Sitting of 24 November 1982

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS
  HIGHLAND REGION (BANAVIE LEVEL CROSSING) ORDER CONFIRMATION BILL
  Read the Third time, and passed.
Oral Answers to Questions
  FOREIGN AND COMMONWEALTH AFFAIRS
  Mr. Speaker: Order. I remind the House that one supplementary question at a time is quite sufficient.
  FOREIGN AND COMMONWEALTH AFFAIRS

    Jordan
    Mr. Adleyasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on his visit to Jordan.
    Mr. Lathamasked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement on his recent visit to the Hashemite Kingdom of Jordan.
    Mr. Cyril D. Townsendasked the Secretary of State for Foreign and Commonwealth Affairs if he wil make a statement on the Middle East.
    The Secretary of State for Foreign and Commonwealth Affairs (Mr. Francis Pym): In the course of my visit to Jordan from 9 to 11 November I discussed the full range of Middle East issues with my Jordanian opposite number, Crown Prince Hassan, King Hussein and others. Jordan has a key role to play in the search for a comprehensive peace settlement. I was impressed by the Jordanian commitment to peace. The Jordanians made clear the importance that they attach to the continuing British and European role in the search for a settlement. We shall continue to work hard with all the parties concerned to sustain the momentum towards negotiations created by President Reagan's initiative and the Fez summit declaration. On Lebanon, we support the restoration of a strong and democratic central Government and United States efforts to achieve the early withdrawal of all foreign forces.
    Mr. Adley: I thank my right hon. Friend for that answer and welcome what he said. Will he confirm that the views of Her Majesty's Government and of King Hussein and the Jordanian Government on the Middle East are very close? What does my right hon. Friend identify as the main obstacle to a peaceful solution, the desire for which seems to be shared by most parties, including those he has mentioned?
    Mr. Pym: I confirm that our perception of the problem and our approach to the task of achieving peace are close. The central issues are, first, the policies being pursued by the Israeli Government, that is to say, their rejection so far of the Reagan plan and their policy towards settlement. Secondly, it is fair to say that the Arab countries have not yet come forward with a clear and concerted view of their position vis-a-vis the Reagan plan. I think that this will become clear within the next few days or a week or two.
    Mr. Latham: When he was discussing the Reagan plan with the King of Jordan did my right hon. Friend. in view of the positive response that the King has given to the plan, draw a distinction between the Reagan plan and the Fez plan, because many of us would regard the Fez plan as completely unacceptable?
    Mr. Pym: Yes, I think that every country has reservations about the Reagan plan, and some differences with it. That would even go for Britain, which has taken a position similar to that of our European partners as expressed in the Venice declaration. There are differences of view, but Jordan and many other Arab countries feel that the opportunity presented by the Reagan plan should not be missed. They are supportive of a peacemaking process based upon it.
    Mr. D. Townsend: Has my right hon. Friend read reports that the number of Jewish settlers in the occupied West Bank is likely to increase this year by 50 per cent? I welcome the intitiative taken by Her Majesty's Government on this point in support of the Reagan plan, but what further action will the Government take to prevent the Reagan plan from being destroyed in this way?
    Mr. Pym: We are concerned about that aspect of the development of events since the plan was proposed. I have made strong representations to the United States Government and to Israel about the importance of a change of policy there. All along I have been pressing them to take a more positive approach to the Reagan plan, which gives an opportunity that should not be missed.
    Mr. Moyle: The right hon. Gentleman referred to the importance of withdrawing foreign forces from Lebanon. Does he agree that a key factor in this is the international peacekeeping force there? What response have Her Majesty's Government made to the request that a British contingent be sent to the Lebanon to take part in the peacekeeping process?
    Mr. Pym: The Government still have that matter under consideration, and we have not yet reached a conclusion. All foreign forces should and must be withdrawn from the Lebanon. However, that is a difficult negotiation to achieve. We are glad that Mr. Habib has come hack into the negotiating arena, and we hope that he will succeed. However, it would be a mistake for the House to underestimate the difficulties.
    Mr. Amery: Will my right hon. Friend assure the House that when His Majesty the King of Morocco brings his delegation here the Government will not receive the PLO representatives unless and until they have by that time accepted the Reagan proposals, with the implication that the representatives recognise the State of Israel?
    Mr. Pym: The Government's position has been that they would be prepared to see PLO representatives if that would further the peacemaking process. Our basic position

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    has been that it would be inappropriate to see the PLO until it renounces violence and recognises the right of Israel to exist. It is essential to take a decision about that difficult matter in the light of the answer to the question whether it will help the peacemaking process. We are considering the request, which we have now received formally, contrary to what was originally proposed, that the delegation should include PLO representation.
    Mr. Hooley: Does the Secretary of State agree that in areas like the Middle East it is vital to uphold the authority of the United Nations peacekeeping operations, and that as long as the great powers allow those operations to be treated with complete contempt—as Israel has done—the prospect of stability and peace is remote?
    Mr. Pym: Yes, indeed. That is just one aspect of the difficulties that I mentioned of achieving the withdrawal of all forces from the Lebanon. There is no doubt that that multinational force has an important role to play. At the moment I think that it is adequate for the job that it is doing, but there is a request for further reinforcements, and that is what we are now considering.
    Mr. Walters: Did it emerge from my right hon. Friend's talk with the King that the Reagan proposals would have a chance of making progress only if there were an immediate freeze of settlements on the West Bank? What positive steps will we and the Americans take to bring that about?
    Mr. Pym: Fundamentally, it is a decision for Israel to take. It is Israel's responsibility. We have made representations to that country in various ways. Clearly, the country with the greatest influence is the United States, and for that reason I have made direct representations more than once about the importance of this change. If the policy now followed by Israel is not altered, a credibility gap will arise in the minds of Arab countries. Clearly that would set back the peacemaking process, for which there is a broad and general desire.

    Falkland Islands
    Mr. Winnickasked the Secretary of State for Foreign and Commonwealth Affairs what consultations with overseas Governments he is having regarding the Falkland Islands and their future.
    Mr. Pym: Our first task remains that of reconstruction and rehabilitation of the islands. When the islanders have had time to recover and consider the future, we shall be consulting them about their views. It would be premature to discuss their future with other Governments until that stage has been reached, but I have of course explained to a large number of other Governments the British Government's position and approach.
    Mr. Winnick: Is the right hon. Gentleman aware that no one in his right mind would wish to live under the rule of the junta in Argentina? However, is there not a danger now of Britain becoming isolated over the Falklands issue? Would it not be sensible at least to explore the possibility of United Nations trusteeship? Will the Foreign Secretary confirm today that he has not ruled out the possibility of negotiations on the future of the Falklands?
    Mr. Pym: The immediate problem is to restore and rehabilitate the islanders, their way of life, and the structure of the islands. Secondly, our aim is to restore
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    normal relations with Argentina. That has been our policy since the end of the conflict. We have had the advantage of our friends in the European Community making approaches direct to Argentina with us in an effort to bring that about. So far, there has been remarkably little sign by Argentina that it wishes to restore normal relations. That, I think, must be the beginning of relations—negotiations or relationships, call them what one will—with Argentina.
    It is premature to consider the question of trusteeship or the other possibilities that could arise in the long-term future. When the islanders have recovered from the shock that they suffered, and have considered their future in the light of events, that will be a more appropriate time to consider the possibility that the hon. Gentleman mentioned.
    Sir Anthony Kershaw: Does my right hon. Friend agree that whether the negotiations are undertaken bilaterally or with others as well, there is little point in such negotiations if it is proclaimed in advance that they must end in the sole sovereignty of Argentina not only over the islands but over the dependencies?
    Mr. Pym: There is no question of negotiations of that sort taking place at the moment, as I made absolutely clear—[HON. MEMBERS: "At the moment?"]—well, maybe never. I am talking about negotiations on sovereignty. That is the whole point and the argument which we deployed at the United Nations and which I have made clear to countries all round the world. However, there is good reason to restore normal relations with Argentina in commercial, diplomatic and other ways, because that is to the advantage of the islanders.
    Mr. Dalyell: What have the Governments of Chile and Uruguay said to our requests for landing rights? May there not be a dreadful accident involving Hercules aircraft in the hazardous business of refuelling and refuelling again from Victor tankers?
    Mr. Pym: We would welcome, of course, the establishment of a regular commercial air service of any kind between the Falklands and the South American mainland, whether in Chile or elsewhere. At present, however, there are political and practical obstacles to that. Undoubtedly Argentina's neighbours are somewhat sensitive about the matter at the moment, and there are other problems. However, it is a desirable objective and one that we are pursuing.
    Mr. Nicholas Winterton: Although I appreciate my right hon. Friend's answer, does he agree that it would help the British Government to have discussions with Chile, because that could provide splendid communications with the Falkland Islands, without going to Argentina or impinging on Argentine air or land space? Does my right hon. Friend agree that Chile is gradually moving back through a voted constitution towards democracy, and that that would stabilise Chile as well as the southern Atlantic?
    Mr. Pym: As I said, we would welcome the establishment of links of that kind with the South American mainland. As Chile is part of that mainland, I include that country in the answer that I have just given.
    Mr. Clinton Davis: How does the Foreign Secretary distinguish between the Fascism that exists in Chile and the Fascism and breaches of human rights that occur in Argentina? Would not such an ally be a very dubious one?

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    Is the Foreign Secretary aware of the declining support among our friends for Britain's stance on the Falklands? Therefore, is it not right that the immediate problems to which he alluded and the longer-term solutions are not mutually exclusive, and that we should be seen to be rather more flexible than he is at present?
    Mr. Pym: The hon. Gentleman is quite wrong. There has been no decline in support for Her Majesty's Government's position over the Falkland Islands. Indeed, the reasons for the decisions and the steps that we took are widely respected, and the House would be entirely wrong if it thought that that did not still command widespread respect—even, I might add, in Latin American countries, some of which, for understandable reasons, feel a certain solidarity with Argentina. Chile was quite helpful to us during the actual conflict, and that is something that we should bear in mind in considering our relations with that country now.

    Madrid Conference
    Mr. James Lamondasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on progress at the Madrid conference.
    Rev. Martin Smythasked the Secretary of State for Foreign and Commonwealth Affairs whether he is satisfied with the progress made to date in the discussions in Madrid on the Helsinki agreement relating to human rights.
    Mr. Wallerasked the Secretary of State for Foreign and Commonwealth Affairs what representations have been made by Her Majesty's Government at the resumed European security conference in Madrid about the Soviet Union's failure to comply with its commitments under the Helsinki agreement.
    The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hurd): The conference reconvened on 9 November. Together with our allies and partners, we have drawn attention to violations of the Helsinki final act, in particular by the Soviet Union and Poland, and given notice of the need to have a concluding document which provides for additional commitments. Western countries have also drawn attention to the need for a clear mandate on a conference on disarmament in Europe.
    Mr. Lamond: As the conference has been going on for more than two years, most of that time having been taken up with discussions on human rights, which, while important, is only one aspect of the Helsinki final acts, is it not time now to drop the 14 amendments which Western countries suggested to the draft document put forward by the neutral countries, move swiftly to measures that will increase security and co-operation in Europe, and agree to the European disarmament conference?
    Mr. Hurd: During the long time which the hon. Gentleman mentions there have been disastrous events in Poland and a steady deterioration in human rights in the Soviet Union. The Helsinki final act and these conferences provide an opportunity and place on us a responsibility to draw continuous attention to these failures by the Soviet Union. The amendments that we have tabled to the draft concluding document reflect that responsibility.
    Rev. Martin Smyth: Bearing in mind the disappointingly slow progress in Madrid, will the Minister, on behalf of the Government, seek an early opportunity to
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    raise with the new Russian leadership the plight of Jews who have been refused basic religious and cultural rights? Will he raise the case of Mr. Yosef Begun, a Hebrew teacher who was arrested in Moscow last month and who may be in danger of being tried and sentenced to a third term of exile?
    Mr. Hurd: The leader of our delegation to the Madrid conference mentioned in his speech last week the position of religious communities in the Soviet Union. He mentioned also a large number of individual cases. Where we see opportunities to raise such individual cases direct with the Soviet Union, those opportunities are taken.
    Mr. Waller: Does my right hon. Friend agree that, far from relaxing restrictions on the freedom of information, the Soviet Union has intensified them with more jamming of the BBC's external services? Whereas previously it was not possible for a Soviet citizen to receive written material from outside that country, it is now not possible for him to send books and other written material to other parts of the world. Could it not be said that since Helsinki the Soviet Union has restricted human rights and freedom of information rather than eased them?
    Mr. Hurd: There has been a deterioration in the position. My hon. Friend is right about the exorbitant levy and complicated licensing system introduced for the export of books. Both the points he raised were mentioned by Mr. Williams, the head of our delegation at the Madrid conference. That conference provides a continuing opportunity to draw the attention of the Russians and public opinion to the position that my hon. Friend has described.
    Mr. George Robertson: The Soviet Union's record on human rights is clearly in conflict with both the spirit and the letter of the Helsinki final act. The Helsinki agreement was by any standard a global initiative, and the review conference provides an opportunity to take the East-West dialogue further, especially with the new regime in the Soviet Union. Will the Minister resist any pressures to sabotage the Madrid review conference and assure the House that the Government will press for new initiatives on confidence building and the disarmament conference?
    Mr. Hurd: In my original reply I mentioned the need for a clear mandate on the conference on disarmament in Europe, which would include, as a first step, confidence-building measures. The hon. Gentleman would not expect us to separate that from human rights, about which we have been talking. It is not sensible to suppose that we can make satisfactory progress if we leave human rights on one side and concentrate on finding new commitments when the old commitments have not been respected.
    Mr. Ginsburg: Will the Minister ask our ambassador to Moscow to convey to the new Soviet Administration the view that even a modest gesture towards human rights might be helpful in getting negotiations going on major security problems?
    Mr. Hurd: We have been trying to convey that message in Madrid. We should like to consider the hon. Gentleman's precise suggestion.
    Mr. Lawrence: Has my right hon. Friend had time to consider the evidence that has come from Bonn, at the hearing of the International Commission on Human Rights, that the Russians have been and are still using

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    political prisoners as slave labour on the Siberian pipeline? Will he ask Ambassador Williams to raise that matter at the Madrid conference?
    Mr. Hurd: I should like to consider that.

    Palestine Liberation Organisation (Lebanon)
    Dr. McDonaldasked the Secretary of State for Foreign and Commonwealth Affairs what information he has as to the use by the Palestine Liberation Organisation of United Nations Relief and Works Agency educational centres in Lebanon for military training purposes.
    Mr. Hurd: The United Nations Relief and Works Agency has carried out its own investigation into allegations that its training camp at Siblin in the Lebanon had been used for military training. Its report confirmed that the centre had been misused and disciplinary measures are being taken.
    Dr. McDonald: Bearing in mind the overwhelming necessity for the United Nations to be entirely neutral in the Middle East, and to be seen to be so by both sides, will the right hon. Gentleman press for an investigation to ensure that no other Relief and Works Agency educational centres have been used by the PLO for military purposes?
    Mr. Hurd: There has been an investigation, and the principal of the centre has been suspended. Disciplinary measures have been taken against other members of staff. In our view that does not weaken the overwhelming importance of UNRWA, to which we contribute substantially, as the main means in the area of providing humanitarian relief, education and training for refugees.
    Mr. Marlow: Is not the main thing now not to concentrate on making propaganda points but to ensure that proper facilities are provided for young Palestinians, many of whom are orphans and without homes, to have proper education? How many young Palestinians are currently receiving education? What do the Government intend to do to ensure that education is available to more of them?
    Mr. Hurd: We are worried about the serious financial position of the agency. It is desirable that Arab countries should contribute more extensively. We intend to maintain a substantial contribution.
    Mr. Moyle: Does the right hon. Gentleman agree that the problem to which my hon. Friend the Member for Thurrock (Dr. McDonald) drew attention is another aspect of the presence of foreign forces in Lebanon and demonstrates the importance of international peacekeeping? While the problem is being considered, will he bear in mind that whereas a training mission from this country might well be smaller than a major commitment, it might be a longer commitment and more intimately involved with a regime whose future is uncertain? Might it be better to take part in more conventional peacekeeping even if that means a larger force?
    Mr. Hurd: We are considering closely with the Lebanese Government the possibility that we could help to train the Lebanese security forces. That could be useful. My right hon. Friend the Secretary of State has already dealt with the matter of a contribution to the force.

    Syria
    Mr. Hoyleasked the Secretary of State for Foreign and Commonwealth Affairs if he will raise at the United Nations the abrogation of human rights in Syria.
    Mr. Hurd: No, Sir. I do not think representations to the United Nations would bring about the result that the hon. Member has in mind. The Syrian Government are well aware of our views on human rights.
    Mr. Hoyle: In view of that reply, will the Minister say whether the Foreign Secretary, during his recent visit to Syria, raised with the Syrian Government the killing of 25,000 innocent civilians in the northern city of Hama, which was reported by Patrick Seale of The Observer? Were any British civilians killed or injured? Was any protest made at that time about the massive violation of human rights? Will he take the opportunity of raising that matter with the Speaker of the Syrian People's Assembly when he meets him later this afternoon?
    Mr. Hurd: I do not believe that there were any British casualties or involvement in the events that the hon. Gentleman has mentioned. In all matters of human rights one has to ask oneself whether intervention with the Government concerned will do any good or whether it is likely to make matters worse. We have tried to make that judgment with Syria as we do with other countries.
    Mr. Latham: Surely my right hon. Friend would not have double standards on that matter? He would want to be sure that he treats Israel and Syria equally.
    Mr. Freeson: That would be too much to expect.
    Mr. Hurd: Israeli actions in the Lebanon are of course outside Israel and in a different category. Ministers views on that have been made clear. We are anxious also about certain human rights in the occupied territories which are not part of Israel but which are temporarily under Israeli occupation.

    Palestinian Leaders (Discussions)
    Mr. Marlowasked the Secretary of State for Foreign and Commonwealth Affairs at what stage in the negotiations to resolve the Palestinian problem he will be prepared to have direct discussions with Palestinian leaders.
    Mr. Pym: We maintain contacts at official level with a wide range of Palestinian opinion. A decision on whether I should meet any particular Palestinian leader would need to be taken in the light of all the circumstances, including whether it would contribute to the cause of peace in the Middle East. We want to see a mutual acceptance of rights and renunciation of violence by both Palestinians and Israelis.
    Mr. Marlow: Given Israel's progressive and accelerating incorporation of Palestine into Israel, and given Israel's complicity, to say the least, in Sabra and Chatila, is it not time that we dropped the conditions precedent on a meeting with the Palestinians—a one-sided recognition of Israel's right to exist and a one-sided abandonment of violence? If we want to get to the heart of the matter, is it not time that we talked to the Palestinians, who are the people that matter?
    Mr. Pym: I dealt with that issue when I replied to an earlier question from my right hon. Friend the Member for

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    Brighton, Pavilion (Mr. Amery). We want to achieve a mutual recognition by the Israelis and the Palestinians of each other's rights.
    Mr. Newens: Is the Foreign Secretary aware of reports that British citizens working on the West Bank as university lecturers and in other capacities have been required by the Israeli authorities to sign anti-PLO statements, failing which they are denied work permits? Is that not absolutely disgraceful? What action are the Government taking to rectify the position?
    Mr. Pym: I agree with the hon. Gentleman. Britain and other countries have protested strongly to Israel, which has now dropped the requirement to sign the declaration. However, I am not yet clear about the full implications of that decision, and I am making further inquiries.
    Mr. Sainsbury: Does my right hon. Friend agree that the discussions that are essential to peace in the Middle East are those between the Governments of the countries involved, especially Israel and Jordan? Will he confirm that he has urged that policy on those countries, especially during his recent visit to Jordan?
    Mr. Pym: If the peacemaking process, with all its difficulties. is to be successful, undoubtedly my hon. Friend's remarks are correct. Other countries are involved, and they must sit round the table and sink and settle their differences. It is a formidable task.
    We are trying to put Israel in a position where it will accept the basis of a peacemaking process. We are also trying to persuade the Arab countries to come forward with a coherent and cohesive response to the Reagan initiative.
    Mr. Hooley: As it is universally agreed that the future of the Palestinian people is the core of the Middle East problem, is it not common sense for the Government and the Foreign Secretary to talk to the leaders of the Palestinians?
    Mr. Pym: I have made the Government's position clear on that matter. We must make our decisions in the light of the circumstances and decide what will help the peacemaking process.
    Sir Hugh Fraser: Is not the question more intense than simply making up one's mind? Surely the Government's mind is clear. They wish to pursue a peacekeeping process based on the Reagan initiative. Is not the PLO excluded from the negotiations under the Reagan initiative? If the Government receive PLO delegations, would that not be a positive step against the Reagan peace process, which I thought my right hon. Friend supported?
    Mr. Pym: I cannot agree with my right hon. Friend, for the simple reason that the Reagan initiative does not exclude discussions with the PLO. The European Community and Britain have said that the PLO must be associated with the peacekeeping process. If it is not, I doubt whether the peacekeeping process will succeed.

    Victor Brailovsky
    Mr. Blackburnasked the Secretary of State for Foreign and. Commonwealth Affairs whether any response has been received from the Soviet authorities to representations made by Her Majesty's Government concerning the case of Victor Brailovsky.
    The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Malcolm Rifkind): No
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    response has been received from the Soviet authorities to our repeated representations on Dr. Brailovsky's behalf. We continue to hope that pressure by both the British and other Western Governments will eventually help Dr. Brailovsky and others in his position.
    Mr. Blackburn: Will my hon. Friend take the opportunity to raise that case at the recently convened Helsinki conference at Madrid? Will he impress upon the Soviets that they have no place in a civilised world when such regression is embodied in their policies?
    Mr. Rifkind: The case of Dr. Brailovsky has been raised no fewer than eight times by the British delegation at the CSCE meeting. I agree with my hon. Friend's concluding remarks.
    Mr. Russell Johnston: Is the Minister aware that some of us find it difficult to understand the basis of principle upon which the Government will repeatedly raise an individual case with the Soviet Union but are apparently not willing to mention the killing of 20,000 people referred to by the hon. Member for Warrington (Mr. Hoyle)?
    Mr. Rifkind: I am currently dealing with human rights in the Soviet Union. Whenever there has been a clear abrogation of human rights in the Soviet Union, the Government have not hesitated to make their views clear to the Soviet authorities.

    South America
    Mr. Jim Marshallasked the Secretary of State for Foreign and Commonwealth Affairs if he has any plans to meet his United States counterpart to discuss Anglo-United States of America interests in South America; and if he will make a statement.
    Mr. Pym: I look forward to meeting Mr. Shultz during his proposed visit to London from 16 to 19 December. Our discussions will be wide-ranging and will, no doubt, include Latin America. It is our view that Western interests in the region have not been significantly affected by the Falkland crisis. Apart from Argentina, our relations with Latin American countries remain good.
    Mr. Marshall: Will the Foreign Secretary inform America of the Prime Minister's view that the Falkland Islands are vital to the strategy of the West—a view stated in the House yesterday? What is that strategy, and what input has there been into its development from America and other countries, especially our Western allies?
    Mr. Pym: The whole of that region is now of considerably greater strategic importance, and every country recognises that. As that region includes the Falkland Islands, obviously the islands are important.
    Mr. Rhodes James: Is my right hon. Friend aware that since 1945 there has been a consistent underestimation of the importance of Britain's interest in Latin America? When he meets Secretary Shultz, will he emphasise that, because of recent events, our interest is now revived and must be maintained?
    Mr. Pym: I agree with my hon. Friend. My predecessor took a great deal of trouble to make a special effort to improve relations with Latin American countries. He paid them an extended visit. Since the conflict in the Falkland Islands has ended, a number of my right hon. and hon. Friends have visited that region. We shall continue that policy.
    Mr. Ogden: What interest has the United States Government shown in the Shackleton report on the economic development of the Falkland Islands? When can we expect the Government's response to the report? When will there be an opportunity to debate it?
    Mr. Pym: The United States is aware of the Shackleton report. We have not had any detailed discussions with America about it. I hope that the Government will be able to tell the House in the near future their conclusions about the report.
    Mr. Clinton Davis: Is not one of the central issues affecting Latin and Central America the excesses in respect of human rights by various Governments? Does the right hon. Gentleman not agree that the United States and the Soviet Union have besmirched any reputation for credibility by their selectivity of condemnation? Is it not a pity that the right hon. Gentleman has shared that selectivity today by, rightly, condemning the Argentine, but saying not a word about Chile, and by, rightly, condemning the Soviet Union, but saying not a word about Syria?
    Mr. Nicholas Winterton: Humbug.
    Mr. Pym: The views of the Government and the House on human rights are well known. We wish that all countries would pursue a standard similar to ours in their relations and dealings with human beings.
    Mr. Farr: Will my right hon. Friend tell the Americans, when they come to London, that their vote on the Falklands issue at the United Nations was inexplicable to many of their friends in Westminster? Will he remind them that they are supposed to stand for the rule of freedom and democracy, as we do, unlike many of the Governments of the mainland South American countries?
    Mr. Pym: The United States Government and every Government must decide how to vote on any issue. The United States has made clear its reasons for its vote. We remain grateful for its strong support during the conflict.

    Falkland Islands
    Mr. Proctorasked the Secretary of State for Foreign and Commonwealth Affairs which countries of the Commonwealth voted against the Argentine-sponsored resolution concerning the Falkland Islands at the United Nations; and if he will make a statement.
    Mr. Pym: Apart from the United Kingdom, 10 Commonwealth countries voted against this draft resolution. They were Antigua and Barbuda, Belize, Dominica, Fiji, Gambia, Malawi, New Zealand, Papua New Guinea, the Solomon Islands and Sri Lanka. A further 18 Commonwealth countries abstained. The principles to which we attach importance are widely supported in the Commonwealth.
    Mr. Proctor: Has my right hon. Friend written to the Foreign Secretaries of the Commonwealth countries that supported Britain in the United Nations, thanking them for their support? Will he write to those countries that abstained or voted against Britain, explaining our position more clearly to them? Will he place the matter on the agenda of the Commonwealth conference to be held next year in India, so that the lessons of territorial aggression are learnt throughout the Commonwealth?
    Mr. Pym: The answer to my hon. Friend's last question is "No, Sir". One must appreciate that well over two-thirds of the Commonwealth countries refused to support Argentina, and that was gratifying. Throughout the whole story I have expressed my gratitude to the Commonwealth countries for their support. All of them, whatever their views, know this Government's view, and the matter should be left there.
    Mr. Ioan Evans: As 90 countries voted against us, 50 abstained and only 12 supported us, should not the Government, as well as having a short-term policy for the Falkland Islands, begin to spell out a medium and long-term policy? It is impossible for the present position to continue. The matter may be raised in the United Nations again.
    Mr. Pym: I have explained our policy. It is too soon to ask the islanders to consider the long-term future. That time will come when they have been able to repair the damage that they have suffered and when life has become more normal again. That will be the time to pursue the long-term strategy, and we shall do that in conjunction with the islanders.

  EUROPEAN COMMUNITY

    Reform and Development
    Mr. Teddy Taylorasked the Secretary of State for Foreign and Commonwealth Affairs if he plans any new initiatives in the Council of Ministers with a view to reforming the institutions and policies of the European Economic Community.
    Mr. Pym: I shall continue to take the initiative in the Council to press for constructive reform and development. Our aims include new policies of benefit to Britain and the Community, such as the ideas on coal now being pursued in the Energy Council, improvements in the operation of the common agricultural policy, and a fair solution to the budget problem, which is one of the things I have been discussing this week in Brussels.
    Mr. Taylor: Is not my right hon. Friend the Secretary of State confessing that, after 10 years of membership, we have made no permanent changes whatever to the budget arrangements, which have so far cost Britain, net, over £3,500 million? Will my right hon. Friend explain why, when the remit from the Council of Ministers to the Commission was to produce plans for a permanent solution, it has apparently produced plans for yet another temporary arrangement?
    Mr. Pym: A permanent solution has not been produced because the 10 members are not able to agree about that matter. I am still pressing them to produce a lasting solution, and I shall continue to do so. It is a mistake to say that nothing has been achieved. Already in the past three years over £2,000 million of our contribution has been repaid, which is a major acknowledgement by our partners that the budget was not fair. Britain was placed in an unacceptable position, and they responded accordingly. It is a mistake to underrate what has been achieved. However, I agree with my hon. Friend that there is a lot more to do.
    Mr. R. C. Mitchell: Which institutions of the EEC does the Secretary of State wish to reform, and how?
    Mr. Pym: As I said in my original answer, we wish to reform the CAP, the budget arrangements and the financial structure. We support the enlargement of the EC by the accession of Spain and Portugal, and that has been negotiated. We are taking a positive approach to developments within the Community in many different ways.
    Mr. Sever: Will the Secretary of State undertake, along with his colleagues, to carry new initiatives to Europe in order to provide a meaningful energy programme for the Third and developing world?
    Mr. Pym: Those matters are under discussion all the time.
    Sir Michael Shaw: As the joint budgetary authority consists of the Council and the European Parliament, must not one of the most important initiatives be that the helpful declaration of 30 June, which was worked out by my hon. Friends, should be translated from good intentions to the completion of the 1983 budget procedure on time and in accordance with the Treaty?
    Mr. Pym: Yes, Sir. I, too, hope that the Council and the European Parliament will be able to reach agreement on the 1983 budget and that it will be adopted in accordance with the Treaty.

    Council of Ministers
    Mr. Gwilym Robertsasked the Secretary of State for Foreign and Commonwealth Affairs when he last attended a meeting of the European Economic Community Council of Ministers; and if he will make a statement.
    Mr. Pym: I attended the Foreign Affairs Council, which was held in Brussels on 22 and 23 November. 1 shall be making a statement to the House immediately after Question Time today.
    Mr. Roberts: Will the Secretary of State take an early opportunity to point out to EEC Ministers the difficulties that British manufacturers are experiencing in exporting to EEC countries? Is he aware that some of the tactics that have been adopted by some of our partners, including the French, are adding to the imbalance in manufactured goods in the EEC? Will the Minister make it clear to EEC Ministers and the House that, while Britain remains a member of the EEC, the Government will protect British industry by adopting suitable tactics?
    Mr. Pym: The hon. Gentleman's last phrase suggests something quite different from the first part of his supplementary question. My reply to the first part of the hon. Gentleman's question is "Yes, Sir". If, as I suspect, the hon. Gentleman has particular cases in mind, I hope that he will let me have details. However, as to the latter part of his question, it is an essential part of our policy to maintain an open trading system.
    Mr. Myles: Does my right hon. Friend agree that the majority of problems for which we are seeking solutions within the Council of Ministers would have existed anyway, whether or not we were in the EEC? Is it not far better to resolve those difficulties within the Community?
    Mr. Pym: Yes. We are trying to do that, although it can sometimes be difficult, particularly in times of recession. We are doing our best in that direction.
    Mr. George Robertson: Will the Secretary of State clarify rumours, which seem to be circulating on a widespread basis, about the bid by France to block imports of New Zealand butter until a satisfactory agreement about the export of butter to the Soviet Union has been ironed out? Will the right hon. Gentleman comment on the allegations of a secret deal between Paris and Moscow on that issue?
    Mr. Pym: No, Sir. The import of butter from New Zealand was part of the arrangements that were made when we joined the Community. That has been the subject of negotiation every so many years, including this year. We have negotiated, or are within sight of negotiating, a satisfactory agreement. We are entirely against the export of surpluses at subsidised prices to the Soviet Union.

    Council of Ministers
    Mr. Hicksasked the Secretary of State for Foreign and Commonwealth Affairs when he hopes to attend the next Council of Ministers meeting; and what subjects he expects to be discussed.
    Mr. Hurd: My right hon. Friend the Secretary of State expects to attend the next Foreign Affairs Council planned for 13 and 14 December. It is too soon after the November Council to forecast the December agenda. The usual monthly statement of forthcoming Community business will be made in due course.
    Mr. Hicks: Will my right hon. Friend give an assurance to the House that, should the Fisheries Council fail to reach an agreement with Denmark over a common fisheries policy, the issue will be raised at the next meeting? Does my right hon. Friend agree that an early agreement is essential, not only from the point of view of the fishermen within the Community, but in the wider context of the European Community's development?
    Mr. Hurd: My hon. Friend is right. As he knows, nine members of the Community are agreed on a common fisheries policy and only the Danes are resisting. When the Danish Prime Minister was in Britain earlier this week, my right hon. Friend the Prime Minister made it clear to him that we have no further concessions to offer. We hope that the Fisheries Council on 29 November will be able to clear the matter up. If it does not it will have to be discussed again at the European Council summit in December.
    Mr. Jim Spicer: In view of the complete lack of progress towards a settlement in Cyprus, does my right hon. Friend agree that the time may well have come for the Council of Ministers, meeting in political cooperation, to discuss the matter urgently to decide whether there is some way in which the European Community can play a part in reaching a solution?
    Mr. Hurd: The time may come, but we do not think that it has come yet. This is in the hands of the United Nations Secretary General and his representative, Mr. Gobbi, who is active in the matter and with whom we are in close touch.
    Mr. Hardy: Does the Secretary of State agree that the agricultural arrangements made earlier this year mean that, no matter what postures or policies are adopted by the Community, the share of the budget devoted to agricultural structure and support will prevent the Community from taking any sensible steps? Therefore, can we see the British Government taking them instead?
    Mr. Hurd: The hon. Gentleman knows that there is agricultural price fixing every year. It will remain our objective at the forthcoming Council, and at all discussions on such matters, to bring about a reduction in the rate of growth of agricultural spending.

