party has been in the forefront of those who have been pressing for increased investment in the electrification of the major rail network.
There are all kinds of separate items that must come into a debate such as this, and many of them have already been mentioned. We must think in terms of the future cost of transport, the scarcity of fuel, and the question of whether we are using the available fuel in the best possible way. I do not think that we now expect transport fuel to run out by the 1990s, but the amount of oil that we can obtain from the North Sea is finite. It is interesting to note that in the past few

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days a number of projects in Canada have finally collapsed because of the cost of producing oil from shale and from tar sands. This is connected not with any physical reason, but with economic reasons, though the time will come when it is economically attractive to undertake such extractions. That instance demonstrates the difficulty of predicting what will be the future in terms of the resources that we can put into our transport system.
I do not want to become involved in the road versus rail argument. I felt that at the beginning of his remarks the noble Lord, Lord Lucas of Chilworth, perhaps put forward rather too strong a road lobby view, though he modified that later in his speech. We must be careful to recognise that there is a matrix here, that road and rail both have their parts to play, and we must all clear our minds as to what part various assets of the country have to play in producing a true national transport system.
We have to look at the environmental impact, and again the public must understand that there are no simple solutions to environmental questions. It is a matter of finding the best solution, not of finding the perfect solution. How much land is one prepared to lose? How much agricultural land is one prepared to let go in order to avoid the danger that would arise to children's lives by building a by-pass around a primary school?
There are no simple solutions, and somehow or other we must help the people of this country to understand that the balance of risk is the best that can be achieved in transport questions. There is no doubt that today mobility is an important part of life not only in this country, but throughout the world. We are perhaps the most mobile society that the world has ever known. For us and for our children the chances of travelling to the ends of the earth are now much greater than they have ever been. Indeed, even in the third world the chances of travelling far abroad are much greater than they have ever been. This is a situation which from these Benches we would in no way criticise. Mobility is liberty, and liberty is the great touchstone of liberalism. But we must recognise that if we abuse that liberty, we are a menace to society, and if the motor-car is the epitome of that mobility, it is also the major threat to life and to liberty itself.
Nowhere is that situation more apparent than in the great conurbations, and in particular in London. I do not again want to get into the long debates that we have had in your Lordships' House in the past few weeks on the problems of London Transport, save to say that in considering the whole subject of transport, there is no question but that the commuter is the person who suffers most—and this is not a party question—from our inability to solve transport problems in the great urban conurbations.
As I think I said in the last debate, so far as London is concerned—and I shall not today go beyond this point—the answer must lie not specifically with the Government, not specifically with the GLC, but in setting up some kind of Greater London passenger transport executive that is capable of looking at the totality of passenger transport problems within the conurbation.
But I repeat that outside that area the answers are better found through the smaller local authorities
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tackling the problems, together with the kind of innovation that can come from using private enterprise, as is being done in various parts of the Far East, such as Hong Kong and Bangkok, which have enormous traffic problems. There is there a degree of innovation which, if it were used in tackling the problems of this country, might help us considerably.
There are many other aspects of this subject which one could deal with. There is the question of the way in which the road fund tax is taken from the motorist. There is the belief that we hold on these Benches that this tax should be graduated according to engine size, and that for ecological and other reasons there should be emphasis on encouraging people to have more efficient and smaller car engines in the future. There is also the whole question of lorry weights. We support the Armitage proposals and believe that common standards are important for the European Community, and that such an approach would remove much of the aggravation from the problem of inter-European heavy freight traffic. There is a need for a degree of further road building in this country, but we use up a great deal of agricultural land, and so we must be quite specific and target our needs onto those areas that are desperately in need. Clearly the M.25 is a specific need, and I would not quibble with some of the other projects that the noble Lord, Lord Lucas, mentioned.
However, at the end of the day we must try to get away from dogmatism on the subject, and we must together look at each problem pragmatically. We must look at the opportunities which exist today within our inland waterways; and if the Humber waterway experiment is successful, we must look at the idea positively with a view to extending it to other areas of the country. I hope that in looking at such ideas we shall not be inhibited by the present aggravation within dockland. The whole question of dock labour relations goes back a long way, and it would not be right to raise it on too detailed a scale in this debate. People understandably have fears based on what has happened in the past on the railways and in the docks. They have fears about loss of jobs. Such fears stand in the way of genuine progress and genuine increases in efficiency, which in the end will improve the job prospects for the country as a whole. It is tragic, as I say, that these fears should be allowed to stand in the way of genuine experiment within this country.
My Lords, I am conscious of the fact that I must not go on too long because this debate has been considerably interrupted and I feel very greatly for the noble Lord who is to follow me, who has been, I am sure, sitting on the edge of his seat for some considerable time. But again I say I am grateful to the noble Lord, Lord Lucas, for introducing this debate, and I am sure we now all look forward with great interest to the maiden speech of the noble Lord, Lord Cayzer.
5.11 p.m.
Lord Cayzer: My Lords, as has been said by several speakers, this is a very difficult problem altogether, and it is a subject on which one could speak for a very long time. I cannot claim to be able to do that because my knowledge of inland transport does not equate with that of other speakers, particularly the mover of this Motion, the noble Lord, Lord Lucas of Chilworth.

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But my interest in inland transport stems from the fact that my company has been engaged in British shipping for over a hundred years, and I have been engaged for most of my life in that context.
There are four ways of moving goods and people around the country—air, rail, road and sea. What interested me very much to see was what vehicles they used, how they travelled. I believe that within these islands, in 1980, 7 per cent. of the people were carried by rail and 92·5 per cent. by road. As far as freight is concerned, the figures were 9·2 per cent. by rail and 82 per cent. by road. Of course, sea, air and rail have this in common, that they all depend on road connections. But I would say that one of the factors in a democracy is choice. Once you get rid of choice you get rid of democracy. Therefore, to a very large degree people will have an influence on the type of development that has been so eloquently debated so far.
The relationship between these modes of transport which I have referred to must change over the years, as it has throughout our island's long history. The change nearly always comes about by economics and by effectiveness and efficiency; and it is nearly always, in the initial stages, a painful process. I want to give an example of this which was a very personal one to myself and to my company. About 20 years ago we owned over 100 ships—passenger liners, cargo liners and other types of ships. Then Nemesis approached and overtook us. It took the form of the airlines, and especially these large jumbo jets. This put an end to our passenger liners, which we had to withdraw from service, and, very sadly, yet thankfully in the circumstances of today, only great liners like the "Queen Elizabeth" ride the seas.
The development of the container ship made the traditional cargo ship redundant, too, and your Lordships can imagine what these changes meant to us, especially when we began to think of employment. But we could not oppose change, nor could we fall back on the taxpayer. We adapted. We moved into a container consortium; we reallocated our resources; and we redeployed as many as possible of the people we had employed. It was hard and it was painful, but two facts emerged which I think are of some interest. First, our turnover increased from £56 million in 1968 to £335 million in 1980. Secondly, and I think even more important, the number of people we employed in this country, albeit in different jobs, rose from 3,500 to 9,000—and that does not count, through the diversification which was forced on us, the large number of people that we also employ through foreign contracts.
Change, properly managed, can therefore bring benefits to both society as a whole and to those who work in it; but I know that in a conservative country like this one (and I use that word with a small "c") change is very hard. None of us likes change; we all fear it. But it is something that we have to face; otherwise, we shall have a stagnant society and probably less employment and a lower standard of living for all the people in these islands. I know that both sides of this House desire to see more employment and the better use of employment. We must identify what changes need to be made dispassionately and on purely economic grounds, I myself think, because, in the end, economics catch up with you. You cannot
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spend more money than you create. We must administer these changes with humanity—that, I think, is absolutely vital—because you cannot take people with you unless you can persuade them that the way you are going to lead them will be for the better.
Returning to the subject of this debate, I think we were slow off the mark in creating motorways. One thinks of the autobahns in Germany; one thinks of the unemployment, which many of your Lordships remember (I do, vividly, because I worked in Glasgow in those days), between the wars. We could have got on with the job then, and done something about it. Of course, there is debate about the heavy lorries, and I think we must get round this, if possible, by bypassing towns and villages. I am very much in sympathy with people who feel that these mammoth container lorries, and so on, passing through their villages, sear their lives. But this is not beyond our ability, and we shall have to give very careful thought to parking space in our towns and cities. To a small degree this is being thought about when people put up new buildings, but, of course, this is a very small part of the matter.
Turning to railways, the noble Lord, Lord Beeching, began the process of dismantling uneconomic railway lines, and this is another area which I think we must look at again. There is no use in running trains unless people are going to travel in them. The question of whether redundant railway tracks—and there are a lot of them throughout the country—can be turned into roads with advantage should be carefully considered. I have great hopes of the fast inter-city trains because they are extremely convenient for those who travel and have to travel a lot between various parts of the country and the metropolis; and the advanced technology which is proceeding, with some difficulty, I believe, means that they are both speedy and comfortable. It may, and I think does, make sense to move certain major bulk commodities such as coal and ore by freight train.
I have no desire to be dogmatic. I believe that this is a serious problem that should not divide us but unite us in trying to find the right solutions. I hope that objectivity will win the day. I, myself, believe that we need more and better roads for the obvious reason that it is cheaper to carry goods by road. Although it has been pointed out that the cost of motoring is expensive, life is made up of choices and quite often one chooses the most expensive thing to do because one likes it best. Therefore I think we must have more roads.
I am very worried about the very large losses which have been suffered by British Rail. I believe it is true to say that since nationalisation British Rail—and I am not being critical; I am merely stating the facts—up until the end of March 1981 absorbed £13 billion, at 1979 prices, of taxpayers' money. This is more than any other nationalised industry and nearly twice as much as British Steel. This cannot be allowed to continue. No privately-owned company would have allowed it to do so. They would have had to change. We who work in the private sector of industry have the discipline of knowing that if we fail we suffer. No rescue service is available. My plea therefore is that where the nation provides the service it should look at

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the matter from the point of view of economics rather than politics.
I hope that I may have said something that at least makes people think a bit about this problem for I am convinced that it is of first importance. We in this country will count for nothing if we cannot put our own affairs in order. If we are going to create more employment, and, hopefully, a good standard of living, it will depend on the ingenuity with which we seek to change the operation of some of the industries which since the war have cost the taxpayer so dearly. Change must come; change will come. We must face it clear-eyed, and we must implement it with conviction and with purpose, and meet its consequences with care and compassion.
5.25 p.m.
Lord Taylor of Gryfe: My Lords, it is a pleasure to congratulate the noble Lord, Lord Cayzer, on his maiden speech. I am sure that the House is indebted to him for bringing to our consideration of this problem of transport his wide knowledge and great experience particularly in shipping. The noble Lord will perhaps forgive me if I do not endorse some of the strictures and criticisms that were offered of the railway system. This is a matter to which I may perhaps return. I should like to apologise to the House. I put down my name for this debate assuming that there would be no major interruption in the course of this afternoon's proceedings. I must leave the House at 7.30. I sought an alternative speaker from these Benches at the last moment, but it was not possible. Perhaps the Minister and the House will accept my apology.
I welcome in the speeches so far delivered in this debate the balanced view and the consensus which seems to be emerging regarding a sensible and balanced transport policy. I think it is right, as the noble Lord, Lord Tordoff, has said, to approach this matter quite pragmatically. When we are assessing the claims on the nation's attention and on the nation's purse for the relative modes of transport, we ought to make comparisons which are reasonable and equal. For example, it is frequently said that road transport is so much cheaper than rail transport in handling freight. You must assess the costs which rail freight must carry in the cost of railway tracks and maintenance and all the other infrastructure of the railway system—the bridges and so on. Heavy lorries do not face the same kind of charges for their use of the main roads.
In comparing modes of transport, we ought to try to get a balanced view of the social costs of transport. I do not think that it would be right in developing a national strategy for transport to rely exclusively on economic factors, because we believe in a good society and in a civilised society which takes into account the environmental implications of any policy. Perhaps I may mention one or two of the environmental implications of road and rail transport—and I am not trying to take this debate down the line of road versus rail, but rather to establish the balance. If I may say so to the noble Lord, Lord Cayzer, who commented on the performance of British Rail, there is no railway in the world which is making a profit and every railway in the world is subsidised by the state and, as far as Europe is concerned, in the context
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of strict comparison, British Rail's subsidy is substantially less than that of any other railway system in the whole of the EEC. I think that that should be said. And I do not believe that the noble Lord, Lord Cayzer, would find many takers in the market for a private enterprise railway system.
My Lords, may I mention one or two environmental factors which ought to be taken into account? Intercity electric trains are around four times more energy-efficient than scheduled airliners and almost 50 per cent. more efficient than a well-loaded car cruising along a motorway. Electric trains are uniquely flexible in their use of primary energy sources. Commuter trains are up to 10 times more energy-efficient than commuting by car. When we see the long queues of cars running into London day in and day out; we should remember that we are using up the nation's resources. These are limited resources. So remember that commuter trains are up to 10 times more efficient than the car that is driven into London.
Studies undertaken have indicated that 4·5 million people were dissatisfied about noise from motorways and principal roads, and 3·4 million people were dissatisfied about aircraft noise, whereas only a very small percentage of people are disturbed by noise from the railway system. That is important. May I say this in relation to the economics of the railways in this country? Most countries have accepted the social obligations of a railway system, and most countries try to encourage the use of public transport. Anyone who visits the United States and sees the excessive demand on land resources—and we are a small island compared to the United States—of the great motorways, and the using up of fuel and energy by the excessive use of motor-cars, will accept that to allow our railway system to deteriorate would be a very serious matter for the future of this country.
If you discuss this matter with the average citizen in the United States he deplores the fact that public transport has been allowed to disappear in many areas. I believe that a sensible transport policy must provide a railway system network which is used by the public. If you allow purely economic terms to be considered in your transport policy, you will end up, as the noble Lord, Lord Underhill, indicated, with no rural transport whatsoever, because it is totally uneconomic to provide transport in areas of small population around the country. In addition, if you simply tailored your transport policy to economic terms, you would probably end up with no railway system.
It is interesting, when we are holding this debate today, that the Financial Times should publish an article which is headed: "Railways unveil plan to lure the French away from the motor-car". This article tells of substantial state investment in making the whole railway system much more attractive for the public, in brightening up the railway stations, putting in all kinds of investment which will ensure that railways will be efficiently run and well used.
By the same token, the French—with complete disregard, I suspect, for the PSBR or EFL—have laid down a completely new line between Paris and Lyon, and on that line put their showpiece of the high speed train, well ahead of our APT in this country. So the French experiment ought to be looked at. They are concentrating on a greater use of the railway system

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as an essential element in sound public transport policy.
What is wrong in this country? We shall not keep a railway system going without additional investment. May I give one or two figures in relation to the rolling stock of British Rail? No replacements are being built at the moment for the whole fleet of over 3,000 diesel multiple units which were built more than 20 years ago. The present rate of renewal for locomotives is under 20 new locomotives per annum to keep the railway system going, although the total requirement is over 1,000 locomotives. About half of the resignalling system is still controlled by mechanical signalling, most of which is over 60 years old.
The great age of railway development in this country was 100 years ago, more or less, which means that a good part of the railway infrastructure, including the bridges and track, are now substantially deteriorating and, in many cases, in danger of collapsing. If one is going to accept that a good and sound railway system is essential for a reasonably balanced transport system nationally, then we shall require to step up the investment, otherwise the whole railway system is crumbling before our eyes. It would be a national tragedy if this were permitted to continue.
Some people will say to me, "It is all right you calling for more investment in British Railways, but are British Railways efficient? Are they doing a good job?" The annual report of British Railways has just been published and is available in the Printed Paper Office. Despite the difficulties of the economic recession of last year, passenger receipts passed the billion mark for the first time in the history of railways in this country. The annual passenger volume was down only 3 per cent., despite the recession. Freight losses were halved. Considerable improvements in productivity were achieved. Transmark, which is the consultancy service for British Rail, is now being used in 27 countries. These are countries which have come to British Rail to invite them to provide their expertise in improving or building their railway systems. This indicates that British railways are not as bad as we all like to complain.
I welcome the Minister's statement recently that he was setting up a new review of railway objectives, that we should set the British Rail Board clear objectives for the commercial and socially necessary railway system and that we should establish a reasonable financial framework to encourage managerial efficiency in meeting these objectives. In the debate on nationalised industries quite recently in this House, I tried to make some comparison between how we run our nationalised industries and the private sector. It is this area of giving a board clear objectives of what it is to attain and making financial resources available to achieve those objectives that the main purpose of the Government should lie, and then let the board get on with it.
I very much welcome the suggestion by the Minister that this is going to be examined. I warn the Minister not to become too bogged down in the numerous controls and checks which are the plague of the nationalised industries. We are inclined to build upon our nationalised industries a great bureaucratic maze which makes decision-making and operations extremely difficult. I suggest to the Minister that, if he establishes
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these new objectives, he backs them with financial support.
May I also encourage him? We on these Benches believe in a mixed economy, and we have said that frequently. It might be possible to inject private capital into some parts of the railway system if it was felt that the financial requirements of British Rail were going to be constrained by the current EFL. There is no reason why the new railway line about to be set down between Victoria and Gatwick should not be financed from private sources with throughput agreements. We should consider that possibility. There is no reason why the level crossing investments, which would make a return in two or three years in terms of economic operation, should not be an object for private investment, provided one made a throughput agreement with British Rail. If it is possible, as in some countries, to finance a road system by a toll system which is privately run there is no reason why some of this philosophy should not be considered in relation to some operations of British Rail.
All I want to say is that there is a strong case for maintaining the railway system. I believe that, in the difficult conditions of today and under the constraints of the external finance limit, the British Rail Board is doing a good job, and I hope that it will command the Minister's support.
5.40 p.m.
Lord Orr-Ewing: My Lords, I should like to add my congratulations and gratitude to the noble Lord, Lord Lucas, for having initiated what I think is a very timely debate on road and rail. I should like particularly to congratulate my noble friend Lord Cayzer on his maiden speech. In this House we are unique in having experts on so many subjects, better-informed people with up-to-date knowledge and personal experience sometimes going back over a lifetime, as he has in the shipping world. I think we all appreciated what he said about the need for flexibility and the flexibility which his company has achieved in totally reorienting the whole product and changing the direction of the company. I think we all have to rethink this, not only in our businesses but in connection with such things as roads and railways.
This debate has been timely, apart from the over-riding interest of the Falkland Islands which must demand much of our time and much of our thought, in that only last week British Rail published their annual report, so that there has been the opportunity over the weekend to study the report. I also think it is an important subject to so many households, as my noble friend said in introducing the debate. Looking at household expenditure, it is quite staggering to see that, apart from rent and food, transport is the biggest expenditure for all the households in this country. So transport and its cheapness is of paramount importance.
I think it is also important that we should set time aside to discuss the biggest user of Government grants. The Government's expenditure Blue Paper sets out all these grants and gives the total expenditure for the current year, which will be £2·7 billion—and this all comes from the taxpayers—of which £950 million will go to British Rail. I know that a good proportion goes into what British Rail call "social railways" and perhaps we ought to be considering whether this is