    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. Pym: The Ten continue to consult closely on such major problems as the Middle East, Poland, East-West relations and the resumed CSCE meeting in Madrid. I discussed these subjects with my colleagues in Brussels yesterday, and we expect to consider them further at the European Council on 3 and 4 December.
    Mr. Knox: Will my right hon. Friend confirm that British interests are much better protected when European Community countries speak with one voice on world affairs than when Britain speaks alone as an isolated nation State? Will he confirm also that British interests would be much less well protected if the United Kingdom were outside the Community?
    Mr. Pym: I agree with the latter part of my hon. Friend's supplementary question. There are some situations and some problems when our voice on its own is probably the most powerful, but there are plenty of others when undoubtedly the influence that we exert is much the greater because we are part of the Ten.
    Mr. Flannery: Does the right hon. Gentleman agree that to ask for a common foreign policy from the EEC is rather like trying to build a Tower of Babel? Is it not obvious that it is nonsense and that we would be better out of the institution? What would have happened if they had had a different foreign policy over there from the one that we had, apparently, on the Falkland Islands? What notice would we have taken of it? We do not take notice of the people over here let alone over there.
    Mr. Pym: As the Ten do not have a common foreign policy and have no intention for the moment of having one, I do not see the point of the hon. Gentleman's question.
    Dr. Mawhinney: Does my right hon. Friend think that the difficulties that some EEC countries had with the United States recently over the Soviet gas pipeline helped or hindered progress towards achieving a common foreign policy?
    Mr. Pym: I do not think that they had a great effect on what my right hon. Friend describes as a common foreign policy, which, if I may say so, is a misdescription. There are common positions within the Ten on a number of issues, but there is not a common foreign policy. The activity of Foreign Ministers within the Ten, and certainly the part that I played, contributed positively to reducing any damage that might have occurred as a result of the events to which my hon. Friend referred.
    Mr. Ioan Evans: Is it not nonsensical to talk about a common foreign policy without knowing what the principles of that policy are? It is surely nonsensical to talk with one voice unless we know that what is said is what we would wish to say ourselves.
    Mr. Pym: I am not taking about a common foreign policy. I am responding to those who are referring to something that is called a common foreign policy, which does not exist.
    Mr. Churchill: Bearing in mind that by next month three years will have passed since the Soviet invasion and occupation of Afghanistan, and bearing in mind also the extreme pressure that the Afghan freedom fighters are under because of the massive amount of modern Soviet war material, will my right hon. Friend consult fellow Governments in the European Community to ascertain whether it is possible for the free nations of Western Europe to do just a little more to help the Afghans in their battle for freedom?
    Mr. Pym: I agree with my hon. Friend. On almost every occasion when I meet my Foreign Minister colleagues and we have an opportunity to discuss political matters, Afghanistan is a subject to which we constantly refer. We are concerned about what is happening there and we are constantly addressing the Soviet Union about it, as I did when I was recently in Moscow. I am much in support of what my hon. Friend says and we shall do what we can.
    Mr. Helfer: As there is a new political regime in the Soviet Union in the sense that it has a new leader, and as peace and detente are important to the future of Europe and to that of the entire world, will the right hon. Gentleman say whether there is any truth in the reports in today's press that he and his colleagues are to monitor the situation in the Soviet Union with a view to ascertaining what trends are likely to develop? Is it not clear that the most important objective is to make good contacts with a view to achieving better relations with the East that will lead to peace—peace being the most important goal?
    Mr. Pym: The Government's objective is to maintain the peace. Yesterday we discussed the change of leadership in the Soviet Union. Her Majesty's Government will make a constructive response to the change. We want to see a more constructive relationship that will lead to a safer peace. At the same time, we must wait and see what changes in policy, if any, are made by the new Soviet leadership. We want to be in the positive position of exploring the minds of the Soviet leadership and seeing what they will do in present circumstances. In the meantime, we shall be ready to respond to any change. We cannot be sure at this stage whether the change will necessarily be for the better, but, naturally, we very much hope so.

    Council of Ministers (Decision-taking Procedure)
    Mr. Dykesasked the Secretary of State for Foreign and Commonwealth Affairs if he is satisfied with the way in which decisions in the Council of Ministers of the Community are taken.
    Mr. Hurd: There is certainly some room for improvement.
    Mr. Dykes: With the looming prospect of the European-wide recession turning into a full-scale depression, does my right hon. Friend believe that the Council of Ministers has the necessary determination and wisdom to take collective measures to save Europe, to

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    bring renewed economic expansion and to merge so-called narrow national interests into the much wider and stronger community of collective interests?
    Mr. Hurd: I am not sure precisely what my hon. Friend has in mind. As he knows, the different forms of Council of Ministers spend much time discussing the economic recession, working out their relationships with the rest of the world and trying to co-ordinate their own policies. That is as far as they can reasonably be expected to go at present.
    Mr. Pavitt: Does the Minister find any difficulty in reconciling his responsibilites in the Council of Ministers of the Ten with the Council of Ministers of the 21 of the Council of Europe? Is there not quite a deal of duplication and unnecessary paperwork which he has to follow through? Is there any way in which there could be much better co-ordination between the Ten and the 21, which would save him much hard labour?
    Mr. Hurd: There is a problem. We try, both in the Community and in the Council of Europe, to prevent the overlap to which the hon. Gentleman has referred. We have recently agreed that in cultural matters the Council of Europe has pre-eminence.
    Mr. Budgen: Will my right hon. Friend undertake to publish any recommendations that he receives, from either the Ministry of Agriculture, Fisheries and Food or the National Farmers Union, that are designed to reform the CAP so as to make it less expensive and less protectionist?
    Mr. Hurd: That is the aim of the Government as a whole, including my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs.

    Revenue Raising
    Mr. Spearingasked the Secretary of State for Foreign and Commonwealth Affairs what proposals have been considered by the Council of Ministers of the European Economic Community for raising additional revenue.
    Mr. Hurd: None, Sir.
    Mr. Spearing: Will the right hon. Gentleman confirm that any increase in the 1 per cent. of VAT which automatically goes to Brussels from the pockets of British citizens will not take place until the House passes an appropriate motion or approves the relevant instrument? Are there any other means whereby the Council or the Commission can increase significantly the EEC's revenue from the United Kingdom in a way that does not require the permission or assent of the House?
    Mr. Hurd: The hon. Gentleman's assumption is right and the answer to the first part of his supplementary question is "Yes". In the Government's view, the own resources of the Community are sufficient for its needs and the priority should be, within existing resources, to establish effective control over the rate of growth of agricultural spending.
    Mr. Dorrell: Will my right hon. Friend assure the House that he will not allow the enlargment negotiations with Spain and Portugal to founder because of the restriction on the Community's own resources?
    Mr. Hurd: It is important that the negotiations should not founder. We see no immediate connection between the negotiations and the issue of own resources.

    Policy Changes
    Mr. Hardyasked the Secretary of State for Foreign and Commonwealth Affairs what recent changes have been made in Community policy of relevance to the United Kingdom.
    Mr. Hurd: The policies of the European Community are constantly evolving and most are relevant to the United Kingdom. Recent developments of particular relevance have included the settlement of our 1982 budget refunds, the steel agreement between the Community and the United States, and further progress towards a common fisheries policy.
    Mr. Hardy: Will the Minister confirm that the United States reacted to a 6·3 per cent. import penetration by European producers rather more vigorously than the Government have reacted to enormously larger penetration of our steel markets by our European partners, who are clearly cheating and dumping in an astonishing way? Will he accept that it is his duty to ensure that his colleagues in the Council of Ministers are aware that we will not tolerate these activities any longer?
    Mr. Hurd: The hon. Gentleman had an opportunity to question my right hon. Friend the Secretary of State for Industry earlier this week on this issue, when the matter was explored at some length. I have no information to gave in addition to what my right hon. Friend said.
    Mr. Steen: Is my right hon. Friend aware of the considerable sympathy and support in the Council of Ministers for Britain's problems, particularly as a postindustrial and urban area? Does he agree that so long as the budget is geared 75 per cent. towards agriculture Britain's urban areas will continue to have a raw deal?
    Mr. Hurd: My hon. Friend is correct. That is why we favour the expansion and increased effectiveness of the regional fund, the social fund, and the energy policy, to which reference has already been made. The growth of those funds must depend upon success in curbing the rate of agricultural spending.
    Mr Farr: On a point of order, Mr. Speaker. I should be grateful for your help and guidance with regard to the composition of Foreign and Commonwealth Affairs questions. Out of a total of 46 questions tabled to the Secretary of State for Foreign and Commonwealth Affairs, only 11 were reached in 35 minutes, whereas only nine questions were tabled on EEC matters, to which 20 minutes were devoted, in which time eight were dealt with. As this has happened frequently, and as most of the more important matters happen to be directed to the Secretary of State for Foreign and Commonwealth Affairs, would it not be better if EEC questions were confined to 10 minutes and the remainder of Question Time on Wednesday devoted to, say, 50 minutes for the much more important matters of Foreign and Commonwealth Affairs?
    Mr. Speaker: I am obliged to the hon. Gentleman. First, I must say that it is not a matter for me but for the usual channels to agree. Secondly, I must remind the House that every time I moved on this afternoon from one question to another some hon. Members were disappointed at not being called. That happened every time.

Foreign Affairs Council
3.31 pm
The Secretary of State for Foreign and Commonwealth Affairs (Mr. Francis Pym): With permission, I will make a statement on the Foreign Affairs Council held in Brussels on 22 and 23 November. The Council dealt with a heavy agenda and reached agreement on a number of issues.
The Council had a first exchange of views on the Commission's paper on the budget solution for 1983 and later. It was agreed that the committee of permanent representatives should get to work on this immediately and report back to the Council at its January meeting.
We discussed East-West trade issues and agreed that we should carry forward the studies approved in the recent Washington talks. Our objective is to improve our cooperation in this field and to achieve a greater cohesion in our approach to East-West trade.
The Council also discussed developments in the final preparations for the GATT ministerial meeting. The Community will continue to press for improvements in certain areas and the Council will meet again in Geneva if necessary. My hon. and learned Friend the Minister for Trade, who was present at the Council, is now in Geneva for the GATT meeting.
The Council agreed in principle on the details of the Community's generalised scheme of preferences for 1983. Ministers noted the progress made in the past month in the bilateral textile negotiations under the multi-fibre arrangement with the Association of South-East Asian Nations and Brazil. The Council also agreed that the Commission should proceed with negotiations with the three dominant suppliers—Hong Kong, South Korea and Macao—making full use as necessary of the flexibility available to them within the global ceilings.
Ministers discussed the external steel regime for 1983. They agreed that the Commission should open negotiations on voluntary restraint arrangements with main third country suppliers of steel to the Community, on the basis of a cutback of 12½ per cent. in import volume in relation to the 1980 base year.
We raised the problem of the trading imbalance under the EC-Spain agreement and asked for a Commission report with proposals for action on Spanish implementation of the agreement, and on the unequal and unjustifiable tariff imbalance in some sensitive areas.
Ministers agreed a special aid programme for Central America. They approved a new management regulation designed to improve the procedures governing the Community's food aid programme. Discussions will continue on other subjects, including the Community's research programme on nuclear safety, the European Parliament's proposals for a uniform electoral system, and a Commission memorandum on the follow-up to the second Lomé convention.
A ministerial conference with the Portuguese in the margins of the Council reviewed progress in the accession negotiations.
Ministers also met in the framework of political cooperation and discussed a number of foreign policy issues, including East-West relations and the Middle East. It was agreed that the Danish Foreign Minister should visit Israel shortly in order to put the Ten's views on the current
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situation. As applicant members of the Community the Spanish and Portuguese Foreign Ministers were present for part of the meeting.
Mr. Eric S. Heifer: One of the problems with the Secretary of State's statements is that he reveals very little to the House of Commons. I am sure that the right hon. Gentleman will agree with me that one has to read the newspapers to glean some information about what was actually discussed.
The right hon. Gentleman referred to the budget and to the budget solution for 1983 and later. The right hon. Gentleman does not say that what has happened once again is that the Government have retreated on the budget question and that we are about to have further tortuous discussions.
The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hurd)indicated dissent.
Mr. Heffer: I see the right hon. Gentleman shaking his head. If the Government have not retreated, perhaps they will explain precisely what has happened, because according to the Financial Times:
"Mr. Francis Pym, the British Foreign Secretary, made a forlorn attempt to persuade the Ten to set next March as a target date for agreement."
We are entitled to know what happened on the budget question.
The right hon. Gentleman referred to East-West trade issues. What exactly is the position? What about the relationship between France and the Soviet Union with regard to butter? The Foreign Secretary has not said what exactly is happening in that direction.
The right hon. Gentleman referred to steel. The Opposition would approve, quite rightly, of a cutback of 12½ per cent. in import volume in relation to the 1980 base year. We would want that to be a little higher, but what about steel coming from the Common Market countries into Britian? What about the increases of imports to Britain of steel from the EEC? Nothing was said in the statement about that. We are entitled to know precisely what is happening.
No details were given about the aid programme, yet it is one of the most important questions before us.
The electoral system which is being proposed—[HON. MEMBERS: "Ah."] Exactly—what was the Government's attitude to that? Are they in favour of abandoning our present method of voting or will they go along with the proposals of the European Assembly? The Opposition are totally opposed to any change in the system of election.
With regard to the Middle East, is the right hon. Gentleman aware that we welcome the fact that the President of the Council is to go to Israel to put pressure on the Israeli Government to stop further settlements on the West Bank? The Opposition believe that not only should the Israeli State have secure and peaceful borders but, equally, the Palestinian people have a right to a State of their own and there cannot be a solution to the Middle East problem until that comes about. Therefore, we would welcome maximum pressure being applied to the Israelis and to the Palestinians, and we welcome the fact that some efforts are being made in that direction.
Is the right hon. Gentleman satisfied that these continual visits by Minister after Minister to EC countries to talk to one another get us anywhere? Is it not time that we began seriously to consider getting out of the Common Market and solving the problem in a different way?
Mr. Pym: The answer to the last question by the hon. Member for Liverpool, Walton (Mr. Heffer) is "No, Sir." The hon. Gentleman said that I had revealed little. I thought that in a reasonable time I had covered most of the important points on the Council agenda. If I had digressed in detail on each of the subjects I should have had to make a very long statement and I doubt whether the House would have welcomed that. I have done my best.
The East-West trade position is exactly as I have described it. In the interests of time, I shall not re-read what I said in my statement.
The hon. Member for Walton said that I had retreated on the budget. That is nonsense. The paper produced by the Commission for the 1983 and later budgets was issued only last week. We decided that we should remit it immediately and return to the subject in January. That seems a reasonable date.
The hon. Gentleman asked about France and butter. I did not mention that matter because we did not discuss it. We did discuss the second Lomé convention, and what will follow, and the electoral system. No decisions were taken and discussions are continuing on both those matters. I cannot say when a decision will be taken.
I am glad that the hon. Gentleman welcomed the visit by the President of the Council to Israel. He certainly will take the line that I described in answers this afternoon, which is in line with much of what the hon. Member for Walton said. I think that that will be helpful. The policy of the Ten towards the Middle East has been made clear today and on earlier occasions. It is not for us to settle the problem, but we want to make the maximum contribution to its solution and to the attainment of peace.
I have tried to cover the wide range of issues that we dealt with in two days. If the House requires a great deal more time for descriptions of every aspect of the discussions it will have to make some new arrangements. I doubt whether that would be acceptable.
Sir Anthony Meyer: Has my right hon. Friend seen reports in today's press which suggest that the European Community, although the largest trading bloc in the world, may not succeed in making an effective stand at the GATT negotiations in favour of the open trading system? Since Britain stands to gain more than any other country in the world from the maintenance of that system and the avoidance of a tariff war, does it not demonstrate more clearly than anything the need for more effective procedures for consultation and action within the Community?.
Mr. Pym: We have enough procedures and institutions to cope with the problems. We certainly regard the GATT meeting as being extremely important, as does the Community. The paper setting out the guidelines which the Minister of State has taken with him are available to the House. I am certain that the ministerial meeting is important as a collective demonstration of political will to maintain and strengthen the open trading system, particularly at a time of recession. In the United Kingdom we wish to press for a fairer balance in access to markets where our exporters face unnecessary barriers.
Mr. Christopher Brocklebank-Fowler: Did the right hon. Gentleman discuss the part that Europe should play in expanding the world economy? Will that view be expressed at the GATT talks today?
Mr. Pym: I do not think that that important issue will be discussed at that forum. At meetings I constantly mention the subject and how it should be handled.
Mr. K. J. Woolmer: Is the right hon. Gentleman still insisting on the full implementation of the original negotiating mandates on the multi-fibre arrangement? Did the Council of Ministers consider alternative trading arrangements if the negotiations should break down before the end of the year? Is the right hon. Gentleman insisting that firm alternative arrangements are reported to the December meeting of the Council of Ministers—the last meeting before the arrangements have to be concluded?
Mr. Pym: I am aware of the hon. Gentleman's interest. Progress has been made and we hope that a satisfactory solution can be found. I cannot give an undertaking that it will be, but considerable time was spent on the subject. It remains a high priority in our approach to the discussions.
Mr. Bill Walker: Does my right hon. Friend agree that in the present difficult world trading conditions the wide range of topics that were discussed shows that it would be wrong to say that massive decisions can be arrived at and put into effective operation quickly?
Mr. Pym: I think that my hon. Friend refers to the discussions on political co-operation over a remarkably wide range of issues on which there is a common position in the Community and which we regularly express in statements. We did not do that on this occasion because it appeared to be unnecessary. No special issue required a declaration. I can assure my hon. Friend that there was a remarkable unanimity in our approach to the world's problems.
Mr. Bob Cryer: Is not the notion of open trading pure mythology and does not the Government's support for the multi-fibre negotiations demonstrate that? May we have an assurance that it was made clear at the meeting that if the MFA negotiations fail and we have to come out, emergency procedures will be implemented? We need that assurance, because the textile industry in West Yorkshire and elsewhere is anxious about the outcome of the negotiations. Is the right hon. Gentleman aware that over 1,000 jobs in the textile industry in my constituency have been lost in the last three years? Does that not reflect what is happening elsewhere?
Mr. Pym: Open trading is no mythology. It is a major contributory factor to the success, development and growth of the world economy in the past 30 years. It is being challenged now because of the world recession. It would be a mistake to allow the protectionist view to gain the upper hand, because that would turn an already serious recession into a calamity. I do not want to contemplate failure of the MFA negotiations. Thought has been, and is being given, to what happens if that occurs, but let us not think in those terms.
Mr. Russell Johnston: A uniform electoral system has been mentioned. Does the right hon. Gentleman's statement mean that the working group to which the subject was remitted on 26 April has completed its work? Did it make any recommendations? Like the

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hon. Member for Liverpool, Walton (Mr. Heffer), although for different reasons, I should be interested to learn the Government's view.
Mr. Pym: The working group has not completed its considerations. It has discovered a considerable number of problems which are by no means confined to any view that the United Kingdom may have expressed. There are a great many differences among the countries of Europe, and even among the countries that believe in a system of proportional representation. The approaches to the systems vary considerably. The working group has identified the differences. Many problems must be ironed out before any conclusion is likely.
Mr. Robin Squire: In spite of the fulminations of the Opposition spokesman, the hon. Member for Liverpool, Walton (Mr. Heffer), supported by a few of my hon. Friends, does my right hon. Friend accept that many people view with incredulity the prospect of another election in Europe in 1985 other than on a common basis, given that Members of the European Parliament are drawn from all European nations and are regarded as equal?
Mr. Pym: I have no difficulty in contemplating an election to the European Parliament in 1985 on different bases. It is legitimate to argue that there would be advantage in having the same system. That is a matter for discussion and debate. There are many problems involved in achieving that objective—if one thinks that it is a worthwhile objective. More work has to be done before all the problems can be ironed out.
Mr. Tam Dalyell: Arising out of the discussions on nuclear safety, what did the Foreign Secretary say to his Italian colleagues who are interested for ethnic reasons—because of the number of Milanese and Neapolitan families involved in the loss of life—about the sinking by the nuclear submarine "Conqueror" of the "Belgrano"? He could say to them, could he not, that he was in New York when the order was given on Sunday 2 May, about to dine with Perez de Cuellar, that he has a clean sheet, that he was not present at the war cabinet, and that he did not know about the order to sink the ship?
Mr. Pym: I can say that our discussions during the past few days in relation to nuclear safety referred to the Super Sara test programme, which is outwith the scope of the hon. Gentleman's question.
Mr. Bowen Wells: Will my right hon. Friend tell us a little more about the discussions on European Community aid to Central America? Does it propose to aid the current regime in Nicaragua? Does it propose to aid the regimes in San Salvador, Costa Rica and Guatemala?
Mr. Pym: The Community decided to have a special additional aid programme for the benefit of Honduras, the Dominican Republic and Costa Rica. Nicaragua already receives aid and will receive some additional aid as a result of the decisions taken this week, but out of money already allocated for aid. It was a special programme confined to the three countries that I mentioned.
Mr. Nigel Spearing: Among the matters that the Secretary of State mentioned but did not
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name, what was the discussion about the Genscher-Colombo proposals? What stage have those proposals reached in the Council? Does the Secretary of State agree that, as they are proposals towards European union, the Government have no mandate for such a move and must, on principle, be opposed to anything that emerges at the end of discussions?
Mr. Pym: No progress was made on the Genscher-Colombo plan.
Mr. Robert Rhodes James: Is my right hon. Friend aware that, with reference to my supplementary question and his answer at Question Time earlier today, the last thing that I intended to convey was criticism of Lord Carrington? I am dismayed that the House might have believed that to be my purpose. Can my right hon. Friend give us further details of the follow-up discussion on the second Lomé convention? Is there a timetable of further developments?
Mr. Pym: We had only a brief discussion on the subject on this occasion and decided to return to it either in December or, as is more likely, in January. My hon. Friend is conversant with the details. Little progress was made on this occasion.
Mr. David Stoddart: Is the Secretary of State aware that I and many other people agree that his original statement concealed much more than it revealed? In future, instead of having the agenda of the meeting, could we have the minutes? Did the Council discuss the implications of the bully-boy tactics of nine member States against Denmark over fishing and the implications of force being used by a member State against another, and what were the results?
Mr. Pym: We did not discuss the common fisheries policy, but my right hon. Friend the Minister of State answered a question on the subject earlier today and the position is as he described it. As to the hon. Gentleman's first question, when the Community comes to certain conclusions, the relevant documents are available to the House. They are scrutinised, investigated and debated in the House, which is the best procedure.
Mr. Richard Crawshaw: Does the Secretary of State agree that everything is possible in the Middle East, provided that the PLO is prepared to acknowledge the existence of Israel and its right to exist as an independent State?
Mr. Pym: Much more than that will be necessary to achieve success in the peace-making process. First, Israel must agree to be positive and constructive in relation to the Reagan plan. Many other things must happen.
Mr. David Atkinson: Did the Council discuss the evidence submitted at the international hearing in Bonn last week to the effect that forced labour is being used to construct the Siberian pipeline—including evidence from those who have worked on the pipeline? If the Council did not discuss that matter, why is Europe continuing to turn a blind eye to the position? Will the matter be on the agenda next month?
Mr. Pym: We did not discuss that this week. I do not know whether we shall return to it next month.
Mr. Peter Hardy: The Secretary of State referred to the desirability of free trade, but does he

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not accept that a world steel trade war has been waged for many months? Will he ensure that our European partners recognise that Britain will take urgent action, as they would take in our case? I would illustrate that by saying that at 3.27 pm I raised the matter with the Minister of State. At 3.30 pm I received a telephone call to tell me that another private steel works is going down the drain.
Mr. Pym: The Government and the whole House are deeply worried about the steel industry. There has been a vast over-capacity. The British Steel Corporation has taken some tough decisions, as a result of which many people have suffered. The same is happening in the United States of America and in Europe. The problem and its consequences are very much in Ministers' minds and we shall try to deal with it as best we can.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call the three Opposition Members and two Conservative Members who have already risen.
Mr. Tony Marlow: Given that the considerable benefits of Community membership are equally available to all countries within the Community and given that we provide a market for expensive European foodstuffs and £5,000 million net of European manufactured goods, is it not the case that it makes no sense or justice that we should be significant net contributors to the European budget? Will my right hon. Friend make it abundantly clear to the other Ministers on the Council that in future we shall not make a significant contribution to the budget equal to or anywhere near the level that we have made during the past three years? Will he also ensure that the next agreement on the Community budget will be permanent and that we will not be party to a further temporary agreement?
Mr. Pym: We have constantly made clear our position on the budget. The Government are prepared to be a modest net contributor to the Community. My hon. Friend may disagree with that, but it is the Government's position and it is fair. When one assesses the consequences and the value of United Kingdom membership of the Community, all the factors must be put on the table. We must include all the factors, such as trade and jobs, as well as the penaltie that arise in some areas, if we are to have a realistic and frank assessment.
I cannot say whether we shall achieve a lasting solution to the budget problem this time, but we must do so by the agreement of 10 countries. Some countries may feel that 1983 is not the time for a lasting solution. However, within a few years, a lasting solution may be achieved if we fail to achieve it now, because then the Community must consider its financial framework. That might provide an opportunity for a permanent settlement. However, we must see how we get on.
Mr. James Lamond: In the discussions about East-West relations, did the other Ministers take a rather passive and negative attitude like that of the Secretary of State, who said that he would monitor developments in the Soviet Union—whatever that means—and wait to see whether an initiative comes from the Soviet Union? Has the right hon. Gentleman forgotten that in 1982 alone the Soviet Union put forward many initiatives, including a complete freeze on the development of nuclear weapons, reduction in conventional
860
weapons and suggestions that outer space be declared a zone of peace, that all nuclear weapons be withdrawn from Europe and many others? Does none of the Ministers realise that the survival of Europe is at stake and that all their other plans will disappear unless they get this one right?
Mr. Pym: What a macabre distortion of what I said and of our policy. I did not use the word "monitor". It was never used in the discussion in Brussels yesterday, which is why I did not use it. I thought that I had described a constructive response to the changes in the Soviet leadership. That is what I intend it to be. I have already had a dialogue with the Foreign Minister in Moscow and we shall continue on that basis, but at the end of the day we must await the response.
I say to the hon. Member for Oldham, East (Mr. Lamond) that the United States of America has made all the running and taken all the initiatives in arms control—
Mr. Cryer: Nonsense.
Mr. Pym: —and for the hon. Gentleman to distort facts in that way is bizarre.
Mr. Teddy Taylor: Why is it that, when my right hon. Friend so rightly and ably tells the Council constantly that the British Government are wholly opposed to the export of highly subsidised food to Russia, the volume of such subsidised food is constantly increasing and is now three times more than it was the year before the Russians invaded Afghanistan and five times as much in value? Will it not undermine the determination of people in Britain and Europe to pay taxes to defend ourselves against the Russians if we must also pay taxes to build up the Russians with much subsidised cheap food?
Mr. Pym: My hon. Friend is immensely wise. Subsidised food formed a significant part of the discussion on East-West trade that has continued for some weeks, in connection with which the sanctions on the oil pipeline contracts were lifted by President Reagan. It seems wrong to trade with the Soviet Union and the East on a basis that subsidises their economies. Although no firm decision has been taken on that matter, that is one of the areas that will be investigated carefully by the countries of NATO with a view to forming a framework for a sound basis of trading with the East.
Mr. Laurie Pavitt: In the exchange on nuclear matters, was consideration given to the position in the United States? On 9 November a majority of Americans in a referendum came out in favour of a nuclear freeze between the United States and the USSR. As Congress ratified that yesterday, will the Foreign Secretary, when he returns in January, seek to establish an initiative to stop the nonsense and foolishness that, although people can already blow the world to pieces 10 times over, expenditure on armaments is still increasing?
Mr. Pym: Even if I were contemplating raising the matter that the hon. Gentleman has asked me to raise, there would be no point in doing so in Europe, as the United States is not a member of the Community.
Mr. Stanley Newens: Did the Council of Ministers consider limiting the supply of arms to the world, particularly in the light of the decision by the French to resume supplies of Exocet missiles to

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Argentina? Is not that a priority on which the EC could take the lead? The Foreign Secretary suggested that the West is taking the lead on arms differences. Is not limiting the supply of arms a priority, so that we can end the mockery of the lives of those who were killed in the Falkland Islands by arms containing components manufactured in this country and supplied to Argentina?
Mr. Pym: At the beginning of the political cooperation meeting, the Foreign Ministers decide what subjects they will discuss. In the meeting that I have reported to the House we decided to confine ourselves to the significant historical event of the change of leadership in the Soviet Union and what it will mean for East-West relations. We confined our discussions to that —Unterruption.]—I did not understand that interjection. There are plenty of other occasions when arms control can be discussed, and is discussed. Yesterday was not one of them. We confined ourselves to the general matter of the change of leadership. Therefore, we did not address ourselves to the point that the hon. Gentleman has made, but on other occasions we shall do so.
Mr. Heffer: Does the right hon. Gentleman agree that that is a negative approach to the situation that has developed? As there is a new leadership in the Soviet Union, surely it would be a good idea if the Foreign Ministers of the EC countries took positive initiatives. When there is a new leadership one should take positive initiatives. The statements that have been made by the new Soviet President can be interpreted positively. I hoped that the Foreign Ministers would do so.
Mr. Pym: I think that it is a mistake to repond to an event such as the death of a leader of the Soviet Union by immediately taking an initiative. We said that we would take a constructive approach and explore the possibilities. Of course, one thinks first of the arms control talks. We are taking that constructive approach to see what response will be made. I do not call that an initiative. It is an intelligent approach to an entirely new situation, which I and other Foreign Ministers watch carefully.

Emergency Debate (Application)
4.5 pm
Mr. Speaker: Before Twelve o'clock this morning I had notice from the hon. Member for Workington (Mr. Campbell-Savours) that he proposed under Standing Order No. 9 to seek an emergency debate. I have read what he submitted to me. In my judgment it would be an abuse of our procedure to allow him to make that application. I hope, therefore, that, bearing in mind what I have said, the hon. Gentleman will not seek to make his application this afternoon.
Mr. D. N. Campbell-Savours: On a point of order, Mr. Speaker. I am grateful to you for your comments. Will you tell me why my application was out of order, yet on 13 April 1981 an application was made by my hon. Friend the Member for Crewe (Mrs. Dunwoody), to discuss the negotiations that were taking place about hospitals being turned into private medical centres and on 22 February 1982 an application was made by my right hon. Friend the Member for Leeds, South (Mr. Rees) to discuss the sale of shares in Amersham International, both of which were allowed?
Mr. Speaker: Both the hon. Gentleman's hon. Friends referred directly to matters that were under way. The hon. Gentleman has given me notice of an alleged decision by the Government, which apparently he is not sure about. I honestly think that it would be a gross abuse of our procedure, were he to continue.
Mr. Campbell-Savours: Thank you, Mr. Speaker. Perhaps I could turn your attention to a statement that was made at a meeting yesterday—
Mr. Speaker: Order. The hon. Gentleman will either proceed against my advice or he will not. I give him my strong advice that he should not proceed with his application. It would be unfair to the House if our procedures for emergency debates were to degenerate into a mere opportunity for a speech to be made without the opportunity of reply.
Mr. Campbell-Savours: Could I then, on a point of order, refer you, Mr. Speaker, to the fact that the Government this afternoon or tomorrow are to make a statement in the form of a written reply, which I believe should have been the subject of a full statement at the Dispatch Box, on the privatisation of Companies House? My application—
Mr. Speaker: Order. Of course, I cannot be aware of what possible answer will come from the Government tomorrow.
Later—
Mr. Speaker: I hope that the House will allow me to express my gratitude to the hon. Member for Workington (Mr. Campbell-Savours), because he has been a good parliamentarian. It is in the interests of the House to accept rulings on such occasions. I do not make them unless I feel rather strongly about a matter.

Corrections to Bills (Mr. Speaker's Ruling)
4.7 pm
Mr. Ian Wrigglesworth: On a point of order, Mr. Speaker. In the past 24 hours hon. Members will have received in the Vote two papers, one on the Telecommunications Bill and the other on the Police and Criminal Evidence Bill, which draw our attention to corrections in those Bills, which were published only days ago.
I should like to draw that matter to your attention, Mr. Speaker, because, although we fully accept that corrections will occasionally be necessary and mistakes will be made, for example in spelling or some other minor matter in a Bill, the corrections in the Telecommunications Bill, of which there are five, alter the text so that the meaning is altered. Therefore, I should like to seek your guidance on the status of those corrections. In effect they are amendments to the text of the Bills. I should like to know whether it is possible to proceed with the consideration of those Bills when, in effect, amendments have been laid before the House before the Second Reading has taken place.
Will you be good enough, Mr. Speaker, to find out for the House who is responsible for it being necessary for those corrections to be proposed so soon after the Bills have been published? The precise wording of Bills is of vital importance not only to the House but to many people outside. For corrections to be submitted on matters of substantial importance to people outside the House, who may be unaware that such corrections have been made until later in the consideration of the Bills is something about which hon. Members will be concerned.
It would be helpful if the House could find out whether this arises because of mistakes made in the House or by
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the printers, or because of the Government, who have had plenty of time to prepare the Bills, delivering them so late to the House, that there is not time for them to be properly printed. I should be grateful for your guidance, Mr. Speaker.
Mr. Speaker: The hon. Member for Thornaby (Mr. Wrigglesworth) gave me notice before Twelve o'clock this morning of his point of order. That has enabled me to consider the matter. I understand that only two corrections affect the text of the Bills. Those are the last two corrections to the Telecommunications Bill. The first reinserts a dropped line, and the second corrects an obvious misprint. Both corrections were sent to the printers on Monday of this week and were published on Tuesday. I am quite satisfied that the use of correction slips in both cases is perfectly proper and it is by no means without precedent. That is the answer that I must give to the hon. Gentleman.
Mr. Wrigglesworth: Further to that point of order, Mr. Speaker. I think that the House would like to know why the amendments were necessary. There has been a great deal of time for the Government to prepare the drafts of those Bills. It is confusing and wrong that amendments should be brought forward so soon after Bills have been presented to the House.
Mr. Speaker: That may well be, but I cannot add anything to the ruling that I have given.