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money well spent or whether there are other ways of running our rural railways more efficiently and providing the service which is needed.
Also we can reflect on the fact that an additional £250 million of grant goes to London Transport and is paid for to some extent by the ratepayers. In London the GLC have actually increased their precept—and many of us will be voting on this tomorrow—by 90 per cent. Had they gone ahead with their schemes, the precept might have been increased not by 90 per cent. but by 1,000 per cent. and the ratepayers would have been very sore if that had happened; so we have to thank the House of Lords judges for their ruling in that case.
What is also a very important part of British Rail is the commuter traffic. Anyone who has struggled to get to their work punctually knows the conditions under which the commuters have to travel. It is a vitally important part of British Rail. In fact, without British Rail the centres of our cities would decay faster and more disastrously then they are doing now. I read recently that, partly because of the high fares and partly because of high rates, many industrial companies are moving their head offices out of London. It is sad to see British Steel, International Harvester, Blue Circle Cement, Unilever, Tube Investments, W. H. Smith, GKN and many, many others—big, important international companies—all moving out because of the costs of keeping their headquarters in London; and that must affect jobs.
British Rail have been very helpful in providing data, and I should like to express my gratitude to them. It is interesting to see in the 1981 figures for London just how many people commute daily between 7 a.m. and 10 a.m.—the peak period. In rounded figures, 400,000 travel by British Rail, 350,000 travel by Underground, and about 100,000 travel by bus to work, while 175,000 travel by car and 17,000 travel by motor-bike, and they generally jump the queues. I believe only 9,000 travel by cycle. Curiously enough, there has been a 50 per cent. increase in bicycles in the last five years, because they get through the traffic. From these figures it would appear that British Rail has not changed much in the last six years. The number travelling by Underground has gone up by 12 per cent. since 1976 and the figure for buses has gone down from 150,000 every day to 100,000. That is a remarkable 30 per cent. cut in bus travellers.
But it is British Rail who carry the bulk of travellers and it is very important, therefore, that they should be efficient and well supported. The commuter services must continue, otherwise we should have a tragic depopulation of all our cities and thereby of the services which our cities provide to the nation.
A good comment has already been made about inter-city services. I think there are the best of British Rail: they have modernised. The Mark III carriages are quiet, comfortable, air-conditioned and very pleasant to travel in. One of the great glories is that you can get away from the telephone, so you can work if you have a mind to, or you can sleep if you want to do that. Certainly I think our BR inter-city services are remarkably good and I only wish that other services in certain ways could match them.
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One can criticise state monoploies but there is a very difficult way of measuring their efficiency. I give full marks to British Rail in that they initiated with Leeds University a study of the comparative efficiency of 10 European railways. I only wish that the figures were a little more up to date. The latest actually relate to 1977 and were published in 1981. When I pressed them for reasons why they did not publish more up-to-date figures they told me that they were under some pressure from their European colleagues because British Rail show up so well in this comparison with their rivals on the Continent that their fellow railwaymen there are not too anxious to give up-to-date figures which might show them in an unfavourable light.
Of course, there are good and bad things about British Rail in this comparison. As between firms, I always find that comparative figures are very helpful. I know that no one set of figures is perfect because you are not always comparing like with like; but if you are at the bottom of every league then something is wrong with your organisation. Here there are strengths and there are weaknesses, and I should just like to draw attention to some of them. First, our fares are far and away the highest in Europe; they are twice or more than twice the fares in Italy, France, Belgium and Finland. Surely British Rail have something to learn here.
Sweden gave an example by a very low fixed fare, and they have enormously increased their passenger traffic. British Rail tried an experiment—I believe it was one pound to go anywhere on one occasion last year—and there was a surge of traffic. Surely, when you have standing overheads which are very high, you should do everything conceivable to attract more passengers and spread those overheads over a greater number, get the fares down and get more people back on to the railways.
Secondly, I have to say that the manpower inflexibility of British Rail is a disadvantage in connection with productivity. This problem particularly effects ASLEF and flexible rostering. At the moment the tribunal of the noble Lord, Lord McCarthy, is sitting, and we are always being told that his report will be coming next week. I am sure that he is being very conscientious, but I can only say that, compared with other nations, we do not have flexibility of manning. Wherever one goes on the Continent, there is seven-day railway working. You do not see only one-third of the trains on Sundays and half the trains on Saturdays. It is the same format. I find myself wondering what makes our Post Office and British Rail believe that fewer people want to use their services at weekends. If the question was ever fairly put, you would find that more people wanted to travel at weekends. They then have time off and want to visit relations, and a lot of traffic could be attracted with more flexible working.
I have to say to the noble Lord. Lord McCarthy—I am sorry that he is not here at the moment, but perhaps one of his colleagues would agree with this—that he is so deeply ingrained, in all our beliefs, as being connected with trade unions, that it must be very difficult for him to sit in objective judgment on this aspect of the railways. We believe, rightly or wrongly, that he was the architect of much of the legislation when Mr. Foot was Minister of Employment. We have also seen him on the Front

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Bench very ably conducting debates on all the legislation which has come on trade union matters.
However objective he is—and I am sure that he will do his best—can the outside world really believe that, after eight years as chairman of the railway arbitration tribunal, he is the best man to give an objective and neutral judgment? I know that he has been elected back into office for two-year periods over a span of eight years, but perhaps he will reflect before he accepts for another two years. He is elected by the trade unions and by the management—incidentally, the taxpayers do not have a say in it—and he is doing it for very modest pay, which is not motivating. But I just wonder if he would like to think about whether he can be considered as objective as he should be on this great issue, which is so important to the future of British Rail.
I should have liked to say something about the service which we have to enjoy on British Rail. We all have stories about the buffet car not being there or, if it is there, not being manned, or about the restaurant car not being there or, if it is there, not being manned. I remember vividly one experience concerning a number of parliamentarians and how they were looked after by Swiss Railways when they had a crisis. After ski-ing against our parliamentary colleagues in Switzerland, we were going down on the branch line from Davos to Landquart where we were to catch the main line train. A poor child slipped under the engine and a leg was crushed, so the train stopped and they sent for hydraulic jacks to lift it up.
Along came the guard and asked whether anyone was trying to connect with an aeroplane. He collected the numbers, made a telephone call and got several taxis up to the nearest road. He then telephoned down, stopped the main line train and, after a wait of half an hour, we were pushed into taxis, taken down to the main line train, on to Zurich airport and back to London. I wonder how many people would have taken that trouble and given that service on British Rail. It is the small things that one remembers and I hope that the good in British Rail will spread more widely in providing a smaller and better service. There are other points to be made from these international comparative figures.
The Government have shown by their large financial grants that they believe in the future of British Rail to generate half their current investment needs, but that is not enough. They are the lowest investors of all European railways. What is sad is that they are not generating enough money to do their research and development. With a turnover of £2,000 million, they are devoting only £13 million to future research and development and that is almost farcical. You cannot keep up with the world and with the competition from road, coach and car if you are not investing more than that in future generations of technology and equipment.
They need to attract more customers, and I believe that they can do that with lower fares. As the noble Lord, Lord Underhill, said, if they are to genreate more cash, everything depends upon getting better industrial relations. I hope that when this furore about flexible rostering is over, they will set their minds to improving industrial relations so that they can provide more efficient railways, a better service, better
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punctuality and a better future, with adequate investment in research and development.
5.55 p.m.
Lord Ferrier: My Lords, before I turn to my prepared speech, I am tempted by something which was said by my noble friend Lord Orr-Ewing and the noble Lord, Lord Taylor of Gryfe, about the cost of rail travel to commuters. My noble friend said that the commuter services are absolutely essential and are part of our way of life, certainly in the metropolitan areas. The noble Lord, Lord Taylor of Gryfe, said that motoring is more expensive than the train. I have occasion, when I fly down from Scotland, to come into London at the middle of the day and I see line upon line of expensive railway rolling stock lying idle from 10 o'clock till 4 o'clock. I should like to know—we can talk about it afterwards, and perhaps there is something in British Rail's figures—whether, although they say that the Highland lines are very expensive, they are anything like as expensive as the commuter lines in London. I want to know whether that factor of capital lying idle has been taken into account in some of these figures.
I shall not say anything more about the railways, because I know that my noble friend Lady Elliot will he devoting most of her speech to them. She knows a great deal about the subject and, like myself, travels a lot by train. So I want, first, to thank my noble friend Lord Lucas for tabling this Motion. It is just as well to rememebr that, over the years, this House has made a tremendous contribution to solving the problems of transport, particularly road transport, in every respect—not only road construction and the like, but also road safety. Looking back over the many years that I have been at it, I have always been associated with the noble Lord, Lord Lucas, and with his father before him, on the same sort of line.
I have a vivid recollection of the late Lord Stonham and of the efforts he made in the middle sixties to develop a fully integrated transport system, such as my noble friend Lord Lucas and the noble Lord, Lord Underhill, have spoken about. We have been at it for years and years, but nothing has really happened. The noble Lord, Lord Underhill, asked whether we can start. We must address ourselves to problems such as the one at Didcot, where rail and road container traffic was to be concentrated. It would have been a marvellous contribution to an integrated system, but the grass is growing up through the sidings because of what the noble Lord, Lord Underhill, spoke of—the failure of industrial relations.
I wonder whether people realise how disheartened many of us are about the question of trade union leadership. Transport has recently been dislocated by the action of ASLEF and a dock strike is on the horizon, as my noble friend Lord Cayzer said. The wording of the Motion narrows down what we can discuss, because my noble friend has concentrated on the economic and social problems rather than on the wider aspects of the whole transport system.
I feel that the problem of trade union power affects the country's economy. The facts are that railway strikes, dock strikes, blacking and the like bear heavily upon the country's economy. I well remember that

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when the noble Lord, Lord Scanlon, spoke on 12th November he said that there is much wrong with the trade union movement. He went on to say that it is time we all co-operated on this issue and gave the TUC the assistance it needs in bringing about new arrangements. It is very interesting that on that occasion this was the motto on both sides of the House.
I am sorry that my noble friend's Motion says nothing about water transport so far as freight is concerned. My noble friend Lord Cayzer—whom congratulate on his maiden speech—spoke about the sea, but he did not mention inland water transport. I shall not say much about water transport because I. see that the noble Viscount, Lord St. Davids, is to speak in this debate. I know I can rely upon him absolutely to let fly on the subject of water transport. He is concerned in particular with internal transport. I am also concerned about the problems of the Highlands and Islands, the ferries and the piers.
The noble Lord, Lord Underhill, said that the railways are not important in terms of the urban areas and concentrations of population. However, we must remember—I am sure that my noble friend Lady Elliot of Harwood will bring out this point—that it is all very well talking about going by car if you are travelling 20 miles, but it is no fun if you have to do 400. And some of us do 400 miles twice a week. In many respects, therefore, the railways are essential to a great number of people, particularly in the rural areas. The noble Lord, Lord Underhill, pleaded for a long-term view of the railways. He said that what we need now is action. Let us hope that we shall soon have it.
With regard to water transport—I shall risk treading on the toes of the noble Viscount, Lord St. Davids—we must remember that, because of the trade unions, it is quite impossible in this country, under the present system, to make use of the barge-carrying ship. To my mind, the barge-carrying ship is the answer to the Channel tunnel. I am against the Channel tunnel for various reasons. The main reason is that it is not sufficiently flexible. Our flexibility in crossing the North Sea and the Channel is greatly interfered with because we have been unable to develop the barge-carrying ship. The Russians have such ships which are driven by atomic power. This is because the dockers here will not handle barges which are to he put into barge-carrying ships. A potential contribution to our transport system has therefore been frustrated by the unions.
It is a pity that our debate is under a certain amount of pressure after the more important discussions about the Falkland Islands. However, so far as labour relations are concerned, I for one—and I think others—look forward to the forthcoming legislative proposals with the greatest of interest. Something must be done to prevent our economy from being interfered with by bad industrial relations.
Your Lordships will know, from experience of my habits, that I cannot be expected to sit down without talking about by-passes. I have in mind, of course, the by-pass round Edinburgh. However, by-passes in general have been mentioned today by several speakers, and they have been referred to in the Armitage Report. One or two points about by-passes
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have not been made in that report. There is an economic aspect to by-passes: that they should be designed to provide places for the proper security and rest of vehicles and their drivers at suitable, well chosen intervals, not only so that loads are secure and the drivers able to get nourishment and rest but also so that provision can be made for the breaking down of loads in order to keep the heaviest of the transport trucks off city streets.
One association said to me that the one thing which we must insist on in relation to the larger, heavier vehicles is that they are not introduced until the by-passes are finished. That is easy enough to say. But there is an economic point about by-passes which merges into the social side, and it is this. The experience, certainly in Edinburgh, has been that fiddling about and indecision about a by-pass has led to the greatest delay in internal planning. It seems to me that it would be good for us to say today, as the White Paper indicates that 13 by-passes should be built in order to save historic cities, that they should be built quickly, because if they are not built and if traffic does not know where access is going to be, local authorities (Lord Tordoff said that it is very important that local authorities should be given ample opportunity to take part in the discussion of transport problems) will be unable to plan their internal transport.
What is more, if they fiddle about over it they will get, as happened in Edinburgh, large areas of planning blight, because people will say, "You must not build here" or, "You must not build there; there may be a road". It is an economic item of the utmost importance that if there is to be a by-pass it should be built as soon as possible. I sincerely hope that the Government (by the Government I include the Secretary of State for Scotland, because when I asked the noble Lord, Lord Bellwin, whether the outlook with regard to by-passes applied to Scotland he replied that he thought that it did) will put capital into roads, for this seems to me to be the best means by which to start the upward surge for which we all wait and hope.
I cut a letter out of the Scotsman the other day. It is from a person who lives in Dundee. He said:
"On leaving Ipswich I stoked my elderly and battered Peugeot up to 60 mph and, with the exception of replenishment stops for car and crew, held it at that speed, by-passing Bury St. Edmunds, Newmarket, Cambridge, Huntingdon, Stamford, Grantham, Newark-on-Trent, Doncaster, Wetherby, Darlington, Durham, Newcastle and Morpeth…".
And then he came to Edinburgh, where there was no by-pass. This is a matter of interest. It is a real problem, in particular for air travellers. It would be of great benefit to air travellers if it were not such a problem to get there from the East and the South of Scotland. As I am sure my noble friend Lady Elliot of Harwood will tell the House, you cannot do it. This is one of the social consequences. I appeal to the Government to do what they can to help the Lothian Region, no matter how much they hate them, to get on with it.
I need not embellish or go over the obvious factors in favour of by-passes generally, which are set out in paragraphs 206 and 207 of the Armitage Report. However, there is one point which the report does not mention and that is the one about delay which I have

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touched upon; delay is going to be expensive if one is going to build a by-pass at all.
From that flows another point which has not been touched upon, nor is likely to be. It is that the absence of a by-pass means that a lot of traffic—particularly commuter traffic—goes dodging about the backstreets in trying to overtake traffic jams. This is a serious matter in many ways. In the good old days the streets were places where children could play. The driver of a hired-car of mine said to me the other day, "When I was a boy I played football in the street, but my kiddies cannot do that now". Of course, there are areas where sensible local authorities have closed streets where children can play for a certain number of hours each day.
We had a debate in this House the other day about road humps. This is a matter which concerns internal planning and transport. It relates to a point made by the noble Lord, Lord Underhill, when he talked about women with prams. I am vice-president of the Pedestrians' Association, and it is as well to remember that in terms of traffic congestion and its bearing on economic and social factors the pedestrian must be remembered. I am so glad that the noble Lord, Lord Underhill, mentioned cyclists. These people are users of transport. It is of social importance to them that they should get about.
On this question of making the streets better for children to play in, I was struck the other day, when we were discussing inner cities, that three Conservative Back-Benchers, without any collusion, all said in their speeches, that city centres should include accommodation for children to play. This is why I like the idea of encouraging the building of road humps or what are called "sleeping policemen". The question of road humps is not a simple one because there are problems in respect of ambulances and fire engines and the matter has to be thought out. In terms of women with prams they are a great help because they enable mothers with prams or carrycots in getting across streets, because road humps are brought close to the pavements. Let us remember that the pedestrian has a rightful place for consideration when it comes to traffic congestion. As to the railways' contribution, I begrudge the expense of the APT (but this has been touched upon by others) because I believe that more money could be spent on renewing the existing rolling stock. Again, I wish to thank the noble Lord for promoting this debate and I look forward to hearing the Minister's reply.
6.14 p.m.
Viscount Sidmouth: My Lords, in rising to speak tonight I should declare an interest in that I am president of the National Council of Inland Transport. It might be worth mentioning in view of what was said earlier by the noble Lord, Lord Tordoff, that a great number of local authorities, in both England and Scotland, are corporate members of that body. I can confirm that their views on transport are of very great interest.
The council concerns itself with all modes of inland transport and recognises the importance of each. Nonetheless—and I see one of my predecessors, the noble Lord, Lord Gainford, in the House tonight—it came into being in 1962, in what might be called the Beeching/Marples era, when the railways first came
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under concerted attack. At that time the "Beeching axe" reduced the railway network from about 20,000 route miles to 14,000 route miles. The figure has since stabilised at about 12,000 route miles. The railways have more or less managed to retain their share of passenger traffic—which was not very high even then—because of their commitment to commuter travel and the success of Inter-City. But by 1980 British Railways carried only 10 per cent. of all freight traffic as measured in tonne miles. I make no excuse, therefore, for concentrating my short remarks on the railways situation only.
I believe there is ample evidence, and it has been acknowledged by several speakers tonight, that a significant contribution by rail is, and will be needed for preventing congestion on roads, reducing environmental damage, and making the most efficient use of energy in the future. Yet, as I see it, that future is under greater threat than it was even in 1962. Basically, this appears to be due to a loss of confidence by the Government—or, should I say, by the Treasury? Certainly, if British Rail are denied the opportunity to make appropriate investments, they will eventually wither on the vine. The British Rail Board itself has identified electrification as the investment priority. The situation there seems to be far from satisfactory.
Reference has already been made in previous debates to the joint Ministry of Transport/British Rail review of electrification carried out in 1981, which found that what was called "Option 5" of the electrification proposals offered a return on expenditure of 11 per cent., cash discounted. Although this inquiry was probably one of the most exhaustive and far reaching of its kind ever attempted, the board has been required to go over the ground once again and it is at present engaged in that exercise. I believe that the board's replies to the queries that have been raised will be ready by early next month.
I have no doubt at all that the board will be able to present a cogent case to the Government, with regard to both the viability of traffic prospects and the financial return expected. The latter should be well in excess of the 5 per cent. real rate of return specified in the 1978 White Paper on nationalised industries, and in excess of the 7 per cent. set by the Treasury for this particular project. British Rail—this is another of its conditions—is also well on course for shedding 38,300 jobs, which was the target set in its corporate plan 1981–85. So the trouble area for all parties concerned in this exercise comes down to a so-called political one, which is all about productivity. Speaking from these Benches, I do not regard this as a political issue and the only interest I will declare is an intense caring for the future of the industry.
It is worth referring again to the joint review carried out by British Railways some years ago in conjunction with Leeds University, which was an intensive comparative study of European rail performances, in which BR's operating, commercial and financial performance was compared with that of nine other European railway systems. I believe that the noble Lord, Lord Orr-Ewing, was somewhat surprised to find that many of the figures show BR to be extremely efficient as compared with the European performance, but I think that to anyone who is familiar with British Rail this is by no means surprising.