Corrections to Bills (Mr. Speaker's Ruling)

  BALLOT FOR NOTICES OF MOTIONS FOR FRIDAY 10 DECEMBER
  Members successful in the ballot were:

  Mr. J. Enoch Powell

  Mr. Anthony Steen

  Mr. Richard Page

Orders of the Day

  Energy Bill
  Order for Second Reading read.
  Mr. Speaker: Before the Minister begins, I should say that I have not selected the Instructions.
  4.11 pm
  The Secretary of State for Energy (Mr. Nigel Lawson): I beg to move, That the Bill be now read a Second time.
  I understand that the right hon. Member for Leeds, South (Mr. Rees) has been promoted to what I take to be the Labour Party's equivalent of the House of Lords. This is therefore probably the last time that we shall face each other across the Dispatch Boxes. I suspect that he has never felt entirely at home with energy matters. His debating style has alternated somewhat unpredictably between over-excitability and somnolence. Nevertheless, I have nothing but the warmest feelings for him personally and I wish him well in his mysterious new role of shadow overlord.
  I shall begin by describing the purpose of part II as an hors d'oeuvres before dealing with part I which contains the meat of the Bill. There is nothing in part II which I suspect even the Opposition at their most ingenious can contrive to find controversial.
  No doubt Opposition Members will recall—I am sure that the hon. Member for Midlothian (Mr. Eadie) will—that their Nuclear Installations (Amendment) Act 1965, which was subsequently consolidated into the Nuclear Installations Act 1965, was agreed to by the House on Second Reading without a Division. Part II merely updates that Act. Its main purpose is to restore the real value of the amounts of compensation that the 1965 Act provides for damage caused by nuclear incidents. No other changes of any substance are being made.
  The House will know that the safety record of Britain's nuclear power industry is second to none. There has not been one emergency at a nuclear power station in more than 300 reactor years of operating experience. Nevertheless, it is prudent to have a liability and compensation system that ensures that damage or injury that is caused by a nuclear incident is properly compensated. That system is provided in the 1965 Act. It gives the operator no-fault liability for nuclear damage and requires him to insure against it. It limits his liability to £5 million per incident and provides for that sum to be topped up to £50 million, if necessary, from public funds, including funds that are provided by other countries by international agreement.
  The 1965 Act gives effect to the two international conventions on third party liability in the field of nuclear energy, to which the United Kingdom is a party. They are known as the Paris and the Brussels conventions. Until now the conventions have provided for figures of 15 million and 120 million European monetary units of account in respect of operator liability and of topping up. They are equivalent to our figures of £5 million and £50 million respectively.
  Over the years those figures have lost much of their value through inflation, and two amending protocols have therefore now been agreed by the parties to the
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  convention. Besides making some technical changes, they increase the upper compensation limit to 300 million special drawing rights. This is an increase of about two and a half times, reflecting the weighted average of inflation in the countries concerned since 1963. The protocols did not alter the operator's liability limit in the same way. That was left to member States' discretion.
  The Bill gives effect to that correction by substituting 300 million special drawing rights per incident, which is equivalent to about £192 million, for the present £50 million per incident. It also increases the operator's liability limit pro rata to £20 million per incident, except for a new category of small operators, for whom the limit will be £5 million. That new figure of £20 million is a sum for which the operator will be able to insure.
  In broad terms, the changes make good the effects of inflation on the United Kingdom's original compensation provisions. Among other minor matters, this part of the Bill allows new compensation figures to be changed by Order.
  Mr. J. Dickson Mahon: Will the right hon. Gentleman give an example of the new class of small operator who is referred to here?
  Mr. Lawson: We have in mind research institutions and universities which have much smaller types of nuclear installations than a power station.
  This part of the Bill contains some useful if inevitably, I regret to say, complex provisions. I shall now deal with part I, which has been welcomed by the CBI and which will be of most interest to the House.
  Part I establishes for the first time a statutory framework to govern dealings between private generators of electricity and the public electricity supply system. I should make it clear at the outset—I recognise that this will cause some disappointment in some parts of the House—that the Bill is not concerned with the privatisation of the existing nationalised electricity supply industry.
  The Bill entitles private generators of electricity—of whom there are many—to sell their electricity to the local electricity board on fair terms. It gives them a guaranteed market. It also allows them to use the public transmission and distribution system. That is an important innovation. Finally, it repeals the archaic statutory prohibition on private electricity generation as a main business activity. This puts into effect the proposal that was first announced by my right hon. Friend the Member for Guildford (Mr. Howell) more than two years ago.
  I shall now describe the key features of part I in a little more detail. Its purpose is to encourage competition in the domestic electricity market by encouraging private generation and supply. It is a long overdue adjustment of the statutory framework for the electricity supply industry which will help to reduce the nationalised industry's monopoly power.
  The Bill will allow the private generator to use the public transmission system—the national grid—whether to supply electricity for his own use elsewhere or to supply third parties, on fair terms. This is in line with the common carrier provisions for the gas pipeline network contained in the Oil and Gas (Enterprise) Act 1982.
  Mr. Arthur Palmer: The right hon. Gentleman talks as if this were an innovation, but it

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  was carefully examined by the Weir committee before the grid of 1926 was established. The idea was rejected as being inappropriate to the working of a grid system.
  Mr. Lawson: I did not for a moment mean to say that the idea was an innovation. It is in practice in some other countries. The innovation lies in introducing it into British law.
  The Bill will also entitle the private generator to sell part or the whole of his output to the electricity board, again, on fair terms. Therefore, the private generator has the choice of two routes for disposing of any part of his output that he does not consume himself.
  In response to the many representations that I have received from industry, the Bill requires tariffs for trading with the boards and for using the public transmission network to be published. The private generator can therefore compare the terms on offer and make a commercial decision. The availability of these two routes will be an important safeguard for the private generator.
  In addition, the private generator will be entitled to a standby supply of electricity from the electricity board for himself and for his customers. In that way he will be able to maintain supplies when his plant is unavailable due to servicing or breakdowns. If the Bill is to achieve its object, the terms of trade between private generators and the public supply system must be fair. That means that there will be no subsidy to private generators, but at the same time the electricity board will not be allowed to exploit private generators.
  In the past, the area electricity boards have purchased privately generated electricity at prices well below those paid to the alternative source, the Central Electricity Generating Board, and that has discouraged private generation. More recently, the boards have moved towards paying prices that are closer to their own avoidable costs. The Electricity Council has issued guidelines within which negotiations between area boards and private generators take place.
  I welcome that as far as it goes, but there have still been widespread complaints from private generators that the terms offered are inadequate. The Bill will, therefore, require electricity boards to offer private generators fair terms. That means, in general, terms that will neither increase nor reduce the prices for electricity paid by other customers of the boards. The same basic approach will apply to charges for use of the board's transmission system.
  The electricity supply industry will be obliged to consult me on the principles underlyng its charges. Any dispute between private generators and electricity boards may be referred to me for settlement. As a result of the Bill, private generators should no longer have cause for complaint. These measures will, I am confident, encourage the growth of private electricity generation in the United Kingdom.
  Mr. Peter Rost: Is my right hon. Friend aware that some anxiety has been expressed not only by the Electricity Council but by the private interests involved to the effect that perhaps there should be an independent system of arbitration? One side feels that the Department will lean too heavily in favour of the electricity supply industry, and the other side believes the opposite to be true.
  Mr. Lawson: Perhaps that means that the outcome will be fair. However, I hasten to add that I shall normally delegate my role and appoint an independent arbitrator to represent me, instead of doing the job myself. I am sure that that will cause great dismay throughout the House, but it is right that hon. Members should be aware of it.
  Mr. Allen McKay: Will the Secretary of State have the sole right to appoint the independent arbitrator, or will the other parties be involved in that decision?
  Mr. Lawson: Of course the right will reside in me as Secretary of State, but I shall obviously want to have an independent arbitrator with whom both sides are content.
  At present, private generation supplies 6 per cent. of total electricity supplies in the United Kingdom and about 15 per cent. of industry's requirements. The latter figure has been as high as 17 per cent., but has recently declined. I hope that the Bill will reverse that trend. A guaranteed market at fair prices, complete with guaranteed access to the national grid, should make new private generating plant a more attractive investment than before. That is particularly relevant at a time when some sections of industry are worried about the level of electricity prices that they have to pay.
  It is worth noting that in many countries at present private industrial generation contributes more to overall electricity supplies than it does in the United Kingdom. For example, the figure is 18 per cent. in Germany and over 10 per cent. in France and the Netherlands, compared with only 6 per cent. in the United Kingdom.
  In practice, the Bill's main impact will be on the development of industrial combined heat and power schemes—a matter that is of particular interest to the Select Committee on Energy, and especially to my hon. Friend the Member for Derbyshire, South-East (Mr. Rost). Indeed, I pay tribute to him for his persistence in championing this cause.
  Although the Select Committee has not yet reported on this subject. I have studied very carefully the evidence that it has taken in the course of its inquiry into combined heat and power. The Bill goes a long way towards meeting the justified complaints of many bodies, about which the District Heating Association and the Chemical Industries Association gave evidence to the Committee.
  Mr. Palmer: I think that the Secretary of State knows that I am a member of the Select Committee on Energy. Why is there no stipulation in the Bill positively to encourage co-generation?
  Mr. Lawson: At this stage, the Bill goes as far as it is right to go. However, the Select Committee will no doubt publish its report in due course and I shall carefully study any recommendations that it makes.
  Combined heat and power—that is to say, making use of the waste heat from power stations—is technically efficient. There is no dispute about that. In the right circumstances it can improve the economics of power generation. About two thirds of existing private industrial electricity generation is in the form of CHP schemes. Indeed, CHP has been a well-established practice in industry for decades, but on a relatively modest scale. The Bill will give it a welcome boost.
  The use of CHP is clearly very attactive in terms of energy efficiency, and I should like to see CHP projects

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  going ahead wherever they are economic. My Department has already done much to help through grants, advice and demonstrations. The Bill does much to ensure that there are no institutional obstacles working against economic industrial CHP. This aspect of the Bill is of central importance.
  The Bill could also have a beneficial impact on private investment in renewable energy sources that generate electricity; in particular, hydro—electric power and wind power. One small company has already applied for my consent to build a private aerogenerator. I do not accept for one moment that increased competition will undermine the nationalised electricity supply industry. On the contrary, it will be a stimulus to the public sector to improve its efficiency so that all consumers benefit. The electricity supply industry has, of course, been fully consulted on the formulation of these proposals.
  I shall briefly go through the main clauses in part I. Clause 1 repeals the 1909 prohibition on private generation as a main business. It also removes a requirement dating from 1919 for ministerial consent. Clause 2 requires private generators to notify electricity boards of their intention to construct new stations if they are in excess of 10 MW. The aim is not to inhibit private generation in any way, but rather to enable electricity boards to allow for private plant when planning their own investment. That should avoid wasteful duplication of investment.
  The one new constraint introduced in the Bill would apply in the event of a proposal to construct a private nuclear-powered generating station. Contrary to the impression given by the Opposition, at present there is no barrier to that happening provided that the operator satisfies the Nuclear Inspectorate and obtains a licence from it. Clause 3 requires that in future the Secretary of State's consent will also be needed. I trust that the House will welcome that clause.
  Clause 4 widens the circumstances under which the consent of my right hon. Friend the Secretary of State for Scotland is needed for the construction or extension of a hydro—electric power station.
  Clause 5 is at the heart of the Bill, and requires an electricity board to respond to a specified request from a private generator by making an offer to comply with the request. The request may be to purchase privately generated electricity from him, or to make a standby supply available to him or his customers. The board is obliged to comply with the request unless, on technical grounds, it would not be reasonably practicable to do so. The board's offer to comply may include reasonable terms and be made subject to reasonable conditions.
  Clauses 6, 7 and 8 deal with the crucial question of charges and prices for the services provided by electricity boards in response to requests from private generators. Two broad principles underlie them. The first is the need to leave the electricity board's customers generally no better and no worse off in consequence of a board's dealings with a private generator. That is what is meant by "fair terms". The second is the need to publish tariffs of prices and charges wherever possible. That will enable private generators readily to assess the commercial prospects of any new venture and to establish whether they are being treated equitably by electricity boards.
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  The Bill recognises that published tariffs may not always be appropriate to particular cases, but in these circumstances prices or charges will still have to embody the principles of fair terms.
  Clause 9 enables any dispute between a private generator and an electricity board to be referred to me for determination, or to an arbitrator appointed by me.
  Mr. David Penhaligon: Will the CEGB be obliged to offer for sale to the private market any power stations that it is considering closing? I imagine that in certain circumstances a profitable company could be put together. For instance, if such a power station were sold, could a private operator in a remote area such as my own in the far South-West import coal to generate electricity at a plant which the CEGB could not run profitably?
  Mr. Lawson: Certainly there are precedents for the CEGB selling a power station that it no longer requires, but that is outwith the Bill, which is concerned wholly with the matters that I have described. The hon. Gentleman's second point is correct. There is, and will be, nothing to stop any private generator or indeed any private industrialist from importing coal if he believes that he can do so on better terms than he can obtain from the National Coal Board. I am sure, however, that the NCB will not miss the opportunity to quote highly competitive prices to anyone wishing to operate a coal-fired power station.
  Mr. Peter Hardy: Does the Minister accept that coal-fired power stations that have gone out of commission in recent years, or may do so in the near future, are largely old, less efficient and waste a great deal more energy than the new ones? In the interest of conservation, will he discourage the use of plant that is not suitable for modern times?
  Mr. Lawson: If plant is uneconomic, it is unlikely to be used. No homilies from me are required to prevent that.
  Clause 10 requires the electricity boards to consult me or my right hon. Friend the Secretary of State for Scotland, as appropriate, on the principles underlying the tariffs that apply to dealings with private generators. This will help to ensure fairness of treatment for all concerned, both private generators and customers of the electricity boards.
  The Bill carries forward the Government's approach to the nationalised industries and the public sector generally. It is our aim, first, to stimulate the operation of market forces and to encourage competition; secondly, to remove artificial constraints on the private sector; thirdly, to open up the possibility for consumers of a choice of supplier; fourthly, to spur the massive State-owned corporations to greater efficiency; and, fifthly, further to diversify the country's sources of energy supply.
  The Oil and Gas (Enterprise) Act has opened up the public gas supply system to competition from the private sector. The pipelines of the British Gas Corporation may now be used on a common carrier basis to transmit other suppliers' gas. The Bill carries the same approach forward to electricity supply.
  I am sad, but no longer surprised, that the official Opposition have so little faith in their ability to oppose this relatively modest measure by argument in the proper constitutional way that they are associating themselves with extra-parliamentary activities and threats which, if carried out, would be both wholly irresponsible and probably unlawful. I refer to the statement made earlier by

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  the hon. Member for Midlothian. I very much hope that he will today think better of his initial knee-jerk reaction. [HON. MEMBERS: "What did he say?"] In any case, I know that the Bill will be widely welcomed by those who understand the business of electricity supply and who are not concerned with party political dogma. In that spirit, I commend the Bill to the House.
  4.33 pm
  Mr. Merlyn Rees: I am grateful for the right hon. Gentleman's words on my departure from my present post, as announced today. I knew that he would like the title "overlord" because working men such as he in the Tory Party always love a lord. I do not think that he has seen the last of me in energy debates. I shall explain to him some time our proposals to look at his and other industrial Departments to see whether they meet the needs of a mixed economy. I believe that there is a part for the Opposition to play in that respect.
  With regard to the Minister's comments about extra-parliamentary action, neither my hon. Friend the Member for Midlothian (Mr. Eadie) nor I have time for any kind of extra-parliamentary action, so I do not know what the Minister is talking about.
  The Bill is divided into two parts. The Minister dealt with the second and then with the first. I shall stick to the normal order. In our view, the Bill is irrelevant to the real issues of electricity supply. It does not deal with the real needs of the industry. A Bill to deal with reorganisation might have led to the necessary discussions on the role and accountability of a monopoly public utility. Questions need to be asked about the CEGB, the Electricity Council and the area boards. The mere fact that the industry is a publicly owned monopoly does not mean that we believe that all is well. Those bodies have existed in various forms for more than 40 years and it is time to ask some questions. The Bill, however, does not provide that opportunity.
  The Bill should have dealt with the structural problems of the industry. The Plowden report, for example, seems to have fallen by the wayside. Nothing came out of it from the Labour Government because we did not have the necessary majority, and those with whom we associated prevented any such action.
  The Bill is unnecessary. The idea of private sector suppliers breeding competition simply reveals the nakedness of the ideological belief that free market forces engendered by this or any other Bill will somehow improve matters in the public sector.
  On part I, I make the same point as I made when we dealt with the Oil and Gas (Enterprise) Bill. I see that the Minister of State, Department of Energy is present. He was extremely helpful at that time and it is no criticism of him that I raise the matter again now.
  The Bill deals with highly technical matters. Looking around, I see no more than two or three Members who understand such matters. I certainly do not. We must depend upon the advice of experts in electricity supply. For that reason, the Bill would be ideal material for the new Special Standing Committe procedure whereby expert witnesses may be called before the Bill goes into the normal Standing Committee procedure.
  Mr. Donald Thompson: It would be a waste of time.
  Mr. Rees: The Government Whip suggests that it would be a waste of time. No doubt he understands the Bill
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  completely. If he does, he is in the minority. That procedure is not a waste of time on a Bill of this kind. It would provide a service to all of us. On many of these matters there is no party political difference. If we could discuss the practical problems with experts, we could help one another to get things right.
  For example, I have compared the common carrier and other provisions of the Oil and Gas (Enterprise) Act with those of the Bill now before us. It is understandable that there should be some differences where there are technical differences between gas and electricity to be taken into account. When there is no technical reason, however, why do the provisions of the Gil and Gas (Enterprise) Act relating to common carrier applications provide that the British Gas Corporation must present the case before any mandatory requirement is made, whereas in this Bill the electricity boards are required to comply with such requests unless they have reason to refuse on technical grounds? Those provisions may amount to the same in practice. I do not know. If we had the advice of experts, we could easily discover why the two measures contain different provisions.
  The issue is highlighted by the provision in section 17 of the Oil and Gas (Enterprise) Act that a direction may be made only if the Secretary of State is satisfied that it would not prejudice the conveyance of gas required by the BGC and others having the right to use the pipeline. This Bill contains no corresponding safeguards, unless the position is covered by the exemption on technical grounds. I offer that as an example of how we could have dealt with the issue more quickly in Committee if there had previously been the opportunity for evidence to be heard from experts in the electricity supply industry and in the Department of Energy.
  There are differences on tariffs. There are differences on the right of the common carrier. There are differences on the minimum amounts to be provided by the private supplier. It is important that these matters should be explained in Committee. I wish that the Special Standing Committee procedure had been implemented. The electricity industry has already supplied hon. Members with information. The Secretary of State, I imagine, agreed. This represents some progress towards meeting my request. I persist, however, in my view that time could be saved if the Special Standing Committee procedure was followed.
  The Opposition oppose the main proposal in the Bill on private supply. Is there a demand, and, if so, what is the size of it, from private suppliers who wish to operate under the Bill? It is one thing to allow private suppliers to produce electricity for their own purposes. Already, 15 per cent. of electricity is supplied in that way. If there is a need to alter the tariff provision—the Secretary of State suggests that it has already been done marginally—the matter must be examined fairly. It is a different thing to say that there should be a private supplier on the grid.
  Any idea that there will be a rush of entrepreneurs wishing to build power stations is moonshine. I read only recently that two power stations belonging to the London Transport executive are to be shut down because it is cheaper to take supplies from the grid—[Interruption.] The Secretary of State makes an aside that I did not hear. I merely say that this is what seems to have happened.
  The Bill attempts to redress the balance in advantages received by the private sector compared with the public sector. The result could be discrimination against the

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  public sector. The Bill cannot be presented as progress towards fair competition between the two sectors. There are more restrictions on the public sector. An area board cannot proceed with development without the Secretary of State's approval whereas the private sector, according to clause 2, can do so. There appears to be no barrier to the private sector gaining access to cheap oil and gas. These sources are denied to public sector generating stations on energy policy grounds.
  I gather that the hon. Member for Truro (Mr. Penhaligon) thought that cheap coal from abroad and the chance to pick up oil in the spot market would make electricity cheaper in the South-West. If that need for cheap coal exists, it should be examined on its merits. The energy policy of successive Governments has been that the bulk of supplies should come from the National Coal Board. This will, at the very least, be marginally affected by the Bill.
  The private sector will, it seems, be able to discriminate among different types of consumer. It will be able to say that supplies will be directed to certain firms or a certain number of houses. This choice is denied to the public sector which has a duty to supply. An advantage is given to the private sector in that it will be able to pick and choose.
  The Secretary of State has explained the legal position behind the change in clause 3. I accept what he says. The change is necessary to preserve the Secretary of State's right to control privately owned nuclear power stations following repeal of section 11 of the Electricity (Supply) Act 1919. Whatever the legal reason, the Opposition are against allowing the private supplier to build a nuclear station. Our record on nuclear stations, as the right hon. Gentleman says, is the best in the world. The housekeeping is good. That is not so in other parts of the world. We believe that clause 3 should be removed and that there should be no private stations generating nuclear power.
  Clause 7 says that the price at which a board shall buy electricity
  "should be on terms which will neither increase nor reduce the prices payable by customers of the Board for electricity supplied to them by the Board."
  This proposal appears worthwhile. It is, however, difficult to see how it will be consistent with other parts of the Bill. If there is to be more generation capacity outside the control of the area boards, this means more unpredictability. It will therefore be necessary for boards to supply more electricity on standby and more marginal excess capacity to ensure no break in supply. More expenditure in the public sector will be involved.
  Mr. Rost: The right hon. Gentleman has got it wrong. The opposite will happen. The availability of alternative supplies on contract from the private sector will allow the evening out of peak loads in the public sector.
  Mr. Rees: I am coming to that point. A number of people involved in the industry made the case strongly to me yesterday along the lines that I have expressed. The hon. Gentleman has one view. I have another. I am aware of his expertise in certain spheres. I would feel happier if a representative of the electricity supply industry had been able to explain the issue to hon. Members. As the
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  Secretary of State says, the Opposition have at least one expert in my hon. Friend the Member for Bristol, North-East (Mr. Palmer).
  Private capacity will be available, by and large, at times when the boards have over-capacity anyway. The siting of plants will no longer be planned on the basis of good access to fuel and the ability to deal with relative weaknesses in the grid system. These inefficiencies will lead to increased costs in the public sector.
  These points of concern about the Bill were put to me yesterday by those employed in the electricity supply industry. I hope that the Minister in his reply will be able to reassure hon. Members that those working in the industry are talking nonsense. Why are rights of entry abolished under the Bill? Are any rights of entry conferred on the private supplier? Will the private supplier play any role in the repair of lines?
  The Secretary of State says that the Bill will encourage combined heat and power. That will be a result of the Bill rather than something that appears in the Bill. I question how it will be achieved. There are better ways to expedite combined heat and power than through the proposals contained in the Bill. There are wider issues associated with CHP such as the lead cities and the choice of the best fuel. I have heard queries about electricity being an ideal product for CHP. It will be interesting to read the report of the Select Committee. The Secretary of State can afford to wait for that report. The right hon. Gentleman claims, however, that an advantage of the Bill will be its effect on CHP. I prefer to await the Select Committee report.
  The Opposition have constantly had to tell the Secretary of State that the legislation he proposes is light in its concern for accountability. Why, in clause 17, is the Secretary of State removing the requirement that has existed for some years that a report be presented to Parliament? Perhaps the current procedure here is not very sensible. Perhaps it does not provoke debates or perhaps there are better ways to deal with it. On the Oil and Gas (Enterprise) Bill, we examined carefully the accountability of public corporations and the companies in which there are State shareholdings. Such accountability is important. It is no answer to remove the requirement to lay the annual report. That is a negative approach to what are, I accept, real problems.
  I note the reasons for part II of the Bill, and the Secretary of State explained them unexceptionally. However, we are to have at some time the report of the Sizewell inquiry, which will be wide—ranging. There may be need for changes in the legislation underlying part II if and when new aspects of compensation and liability arise from the report. There will be much discussion in Committee about accidents and liability, particularly because—the Secretary of State omitted this point—if clause 3 remains, it links up with part II. When I first looked at the Bill I thought that this point would be simple, but now I think that there will have to be wide-ranging discussions about the nuclear aspect.
  The Bill is not about nationalisation or privatisation. It turns the clock back to the time when there was private generation of electricity. At the moment, private electricity comes from firms which use it for their own purposes. Their generating sets are not set up particularly, as the Secretary of State explained, to put electricity into the public grid.
  Mr. Tony Marlow: The right hon. Gentleman will be as aware as I am that the private generation of electricity in the Federal Republic of Germany is four times the level in the United Kingdom, and about a quarter of the amount of public generation. Is the right hon. Gentleman suggesting, or would he care to suggest, that the generation of electricity or the cost of electricity is any worse or less favourable in the Federal Republic of Germany than it is here? Is there any disadvantage in the private generation of electricity?
  Mr. Rees: For the past 50 years, going back to the Weir report and all the others since, our way of doing it has been the best. [Laughter.] What strange laughter. Does the Tory Party believe that we do things badly? I believe that our electricity supply industry is good.
  Mr. Lawson: The party of reform.
  Mr. Rees: I am happy to change, but I am not happy to move away from the general policy that we have followed for the past 50 or 60 years.
  Mr. Gordon Wilson: Does that make the right hon. Gentleman a representative of a party of conservators? It seems to me, from his last remarks, that he is not inclined to accept any change.
  Mr. Rees: As to change, I should remove certain parties from the House, although not by extra-parliamentary activities.
  The Bill should have been concerned about structures and the Plowden report. We shall have a constructive Committee stage in which, unhappily, I shall not participate. Overall, this is an unnecessary Bill. We shall oppose it, particularly on the grounds of clause 3 on nuclear provision. I ask my right hon. and hon. Friends to vote against it.
  4.54 pm
  Mr. John Hannam: I have great pleasure in supporting the Bill, which my right hon. Friend the Secretary of State introduced so ably. However, I disagree with his description of part II of the Bill—the nuclear part—as the hors d'oeuvre. It seems to be rather more a delicious savoury.
  The right hon. Member for Leeds, South (Mr. Rees) suggested that the Bill might be a satisfactory candidate for the Special Standing Committee procedure. I was fortunate enough to sit on one of those Committees, which dealt with the Education Bill. It was an effective method of dealing with a Bill that contained no great party political controversy. This Bill should not contain any party political controversy, which would make it suitable to go through the Special Standing Committee procedure.
  I read in a newspaper the comment of the hon. Member for Midlothian (Mr. Eadie) at the General and Municipal Workers Union conference that the Bill would lead to the destruction of the indigenous coal industry. That shows that the Labour Party does not regard the Bill as non-controversial. However, he went on to contradict himself when he said that the Bill would have very little impact on electricity generation. The Bill is thus not suitable for Special Standing Committee procedure because there is party political controversy in it. The evidence being given by outside parties could easily degenerate into a scoring of points rather than a receiving of evidence. Even with the Education Bill, on certain aspects of the evidence presented, there was a danger of that.
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  Thus, although I favour the system of Special Standing Committees and should like to see it applied to all legislation, I feel that we do not have the system quite right yet to deal with this type of legislation. However, if the Official Opposition make it clear that they are not opposing the Bill, I should support it going through the Special Standing Committee procedure.
  I support the Bill because over some 10 years of involvement with energy I have become increasingly concerned at the rigidity built into our monopoly energy supply industry. With regard to electricity, the Bill represents an important step forward in removing some of that rigidity and introducing new powers for private generation and distribution of electricity. This is not a new development—about 16 per cent. of our industrial electricity is provided through private generation, as is 6 per cent. of our total electricity. This is nothing new, but rather a development of an existing system.
  Neither is the Bill, as the right hon. Member for Leeds, South admitted, a privatisation measure. It is rather a means of stimulating independent schemes, such as combined heat and power schemes, which have never got off the ground properly, given the cool reception over the years by the CEGB. I note that the Labour Party in its 1982 programme argues strongly for the combined heat and power schemes as
  "part of an attack on the chronic fuel poverty, cold conditions and condensation problems faced in urban areas".
  I do not quite see combined heat and power schemes in that context, but nevertheless, I welcome the support of the Labour Party for the Bill, which fulfils that part of its 1982 document.
  I also welcome the support that the SDP has given the Bill. In its energy policy document it states:
  "it is also important to ensure that the CEGB pays a fair price for privately generated electricity".
  That is what the Bill aims to achieve. With the support of both Labour and the SDP, the Bill should not run into difficulties in Committee, although the danger is that, with the SDP supporting it, the Liberals will no doubt feel that they have to oppose it on the grounds that, on energy policy, never the twain shall meet.
  The present organisation of the British electricity supply industry combines the worst of all possible worlds. On the one hand it is highly centralised and top-heavy, and dominated by the powerful bureaucracy of the CEGB with its responsibility for the generation of electricity throughout England and Wales. On the other hand, its functions are curiously fragmented, with responsibility for sales and marketing separated from power generation and lying with 12 statutory area boards that are relatively autonomous. Floating nebulously above the CEGB and the area boards is the Electricity Council, a body with a general advisory role, but also charged with the two specific functions of finance and industrial relations. Altogether the electricity supply industry consists of a grand total of about 14 statutory bodies. It is neither truly centralised, nor truly decentralised. It manages to effect a complete split between the two major functions of any commercial enterprise—production and sales.
  Mr. Palmer: That top-heavy structure was introduced by the hon. Gentleman's party in the 1957 Act, and it was strongly opposed by the Labour Party.
  Mr. Hannam: I am pleased that the Labour Party is now arguing strongly that it should be changed, modernised and brought up to date with the changing scene.
  The present structure makes the measurement of performance extremely difficult, because no individual unit can be held fully accountable. I am glad to have the support of the hon. Member for Bristol, North-East (Mr. Palmer) for the changes which clearly need to be made, and in the Bill we are embarking on that change in a gradual way.
  I shall say a few words about how I see the future as a result of the Bill. The area boards sell a product to their customers, but have no control over the greater part of its costs—the CEGB's bulk supplies. There are question marks over the way in which the price of the CEGB's bulk supplies is arrived at. Although the CEGB is required to consult the Electricity Council about its commercial policy, the board has complete control over the bulk supply tariff, which is designed to maximise its own financial performance, rather than to enable the area boards to meet the needs of the market place.
  It is inconceivable that anyone starting from scratch would design such a muddled organisational structure. Nothing resembling it exists anywhere else in the world, and with good reason. The deficiencies in the structure of the electricity industry are accentuated by the complete absence of competition. The existing organisation has a near-monopoly, for which there is no logical justification of the generation, transmission and sale of electricity.
  The chairman of the Midlands electricity board, Mr. Shepherd, faced the problem squarely, when he said in evidence to the Select Committee on 24 November 1981:
  "If you get huge monolithic corporations, and basically the electricity supply industry is such an organisation, it does not exactly lead to innovation unless it has competition … at least in comparison of performance if not in fact of actual supplies".
  I therefore wish that we were going further in this legislation. I wish that we were legislating for changes in the structure of the industry. I should like to see eight new all-purpose power boards generating and distributing electricity. Then, I believe, we should have a more responsive and flexible structure which, together with the use of the grid as a "common carrier", would stimulate greater innovation and efficiency.
  If we had had this Bill early in the 1970s, together with a much more decentralised structure of all-purpose boards, by now, instead of a handful of CHP schemes in this country, we would have something nearer the several thousands of CHP schemes that exist in other European countries. We would also have better utilisation of existing plant and much lower costs for British industry which has faced—and, in some cases, still faces—adverse price comparisons with rival firms on the Continent, although I congratulate the Government on the steps that are now being taken to try to hold down the costs of industrial energy here.
  Mr. Gordon Wilson: The hon. Gentleman said that if there had been all-purpose electricity boards in England and Wales there would be plenty of CHP stations. Does he not know that all-purpose boards are to be found in Scotland, and there are no CHP schemes there?
  Mr. Hannam: The all-purpose board in Scotland is not the best example, because there is no comparison between that board and any other all-purpose board. It has isolated
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  itself and has been used as an instrument in the production of power stations to use up coal and to try out nuclear power. If we had more than one all-purpose board, by now we would have seen innovative developments of many kinds which would have led to the use of alternative systems for producing electricity.
  In this Bill we are taking the right steps. I accept that it will be a slow process of developing private generation, and I know that some difficult technical problems will have to be overcome. I am sure that it is right to open up the electricity supply system in this way, especially if by so doing we support the various alternative schemes of CHP, wind, wave and hydro power.
  I shall not go into the details of all the complaints that have been made over the years about the resistance of the industry to private generation and the sale of surplus electricity to the area boards. Anyone who wants to see the evidence only has to read the Select Committee's evidence in 1981.
  I see no reason why the Bill should take long to pass through Committee, although I agree with the right hon. Member for Leeds, South (Mr. Rees) that it is important to ensure that the sophisticated system of electricity and its distribution is not impaired in any way. I imagine that the clauses dealing with the method of charging and measuring the electricity supplied and purchased through the grid system will need careful scrutiny. The present system involves the division of electricity transmission into different voltages, and clearly it is not a simple matter of measuring so many units into and so many units out of the grid.
  The Electricity Council has provided right hon. and hon. Members who are interested in energy with an excellent brief on the Bill. It states that the consultations that have taken place between the Department of Energy and the Department of Industry have resulted in the incorporation of a number of safeguards in the Bill. That process is therefore taking place, and I believe that it will continue during the passage of the Bill. I am sure that Parliament can provide the necessary safeguards which are felt necessary to protect the general body of consumers.
  Finally, on the clauses in part II dealing with nuclear power, I wish only to mention the PWR programme and the design proposals for Sizewell B. If the design is approved at the inquiry, if the first PWR can be constructed at a lower cost than the AGR, but with equal safety, and if the foreign components of the PWR can be kept down to 15 per cent. to 20 per cent., our future nuclear programme, assuming that the inquiry is in favour of the PWR, will be based on PWR technology.
  I am disturbed, therefore, to hear that British firms engaged in the manufacture of boilers and generators are now being told that the contract for the four steam generators in the PWR at Sizewell will be placed with Westinghouse in the United States. That is most disappointing and conflicts with the assurances that were given earlier this summer that, although the pressure vessel order would have to be placed with Framatone in France, the generators and pipework orders would be placed with United Kingdom firms.
  I appreciate that costs will be higher in the United Kingdom than in the United States, and that there might be a slightly longer construction period, but if British firms are to be able to provide the necessary technologies in subsequent PWRs, surely they should be involved in as much of the first PWR as possible. If the CEGB plan for