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All the more reason, therefore, to be concerned, and I think the British Rail Board were, at what appeared to be two outstanding points where our results did not square with those obtained abroad, with one exception to which I will return. The two points were that, so far as operating staff were concerned, it emerged that the average hours worked by BR staff were almost 25 per cent. higher than those of any other railway without equivalent higher levels of output per man. When it came to train crews, the finding was as follows:
"It is in the freight and parcels sector that the biggest differences arise. The performance of BR and FS (that is the Italian railways) is very much worse than any other railway, requiring more than twice as many staff to run a freight train as the more efficient railways".
So I think it is perfectly correct for British Rail to have picked that up—it was one of the outstanding points arising from the inquiry—to see what could be done to improve it.
To my mind—and I have had experience of operating road transport—there is considerable contrast here with lorry drivers. Let me say at once—and I have worked with them—that British rail drivers are probably the best trained and most efficient and reliable anywhere in the world. It is all the more surprising, therefore, that, as I understand it, these extremely good drivers spend only three and a half hours out of an eight-hour day driving a train. I was making the point about road transport, and after all this is where a lot of onetime railway freight has now gone and is carried. Anyone familiar with recent legislation on the subject of drivers' hours will know that on the grounds of safety the main thrust of the legislation has been concerned with preventing lorry drivers driving nine, 10 or even more hours per eight-hour day, if I may he forgiven an Irishism.
Therefore, I think that it is perfectly right to try to find ways of allowing British Railways drivers to exercise their skill for more of the time during the day. Naturally, I will not get on to the question of flexible rostering, which is under consideration by the noble Lord, Lord McCarthy, and we look forward to his report, I believe later this week. But the danger I see there is that, irrespective of what the hours prove to be, nothing will he settled because both sides are so entrenched in confrontation. It is absolutely vital that this long-standing controversy should be resolved, or the industry, while arguing fruitlessly about what are in many cases outmoded principles, may well end up emulating Sampson and bringing down the whole structure about its ears.
In the debate in this House on 21st April on efficiency in the public sector, the noble Lord, Lord Boyd-Carpenter, speaking, I am sure, from experience, said this:
"Let us analyse the basic problems of the nationalised industries. I think the first and 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".—[Official Report], 21/4/82; Col. 563.]
I suggest that really one can go further than this, because, in so many of our declining but still vital industries, most of which are to be found in the public sector, one finds a form of conservatism—speaking of course with a small "c"—whereby all sides of the
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industry become locked into attitudes and practices which prevailed and were very successful in the days when they were at their peak but which are no longer relevant.
So I think that, faced with this problem, it is perhaps inevitable that the Government, particularly one holding the present political and economic convictions, should seek some other criteria in determining the level of support to be given to each sector of each industry, including wages and salaries. I believe that this is right and that the policy of strict cash limits has been successful in bringing some discipline to this difficult area. I would submit, however, that that policy applies in principle mainly to the current account, where it can be adjusted within reason from year to year to take account of need and the general economic position of the country, as it would be in private industry. But different criteria must surely apply to investment policy, especially in dealing with programmes which may take a decade to carry out and will affect the economy of the country well into the next century. To borrow money to balance current account may well be to mortgage the future of our grandchildren, but successful long-term investment in the infrastructure of the public sector would surely be to secure that future.
Before I sit down, I should like to mention the advanced passenger train, to which reference was made, I think possibly confusing it with the high-speed train. There is a useful comparison with the French experience with their TGV, in that they have got it into service very much more quickly, whereas the APT is still in great difficulties. I think there are two points to be made here, both financial. First of all, as the noble Lord, Lord Orr-Ewing, pointed out, the amount available to British Rail for research and development is absolutely ridiculous in relation to the size of the business. It looks as though this very clever and promising invention has run into the classic problem of not having enough funds to carry out the development part of the project, which often costs very much more than the initial research work on which it is based. The second point I want to make is that the French TVG is running on a special track, and therefore it is a perfectly conventional type of technology, an electric locomotive with carriages, such as the Japanese introduced about 20 or 25 years ago with their bullet trains. Therefore, the whole thing comes down not to a great French triumph of technology, but simply to the fact that their Government have more faith in their railways and were prepared to invest more in them than ours were.
Baroness Phillips: My Lords, before the noble Viscount sits down, he appears to be extremely knowledgeable; as a great commuter and customer of British Rail, can he explain why they found it necessary to invest in pulling down a perfectly good station at Victoria when they cannot find the money to invest in research?
Viscount Sidmouth: My Lords, I am very sorry; I should be very glad to oblige the noble Baroness, but I do not think I can answer that one without notice.
6.29 p.m.
Lord Teviot: My Lords, I must thank my noble friend for putting down this very important Motion, and also for wording it in such a constructive way, so that one knows precisely what one is debating. Also, I would like to join with other noble Lords in congratulating the noble Lord who made his maiden speech; he gave us a very clear, interesting speech, and we hope he will speak again soon.
My Lords, as I think your Lordships would expect, my own brief intervention will be concerned mainly with the carriage of persons by public transport. Above all, it should give us the opportunity to discuss the problem with a fresh look and to adopt, as has been done this afternoon, an entirely apolitical approach. This is helped by the fact that in the past few weeks there have been valuable reports on public transport by the National Consumer Council and the National Consumer Council for Wales. The NCC has identified the consumer's problems under three headings: the cost of services; their availability and frequency; and their quality. The latter points come back, in a high degree, to reliability, and that reflects the theme of the Motion, because in urban areas the major stumbling block to maintaining timetables is traffic congestion. At this stage I shall leave what I had planned to say because it has been covered by the opening speakers. Nevertheless, there is still a great deal for all of us to talk about and, therefore, your Lordships will forgive me if I speak from a few notes.
The first matter that I should like to deal with is cost of services, their availability and frequency and their quality. Indeed, this is very much the theme of everybody's speech. There is a great advantage if people travel by public transport. My noble friend and others mentioned that only half the population have driving licences and a high proportion of people do not have regular access to motor-cars. That is fine. However, even half that population in their motor-cars can cause appalling congestion compared to the great number of people who are carried by public transport, either by road or by rail. Also, on the question of cost, travelling by public transport is not as flexible or as personal as driving about in one's own car. Nevertheless, it is easier—one can read one's newspaper and so on—and as a free nation I think that everyone likes to do his or her own thing. Therefore, cost is very important. Unfortunately, successive Governments have always increased fares, and every time fares have gone up—and they have gone up even ahead of inflation—the number of people travelling has fallen and, therefore, the availability of services, their frequency and their quality have also fallen. So all these matters are very much interrelated and they show the importance of subsidies.
I noticed that in my noble friend's speech mention was made of the cost to the ratepayers. Be that as it may, I think that in order to maintain a good public transport system subsidies are important as regards the wider issues. I shall not go into the "whys" and "wherefores" of London Transport. But I do think that lessons should be learnt, and figures should be studied very carefully of people travelling in the Great Wen between October and March, and whether the traffic flowed easier, whether more people were travelling and so on. As I have said, we are being apolitical.
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Unfortunately, when the GLC presented this to us—in my view, if I am allowed to be political, it was very clumsily done—I think that quite rightly the people of Bromley who were not affected but who still had to pay high British Rail fares, had every ground to complain. In the end, there should be many lessons to be learnt from London and other cities—indeed from everywhere. If we are to benefit from low cost transport, let us study the matter. I believe that such studies are carried out in many countries. Another point to mention is that within the Common Market countries only ourselves and Greece show a declining number of people travelling by public transport. This is a pity.
Mention has been made of costs, and that affects availability of routes. As regards the railways, we have more or less the same number of routes. The railways have done great things to persuade people to travel on trains, by their "bargain breaks", family rail cards and so on. Whether their costing is warranted, one does not know. However, they have conducted a fairly aggressive marketing policy for people to travel on trains and I think that people are doing so. That could also apply to express coaches.
It has also been mentioned that since the 1980 Act there has been a great increase in the number of people travelling by coach. There has been more flexibility, which is absolutely splendid. Travel by coach is generally for long distances, and quite often for social needs and not for basic essential needs. As a result, I do not think that the stage carriage has benefited at all. What we are really talking about are the essential needs of transport—people going to work, people going to shop, people going out in the evening; and another aspect which I do not think has been mentioned this afternoon is that of safety against road accidents. Many road accidents are, I believe the term is, "drink related", resulting from people going to parties and so on. If the possibility of not necessarily hiring a huge coach but, for example, a minibus, were explored even further and encouraged, and people could get together and hire such transport and have a jolly good evening out yet not needing to worry about accident, it would be a great advantage.
Another matter that I should like to mention as regards cost is the one-man operation. It might he cost effective but it quite often deters people from travelling if they have to sit on a bus while the poor driver collects the fares from everybody boarding it. It is all right if there is one fare covering all journeys, or a coin in the slot would be quicker. But if there is a fare stage structure, it takes hours, and it is frustrating for the motorist and causes congestion. It might be economical and I am sure that in rural areas it can work very well and be an advantage. However, it can be a disadvantage in cities, and that is something that we need to consider.
I shall not go on for very much longer. I think that perhaps I may not have covered the quality of service. I think that there is some comfort to be drawn here, and I suppose that in some ways we are getting better at it. Long distance trains are being made more comfortable. One would like to see them cleaner, but quite often, public habit influences that aspect. It is quite interesting to find that, if one travels on certain suburban trains in certain areas, the standard

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of graffiti differs. It is very difficult for operators always to keep buses clean.
Mention has been made of investment. Noble Lords have talked with great authority and from prepared speeches on investment. I should like to concentrate entirely:on public road transport and the maintenance of vehicles. This has very much declined. When I was in the industry some 15 to 20 years ago, one had the advantage when one drove one's bus on to the pump at night, that one could submit a defect card and there would be people who would be able to give you more clutch stop, more on the brakes or generally maintain the vehicle. Unfortunately, this service has somewhat declined. Also, pits for renovating buses were designed for forward engines or under-floor engines. Now buses have engines at the rear and so these pits are largely obsolete. One should like to see some emphasis put on that matter.
I could mention many other things. We have the Transport Bill before us and we shall go into the question of buses again. Anyway, this has been a most interesting debate. I again thank my noble friend for initiating it and I await with interest to hear my noble friend who is to reply.
6.40 p.m.
Baroness Macleod of Borve: My Lords, like other noble Lords, I am very grateful to my noble friend Lord Lucas of Chilworth for initiating this debate this evening; and congratulate the noble Lord, Lord Cayzer, on his expert maiden speech. The debate has been wide-ranging, and indeed noble Lords who have already spoken have covered practically all the points upon which initially I had thought of speaking. So I shall concentrate tonight on only two small aspects. We have heard of the M roads, the big roads, the rails and the autobahns. I do not think your Lordships will mind if I lead you down a little country lane.
The various systems of inland transport have already been discussed. But people have to use those systems, and it is the people about whom I want to speak briefly this evening. I have been a car driver since I was 17 years old—a long time ago. Being disabled, I cannot use the buses, so I cannot travel on the transport referred to by my noble friend Lord Teviot. However, I know a certain amount about motor-cycles and cyclists. So it is a form of two-wheeled transport about which I wish to say a very few words this evening.
The noble Lord, Lord Underhill, and indeed my noble friend Lord Orr-Ewing spoke about pedal cycles, but motor-cyclists and the safety of motor-cyclists on our roads today are what have concerned me for a very long time. Today I have had the opportunity of finding out the latest figures of those killed on our roads using the two forms of two-wheeled transport and those who have been seriously injured. I am pleased to say that from the figures I have received it seems that in 1981 fewer people riding motor-cycles were killed—though only marginally fewer—than in 1980. The total in 1980 was 1,163, whereas in 1981—the last figures available—in the first quarter 205 were killed, in the second quarter 296, and in the third quarter 356, and in that quarter there was a drop of 7 per cent. However, the seriously injured in those quarters amounted to 3,378
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in the first quarter, 5,567 in the second quarter and 6,679 in the third quarter, which was up by 5 per cent.
It seems to me that cyclists—perhaps the old-fashioned variety of non-mechanised transport—must be taken into our considerations when we are talking about the users of our roads. In 1980 302 were killed, but in the first quarter of 1981 54 were killed, in the second quarter 89, and in the third quarter 85, and 3,005 were seriously injured during the first three quarters of 1981. I believe that we must do something for these people, who are mostly young.
Safety seems to me to be part of training. During one of our recent debates the Minister said—and it is, indeed, in an Act—that motor-cyclists shall receive two-part training. I am very sorry to have discovered that, whereas when we discussed this Bill it was thought that the RAC and the ACU would undertake the two-part training of our motor-cyclists, unfortunately—it is a voluntary scheme—the people involved are not now able to give the time that is necessary to fulfil their obligations under the new Act. Therefore, the RAC has had to give up its part of the training.
I should like to ask the Minister what will happen to this, to me, vitally important aspect of educating the young people in our country to use their motorcycles wisely and safely. I was also told when I raised the subject of good manners, which also seems to me to be part of safety, that there was no time to teach the young people anything except a rudimentary knowledge of the Highway Code and how to use their motorcycles on the roads. Therefore, good manners have been left out of the curriculum.
Conspicuity—a word which has been brought into our language recently when we have discussed the safety problems of these people—is also very essential, not only for motor-cycle users but also for the other two-wheeled riders of the pedal cycles. Those of us who drive, as I do, round London every day and in and out of London every day will have noticed that pedal cyclists come very fast from every angle and are almost impossible to see. I think that it is amazing that there are so few accidents, but to my mind every accident is very important, and when it leads to a death it is extremely important.
I am also informed that the state of our roads leads to a great many accidents for those people about whom I am talking because, as most of us know, the local authorities do not maintain the roads to the standards that we would like to see. There are potholes and pitfalls in the roads—and I do not include the humps on which my noble friend is so keen, and on which I am not. Motor-cyclists come along and go into the great holes and fall off their machines; they are run over by a car and killed. That is my information, which I have gleaned from several hours' work, but it is also my view that far more should be done for these two-wheeled people who use our roads.
In conclusion—and I promised that I would be the shortest speaker—I should like to pay one very quick tribute to Motorail. I prefer not to travel by rail for all sorts of reasons—the platforms are too long for me —but when I take my car to Scotland, as I try to do every year—Motorail is excessively helpful in getting me and my car on the train and getting us off. So I should like to pay a small tribute to Motorail. I am

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also very grateful to my noble friend for initiating this debate.
Lord Ferrier: My Lords, before my noble friend sits down, is there not a new regulation that motor-cycle learners shall not ride machines of greater horsepower than 2½?
Broness Macleod of Borve: My Lords, yes, that is true.
6.50 p.m.
The Countess of Loudoun: My Lords, like my noble kinsman Lord St. Davids, I should like to say a few words about water transport. In the United Kingdom the various modes of inland transport—road, rail, waterway and pipeline—have developed separately. Waterway transport was the first method of moving goods on a large scale, but, with the advent of rail and good roads, little further investment was made in waterways to enable them to compete. As a result, the potential of waterway transport has been virtually ignored. The past few years have shown a welcome change of approach by Government. In 1978 the first major improvement to a waterway for freight transport purposes since 1905 was authorised. The scheme for the Sheffield and South Yorkshire Navigation is due for completion early in 1983 and will facilitate the passage of craft to Rotherham in the heart of the South Yorkshire industrial conurbation.
Another welcome development is the provision under Section 36 of the Transport Act 1981 for grants to the private sector towards the cost of waterway infrastructure projects which will result, we hope, in a reduction of traffic on roads, thus easing the congestion on these roads and in the cities, albeit in a very small way. Nevertheless, there is still a need to rectify the imbalance in investment criteria for the various transport modes. Unlike the roads, improvements to a waterway for freight transport purposes carry a heavy financial burden in interest charges for which the customer has to pay. Competition between transport modes should be based on rules which are clearly equitable and fair.
Now why am I in favour of the greater use of water transport. What arc some of the benefits, as I see them? The introduction of push tow techniques has reinforced the fact that waterway transport is cost-effective. Operating costs per ton are low, and the serviceable life of a barge is 25 to 30 years—much in excess of that of a road vehicle. Studies carried out in Europe, the United States of America, and the United Kingdom have shown that water transport is more energy efficient than rail and, on average, between four and five-times more so than road transport.
Waterways are friendly to the environment. There is little noise, vibration, pollution or visual intrusion—all matters on the credit side. Waterways are already used extensively for the removal of household waste and sewage and industrial sludges. They are also eminently suitable for the movement of hazardous and dangerous goods. Substantial quantities of petroleum products, caustic soda, sulphuric acid and chlorine are already moved by inland waterways. There has been growing public concern over the danger of transporting such goods by road. The inherent safety of
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water transport makes it ideal for the movement of substances with explosive, radioactive, toxic, corrosive, and inflammable properties.
Other opportunities for water transport arise in the movement of heavy lifts. In 1981 a large water processing unit was moved by water from Gloucester to Avonmouth for export to Abu Dhabi. The movement of such loads by rail can present problems because of loading gauge restrictions, and transport by road involves disruption of traffic and the risk of damage to bridges. There is increasing evidence of opportunities for growth in the commercial waterways with regard to the carriage of freight, but the co-operation of the local authorities concerned must be secured to provide suitable industry alongside the waterways.
Inland waterway transport in the United Kingdom appears to have reached a turning point. The decline in tonnages moved in recent years has been arrested. With a fairer distribution of transport resources, and bearing in mind the changing traffic patterns and present-day needs, the commercial waterways can play a bigger part in the transport needs of the United Kingdom.
6.54 p.m.
Baroness Elliot of Harwood: My Lords, we have heard most interesting speeches and we are indebted to the noble Lord, Lord Lucas, for having introduced this debate. It shows also how much agreement there is in your Lordships' House on a subject of this kind. I have listened to all the speeches and I have agreed with everything that the noble Lord, Lord Underhill, had to say, and I admired the way he put it; I have agreed with everything that the noble Lord, Lord Taylor, said, he having had great experience on the board of a Scottish railway; and I have also agreed with many other people. I was interested in Lady Loudoun's description of waterways, of which I am afraid I know absolutely nothing but which I am quite sure are very important.
I should like to join those who are supporters of, and users of, the railways. I am a great supporter of the railways, and always have been, for several reasons. First, the railways are a much safer way of travelling than any other. Accidents on railways arc far fewer than accidents on the roads. For the travelling public —and I am one of them—rail travel is far less tiring than driving either on roads or motorways, though one has to drive a certain amount on the roads, of course. Distances are more quickly covered. The night sleepers, which I use twice a week, save hours of time. You arrive in the morning at breakfast time and you have the whole day for your work, and it is a good method of saving time.
The more traffic increases on the roads, the more vast sums have to be spent on motorways and paid for by the taxpayers. The noble Lord, Lord Taylor, pointed out that much of the debt which appears on the railways appears because they have to pay for their track and for their expenses, whereas the roads are in a more fortunate position. It all comes back to us in the end, but the fact is that roads have more public money. For British Rail there is every advantage. Long distances can be covered faster every year and in great comfort, and commuters, who only use the

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railways for short distances, get up and down into the big cities far more easily by rail than by road.
I hope your Lordships will read the annual report of British Rail. It is a fascinating document, and it puts the case for the railways very succinctly. Passenger receipts have passed the billion mark in this new report. The volume of passenger traffic alone is 8 per cent. up in the last five years. Freight losses have halved due to improved productivity, and I believe that that could be increased if more freight went on the railways, excluding of course perishable goods, for which lorry traffic is much more convenient and better.
Freight traffic is increasing all the time. Ninety per cent of all the passenger trains arrive within five minutes of scheduled time. I think it was said by the noble Lord, Lord Orr-Ewing, that international comparison shows that British Rail is the most cost-effective railway in the world. What is it, then, that we need to improve our railway system? It is quite simple. We must provide more capital for investment. In a policy document published in 1981, British Rail put forward excellent plans to replace the worn out rolling stock, to electrify the railways, and the diesel engines, and to try to improve the railway equipment which is extremely old. I think again it was the noble Lord, Lord Taylor, who said that the diesel engines are between 20 and 30 years old, and new rolling stock is badly needed. Travelling, as I do, twice a week to Scotland and back, I realise how old the rolling stock is. I have been sleeping in the same berths since the war. Renewal is vital if the whole thing is not to come to a stop.
Most important of all, as the noble Lord, Lord Underhill, said, is to electrify the railways. Not only is it absolutely vital, but it has every advantage, including speed, economy in running costs, comfort and savings in oil. The Government are committed to a 10-year plan, and that is the basis of the future economy of the railway business. One of our great companies, Balfour Beatty, have new contracts to electrify lines in the United Kingdom—some of them have been mentioned, including Manchester, Liverpool and London—and they have contracts for India and elsewhere. Unless electrification goes on in the United Kingdom, their field team of skilled men will be reduced, as I learnt from attending a meeting called by the noble Viscount, Lord Sidmouth, to discuss the railways. That company had a skilled team of 252 men, but in August 1981 the number was reduced to 190 and, if any scheme is halted, the team will be further reduced to 52 and then to 35, all because of the slowdown in the rate of electrification. Unless electrification goes ahead, skilled teams like that will come to and end, and that will mean an enormous increase in expenditure when electrification takes place, by which time the teams will have been disbanded. To allow that to happen would be a false economy because it must mean increased expenditure when it is finally done, and at the same time our railways will be falling behind those of other countries.
At that meeting, a member of the European Parliament said that European countries invested more in their railways than we did. For example, in France, new investment worth £830 million had gained 40 per cent. new passengers and was already earning 20 per cent.
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more in returns. Countries in Europe generally have flexible rostering. Though it is a controversial subject, it is standard practice in Europe. What we need is a definite commitment by the Government to long-term investment without interruption. Skilled teams must be kept together because that way the work is done more quickly and economically.
I congratulate British Rail on the many new ways they are helping their customers, including the rail card for disabled people, the old age pension card, which I use continually, and the £2 ticket for a month's travel. All those items encourage people to travel by train. In addition, I can say from long experience that BR are to be congratulated on the efficient and courteous way in which the staff serve their customers.
In the current annual report, Sir Peter Parker defines the objects of British Rail now as, first, to modernise the services; secondly, to give better value for money; and, thirdly, to be a competing railway. BR must compete efficiently with their existing assets, which are many. Investment in capital equipment will give a valuable return to the nation and of course to the customers who use the railways. Competing through efficient, new-style management and attracting new customers is another of Sir Peter Parker's definitions for the future.
In the policy document to which I referred, all the plans point to 1983 being a crucial year. Unless we are then replacing worn-out engines, rolling stock and other vital equipment, the railways will be beyond repair. If we do not do what is recommended in that report, endless closures will take place. Already in some areas there are no railways. I live in such an area. If you want to get to a train you must drive 50 miles, making 100 miles for the return journey to the station. There are threats to North Scotland's railways—north of Aberdeen, possibly up to Inverness —people cannot afford to fly (it is three times as expensive as travelling by rail) and cars and petrol are much more expensive than the railways, and of course call for more roads.
Now is our chance to modernise and electrify, and that is vital. The trade unions know it, for their interest is the same as ours, and the management and customers hope very much that the co-operation which we all want to see between unions, management and customers will now really take place. I appeal to them all to help in every way so that the whole nation may benefit.
7.6 p.m.
Viscount St. Davids: My Lords, I thank the noble Lord, Lord Lucas, for initiating this debate and for asking me to speak in it about waterways. I will not disappoint him. Nor will I disappoint the noble Lord, Lord Ferrier, with every word of whose speech on waterways I thoroughly agreed. I am glad I have one more convert to the idea of the barge-carrying ship.
In talking about the waterways in connection with transport, let us first consider what they cannot do. There is absolutely no sense in trying to make our narrow waterways—our little old waterways with 7ft. wide locks—into cargo-carrying waterways. That could not be done economically, and any attempt to do so would merely cause larger financial losses. As

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for passengers, the narrow waterways have a small and limited purpose; they can be used to decoy people on holiday away from the horribly noisy roads on to the peaceful, quiet waterways. There, the narrow waterways have a limited use.
Their real use in transport is in respect of the major waterways which lead inland from the seaports. Seaports are places which positively generate traffic jams. There is no better way of producing a traffic jam than taking a very large object and loading or unloading its contents into and out of a large number of small objects. When you do that in a limited area, you not only create a fine traffic jam but you also have the problem of people wanting to live in the vicinity and therefore needing houses, shops, public transport, their own motor-cars and all sorts of other things, the result being that every major seaport creates a bad case of traffic jams.
There is only one way to overcome that difficulty; it is to spread the traffic out, and here I would make a point which will interest the noble Lord, Lord Underhill. The Dock Regulation Acts have done a great deal of good, possibly not intentionally, in that they have spread our seaports all along the coast instead of concentrating them in a few long-established spots. The result has been to spread the traffic out. I am sure that was not meant, but the result has been wholly good, and it has also caused a large outbreak of private enterprise, in praise of which I feel sure the noble Lord, Lord Cayzer—I thank him for his speech, of which I greatly approved—would join me.
How does one spread out these ports? One of the best ways is to spread them further inland, as far as possible along natural or artificial waterways. It can be done in several ways. One way is further to develop the low profile, short seas ship, which can go up into the great European waterways—in many cases right up into the interior of Europe—which can cross the seas, and can come up our major rivers, such as the Thames, the Trent, the Severn, and so on. There is a great possibility of doing that. There is also the self-propelled motor barge which can be used on our own inland waterways; in particular, as my noble relative said, on the major waterways of the Yorkshire area, which have recently been enlarged and which will soon be complete. That is another way of doing it.
But undoubtedly the best way of all in the future will be the barge which can be carried aboard a ship. I have talked about this before, and I shall go on talking about it until it happens. Much of the traffic of today is in containers, but one cannot make a road container of more than a certain size, because otherwise it could not be moved along a road. But one can make the container waterproof and float it. Once one can float it, one can have a very much larger container. The containers can be carried aboard ships. When they get to a waterway they can all be dropped into the waterway and, as my noble relative said, a pusher tug can be used to push them in rafts. I am informed that in parts of Europe they are now pushing rafts of these containers of up to 11,000 tonnes at a time. That is a major operation in anybody's estimation.
Those container ships are very valuable in our days. They are especially valuable to us because much of our traffic is now with Europe, and the European waterways are very far developed indeed. But it is not only to
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Europe that the barge-carrying ships can go; they can go anywhere in the world, and the waterways of the world are everywhere being developed. The Americans are very busy at the moment making brand new waterways, and American container ships are coming here loaded with barges, but at the moment they are not getting as far up our rivers as they should be.
The whole process needs much more developing and we ought to have container ships. I was glad to hear that British Waterways is going into a consortium with private enterprise to build barge-carrying ships which it is hoped to use in the near future in this country. This is the great development because in this way we can take goods off the roads, not just in small quantities, but in really large quantities. It is all very well talking about small developments, and it is perfectly true that a large number of small developments will produce a bigger effect, but here is a really large effect than can be achieved comparatively simply.
If I had just one major point to make in a speech on the subject of waterways and if I were to put that point alone, I would echo the noble Lord, Lord Ferrier. I would say that what we really need in this country to make our inland transport and our cross-seas transport easier, cheaper, more pleasant, less polluting, and more cost effective, with less consumption of valuable fuel, is more barge-carrying ships. Let us expand our waterways until they can take the container barges, which can then be pushed right up into the centre of our country, wherever our industry needs them.
7.16 p.m.
Lord Renton: My Lords, I doubt whether when he tabled his Motion my noble friend Lord Lucas of Chilworth expected that we would have such fascinating discussions on inland waterways and container ships. Before I go any further I should like to join in the chorus of welcome for the maiden speech of my noble friend Lord Cayzer. His mention of container ships has started something terribly important, because it prompts us to realise that our future economic prosperity is so much linked with Europe.
If I may follow up what the noble Viscount, Lord St. Davids, said, I would say that the link between Europe and the East Coast ports through the container ships is essential to our prosperity, and it follows that the link between the East Coast ports and the manufacturing towns of the Midlands is also essential. Successive Governments have not done too badly up to a point (something to which my noble friend Lord Ferrier referred) in improving the road system by means of dual carriageways, especially on the A.604 between the East Coast ports and the Midlands. But the dual carriageway system westwards ceases when we get to the A.1, and there is a vital, long overdue need for the link between the A.1 and the M.1. to be completed. I pay tribute to what has so far been done, as far as Huntingdon. T am referring to matters with which lam so familiar, because I was the Member for Huntingdonshire for a third of a century, and in those days I started agitating for the A.1-M.1 link to he completed, but work on the completion has still not been started.
Perhaps I am being a little unfair to my noble friend Lord Avon in not having given him notice, and I do not suppose that he is in a position to discuss this

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particular point, but I hope that he will take it on board, as we now say. It is essential that the link should be completed. It is planned, but not as a dual carriageway, and the idea of an A.1-M.1 link which is not planned as a dual carriageway is just plain shortsighted.
Of course there is a need for various by-passes, too, in that part of the world. As my noble friend said, Huntingdon has its by-pass, but Thrapston needs a by-pass. The A.45, which is also an east-west route, is not planned to become a dual carriageway in the foreseeable future, so far as I know, but it is nevertheless a very important route. Further by-passes are badly needed at St. Neots, Kimbolton and Kettering. I mention those factors in the debate because they seem to me to complete the saga which has been so vividly described by my noble friend Lord Cayzer, the noble Viscount, Lord St. Davids, and others.
I am one of those old-fashioned people who is always grateful for an excuse for nostalgia. That is one of the reasons why I am grateful to my noble friend Lord Lucas, because, when I came down from Oxford, I started life in Paddington Station, where I was a pupil of the Great Western Railway, and that has given me a lifelong sympathy towards the case for the railways. May I say straight away that I agree with the noble Lord, Lord Underhill, when he says that we must have an effective railway system. He thinks that, in order to achieve that, it must be part of a fully planned and integrated system; but very early in the debate the noble Lord, Lord Tordoff, disagreed with him—I think rightly—and I disagree with him, too. It is not merely the complexity that Lord Tordoff mentioned, which makes planning on this kind of scale and in this kind of detail extremely difficult. The trouble is that consumer demand changes. If consumer demand were a constant, you could do a great deal of planning; but, in the very nature of our rapidly evolving economic and social life, you have to have more flexibility than a planned and integrated system will allow.
Lord Underhill fairly asked: do the Government have a transport policy? The Government certainly have a transport policy for the railways, and I suggest that this Government have done more than any other Administration in the last 20 to 30 years to ensure that the railways have a successful future. May I just mention four important points of their policy for the railways. First, the Government have put more money into the railways, by raising the external financial provision in each of the last two years—this is in real terms—more than has been done before and by putting the Exchequer grant for passenger services in 1981 to the formidable sum of £755 million.
Secondly, they have ruled out any further substantial cuts in the passenger network. Thirdly, they have endorsed the principle of a programme of mainline electrification, on which good progress had been made over a good many years under all Governments; and it is worth mentioning in passing as we were talking about the East Coast ports, that in December the Secretary of State for Transport approved plans for electrifying the railway services into Harwich, Norwich and Ipswich. Fourth, but by no means last, this Government have avoided any reduction in the ceiling on investment in British Railways.
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That is not bad; but it is surely common ground between us all that the Government, the taxpayer and the travelling public are all united, as we are in your Lordships' House, to see an efficient, cost-effective and well-invested railway system. However, I fear that they will never get it if the unions insist on more men being employed than the railways require, or on their being paid ever-increasing wages with no regard to productivity. These are fundamental facts which need to be stated. We should not be squeamish about stating these facts, because they are fundamental to what everybody wants to achieve.
One could go much further on this question of the railways, but I wish to make only a very short speech in this interesting debate. All I would say in conclusion is that I wish the Government well in a continuation of their regard for priorities so far as our transport system is concerned, but hope that they will not long delay the completion of the link between the East Coast ports and the Midlands.
7.25 p.m.
Lord Ponsonby of Shulbrede: My Lords, as did other noble Lords, may I start by thanking the noble Lord, Lord Lucas of Chilworth, for initiating the debate this afternoon. Indeed, as was underlined by the noble Lord, Lord Renton, who has just sat down, the debate has been far more wide-ranging, I am sure, than the noble Lord, Lord Lucas, would have guessed. In fact, we seem to have discussed a very wide range of subjects. I was particularly impressed with the maiden speaker, Lord Cayzer, and should like to congratulate him. He was pointing to the changes in the modes of transport which had taken place over the past few decades—the switch from ship to air for long-distance travel; and this, of course, has had very far-reaching effects on the whole economic fabric of many of the British seaside resorts, and of resorts overseas. So it has been a very important switch.
The question which the noble Lord, Lord Lucas, has raised this afternoon is directed at the economic and social consequences of traffic congestion on the roads and in the big cities. Many speakers have spoken, and have indeed concentrated their words, on the broad problems of movement around the country—the building of by-passes, and the position of the British Rail network. The noble Lord, Lord Lucas, in his opening remarks, very rightly underlined the emotional aspects of transportation and the amounts spent by the average householder on it, drawing comparisons between each component of that spending; and he pointed out to us that the more income people had the more money they tended to spend on transport.
He led us to the fact that there was a direct relationship between personal incomes and transport needs, and that higher income groups tended to use more of the transport services. He also stressed that adequate resources should be made available for transport services as a whole, but felt that the balance was not fairly prescribed at the present time. The noble Lord then proceeded to outline his roads policy, and told us how many particular improvements were under construction at the present time. Other noble Lords questioned the amount of land needed for road building. I think the point I want to come to on this is