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  the manufacture of these generators in the United States goes ahead, thousands of jobs could be lost in United Kingdom firms such as Babcock.
  Mr. Rost: I support what my hon. Friend says about British orders for the PWR programme, but does he not agree that we are paying the price for the tentative and delayed agreement to go ahead with PWRs in this country? It is difficult to understand how we can expect British industry to compete with a one-off PWR, instead of a proper programme.
  Mr. Hannam: I agree with my hon. Friend that delay inevitably results in loss of jobs at some stage. Babcock, for example, will face serious problems in the coming year or two, once it has finished the construction of the coal-fired station in Hong Kong. Orders need to come at the right time if major firms such as Babcock are to retain their work forces.
  I am more disturbed about the longer-term implications of not having British firms involved in learning the technology at the first stage, with the first PWR. I therefore ask the Minister, in winding up, to pay particular regard to this matter and, if possible, to give us an assurance that these vital orders will go to British firms wherever possible, because of the long-term interests of United Kingdom manufacturing technology.
  Mr. Jim Craigen: One of the projects that would be of considerable help to Babcock would be the combined heat and power scheme being developed in Glasgow. I hope that the Minister takes note of that.
  Mr. Hannam: I agree with the hon. Gentleman. I deplore the plans of the General and Municipal Workers Union to block any increase in private generation. It amazes me that again and again powerful unions, obsessed with some kind of political dogma about interference with State-owned industries, insist on taking steps which prevent growth and flexibility in their own industries, with the result that there is a massive loss of jobs in the industries that they are trying to protect.
  The Bill contains new limitations on the extent to which generating plant can be built. As my right hon. Friend the Secretary of State pointed out, anyone at present can technically build a nuclear power station or a hydro plant provided they obtain the necessary safety and planning approval. After the passage of the Bill, ministerial consent will be needed. If one is discussing whether nuclear power stations should be privately or publicly owned, it is worth pointing out that the majority of nuclear power stations in the West—there are now a large number of them—are privately owned. The fact that at some stage in the future a nuclear power station could be privately owned should not be a frightening concept. However, I do not foresee that developing for many years.
  I support the Bill as a welcome move towards taking the electricity industry successfully into the twenty-first century.
  5.11 pm
  Mr. Arthur Palmer: I am pleased to follow the hon. Member for Exeter (Mr. Hannam), partly because he made a vigorous attack on his party's past. For some time I have held the theory that the present Conservative Administration is as much at war with its own past as it is with the Opposition. I hope that
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  the hon. Member for Exeter will send a copy of his speech to Mr. Aubrey Jones, who was the Minister at the time. I do not know whether he is still a member of the Conservative Party.
  Mr. Penhaligon: He has joined the Liberal Party.
  Mr. Palmer: He was a curious type of Conservative, I always thought. Mr. Aubrey Jones was responsible for the 1957 Act whose great defect, in my view, was, and remains, that it separated the generating side from the area boards and in so doing removed generation and its costs from the pressure of the consumer. That point was made strongly by the Labour Opposition at the time.
  The hon. Member for Exeter said that the Bill was a simple, easy one, but I believe he will find that the more he examines its implications, the more he will see how complicated the matter is in practice. That is evident from the schedules to the Bill, because changes are to be made and enactments repealed not only in the nationalisation statute of 1947 and the post-nationalisation statute of 1957, for which the Conservative Party was responsible, but in the Acts of 1919, 1922, 1926 and even 1888. From a legislative point of view, the Bill is complicated.
  I believe that the House knows my connections with the electricity supply industry, and I should declare my interest as a member of the executive of the Electrical Power Engineers Association. It is a peaceful but knowledgeable union. Hence, I am aware that, historically, nearly all major changes of principle within the British electricity supply industry have been preceded by a public inquiry.
  The Weir committee of 1925 produced a great reforming report, which preceded the setting up of the national grid and the standardisation of frequency and voltage. The McGowan committee went before the changes brought about by the 1947 Act. While the industry was nationalised, it was also rationalised largely in line with the McGowan committee's proposals. The 1957 Act was preceded by the Herbert committee's report, although unfortunately Mr. Aubrey Jones did not pay full attention to that report.
  A few years ago we had the Plowden committee report, which my right hon. Friend the Member for Leeds, South (Mr. Rees) mentioned. That committee worked hard and I had the honour of giving evidence to it. Everyone assumed that Plowden would be followed by a major reorganisation of the electricity supply industry. The report dealt with the problem of the remoteness of the CEGB, amongst other things, but nothing was done. The Labour Government made a brave attempt but was frustrated by the Liberal Party, on whose Members' votes the Labour Government depended.
  All that we have now is this rather ill-thought-out measure which is a clumsy attempt to apply the Government's beloved privatisation principle to the electricity supply industry. That principle has been used for oil, gas, the airways and so on.
  When I was trained as an engineer I heard about a rather mythical creature known as the "five-eighths" fitter. It was a joke term for a botcher who had just one tool— a ⅝in. spanner—which he applied under all circumstances and at all times. Privatisation is the Government's botching remedy for everything, but it does not easily fit the electricity supply industry. I believe, therefore, that the Bill will need the closest attention and will need to be

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  substantially modified in Committee if it is to work at all. If it becomes law in its present form it will create confusion.
  Electricity is a unique product. It cannot be seen. Modern transmission is by alternating current, which means that electricity cannot be stored and must be consumed at the moment that it is produced. That is a peculiar feature of electricity supply and dominates its economics. We have attempted over the years to deal efficiently with its nature in the United Kingdom by having a single national interconnected system which is the largest of its type in the world. It is difficult to compare costs with those in, say, Germany, because it does not have interconnection on our scale. It has given a remarkable security of supply to the people of this country which is not found in other countries. If one compares like with like, British electricity is probably in real terms still the cheapest supply available for the domestic consumer, if not always for the industrial consumer.
  If private generation is to be allowed into the grid by the methods proposed without proper control—control is just as important as ownership—the immediate concept of the merit order of the working of power stations could easily be put at risk, because unless one can control the time when stations come on to the line, the overloading of transmission lines can throw out the merit order of power stations. In these days of sophisticated computer techniques load dispatching is calculated not just week by week, day by day, or hour by hour but occasionally almost minute by minute. If that problem is not considered, it will put up the costs to the electricity consumer.
  The Secretary of State was coy on that. He said that the Electricity Council had been consulted. I am sure that it was consulted, but the precaution was taken of changing its chairman at the appropriate time—bringing in an experienced ex-civil servant—so there was no danger of a Sir Denis Rooke emerging. I have read some of the documents issued by the council. It takes a cold attitude towards this legislation. It does not like it at all. If it had a more militant spokesman, it would say so publicly.
  There is nothing in the Bill about the control of the hoped for private power stations that will be fed into the interconnected grid, which is a very sophisticated system of electricity supply. That matter must be dealt with in Committee first, and perhaps in the long term through regulations introduced by the Minister. Apart from the day to day operation, we must consider the siting of privately owned power stations. At present all new power stations are subject to the Minister's consent. The Minister is shaking his head. He will find that that provision goes back to 1919, I think.
  Under the legislation before us, a private operator needs only to notify the local area electricity boards of his intention to erect a power station. He must obtain ordinary planning consent, and away he goes. A small, publicly owned power station could be subjected to an expensive public inquiry, ordered by the Minister, while a private station—perhaps 10 times the size—would be free of the need to obtain permission. That cannot be right, and the Committee must pay attention to the point.
  The 1926 Act, which came into force before nationalisation, introduced the concept of selected stations. When the 1926 Central Electricity Board was established, it operated the grid and had the right to select
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  certain stations for connection to it. Some stations could be operated as part of an interconnected system, while others could not. The current legislation makes little provision for that aspect. If the Government were to read some of the reports, they would not make these mistakes.
  What about the obligation to supply electricity? From its beginning, in the days of the municipalities and companies, the electricity supply industry could not pick and choose its customers. It had a legal obligation, as a public utility, not to discriminate among consumers. The gas industry has been freed of that obligation, which has helped it to become an effective competitor with the electricity supply industry. The Secretary of State, who laughs, is such a knave in these matters. The gas industry has more freedom. The grievances of the electricity supply industry about that have been represented to Ministers on many occasions, but nothing has been done. The private generators, with their own customers, will show far better financial results it is said. That will not be because of technical merit, but because they do not have the public utility obligation that is placed upon the electricity boards.
  The Bill appears to revive the almost forgotten idea of the use of the national grid as a common carrier. That theory was considered by the Weir committee in 1925, which produced the report that led to the coming of the national grid. It was rejected as being incompatible with the concept of a technically integrated grid receiving and supplying electricity as a tank does water. When the kilowatt hours are on the grid, they will not wear little jackets saying "private enterprise units" or "public ownership units." They will simply be units of electricity. It will be impossible on the grid to discriminate between the public and private producers. If the proposal is carried to extremes, there could conceivably be a private generator of electricity in Scotland making a contract with a user in Torquay to supply electricity via the national grid. I do not know how the exact costs would be apportioned. Does anybody?
  Mr. Rost: The hon. Gentleman referred to the recommendation of the Weir committee not to allow the grid to be a joint carrier. That was in 1925, when we did not have a proper national grid. Circumstances then must have been completely different from the circumstances today. Surely the hon. Gentleman is not suggesting that because that view applied then it must apply for ever more and not be reviewed.
  Mr. Palmer: Principles must be examined on their merits. Sometimes they are good, sometimes they are bad. Some people say that virtue is out of date, but that is not everyone's view. That aspect of the Bill is so absurd in my view that it crosses the border of farce. Other provisions are more serious, as they will turn back the clock of electricity supply advance.
  The Secretary of State gave a weak answer to me about combined heat and power. If we are to encourage that—I am in favour, as it gives greater overall thermal efficiency—it must be included in the Bill. If the Plowden report had been implemented, it would have been included. The committee wanted power to be given to the electricity boards to sell heat as well as power. We could have made it mandatory had we wished to do so. The Secretary of State is smuggling private enterprise contraband by putting it into the respectable attache case of combined heat and power.

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  Who wants the Bill? Does the CBI want it? It wants all sorts of things. What it wants depends on the day of the month. The CBI has given no guarantee—how could it?—that there will be a great willingness by private enterprise to find capital that will give a return on what is invested.
  If the Government were sensible, they would withdraw the measure, have a fresh look at the Plowden report, and introduce a comprehensive Bill which would bring about the overdue reorganisation of this great industry.
  5.30 pm
  Mr. Peter Rost: I am glad to speak after the hon. Member for Bristol, North-East (Mr. Palmer) who was my colleague on the Select Committee on Energy. However, I must express surprise at his concluding remarks. He is apparently seeking to ease his conscience and vote against the legislation when all the work that he has done in Committee must point him in the direction of supporting the Bill.
  The hon. Gentleman asks who wants the legislation and suggests that there is no evidence that the legislation is needed. Yet he has taken a leading part in the lengthy inquiry on combined heat and power in Britain which we are now concluding. He chaired most of the sittings and must have heard the vast evidence, which was accumulated from all sectors of the economy, of the obstacles and institutional restraints that have prevented combined heat and power from developing in Britain.
  Those are the people who want cheaper heat and electricity. The consumer who freezes in his home because he cannot afford enough heat wants it. Industry desperately needs it because it is being priced out of world markets with energy that is not as cheap as it might be.
  Mr. Palmer: Surely I dealt with that point. If that is the case, why is not there something in the Bill about it? I know that the hon. Gentleman would welcome that.
  Mr. Rost: I do not dispute that. However, we must make our stand on the argument, put forward by the right hon. Member for Leeds. South (Mr. Rees), that the legislation will not lead to much more private generation of electricity. The answer to that is that the right hon. Gentleman does not know. The private generation of electricity in Britain has not had a fair opportunity to show that it can be competitive with the public sector because the public sector has been given monopoly and statutory powers by Parliament. One cannot blame it. If one is given monopoly and statutory powers they should be used, perhaps even abused if that can be got away with. That is precisely what has happened. We have not had the economic climate where fair competition has been able to show itself.
  That is what so much of industry and, increasingly, the consumer are complaining about. The consumer is becoming aware that in other parts of the world cheap heat that has been denied to him in Britain by the institutional structures that have been allowed to develop is made available to people in their homes.
  I welcome the legislation as long overdue, and I congratulate the Government on having introduced it. It will go a long way—not all the way—towards introducing competition in the electricity supply industry. It will provide an incentive for efficiency in the public sector, which will remain predominant, but it will also increase
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  competition and provide a spur to greater efficiency because the private sector will be able to show that it can produce cheaper electricity by selling heat now that it is being given a fair opportunity.
  The combined production of heat and electricity will be cheaper than electricity now produced in the public sector where two thirds of the fuel is thrown away to warm the rivers and the atmosphere. It will also give consumers a choice. The British consumer has never had the choice, except in a few isolated cases, of heat from power stations produced in combination with electricity. As in Europe, he will have that choice and will find it highly desirable because it will offer him heat which now he does not get and cannot afford. Moreover—an argument which should appeal to all hon. Members—it is a natural development towards the more rational use of British energy. If the legislation encourages more private generation and district heating among local authorities, it will ensure that British energy is far more efficiently used and conserved for the longer term.
  Mr. John Spellar: Many of those aspects appeal to Labour Members, and that is why we are so surprised that the recommendations of the Plowden report, that there should be a complete change in the statutory duties of the electricity boards in that respect, are not implemented in the Bill. I am surprised that the hon. Gentleman is not drawing attention to that.
  Mr. Rost: I assure the hon. Gentleman that I intend to draw attention to that later.
  I must emphasise why I believe the legislation is so desirable and beneficial. The main reason is that it will encourage more private generation of combined heat and power. I regret that the British electricity supply industry has opted out of district healing combined with electricity production. It has not promoted it; it has tried to stop it. That is regrettable because such a course is not in the best interests of the nation or the consumer, or indeed of the electricity supply industry. It will come to discover that before long if it turns its back on the inevitable developments that must take place as a result of the recent dramatic changes in fuel economics.
  The electricity supply industry has turned its hack on those developments. It offers the heat from the power stations only if people go and get it. That is a negative attitude. That must be compared with the utilities in other countries which are actively promoting the sale of heat because it is profitable. They find that they can undercut other forms of heating by selling their surplus heat and in doing so can produce their electricity more cheaply.
  The legislation is valuable and will help to promote more combined heat and industrial heat with electricity production. There is the major scandal of wasted energy in Britain. We cannot afford to waste it now, and we shall be unable to afford to do so in generations to come. The method of producing electricity in Britain has been justifiable in the past when energy was relatively cheap and when there was plenty of it. That is changing and will change even more in the future. We cannot possibly justify the production of almost all our electricity at a thermal efficiency of 33 per cent. or 34 per cent. It has been proved not just technically but economically that one can achieve 70 per cent. to 80 per cent. thermal efficiency if one uses the heat for heating instead of throwing it away. The fuel poverty that results from this inefficient use of energy can no longer be justified.

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  Within a short distance of the homes of many of my constituents in the Trent valley— homes which are inadequately heated and badly insulated—heat that is being thrown away from major power stations could be piped to cities such as Derby. People are beginning to ask, "Why can we not have this heat? Why does it have to be thrown away when other countries are increasingly building up heat grids and getting the benefit of cheap heat?" Why is this cheap heat being denied to so many millions in the United Kingdom?
  It is important that we remove the institutional obstacles and the statutory restrictions that have prevented private generation and the development of CHP in the public sector. The arguments that have been thrown up against the private generation of heat and electricity over the years have gradually been discredited one by one. It was argued that our climate was not as cold as that on the Continent. It is true that our winters are not quite as cold as those of Continental countries, but it has been shown that we have more days than most Continental countries when background heat is required. That is because of our damper springs and autumns.
  It was argued that we did not need district heating because we did not live in rabbit hutches such as were to be found on the Continent. That, too, has been discredited by statistics. There was the red herring that district heating meant that the public no longer had a choice. It was said, "You have your hot water or you have nothing. With district heating one has to accept an East European type of planning." That, too, is nonsense.
  What choice do millions of our people have today? They do not have the choice of obtaining district heating. Those who have district heating in Denmark, for example, do not regard it as a deprivation of choice. The problem in Denmark and in other countries, such as Germany, is that politicians locally and nationally are besieged by electors who complain that they have not had the opportunity to enjoy district heating, whereas others have. The advantages in terms of price and convenience are so clearly seen by those who have it that the choice comes automatically.
  There is also the "disruption" argument. It is claimed that district heating and private generation of CHP schemes would mean tearing up our roads. I can only say that British Gas makes a good job of that already. CHP schemes are being installed this very day in other parts of Europe, and it has been proved that the disruption is minimal.
  Above all, we have thrown at us the argument that there is no need for a heat grid because we have plenty of other energy, such as gas and electricity, for heating and other purposes. That is an unacceptable argument. I invite those who say that we do not need district heating to ask those who cannot afford the higher heating bills that they are required to pay whether they would like an alternative source of heat.
  Most of the arguments that have been advanced against district heating have been discredited. The one that remained until recently was that such schemes were uneconomic. We have been told that the thousands of district heating schemes in the rest of Europe are all uneconomic. That argument, too, has been thoroughly discredited by a series of independent reports commissioned by the Department of Energy and others. We
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  have had the Dr. Walter Marshall inquiry, and the W. S. Atkins investigation, for example, proved that the economic viability of large-scale district heating is even more advantageous than original inquiries showed.
  Mr. Palmer: The Select Committee on Energy is working towards the end that the hon. Gentleman is advocating, but what does it have to do with the Bill?
  Mr. Rost: I have every intention of making clear the relationship of that issue with the Bill. The Bill, when enacted, will liberate the market for the private generation of electricity. That generation will be more economic than that carried out in the public sector because it will lead to the production of heat. It will also encourage the private utility, in partnership with municipal authorities and industry, to develop lead city large-scale district heating.
  The hon. Member for Bristol, North-East (Mr. Palmer) has been on the Continent with me and he has seen large-scale district heating in countries such as Denmark, where it is within the private sector. In Denmark district heating is organised not by a nationalised utility but by a private utility that produces and sells heat and electricity in partnership with a local authority. It is for that reason that I regard the Bill as vital.
  The electricity supply industry has made it clear to the Select Committee on Energy and to other groups that it is not interested in selling heat. It does not want to sell heat, and we cannot blame it for taking that view because such sales will compete with the electricity that it is trying to persuade us to buy for space heating.
  The electricity supply industry does not want to lay pipes and sell heat. It looks increasingly likely that district heating will be developed more in the private sector in partnership with municipal authorities and industry. This is already happening. If we wait for the electricity supply industry to provide heat for our homes, we shall probably have to wait for ever. The Bill is important because it will encourage industrial CHP and allow industry to obtain its energy at more competitive prices. It will also allow the development of domestic district heating.
  The reason that has caused Britain to lag behind in district heating has led to the introduction of the Bill. We have monopoly industries in gas and electricity and we have statutory obstacles which have prevented private generation and the emergence of a more economic form of heating. For those reasons the Government have introduced the Bill. The evidence that has been accumulated over recent years is now so overwhelming in support of removing the obstacles that it can no longer be ignored by the Government.
  When the Select Committee produces its report it will confirm, unless the evidence has already been published, that there has been a vast volume of complaints from many sources about the unfair practices that have prevented CHP developing in Britain. I shall refer to one or two of them because they are crucial to the proposed legislation and explain why the Government have moved in the direction that is signalled by the Bill. The Midlands electricity board has produced evidence that when it tried to introduce a district heating scheme for the new town of Telford—it wanted to use gas—the British Gas Corporation refused to supply the town. It said that gas should be reserved for premium use rather than burned for combined heat and power production. The result was that the scheme did not

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  go ahead, and now homes are being supplied individually by British Gas, which is a far less efficient way of consuming that fuel than by combined heat and power.
  The Midlands electricity board produced evidence of the Hereford scheme which has shown that it is cheaper to produce electricity combined with heat than it is to buy the electricity from the grid at the grid price. Industry in Hereford is receiving its heat more economically than it would have done in any other way. The result of that scheme is that many other industries are queuing up for similar CHP plants. Others are going ahead—for example at Fort Dunlop. Tremendous interest has been shown and the Midlands board has broken ranks with the electricity supply industry and has gone its own way and proved that CHP is the most efficient way of producing heat and electricity for industry.
  The Select Committee heard the evidence of the Walter Marshall committee, which was commissioned by the Government. It took five years to report but it did so, finally, in 1979. It showed conclusively that district heating and CHP is cost effective, and recommended that it should go ahead. Above all, the evidence of the Walter Marshall committee and the evidence given by Sir Walter Marshall, who is now the chairman of the CEGB but was not at that time, was revealing. He told the Select Committee that the electricity supply industry should move towards CHP, and that if it did not, the statutory obstacle should be removed to allow it to happen in the private sector.
  We have heard a great deal of other evidence in recent months about the institutional obstacles that prevent a most cost- effective use of energy in Britain. What has emerged particularly is the unfair operation of the tariff system whereby those who have the nerve to try to produce their own electricity are penalised—they have been for many years—by the electricity monopoly which has refused to pay a fair price for that electricity and, moreover, has charged an unfair price for standby facilities. Many examples of that are on the record.
  If hon. Members wish to consider this point in more detail they should examine Slough Estates, a major CHP plant in Britain, which supplies a large number of local industries. Slough Estates has shown that its peak load is not in line with the CEGB's peak load and that it could have offered its surplus electricity to the grid system at a time when the grid needed it most, yet it was not able to do so because it was not offered a fair price. That is an interesting example of how co-operation between the private sector and a nationalised utility could have benefited the consumer and the nation as a whole, but that was prevented by the institutional obstacles.
  I welcome the clauses that will ensure that a fair price is offered for electricity produced in the private sector. Consumers will welcome it, too, particularly those industries that have been virtually squeezed out of existence because they cannot afford the energy that they need. Consumers in the domestic sector will also benefit because the extra competition will lead to more efficient energy production.
  In view of what happens abroad one wonders why we have to reinvent the wheel in Britain. We have only to study what is happening in Denmark, France, Germany and elsewhere to realise that there must be something wrong in Britain. If district heating is increasingly being supplied and is already serving 2,000 to 3,000 cities in Europe, there must be reasons why it is not happening in
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  Britain. We have discovered the reasons. The Government have accepted the reasons and are now legislating to remove some of those obstacles. The unfair tariff system, the restrictions on using the grid as a joint carrier, the fact that there has been no independent arbitration when there has been a dispute between private generators and the public sector, have all been major obstacles which are now on their way out.
  I should have liked to see us go further, and I hope we shall do so before long. In this, I support my hon. Friend the Member for Exeter (Mr. Hannam) most strongly. I should have liked to see the Government tackling the organisation of the electricity supply industry a little more courageously. Perhaps we shall, but we must accept that we cannot do everything at once.
  I should like to see area boards given far greater autonomy to produce as well as to sell electricity, which would encourage them to produce and sell more heat. I should like to scrap the Electriciy Council and convert it into an energy council, so that it could have more overriding responsibility for ensuring that our energy is produced more effectively. That is one of the recommendations of the Walter Marshall committee. I support that recommendation and it must be the next stage. There should be a decentralisation with the area boards being able to compete with one another as a yardstick of efficiency so that the consumer can judge why one area is not as good as another—perhaps because it is not doing things as well as it ought. That would achieve a great deal to improve the effectiveness of our public sector electricity industry.
  Taking a longer term view, we can no longer afford the colossal waste of fuel that our present system of electricity production allows. Not only can we not afford it, but we as a country cannot afford the higher cost of energy that results from that system. Our industry has already been handicapped by high electricity costs and because it has not had a fair opportunity to produce its electricity in competition with the public supply. It will now have that opportunity.
  The legislation is important because it will open up for the consumer not only an additional choice of another fuel for heating, but the opportunity to have the cheapest fuel available for heating—hot water, which is a byproduct of electricity production. The legislation is important because it will begin to tackle the institutional structure of the monopoly industries which have been so reluctant to adapt to the present economics of fuel and have been reluctant to accept where the future lies in our energy patterns in Britain. If the public sector is not prepared to market heat, as happens in other countries, it is because it is a cheaper and a more economical system, the Government are right to ensure that the market is set free for the private sector to move in and show how it can be done and, by competition, jog the public sector to do things more efficiently.
  The legislation removes some of the obstacles that have inhibited a more rational use of energy. It removes some of the obstacles that have prevented the consumer from gaining the benefit of the more economical energy to which he is entitled and from which consumers in other countries already benefit. For those reasons, I welcome the legislation and congratulate the Government on introducing it.
  6 pm
  Dr. J. Dickson Mabon: The hon. Member for Derbyshire, South-East (Mr. Rost) padded out his speech. It was a good speech at the beginning, but it became a bit dreary towards the end. I did not understand the hon. Gentleman's logic when he said that the meritorious concept of combined heat and power, being introduced in Britain at long last would be favourably affected by the Bill. He and the hon. Member for Exeter (Mr. Hannam) reserved their position and said that not all the obstacles were to be removed. They both said that the Bill should be something else or do something in addition. They want a Bill to reform the structure of the industry. Is the absence of that reforming structure a reason why combined heat and power will not succeed? Is that their argument? Do they say that the Bill should be perfected in that way?
  I do not think that it is possible to reform the industry, using this Bill as a vehicle. That would probably be beyond the scope of the long title. Are the hon. Members saying that it is a pity that the Bill does only a limited amount and that it would be better if it were broader and more general? I do not understand how they can welcome the Bill and have such reservations.
  I disagree with the hon. Member for Exeter about the procedure that we could have adopted. I hope that the Under-Secretary will respond to that. Why cannot the new Committee procedure be used? I do not agree with the hon. Member for Exeter that we can use the new procedure only when a Bill involves non-party issues and is noncontroversial. I think that the new procedure is ideal for issues that are controversial, though not necessarily in a party sense.
  We are expecting to consider soon a Bill on mental health in Scotland. The legislation involves controversial issues and doctors might want to argue with us and among themselves about contentious legal matters and restrictions. The new procedure lends itself to dealing with such complex matters. I have in mind the excellent statements by representatives from the electricity industry. Some of them are complex and difficult to comprehend. The new procedure should be used so that we may have a fair balance between the public and private sectors.
  The Secretary of State talked about having an arbiter. The arbiter would be appointed by him and the choice might be influenced by the contesting parties. I am sure that the hon. Member for Exeter has read the submission by the Electricity Council of the comparison between the common carrier provisions in the Oil and Gas (Enterprise) Act and the common carrier provisions in the Bill. If we believe in fairness between the public and private sectors, we should ensure that the issues are investigated in full in this new type of Committee.
  We all know about the drawbacks of the old system of Committee work. Third parties are not allowed to participate. It is not always easy for a Minister to respond to the arguments, because he cannot always be adequately briefed. In the interests of creating good legislation, the Minister should consider using the new procedure.
  I agree that here a party conflict is involved. There seems to be an unwillingness by Labour Members to change the present system, but no system can be perfect after so many years. Private generation already exists within the system. No purity of argument is involved.
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  I am not convinced that the 15 or 17 per cent. of private generation in industry will increase by much—discounting combined heat and power, which I cannot quantify. Why should we get excited? Why think that the Bill will be a death blow to the public power industry? I do not think that it will. There is no reason why we should not give the Bill a fair wind, so long as there is fair treatment for both the public and private sectors.
  Naturally, I hope that the Bill does not contain an inbuilt Conservative cheat in favour of private industry. I hope that the Government are not trying to make a success of the provisions to counter Labour Party prejudices. The official Opposition do not want private enterprise to succeed, because it does not suit their book. Fortunately only few in the old Labour Party take that view. Like Members of the SDP and the Liberal Party, the majority want the best system in a pragmatic economy. We want a symbiosis of private and public sectors. One sector should not be the parasite of the other. The private sector must not sponge on the public sector. That is why we must get the balance right. The two sectors can live without feeding on each other but by complementing each other. That is the way in which the Bill should be drafted.
  The SDP does not wish to oppose the Bill on Second Reading. We accept its merits. Part II is unexceptionable, apart from some of the consequences for Sizewell. We have serious reservations about privately-owned nuclear power stations. We tabled an Instruction, which Mr. Speaker said he would not call.
  We cannot see our way to supporting the Bill on Third Reading, however much it is improved, unless the Government abandon the clauses which allow, even in theory, privately owned nuclear power stations to operate in Britain. The provision is unnecessary. In a recent broadcast the Under-Secretary confessed that no one was knocking at the door asking for a licence for a privately owned nuclear power station. He implied that the nature of the Bill made it necessary to express these provisions in a certain limited way. If there is no chance of, and no case for, privately owned nuclear power stations, why allow them in the Bill?
  The Under-Secretary of State for Energy (Mr. David Mellor): The right hon. Gentleman must appreciate that, under the previous Act, there is no prohibition on anyone owning a private nuclear power station. If a body generates for its own use, it does not need permission, but of course it has to go through certain procedures and it requires a licence under the 1965 Act. We are not making that easier, but erecting a further barrier.
  Dr. Mabon: The Under-Secretary is being charming to me if he is implying that I was responsible for the legislation in 1964, when in fact I was the Minister in charge of housing and local government in Scotland. The fact that he claims that permission exists and that private nuclear stations do not proves my point that there is no demand. Who is now knocking at the door? Why must we have private nuclear power stations at all? Public anxiety has existed since 1965, despite our excellent record on atomic energy, our splendid public authorities, our record in the industry and our ability to run a nuclear power industry.
  Mr. Mellor: I shall have another crack at the right hon. Gentleman to make him see that it is no part or purpose of the Bill to permit private nuclear ownership. It is

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  impossible for anyone, however malevolently inclined, to read clause 3 as suggesting that the Government intend to promote private nuclear power stations. We are adding a further barrier to their construction. Ever since the regulations have been around—that is throughout the course of the legislation, going back to 1919—it has been possible and permissible for people to buy and construct power stations. We are making it no more or less likely for that to happen today. It should come as no surprise to the right hon. Gentleman to learn that we have no wish to encourage private nuclear power stations.
  The purpose of the bill is quite different. Only others in the alliance, such as the hon. Member for Truro (Mr. Penhaligon), who lives in a fantasy world, will try to stir up this matter. I hope that the right hon. Gentleman takes a different view.
  Dr. Mahon: The Under-Secretary of State is being unfair. Many British people support a nuclear energy programme, but are still seriously worried about safety, including the disposal of radioactive waste. They know that we must constantly stress safety and satisfactory disposal if we wish to sustain the creation of more nuclear energy plants. The case for nuclear energy plants would be disastrously weakened if a private individual could promote the construction of a privately owned nuclear power station.
  I am not so much distressed about clause 3(1) as about clause 2(1). I do not wish to turn the debate into a Committee stage by discussing clause 2(1), but it is fundamental to the Bill. It allows:
  "any person other than an Electricity Board … who proposes—
  (a) to construct or extend an electricity generating station having plant with a rating exceeding 10 megawatts, or" and so on. That paragraph could be amended to read "but not a nuclear generating station."
  Any other type of power station could be permitted. By amending clause 2(1) clause 3(1) would be unnecessary. It could remain in the Bill, but it would be redundant.
  I, or my hon. Friend the Member for Truro (Mr. Penhaligon), or any hon. Member who represents us in Committee, will seek to make that amendment. If none of us is appointed to the Committee, we shall try to persuade hon. Members of like mind to promote the amendment, because it is extremely important. If that amendment, or something equivalent to it, is not made, admirable though the Bill is, we could not support it on Third Reading.
  If the clause allows the present position to continue, as the Minister says it will, we cannot support the Bill, despite the addition of the new provision in clause 3(1). I hope that I am making this speech and not the Under-Secretary of State, but I shall give way again.
  Mr. Mellor: The right hon. Gentleman is making an awful fuss. He sat in the Department of Energy for five years. Throughout that time it was possible for someone, without his consent, to apply to build a nuclear power station privately. We are adding a further obstacle to private construction by making consent from the Secretary of State necessary. I do not understand why the right hon. Gentleman is getting uptight, since he had to live with that possibility for the 20 years during which he held office and has been involved in such matters. Why should he get excited now?
  Dr. Mahon: I should have been in office for 20 years. Alas, I held office for only nine years, six of which were spent in the Scottish Office. During that time I never once
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  saw an application, or even a proposal, however remote, to build a nucleur generating station privately in Scotland. Nor did my English colleagues hear of such an application in their domain.
  Mr. Penhaligon: Does my right hon. Friend agree that the Bill will mean a change for nuclear power stations? If the generation of electricity by nuclear power is as cheap as some argue, and if private generators of electricity will receive a fair price for their commodity, which is a welcome part of the Bill, private electricity generation using nuclear power could be viable economically, but it could not have been during the 20 years about which my right hon. Friend and the Minister were talking.
  Dr. Mabon: Yes. Our two arguments are entirely sustainable in defiance of the Minister's obstinacy. He is not the most malleable of Ministers and it will be difficult to persuade him in Committee. The Minister cannot dismiss these two propositions, the first of which is that historically the position on safety has changed. The second is the complete absence of demand. I also wish to mention the future of the nuclear power industry, especially in relation to Dounreay, because that affects the theoretical wish to have private nuclear generating stations running in tandem with the public sector.
  The Minister cannot dismiss the argument of public anxiety. The proposed reprocessing plant at Windscale caused the longest-ever public inquiry. The reason for such a long inquiry was the immense public desire to ensure that we got it right. By holding such inquiries, Britain has done more than any other country to reassure the general public. There were two debates in the House of Commons and two free votes in Parliament, and everyone who wished to make representations was allowed to attend the public inquiry.
  The Sizewell inquiry will also be lengthy, because the Government wish to hear every case. There is genuine public anxiety, not so much about our existing nuclear power stations, as about foreign stations that have suffered a series of alarming accidents. The new system proposed at Sizewell caused considerable public anxiety when operated in America, where it was privately owned, to such an extent that a lobby—not always rational—has grown up against nuclear energy in principle.
  I support those who wish to see the safe extension of nuclear energy in Britain, but I do not wish the ace card to be given away—that a nuclear power station could be privately owned. There may be a case for that in 20 years' time, but there is no case for it today. No private contractor has asked for permission to construct a nuclear power station, so why should we include it in the Bill? If someone had asked, I could see the logic of saying to the House, "Perhaps we should amend when we bring in the long-overdue Bill to reform the structure of the industry," but there is no need for it now.
  There will soon be a statement about the future of the prototype fast reactor at Dounreay. We are all worried about what will happen there, because it affects the nuclear component of electricity generation in the United Kingdom. The private licensing of nuclear power stations adds an alarming dimension and is allied to this situation. The Secretary of State said nothing about the future of nuclear energy.
  We heard an alarming report about Sizewell. We were told not by an Opposition Member, but by a Conservative