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that we do have a slowly improving network of major roads, and a large amount of the freight is carried by road.
Another point which was mentioned by the noble Lord, Lord Lucas, was that public transport in rural areas was an unsolved problem which he did not wish to discuss further this evening, but my noble friend Lord Underhill, however, outlined the importance of retaining a national network to support transport in rural areas. So far as London is concerned, the noble Lord, Lord Lucas, made a case for a political structure for London Transport and for a professional day-to-day running of the transport system. He even supported the idea of a one-for-one subsidy for London Transport, but he underlined the high expense of transport in London. I know that nobody would disagree with that. Indeed, many noble Lords have underlined the point that transport in London is among the most expensive in Europe and that it is one of the least subsidised. But what we need in London and in our major conurbations is a balanced and co-ordinated system with each part of the transport system contributing to the total what it is best able to contribute.
For example, many noble Lords have made the point that certain goods such as coal and oil are best carried by road, whereas it is more convenient for others to be carried by rail. I think it was the noble Lord, Lord Orr-Ewing, who made the point of the massive losses of British Rail since nationalisation. If he were in his place, I would remind him that losses by the railway had been going on for many years before they were nationalised, other than for the short period during the war years when they were used heavily by the Government for troop movements and movements of supplies.
Surely, this must be the criteria by which we judge our public transport system. Surely, our aim must be to ensure the vitality and competitiveness of our major urban conurbations and, coupled with that, the improvement of the environment and the convenience of the users, including pedestrians.
Not many noble Lords have concentrated their remarks on the problems of the big cities. The sheer numbers of pedestrians in central areas have of themselves created hazardous problems and led to the building of pedestrian precincts. However, the problem of the old cities in tackling these are very great. In London we have created traffic-free areas. There has been a great advance in pedestrianisation; areas at Leicester Square, Carnaby Street and South Molton Street are entirely pedestrianised.
I would have been a joy if one had been able to extend that idea and to have created that pedestrian environment in an area such as Oxford Street, but unfortunately the road system in London is such that that particular idea was not possible. But I am glad to say that, for safety reasons, the pavements in Oxford Street are much wider than they used to be. This has made it slightly less hazardous than it was for pedestrians. We also have a situation in Oxford Street where the pedestrian feels that he has almost more importance than the taxis and the buses, which are the only vehicles now allowed in that street.
If one thinks about other European cities such as Munich, Copenhagen, Gothenburg, Cologne, Vienna and Amsterdam—all of these have tried to make im-
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provements in their city centres to better conditions for the pedestrians. Over the years, talking to civic leaders in these cities, one has found how often particular ideas concerning pedestrians have come about by accident. For example, in Munich it was the building of a subway to join the two low-level rail stations in the main street which led to the creation of a "pedestrianised" street right through the centre of that ancient city and something which is a joy for all who use it. In Gothenburg it was the police concern about the congestion at Christmas time which led to the closing of a particular street to traffic. People then realised that it as quite possible to operate in the city without allowing traffic to use this particular street. People, once having tried the scheme, found it was something which could be extended.
I know that one of the major problems when one is developing schemes of this sort is that one often meets objections from the police. Sometimes it is possible to overrule those objections. But so often it happens that when one creates a pedestrian area one finds that one can manage quite well without that particular artery. I think that a transportation policy in the conurbations in the big cities is inevitably a carrot and stick policy. The carrot is the cheap fare and the stick is the enforcement of parking restrictions. But we must also accept that there are certain aspects of the stick which the public will not accept—such as a cordon to stop cars from going into the whole of a central area. The carrot encourages people to use public transport, which is socially beneficial.
The noble Lord, Lord Orr-Ewing, pointed to the very large number of people who travel to work by public transport and particularly singled out the fact that the number of people who use the bus as their means of travel to work had dropped very substantially in recent years. I think it is important that we should encourage a further switch back to public transport. The noble Lord advocated cheaper fares by British Rail. He felt that British Rail should be more imaginative if they want to see their traffic grow. In fact, British Rail have been very imaginative in a lot of the ideas and fare packages they have introduced in recent years. I am sure that, if their financial position made it possible, they would like to extend the ideas they have been carrying out in recent years.
To return to the question that the noble Lord raised about the drop in the number of people using buses in the inner areas, of course one of the reasons is that people find the bus service more unreliable than Tube transport. They find also that their journey time often tends to be longer. What is needed is to reverse that situation and to encourage people to switch to the use of the bus. I think that the short experiment that we had of cheap fares in London showed that it was possible, given certain conditions, to encourage that switch.
The noble Lord, Lord Teviot, thought that one good thing might be to have more one-man operated buses in London. We found in London that this only works if you have a bus operating on a simple flat-fare system. If you have a multi-fare system the journey time is longer because it takes so long for the driver to collect the fares. The effect of this is that, in order to maintain the same bus service, you have to have more buses operating on a particular route, so

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the saving you at first thought you had made quickly disappears. As we all know, if one increases the average speed of a bus by something of the order of 2 miles an hour one suddenly has a very improved service indeed. The problem of unclogging the roads is very important, and one of the ways to do this is by the carrot.
Several noble Lords raised the question of the control of London Transport. This is a thorny problem and not one that I want to discuss at length this evening. What is important is the question of the co-ordination between London Transport and Birtish Rail, the question of the ease of moving from one mode of transport to another. Over recent years we have seen vastly improved interchange facilities in London in this field. I am thinking particularly of the interchange facilities between British Rail and London buses at Euston and Victoria. There have been very great steps in this direction there. In conclusion, I should like to say that this has been a very useful debate. A number of useful ideas have been stimulated and I shall be very interested to hear what the noble Earl has to say.
7.41 p.m.
The Earl of Avon: My Lords, we have had a wide-ranging and well-informed debate and, as I have found is usual when this House discusses transport problems, it has produced a lot of original ideas. I join with other noble Lords in saying how grateful I am to my noble friend Lord Lucas for raising and introducing this subject, and also to other noble Lords for their contributions. It is a topic on which it is particularly useful to have such an exchange of ideas. I should also like to congratulate my noble friend Lord Cayzer on his modest and most informative speech. He seemed to cover a great deal of ground in his speech of some 12 minutes. I am sure that the whole House looks forward to hearing him often in the future.
Transport has probably never before been the subject of such acute political controversy. In some ways, political differences about transport policy are inevitable and, indeed, proper, as both the noble Lords, Lord Underhill and Lord Tordoff, said in their opening remarks. Many may find some things which I say are a little bit Conservative—this time with a capital "C". We can legitimately take different views about levels of fares and subsidies, or the extent to which private cars should be controlled in city centres. The big problems arise when transport is deliberately made into a political issue, and when dogma is pursued without regard to consequences and costs.
If I may take traffic congestion first, as that is the first subject raised in my noble friend's Motion. we should look at traffic congestion in its historical context. It is not new. Traffic jams in our cities pre-date the invention of the internal combustion engine. The building of the first underground railways in London was partly a response to the difficulty of moving through streets congested by horse-drawn vehicles.
But of course the major problems have arisen with the growth of motor transport, particularly private cars. The number of cars and the use made of them has increased dramatically. Over the past 30 years, the number of cars and the miles travelled in them has
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increased by a factor of six. Now, as we have heard, over 80 per cent. of all passenger travel is by car, and over 80 per cent. of freight goes by road. This is a major social and economic shift which was described very well by my noble friend Lord Cayzer.
Inevitably, we tend to dwell on the problems which this immense growth in road transport has brought. But it would give a false picture if we did not also remember the big advantages and benefits. The fact is that where people have the choice they usually prefer to own and use cars. This is a universal phenomenon. The reason is that cars are so convenient in providing door-to-door transport under people's individual control.
Customers have increasingly chosen lorries because of their inherent advantages for most—though certainly not all—kinds of freight traffic in our relatively small country, where average hauls are so short. For many journeys where goods carried by rail would have to be loaded onto lorries at either end, it makes more sense and is more economic for them to go by road the whole distance.
But the growth of traffic has of course brought problems, many of which have been touched on this afternoon. The Government recognise these problems. Congestion is one of them. It wastes time and fuel; it is inefficient; it is frustrating to drivers; it damages the environment; and it causes great annoyance to people who live in streets continually blocked by lines of vehicles.
The problem of congestion has not been solved. Far from it. But let us not underestimate what has been done. The remarkable thing is that we have coped relatively well with the vast increase in traffic. For example, the worst fears of transport planners 20 years ago were that the forecast increase in car ownership would lead to paralysis of our city centres. This has not happened. Indeed, the general trend—there are exceptions—appears to have been for urban traffic speeds to increase slightly over the years.
How has this been done? What are the lessons for the future? Road building can help greatly, though it is not a universal panacea. The motorway network carries a large volume of traffic swiftly and efficiently between the major industrial centres. We have also invested a great deal in other strategic routes, for example by providing by-passes to take traffic out of narrow streets. Imagine what traffic conditions would be like in many towns if we had not built these roads. Imagine, for instance, what conditions would be like in towns such as Marlborough if the M.4 had not been built.
This work continues. The Government are investing about £700 million this year on maintaining and improving trunk roads in England, and local authorities will be spending about £1,200 million on their roads. We have proposals to deal with the worst bottlenecks—for example the two-lane section of the M.1 near Watford, and the Barton Bridge carrying the M.62 over the Manchester Ship Canal. Our top priority is the M.25 round London. This will provide a vital route for traffic from, for example, the Midlands and North trying to get to the Channel ports, avoiding the centre of London. It will save a considerable amount of time for drivers, and will reduce congestion in many communities on the outskirts of London.

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The decentralisation of employment and population has also helped because it has meant less traffic in city centres than there would otherwise have been. In urban areas, there are several ways in which we have tried to cope with traffic. I have already covered in some detail in the debate we had on Wednesday, 27th January, what we are doing about traffic control and management, and about parking and enforcement. With your Lordships' permission, I do not intend to go over that ground again. I spoke then about a new generation of traffic control equipment which is coming into use called SCOOT.
The noble Lord, Lord Underhill, talked a little bit about traffic management. I should like to bring to the attention of the House the fact that the traffic management authorities have wide powers to regulate traffic. They can direct heavy traffic to the roads best adapted to take it. They can prohibit the manoeuvres most likely to delay other traffic. They can give priority to buses. They can exclude all traffic—especially from play streets, which another noble Lord mentioned—or some kinds of traffic, from residential or pedestrianised areas. This can make conditions in towns much more civilised. These powers can be exercised by local authorities.
We also came back to our old subject of road humps. I confess that I could not remember whether prams were a good thing or a bad thing on the grounds that you can push a pram over the bridge made by a road hump or alternatively if you are pushing a pram in the road it is rather difficult. No doubt I can refresh my memory on that afterwards.
The noble Lord, Lord Lucas, asked about progress on a number of road schemes, and I am glad to say that on the Winchester section of the M.3 the challenge in the High Court to statutory orders for the Popham-Bar End section has been withdrawn and we should be able to start construction later this year. A consultant study considering all the options south of Bar End is under way and we expect a report by the end of the year. As for the M.1-A.1 link, which was also mentioned by the noble Lord, Lord Renton, preparation has taken longer than expected but we hope to publish draft orders soon.
I have also taken note of my noble friend's other suggestions. He is right when he says that I am not in a position to comment on the by-passes he mentioned. The public inquiry into the M.40 from Oxford to Birmingham will open before the end of this year and we expect to announce the date very soon. The remaining scheme mentioned by my noble friend was the section of the M.20 between Maidstone and Ashford, which duplicates the existing A.20. The A.20 here, although far from ideal, is in better condition than many other older trunk roads, and though it touches two or three villages the environmental problems are not as bad as in many other places. The Government therefore decided in 1980 that design work should be halted for the time being while scarce resources were concentrated on more urgent schemes elsewhere; but the scheme is still in the programme and we shall pick it up again as soon as there is a prospect of finding the money to build it.
My noble friend Lord Ferrier, in a lively speech containing some intriguing suggestions on transport, referred to the question of the Edinburgh outer city
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by-pass. As my noble friend will recall from previous discussions of this road scheme in which he has taken such an interest, this is not a trunk road and thus not a Government responsibility. The responsible highway authority is the Lothian Region and this important road scheme is their top priority. They are proceeding with it as quickly as they can, and I note what he has said about delay. The Government are involved in providing finance for the scheme and I am happy to be able to say that, despite the difficult decisions which have had to be made about public expenditure, we have managed to give Lothian more money over the next few years in order to allow them to make progress as fast as they can.
My noble friend Lord Lucas also asked about proposals for using private funds for road building. The Government firmly believe that increasing the diversity of funding could have many advantages. As the noble Lord said, a number of construction companies have expressed an interest in schemes based on a royalty system, and the Economic Development Committee for Civil Engineering have also been looking into this. The use of private finance raises a number of fundamental questions which the Government have had to consider. This has taken some time, but I am glad to say that the Department of Transport will shortly be inviting the construction industry to discuss whether a scheme can be found which meets the needs of both the Government and the industry.
The noble Lord, Lord Underhill, mentioned bicycles and my noble friend Lady Macleod mentioned pedal cycles. The Government are encouraging local authorities to put forward schemes in this field, and there is a general awareness about these matters. I believe the first lights are shortly to be turned on in London at a cycle crossing out of Hyde Park. There is to be an expansion and improvement of the national cycling proficiency scheme which RoSPA plan for this year, and we now give encouragement to cyclists to be conspicuous and to motorists to look out for cyclists. In fact, a TV publicity campaign took place in London last summer. A high priority is being given to road maintenance expenditure by local authorities and the majority of counties in the last round had their bids accepted in full. I agree with my noble friend Lady Macleod about cycling, and I should like to say that I personally believe that one of the major ways of cutting down the loss of life would be to obey the Highway Code. That would be the quickest way to reduce casualties.
To come on to motor-cycle safety, as the House will recall, in the Transport Act 1981 we took some measures geared towards this. There was a reduction in the size of the learner machine; there was a limit on the duration of the motor-cycle provisional licence and there was a two-part test. The object has been to give encouragement to learners to take training and pass these tests. Also, as my noble friend Lord Ferrier mentioned, new learner machines have been introduced because the present 250 cc machine is too powerful for the average learner-driver.
Finally, my noble friend Lady Macleod asked about the withdrawal of the RAC-ACU from motor-cycle rider training. This is regrettable but we do not believe it will seriously affect the new scheme. The RAC-ACU grant will now be made available to the

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Motor Cycle Safety Foundation and this will help defray the initial costs of the training organisations, including the former RAC and ACU centres which wish to join this scheme.
Turning to the special traffic problems in London—and I am grateful to the noble Lord, Lord Ponsonby of Shulbrede, for taking us on a walkabout of some of the new spots—I believe that, contrary to general experience, the average speeds in London have not improved, and of course there is no easy solution. Sadly, in London the GLC's roads programme has been a political football over a number of years and the present GLC has a declared bias towards a purely public transport solution to London's problem. It was decided against proceeding with all but a few major road schemes. This lack of balance—the theme of my noble friend's Motion—does nothing to help the problems of London.
So far as the Government's direct responsibilities are concerned, a great deal is being done to improve the road network in and around London. Plans for the current trunk road programme within and bordering the GLC area will cost about £1 billion over the next 10 years. I have already mentioned the M.25. Other projects include further improvements to the North Circular Road, with dual carriageways and improvements to junctions; the East London River Crossing plus connecting routes, which will form strategic links for the Docklands; and the improvement of other key radial routes into London, including the A.20 and the A40.
This major programme has three main aims. The first aim is to help the economy of London, notably with the revival of the Docklands. The second aim is to meet London's environmental needs by providing routes which will relieve badly congested other roads; a good example is the M.11-Hackney link which will relieve Leytonstone High Road. The third aim is to improve safety; and this point was made by several noble Lords. One example is the improvement of the junctions on the North Circular to separate pedestrians and traffic. This will deal with some notorious accident black-spots.
I now turn to the other main part of my noble friend's Motion:
"the need for balanced, efficient and economically viable rail and road transport systems which do not place excessive burdens on taxpayers or ratepayers".
The Government agree with every word of that proposition. I should like to explain why, and what we are doing about it. Before doing so, I should like to say that the Government do not treat traffic congestion in isolation from these other aspects of transport policy. Obviously there are most important connections between the two. In particular, the large numbers of people who travel to work in our city centres could not possibly all get to work by private car. Over a million people travel into central London each working day and 80 per cent. come by public transport. If they all tried to come by car, they simply would not get to work, or if they did, there would be nowhere for them to park.
The noble Lord, Lord Underhill, asked whether there was a separate sub-department within the department which dealt with the environment. In
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point of fact there is not, and I think there are two reasons. One is its close involvement with the Department of the Environment itself. As the noble Lord is well aware, they have been part of each other; then they separated and later became part of each other again. Secondly, they do involve themselves very much with the environment and, if I might give an example, the transport department is actually involved with landscaping.
Another noble Lord produced the theory that trains and buses are more fuel efficient than cars. In practice their fuel efficiency depends on their load factor, and a car carrying four people can be more fuel efficient than an almost empty train. It does not make economic or energy sense to run more trains or buses than are needed, as that would not save fuel.
There are obvious lessons here. A balanced transport policy is one which recognises, first, the proper role of each mode and the need for a reasonable level of subsidy for public transport and, secondly, that resources for transport, as for everything else, are limited. So the more efficient the transport operators are the more both passengers and taxpayers will benefit. The third point is the recognition that we get nothing free in transport. There is no pot of gold. Most clearly, higher subsidies mean higher taxation. The Government believe that subsidies are necessary to run an adequate public transport system. But it is important to be sure that we are getting something worthwhile for the subsidies that are paid.
Consider, my Lords, the example of subsidies for buses. This year we are grant aiding through Transport Supplementary Grant £260 million of local authorities' spending on bus subsidies in England. The bus industry as a whole receives more than £1 billion a year in support from the public purse. These are large sums of money. The Government are bound to be concerned to see that we get good value. It is easy, as we have seen, to increase the cost of subsidies very quickly indeed, if fares are cut or allowed to get out of line with changes in costs. Deliberately low fares, unrelated to costs, will not change the long-term downward trend in the use of bus services. They may postpone a decline temporarily, and at great cost, but, in themselves, these policies are not going to reverse the slow decline in public transport use.
But the bus industry is, and will continue to be, a large and essential part of our transport system. Even if there were to be no subsidies at all, the Transport and Road Research Laboratory have estimated that by the year 2000 the use of buses would be between a half and four-fifths of present-day levels, depending on the rate of economic growth. The Government have no intention of accepting even that level of decline in bus services. On the contrary, we have made it clear that we foresee a continuing need for bus subsidies in future years. But they will be at levels that strike a fair balance between the travelling public and the taxpayers and ratepayers who meet the cost.
The levels of public expenditure on subsidies for which we are providing will allow an adequate standard of bus services to be maintained, provided that services are tailored to demands, that fare levels are kept in reasonable line with inflation and that services are operated efficiently. That puts a responsibility on operators and local authorities to look closely at

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what these subsidies are buying, whether they are buying the right services and whether there are ways of providing those services at lower cost.
These themes have been vividly illustrated recently in London. The GLC took a decisive step to try to solve London's traffic problems at a stroke by introducing a massive reduction in London Transport fares. This was misguided and, as we learned, illegal. Since the judgment of the Law Lords, the GLC have mounted a publicity campaign—at a cost to their ratepayers of £¼ million—aimed at forcing the Government to introduce emergency legislation to enable them to return to their extravagant low fares policy.
Lord Teviot: My Lords, I do not think I even apologise for interrupting. Is my noble friend aware that he is giving us the most appalling bromide about Government costs and everything else? In this debate we have tried to suggest something to enliven public transport and to give a bit of initiative. My noble friend is going back over the same old ground about cost effectiveness, but what we are trying to do is to suggest something to avoid congestion. We are only going through what successive Governments have tried to do about costs and other things. What we are trying to do is to look at a much wider policy. I wish that my noble friend would slightly develop his theme on that. I have probably not been concise or constructive, and I am sure that other people could interrupt him and do rather better than I have done.
The Earl of Avon: My Lords, if I understood my noble friend aright, I think he will discover, if he reads the report of my remarks, that I have been stating a reasoned and general policy. If I may continue from where I was, we are not prepared to legislate to turn back the clock. But the Government have taken urgent action to resolve the immediate problems. We introduced the Travel Concessions (London) Act to enable the GLC to support concessionary fares. And we offered legislation—which the GLC declined—to enable the £125 million deficit from the low fares policy to be spread over five years, cushioning the impact on fares. I must make it clear that the Government support the payment of a reasonable level of subsidy to maintain essential transport services. Last year some £250 million was paid to London Transport in various grants, and a similar level of subsidy will he available in 1982. About £100 million of this support comes from the national taxpayer.
I can quite understand that many people see advantages in low fares. But the GLC has not owned up to the enormous cost to the ratepayers of their way of achieving this. Over the next four years, it would have cost about an extra £1,200 million. Many people, such as pensioners or those living in some outer boroughs, stood to gain nothing from it. Many ratepayers could ill afford to finance the policy. By its impact on industrial and commercial ratepayers it would have damaged the prospects for jobs in London. The tragedy is that, even on the GLC's own estimates, their low fares policy would have had only a marginal effect on private car journeys, while at the same time cutting back on the scope for financing much needed road improvements.
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A truly fair fares policy must balance the interests of the traveller, the ratepayer and the taxpayer. The GLC policy failed to do this. Nor did it consider the possibility of achieving savings through increases in efficiency and productivity. If London Transport had achieved the productivity levels of other major cities in this country, about £80 million a year would be available to reduce fares. Instead, the policy was to increase services and wage costs at the ratepayer's expense. This did not give good value for money. The Government are not prepared to legislate merely to enable the GLC to return to its old extravagant policies.
Lord Tordoff: My Lords, I must apologise to the noble Lord for interrupting again, but I really take the point of his noble friend that we have carefully stayed away from this rather polemical subject this afternoon. So I wonder whether the noble Earl could draw that part of his remarks to a close, lest people on other Benches of this House may get rather over-excited at this late hour of the night.
The Earl of Avon: My Lords, I am grateful to the noble Lord for his advice. I had come to the end on that point. Noble Lords have mentioned the levels of subsidy paid to the public transport systems in various European cities, and we feel that such comparisons are often made on a rather selective basis. For one thing, the comparisons are invariably over-simplified and misleading, because it is virtually impossible to transpose the accounts of foreign transport undertakings so as to permit a thorough and accurate comparison. For example, the figures quoted often omit capital grants, which obviously make a difference.
If I may now turn to the railways, similar general principles—efficiency, economy, balance, proper regard to the interest of taxpayers—apply to the railways. The railways have an essential role to play in our transport system, and I assure the noble Viscount, Lord Sidmouth, that the Government's support for them has been strong. We have shown flexibility towards their financial difficulties. Recent investment, which has included the introduction of the High Speed Train—much praised this afternoon—major infrastructure schemes and rolling stock replacement programmes, gives the lie to criticisms that investment provision has been inadequate. We shall continue our support to ensure that the railways have a healthy future.
Some British Rail activities should stand on their own feet. For freight, we believe that the railways should operate in the market place to attract that traffic which is most suitable for rail, and that this business should be operated commercially, without public subsidy. There is one exception, to which I shall return later. Similarly, all the British Railways Board's other business, except the socially necessary passenger services, should be run on fully commercial lines. The board have recently submitted new business plans for Inter-City and freight to achieve this aim.
The socially necessary rail passenger services do require subsidy. At the same time, we are anxious that taxpayers should not suffer as a result of having to support them. These considerations have been taken into account when fixing the grant level for British Rail in 1982. The figure which we have announced of £804 million is less than the board have

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sought, and represents a cut in real terms on the exceptional grant allowed in 1981. Nevertheless, the figure remains some £100 million higher than grant in 1980, allowing for inflation.
For the first time since the Public Service Obligation Grant was introduced in 1975, a portion of the grant has been earmarked for necessary maintenance and renewal. Other steps are also being taken to improve economy and efficiency. The noble Lord, Lord Taylor of Gryfe, may be interested in this. Mr. P. J. Butler, of the accountants Peat, Marwick, Mitchell and Company, has been asked to make a report on the board's trading position, and this report will form an important part of the review of railway finances which the Government have initiated today. Sir David Serpell, former Permanent Secretary of the Ministry of Transport, and until today a member of the British Railways Board, will chair this independent review, with Mr. Butler, Mr. Goldstein, a senior partner of a firm of consulting engineers, and Mr. Leslie Bond, a director of the Rank Organisation. The terms of reference of the inquiry are:
"To examine the finances of the railway and associated operations, in the light of all relevant considerations, and to report on options for alternative policies, and their related objectives, designed to secure improved financial results in an efficiently run railway in Great Britain over the next 20 years".
The committee's report is expected to illustrate the options open to provide a firm foundation on which the Government can establish clear objectives and make justifiable financial provision for the future of the railways. If we are to invest in the railways, we must look to the railways for achievements in return.
The review of main line electrification, about which a number of noble Lords have spoken, demonstrated a sound financial case for a programme of electrification, based on favourable assumptions about the financial performance of British Rail's freight and Inter-City businesses, which will be the main beneficiaries. The Government were not prepared to make an unconditional commitment to the electrification of an extensive network because the performance of these businesses was deteriorating. We therefore invited the board to draw up a 10-year programme of electrification where the benefits could clearly justify the investment based on new commercial plans for the Inter-City and freight businesses for those potentially profitable main lines.
Lord Underhill: My Lords, I wonder whether the noble Earl could give the House an indication of when decisions will be taken, bearing in mind the fact that the chairman of the British Railways Board has made it quite clear that the investment rate for last year could not be used, due to the EFL, and to the fact that there is a badly needed programme of track and rolling stock renewals.
The Earl of Avon: My Lords, the board are currently preparing this programme and will consider it as soon as it is available. The approval of individual electrification projects within the programme depends not only on the profitability of the investment in question
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but also on the board's ability to generate the resources necessary to finance the investment.
Improvements in productivity and performance do not all have to depend on costly investment. Some of them will generate resources to allow the investment elsewhere which is essential to the future of the railways. The board have already had much success here, and we pay tribute to them. My right honourable friend the Secretary of State for Transport drew attention to this success when he approved electrification to Norwich, Ipswich and Harwich last December. The board, and the majority of their employees, recognise that continuous progress is essential.
If I may digress, I should like to join with other noble Lords, particularly the noble Lord, Lord Taylor of Gryfe, and my noble friend Lady Elliot of Harwood in their tribute to the great strides which British Rail have made during the last two decades. While in this House we make a lot of suggestions, not criticisms, this should not obscure our own appreciation of them. I should like to say to my noble friend Lady Elliot of Harwood that I hope that in her long, extended journeys in sleeping cars the old rolling stock rocks her to sleep.
If I may say a word about rail privatisation, we also believe that this will help by freeing the subsidies from the restrictions which apply to the public sector and making more resources available to the railways. I am afraid that I have "gone on" for rather a long time, but there was no opener for this side. Therefore, perhaps I may be excused if I just finish off my remarks. There is further room, too, for the disposal of non-operational assets. We are considering with the board how private capital may be introduced into parts of the main railway businesses, or into particular schemes. And we are keen to see pursued such initiatives as low cost operations and the rationalisation of services and infrastructure. In these ways we can seek to ensure that the railways are offering the services that their customers want as efficiently as possible and at the lowest cost to the taxpayer. That is the best way to ensure that they survive as a viable and competitive alternative to other modes of transport.
I should like to touch on fare increases, a point which was raised by my noble friend Lord Orr-Ewing. It is, of course, for the British Railways Board to decide on the size and timing of rail fare increases. This is not a matter in which the department intervenes. British Rail are having to consider measures to repair the financial damage caused by the strike, and I know that they will seek as far as possible to avoid measures which will cause harm. I am sure that the noble Lord will be aware of some of the schemes which British Rail have recently produced and which were accentuated both by the noble Lord, Lord Ponsonby of Shulbrede, and by my noble friend Lady Elliot of Harwood.
The question of rail research has been raised, The British Railways Board's technical centre at Derby is a world leader in the field of technological innovation and the application of scientific techniques to railway systems. I hope that this will continue to be so, and I have no reason to think that it will not. Incidentally, of their £13 million research budget, some £7½ million to a joint research programme is funded

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on a 50:50 basis between British Rail and the Department of Transport.
In pursuit of a balanced transport system, we have to see that each mode plays its proper part. That part will largely be determined by customers. I hope, and I believe, that we are all agreed that the preferences of customers should be paramount. But Government can legitimately influence those decisions where there is a good, demonstrable case for doing so.
I should say just a word about the inland waterways. However, as both the noble Countess, Lady Loudoun, and the noble Viscount, Lord St. Davids, took us on such a quick and glorious trip, it may not be all that necessary. The Government recognise that there is a considerable backlog of maintenance work on our inland waterways. The British Waterways Board have said that they would propose to tackle it over a 10 to 15-year period. We think that this is a sensible plan, which will allow the maintenance programme to keep pace with the board's resources. In the current year, we will be giving them grant aid of £37·7 million. Most of this will be spent on the continuing programme of regular repair and maintenance undertaken by the board, but million has been specifically set aside to help with the backlog, by funding specific projects and the replacement of essential equipment. Grants for waterways were introduced last summer and there has been considerable interest, though no formal applications have yet been lodged. Money is available and we should welcome some worthwhile applications from industry.
I hope that what I have said gives a clear indication of the Government's general approach. We start, with both freight and passenger transport, from the essential point that the needs of transport users and customers must predominate. Their preferences are in general best expressed through the market, with regulation concentrating on safety and other standards, which only Government can control or supervise. But this is not sufficient to produce a properly balanced transport system. Subsidy is needed to maintain a reasonable level of public passenger transport, or to influence freight transport so that it does less damage to the environment. But levels of subsidy must also have regard to the interests of the taxpayer.
This is a complex subject. There are no simple answers. I have not, I am afraid, had time to deal with some of the important subjects, such as better services for customers from the removal of licences for express coaches, a matter which noble Lords have touched on. But I hope I have said enough to show that the Government are determined to pursue a policy which meets my noble friend's prescription of balance, economy, efficiency and regard to the interests of ratepayers and taxpayers. I close by thanking all those who have contributed this afternoon, in particular for their imaginative ideas and constructive criticism. It has been a very worthwhile debate.
Lord Underhill: My Lords, before the noble Earl sits down, may I ask him one question. I appreciate that he has endeavoured to deal with many points, but there was one very important question, concerning
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transport facilities in rural areas, about which he has said nothing at all in his speech.
The Earl of Avon: My Lords, I am grateful to the noble Lord. We do think that this is important. I cut out the last four pages of my speech because I thought that 36 minutes was enough. if I may, I will go into that question on another occasion.
8.19 p.m.
Lord Lucas of Chilworth: My Lords, it remains for me first to thank my noble friend the Minister for his galloping wind-up and for his great ability in having discussed and answered a number of the points and questions which have been raised. That there may have been a preponderance of speakers on the subject of rail does not, I believe, in any way invalidate any kind of argument which the other modes have sought to represent. It must in fact only go to show British Rail the very great, real and deep concern which your Lordships' House has for the railway industry. If electrification is required, I suggest that perhaps the kind of support which they have received here this afternoon will electrify their board to get on with the task in front of them.
I have to confess that I am not over-happy at hearing my noble friend the Minister suggest that yet another inquiry is to be put in hand. I should have thought that all the inquiries, all the reports had been made. It is a decision of principle which has to be made, and managment has to be charged with the job. Failure, on an efficiency audit in two or three years' time, will mean the sack—at least, it always does in ordinary commercial terms. Let me at this stage thank all noble Lords who have made such wide, varied and interesting contributions.
Two points have emerged from this debate. The first was that made by the noble Lord, Lord Ponsonby of Shulbrede, when he talked about London and the co-ordination of modes. Again, I just want to draw attention to the report of the transport committee in the other place which is to be published, I believe, in about a month. I think we might well have a look at that report. The other point—and I so often have to raise a point with the noble Lord, Lord Underhill—was that raised by the noble Lord opposite when he spoke of wanting a transport authority. I always understood that it was the Department of Transport which represented that kind of interest; that it was the transport authority. If the noble Lord, Lord Underhill, is suggesting for a short while that that authority is not necessarily performing the more exciting task that might be thought appropriate—that of foreseeing the needs before they arise—then I would agree with him. It seems to me that perhaps in that department a long-term section might be set up to try to evaluate the fast-changing needs, which are not going to be met by a continuation of the existing systems.
I should like to conclude by joining with my noble friends and other noble Lords in offering congratulations to the noble Lord, Lord Cayzer, and by thanking all noble Lords for their contributions. My Lords, I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Supply of Goods and Services Bill
8.23 p.m.
Lord Mishcon: My Lords, I beg to move that this Bill be now read a second time. I do so with a sense of privilege. This Private Member's Bill has come to your Lordships' House after having passed through all its stages in another place, where it was sponsored by my right honourable friend the Member for Sunderland, North, who was fortunate enough to win the first place in the ballot. The present Minister for Consumer Affairs, Dr. Vaughan, recently referred to the Bill as having received—and I quote his words,
"a chorus of praise from all sides".
I am personally gratified that the noble Lord, Lord Cockfield, will be speaking on this Bill from the Government Front Bench in his new and deservedly elevated position of Secretary of State for Trade. I believe it will be the first Bill with which he has dealt in this House in his new office. Using, if I may, the phraseology of the Bill itself, I pay tribute, having suffered from it in debate, to the extensive merchantable quality of his ability and the uncanny fitness of his repartee for the purpose for which it was intended, especially during Questions.
The consumer—indeed, the whole public—is very much in the debt of the Law Commission. Their first report in this field on exemption clauses led to the Supply of Goods (Implied Terms) Act 1973. Their second report led to the Unfair Contract Terms Act 1977. A Consolidation Act, the Sale of Goods Act 1979, consolidated the statutory law relating to the sale of goods as contained in the famous Act of 1893 —which, incidentally, was a model of clarity in legislation—and amended the 1973 Act and some other legislation. But there are contracts for the supply of goods which do not amount legally to a sale of goods as covered by that Act.
May I mention some categories of such transactions which will be quite familiar to your Lordships? There is barter and exchange, covering for example the purchase of a car in part exchange; goods obtained with coupons or vouchers, covering for example goods supplied with cereal packet tops sent in or "10p off" coupons; goods supplied as a bonus with another product; contracts of works and materials of which common examples are car parks supplied by a garage, or a central heating system installed by a builder.
There is also the hire transaction, a very common example of which is the hire of a television set. In such transactions only possession passes to the consumer and not title or membership. Such a transaction would therefore not be covered either by hire-purchase legislation or by the Sale of Goods Act because in both cases title of the goods will or can pass.
It was with this type of transaction, not covered by any statutory provisions, that the third report of the Law Commission dealt. It found that the common law on the subject—the case law—was in a confused state, sometimes hidden away in the recesses of law reports from a bygone era, and sometimes actually contradictory. Wisely, your Lordships may think, the Law Commission recommended that the law relating to these matters should be set out clearly in a
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statute. Logically, your Lordships may think, the Law Commission recommended that the obligations of a supplier to a consumer, whether or not this amounted to a sale of goods as defined by the Sale of Goods Act, should as nearly as possible be the same; providing for quality, fitness for purpose, title and suchlike. Considerately, your Lordships may think, the Law Commission prepared a draft Bill modelled on the sale of goods legislation. That draft Bill, for which I express my gratitude as I said as well as making proper copyright acknowledgment, is Part I of this Bill.
Part III of the Bill has some supplementary provisions amending the 1973 and 1977 Acts and providing for the interpretation, commencement and extent of the Bill.
That brings me to Part II. Part II of the Bill deals—and your Lordships may think not before time—with contracts for services. Which one of us would not want to pay tribute to those people—and there are many —who supply services, often very essential services, and who keep up standards of efficiency both in terms of quality and the time taken in rendering those services, and who also with integrity do not take advantage of the urgency of the service required by taking the consumer, if I may use the inelegant but descriptive phrase, "for a ride"?
How many of us have, however, suffered from another kind of supplier of services, however much in a minority, be it a garage or be it a plumber, or a firm where a piece of work is performed or a facility provided such as laundering or holidays? Statistics as to consumer complaints reported to the Office of Fair Trading for 1979–80 make interesting reading in this context. They are to be found in the annual report of the Director General published in 1980. In relation to what could be broadly termed services, those complaints number 123,759. Even more illuminating and more eloquent are the findings of a survey carried out for the National Consumer Council by Research Services Limited between November 1979 and November 1980. Of consumers who had had various items serviced or repaired in the previous 12 months, one in 10 motorists or motor-cyclists was dissatisfied with the quality of work done: with grumbles about quality of repairs and servicing of rented television topping the list, 20 per cent. were dissatisfied. And these were closely followed in the customers' complaints league by complaints about the quality of repairs or servicing of gas cookers: 19 per cent. expressed themselves as being dissatisfied. Runners up were the servicing of household appliances of various kinds.
The National Consumer Council, to whom I am indebted for their effective briefing and assistance in connection with this Bill, realised the urgency of doing something in the light of this situation, having regard to the uncertainties of the present law and the absolute jungle of precedents at common law through which the practitioner, and certainly the layman and the man or woman in the Citizens' Advice Bureau, would have to tread a wearisome and confused way to find out what were the legal rights. The National Consumer Council performed a great public service. They produced a report called Service Please, which, again in line with the rights and duties set out in the Sale of Goods Act, researched what the common law is, or is