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  Back-Bench Member, that the main purpose of going ahead with Sizewell, although our present electricity generation exceeds our present needs, was to maintain the home industry's ability to build nuclear power stations. Yet the hon. Member for Exeter told us today that the main orders for the projected building at Sizewell will go to the United States of America. That cuts the ground completely from under the British nuclear power industry.
  The hon. Gentleman said, in the hearing of many hon. Members—it can be read in Hansard—that the CEGB would send orders for four steam boilers at the Sizewell development to Westinghouse in the United States of America. That will affect seriously the Babcock plant in Renfrew, which now is struggling hard to attract foreign orders. In addition to taking part in the general combined heat and power exercise in Britain, Babcock's wish to contribute towards the development at Sizewell. I do not have to itemise all the other great firms in Britain that are also anxious to help to build the power station at Sizewell.
  Those are all important matters. We want to give the Bill a fair wind and a fair chance. We do not want to be partisan, but we warn the Minister that we have a genuine anxiety which it is his duty to seek to assuage.
  6.20 pm
  Mr. David Stoddart: I shall not follow the four points made by the right hon. Member for Greenock and Port Glasgow (Dr. Mabon) except to say that I agree with him that we would welcome an examination of the Bill, small though it may be, by a Special Standing Committee.
  It has always been well known that if we constructed PWRs in this country large orders would have to go abroad. It is well known that vested interests are involved in the construction of PWRs. Influence has been brought to bear on the Prime Minister and others by Lord Weinstock. He has interests in the General Electric Company and there is a tie-up there with Westinghouse. The right hon. Gentleman will know that as well as I.
  As an argument in favour of combined heat and power, the speech by the hon. Member for Derbyshire, South-East (Mr. Rost) was extremely good. There is no question but that he put his arguments well. I agreed with many, if not most, of the arguments. However, as arguments for the Bill, they stank. The hon. Gentleman had no argument for the Bill. The Bill has nothing to do with CHP. If it did, I would have hoped that the hon. Gentleman would persuade his right hon. Friend the Secretary of State to delay publication of the Bill and its Second Reading until the Select Committee on Energy, on which we both serve, had reported its findings on the CHP inquiry. It would have been sensible of the hon. Gentleman to advise his right hon. Friend to do that, if the Bill is all about combined heat and power.
  Mr. Rost: The hon. Gentleman will know that similar legislation has been enacted in other countries, deliberately designed along the same lines to help to promote the private generation of combined heat and power so that it can compete fairly in the market place with the public utilities. One has only to look at America, Germany and other countries, to see that that has already happened.
  Mr. Stoddart: The hon. Gentleman knows that the electricity supply industry, which is integrated in this country, differs substantially from the electricity supply industry in Germany and the United States, where there is already a great deal of private investment and generation.
  The hon. Gentleman also referred to private generation. He asked why we were opposed to doing something new. It is not something new. Until the electricity supply industry was nationalised under the Electricity Act 1947, we had precisely that—private generation. There were private electricity companies together with the municipal undertakings. They sold to individual areas and also to the national grid, which was built up by the Central Electricity Generating Board because it was necessary for security of supply and cheapness to have an integrated electricity system.
  The Government of the day, who were backed by all sorts of eminent people and reports, decided that if we were to have a good and proper integrated service, in which all consumers were equal and electricity would be supplied not only in urban areas, but in rural areas at roughly the same cost, we needed an integrated supply system. That is precisely what we created. Up till now it has been highly successful. The fact that it has had some failures has been due to the attitudes and actions of various Governments to the electricity supply industry. We must take that into account.
  This is a mouldy, silly, spiteful little Bill. I am sorry that it has been introduced. It does nothing for consumers or for the industry. It is positively harmful to the stability and good management of the electricity supply industry.
  The Secretary of State is an amusing fellow at times. He said that the Bill was introducing competition. He knows that the Bill does not introduce competition. As my right hon. Friend the Member for Leeds, East (Mr. Rees) and others of my hon. Friends have said, it is difficult to introduce competition when one is merely providing the same product in the same distribution system. One cannot distinguish the electricity that one is getting. One cannot have red electricity and green electricity. If the Secretary of State wanted to go along the lines of his own bigotry and ideology he could provide competition. In various ways, he could provide the consumer with choice.
  Electricity travels at 186,000 miles a second. That is a constant. We cannot interfere with it. However, we can interfere with the supply of electricity and the manner in which it is supplied in many other ways.
  For example, if we wanted to give consumers a choice we could say to them: "If you go on the private system, you could have a supply at 110 volts. If you go on a public system you could have it at 240 volts." That is a real choice because some people think that 240 volts is too dangerous and that 110 volts is safe.
  One can also provide electricity either through direct current or, as we do at present, by alternating current. Perhaps a direct supply, although it is more dangerous, would, because it does not have the same losses in transmission, be much more suitable to certain consumers. However, that is not what is proposed. The Government are not proposing to give the consumer a choice. It is misleading and pulling the wool over the people's eyes to say that this little piece of privatisation or the giving of access to the national grid will assist consumers. It will not do so. It will not lead to large-scale CHP.
  The Bill will injure the electricity supply industry, which is an integrated system. The industry stands or falls

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  by being integrated and by being able to do its own planning on a day-to-day basis for the supply of electricity and for the capital programme. The effect of allowing private generators into the transmission system without let or hindrance is bound to injure the stability of the industry and make its planning much more difficult.
  As my hon. Friend the Member for Bristol, North-East (Mr. Palmer) has said, the system gives a security of supply that is second to none in the world. That is an absolute. It provides security of supply. Through private generation, and if too much reliance is placed on private generation, that security of supply could be undermined as the safeguards will not be the same. Nor will the efficiency of maintenance be the same as it is in the CEGB.
  There is also the merit order list. It is a significant part of keeping down the costs of electricity to consumers. As my hon. Friend the Member for Bristol, North-East said, it is done almost minute to minute. As I worked in a power station once, I know the amazing way in which the national grid can bring power stations onto load in the order of merit and so provide a cheap and secure supply to consumers.
  Without the control of the power stations, I do not believe that the electricity supply industry will be able to cope with that merit order list as it does now. It will not have the same power or control. Private generators may not have the same will as the CEGB has now.
  Mr. Palmer: If the industry does not have control of the merit order, costs are bound to rise. That applies as much to transmission controls as to power stations.
  Mr. Stoddart: My hon. Friend is absolutely right. That is why he and I oppose the Bill. We believe that the existing electricity consumer must pay the cost in the form of higher prices and the lowered efficiency of the electricity supply industry.
  The clause that provides for the compulsory use of the board's transmission system has been likened to clauses in the Petroleum and Submarine Pipe-lines Act 1975, about which I know little. However, I know that this is a completely different issue. Although I opposed that Act, I know that it is one thing to give suppliers of gas access to the pipeline and quite another to give private suppliers of electricity access to the transmission lines. Electricity cannot be stored. It must be used the second, or rather less than the second, that it is produced. Gas, however, can be stored. What the gas corporation does not pull out of the ground today it can use 20 years hence. The same is not true for electricity. That is why compulsory use of the board's transmission lines will upset its day-to-day and long-term planning.
  What is more, because private generators will also have the right to demand a supply from the electricity industry, the two combined will make it essential for the CEGB to keep plant that it otherwise would not keep. Moreover, that plant will probably be idle and therefore be a burden on taxpayers.
  The hon. Member for Derbyshire, South-East dealt at length with combined heat and power. I agree with him. It is a disgrace that we should throw 35 per cent. of the heat that could be used for other purposes—heating homes, for example—out of chimneys and cooling towers. It is a crying shame that we have done nothing about that. It is absolutely necessary —I am sure that the Select
  896
  Committee will make its recommendations accordingly—that we get on with CHP as soon as we can. The Bill will not help that in any way.
  The Atkins report said clearly that CHP was viable and would produce a return on capital, not merely in line with the Government's strictures but, in some cases, above that figure. The report said that CHP in the lead cities should be provided by private generators. It continued:
  "The Government should initiate as part of a further CHP/DH programme the preparation of full project plans for two or preferably three CHP/DH schemes in the shortlisted locations showing the higher rates of return on investment. The local authorities concerned should be required to give support to and actively participate in the preparation of the plans. The plans should be in sufficient detail to enable phased implementation of the schemes. The ESI must at an early date review their future new power station policy to identify the most appropriate medium and long term operating role of CHP stations based upon CHP/DH development up to the national potential predicted in this study."
  Mr. Atkins and his partners envisaged CHP being carried out by the electricity supply industry, the Government and local authorities in partnership. He saw no role for private generation in those lead city schemes.
  The Bill should be about the reorganisation of the electricity supply industry and the removal of the barriers to its providing heat and power. We have come up against that barrier time and again. That was contained in the evidence that was given to the Select Committee. That is what the Bill should be about, not the silly little clauses that we have. It should be a real Bill that will help CHP. The hon. Member for Derbyshire, South-East and I are in agreement on that.
  Mr. Rost: I agree with the hon. Gentleman to a considerable extent. Does he agree that the present legislation, by introducing some competition to the nationalised sector, will force the nationalised electricity supply industry, if it wishes to stay in business, to become more competitive? Does he also agree that the only way to do that is to market its heat?
  Mr. Stoddart: I understand the hon. Gentleman's commitment to CHP and respect the work that he has done on it. Nevertheless, with respect, I do not believe that private industry will be able to find the necessary capital to provide the type of CHP that both he and I want. I mean the CHP district heating schemes, not industrial CHP.
  The Under-Secretary for Energy (Mr. John Moore): Why not?
  Mr. Stoddart: I shall tell the hon. Gentleman why not. In relation to sources of heat, Atkins said:
  "The Stage 1 feasibility studies have demonstrated that, at the present time, only CHP power station units with an electrical rating of 150 MW(E) and above can provide the thermodynamic efficiency which is likely to result in a viable cost for heat from power stations to serve large city schemes."
  No private firm would put up risk capital for a power station with an electrical rating as high as 150 MW. It costs hundreds and millions of pounds to construct such a power station and I do not believe that there are any takers in the market to provide a CHP scheme together with a local authority and the Government. That is why the Bill is completely irrelevant to the important subject of CHP. CHP is Labour Party policy, so there is no political difference between the Opposition and the hon. Member for Derbyshire, South-East (Mr. Rost).
  I heard the arguments about clause 3 and the exchanges between the Government Front Bench and the right hon.

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  Member for Greenock and Port Glasgow. If the Government are serious, I cannot see why clause 3 cannot be prohibitive. I do not understand why it does not simply prohibit private firms or individuals from building nuclear power stations. There would then be no arguments between the Government and the right hon. Member for Greenock and Port Glasgow and others. I deplore the idea of nuclear power stations being built and managed by private firms.
  I am sure that the hon. Member for Derbyshire, South-East, with whom I had the privilege of visiting the United States of America, will agree that there is clearly a difference between the housekeeping, safety methods and management of our nuclear power stations and those in the United States of America, which are in private hands. The Government will have nothing but trouble unless they make it clear—as they can do in the Bill—that it is contrary to Government policy to allow private nuclear generation.
  I want to help the Government; the Under-Secretary of State should not laugh. Sometimes his expressions and words offend. When people try to help him, he should not do that. He is a little young, but as he gets older he will understand that even Labour Members want to help. I have not yet forgiven him for the garbage in, garbage out, gibe that he made about a distinguished scientific adviser to the Department of Energy, Sir Kelvin Spencer. The Under-Secretary of State and the Government will save themselves a lot of trouble from the anti-nuclear lobby if they make it clear that there will be a ban on private nuclear generation. I hope that the hon. Gentleman will introduce an amendment to clarify that.
  I shall conclude as I began, by saying that this is a piddling, silly little Bill and that I shall certainly vote against it tonight.
  6.43 pm
  Mr. Richard Alexander: I disagree, in particular, with the final remarks of the hon. Member for Swindon (Mr. Stoddart). The Bill may be modest, but it certainly does not fit his description. In turn, I hope to make a modest but short speech. This is not the time for making grandiose, earth-shattering, parliamentary reputation-making speeches. After all, it is always easy to ruin a reputation.
  This modest Bill opens up a new prospect for electricity generation in this country. That is what it is all about. Subject to safeguards, it allows the generation of electricity as the main rather than the subsidiary part of one's business. With respect to the Government Whip, I agree with the earlier remarks of the right hon. Member for Leeds, South (Mr. Rees). In this highly technical Bill, there is some scope for the Special Standing Committee procedure. Some of the points raised by the hon. Member for Swindon could well be tested through that procedure. I may now have fallen out with the Whips for agreeing with that suggestion, but the procedure is nothing new.
  The right hon. Member for Leeds, South said that we could leave things as they were. He said that we should leave things as they had been for the past 50 years. That might be the conservative way, but it is not the innovative Tory way of dealing with exciting prospects such as the generation of energy. Unlike the hon. Member for
  898
  Swindon, I believe that the introduction of competition into the CEGB's monopoly will not damage the industry. Nor is there any reason for it to damage the CEGB.
  There is already some partnership between private and State generation. At present, private business can generate electricity for its own use and sell the surplus to the national grid. Therefore, there will be no vast change. I am surprised that Opposition Members should feel obliged to vote against the Bill. Privately generated electricity already accounts for 16 per cent. of industrial electricity and 6 per cent. of national needs as a whole. It is largely confined to the chemical, food processing and paper industries, but the Bill would enable the idea to spread to other suitable industries. The whole concept may be attractive to smaller local electricity demands, such as those of industrial estates in medium-sized towns.
  Privately generated electricity might just mean that we can at last do away with the wretched business of standing charges. It will be more difficult to argue the need for standing charges if electricity is privately generated. That suggestion may give rise to some controversy, but I am sure that my hon. Friend the Under-Secretary realises that standing charges are greatly resented.
  My main point is that our European friends do not operate under our monopolistic system for obtaining their electricity. Why should we be the only ones to be always out on a limb? Local suppliers, both public and private, supply local electricity needs to Europe. That is what the Bill envisages. This is a high technology industry. The CEGB rightly prides itself on its efficiency; whether it is efficient is another matter, but it believes itself to be efficient and I accept that belief. If we bring some competition into the industry, we shall bring in access to private high technology and research. I believe that the private entrepreneur as well as the State has a part to play and that this could be a healthy development.
  Nationalised fuel in this country is far more expensive than fuel in other EC countries with similar industrial capacity. Why should it not be as cheap here? Perhaps a little competition would make it so. The Bill is bound to stimulate competition and efficiency. It should result in smaller price increases and both sides of the House should welcome it.
  It has been suggested that the scheme would put prices up. I cannot see how competition could have that effect because consumer resistance would result in some competitive pricing. Competition is competition for a market; one cannot say, "Buy my product, which is more expensive than the others," and expect to do business. One has to prove that one's product is cheaper than the next man's, yet competitive in quality. Under these proposals, prices are bound to increase more slowly and to be more responsive to market needs.
  The CEGB will remain the main supplier. It costs about £750 million to build a power station. Not many power stations will be built as a result of the Bill, especially as the lead-in time from planning to fruition is about 10 years. No one will be obliged to enter the field and there will therefore be no damaging inroads into the position of the CEGB. There will be no scope either for cowboys to make quick profits and run away. The private supplier will have to operate under the same strict safeguards and controls and the same licensing rules as the CEGB.
  Nothing revolutionary is proposed in the Bill—nothing that does not apply to almost every Western country. The

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  Bill will not harm the existing industry and it should benefit the consumer, who after all is supposed to be the customer for whom the whole industry is working.
  I welcome the Bill. I believe that it will bring fresh thinking and competition to the industry. Once again, the Conservative Government are letting a fresh breeze blow into an area of the nation's life.
  6.53 pm
  Mr. David Penhaligon: Three aspects of the Bill please me most. First, it will allow and encourage innovation. Indeed, I believe that it will encourage innovation rather more than it will encourage competition. Many possible alternative sources of energy are being independently explored by scientists and engineers of considerable calibre. The Bill is the most practical encouragement that they could receive. It will give them the opportunity to sell their wares. Having taken a great interest in alternative energy for some years, one is aware of the claims made for various alternative sources. The Bill will allow the people involved to test their ideas and to put their efforts up against fair competition. The Bill will make that far more possible and likely.
  Secondly, although many of us sometimes make too many judgments on the basis of our own constituencies, I know that in my constituency there is a substantial amount of privately owned plant capable of starting operations tomorrow. According to the owners, only the tariff arrangement between themselves and the CEGB prevents them from switching the plant on. The capital has been invested and the plant is there. I have said many times that in the present economic situation Britain should take more advantage of the capital already invested in our economy. It seems crazy that a long-standing argument about tariffs should prevent that.
  Despite recent movements by the CEGB, I have no doubt at all that it has fixed outrageous tariffs in a deliberate attempt to prevent the private generation of electricity. As a trained engineer, I know enough about these matters not to be silly enough to try to predict whether those plants will be economic. Given the pricing policy outlined in the Bill, it will be for the owners to judge, and what better judgment can there be than that of the person who owns the plant as to whether the project is worth while?
  Thirdly, as the hon. Member for Derbyshire, South-East (Mr. Rost) has said, the Bill will encourage combined heat and power schemes. Over the years he must have found it frustrating to attend so many energy debates in which everyone supported heat and power schemes but no one did anything about them. I do not know whether the Bill will encourage such schemes to the extent that the hon. Gentleman would wish, but it must certainly encourage them to some extent; that is greatly to be welcomed.
  It is worth emphasising to those who are doubtful about heat and power schemes the sheer limitation in the efficiency that can possibly be achieved by present methods of transforming heat into electricity. Average thermal efficiency is 33 per cent., although I believe that sufficient capital investment could raise it to 37 or 38 per cent., but anyone trained in engineering knows that there is no chance of achieving greater thermal efficiency than that until we have developed a whole new generation of materials capable of maintaining their shape and size at temperatures, pressures and stresses beyond the fantasies
  900
  of anyone currently in materials engineering. It is worth stressing that we are stuck with that limiting factor to show that the argument for heat and power generation does not derive from a temporary inability to build efficient power stations. It is a basic fact of thermodynamics. The Bill will encourage heat and power schemes and we should all welcome that.
  I should be interested to hear how the Minister envisages the development of private power stations. The most obvious source of private power generation is unused plant and I appreciate and welcome the possibility of its use. Some hon. Members have talked as though private entrepreneurs will be building 150 MW power stations. One never knows—the world is full of surprises—but I doubt whether anyone will be starting such a project next week. As I suggested in my short intervention in I he Minister's speech, however, many existing power stations are—unfortunately, in my view—gradually being closed down by the CEGB. In my part of the world, the power station at Hayle has completely gone, a power station at Plymouth is to be closed and I understand that another at Yelland on the north Devon coast, is also scheduled for closure.
  What is the Government's view on these power stations? The most rational approach for someone entering private generation would seem to be to buy one of these sites with equipment already installed and planning permission already in existence. The station will also be connected to the national grid, which means an enormous saving.
  Private ownership of these power stations represents an interesting possibility. The CEGB is knocking them down and abandoning them. The price that it puts on the assets must be virtually zero. Hardly any of the equipment is taken away to be used elsewhere. It is sent to the scrap yard. We are talking of a scrap yard price for the stations.
  With those power stations in private hands and the opportunity that exists in my area to import coal from world markets, a private enterprise takeover of a redundant site is the only real possibility of a privately owned power station producing electricity for the national grid. Is that considered by the Government to be a good idea? Will they encourage the Central Electricity Generating Board to sell stations in such circumstances? If they do not agree that my proposal is the most likely means by which large-scale private electricity will result from the Bill, I hope that they will explain their own approach.
  The Minister will not be surprised to know that I have a basic and fundamental objection to clause 3. My party will vote for the Bill on Second Reading. It contains some proposals for which we have argued and which we welcome. I shall not, however, be going through the Lobby in support of the Third Reading of a Bill that does not make it absolutely clear that there will be no private generation of electricity by means of nuclear power within the United Kingdom.
  If technology in 40 years' time is so competent and well-proven that these stations can be allowed to go into private hands, another Bill can be introduced to change the situation. With existing technology, the idea that any rational Government would seriously say that it welcomed and wished to encourage the private nuclear generation of electricity is beyond belief. Any Government that believed this to be a political or rational possibility in Britain would show that they were not aware of public opinion or arguments.

  901
  The reason for the clause is the Government's obsession with the technology of nuclear power for generating electricity. They will not admit that it is different from all other forms of steam-raising available for generating electricity. To allow private generation of electricity but to make nuclear power a separate Government monopoly would be an admission by the Government that there is a difference.
  I have no doubt that a case can be made. Given that, for the first time, a private generator of electricity will get a fair price for his product, there is a greater likelihood than before of someone wishing to build a private nuclear power station.
  If the Government reply that no one has asked to build a nuclear power station, I invite the Minister to answer one simple question. If the economics were favourable, would he welcome and approve an application from a private individual or a privately owned company to build a nuclear power station? That is the fundamental question. It should not simply be asserted that no one has applied, that such a proposal is not economic and that therefore no one will apply. Would the Government welcome such an application? If the answer is yes, we will know where we stand. There is a fundamental disagreement. If the answer is no, as I suspect, why has the clause been allowed to remain in the Bill?
  I welcome the Bill for its new ideas, which could lead to considerable entrepreneurial and new technology investment in energy production. However, the inclusion of the clause to which I have referred means that the Bill will cause great political controversy. I suspect that a significant part of the Committee stage will be spent discussing this issue.
  It is clear that the Social Democratic and Liberal Parties are united. We are in favour of the Bill but opposed fundamentally to clause 3 as it exists. We shall vote for the Second Reading but we shall not vote for the Third Reading unless that aspect of the Bill is changed.
  7.5 pm
  Mr. Bill Walker: I cannot agree with some of the comments of the hon. Member for Truro (Mr. Penhaligon), especially on the generation of electricity from nuclear power. It is recognised that there is dreadful waste in the generation of power. The manner in which a finite fuel like oil is used for the generation of electricity must be viewed with deep concern. There are highly emotional and often rational arguments against the use of nuclear fuel or nuclear power, but it has to be remembered that nuclear technology exists. The arguments against its use are the arguments that were employed against using aeroplanes to fly.
  When cars first appeared on roads, individuals walked in front of them with a red flag. It is not unusual that man should be apprehensive and worried about new technology. Man has always been upset and worried about new technology, but it exists, and it will continue to exist and to develop. If other nations develop the technology and use it and we do not, we shall be put at a disadvantage. We cannot allow that to happen. Our manufacturing industries will find themselves in competition with those that depend on fuel generated in different ways and probably at cheaper cost.
  Mr. David Myles: The hon. Member for Truro (Mr. Penhaligon) said that he would never agree to an application to build a private nuclear power station. Does my hon. Friend agree that such an application would prove that a private firm had the technology, the knowledge and the ability to go ahead? No amount of wishful thinking will eliminate the fact that the firm possesses that knowledge and ability. It it not nonsense to suggest that to prevent a firm from buidling a nuclear power station would take away that ability?
  Mr. Walker: I thank my hon. Friend for his interesting intervention. He has pinched part of my speech. I hope to deal with the matter in more detail. My hon. Friend is correct.
  I say to those opposed to the use of nuclear energy for the generation of electricity that we are using fossil fuels and that these are finite. We have a duty and responsibility to those who follow us to ensure that we leave behind what they can use.
  There are areas where oil has not been replaced by technology. I refer to aviation fuel for aircraft. One cannot in the present state of technology use anything but oil derivatives to fly aircraft. Therefore, we must continue to keep sufficient of that finite fuel as long as we do not have the technology to use other means of propulsion for aircraft. Motor vehicles and many ships also run on oil derivatives. We must continue to husband these resources, and that, if nothing else, puts a duty on us to make use of the technology that exists for the generation of electricity from nuclear fuel.
  I welcome the Bill, because it removes the monopoly powers of the electricity boards in the supply of electricty. Anyone who has listened to me speak recognises that I do not care for monopolies, whether they are public or private. I believe that competition in everything is in the best interests of the consumer. As in all other matters of supply, it is always better to have flexibility and competition. The Bill will give the private sector companies a chance to generate and to rationalise their generating capabilities.
  The Bill will assist the CEGB to make the decisions that otherwise it may not make, or may defer making. There is nothing like a little bit of competition to sharpen a company. We see that all around us, and perhaps the best example is British Airways. Those who use British Airways' services to Scotland will know what I mean. British Airways, full marks to them, have sharpened their operations as a result of competition and a changing market.
  It is important that we supply customers with electricity in the most effective, efficient and competitive way for the customer. It is the customer whom we should always keep in mind. The Bill will give the private generator the ability to obtain supplies from an electricity board for his own and for his customers' use. This is essential, because one cannot store electricity. There are peaks and troughs in demand and when they occur one must be able to iron them out. That can be done through the grid system.
  In Scotland we have understood for a long time how the grid system works. With our capacity to store water in our dams, we are able to store it in such a way that we can generate electricity when the demand requires it. One cannot do that in any other way. The water is there, given to us by nature and by God. Hydro-generating is a vital part of the Scottish economy.

  903
  The provision to refer disputes in this matter to the Secretary of State and for the Secretary of State to determine the matter finally is welcome. I welcome it, and I only wish that it had been contained in the Civil Aviation Acts that we have passed in the past two years. It would have saved myself and many other hon. Members hours of work and removed the need to write hundreds of letters, to place an early-day motion on the Order Paper and to call for an Adjournment debate. If we had had this referral to the Secretary of State to determine matters of dispute, we should not have been faced with the problem of the proposed airway in Scotland and the effect that it will have on gliding.
  I welcome the provision to which I have referred, and I trust that my right hon. Friends on the Front Bench will bear in mind the fact that when one is exposing the private sector to possible disputes it is always wise to have a referee somewhere and some provision in Bills so that the referee can act in the best interests of everyone. Consequently, I can be said to be less than impartial when I say that it is wise to have a type of long stop such as the Secretary of State determining disputes.
  I welcome the new system, which will be of benefit to customers and the economy because it will ensure that the assets that we have are more effectively and fully used.
  The relationship between monopoly purchasers, whether in the public or private sector, and the people who supply them with their products, can often develop in such a way that it is unhealthy and unhelpful for the supplier of the goods. For example, the manufacturer of equipment who is supplying it to the electricity boards can, with the passage of time, find that if the relationship is not good he is faced with the problem of not being given a good opportunity either to tender or to supply, and this could lead to the demise of a number of companies. Therefore, the wider the options and the greater the number of people who are making decisions, the more opportunities there will be for companies in the business of supplying goods to what are, at the moment, monopoly purchasers.
  If one removes the monopoly, one removes the cosy relationship that can develop between purchaser and supplier. In some instances there may be only one supplier to a monopoly purchaser. That cannot be healthy either for the price of the product or for the parties concerned. We should be thankful that the relationship will now change and that the viability of manufacturers in the business of supplying equipment and plant to electricity generating sources will be increased because they will have an opportunity to supply more than one source.
  Hydro power is an important and vital sector of electric power generation in Scotland. As anyone who lives in the north of Scotland knows, for years we have exported electricity. Therefore, anything that we can do to make better and more use of our natural resources can only be to the benefit of the people in Scotland. One of the advantages of generating electricity privately in this way is that some of the benefits will remain in the area where it is generated. That is vital, because, sadly, the grand ideas that were talked about when the scheme was first developed have long since faded away. Now, each of the areas is just part of the total set-up. The new provisions will be beneficial.
  I welcome the raising of the lower capacity limit from 50 kW to 1,000 kW because that will be beneficial to those who wish to develop in the Highlands. I am at a loss to understand why anyone should object to the construction
  904
  of a private sector power station. If individuals are prepared to invest their capital and take the risks that the market presents, we should welcome it. We should welcome anything that increases competition. I can envisage circumstances in which a nuclear power station could be financed, constructed and operated by private money. If we can accept the generation of electricity from nuclear elements, what is important is the safety regulations and how tightly they are operated.
  I make what I consider to be a valid comparison. I cannot believe that those who regularly fly between Scotland and England believe that it is safer to fly in a publicly owned aircraft than in a privately owned one. I cannot see how that case can be made. That is as good an example to use as any, because there is no difference between the public and private sectors. What is important is that both aircraft are operating under the same safety regulations. Of those of us who fly regularly from Scotland to England, some fly British Caledonian and some fly British Airways. I defy any of them to suggest that British Caledonian is less safe than British Airways. Nobody could argue that, because we know that both operate to the same safety standards. That is what matters. Therefore, it should and must be possible for private sector generation of electricity from nuclear sources provided that all producers operate within the same safety parameters.
  Mr. Penhaligon: If the hon. Gentleman compares the State monopoly in Britain for nuclear power and its superb safety record with the industry in the United States, does he believe that it is sheer chance that one is a Slate monopoly and the other is run in the somewhat laissez-faire manner of the American nuclear industry?
  Mr. Walker: I am probably the wrong person to answer that question, because I shall be simplistic about it. I know that many more power stations are operated by nuclear power in the United States than is the case here and, being an airman, I know that the risks are greater the more one flies. The risk element changes. There are inevitably problems that do not exist with a smaller number. That is the simple approach of an airman.
  Mr. Penhaligon: Stick to airways.
  Mr. Walker: Yes. Airways are a prime example. The more hours one flies, the more chance there is of involving the human element. Normally, it is the human element that fails. Rarely does technology fail completely, but when it does, there is a major disaster. There are, of course, often major disasters when the human element is involved. That is true both in generating electricity and in flying aeroplanes. One cannot legislate for the human element.
  Mr. Barry Porter: In replying to the hon. Member for Truro (Mr. Penhaligon), would it not be more sensible to compare the federal and state safety regulations that apply in the United States with those that apply in this country, rather than draw a false contrast between State-owned and private enterprise?
  Mr. Walker: I thank my hon. Friend for his intervention, because I said that I was not knowledgeable enough to answer the question. I do not know the differences between the different states on safety regulations. I should not wish to enter into a discussion of that depth without first making sure that I knew the

  905
  differences. As I do not know those differences, I tried to relate the question to a common factor, which is that the more one does something, the greater the risk ratio.
  I do not believe that it is chance, as the hon. Member for Truro said, that has led to our splendid record. His argument, as I understood it, is that we have a good record because we have tight safety regulations. If those tight safety regulations are carried into the private sector, the analogy that I gave between private and public sector aeroplanes applies. If both operate to the same criteria, both have the same risk ratio.
  Mr. Penhaligon: The hon. Member is talking about technology, and I am worried about what he is saying. What he says about aeroplanes is largely true. Because of the many hours of experience that had been gained in flying that aircraft around the world we thought that we had solved all the problems, but then we find out the hard way about stress-induced failures and fatigue in aeroplane components. Aeroplanes crashed, not because the regulations were wrong or improper or because they were not rightly enforced, but because of a new technology, and all the problems had not been overcome. We discovered the hard way about laminar flow changes when an aeroplane goes through the sonic barrier. That was not due to a lack of safety regulations. Nor was it the fault of Ministers or anything else. It was simply because it was a new technology which was not fully understood. It is understood now, and it is well regulated. Some of us have doubts—not paralytic fears, as the Minister suggested I have—about whether we have resolved all the technology barriers in the nuclear industry. That, in our opinion, makes a difference.
  Mr. Walker: I thank the hon. Gentleman for his intervention, because, if anything, he continues to make my case more solid. He spoke about laminar flow and the problems of high-speed flight. We must look at the time scale from the introduction of the prototype models, and the knowledge and experience that have been gained between the end of 1945 and today. One can now fly across the Atlantic in Concorde at Mach 2. One could not do that 15 or 20 years ago.
  With the advances in technology, the experiments that have been conducted, and the safety record in the generation of nuclear power in this country, we must acknowledge that we have gone beyond the experimental stage. We are now in the development and use stage. Thus, the hon. Gentleman's arguments are not valid and cannot be sustained.
  Mr. Hardy: Does the hon. Gentleman accept that his analogy with aircraft, although interesting in many respects, is not entirely appropriate? The life of a nuclear power station will be more than 25 years. The life of an aircraft in service, unless it is going to its third or fourth owner in the wilder areas of South America or Africa, is much less. The cost of a nuclear power station is greater than the cost of an individual aircraft, if it is a successful model, but if we embark on a nuclear programme such as the hon. Gentleman seeks to support it will mean that we shall freeze our energy technology and not be in a position to provide the capital for the new technology, nuclear or otherwise, that would otherwise be available. The hon. Gentleman is likely to support his Government in the position of an economic or energy ostrich.
  Mr. Walker: I am sure that all hon. Members will pass their own judgment on the matter. If the hon. Member for Rother Valley (Mr. Hardy) believes that an aircraft is no longer in use after 25 years, he should visit Heathrow. Indeed, if he visits any Royal Air Force station he will see many aircraft over 25 years of age. With modern technology and knowledge, we have a duty and a responsibility to ensure that those who follow us have the advantages of our knowledge and technology and the use of the equipment that we have today.
  When I spoke earlier about the use of nuclear power in generating electricity, I said that one of the finite fuels that we have in abundant supply in this country is coal. We should make the maximum and most effective use of that fuel. However, the generation of electricity by coal should be considered in terms of the pits that are being closed. When pits are no longer considered viable by the National Coal Board and are closed, it does not mean that they contain no more coal. There is coal there. Why do we not give these pits to anyone in the private sector who wishes to operate them and who is prepared to work them? Why not give them the pits for nothing? After all, they are only holes in the ground after the NCB ceases to use them. In that condition they provide nothing for the local community.
  If private sector companies or individuals are prepared to take on the risks, both financial and otherwise, of operating those pits, I think that we should consider that course. It might make a small contribution to those communities which suddenly find, when the National Coal Board makes its decision, that there are no longer any jobs in the area. By giving those pits to the private sector, jobs and fuel might be provided for the local community, and possibly also a little competition, which would be healthy for the NCB.
  Mr. Porter: Does my hon. Friend agree that pits are closed because they are uneconomic and that those decisions are based on the present cost of production and demand? Those considerations may alter. Would it not be worth considering keeping those pits on a care-and-maintenance footing to see whether costs and demand change? They would then have some value. It does not seem necessary for the NCB to give them away as worthless.
  Mr. Walker: I did not make that suggestion flippantly. I believe that we should look at ways and means to continue employment opportunities for all those who, through no fault of their own, find themselves living in an area where working conditions have changed. In addition, I believe that competition is healthy and that anything that one can do to stimulate change and help individuals to do something themselves can only be healthy for the community.
  If pits are deemed to be uneconomic by the NCB because of present technology, the private sector may be able to introduce that new technology in a way that the public sector cannot. The private sector may be able to extract coal at prices that would make the pit viable. There would be no risk to the State, as no State funds would be involved. It would be quite straightforward. The National Coal Board would say "Here you are, here is a pit that is no longer considered viable. If you want to set up a company to operate it, you may do so." Certain limitations could be laid down. I make that suggestion because of the