1237
believed to be, and their recommendations are the basis of Part II of this Bill.
Some have sought to say that it is not what the law should be, and I am delighted to say that the Law Commission will, at the Government's request, be studying what reforms, if any, there should be in the law in this area. That, of course, is bound to take some considerable time. Legislation following upon it may either never take place, or on past records, as the noble and learned Lord the Lord Chancellor, to his sorrow, knows only too well, may take a very long time before it can be slotted into a legislative programme, especially if the recommendations are somewhat controversial. In any event, those recommendations are scarcely likely to lessen consumer rights as against the present legal position. Therefore, it must be right, and I understand that the Government fully agree with this view, at least to put the existing law as it is believed to be into a statute, to have it consistent so far as possible with the supply of goods legislation and to do so now, so that the customer and the supplier of services and their advisers will at least know where they stand now by referring to a comparatively short Act of Parliament. That is Part II of the Bill, as I have said.
To ensure that speed of legislation does not operate to affect certain services unjustly or inappropriately by covering them in Part II when they should not be so covered, there is a clause in this Bill, which is Clause 12, which gives the Secretary of State the power to exclude by order the application of the provisions of Part II to specified kinds of contracts. Part II, as drawn, puts into statutory form the existing law on three main aspects—the quality of services, the time for carrying them out and the price to be charged.
Finally, my Lords, may I briefly and in lightning form—
Lord Lloyd of Kilgerran: My Lords, I am so sorry to interrupt the noble Lord, and with his usual courtesy he has given way. May I ask him, before he passes from Part II, to assist me and several others? We have received a note from the Law Society, of which he is a member, indicating quite clearly that Part II of the Bill is unsatisfactory and that therefore it should be deleted, as the Law Commission is now seized of this matter. The noble Lord himself extolled the work of the Law Commission, though I agree about the delay. May I ask him, as a member of the Law Society, what attention am I to pay to this very strong note from the Law Society about Part II of the Bill?
Lord Mishcon: My Lords, I am grateful for the intervention. My recommendation in regard to the Law Society or any document emanating from it would always be, as I am a faithful member of that society, that it should be treated with respect. I happen to believe, however, that the reaction should be limited to respect on this occasion, and not agreement, and I say so for the reasons that I endeavoured to give—namely, that Part II sets out in a way which is urgently necessary what is the present law, and the Law Society in its document in no way says that that is done inaccurately.
What the Law Society says, so far as I understand it, is, first of all, wait for the Law Commission to see what reforms there may be. I have already said that this could mean waiting for years, as we all know. Secondly,
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it says that there are some things covered—and I remember that it points out through its Company Law Reform Committee the position of non-executive directors—and that that should of course be looked at in regard to Part II. That is why I referred to the clause which enables the Secretary of State to except certain services, certain contracts for services, from Part II of the Act. I therefore feel on this occasion, although I speak with the respect that I advocated, that the Law Society is not correct in advocating that Part II should not be in this Bill. I repeat my gratitude to the noble Lord for that intervention because it has enabled me to elucidate something that I was very keen to make plain.
Lord Lloyd of Kilgerran: My Lords, may I reciprocate that gratitude to the noble Lord for his courtesy?
Lord Mishcon: My Lords, happily in that tone continuing with my remarks, I was about, as I said, to take your Lordships through the clauses of the Bill in lightning form, and I promise that it will be in lightning form.
Clauses 1 to 5 lay down in regard to the supply of goods the terms to be implied into non-sale transactions and make clear the circumstances in which they are to be implied. In regard to the hire of goods, Clauses 7 to 10 lay down the terms which are to be implied into contracts of hire as defined by Clause 6, and make clear again the circumstances in which they are to be implied. Part II does this in the same way for the supply of services. All these are in line, so far as possible, with the Sale of Goods Act.
I should perhaps mention at this stage that the Bill as it now stands does not include Scotland. At the Committee stage provisions were added so that it did, but at the request of the Scottish Law Officer in another place they were removed at the Report stage, much to the disappointment, if I may say so, of the Scottish Consumer Council. However, it is true that the relevant law in Scotland is different in many ways from English law, and it was thought better that their Law Commission should delve into those differences, and generally, before legislation is passed affecting Scotland.
I feel that this Bill fills a serious void in consumer law.
"Small wonder",
said The Times on 20th December 1981,
"with the need to rely upon old case law, that aggrieved customers often feel powerless to complain".
A provincial newspaper in October 1981 said:
"It is right that we all know where we stand".
I hope that your Lordships will agree with those on all sides in another place and with so many bodies outside Parliament—consumer and trade alike—that this is a good Bill, and that your Lordships will give it, as they did, a general welcome. My Lords, I beg to move.
Moved, That the Bill be now read a second time.—(Lord Mishcon.)
8.43 p.m.
Baroness Seear: My Lords, the hour is late, the list of speakers relatively long and I shall be extremely brief.

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It is easy to be brief because this Bill, as was made clear in another place, is one that commands very wide general agreement. The most remarkable thing about the Bill is that it is necessary to have it at all. The Bill relieves uncertainty, and uncertainty which a great many of us did not really know existed. It is, for me at any rate, a matter of very considerable surprise to discover as regards the Sale of Goods Act—although I suppose if one had thought about it in detail it would not be a surprise—the many exceptions as regards hire, services and so on which do not come under the same legislation already. Once that has been made clear there can surely be very little doubt that legislation to tidy up the position, to remove the uncertainty, is long overdue. Of course, by the time one has put together a contract for services, hiring and barter, all those different transactions added together cover a very considerable amount of economic activity.
While of course it is true that in common law there is protection, although it is not very clear always what that protection is, I am sure that the great mass of people like myself believed that these transactions were covered in the way in which sales were covered. Once it has been made clear that this is not so, there surely can be no argument that legislation is required to bring this kind of transaction into line with the protection that is given to ordinary sales. So one can surely only give this legislation a very general welcome.
There are one or two points that I should like to raise. It seems to me that not only is this useful and helpful to consumers—a vast group covering everybody in the community, however badly organised groups in relation to other interest groups; not only does it give them protection which is plainly needed, but it must surely also do something to improve the quality of goods and services because there is more extensive coverage requiring better quality. When one thinks how much of the trade of this country is connected with activities of this kind and how widespread are complaints—sometimes no doubt unjustified but often, as we all know and as report after report has shown, all too justified—it can only be good for the general trade of the country, for the economic position of the country generally, if steps are taken to ensure that the standards in these areas are of a higher level than they have been heretofore.
With regard to the apparently slightly controversial Part II and the question raised by my noble friend, prompted—if that is the correct word—by correspondence from the Law Society, I can only say that, listening to the noble Lord, Lord Mishcon, I was persuaded that, even if there are doubts in the minds of the learned members of the Law Society, there surely is a great deal to be said for having Part II included in the Bill. If it is the case that it is necessary for a further investigation to take place, then I am convinced —perhaps too easily, but I am convinced—that Clause 12 gives sufficient coverage to deal with any uncertainties that may arise from further examination, so that we get services, a vast and very important area, on to the statute book while taking action to see that particular cases which may need further investigation can be dealt with.
There is also the question of Scotland. Far be it from any Saxon Act to say what should go on in Scot
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land. But if it is true, as the noble Lord has said, that the Scottish Consumer Council is unhappy because Scotland is being omitted from the Bill, then would it not be possible—and I ask this with no idea of the answer—to include Scotland in the Bill, but to include also a clause saying that it will not become operative for Scotland until the Secretary of State is satisfied that the doubts that had been raised as regards certain matters connected with Scottish law had been satisfactorily dealt with? I understand that the objection is that Scottish law is different, and therefore to impose this law on to Scottish law might create certain anomalies and difficulties.
The advantage of such a course would be that any such investigation will take a certain amount of time. But we all know that getting a new Act through (which is what would be required) if we have to wait for those investigations, and then be satisfied that a law of this kind can, in fact, be introduced for Scotland, would involve a very long delay before it was made available to the Scots. Whereas if it were now included, but were not to become operative until the Secretary of State so decided, following investigations, then there need be no delay once those investigations had been undertaken. I should like to suggest that this would be worth while looking at if it is seriously considered, as I understand the Scottish Consumer Council believes, that some legislation of this kind is also required for Scotland. With that query I would very much like to give the support of these Benches to the Bill.
8.49 p.m.
Baroness Burton of Coventry: My Lords, I am glad that the Bill seems to be receiving such wholehearted support. I began on this matter very early. Towards the end of October, which seems a long time ago now, I was looking at various aspects of consumer affairs and I was studying in detail a report which was mentioned by the noble Lord, Lord Mishcon; and that was, of course, the report published by the National Consumer Council called Service Please with a subtitle Services and the Law: A Consumer View. I expect that many of us will be referring to that report tonight.
I should like to say a word or two about it because of the effect it had on my thinking. It seemed to me, so long ago as last October, a most excellent piece of work and, as any other student of consumer affairs would have done, I set to work to make detailed notes about it, having no idea that we would have any chance of discussing the points in it as soon as this in both Houses of Parliament.
I thought it was sensible and fundamental of that report to decide that a preliminary necessity was to identify the principles of existing law which cover the problem areas and which are common to all services without exception. Those who read the report will note that three main types of service problems emerged: the first was the quality of the service; the second was problems with delays; and the third was problems over cost. The writers of the report found that those three types of problems covered all categories of service.
This had a particular relevance for me because many years ago I tried to have this done by the Citizens' Advice Bureaux because I believed that if one could identify common problems surfacing throughout the

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country, then these could be studied centrally by Citizens' Advice Bureaux; they would bring real benefit to all bureaux and to the people who went to them for advice.
The National Consumer Council report, Service Please, went on to suggest that we should all benefit from that if the principles of existing law could be restated as part of an Act of Parliament. The report listed these basic principles as:

"1. A service should be carried out with reasonable care and skill:

2. The supplier should perform the service within a reasonable time;

3. The supplier should be entitled to claim only a reasonable price where no price was fixed; and

4. Where the customer is a private consumer, the supplier should not be able to avoid these provisions".

As I understand it, only the fourth point would create new law, and I think it is important to state that these proposals put forward did not change the balance of responsibility between the supplier and the consumer. It was thought in the report that the best way of doing this would be by Act of Parliament, possibly a Goods and Services Act 1982. This is what appeared in the report last October, 1981.
The more I studied the report, the more enthusiastic I became. Then, of course, on 22nd January last we had Mr. Fred Willey's Supply of Goods and Services Bill, which seemed to cover all the points raised in the report of the National Consumer Council. I hope that these few introductory remarks will help to explain my enthusiasm for the Bill, and also at the outset to convey my congratulations to the National Consumer Council for the service that I think they have rendered to every consumer.
I turn now to the Supply of Goods and Services Bill which is before us today. I hope, as both previous speakers have hoped, that we shall not only give this Bill an unopposed Second Reading, but an enthusiastic one. My noble friend Lord Mishcon, with his legal training, was able to give a legal presentation of the Bill. I would not aim to do that, but perhaps I could give a more general one for those consumers who are not legally trained.
The Bill has two objectives. The first is to implement the 1979 Report of the Law Commission on the Sale of Goods. Most important, the Bill will cover goods that are provided under work and materials contracts. My noble friend—and I am sure that he does not mind my calling him my noble friend—did mention this—
Lord Mishcon: My Lords, may I tell the noble Baroness that I am honoured, and will continue to be honoured, every time she refers to me in that way.
Baroness Burton of Coventry: My Lords, old habits die hard, even if we have moved Benches. The Bill will cover goods that are provided under work and materials contracts. Mr. Willey gave as an example that if a plumber provides and fits taps, the protection will be the same as though the taps were bought in a shop. That will cover many goods. Emphasising what I said earlier, this is not an attempt to write new law, but an effort to remove doubts and uncertainties. As the Law Commission said, uncertainty is undesir-
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able. It is especially undesirable in relation to consumer goods, and these matters are dealt with in Clauses 1 to 5.
We should note, as has been stated, that similar protection for hire transactions is provided—not hirepurchase, which has been dealt with in previous legislation. Hire transactions are outside the provisions of the Sale of Goods Act 1893 because there is no transfer of ownership. It is possession that is transferred. It is getting late and to avoid going into too much detail on Second Reading, may I just say that the problem entitled contracts for the hire of goods is contained in Clauses 6 to 10. Clause 11 deals with the exclusion of implied terms and is in support of the provisions made.
When the Bill arrived back on the Floor of another place following amendments made during the Committee stage, Part II had become the Scottish law of supply of goods. During Report and Third Reading in another place much attention was given to the Scottish aspect. Many points of considerable interest and importance were raised. I know that the noble Baroness, Lady Seear, has mentioned those and I think that they should be commented on in Second Reading, although the Bill, as now before us, does not extend to Scotland. I am particularly glad that my noble and learned friend Lord Wilson of Langside has said that he will do this. As a former Solicitor-General for Scotland and a former Lord Advocate, we obviously could not have anyone better qualified on that subject.
Part I deals with the supply of goods. Part II of the Bill deals with the provision of some statutory protection in the case of contracts for service. The first, already referred to, is the implementation of the 1979 Report of the Law Commission. Anyone who has studied the debate in another place or the Committee stage in another place will have noted the universal congratulations given to the National Consumer Council and to its report. It was recognised that Part II of the Bill that we are discussing today was inspired by this work and I would like, once more, to add my recognition. In fact, I think that we could not do better here than echo what was said by the former Minister for Consumer Affairs, Mrs. Oppenheim, at column 535 on 22nd January, when speaking of the
"excellent and widely welcomed National Consumer Council Report, Service Please".
She went on to say:
"Indeed, it seemed to be the answer to a cri-de-coeur from many thousands of consumers throughout the country".
The help given by the National Consumer Council in its study of the problem of services has been invaluable for the preparation of Part II. If accepted by Parliament, Part II of the Bill will codify for consumers the quality of service that they have a right to expect. Indeed, Mrs. Oppenheim warmly welcomed the attempt made here to codify this existing common law. She herself said that she would like to see wider codification of the common law in this field.
The Minister, as she then was, went on to speak of the problem in Clause 16 which, for Second Reading, was headed "Restriction on exclusion of implied terms". She felt that this might well prejudice what is known as the "two-tier service" system operated by many traders. Mrs. Oppenheim believed that the

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position of consumers in relation to exclusion clauses had been greatly strengthened following the proceedings on the Unfair Contract Terms Act 1977. Furthermore, the noble and learned Lord the Lord Chancellor had agreed to refer the question of services to the Law Commission, and the Law Commission would review the matters presently covered by Clause 16 of the Bill then being discussed. Upon this, Mr. Willey said that he was willing to withdraw Clause 16 at the Committee stage to allow the Law Commission inquiry to proceed, and this was done.
In conclusion, I believe that all consumers and consumer organisations will be grateful for what is before us now. Obviously it would have been more satisfactory, or easier for discussion, if the present Part II had been drafted by the Law Commission following a review by it and all the consultations with interested parties that would have been inherent in such a review. That was the problem arising from the proposed Clause 16. But for once speed was of the essence. We do not usually get a chance to have legislation through as quickly as this.
If we think back on the dates, the National Consumer Council report was published only three months before the Second Reading in another place. The Bill itself was published only 10 days before. There would have been more time for deliberation had Mr. Fred Willey not come first in the ballot and seized the initiative by selecting this Bill. We are glad that he did so, and in paying tribute to him I would like to pay tribute to the welcome and co-operation offered by the Government through Mrs Oppenheim, and of course once more to the National Consumer Council. I hope that we shall be as speedy in our House, and I also hope that having the Secretary of State for Trade among us will mean that we shall be able to bring more parliamentary weight and influence in future to the whole area of consumer affairs. I hope that everyone will welcome this Bill.
9.2 p.m.
Baroness Elliot of Harwood: My Lords, I should like to add my contribution to this debate entirely agreeing with everything that the noble Baroness, Lady Burton, has just said. I will, if I may, congratulate the noble Lord, Lord Mishcon, on the manner in which he introduced this Bill, which made it simple to understand although in some ways it is a rather complicated Bill.
This Bill is excellent reading, and it responds to so many of the problems connected with consumer needs and consumer queries. It explains the law and how it should be interpreted. It introduces clarity into complicated legal questions. I should like to add my congratulations to the National Consumer Council on the admirable document which they wrote and about which the noble Baroness, Lady Burton, has spoken, and which provides first-class and interesting reading.
If one had been in any doubt as to whether or not this Bill was necessary, there are some statistics which, notwitstanding my quite extensive experience of consumer affairs, surprised me. One of the documents points out that at 879 Citizens' Advice Bureaux in England and Wales, 4·1 million inquiries were made,
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of which 758,000 related to consumers, trade, or business matters. That surely is a good example of the kind of problems that beset a great many consumers in a great many different fields.
Although the Citizens' Advice Bureaux have trained and skilled advisers they are not necessarily lawyers. There may be many problems which are difficult to answer when legal interpretation is required. Therefore, in Part I of this Bill, which deals with contracts for the supply of goods, hire-purchase can now be explained and clarified to serve both supplier and consumer. The accounts given of the failure of contractors of any kind to fulfil their obligations are also alarming and convincing.
Another point is the cost of work rising far above the contract price, which seems to be quite normal, and consumers, uncertain of their rights, do not like to prosecute. This Bill now explains the problems so definitively that it will enable them to see whether or not they have the right, and indeed the necessity, to try to rectify some of these matters. The Bill seems to me to be in every way excellent, and it is one which I hope everyone will support.
There is one point which has been mentioned by previous speakers, and that is the reception which the Bill had in another place in connection with Scotland. As your Lordships know, I live and work there and I think know as much about Scotland as almost anybody else; and I read with interest on Friday, 2nd April, the Report stage of the Bill. I have it here in my hand. I found it most disappointing.
I am glad that we have the noble and learned Lord, Lord Wilson of Langside, speaking on this because he is one of the great experts, while I am not. Although I know that Scottish law is very different from English law, I was not convinced by the Solicitor General for Scotland arguing that this Bill could not, in its present form, apply to Scotland. He did not indicate that it would never apply, but that in order that it should apply there should be an inquiry by the Law Commission for Scotland.
I do not dispute that. This is a legal point and I have no doubt that the Procurator was quite right, but it is disappointing because all that is described in the Bill, all that is described in the reports of the Consumers' Association, apply to Scotland just as much. I am not in the least surprised that the Consumer Council for Scotland took a dim view of the reception which this Bill had from the Solicitor General. I hope that we shall be able to get round this in some way, or that the Scottish legal people will undertake to make this inquiry in time so that it can be used in, and applied to, Scotland.
I do not know whether Lady Seear's idea is possible—I was quite attracted by it—that Scotland should be included on the understanding that it does not come into effect until the Scottish legal people agree. I slightly doubt whether they would agree to that, but it is certainly an idea. I am disappointed that this Bill should not be able to be applied to Scotland, and I hope that we in this House will support the Bill as it stands, and that it will go through this House and become the law of the land; and then I hope that Scotland will see to it that it follows as quickly as possible in England's footsteps.
9.8 p.m.
Lord Wilson of Langside: My Lords, I wish to add my congratulations to those of the noble Baroness, Lady Elliot, to the noble Lord, Lord Mishcon, for his admirable presentation, and clarity of explanation, of the Bill. The only point on which I wish to touch is that of the circumstances by which Scotland came to be excluded from the terms of measure, and I ask Lord Mischon to believe me when I say that I do it with the greatest of reluctance. I say that because I am one of those peculiar Scotsmen who think that the Scots, on the whole, are at their best when in partnership with the English in terms of the Treaty of Union. I cannot speak for the other side of the partnership. I am always conscious—I was conscious of it when I was in Government and I am equally conscious of it out of Government—that if one puts a strain on that partnership, at however simple a level, that is undesirable, and the Scottish dimension is in danger of becoming a bore to the English, which is bad for the relationship.
I have told the noble and learned Lord the Lord Advocate that I would be raising this matter. I hope that the Government will look at the subject afresh and anew and will consider whether indeed they were right to exclude Scotland from the terms of the measure. I do not wish to argue that they were wrong. However, the circumstances are most unfortunate, and I hope the Secretary of State, for his interest, will look at the matter and take note of these circumstances with a view to the future where legislation of interest to both countries in the Union is involved.
I say that because, when I read the Official Report of the debates in the other place and the whole background to the exclusion of Scotland from the Bill, I could not help thinking that there was something which the sociologists, somewhat pretentiously, call "institutional malfunctioning". That is something, of course, which is always with us, like birth, death and other things. It is something which it is an important function of Government to minimise, to take note of and have regard to for the future. It is something which most of us who have been in Government have probably contributed to. I am sure the noble Lord the Secretary of State will not yet have done that, and is unlikely to do so in the future, but most of us would probably concede that we have. It is also something which results from a wide range of causes, from gross incompetence to mere human inadvertence, sometimes even bad luck. It is also something the consequences of which cover an equally wide range.
I say all that because the short point I wish to make—there is, I believe, great validity in it—is that the functioning of the machinery of Government in relation to Scotland's place in this Bill was somewhat less than adequate. The report on which the Bill is based was printed by order of the House of Commons in July 1979. I do not know when the Law Commission started work on it, but certainly they were at work on it in the middle of 1977, over five years ago. It was not a joint report, as some of the reports of the Law Commission have been, and I make no complaint about that. There were good reasons for that.
I am as jealous as anyone of the independence of the Scottish system, but the point is that there are many areas where it is undesirable that the provisions of the law in the two countries should be out of step. I
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should have thought—and I do not think that the Government dispute it—that the area of the law concerned with consumer protection was one such area.
Surely common sense requires that, quite apart from those areas where joint reports of the two Law Commissions are undertaken, the Scottish Law Commission should keep under review the programme of the other Law Commission, in order to avoid the danger of the law in two countries of the Union getting out of step, where that is contrary to common sense, or is damaging to matters of importance, matters of public policy.
But, of course, it is not the Scottish Law Commission's job to see that that kind of situation is avoided; it is the Government's job, and they, too, should be alert to the need for it. I ask the noble Lord the Minister whether any time before or after 1979 the Government and the Scottish Law Commission took note of the possibility that, in view of the report on which the English Commission was embarked, the law would get out of step? Whether they did or not, in January 1980—and, after all, that was two and a half years ago—the Scottish Consumer Council wrote to the Scottish Law Commission pointing to the report and asking whether they would review the position and consider whether legislation for Scotland would be appropriate. The reply was to the effect that they could not give the matter priority because it would make too great a demand on their resources.
It is some years since I was involved in such matters, so I speak with a certain reservation, and I might be wrong, but frankly, as a former Lord Advocate and a former civil servant who was responsible for the department which was answerable for the Scottish Law Commission, I am a little sceptical about the plea regarding lack of resources. As for priority, since the letter was written more than two and a half years ago, I find it quite irrelevant to the circumstances of today.
In any event, Scotland has been excluded from the Bill on the ground that a more considered review of the law by the Law Commission is essential. I might concede that this may be so today; I cannot be absolutely sure; the position is quite complex, and I have no resources other than my own on which to depend. But I would ask the Government to look at this matter again and consider whether they are right, and consider, too, what the noble Baroness, Lady Seear, said. I would ask the Government in particular to consider the letter, dated 29th April 1982, which the chairman of the Scottish Consumer Council wrote to the Solicitor General for Scotland, who in the other place had justified the Government's stand. I find it a most impressive and forceful letter. It might be that it is too late to overcome the damage that has been done, but I venture to hope that someone will point out to the Scottish Law Commission—because it is not for them to decide how the law should be reformed; it is for the Government to decide—that these are matters that they should try to anticipate. But, in any event, I think that the Government should anticipate them, and I leave the matter there.
9.19 p.m.
Lord Young of Dartington: My Lords, I should like to follow other noble Lords in thanking Mr. Willey for introducing the Bill in the first place and the noble