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  anxiety in some parts of Scotland when pits close because they are no longer considered to be economic. There might be some individuals who are prepared to take them on as a private sector venture. I believe that the Bill will help the generation of electricity, the customers and in the end will help to make our companies more viable.
  7.33 pm
  Mr. John Spellar: I shall return the House from the world of aviation back to the Bill. One or two Conservative Members have addressed themselves, often with good arguments, to the Bill that the Government should have introduced to reorganise the electricity supply industry in accordance wih the recommendations of the Plowden committee report of 1976.
  The Employees National Committee for the Electricity Supply Industry issued a statement about the Government's proposals. It said:
  "It will be better in our opinion if any legislative proposals affecting the industry would concentrate on changes in its organisation and powers, which a sucession of Inquiries have recommended over the last decade or so and which successive Governments have so far ignored."
  My right hon. Friend the Member for Leeds, South (Mr. Rees) drew attention to the problem that prevented the previous Government from bringing forward such necessary legislation. They lacked both a majority and support from their coalition partners. Such constraints do not apply to this Government, nor does the constraint of parliamentary time apply, because they have found time to introduce a Bill relating to the energy industry.
  I have to declare an interest in the industry as a national officer of the Electrical, Electronic, Telecommunication and Plumbing Union which is the major union in the industry, and part of the employees national committee, whose report I quoted. In the industry's opinion, the Government would have done better to bring forward reorganisation as recommended by the Plowden committee.
  The Secretary of State and the hon. Member for Derbyshire, South-East (Mr. Rost) have made great play with the advantages of combined heat-and-power schemes. They argue that the Bill enables a much greater use to be made of the calorific potential in fuels that combine heat and power. The hon. Member for Derbyshire, South-East did not reply to my intervention and say why the Government did not introduce legislation, as proposed in paragraph 4.23 of the Plowden report, to change the industry's statutory duties and make it clear that it had a prime duty to provide for the economical and efficient supply of electricity, but also to provide heat through the use of combined heat and power schemes.
  If the Government were not using combined heat and power as window-dressing for other purposes and were genuine in their commitment to CHP, they would have included clauses to free the generating board or area boards from those statutory restraints. The Government should say whether they will be making changes in the Bill later to bring that about.
  We must consider whether the Bill is compatible with sensible planning of energy and electricity policy. The CEGB has a statutory duty to plan for the future, as does the Secretary of State for Energy. In its evidence to the Sizewell B inquiry, the Department of Energy made clear the CEGB's responsibility to develop and maintain an
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  efficient, co-ordinated and economical system of supply of electricity in bulk for all parts of England and Wales. There are separate boards for Scotland. The CEGB has to take account of limitations in its planning, as do the Government when considering the industry's capital programme.
  If the electricity supply industry, the generating board and the Department of Energy are taking account of both supply and demand to create a proper plan for energy supply, what is their position with regard to private operators who come to them with their plans for development? If the plan is inconsistent with the Central Electricity Generating Board's plan as agreed with the Department of Energy, will the Department say, "Your plan is inconsistent with that plan either in fuel use or location, and we shall therefore refuse you permission to operate the station"? If the Department does not do that, what happens to the efficient planning of Central Electricity Generating Board and the Department of Energy? If the Department of Energy allows it, planning becomes highly unnecessary.
  We have had a number of examples of the need for long-term planning in a major industry and a major Department such as the Department of Energy. Is that consistent with random individual decisions unless they are made only within the overall scope of the national plan?
  The balance of fuel mix must also be considered—not just the amount of electricity that is needed but the means by which it will be generated. Here I take issue with the hon. Member for Perth and East Perthshire (Mr. Walker). The main reason that the CEGB has more effective safety provisions at its nuclear installations than those in the United States was mentioned earlier. It has over 300 reactor years' experience of operating nuclear power stations. The CEGB has experience of many stations. The training of the work force can benefit from the experience of a much wider range of nuclear installations. The individual power station in the United States has only a limited experience of operating difficulties. That can lead to more accidents and difficulties than would occur if there were wider experience. That is the critical difference which makes individual operators of nuclear power stations in Britain inappropriate. That is why clause 3 is detrimental on safety grounds.
  Equally inappropriate is the overall energy planning of the fuel mix between different fuels. The Government have obviously taken a view on the balance between coal and nuclear power in the generation of electricity. They put that view to the Sizewell inquiry. Whether to have a PWR or an AGR is not the issue. They have made a decision whether to have nuclear power of fossil fuels. The balance is largely being made up at the expense of oil because oil has far more uses, as the hon. Member for Perth and East Perthshire mentioned.
  If the private generation of nuclear power is inappropriate, there must be a shift in balance towards coal within that strategy. Where does that leave the Government's plan for the balance between fuels in generation? Where does it leave their objective on a steady ordering programme for the nuclear industry, particularly within currently established industrial demand The Government must address themselves seriously to that question.
  There is an equally worrying aspect about the coal industry which has been mentioned several times, among

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  others by the hon. Member for Truro (Mr. Penhaligon). The current relationship between the CEGB and the National Coal Board, and the Department of Energy and the Government is regulated by the relationship between the generating authority and the National Coal Board. A substantial expansion of imports of cheap coal on the open market may be an attractive option in the short term, but in the long run it will be detrimental to our security of supply and our fuel industry. Is allowing the introduction of private operators an attempt to import coal by the back door rather than having a head-on confrontation between the CEGB and the National Coal Board?
  The employees and the management in the NCB will be interested in the Government's reply as to the implications of that policy on their relationship with the generating authority. Many of my hon. Friends have mentioned the national grid structure and the operation of the merit system. Hon. Members would be well served if they were to see the CEGB's sophisticated operation at Bankside. That could not be based simply on the willingness or intention of an operator to sell into the grid. It must be based on high level instructions and rapid responses based on a sophisticated planning system. If that system is not being operated, and if the proposals are detrimental to it, stations would be operating out of sequence in their merit order at a far greater ultimate expense to the consumer.
  We must also be concerned about security of supply. The Bill tries to ensure a security of supply to the private operators and those who are dependent upon them. That requires a surplus capacity which must be paid for out of the national system. We saw a failure of Britain's supply last winter. France has also seen a major breakdown. Industry would have to bear a major cost of such unprecedented and uncatered for breakdowns in supply. They would also be a major inconvenience to consumers.
  Mr. Porter: I am much impressed by the hon. Gentleman's grasp of the detail of the industry. However, the Bill was earlier described as a "modest measure". I agree with that. Will the hon. Gentleman address his mind to a question which has not been answered so far. Why, if safety and planning factors are so important, has no other country in the Western world deemed it necessary to exclude the private sector?
  Mr. Speller: A problem that has arisen in the debate is that people confuse a national monopoly with a natural monopoly. It is not proposed to run grid lines from two different companies down the same street. Nor does that happen in any other country. Although in the United States different companies operate in different areas, the same companies do not operate for the benefit of the same consumers in similar areas. Yet that is the direction in which the Bill is moving, although not entirely adequately. We are talking about parallel systems of supply which do not have an equal basis. They are based on the private supplier being able to sell electricity into the system when he so chooses, and to take electricity from it when he so chooses. Will that be based on average or marginal pricing, and will the national system bear a greater share—a disproportionate share—of the cost within the system? Those are the questions that arise out of the proposals.
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  Hon. Members have referred to the price currently being paid to private suppliers. About 4,000 million units are being sold to the electricity boards out of the 18,000 million generated each year, according to the CEGB. Are the Government interested in new generation or primarily in upping the price of the units which they already sell to the CEGB, perhaps feeling that they will get a better deal under the new arrangement?
  Mr. Mellor: The hon. Gentleman is making an interesting point and I do not want him to develop a line of argument that is unintentionally misleading. Of the 4,000 million units that are sold to the industry, 90 per cent. are generated by British Nuclear Fuels Ltd. and the Atomic Energy Authority, which are not part of the private sector at all.
  Mr. Spellar: Others may still benefit from that. However, others are also selling into the system. Conservative Members have said that they are concerned at the price and who will benefit from any change.
  It also appears that one of the difficulties of private suppliers, because of the present economic recession, is that they are selling less electricity to their existing customers than they were previously, and that perhaps selling into the national grid would therefore be an attractive option for them.
  I make one further point about nuclear power and the possible erratic development of private industry. The issue was raised by the hon. Member for Exeter (Mr. Hannam) when he asked for assurances from the Minister that the equipment for the new power station would be supplied by British manufacturers. The Secretary of State would be faced with difficulties in giving such assurances under the Central Electricity Generating Board's system. If he is asked to give such assurances for a private operator who is seeking to create generating capacity, the difficulties will be far greater and may be impossible to overcome.
  The power engineering industry, the boilermaking industry and other industries that rely on power generation are dependent on consistency and observable ordering patterns because they have to work on long lead times. They look to planned development rather than what they have experienced in the past, even under the Central Electricity Generating Board. They want planned development rather than massive bursts of investment followed by a complete drought of the sort that they are now experiencing. The life of these industries would be much harder within the haphazard system that is proposed than under the system that the generating board is currently operating.
  Many hon. Members have described the Bill as a modest measure. At best it is irrelevant and at worst it will undermine the electricity supply industry. It will be destructive of good planning and good organisation in the industry and it does not address itself to the problems of the electricity supply industry. It is to those problems that the Secretary of State for Energy and the Department should have addressed themselves.
  7.53 pm
  Mr. David Myles: I am pleased to be able to participate in this debate, especially as I sat through all the stages of the Oil and Gas (Enterprise) Bill, which I enjoyed thoroughly. I have an added enjoyment in participating in the debate because I have recently discovered that I am not

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  to be a member of the Committee which considers the Bill. I understand that I am to be a member of the Committee that is to consider the Agricultural Marketing Bill. That means that I shall be able to make some of the comments that I might have made in Committee if I had been a member of it. I shall be able to do so on Second Reading instead of in Committee.
  I am pleased that I shall be able to take up some of the remarks of the hon. Member for Birmingham, Northfield (Mr. Spellar). I listened to the hon. Gentleman's maiden speech, on which he should be congratulated. I congratulate him on the constructive and thoughtful contributions that he has made since becoming a Member of this place. They have been the sort of speeches that we expected from Jocelyn Cadbury's successor. Perhaps I should say that Jocelyn Cadbury inherited my secretary. He did so after I fell out with her, I regret to say.
  I welcome clause 1, which repeals section 23 of the Electric Lighting Act 1909. It repeals also part of the Electricity (Supply) Act 1919. This shows how necessary it is to update electricity supply and generating legislation. The 1909 and 1919 Acts stood on the statute book unaltered for an extremely long time. The Government are continually showing initiative in updating legislation that is necessary for our well-being.
  Energy is one of the most interesting and necessary requirements for the well-being of the nation and the people. There are far too many monopolies in the energy business. I welcome the Oil and Gas (Enterprise) Act because it moves away from monopolies to more competitive business. The Central Electricity Generating Board, the National Coal Board, the British Gas Corporation and the British National Oil Corporation have all been huge monopolies. Those who are elected to this place seem always to want to grasp power although they do not always have much knowledge. In this case, they want to grasp power literally. I welcome the freedom that the Bill will give private entrepreneurs, who will look to ways of producing electricity and other forms of energy from electricity.
  The hon. Member for Truro (Mr. Penhaligon) talked about thermal efficiencies and other concepts which I, as a simple farmer, cannot talk about. Only the competition of private enterprise and entrepreneurs will produce efficient electricity generation and power-producing industries in future.
  I live in an area dominated by small business and rural industries. Sometimes the rural communities are remote. The national grid has been extended and in my constituency only two or three people are now waiting for it to be extended to them. I understand their desire for that to happen. I am old enough to remember when we used to light farmhouses with Tilley lamps. We then moved on to self-generating plants. I remember the electricity generating plant that my family had. It was a Kohler D 110 volt system that went on with the first switch and went off with the last one. It used to catch alight regularly. Luckily our farm was remote and we did not set fire to other properties.
  We then progressed to a diesel generating engine and were able to put away the Tilley lamps. That plant produced some heat generating power and we were able to get some of the modern comforts that many urban dwellers seem to think are essential nowadays. We then joined the grid.
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  When we had our own generating equipment we felt independent. We saved energy and ensured that there was no unnecessary waste. We live in a world of waste. The amount of waste in this material world is almost unmentionable, which leads me on to some almost unmentionable matters.
  The waste from agriculture is the dung or excreta from farm animals. Its energy potential was demonstrated to me on a visit last year to America to a farm called Mason-Dixon, which was right on the Mason-Dixon line. The farm was making use of methane which could be produced from the animal waste. It was an 800-cow dairy farm but I was assured that the process could be viable with only 50 cows. It was a fascinating experience. The fanner was having great problems because he could not control the amount of gas that was produced from the waste material, nor the amount of electricity then produced from the gas. The farm had a surplus of electricity and gas. It was interesting to see how private enterprise developed that technology to utilise the waste. The farm was eventually able to produce all the electricity it needed and far more from the waste which is normally spread on the land.
  Indeed, the waste is still spread on the land and electricity is generated as well. The solid waste material was dried and the liquid material was pumped into an irrigation system driven by the electricity produced. The cows were even bedded with the dried solid material so the circle continued. The system was as good as perpetual motion.
  That is the type of recycling that we must look for in future energy production. Only by privatising—that is a horrible word—and throwing open energy production to those who have the wit, the wisdom, the ability and the capital to experiment will future energy needs be met.
  Private enterprise does not always experiment purely for gain. The profit motive is not the only consideration in the private sector. If it were, I would not have continued as a hill farmer all of my life because that is more a way of life than an economic business. Interest is generated as well as new enterprises when we allow the private sector its full head. Therefore, I greatly welcome such private enterprise.
  I should like to mention the scheme at Robroyston. My hon. Friend the Member for Perth and East Perthshire (Mr. Walker) mentioned the great advances that were made at the beginning of hydro-electric production. They fell off when the grid was connected and supplies could be drawn from electricity produced more easily by coal or nuclear power. The Robroyston idea is delightful and could be used in a smaller enterprise. The idea is that water is pumped to the top of the dam and stored when demand for electricity is not as great and power is produced at peak periods when the water is allowed to fall to the lower level.
  That is a great idea which could be better developed not on a grand scale by pumping the water of Loch Lomond up into the shady glen in the shadow of Ben Lomond but in far smaller private enterprises. Only private enterprise has the motivation and interest to try new methods.
  Dounreay in the North of Scotland is a leader in the production of electricity by nuclear means and in new technologies. About 14 per cent. of our electricity supply is produced by nuclear means.
  Mr. Gordon Wilson: The hon. Gentleman is wrong. In Scotland 30 per cent. of electricity is supplied by nuclear means.
  Mr. Myles: I am pleased to bow to the hon. Gentleman's superior knowledge. I know that the Scottish National Party is looking desperately for ways to make Scotland self-sufficient in energy.
  Mr. Gordon Wilson: We are self-sufficient.
  Mr. Myles: Scotland has all the facilities for producing energy. It has plenty of cattle, wind, water, peat and nuclear resources. Energy will not be produced as a result of SNP philosophy. The SNP is moving away from the type of philosophy that I expect from the right hon. Member for Western Isles (Mr. Stewart) and towards creating an urban society with the authority to control everything. Freedom of the individual is important, not the freedom that the SNP so hypocritically espouses. Man must have the freedom to develop his talents for producing energy.
  I have been diverted by the hon. Member for Dundee, East (Mr. Wilson). In the United Kingdom as a whole 14 per cent. of electricity is produced by nuclear means. Nuclear production has grown gradually over 25 years. In that time how many deaths were directly attributable to the production of electricity by nuclear power? I believe that not one death can be pinned directly to such production.
  The fishing industry is seven times more dangerous than the coal industry, but the coal industry is dangerous. The development of nuclear energy would allow the majority of our electricity to be supplied by nuclear means and if wind, water and peat are utilised along with wastes we could develop many alternative means of producing energy. I hope that the Bill is the first step on that road.
  I hope that it will not take 60 years to update this measure. The snowball is probably rolling faster than that. I hope that this Government will continue for another 20 years—I am sure that they will continue for another five. We can continue down the path of generating new electricity and new ideas as well as stimulating the economy—the path on which the Government have started so well.
  8.9 pm
  Mr. Gordon Wilson: I can hardly follow the argument of the hon. Member for Banff (Mr. Myles) for cow-watt hours taking the place of kW hours. His lengthy point about the opportunities for creating energy from waste products is probably worthy of development in some other countries.
  The Bill does not follow the usual privatisation pattern that we have come to expect from the Government. Although I have reservations about clause 3 and some other parts of the Bill, it is interesting and on balance, my right hon. Friend the Member for Western Isles (Mr. Stewart) and I have decided to support it on Second Reading. There are no assets to be sold off to the private sector. The Bill does not wish to give away State assets to those who have not participated in building them up. Clause 1 breaks the State monopoly, but—as is provided elsewhere in the Bill—the national transmission system is retained and is allowed to be used, at a cost, by private generators. Monoply that is in the public interest is frequenty good if the monopoly is sensitive and protective. However, if freedom of choice is to be removed, public sector monopoly must be justified.
  Other hon. Members concentrated on the merits and demerits of the English system, but I shall concentrate on
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  Scotland. Although once good, the Scottish electricity system is now a scandal. The reasons are clear-cut. The Scottish boards have proved utterly inefficient in their planning. They created colossal blunders and they were savaged by the Select Committee on Energy when evidence was produced that the capacity of the Scottish boards was 70 per cent. above the needs of the economy. They wasted hundreds, if not thousands, of millions of pounds by having unnecessary plant that has resulted in higher costs to the consumer. Over the years, the boards were warned of a drop in demand, but they refused to accept that the pattern of all-electric housing was changing in Scotland. They failed to recognise the impact of gas on industrial and domestic markets and they also failed to realise that the economy was not growing as fast as many of us would wish.
  Apart from their inefficiency, the Scottish boards have been dominated by nuclear mania. They decided to progress with Torness despite the evidence that the cost of the power station would be astronomical and that there was no market for the electricity that it produced. Despite engineering difficulties—especially those experienced at the Hunterston B power station—they decided to go ahead with the AGR system. The boards produced a secret corporate plan, which said that the South of Scotland electricity board intended to reduce its use of coal. That policy would have caused great problems for the Scottish coal board, which relied upon the SSEB as its major customer.
  If the reasons that I have given in justifying the need to break the State monopoly were not enough, both the southern and northern boards have acted badly in their social obligations. The North of Scotland hydro-electric board has long since lost the social duty required of it b0y the original legislation. The board went ahead with the proposal to increase the cost of electricity produced by diesel generation for the island communities. Instead of helping those communities by spreading the additional cost to consumers throughout Scotland, the board took the antisocial step of increasing power. They were forced to drop the proposal only by substantial public objections and eventually the instruction from the Scottish Office Minister who dealt with the matter.
  However, that is not to suggest that the North of Scotland hydro-electric board inspires great confidence. Indeed, its previous chairman was an ex-Labour Minister—an amiable man—who was appointed under political patronage. Today he was replaced by Mr. Michael Joughan, a former Conservative candidate and former president of the Scottish National Farmers Union. The political patronage system seems to work effectively, but not to the aid of the consumer. We should have better than amateur management of such a large board.
  The South of Scotland electricity board has the worst record of disconnections in the United Kingdom and had to be rebuked publicly by the Secretary of State for Social Services before relenting on its programme of cutting off poorer consumers. It could also be criticised for its slowness in introducing aid to industry.
  I have many criticisms of the actions of those boards and I have no confidence in them. That brings me to the point where the Bill may help. The hydro-electric board was established for the North of Scotland originally to use hydro power, although most of its power is now imported from the SSEB. However, it has several stations that

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  generate electricity, one from oil at Carolina Port B—it is being closed down—and a new station at Peterhead, which is now running on gas but will eventually switch to oil.
  The hydro-electric board lost interest in the production of power by hydro electricity. When cheap oil came in, the board switched to oil-powered stations and also bowed to the SSEB, which produced power by nuclear generation. The board has been slow to develop wind and wave power. Any developments during the past few months or years came as much from the urgings of the Department of Energy as from the hydro-electric board, which is deeply conservative and did not wish to become involved in those areas.
  I hope that the North of Scotland hydro-electric board can be revamped. It should become a renewable energy board and should use the renewable energy resources that abound in the North of Scotland. The Government should consider giving the hydro-electric board the lead in the development and usage of renewable energy. That will come from hydro power. It is estimated that only between 30 per cent. and 50 per cent., given the different calculations, of Scotland's potential for hydro power has been utilised. It is the cheapest form of power available and programmes should be set in motion to go ahead with it as quickly as possible. In view of the uncertainties that hang over the Dounreay research establishment, the Government should steer some additional research in renewable energy resources that way. Perhaps the Minister can tell us about Dounreay, because there is much uncertainty and anxiety about that research station.
  The Bill provides an opportunity to develop renewable energy. If the hydro-electric board will not do it, the Bill allows the private sector to become involved. Except perhaps in wave generation development 10, 15 or 20 years in the future, only small producers will be involved in private generation. Power will come from low-fall hydro generation with small units or from small aerogenerators, but surplus power can be incorporated into the grid more fairly and effectively than at present. The board is prepared to accept small amounts of power. The rate that it is prepared to pay at present is judged to discourage anyone who wants to offer additional sources of power.
  I do not think that there will be any new large power stations in Scotland. There is a huge over-capacity. That is an indictment of the overall management of the industry. The Bill will not make over-capacity worse than have the existing boards. There is an argument that, had the Invergordon smelter been equipped with its own power generating facilities it would have been less likely to opt out of its bargain with the Scottish electricity boards in relation to the use of power from Hunterston B.
  Once the figures were issued, it was shown that the bargain was less generous than the offer to the smelting industry in north Wales and the North-East of England. That is one reason why the Invergordon smelter went. There is a prospect that many small users and producers will use the grid. I do not think that there will be the problems that other hon. Members have mentioned.
  Private nuclear plants are covered in clause 3, to which I strongly object. I do not agree that they would be desirable. Safety must be paramount. Many of us have worries about the safety of nuclear power stations in the public sector. With all the training that is given to the work force, the precautions that are laid down, the regulations and the inspectorate, we still have worries. If clause 3 were
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  to remain in the Bill, that would be unacceptable to me and my party. We would have to change our vote on Third Reading, as other parties have said they will.
  I suggest to the Minister that there is a preferable way of dealing with the proposal for private nuclear power stations, in the unlikely event that they would be built. We could use the Private Member's Bill procedure. If there were a proposal to build a private nuclear-powered generating station, it would be possible for the consortium concerned to bring forward a Private Member's Bill, subject to the procedures of the House. One would have to make sure that both Houses were fully consulted on that issue and had a voice. Such an important matter should not be left to go ahead with just the consent of the Secretary of State for Energy. If the Minister were to take on board my suggestion of a Private Member's Bill procedure, that is a solution that he and his Department might consider in Committee.
  On balance, I welcome the first part of the Bill. It is a useful development. It allows a small innovation, which will be helpful to the renewable technologies at which the big electricity boards have so far shrugged their shoulders. If we encourage those matters, we will have made some progress. For that reason my right hon. Friend the Member for Western Isles and I will vote for the Second Reading of the Bill.
  8.24 pm
  Mr. Michael Morris: It is a welcome change to hear the hon. Member for Dundee, East (Mr. Wilson) supporting us on energy. As he said, the Bill is interesting. It contains dimensions that have not been examined already. I apologise to my right hon. Friend the Secretary of State and to the right hon. Member for Leeds, South (Mr. Rees) for not having heard their speeches. I confess that I was involved in trying to sort out the impact of the Oxford regional health authority on Northampton.
  Privately generated electricity supplies 6 per cent. of today's overall needs and, what is more relevant to the Bill, 15 per cent. of industry's needs. It is fair for the Opposition to ask whether the Bill is necessary as an extension of that element. I shall take up that point.
  First, I hope that the Opposition accept what the hon. Member for Dundee, East said—that the Bill is not a privatisation measure. It is an extension of the private sector, but we are not overturning anything. It is a modest Bill. No Conservative Member would claim that it is a major campaigning Bill. How far it will encourage CHP is open to debate but no one will deny that it will be of some benefit.
  Secondly, the Bill will help alternative energy schemes. As I understand the official Opposition's stance, we have a common interest in those matters. I understand that the Labour Party favours both the exension of CHP and alternative energy schemes. It would be helpful if that was confirmed in the Opposition's winding-up speech.
  I shall discuss clauses 1 to 15. Other hon. Members have covered the nuclear dimension more than adequately. I especially welcome clause 1. It is part of the guts of the Bill in that it removes the statutory prohibition on private generation of electricity as a main business and enables the private generator to produce electricity for supply, wholly or mainly to others, without having to obtain the Secretary of State's consent. Clauses 2 to 4 are consequential upon that.

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  The other key dimension of the Bill is contained in clauses 5 to 15. That group of clauses enables a private company to use the CEGB's grid system for transmitting electricity to customers and electricity boards. It also provides for standby and buy-back terms.
  Some of the most interesting debate in Committee will be on the common carrier provisions. That is certainly the case if discussions on the Oil and Gas (Enterprise) Bill are anything to go by. It is important to recognise the contents of the common carrier provisions. Electricity boards will have new duties to offer to purchase electricity from private generators and to allow them to use the grid. Moreover, private generators will enjoy extended rights to obtain supplies from the electricity board either for their own use or for their customers. That is the so-called standby facility.
  It has been said that tariffs and the provision for pricing alternative supplies should be dealt with openly. There is also provision to safeguard the area boards so that they may obtain a satisfactory return on their assets.
  There is also an apparently controversial provision—I do not see it as such—that if there is a dispute between the parties, the Secretary of State shall have the final say. No doubt there will be endless argument in Committee about whether the Secretary of State is the right person to act as arbitrator, or whether the arbitrator should be an independent body or person. On my reading of the Bill, things seem satisfactory as they are. The key point of clauses 1 to 15—I suppose that this is where the Labour Party departs from the philosophy behind the Bill—is that they introduce competition into electricity supply. "Competition" seems to be a word that the Opposition find it difficult to accept.
  The hon. Member for Birmingham, Northfield (Mr. Spellar) spoke about central planning. The official Opposition have not yet got round to thinking about the role of competition. They think only that if something is centrally planned, it is good, and that competition makes it seemingly impossible to plan anything. However, competition is the key for the consumer. If the Bill is left relatively unamended, a private generator will be able to use the public supply system to reach his customers. That is the nub of the Bill. A major manufacturer such as ICI or GEC will be able to have a plant in one part of the country and to supply electricity to other outposts. In its representations to hon. Members, the CEGB is clearly worried about how it will control and meter output transmitted through the grid system to somewhere else in the country. However, that is not such a difficult problem.
  In September, I had the privilege of visiting Sullom Voe. I spent four days looking at platforms and listening to representatives of the oil industry. The whole of the North Shetland base is pumping oil into Sullom Voe. However, there is no particular problem about metering the oil of firms such as Shell, Conoco, Amoco or any of the other producers in that part of the North Sea. Meterings are undertaken and there is verification of the meterings. An operating company such as BP acts on behalf, I think, of 32 different oil companies on a scale that is probably unprecedented anywhere in the world. I have never before seen such a complicated area managed with such great ease and with so little difficulty. The so-called problem of whether different factory units are taking out more than they put in really is no problem.
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  It has been said that additional private generation will help the area boards, particularly during winters such as the last one. We all know that electricity demand was greatly stretched on several occasions. A standby facility in the private sector will be a great help to the area boards. The whole system will benefit the economy. It will, I hope, ensure that the supply industry's assets are fully used and that we shall not witness the enormous duplication of investment mentioned by the hon. Member for Dundee, East (Mr. Wilson). It is fair to ask whether there is any benefit for British industry. In the days and weeks ahead, I hope that my hon. Friend the Under-Secretary will consider such points carefully.
  There is an opportunity here for the Department of Energy to take an initiative which, sadly, the Department of Industry seems not yet to have taken. I think that all hon. Members will agree that the Bill will produce an increased interest in small-scale electricity generation. Whether the official Opposition like it or not, that will happen. The Department of Energy has the opportunity to turn that to the benefit of British industry.
  If there is an increased interest in small-scale electricity generation, as sure as eggs are eggs the developing world will also take a great interest. In a previous incarnation, I worked in India. I well recall touring eastern India, where I was responsible for Bihar, Orissa, Uttar Pradesh and Bengal. In those areas of the developing world and throughout Sri Lanka, which I know well, one of the greatest problems is electricity generation. Indeed, this country has invested more than £100 million in the Mahawehli Ganja hydro-electric project in Sri Lanka to provide that developing country with electricity. Even when that project is completed, it is unlikely that the resources of Sri Lanka, let alone those of smaller developing countries, will be adequate to meet the demand for electricity.
  As the Bill will create an incentive for small-scale electricity generation, this country should take that golden opportunity to invest in research and development in the potential for major exports of off-the-peg units of a scale attractive to developing countries. If we take that on board at the outset, we can produce units adaptable to the needs of different parts of the world.
  On the domestic side, we know of recent successful research into multi-fuel firing. Work may also have been done on multi-fuel firing for small-scale electricity generation, but I rather doubt it. Again, if we feed in that requirement at an early stage it could lead to major export developments.
  I hope that at the planning stage we shall bring in not just the Department of Industry, which is highly relevant in terms of research grants, but also the Overseas Development Administration, because it must know where such units are required. I can imagine no better form of aid programme than one which includes the provision of power generation, which is fundamental to the economic growth of so many developing countries. In other words, I see major merits in what is almost a spin-off effect of the Bill.
  Finally, the Minister should not worry too much about criticisms of the Bill. The hon. Member for Northfield made an interesting speech. He said that the Plowden report should have been implemented. In other words, we should have produced a major Bill. Perhaps he is unaware of the effort that we put into the Oil and Gas (Enterprise) Bill, as he was not a Member at the time. He mentioned

  919
  one interesting dimension, however. If we genuinely believe in combined heat and power, the restriction on the CEGB should be lifted. I should certainly be interested to hear whether any development is likely in that respect.
  The hon. Gentleman also said that he did not see for the private sector a role that was compatible with central planning. He is right. With outright central planning, one cannot have a private sector. My hon. Friend the Minister should be reassured that the industry and the consumer do not want total central planning. They want competition and a vibrant industry. That is what the Bill will begin to give the customers.
  8.40 pm
  Mr. Peter Hardy: Parts of the speech of the hon. Member for Northampton, South (Mr. Morris) would have justified the Secretary of State's attendance. I preferred the hon. Gentleman's approach to that of his right hon. Friend. If the Secretary of State had sought to sell the Bill as the hon. Gentleman did, the temperature on the Opposition Benches earlier today would have been lower. Both the hon. Member for Derbyshire, South-East (Mr. Rost) and the hon. Member for Northampton, South appeared to put a modest gloss on the Bill and seemed also to support the proposal that a Special Standing Committee should hear expert evidence. I trust that they will support the representations that have been made. Given the conflict of interpretation about the character of the Bill, it seems to me that the suggestion should be accepted.
  The Bill is excessive in some respects and inadequate in others. It is an inadequate contribution to any wise consideration of energy policy. It is excessive because it seems likely to stimulate an unwise surplus of electrical generating capacity. If it is the intention, as the hon. Member for Northampton, South suggested, to create trading development, there is something to be said for a surplus. The speech of the Secretary of State did not offer that opportunity. The right hon. Gentleman's speech should serve as a warning to customers to beware of the right hon. Gentleman when he appears to be bearing gifts.
  The Secretary of State seems to have condescended to agree that any nuclear power proposals should be subject to his permission but seems prepared to allow any kind of alternative generation to go forward. That is dangerous. I hope that the Under-Secretary of State will amplify the point made by the Secretary of State, in reply to the hon. Member for Truro (Mr. Penhaligon), who suggested that old power stations which are out of date and due to be closed under the CEGB programme, should be sold off to the private sector and used to burn imported coal. I am not an expert in thermal efficiency, but we would be talking about reviving out-of-date plant with a thermal efficiency 10 or 12 per cent. or more below that which might be obtained by new plant.
  I spent part of today at a function in London involving a firm from my constituency which has devoted energy and expertise to the proper use of energy and has received a national award. On the same day, I have heard the Secretary of State say that he wants us to continue to use plant that is 30 or 40 years old. That is tragic. It is ill-advised of the Secretary of State, in a throw-away style, to agree with the alliance spokesman, the hon. Member for Truro, that we should move to a reliance on imported coal. My hon. Friend the Member for Midlothian (Mr. Eadie)
  920
  will not wish me to spend too long on that matter. I am sure that he looks forward to saying a great deal about it himself.
  This year is a far one year than many hon. Members appear to recognise. It is the year when this country, for the first time in its history, imported more manufactured goods than it exported. The Government seem unperturbed by that sad fact. I suppose that the Government feel that the offshore oil resources are unlimited and will go on for ever more, and that we can continue to export billions of dollars worth of our oil. However, one day the reckoning will come. Either the price of oil will fall—there must be fears about that—or the reserves will have so diminished that oil cannot sustain us any longer. Where shall we be then? Our industrial base will be eroded even with the commendable vision of the hon. Member for Northampton, South with his desire to export small generating kits to the Third world. Our industrial base will have been eroded and the country will have been brought to a pretty pass. That is the logical development of the sort of policies that the Government are pursuing.
  I hope that the Minister will respond to these points, because the nation is entitled to be advised on this matter. I hope that the Under-Secretary will say whether the Secretary of State was being serious in wishing to see power stations which should be demolished being kept open for a quick pound by some entrepreneur who feels that he can use imported coal that may be subsidised. The future of this country cannot be left to people who will take such an irresponsible position.
  I am concerned because from 1979 until recently, the Government on the whole handled the coal industry with some intelligence and sensitivity. Perhaps as a result of short-sighted calculations, the events of the past few months suggest that that intelligence has not been maintained. The reference to imported coal was relevant to this.
  Mr. Alex Eadie: My hon. Friend is making an important point about imported coal. However, he must be reasonably fair to the House. It is not only the Government who say that they are in favour of imported coal. The Liberals and the SNP also say it. There is a united front about imported coal.
  Mr. Hardy: I take my hon. Friend's point, which he is right to emphasise. The Minister should clarify the position. The alliance spokesman urged, and unfortunately the Secretary of State responded, that the old out-of-date power stations should be used well beyond their sensible life to burn imported coal from countries that have the wit to subsidise coal.
  Mr. Rost: I think that the hon. Gentleman has slightly misunderstood the argument about converting the older central city power stations. The purpose would be to modernise the equipment to burn coal with a fluidised bed that is environmentally acceptable, and to increase the thermal efficiency from below average, as at present, to above average by converting the stations to heat production as well.
  Mr. Hardy: As an alternative to Sizewell, that will appeal to many people. However, the point made earlier had nothing to do with central power stations. The hon. Member for Truro comes from the far South-West, where there are not many city power stations. I think that he is