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Lord, Lord Mishcon, for the skill with which he has presented it this evening. I should like also, if I may, to couple with both of them the name of someone not so well known, Rosemary Delbridge, who was mentioned by several speakers in the other place. After leaving the Consumers' Association, she joined the staff of the National Consumer Council, and was indeed one of the first members of the staff of that council when I was the chairman. Intelligent, humane, humorous and attractive, she was also a doughty campaigner and lobbyist for this Bill, and saw it launched, and well launched, before, most unfortunately and tragically, she died at the early age of 32. One of the many reasons why I shall be glad if this Bill gets on to the statute book is that in its own way it will be a memorial to the work of a rather remarkable young person.
An excellent case has already been made out for this Bill, and I do not want to go over that ground again, especially in view of the time. But I would, if I may, like to broaden the context in order to explain why it is that the consumer movement is so deeply in support of this Bill, and would be in support of any further measures that may be taken along the same lines, only more ambitiously, in the future. The fact is that as far as services are concerned—I am referring particularly to Part II of this Bill—the field of concern is continually expanding, and this for three reasons.
The first reason is that the size of the service sector is expanding all the time. It is expanding in this country, and has done so and is doing so in all industrialised countries. As people's incomes increase the proportion going on services increases and the proportion going on goods relatively decreases—a fact first pointed out in a classic work of economics by Colin Clarke as long ago as, I think, 1941—and partly because of this the service sector is bound to baulk larger in the concern of consumers.
The second reason is that consumers can so much more readily be "done down" over services than they can over goods. They can more easily be kept ignorant about what it is that is being supplied to them. It is much more difficult for them to find out, for instance in the case of repairs, whether the work in question has been well and responsibly done. How is the consumer to know (as the report which has been mentioned several times this evening says in very forceful terms) whether his car or the complex piece of equipment which has been repaired has in fact been properly repaired in his interests? In view of this, it is not at all surprising that the statistics (referred to, again, by other noble Lords before me) collected by the Office of Fair Trading should show how enormous are the numbers of consumer complaints about services—about their quality, about the delays and about the excessive cost.
The third reason is that it has been, and still is, more difficult for the law to give consumers protection against unscrupulous traders and tradesmen, or pseudo-tradesmen—people who pass themselves off as tradesmen when in fact they have not the necessary qualifications. But at any rate in this Bill we have a modest but useful contribution to strengthening the law by means of codification which will increase the certainty of the law, the clarity, the ease of reference and the intelligibility of the law, all of which is so
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important to consumers. There is clearly a great deal more to do, and we can all hope that when the Law Commission has reported again there will be further and, we could hope, much more ambitious legislation to follow up this particular Willey Bill.
The only point of controversy, I think, is about the question raised by the noble and learned Lord, Lord Wilson of Langside, and that concerns Scotland. He spoke about it with authority. I want only to add to what he said by underlining one particular point, and that is the advantage of having a uniform body of commercial law in the two countries unless there is strong reason to the contrary. There may be two nations and there are certainly two systems of law, but there is one economy. That being so, consumers in Scotland, unless there are very strong reasons to the contrary, should not be deprived of the degree of protection given to consumers in England.
Moreover, the Sale of Goods Act 1979, which was the direct progenitor of the Bill before us, was applied to the whole country. Scotland was not excepted. In my view, as in the view powerfully put by the Scottish Consumer Council, this successor Bill should be applied to the whole country. I hope that the Government will be persuaded of this, will be prepared to look anew at this question of Scotland and will be prepared to have Scotland reinserted in the Bill as one of the territories to which this new law is going to apply.
9.28 p.m.
Lord Drumalbyn: My Lords, I have not put down my name to speak, but there is one matter to which I should like to refer and which I was confident would be referred to in the course of the debate. I should like to make brief mention of it, but before I do so, I might say that it would seem almost appropriate that as I am the only person present today, apart from one other, who has not made a speech, I should say a word at this stage. I should like to congratulate the noble Lord, Lord Mishcon, very greatly on the manner in which he has introduced this Bill. He always does things so suavely and acceptably that he has added lustre to what already was a very promising Bill.
The point that I wish to refer to I think I can most easily put to the House by quoting directly from the National Consumer Council's excellent paper called Service Please, at the bottom of page 31. It is talking about the exclusion clauses and says:
"We have argued that these obligations should attach to a supplier whether or not the customer is a private consumer. In one respect in relation to the exclusion clauses, we are convinced that something slightly more than codification is required. Accordingly, we have further recommended that the Unfair Contracts Terms Act 1977 be amended to prohibit the exclusion of the supplier's obligation to perform his services with reasonable care and skill where the services are supplied to a private consumer".
As I understand it, Clause 16 in the Bill—which deals with the possibility of varying or negativing a right, duty or liability arising under a contract for the supply of a service—does not seem to reflect the recommendation of the National Consumer Council. I would only like to ask, if my noble friend would refer to this matter, whether he can briefly indicate why it does not reflect that recommendation of the NCC, and to draw attention to the possibility that we might

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well discuss it at greater length on the next stage of the Bill.
May I add also a quick reference to the last subsection of that clause which says:
"This Part of this Act has effect to any other enactment which defines or restricts the rights, duties or liabilities arising in connection with a service of any description".
It seems to me that there are quite a number of such provisions in nationalisation Acts and in the practices of nationalised boards, including British Railways, where a great many exclusions of that sort or limitations and restrictions arise either in the statute law itself as it now exists at present or else in orders and regulations made under that law. Can it be that this refers to regulations and orders as well as to the principal enactment? If so, will this not be something worth discussing also? I hope I have not detained your Lordships too long. I thought it right to raise what seems to me to be an important matter.
9.32 p.m.
Lord Ponsonby of Shulbrede: My Lords, my noble friend Lord Mishcon, in moving the Second Reading of this Bill most eloquently, told your Lordships of its purpose. I do not think it necessary for me to repeat what he said. As the noble Baroness, Lady Seear, said, it is surprising that Part I of the Bill concerning the supply of goods should be necessary at all. This Bill has enjoyed widespread support from all sides of the House and from a multiplicity of organisations, as has been mentioned: the National Consumer Council, the Consumers' Association, the Scottish Consumer Council, the Welsh Consumer Council, the National Federation of Consumer Groups, the Citizens' Advice Bureaux and the Institute of Trading Standards Administration. It has now been blessed by the noble Lord, Lord Young of Dartington, who can be regarded as the father of the consumer movement.
The basic purpose of the Bill is to clarify the law as it exists between the supplier of goods and services and the receiver of those goods and services. It should succeed in its purpose so far as the supply of goods is concerned, but we must acknowledge that, so far as it applies to services, it is only a step in the right direction. As we have been told this evening, the Law Commission is, as my noble friend reminded us, undertaking a more comprehensive reform of the law than that attempted by this Bill.
It is an area of great concern to consumers and tends, after housing and social security problems, to be the largest area of concern voiced by those seeking advice from the Citizens' Advice Bureaux. It is also an area of concern to the EEC, who I know are hoping to carry out research in this particular field.
The solution which the Bill adopts is the term of reasonableness. Services should be provided with reasonable care and skill in a reasonable time and at a reasonable charge. The National Consumer Council takes the view that most cases will be black or white and there will be little doubt about reasonableness. But, of course, it will be up to the courts to decide whether a service which has been provided has been provided in a reasonable way. An individual consumer may feel that a charge of £40 for a five-minute job repairing an electrical appliance is unreasonable. On investigation it may be found to be quite reasonable, but will
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the consumer accept that such a charge is reasonable?
I accept the difficulty of laying down a more definite standard other than that of referring to industry codes of practice; but I do believe that the Bill as it stands is an important step forward and one to which your Lordships should give a Second Reading this evening. I hope that the noble Lord in his reply will look at the question of whether it should also apply to Scotland, as a number of noble Lords have suggested.
9.36 p.m.
The Secretary of State for Trade (Lord Cockfield): My Lords, may I first of all express my great appreciation of the very kind remarks which the noble Lord, Lord Mishcon, made about me in the introductory part of his speech? I am quite sure that what he said is not covered by the maxim, "timeo Danaos et dona ferentes".
This is an important Bill; it has been widely welcomed on all sides of the House, and the Government join in the general welcome. It is of course, as the noble Lord, Lord Mishcon, has said, a Private Member's Bill, and the responsibility for securing its passage rests primarily with its sponsors, although, if I may be forgiven for saying so, with so powerful and persuasive an advocate as the noble Lord, Lord Mishcon, in charge of the Bill, support by the Government would seem hardly necessary.
The noble Baroness, Lady Seear, made the point that the provisions of the Bill would encourage improvements in the quality of goods and services. This is an attractive and important argument. My noble friend Lady Elliot of Harwood quoted the experience of the Citizens' Advice Bureaux and stressed how important it was that the law should be understandable by the people. Part I of the Bill and indeed much of Part III closely follow the draft Bill prepared by the Law Commission and attached to their report on Implied Terms in Contracts for the Supply of Goods. This Law Commission report, like its predecessors, was based on wide consultation and detailed study of the existing law.
Nevertheless, despite the general support, a number of criticisms have been made of specific parts, and I will return to those in more detail later. I do need to emphasise that the onus of satisfying the critics rests not so much with the Government as with the sponsors of the Bill. I am sure that they will do all in their power to secure a unanimity of approach on these matters.
I should like at this stage, if I may, to pay tribute to the work of the Law Commission in the field of the law relating to the sale of goods and related sectors. The increasing imbalance which has emerged over the years between traders on the one hand and individual consumers on the other was upsetting the balance originally established by the Sale of Goods Act 1893. The Law Commission has undertaken a series of detailed studies in this field, as a result of which three new Acts have reached the Statute Book over the last 10 years, each of them seeking to clarify or strengthen the existing law in a particular part of the field. The first of these, the Supply of Goods (Implied Terms) Act 1973, dealt with an abuse which was developing, under which consumers were deprived of their basic rights by "small print". It provided that, when buying goods or

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acquiring them by hire purchase, consumers could not be deprived of the benefit of the implied terms about title, merchantability, fitness for purpose and being true to description.
The Unfair Contract Terms Act 1977 dealt with two separate problems. First, it provided additional protection for consumers who acquired goods other than by purchase or hire-purchase, by providing that they could not be deprived of the benefit of any terms implied by common law that goods were merchantable, fit for their purpose or true to a description applied to them. Secondly, it sought to deal with traders who had been escaping liability for negligence as a result of small print in contracts. It prevented traders from escaping liability for death or injury arising from negligence, and allowed them to exclude liability for other negligence only if they could show that such an exclusion was reasonable. The Sale of Goods Act 1979 consolidated the 1893 Act and the subsequent amendments. Although it did not add to the law, it provided a clear statement of the existing law in a single document.
Part I of the present Bill is therefore the fourth piece of legislation in this field for which we are indebted to the Law Commission. It carries forward the work of the 1977 Act by defining the terms which are implied by law in contracts for the transfer or hire of goods (other than contracts of sale or hire-purchase). The Law Commission found that the terms implied by common law in such contracts were close to, but not exactly the same as, the terms prescribed by the Sale of Goods Act. They propose that these should be set out in clear simple terms. Once the Bill is in force, consumers who enter such contracts will have the same rights set out in the same clear statutory terms as those who buy goods in normal straightforward transactions. Indeed, the consumer who hires goods will have the additional right to enjoy what the lawyers call "quiet possession of the goods". The 1977 Act ensures that a consumer cannot be deprived of the benefit of these implied terms. It is a tribute to the thoroughness of the Law Commission's study that few anxieties have been expressed about Part I of the Bill.
Part II deals with a different sector and has a different origin. It stems from the National Consumer Council's report Service Please, which was published last October. This clearly identified the problems which consumers faced when services proved unsatisfactory. It urged that the existing common law on services should be codified in a statute. It suggested, therefore, that the Government should ask the Law Commission to study the law on services. In the meantime, pending that study, it suggested that three terms should be implied by statute into contracts for services, unless the parties agree to the contrary.
The Government accept that the present position is unsatisfactory. My noble and learned friend the Lord Chancellor has therefore agreed to ask the Law Commission to study the law on services. Meanwhile, the sponsors of this Bill suggest that, in general, and unless the parties agree to the contrary, there should be implied terms that a person providing services will do so with reasonable care and skill, do so within a reasonable time and be entitled to make a reasonable charge.
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Part II of the Bill is intended to codify the existing common law. I am sure your Lordships will appreciate that the Government would not wish to impose new obligations on important sectors of the service industry without full and proper consideration.
It is clear from what has been said this evening that some noble Lords believe that the Bill would impose new obligations on important sectors of the service industry. The noble Lord, Lord Lloyd of Kilgerran, in an intervention, referred in particular to the representations made by the Law Society. The noble Baroness, Lady Seear, touched on the same point. I hope that the sponsors of the Bill will give very careful consideration to the points which have been raised and will consider whether these make it necessary or desirable to amend the Bill in any way.
The Government will naturally also consider the points which have been made during the debate. I should, however, at this stage like to give some reassurance to those who have expressed anxiety about the problems which particular service industries would face if the Bill were enacted in its present form. I should not make an order bringing Part II into effect until there had been a reasonable opportunity for service industries to study the position and draw my attention to problems which they would face. If a case could be established on a full examination of the facts that the Bill would impose new obligations on a particular sector, I should be prepared to consider using my power under Clause 12 to exclude those services from those provisions of the Bill. I hope this statement will give reassurance to people who have expressed concern regarding a number of these points.
The noble Baroness, Lady Seear, raised the question of the application—or perhaps I ought to say the nonapplication—of the Bill to Scotland. The same point was made by the noble Baroness, Lady Burton of Coventry, by my noble friend Lady Elliot of Harwood, by the noble Lord, Lord Wilson of Langside, and by the noble Lord, Lord Young of Dartington. The application of the Bill to Scotland was opposed in another place essentially because it was considered that it was inappropriate to legislate in relation to the supply of goods in Scotland until there had been separate consideration of this area of law by the Scottish Law Commission. The provisions relating to the supply of goods which apply in England and Wales are, of course, based on the recommendations of the Law Commission, made after widespread consultation. An examination of the law on the buyers' remedies and the standard of quality and fitness in contracts of sale has been started by the Scottish Law Commission.
The law in Scotland, as has been said, is significantly different from what it is in England. There are obvious dangers in trying to apply what is suitable for one jurisdiction to the other without due and full consideration. Similar arguments apply to the supply of services. Indeed, the legal position is even more uncertain, and I understand that the Scottish Law Officers and, indeed, most informed legal opinion in Scotland take the view that legislation on the supply of services for Scotland would be both risky and premature. I am sure, however, that my noble and learned friend the Lord Advocate will consider the suggestions of the noble Lord, Lord Wilson of Langside, in the light of priorities which my noble and learned friend

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and the Scottish Law Commission need to set for their future work.
My noble friend Lord Drumalbyn raised the question of Clause 16, which was deleted in Committee in the other place. This was done because it would have prevented traders from offering a two-tier service. It was agreed to leave it to the Law Commission to consider whether such an important change in the law was desirable.
Having dealt with these particular points, perhaps I may say in conclusion that even those who have expressed reservations on particular aspects of the Bill nevertheless clearly welcome the Bill as a whole. I welcome it on the same basis and in the same spirit. I hope that the House will give it a Second Reading.
Lord Mishcon: My Lords, I ask your Lordships to give this Bill a Second Reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

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