  921
  talking about providing electricity for the south-western peninsula and the Secretary of State should not have been lured along that path, which is so dear to the hearts of the alliance. There will be a risk of a substantial surplus, which will have implications for prices. There has not been adequate consideration or consultation with the industry.
  The Minister will have seen the statement by the Electricity Council and the reference on page 2 to safeguards. The Secretary of State's speech did not fully cover the major and important safeguards that are referred to in that document. I should be grateful if the Under-Secretary of State would pay some attention to the safeguards mentioned by the Electricity Council. No doubt we shall return to the matter in Committee, but it would be appropriate now for the Government's position to be clarified.
  Will the Government assure us that the proposals in the Bill will put no additional burden on the board's customers? Industrial energy prices in this country are already far too high. It is no good saying that it is because of the inefficiency of the energy industries. It is because our principal competitors make sure that their energy prices are below ours. If the Minister wishes to consult people in the steel industry, whether in the public or private sector, he will find that they are well aware of that vicious competition.
  I also ask the Minister to ensure that the electricity undertakings are given adequate notice of the plans of the private sector. If they are to provide a back-up service in emergencies, they are entitled to know how much electricity they will have to provide. Planning is necessary, even though central planning did not appeal to the hon. Member for Northampton, South.
  The safeguards to which the Electricity Council referred, including the proposal that the ground rules should be the same for both the public and private sectors, are perfectly fair. I hope that the Government are not so obsessed with doctrine that they will be particularly favourably disposed to the private sector—the essence of their view being that the private sector is capable of looking after itself. I hope that the same ground rules will apply to both the public and private sectors.
  The Electricity Council said that the regulations governing both private and public sectors should be the same, with the same access to fuel supplies, and the same grants and allowances from the Government. I believe that the rights granted, including the right granted to the private sector to use the board's transmission and distribution system, will be regarded as practical by the electricity supply industry. The Minister should assure the industry that there is no ground for concern in that regard. If the Bill justifies that concern, I trust that the Minister will agree to its being amended.
  The main reason for my intervention this evening is the problem of energy prices. The major function of the Department is to ensure that British Industry is no longer crippled. If the line suggested by the Secretary of State results in increased energy prices to industry or to some of my poorer constituents, including a lady constituent of mine who is trying to bring up children aged 1½, 2½ and 3½ without electricity, I hope that he will realise that energy prices need a higher priority than they have so far been given. I hope, therefore, that the Minister, in winding
  922
  up, will respond more constructively than the Secretary of State seemed to suggest was likely when he introduced the Bill.
  8.52 pm
  Mr. Tim Eggar: In a brief speech I shall pick up one or two points that have been mentioned by other hon. Members.
  I start with the final theme of the hon. Member for Rother Valley (Mr. Hardy). He spoke in favour of lowering electricity prices. On that I wholly agree. However, He seemed to think that a monopoly—that is what the CEGB and the area boards are—will somehow produce cheaper electricity than the Bill will produce. The aim of the Bill is to introduce competition with the area boards, to allow private generation, and in particular, to assist industry. One of the great complaints made by industry is that some firms have the capacity and the ability to generate electricity, yet cannot take it 100 yd to a neighbouring plant. They have to get permission, and all too often the relevant area board will not give it. To claim that the Bill will raise prices simply does not stand up to analysis.
  The most important provision in the Bill is the one that allows for a common carrier grid, because it gives teeth to permitting private generation. I hope that it will lead eventually and slowly to a complete reorganisation of the electricity industry. In that way, we shall gradually move away from the present centralised system of one generating board and area boards to a series of area boards which both generate and market.
  A common carrier grid system would facilitate such a move. That is important because, if we move to an area generating board system, as I hope we shall, it is vital that area boards have the ability and are permitted to sell in other areas if they can compete with the customer's particular area board. That is important because otherwise all one does by moving to area generating boards is to create smaller public monopolies, or, I hope, eventually, private monopolies, rather than the present national monopoly.
  Mr. Palmer: The hon. Gentleman talks about an area board moving into another board's area and duplicating capital resources. He is surely changing a principle that existed in the electricity supply industry long before nationalisation—of each undertaking, whether private or public, having its own territory.
  Mr. Eggar: I always listen with great care to the hon. Gentleman, whose experience I recognise. If one moved to a common carrier grid system, as under the Bill, if the south-western area which has a generating capacity can compete with the north-western area, after taking into account the additional tariff that it will have to pay because there is a common carrier grid, there is no reason why it should not be free to do so. Competition between area boards will reduce inefficiency.
  The stifling and enveloping impact that the present electricity organisation has on heat and power is appalling. There are two schemes only in this country at the moment compared with many thousands in Europe. If we allow private generation of electricity, combined heat and power would be given a considerable fillip. That is another reason why I welcome the Bill.
  The headlines that we have seen about the Bill suddenly permitting private nuclear generation for the first time are

  923
  not correct. Anyone has been allowed to build a nuclear power station, but it has not been feasible. The fact that we are now producing a common carrier grid means that it will make sense for private industry, if it wishes, to invest in nuclear power stations. That must be to the country's advantage in the long term.
  8.58 pm
  Mr. John Ryman: I intervene briefly to refer to one background matter—the current crisis in the coal mining industry. Whenever I have approached Ministers with problems on the industry I have had a great deal of help. I do not believe that the urgency of the crisis is appreciated. There was an announcement in the national press this morning that about 60 pits are to be closed by 1991 with a consequential loss of between 30,000 and 45,000 jobs. That information was contained in the memorandum issued by the National Coal Board to the Monopolies and Mergers Commission. It is very serious and it is worth looking at the precise circumstances for a moment or two.
  The crux of the matter is that the NCB is acting under the provisions of the Coal Industry Act 1980, passed by this Government, which imposes upon it strict cash limits. As a result of that, it has embarked upon a ferocious programme of pit closures throughout Britain.
  Mr. Eggar rose—
  Mr. Ryman: The hour is late and I want to deal with this point before the Minister replies.
  The NCB has embarked upon a ferocious programme of pit closures—
  Mr. Eggar rose—
  Mr. Speaker: Order. It is clear that the hon. Gentleman will not give way. However, it is not the end of the debate yet.
  Mr. Ryman: I am speaking on behalf of a constituency in the North-East of England which has suffered programmes of pit closures from Governments of all political complexions.
  Mr. Eggar: On a point of order, Mr. Speaker. I seek your guidance. I was under the impression that the Bill was about electricity generation. I do not think that it has anything to do with the NCB or pit closures.
  Mr. Speaker: The hon. Gentleman knows that there is always wide debate on Second Reading.
  Mr. Ryman: I can well understand why the Government are so sensitive about the massive pit closures.
  The matter is serious. I am not taking a liberty. The lives and jobs of thousands of men in Britain depend upon the coal industry. The hon. Member for Enfield, North (Mr. Eggar) obviously does not know that there have been secret discussions between members of the NCB as to which pits are to be closed in the coming few years.
  The position of the NCB at the moment is delicate because the present chairman, who is a mining engineer, as are the majority of the directors, is due to complete his term of office next June, he having been put there for an interim period of one year only upon the retirement of Sir Derek Ezra last summer.
  It is plain as a pikestaff that there is a power struggle in the NCB. There is serious competition as to who will
  924
  succeed the chairman when the appointment is made by the Secretary of State, presumably in consultation with others, next summer.
  As a result of that and the meetings that have taken place with the National Union of Mineworkers recently about the future of the coal industry, will the Minister state the Government's intentions for the NCB? "Plan for Coal" was reaffirmed in the House by a junior Minister as recently as 15 November this year.
  Mr. Eggar rose—
  Mr. Ryman: No, I have already said that I shall not give way.
  The Government must come clean. If they are embarking on a massive programme of pit closures they should say so. If they are coercing the NCB to pursue such policies they should come clean. They are not entitled to play cat and mouse with the lives of the men in the coal mining industry. They must not mislead mining areas in Britain and embark on a policy which led to the resignation of the previous Secretary of State for Energy, who was transferred to another position in the Government at short notice because he could not handle the negotiations with the NUM.
  That, and the problem of cheap imported coal, has produced a crisis in the mining industry. It is all very well for Conservative Members to laugh and guffaw, but this is a serious matter for Britain's economy and for the mining industry. By not making a statement on the current issues the Government are doing nothing to allay fears.
  The reports in the press today came not from an announcement by the NCB but from a leak from the NUM. A statement of the Government's intentions towards the mining industry would be welcome. Are they serious about "Plan for Coal"? Are they serious when they say that they propose to invest in the coal mining industry?
  Mr. Hannam rose—
  Mr. Ryman: No, I shall not give way. I will not be intimidated by the guffaws of Conservative Members when making a serious contribution at a late hour in the debate. It ill becomes Conservative Members to guffaw in a blimpish manner while I am talking about the lives and work of 40,000 coal miners. It is a serious matter which deserves the consideration of the House, and I ask to be allowed to speak. I hope that I shall be listened to quietly and sensibly for a short while. If Conservative Members pay me that courtesy, they will appreciate the argument.
  As a background to this important measure, the wellbeing and viable future of the mining industry is vital. That is the point that I am seeking to make.
  What are the Government's intentions and do they stand by the statement that was made by the Under-Secretary of State for Energy on 15 November? Do they still intend to support "Plan for Coal"? Will they support a programme of investment in the coal mining industry and use their influence with Mr. Norman Siddall and the other directors of the National Coal Board to prevent the wholesale slaughter of pits throughout the country? I hope that the Minister will be good enough to deal with my question when he replies.
  9.7 pm
  Mr. Alexander Eadie: We are approaching the end of the Second Reading of this 33-clause and two-schedule Bill, which I think the Secretary of State

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  described as falling into two separate parts. I shall qualify that by saying that it falls into almost two separate parts. Part I deals with the private generation of electricity as a main activity of business. Part II deals with amendments to international conventions on civil liability for nuclear incidents. The link between the two parts is that a private operator under part I who uses nuclear technology will be bound by the provisions of part II.
  I was surprised by the interruptions that my hon. Friend the Member for Blyth (Mr. Ryman) experienced, especially from the hon. Member for Enfield, North (Mr. Eggar), who entered the Chamber at 8.45 pm and wanted to raise points of order about the arguments that my hon. Friend was advancing. If he had been in his place earlier, he would have known that it had been a fairly wide-ranging and good-natured debate.
  The hon. Member for Perth and East Perthshire (Mr. Walker) told us that he was an airman. He told us also that he wanted to sell off the pits. He took us into the highways and byways. I think that my hon. Friend the Member for Blyth was in order, because the Secretary of State said in replying to a question that foreign coal would be imported if the Bill were enacted. Surely my hon. Friend's remarks were pertinent and relevant to the Bill.
  I see that the Liberal spokesman on energy, the hon. Member for Truro (Mr. Penhaligon), is in his place. He endorses the importation of foreign coal. I note that the energy spokesman of the Social Democratic Party, the right hon. Member for Greenock and Port Glasgow (Dr. Mabon), is present. He, too, endorses the importation of foreign coal. Presumably he will endorse the importation of South African coal and coal from anywhere else. My hon. Friend was right to draw attention to the impact that the importation will have on the coal mining industry. The Minister has a responsibility to respond to my hon. Friend's comments and questions, because they are relevant to the debate.
  Mr. Eggar rose—
  Mr. Eadie: We believe that the Bill has been flung at the House. I understand that there has been some discussion with the public utilities about the Bill. They were aware of its existence, but they did not know that it was to be presented to Parliament with such rapidity. The unions, too, have a point of view, with which I shall deal later.
  Few measures have been presented with such indecent haste as the Bill. The Government appear to be hell-bent on riding roughshod over every decency that is generally associated with legislation. The Opposition have had little time to study the Bill between its publication and the debate today. I suggest to the Secretary of State that the Government injured not only the House, but themselves, by the indecent haste with which they presented the Bill.
  The Government have said that this is a timely and important Bill, so we are entitled to ask the Under-Secretary of State, "Why the hurry in introducing the Bill?" The Opposition will come to the conclusion that the Government's eyes are probably focused on a possible early general election and that they want the decks cleared of legislation to give them the so-called political advantage in that election. [Interruption.]
  926
  The Secretary of State can mutter as much as he likes, but the political dogma of privatisation is more important to the Government than the well-being of the electricity supply industry and its workers.
  It has become clear that the Bill has been quickly cobbled together to meet the needs of a possible early general election and is not concerned with the well-being of the electricity supply industry. I shall substantiate that later. We are entitled to ask whether there is a need or a call for the private generation of electricity. As far as we can see, there is little evidence to support any such claim. It is not surprising that when Government spokesmen and Government supporters are challenged on that they say that perhaps in 10 years' time an urgent need will emerge. A Government spokesman said that on the radio.
  Hon. Members who have listened to the debate will know that there is not unanimity between the Government Front Bench and the Back Benches. The Back Benchers are enthusiastic about the Bill. They consider that it is one of the best things to happen since sliced bread. They tell us about all the wonderful things the Bill will do, but Ministers say that the Bill does not mean very much. It is hardly surprising to hear such comments in the light of the over-capacity in the electricity supply industry, which has come about largely as a result of the economic recession into which our country is locked, and not least because of the high capital costs and construction times in building nuclear power stations.
  When the Government speak of 10 years, they are being a little optimistic. I have news for the Government: they will not be in power in 10 years' time. We will sweep aside the nonsense in the Bill. I shall continue to say that during the rest of my speech and in Committee.
  The hon. Member for Perth and East Perthshire commented on the rural parts of our land, particularly the areas which he and I represent in Scotland. It is nonsense to imagine that in those areas it will be possible to create the need for the private generation of electricity. Population dimensions dictate that.
  The Bill is segregating in its concept and activation. The Government are putting a doctrinaire proposition to the House. A wealth of information is available on the structure and reorganisation of the electricity industry. Did the Government examine the Plowden report, for example, when framing the Bill? All the area boards submitted their views about the reorganisation of the industry. The power supply unions had positive views about Plowden. Did the Government canvass them?
  An interesting issue was flung into the debate when the hon. Member for Northampton, South (Mr. Morris) said that perhaps we should do something about Plowden. He added that he did not want to be bothered with too much trouble, because of what had happened during the passage of what is now the Oil and Gas (Enterprise) Act. The Government are more concerned with the politics of legislation than with the administrative efficiency of industries. That is why they decided not to consider Plowden, which deals with the reorganisation and structure of the industry, and which was mentioned by my hon. Friends the Members for Birmingham, Northfield (Mr. Spellar) and Bristol, North-East (Mr. Palmer). We could have a more efficient electricity industry to serve the nation.
  The Under-Secretary may talk about confidentialitly between Governments. I am a former Energy Minister. When in office I knew that talks were held with the then

  927
  shadow spokesman for energy with a view to putting through Parliament agreed measures for the reorganisation of the industry. There was a consensus in the industry about its reorganisation. The Government must know what happened then. The hon. Member for Truro was one of the niggers in the woodpile during the discussions on reorganisation. He attended all the meetings. I am not revealing any secrets.
  The Opposition believe that the Bill is a miserable, masquerading effort. It is a disgrace that the Government should introduce such a Bill after three and a half years in office. I am sure that the Minister will concede that the Electricity Council is representative of the electricity supply industry in England and Wales. The South of Scotland electricity board and the North of Scotland hydro-electric board are responsible for the generation and supply of electricity in Scotland. We have all received the Electricity Council's statement, which was issued with the approval of the SSEB and the North of Scotland hydroelectric board.
  So far the debate has been tidy and cosy on the Government side of the House. The Minister must reply to some of the comments in the report from the Electricity Council. I refer especially to paragraphs (b) and (c) on page 1 of the report. Paragraph (b) states:
  "The purchase of 'surplus' electricity by a Board at a fair price. The purchases will be made on a basis which will neither increase nor decrease prices charged by Boards to their own consumers. This means that any financial advantage will go to the private generator/supplier and his consumers."
  Paragraph (c) states:
  "The use of the Board's transmission and distribution systems for which the cost will be chargeable. The 'right' is novel. The present system is a fully integrated one under single operational control which evolved from developments early this century, and at present gives substantial financial benefits to consumers."
  Those two statements are either facts or assessments. If they are not facts, the Secretary of State must tell us.
  The industry asked for seven safeguards, and they are important to the electricity industry. They dealt with the burden on the consumer, adequate notice to the private sector, the proposals for private generation, rights granted to the boards, the present integrated system and the undue preference shown to private consumers. Time prevents my speaking at length about the safeguards, but I put them on record.
  The Secretary of State is aware of the document. It is captioned:
  "The safeguards that the Industry are seeking are principally"
  and they are set out. As the Bill was flung at us with such indecent haste, the Secretary of State has a responsibility to comment on the request for safeguards. It is a gross deception to claim, as a Minister did, that the Bill will activate the installation of combined heat and power. There are several reasons for the delay in starting combined heat and power schemes and it is bogus to claim that the Bill will activate and accelerate privatisation.
  We know that the Government believe in the economics theory—the Secretary of State believes that Adam Smith is not dead—of the invisible hand that guides market forces. The right hon. Gentleman often tells us with pleasure that they will operate. We have taken soundings among City financial institutions to see whether capital would be made available for combined heat and power schemes and for private power stations. The reply was a firm no.
  The parts of the Bill relating to access to the national grid and the selling of electricity to public utility are very
  928
  woolly and will require not only clarification but substantial amendment. It is nonsense to suppose that the general consumer will be willing to pay for such grid system features as the standby arrangement—the provision that private consumers can switch into the grid on a wet and windy day.
  Clause 3 deals with nuclear power generation. If ever a Bill opened a Pandora's box, this is the example. Someone else said in another context:
  "Father forgive them: for they know not what they do."
  The Government are committed to nuclear power and have tried to convince the public that they can handle all the environmental consequences of thermonuclear power generation. The Prime Minister had her photograph taken sitting on top of a reactor to show how safe it was. I shall refrain from commenting on that. The Government argue that it is in our best interests to have more nuclear power stations, but at a stroke they have given a gift to every anti-thermonuclear power lobby in Britain.
  The Bill has a screaming caption—"Privatisation of power stations." The Government's defence is strange. They say that it makes no difference that, in the past. nuclear power could be generated privately provided that all the conditions were met. They may be right—I do not know—but they have triggered off another nuclear power station debate. That may not be bad, but it will have started for the wrong reasons.
  I do not have time to deal with the folly of encouraging private nuclear power stations, but I shall pursue the logic of the Government's claims for the Bill. They say that it is unlikely that private users who wish to generate electricity will build their own nuclear power stations, but that other fuels will be used, with coal being the most likely. The Government do not seem to have realised that to the extent to which new privately operated capacity will be introduced, the electricity boards' markets will be reduced. If capacity must increase, they will find it more difficult to justify the building of new nuclear power stations. If the Government believe in their Bill, they should not go ahead with the pressurised water reactor at Sizewell.
  Every objector in Britain will examine the Government's proposition, and they will certainly read the speeches by Conservative Back-Bench Members today, who went over the top and claimed far more than the Government have claimed. The objectors are aware of electricity demand. The Government have destroyed their own case for going ahead with the project. Electricity sales are still falling, because of the Government's economic folly, and the boards have more than enough electricity to meet present demand.
  Mr. Rost: It is too expensive.
  Mr. Eadie: It is not too expensive. If the hon. Member for Derbyshire, South-East (Mr. Rost) does not realise that we are in the throes of an economic recession, he should not be a member of this honourable House. The Bill is a poor attempt to convince Right-wing Conservative Members that the Government intend to reduce the nationalised sector. It is a good example of the political ineptitude at the Department of Energy, which does not have a good record. The Department's only defence of the Bill is that apparently it has received the Government's seal of approval.
  My time is up. I shall keep my promise to the Under-Secretary of State. Perhaps he is relieved, but perhaps he

  929
  is not. All Governments whose eyes become glazed with visions of election ballot boxes deserve the contempt of the House. The Government should not have introduced this measure. It is a miserable Bill. It is a pirate of a Bill. Whether the Scottish National Party, the Liberals or the Social Democratic Party decide to go into the Lobby with the Government, my right hon. Friends and I will be in the Opposition Lobby, because we believe that the Bill is a miserable measure.
  9.31 pm
  The Under-Secretary of State for Energy (Mr. David Mellor): In a spirit of camaraderie, I shall raise the one point made by the hon. Member for Midlothian (Mr. Eadie) with which I agree. The debate has been wide-ranging and interesting. In the time available I shall try to respond to as many points as possible. Some points need a response tonight but there are others that perhaps can more conveniently be left to the Committee. If I inadvertently blur the lines of a fairly clear distinction and any Opposition Member or any of my hon. Friends is aggrieved that I have not dealt with a point that he thinks I should have dealt with, I shall be only too happy to write to him.
  My right hon. Friend the Secretary of State carefully introduced the provisions of part II of the Bill. He said that he hoped that it would be generally accepted. As no Back-Bench Member has adverted to it I assume that the silence implies consent to the common sense of the proposed measures. After 25 years of diminishing monetary values, it is no surprise that an uprating should be necessary. It would have been wrong not to take action to revalidate the Paris and Brussels conventions. That is what the protocols, which have been recently negotiated, do. I am glad that we have been able to find an early legislative opportunity to amend the Nuclear Installations Act 1965 so that we can formally ratify those protocols. I am equally glad that that seems to be the will of the House.
  Part I of the Bill is more controversial territory. Contrary to what the hon. Member for Midlothian thinks, this is a carefully set out and interlinked set of provisions, which will encourage sensible progress towards the better use of our energy resources. The provisions encourage private generation without adversely affecting the interests of other electricity consumers. They establish a framework that is both fair and reasonable and provides for fair and reasonable dealings for the first time between the electricity supply industry on the one hand and the private generator on the other hand. They meet a need that is recognised by industry. They have been welcomed by the CBI. They will achieve a result that is beneficial, I am sure, to the national interest.
  I am sorry that it should be a matter of controversy that we should seek to encourage private generation. As the right hon. Member for Greenock and Port Glasgow (Dr. Mabon) said, there is no great Rubicon to cross. We have had private generation in this country for some time. However, the problem is that the amount has been declining owing to older uneconomic oil-fired plant being withdrawn from service. Private generation in the United Kingdom is well below the levels in other Western European countries. It is right that that should be reversed because most private plant will be combined heat and power plant, which achieves much higher conversion
  930
  efficiencies, as my hon. Friend the Member for Derbyshire, South-East (Mr. Rost) so pertinently said, than can conventional generating plant.
  The close integration of CHP plant with manufacturing process is generally best achieved by private industry, not the public supply industry, although I pay tribute to the Midlands Electricity Board for developing two CHP projects in close association with the industry. However, in doing so, it has perhaps exposed the reluctance of the overwhelming majority in the industry to show the same interest and commitment.
  The scope to reverse that downward trend exists but that will only happen if it makes good commercial sense to invest in generating plant. The Bill offers encouragement by establishing a statutory framework for fair dealing between the private generator and the ESI. The ultimate decision whether to become involved in private generation or whether to expand existing private generation must rest with the private generator and his perception of the market. It is his judgment of the commercial realities that matter. That will determine what effect the Bill will have in the end.
  There are three novel key proposals that I commend to the House. First, there is the right to sell privately generated electricity to electricity boards on fair terms. For the first time, that will be clear and above board and the duty will be established. Secondly, there is the right to use the public transmission and distribution system on fair terms and, thirdly, there is the important right to appeal to an independent figure—the Secretary of State—in case of disputes.
  There is no intention to leave the public supply industry or its customers worse off. Those Opposition Members who made that point have not studied the Bill as carefully as they might. The aim is that electricity boards should offer private generators the best possible deal consistent with protecting their customers' interests. That is what fair terms mean. The regime is in no way tilted towards the private generator. It is neutral. The changes are significant because the regime has not been neutral for a long time but has been biased against the private generator. That is the only reason.
  Mr. Palmer: If the new private generating units come about, will they be authorised undertakings with the right to give supplies generally and the right to break up streets? Will they be subject, therefore, to the electricity supply regulations, the overhead line regulations and others?
  Mr. Mellor: They will be fully integrated in every material particular into the existing regulations. We shall have plenty of opportunity to go through that matter with care in Committee. I am glad that the hon. Gentleman will no doubt be a member of that Committee.
  Dr. J. Dickson Mabon rose—
  Mr. Mellor: I should like to continue. Private industry will be able to contemplate investment in electricity generation in the knowledge that a secure market exists and that a fair price will be offered. Such investment should make good sense if the cost can be kept below that of electricity supply industry or if revenues can be boosted by utilising the heat that is produced as a byproduct when electricity is generated by plant that uses fossil fuel.
  The Bill should encourage private investment but whether it does so is up to the state of the market. It is up

  931
  to us to create the right climate so that the market can develop if that is the wish of those who are involved in industry and commerce.
  The Bill should encourage—we already have evidence that it will encourage— private investment in alternative energy sources such as wind-powered and hydro-electric plant. My hon. Friends the Members for Banff (Mr. Myles) and for Perth and East Perthshire (Mr. Walker) made valid points in favour of hydro-electric power.
  The Bill breaks new ground and is at its most imaginative and significant in permitting private generators to send their electricity through the public transmission system. It will give the private generator an alternative outlet, apart from his own use, or sale to the electricity boards. That is one of the most encouraging new features of the Bill with regard to stimulating private generation.
  Dr. J. Dickson Mabon: One of the first questions that we asked the Minister was whether, if he is to be evenhanded between the public and private sectors in this matter, we are to have the special Standing Committee procedures so that we can take evidence, at least in some sittings, to get the matter clear. It is extremely complicated.
  Mr. Mellor: That is a matter for the Leader of the House, not for me, and for representations through the usual channels.
  I shall now deal with the allegation that the hon. Member for Midlothian made about the indecent haste in the preparation of the Bill. I cannot understand where he has got that idea from. Our intention to introduce such a Bill was first announced by the former Secretary of State for Energy, now Secretary of State for Transport, in July 1980. In April 1982 the areas that the Bill would cover were the subject of a consultative document that was sent to nearly 50 groups. The Bill has been introduced for Second Reading at the end of November. If that is the hon. Gentleman's idea of indecent haste, I would love to know his definition of delay. Perhaps his definition would be sufficient to entitle him to become a member of my old profession, the legal profession, because his attitude must be very similar to that which we are often alleged to have.
  The hon. Member for Midlothian was labouring hard to establish that the Electricity Council saw the Bill as controversial. That theme was taken up by at least two Opposition Members. The truth is that it is not controversial. The Electricity Council has been consulted at every stage. As a result of some of its detailed submissions, its ideas have been incorporated in many parts of the Bill. Our contact with the council is continuing. I do not rule out the possibility that further changes may be made in Committee to one or two of the more detailed provisions. However, any idea that there will be a re-run of the Oil and Gas (Enterprise) Bill and the British Gas Corporation's attitude is wholly misconceived. The Electricity Council loyally accepts that the Government are fully entitled—against any of the principles of the nationalised industries—to introduce this measure. It knows only too well that we listen with care to what it says and that we have taken account of its comments.
  The Bill is not a source of trouble between the Government and the Electricity Council. However, the hon. Member for Midlothian has a great interest in stirring
  932
  up trouble, although he is tilling pretty infertile ground. The wide-ranging consultations, involving nearly 50 bodies ranging from the Advisory Council on Energy Conservation to the GLC, the Association of County Councils, the Association of Metropolitan Authorities, the chambers of commerce, the British Electrical and Allied Manufacturers Association, British Rail, the Institution of Mechanical Engineers, the electricity trade unions, the TUC and even the Friends of the Earth were sent a consultation paper, although the last did not reply.
  The right hon. Member for Leeds, South (Mr. Rees) asked whether there was any demand for the provisions. We undertook the consultation exercise to find that out and we are quite sure that there is a demand. It is easy to say that there is a demand and that people are interested, but it is not easy to quantify that demand and say how it will materialise. I concede that I cannot say which company will make a further investment and which will not. However, I can say that there is a demand and that a welcome has been given.
  There is a point that should be considered. To what extent does a step towards greater freedom need to be justified in terms of a proven demand? It almost speaks for itself. The creation, for the first time, of a fair regime between the electricity supply industry and the private generator will stimulate the interest that undoubtedly exists into practical applications.
  To the astonishment of those of us involved in preparing the Bill, the inoffensive clause 3, which deals with private nuclear generating stations, has caused most concern. When I first heard on the radio that the main aim of the Bill was to privatise nuclear power, I thought that it was either the work of people who had not bothered to read the Bill, the work of those who deliberately sought to distort it, or both. It surprised me that the right hon. Member for Leeds, South, for whom—although I do not want to embarrass him—I have the greatest respect, should be under a genuine misapprehension. However, it behoves me to take the issue more seriously than I was initially inclined to do. It staggered me even more that the right hon. Member for Greenock and Port Glasgow who defended the Government during the passage of the Nuclear Installations Act 1965–
  Dr. J. Dickson Mabon: That was 20 years ago.
  Mr. Mellor: Indeed, but the right hon. Gentleman, as a great exponent of the new politics, knows so much better than we elderly exponents of the old politics. After five years at the Department of Energy, he is also concerned about that point. Not surprisingly, the hon. Member for Truro (Mr. Penhaligon) is also concerned because he is always concerned about such issues. What is the truth of the matter?
  The truth is that as I now stand here—or you, Mr. Speaker, sit there—there is no legal bar to anyone's applying to construct a private nuclear power station if he intends to use the electricity in his own factory premises, as so many private industrial generation projects now do. What is all the scaremongering about when that has been the situation since the 1919 Act introduced an arbitrary and indefensible distinction between those who generate for their own use and those who generate substantially for the use of others?
  We are told that, unless we do something about the notorious clause 3, the support of no fewer than three

  933
  parties will be withheld. The inducement is overwhelming, but what can we do about it? What is so objectionable about it? Clause 2 provides that private generators should not require the consent of the Secretary of State to run conventional power stations, although they will have to comply with all other relevant provisions. Clause 3, however, puts nuclear generation in a different category and makes it subject to the consent of the Secretary of State. In other words, far from being a Dr. Strangelove' s charter for private nuclear generators, the clause inserts a further barrier.
  Mr. Allen McKay: As the Secretary of State will be the sole arbiter, may we be assured that private nuclear generation will be subject to all the safeguards and safety provisions that now apply to the nuclear power industry?
  Mr. Mellor: Anyone undertaking private nuclear generation will have to comply with all the safeguards that the Labour Government in their infinite wisdom laid down in the 1965 Act—not one jot or tittle more or less. In addition—if the measure does not bite the dust due to the withdrawal of support by three parties—private generators will have to obtain the consent of the Secretary of State.
  When I heard that these provisions caused such concern to the hon. Member for Truro as well as to the right hon. Member for Greenock and Port Glasgow, I wondered what it could all be about. When I saw their little motion on the Order Paper, I thought that it was typical of the alliance to focus attention on the most spurious point, thus avoiding the need to do any harder and more determined work. Nevertheless, I was mollified—I know that the hon. Member for Truro regards me as unmollifiable—by the supportive comments not only of the hon. Member for Truro but of the right hon. Member for Greenock and Port Glasgow. I congratulate the hon. Member for Truro on the way in which he restrained himself from making any comment on part II of the Bill and focused on his welcome support for part I.
  The last time that the hon. Member for Truro and I crossed horns on this matter, as long ago as November last year, the hon. Gentleman assured me that these matters were being sorted out in the alliance. The Guardian, however, is clearly unaware of that. As recently as September, it referred to fission within the alliance on energy policy, with one group supporting nuclear power and the other opposing it. Fission becoming fusion is a very dangerous process, so I advise the alliance to beware.
  To avoid laying themselves open to the charge of seeking to oppose for the sake of opposing —we expect that of the official Opposition—or seeking the lowest common denominator of agreement, I urge alliance Members to find it in their hearts to realise that clause 3 is not a sinister threat to safety but an additional barrier to private nuclear generation. It is no part of the Government's intention in the Bill to do anything to encourage private nuclear generation, which is no more or less likely as a result of the Bill than it has been throughout the 20 years during which the right hon. Member for Greenock and Port Glasgow has been concerned with these matters.
  Mr. Penhaligon: I know that we do not agree. I wish to ask a simple question. If someone made an application
  934
  to build a nuclear power station of approved design to current safety regulations, would the Government say yes to the application?
  Mr. Mellor: It would be improper for those who have to carry out a quasi-judicial function to give a blanket yes or no at this stage. The application would have to be judged on its merits. No one standing at this Dispatch Box could give any different answer.
  I want to agree with the hon. Gentleman. There is no statutory obligation upon the Central Electricity Generating Board to sell surplus power stations, but if the offer was right, it would seem to the Government a sensible thing to do. The CEGB arrived at that conclusion in the case of the Spondon H power station which it sold to Courtaulds, who were the purchasers of the heat. There is a precedent. The Government wish that kind of arrangement the same fair wind as the hon. Gentleman does.
  One of the first beneficiaries of the part of the Bill that abolishes the spurious distinction of generation for own use and generation for sale might be the hon. Gentleman's part of the country, although just outside his constituency. We have an application from someone who wants to set up an aerogenerator, who has the permission of the local authority and who has persuaded the South-Western electricity board to buy his power. If the law remained as it now is, he would not be able to set up this sensible and reasonable business of promoting alternative energy; he could not sell his electricity as a main business to the SWEB because it is against the law and he could not run his business without selling the electricity. This is one tangible example of the utility of the Bill.
  Mr. Hardy rose—
  Mr. Mellor: I have given way several times. I wish now to conclude my remarks.
  My hon. Friend the Member for Derbyshire, South-East made a distinguished and interesting speech on combined heat and power. When he praises us for taking a real interest in combined heat and power, we know that he would not say it unless he thought it was the case, such is his interest in the matter. My right hon. Friend the Secretary of State has made clear his commitment to combined heat and power before the Select Committee. Real progress is being made. This measure will stimulate industrial combined heat and power and could also have benefits for district heating. We are considering with the utmost seriousness the Atkins report on district heating. We await the Select Committee report on combined heat and power with interest. It will be a guiding factor in our future plans.
  There is dissatisfaction, as my hon. Friend the Member for Derbyshire, South-East made clear, among those involved in combined heat and power schemes about the state of their relations with the nationalised industry. There is no question but that the fair regime that we now establish for the first time will be of inestimable value in ensuring that those resentments disappear.
  I have been asked about PWR procurement for Sizewell. There is no particularly helpful comment that I can make at this stage because the matter is subject to a public inquiry. If Sizewell was to proceed, procurement arrangements would be a matter for the Central Electricity

  935
  Generating Board. The Government have made it clear that we would wish to see orders go to United Kingdom firms wherever possible.
  The Government have been attacked by the hon. Member for Midlothian about the Bill. The hon. Gentleman has not stated what he finds so objectionable about a measure designed to introduced much-needed competition into electricity supply, to widen choice and to stimulate the development of combined heat and power as an efficient way of supplying industry with reasonably priced electricity. Above all, the hon. Gentleman has not said what would be the Opposition's alternative if they had this responsibility instead of us.
  Much has been said about reorganisation. Labour's 1982 programme, on the subject of reorganisation, said:
  "The electricity supply industry is in need of reorganisation. There is, in the present structure, insufficient central control of the separate boards".
  What is the Opposition's answer to the many problems that so many people, from individuals in their own homes to industry, bring forward about the electricity supply industry? It is to make a monolith even more monolithic. What a typically Socialist, typically irrelevant answer to a major problem. Has the Labour Party learnt nothing in the 35 years since the industry was set up?
  Then we have the vexed question of the generation pattern, which has been referred to. The 1982 Labour programme says:
  "We believe that a great deal of new plant should be coal-fired to ensure that the electricity generating board maintains its present high level of coal use and to encourage the continuing growth of the coal industry."
  It is an extremely interesting concept of the production of the most fundamental energy in this country—electricity—that the Labour Party should regard it merely as a way of stimulating the coal industry. Some of us think that the job of the electricity industry is to provide electricity as efficiently as possible, and to be consumer-related in the sense that it is related to the demands and needs of the consumer. It should not be an adjunct, a consumer, to another industry with which Labour Members seem to have far too slavish a relationship for the national good if they were ever to regain power.
  We have had a sensible discussion about the combined heat and power scheme. However, when I read the Labour 1982 document or listen to what the right hon. Member for Leeds, South has to say about combined heat and power, I find no mention of the scheme's industrial application. Everything is about district heating. The combined heat and power scheme is extremely relevant to industry because industry is concerned about the cost and the way in which it can get energy. It is an indictment of the Opposition that they seem to be unable to address their mind to combined heat and power in industrial use—a major factor in some heavy process industries and their recovery.
  I congratulate the hon. Member for Birmingham, Northfield (Mr. Spellar) on the lucidity of his speech. However, before he starts speaking to us about the future of the power plant industry, he should, as a member of a highly persecuted breed—a true forceful Labour Rightwinger—say something to the National Executive Committee about its threat to nationalise the power plant industry. Nothing would he more calculated to ruin some of our best companies, such as GEC, Northern Engineering Industries and Babcock than nationalisation.
  936
  The right hon. Member for Leeds, South seemed surprised when my right hon. Friend the Secretary of State talked about irresponsibility and about extra-parliamentary objections to the Bill. The actions of the hon. Member for Midlothian came as a shock to us, following as hard as they did on the disgraceful speech by the right hon. Member for Chesterfield (Mr. Varley). That speech, in tandem with that of Mr. Arthur Scargill, tried to induce the miners to come out on strike and threw the full weight of the Labour Party behind that. No sooner was that done than the hon. Member for Midlothian went into a conclave with members of the General and Municipal Workers Union—
  Mr. Eadie: Not true.
  Mr. Mellor: The hon. Gentleman says that that is not true. I should be interested to know whether he has asked the Press Association to correct this. I shall read the full story:
  "Power workers' leaders today threatened to pull the switches on private generators if Government plans undermine the nationalised electricity supply industry.
  Representatives of more than 30,000 General and Municipal Workers' members, many operating strategic sub-stations, today pledged their 'determination lo protect the industry against privatisation.' Meeting in Lor don, they supported MP Alex Eadie, a former Labour energy Minister, who told them he would speak against the Government privatisation Bill.
  Afterwards he said: 'These workers probably have more power to disrupt than any others in the country."'
  Mr. Eadie rose—
  Mr. Mellor: I shall not give way, as there are only two minutes left.
  Mr. Eadie: It is a lie.
  Mr. Mellor: If it is a lie—
  Mr. Eadie rose—
  Mr. Mellor: If it is a lie, it is a matter for the hon. Gentleman and the Press Association.
  Mr. Eadie: It is a lie.
  Mr. Speaker: Order. We have had a quiet debate so far, I understand. We must use parliamentary language, however strong our feelings.
  Mr. Eadie: I was not present at the time.
  Mr. Mellor: Now that the hon. Gentleman has that off his chest, I commend the Bill to the House.
  Question put, That the Bill be now read a Second time:—
  The House divided: Ayes 304, Noes 201.

  Division No. 16]

  [10 pm

  AYES

  Adley, Robert

  Best, Keith

  Aitken, Jonathan

  Bevan, David Gilroy

  Alexander, Richard

  Biffen, Rt Hon John

  Alison, Rt Hon Michael

  Biggs-Davison, Sir John

  Arnold, Tom

  Blackburn, John

  Aspinwall, Jack

  Blaker, Peter

  Atkins, Rt Hon H.(S'thorne)

  Body, Richard

  Atkins, Robert(Preston N)

  Bonsor, Sir Nicholas

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

  Boscawen, Hon Robert

  Baker, Kenneth(St.M'bone)

  Bottomley, Peter (W'wich W)

  Baker, Nicholas (N Dorset)

  Bowden, Andrew

  Banks, Robert

  Boyson, Dr Rhodes

  Beith, A. J.

  Bright, Graham

  Bendall, Vivian

  Brinton, Tim

  Benyon, Thomas (A'don)

  Brittan, Rt. Hon. Leon

  Benyon, W. (Buckingham)

  Brooke, Hon Peter

  937

  Brotherton, Michael

  Hamilton, Hon A.

  Brown, Michael(Brigg & Sc'n)

  Hamilton, Michael (Salisbury)

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

  Hampson, Dr Keith

  Browne, John (Winchester)

  Hannam, John

  Bruce-Gardyne, John

  Haselhurst, Alan

  Bryan, Sir Paul

  Hastings, Stephen

  Buchanan-Smith, Rt. Hon. A.

  Havers, Rt Hon Sir Michael

  Buck, Antony

  Hawkins, Sir Paul

  Budgen, Nick

  Hawksley, Warren

  Bulmer, Esmond

  Heath, Rt Hon Edward

  Burden, Sir Frederick

  Heddle, John

  Butcher, John

  Henderson, Barry

  Butler, Hon Adam

  Heseltine, Rt Hon Michael

  Carlisle, John (Luton West)

  Hicks, Robert

  Carlisle, Kenneth (Lincoln)

  Higgins, Rt Hon Terence L.

  Cartwright, John

  Hogg, Hon Douglas (Gr'th'm)

  Chalker, Mrs. Lynda

  Holland, Philip (Carlton)

  Channon, Rt. Hon. Paul

  Hooson, Tom

  Chapman, Sydney

  Horam, John

  Churchill, W. S.

  Hordern, Peter

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

  Howe, Rt Hon Sir Geoffrey

  Clark, Sir W. (Croydon S)

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

  Clarke, Kenneth (Rushcliffe)

  Howell, Ralph (N Norfolk)

  Clegg, Sir Walter

  Hudson Davies, Gwilym E.

  Colvin, Michael

  Hunt, David (Wirral)

  Cope, John

  Hunt, John (Ravensbourne)

  Cormack, Patrick

  Hurd, Rt Hon Douglas

  Corrie, John

  Irvine, Rt Hon Bryant Godman

  Costain, Sir Albert

  Irving, Charles (Cheltenham)

  Crawshaw, Richard

  Jenkin, Rt Hon Patrick

  Crouch, David

  Johnson Smith, Sir Geoffrey

  Dickens, Geoffrey

  Jopling, Rt Hon Michael

  Dorrell, Stephen

  Joseph, Rt Hon Sir Keith

  Dover, Denshore

  Kellett-Bowman, Mrs Elaine

  du Cann, Rt Hon Edward

  King, Rt Hon Tom

  Dunn, Robert (Dartford)

  Kitson, Sir Timothy

  Durant, Tony

  Knight, Mrs Jill

  Dykes, Hugh

  Knox, David

  Eden, Rt Hon Sir John

  Lang, Ian

  Edwards, Rt Hon N. (P'broke)

  Latham, Michael

  Eggar, Tim

  Lawrence, Ivan

  Elliott, Sir William

  Lawson, Rt Hon Nigel

  Ellis, Tom (Wrexham)

  Lee, John

  Eyre, Reginald

  Lennox-Boyd, Hon Mark

  Fairbairn, Nicholas

  Lester, Jim (Beeston)

  Fairgrieve, Sir Russell

  Lewis, Kenneth (Rutland)

  Faith, Mrs Sheila

  Lloyd, Ian (Havant & W'loo)

  Fell, Sir Anthony

  Lloyd, Peter (Fareham)

  Fenner, Mrs Peggy

  Loveridge, John

  Finsberg, Geoffrey

  Luce, Richard

  Fisher, Sir Nigel

  Lyell, Nicholas

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

  Lyons, Edward (Bradf'd W)

  Fletcher-Cooke, Sir Charles

  Mabon, Rt Hon Dr J. Dickson

  Fookes, Miss Janet

  Mc Crindle, Robert

  Forman, Nigel

  MacGregor, John

  Fowler, Rt Hon Norman

  MacKay, John (Argyll)

  Fox, Marcus

  Maclennan, Robert

  Fraser, Rt Hon Sir Hugh

  Macmillan, Rt Hon M.

  Fraser, Peter (South Angus)

  McNair-Wilson, M. (N'bury)

  Freud, Clement

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

  Fry, Peter

  Mc Quarrie, Albert

  Gardiner, George (Reigate)

  Madel, David

  Gardner, Edward (S Fylde)

  Major, John

  Garel-Jones, Tristan

  Marland, Paul

  Gilmour, Rt Hon Sir Ian

  Marlow, Antony

  Glyn, Dr Alan

  Marshall, Michael (Arundel)

  Goodhart, Sir Philip

  Marten, Rt Hon Neil

  Goodhew, Sir Victor

  Mates, Michael

  Goodlad, Alastair

  Mawby, Ray

  Gorst, John

  Mawhinney, Dr Brian

  Gow, Ian

  Mayhew, Patrick

  Gower, Sir Raymond

  Mellor, David

  Grant, Anthony (Harrow C)

  Meyer, Sir Anthony

  Gray, Hamish

  Miller, Hal (B'grove)

  Greenway, Harry

  Mills, Iain (Meriden)

  Grieve, Percy

  Mills, Sir Peter (West Devon)

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

  Miscampbell, Norman

  Griffiths, Peter (Portsm'th N)

  Mitchell, David (Basingstoke)

  Grist, Ian

  Mitchell, R. C. (Soton Itchen)

  Gummer, John Selwyn

  Moate, Roger

  938

  Montgomery, Fergus

  Smith, Tim (Beaconsfield)

  Moore, John

  Spence, John

  Morris, M. (N'hampton S)

  Spicer, Jim (West Dorset)

  Morrison, Hon C. (Devizes)

  Spicer, Michael (S Worcs)

  Morrison, Hon P. (Chester)

  Sproat, Iain

  Mudd, David

  Squire, Robin

  Murphy, Christopher

  Stainton, Keith

  Myles, David

  Stanbrook, Ivor

  Neale, Gerrard

  Stanley, John

  Needham, Richard

  Steen, Anthony

  Nelson, Anthony

  Stevens, Martin

  Neubert, Michael

  Stewart, A.(E Renfrewshire)

  Newton, Tony

  Stewart, Rt Hon D. (W Isles)

  Nott, Rt Hon John

  Stewart, Ian (Hitchin)

  Ogden, Eric

  Stradling Thomas, J.

  Onslow, Cranley

  Tapsell, Peter

  Oppenheim, Rt Hon Mrs S.

  Taylor, Teddy (S'end E)

  Osborn, John

  Temple-Morris, Peter

  Page, John (Harrow, West)

  Thatcher, Rt Hon Mrs M.

  Page, Richard (SW Herts)

  Thompson, Donald

  Parris, Matthew

  Thorne, Neil (Ilford South)

  Patten, Christopher (Bath)

  Thornton, Malcolm

  Patten, John (Oxford)

  Townend, John (Bridlington)

  Pattie, Geoffrey

  Townsend, Cyril D, (B'heath)

  Pawsey, James

  Trippier, David

  Penhaligon, David

  Trotter, Neville

  Percival, Sir Ian

  van Straubenzee, Sir W.

  Peyton, Rt Hon John

  Vaughan, Dr Gerard

  Pink, R. Bonner

  Viggers, Peter

  Porter, Barry

  Waddington, David

  Prentice, Rt Hon Reg

  Wainwright, R.(Colne V)

  Price, Sir David (Eastleigh)

  Wakeham, John

  Prior, Rt Hon James

  Waldegrave, Hon William

  Proctor, K. Harvey

  Walker, Rt Hon P.(W'cester)

  Raison, Rt Hon Timothy

  Walker, B. (Perth )

  Rathbone, Tim

  Walker-Smith, Rt Hon Sir D.

  Renton, Tim

  Wall, Sir Patrick

  Rhodes James, Robert

  Walters, Dennis

  Rhys Williams, Sir Brandon

  Ward, John

  Ridley, Hon Nicholas

  Warren, Kenneth

  Rippon, Rt Hon Geoffrey

  Watson, John

  Roberts, M. (Cardiff NW)

  Wells, Bowen

  Roberts, Wyn (Conway)

  Wells, John (Maidstone)

  Roper, John

  Wheeler, John

  Ross, Stephen (Isle of Wight)

  Whitelaw, Rt Hon William

  Rossi, Hugh

  Whitney, Raymond

  Rost, Peter

  Wiggin, Jerry

  Royle, Sir Anthony

  Wilkinson, John

  Rumbold, Mrs A. C. R.

  Williams, D.(Montgomery)

  Sainsbury, Hon Timothy

  Wilson, Gordon (Dundee E)

  Shaw, Giles (Pudsey)

  Winterton, Nicholas

  Shaw, Sir Michael (Scarb')

  Wolfson, Mark

  Shelton, William (Streatham)

  Wrigglesworth, Ian

  Shepherd, Colin (Hereford)

  Young, Sir George (Acton)

  Shepherd, Richard

  Shersby, Michael

  Tellers for the Ayes:

  Silvester, Fred

  Mr. Carol Mather and

  Smith, Dudley

  Mr. Anthony Berry.

  NOES

  Abse, Leo

  Campbell, Ian

  Adams, Allen

  Campbell-Savours, Dale

  Allaun, Frank

  Cant, R. B.

  Anderson, Donald

  Carmichael, Neil

  Archer, Rt Hon Peter

  Carter-Jones, Lewis

  Ashley, Rt Hon Jack

  Clark, Dr David (S Shields)

  Ashton, Joe

  Clarke, Thomas(C'b'dge, A'rie)

  Atkinson, N.(H'gey,)

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

  Bagier, Gordon A.T.

  Cohen, Stanley

  Barnett, Rt Hon Joel (H'wd)

  Concannon, Rt Hon J. D.

  Benn, Rt Hon Tony

  Cowans, Harry

  Bennett, Andrew(St'kp't N)

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

  Bidwell, Sydney

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

  Booth, Rt Hon Albert

  Cryer, Bob

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

  Cunliffe, Lawrence

  Bray, Dr Jeremy

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

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

  Dalyell, Tam

  Buchan, Norman

  Davies, Rt Hon Denzil (L'lli)

  Callaghan, Rt Hon J.

  Davis, Clinton (Hackney C)

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

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

  939

  Dean, Joseph (Leeds West)

  Marshall, Jim (Leicester S)

  Dewar, Donald

  Mason, Rt Hon Roy

  Dixon, Donald

  Maynard, Miss Joan

  Dobson, Frank

  Meacher, Michael

  Dormand, Jack

  Miller, Dr M. S. (E Kilbride)

  Dubs, Alfred

  Mitchell, Austin (Grimsby)

  Duffy, A. E. P.

  Morris, Rt Hon A. (W'shawe)

  Dunwoody, Hon Mrs G.

  Morris, Rt Hon C. (O'shaw)

  Eadie, Alex

  Morris, Rt Hon J. (Aberavon)

  Eastham, Ken

  Moyle, Rt Hon Roland

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

  Mulley, Rt Hon Frederick

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

  Newens, Stanley

  English, Michael

  O'Neill, Martin

  Ennals, Rt Hon David

  Orme, Rt Hon Stanley

  Evans, Ioan (Aberdare)

  Palmer, Arthur

  Evans, John (Newton)

  Park, George

  Ewing, Harry

  Parker, John

  Faulds, Andrew

  Parry, Robert

  Field, Frank

  Pavitt, Laurie

  Fitch, Alan

  Pendry, Tom

  Flannery, Martin

  Powell, Raymond (Ogmore)

  Foot, Rt Hon Michael

  Prescott, John

  Ford, Ben

  Race, Reg

  Foster, Derek

  Radice, Giles

  Foulkes, George

  Rees, Rt Hon M (Leeds S)

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

  Richardson, Jo

  Freeson, Rt Hon Reginald

  Roberts, Albert (Normanton)

  Garrett, John (Norwich S)

  Roberts, Allan (Bootle)

  Garrett, W. E. (Wallsend)

  Roberts, Ernest (Hackney N)

  George, Bruce

  Roberts, Gwilym (Cannock)

  Gilbert, Rt Hon Dr John

  Robertson, George

  Golding, John

  Robinson, G. (Coventry NW)

  Graham, Ted

  Rooker, J. W.

  Hamilton, James (Bothwell)

  Ross, Ernest (Dundee West)

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

  Rowlands, Ted

  Hardy, Peter

  Ryman, John

  Harman, Harriet (Peckham)

  Sever, John

  Harrison, Rt Hon Walter

  Sheerman, Barry

  Hart, Rt Hon Dame Judith

  Sheldon, Rt Hon R.

  Hattersley, Rt Hon Roy

  Shore, Rt Hon Peter

  Haynes, Frank

  Short, Mrs Renée

  Heffer, Eric S.

  Silkin, Rt Hon J. (Deptford)

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

  Silkin, Rt Hon S. C. (Dulwich)

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

  Silverman, Julius

  Home Robertson, John

  Skinner, Dennis

  Homewood, William

  Snape, Peter

  Hooley, Frank

  Soley, Clive

  Howell, Rt Hon D.

  Spearing, Nigel

  Hoyle, Douglas

  Spellar, John Francis (B'ham)

  Huckfield, Les

  Spriggs, Leslie

  Hughes, Mark (Durham)

  Stallard, A. W.

  Hughes, Robert (Aberdeen N)

  Stoddart, David

  Hughes, Roy (Newport)

  Stott, Roger

  Janner, Hon Greville

  Strang, Gavin

  Jay, Rt Hon Douglas

  Straw, Jack

  John, Brynmor

  Summerskill, Hon Dr Shirley

  Johnson, James (Hull West)

  Taylor, Mrs Ann (Bolton W)

  Johnson, Walter (Derby S)

  Thomas, Dr R.(Carmarthen)

  Jones, Rt Hon Alec (Rh'dda)

  Thorne, Stan (Preston South)

  Jones, Barry (East Flint)

  Tilley, John

  Kerr, Russell

  Tinn, James

  Kilroy-Silk, Robert

  Torney, Tom

  Lambie, David

  Urwin, Rt Hon Tom

  Lamond, James

  Varley, Rt Hon Eric G.

  Leadbitter, Ted

  Wainwright, E.(Dearne V)

  Leighton, Ronald

  Walker, Rt Hon H.(D'caster)

  Lewis, Arthur (N'ham NW)

  Wardell, Gareth

  Lewis, Ron (Carlisle)

  Watkins, David

  Litherland, Robert

  Weetch, Ken

  Lofthouse, Geoffrey

  Welsh, Michael

  Lyon, Alexander (York)

  White, Frank R.

  McCartney, Hugh

  White, J. (G'gow Pollok)

  McDonald, Dr Oonagh

  Whitehead, Phillip

  McGuire, Michael (Ince)

  Willey, Rt Hon Frederick

  McKelvey, William

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

  McNamara, Kevin

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

  McWilliam, John

  Winnick, David

  Marks, Kenneth

  Woodall, Alec

  Marshall, D(G'gow S'ton)

  Woolmer, Kenneth

  Marshall, Dr Edmund (Goole)

  Wright, Sheila

  940

  Young, David (Bolton E)

  Mr. George Morton and

  Mr. Allen MacKay.

  Tellers for the Noes:

  Question accordingly agreed to.
  Bill read a Second time.
  Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).
  Mr. Eadie: On a point of order, Mr. Speaker. It is a serious offence in the House when a Minister knowingly—I know that it is unparliamentary to allege a lie—utters an untruth. Many more difficulties arise when a Minister, having told an untruth, promises to give way so that the allegation can be refuted and then refuses to do so. The Under-Secretary alleged that I was present at a meeting that I did not attend. I cannot accept responsibility for what he reads elsewhere. I was not present at the meeting and I was not privy to the decision that was taken, to which he referred. In accordance with the traditions of the House, the Minister should have the decency to apologise.
  Mr. Mellor: Further to that point of order, Mr. Speaker. The suggestion of extra-parliamentary action was raised by my right hon. Friend the Secretary of State when he opened the Second Reading of the Bill—
  Mr. Harry Ewing: The Minister must take responsibility for his own statements.
  Mr. Mellor: —and that seemed to lead to some surprise on the part of the right hon. Member for Leeds, South (Mr. Rees). I thought it right to expand on my right hon. Friend's suggestion when I replied to the debate. In doing so I read out what I had before me, which was a news item on the Press Association tape that was dated 18 November. I read it as reported and read all but the last two paragraphs. If the hon. Member for Midlothian (Mr. Eadie) says that he is misreported in the news item, I will, of course, accept that, and I do accept that. I have not the slightest interest in unnecessary bad blood with the hon. Gentleman or any other hon. Member. However, we all rely on what appears on the tape. I read out an item that appeared on the tape, which has been widely reported in the press. I had no knowledge that the story that appeared on the tape or the reports that appeared in the press were in any sense controversial. However, if the hon. Gentleman says that the Press Association report is wrong, I shall accept entirely what he says. It is the first time—[Interruption.]
  Mr. Eadie rose—
  Mr. Speaker: Order. May I just appeal to the hon. Gentleman? I know that he feels strongly, but the Minister has—
  Mr. Eadie: Further to the point of order, Mr. Speaker. The Minister's words were within the hearing of the House. If he was conveying to the House an apology for what he said earlier, it was the worst apology that I have ever heard. I repeat that I was not present at the meeting and nor was I privy to any decision that was taken at it. I learnt about the decision only when listening to a radio broadcast. The hon. Gentleman should have the decency to apologise without qualification.
  Mr. Jack Straw: Further to that point of order, Mr. Speaker—
  Mr. Speaker: Order. I think that the hon. Member for Blackburn (Mr. Straw) may take it that his hon. Friend the Member for Midlothian (Mr. Eadie) can look after himself. The money resolution—
  Hon. Members: Withdraw.
  Mr. Straw: Further to that point of order, Mr. Speaker. I am sure that my hon. Friend can look after himself, but there is a further important point. A double dishonour was committed this evening. Not only was a charge of untruth made against my hon. Friend, but, within the hearing of the House, the Minister said that he would give way to my hon. Friend in order that my hon. Friend could refute the charge. The Minister refused to do that. We want a double apology from the Minister tonight.
  Several Hon. Members rose—
  Mr. Speaker: Order. Like all hon. Members, I have a vested interest in good will in this Chamber. As I understood it, the Minister was withdrawing that remark.
  Mr. Mellor: I sought to explain, Mr. Speaker, but it was difficult against the barrage of what hon. Members were saying. The unchallenged story was on the tapes and I used it in good faith. If the hon. Gentleman says—[Hors. MEMBERS: "Withdraw."]—that he was inaccurately reported I entirely accept that, but the first I knew of that was after I used the story.
  Several Hon. Members rose—
  Mr. Speaker: Order. The money resolution—
  Mr. Eadie: Further to that point of order, Mr. Speaker. Hon. Members have rights. I repeat again that if the Minister is making an apology at the Dispatch Box, it is the worst apology that I have ever heard in this honourable House. I am asking the Minister to withdraw without qualification. I repeat that I was not present at or privy to the meeting that was discussed and I had no knowledge of the decision until I heard of it on the radio. I am asking the hon. Gentleman to withdraw without qualification.
  Several Hon. Members rose—
  Mr. Speaker: Order. The question is the money resolution.
  Mr. Roy Hattersley: Further to that point of order, Mr. Speaker. The whole House has a vested interest in proceeding to the next item on this evening's agenda. May I suggest, with respect to you, Mr. Speaker, and to the Minister, that the best way for us all to accomplish that task is for him simply to say "I withdraw".
  Hon. Members: Withdraw.
  Mr. Mellor: I have made it as clear as I can, Mr. Speaker, that I have acted in good faith on press reports—[HON. MEMBERS: "Withdraw."] If the hon. Gentleman says that he was inaccurately reported, I entirely accept that. In that case—[Horn. MEMBERS: "Withdraw."]—I regret the fact that there was an inaccurate press statement of what he said. I cannot say more than that.
  Several Hon. Members rose—
  Mr. Speaker: Order. I think I heard the Minister say—
  Mr. Eadie rose—
  Mr. Speaker: Order. I am on my feet at the moment. It is my point of order at the moment. I thought I heard the Minister say that he was sorry if there had been a mistake.
  Mr. Eadie: I apologise, Mr. Speaker, I did not realise that I had called you for your point of order.
  The Minister has an opportunity to gain for himself the respect of the House of Commons or to lose all respect during the whole of his parliamentary career. He has made before the House an inaccurate statement for which he is responsible. Although he read it from a press report the Minister is responsible for his own words. He has written that into the record of the House and he should have the decency to come before the House to withdraw that statement without qualification.
  Mr. Mellor: I have no wish to perpetuate this exchange. If the hon. Gentleman says that there was a misrepresentation and a slur in that story, I unreservedly accept that. I regret very much that this was not challenged before—[Horn. MEMBERS: "Withdraw."] The hon. Gentleman says that he was not there. I unreservedly accept that and I regret that I did not end my speech in some other way now that he has told me that.
  Several Hon. Members rose—
  Mr. Speaker: Order. An apology has been given.
  Mr. Hattersley rose—
  Mr. Speaker: Order. I do not wish to bulldoze the next business.
  Mr. Hattersley: Further to that point of order, Mr. Speaker. I regret the necessity to pursue the issue, but you will understand, as the House and the Leader of the House understand, that every time that the Minister qualifies his withdrawal he makes it not a withdrawal. I ask those who sit beside him to advise him simply to say what is clearly required. My hon. Friend says that he was quoted as saying something that he did not say. No one suggests that my hon. Friend is deceiving the House. The Minister's clear obligation is, therefore, to utter the two words "I withdraw". I ask his right hon. and hon. Friends to persuade him to do the sensible thing and allow us to proceed.
  Mr. Peter Tapsell: I think that I have sat in the House longer than any right hon. or hon. Member now sitting on the Opposition Front Bench. Having listened to the exchanges I think that my hon. Friend the Minister has been extremely courteous to the House. He has made his position plain. In the best traditions of the House the Opposition would be wise to leave the matter there.
  Mr. Doug Hoyle: Further to that point of order, Mr. Speaker. Press reports are sometimes inaccurate. The best thing to do is to recognise that they can be untruthful. The Minister should withdraw and apologise.
  Several Hon. Members rose—
  Mr. Speaker: Order. There is no point in continuing to listen to points which are not points of order, but points of indignation. [Interruption.] Order.
  Mr. Straw: Further to that point of order, Mr. Speaker.
  Mr. Speaker: Order. I have allowed points of order because I know that the hon. Member for Midlothian (Mr.

  943
  Eadie) feels very deeply. I have allowed a statement from the Minister. I see little advantage in continuing these points of order.
  Mr. Hattersley: Further to that point of order, Mr. Speaker. My great anxiety, and my principal duty, is to move a different motion tonight, but you will understand that I should be deceiving the House if I pretended that Opposition Members were satisfied with what has happened since 10.15 pm. The more that the Minister is reluctant to utter the phrase "I withdraw" the clearer it is that he is not making the withdrawal required of him and the deeper he gets into the difficulty. If he will say "I withdraw" we can proceed. Let him say it.
  Mr. Mellor: I thought that I had said it. If it satisfies the right hon. Gentleman I shall say it. The hon. Member for Midlothian has said that I was inaccurate. Of course I withdraw.
  Hon. Members: At last. We made him say it.
  Mr. Speaker: Order.

  Energy Bill

    ENERGY [MONEY]
    Queen's Recommendation having been signified—
    Resolved,
    That, for the purposes of any Act of the present Session to amend the law relating to electricity so as to facilitate the generation and supply of electricity by persons other than Electricity Boards, and for certain other purposes, and to amend the law relating to the duties of persons responsible for nuclear installations and to compensate for breach of those duties, it is expedient to authorise—

    (a) the payment out of money provided by Parliament of any administrative expenses of the Secretary of State attributable to the said Act;

    (b) any increase attributable to the said Act in the sums payable out of money so provided under the Nuclear Installations Act 1965; and

    (c) the payment of any sums into the Consolidated Fund.—[Mr. Lang.]

    BUSINESS OF THE HOUSE
    Ordered,
    That, at this day's sitting, the Motion relating to British Nationality may be proceeded with, though opposed, until half past Eleven o'clock or for one and a half hours after it has been entered upon, whichever is the later.—[Mr. Lang]

  British Nationality
  Mr. Speaker: I wish to give a ruling before this debate begins. The regulations before the House tonight fix fees for registration as a citizen or British subject and for the grant of a certificate of naturalisation as a citizen. Debate is bound to be limited on this issue. It could relate both to the desirability of making charges and to the levels proposed, but a debate on British citizenship would, of course, be out of order.
  10.29 pm
  Mr. Roy Hattersley: I beg to move,
  That the British Nationality (Fees) Regulations 1982 (S.I., 1982, No. 1011), dated 21st July 1982, a copy of which was laid before this House on 29th July, in the last Session of Parliament, be revoked.
  In praying against the order, the Opposition are raising a matter that relates to a fundamental difference of philosophy between the two major parties, for it seems to us that to establish a right in law that some members of the community cannot exercise because they do not have the money, is not the mark of a truly free society. A truly free society enshrines in its legislation rights that all its citizens or all those who dwell within its boundaries can exercise, irrespective of their financial circumstances and position. Yet if these regulations become law, they will divide the community that may apply for British citizenship into two groups—those who are theoretically entitled to citizenship and who can claim it because they can afford the fees, and those who are theoretically entitled to it but cannot obtain it because they cannot afford the fees.
  The most obvious example is a Pakistani woman of good character with an adequate, or more than adequate, command of English who has resided in Britain for five or more years. That woman is entitled to British citizenship. If the proposed changes in the immigration rules that we debated recently are carried through the House, her acquisition of British citizenship will be of fundamental importance in certain circumstances. It will mean the difference between her right to be joined in Britain by the husband of her choice or not to be joined here by the husband of her choice. The acquisition of British citizenship will determine the future pattern of that woman's life and her freedom to marry and live with the man she chooses. That is deeply significant to the woman and to her family. It is right that she can obtain, thus enabling her husband to join her here under the law, but she can exercise that right only if she can spend a sum of money that is well beyond the means of many of those families.
  There will be two classifications of potential British citizens in that group of women— those who can afford to become British and those who cannot. That is fundamentally wrong in every way.
  I hope that I need not remind the House that the highest fee for British nationality embodied in the regulation—£200 for a single registration—is well beyond the means of many of those who are likely to apply for British citizenship. The fee must be—some of us fear that it is intended to be—a deterrent that will prevent application for British citizenship from lower income groups. The fee is a result of a most extraordinary increase announced, and pushed through the House, by the Government. There has been a massive increase in the

  945
  nationality fee from £70 to £200 in five years, and a greater increase for discretionary registration from £35 to £200 during the same period.
  Those massive increases are certain to prevent some people who have the theoretical right of citizenship from exercising that right. They have been justified in the House and elsewhere by the Government's insistence that they must cover the cost for the processes involved in naturalisation and registration.
  The Minister of State, speaking on an amendment related to that topic, said in the Committee on the British Nationality Bill:
  "we are unable to provide a free service of naturalisation or registration.… it must remain Government policy to recover as much as possible of the cost of processing nationality applications."£[Official Report, Standing Committee F, 12 May 1981; c. 1884.]
  I shall consider in a moment whether that is a reasonable proposition.
  I ask the Minister whether the fears of many bodies outside the House are confirmed and whether, far from covering the fees of nationality and registration applications, the Government are making a profit on the poor families who in many cases will be unable to afford the fees required of them. I fear that the Government wish and intend to do far more than break even. I fear that it is the Government's intention, at least in this year, to make a substantial profit on the operation.
  I refer the Minister of State to two parliamentary questions, one asked by my hon. Friend the Member for Lambeth, Central (Mr. Tilley) on 13 May and one asked by my hon. Friend the Member for Battersea, South (Mr. Dubs) on 6 July. If those two answers were right—of course they were—and if one relates the income from nationality fees on one side of the balance sheet to the cost both of processing registration and naturalisation and of running the nationality division on the other side of the balance sheet, the net difference is a profit of £1·2 million. That profit accrues to the Home Office even when one has calculated, according to cost, the actual price of running a division of the Home Office.
  If the Minister's words in Committee were to be taken at face value, all the Government hoped to do was to cover the marginal cost of each application for British citizenship. If those two answers are as accurate as ministerial answers normally are, the Government are covering the cost of each registration application and nationality application, the administration of those services and the division in the Home Office that was responsible for that policy, but are still making a profit of £1·2 million.
  I am open to the Minister's contradiction if the two parliamentary answers were wrong, but that is inconceivable. If the two answers were right, it is disgraceful that what is enshrined in law as the right of people resident here should be, first, priced prohibitively for some of them and, secondly, priced at a level that allows the Government to make a profit on that enterprise.
  Not only does that seem wrong in principle: it seems wrong in comparison with what happens in other civilised countries. Many Conservative Back-Benchers normally cry at me for comparisons when I talk about immigration policy. Fortunately, they are not in their places, except for one, the hon. Member for Basildon (Mr. Proctor). On his behalf, and on behalf of those who are absent, let me
  946
  remind the House of what happens in other civilised countries—or dare I say, on this matter, in more civilised countries—with regard to applications for citizenship.
  In France, Holland, and Australia—I choose the examples purely at random—there is no charge. Those countries take the view, which is philosophically defended more easily than the Government's position, that if the Government of the day pass into law something that is the right of people resident in that country, that right should not be inhibited by any charge. However, France, Holland and Australia, which make no charge, are not the only classification. There are other countries, such as Canada, which charges between $2 and $15, and the United States, which charges $5. The people there believe that a notional price is right and proper. The consulate told me that it was to prevent and avoid frivolous applications with no purpose or meaning.
  I do not believe that the Opposition would object to a small charge to avoid the frivolous application and the waste of administrative time, but the difference between the notional charge and the substantial charge of £200 per person is not only quantitatively great; it is fundamentally different. That is why the Opposition will vote against the proposal tonight.
  Mr. K. Harvey Proctor: Did the right hon. Gentleman consider that the charges made under the previous Labour Government were notional?
  Mr. Hattersley: They were rather more than notional, but they were a great deal less than is being charged now.
  Mr. Proctor: Will the right hon. Gentleman give way?
  Mr. Hattersley: When I have given way this time, I shall give way again. While I am giving way the first time, I remind the hon. Gentleman that the increase that I quoted is from £35 to £200. I am sure that he can do the simple sum that shows the proportional increase and I am sure that he will agree that that move is something from notional to fundamental. I shall give way again with pleasure.
  Mr. Proctor: If the right hon. Gentleman agrees that the charges were rather more than notional under the previous Labour Government, can he tell the House what steps he took to have them reduced?
  Mr. Hattersley: The hon. Gentleman is obsessed with my obligation to have resigned from the Government five or six years ago. He makes that point in every debate. I accept entirely that while I was burrowing away as the Minister of State in the Foreign Office I was not as diligent as I might have been about every order that went through the House. If the hon. Gentleman ever achieves office in a Conservative Government, I promise him that all sorts of things that happen will escape even his notice.
  I also ask the hon. Gentleman to try for one moment to concentrate on the merits of the argument that is being pursued. One of the features of association football is that people who cannot play the ball choose to play the man. I propose to continue playing the ball for the next 20 minutes.
  Mr. John Fraser: Some of us who served in that Government were worried about the matter but, unfortunately, we were not listened to by the right hon. Member for Glasgow, Hillhead (Mr. Jenkins).
  Mr. Hattersley: I propose to abdicate from this apportionment of blame and continue with the merits of the argument that ought to detain the House from time to time when we discuss matters of some importance.
  The merits of the argument are clearly these. To charge £200 is, in many cases, to prohibit the nationality application that is, in theory, the people's right. It is a charge that is not mirrored in other civilised and compassionate countries.
  As the hon. Member for Basildon is so keen to know the Labour Party's attitude on these matters, I remind him that in Committee on the British Nationality Act 1982 we proposed a maximum charge of not more than 1 per cent. of the taxable income of the applicant. My view is that that was a maximum and probably on the high side. One can think of people for whom 1 per cent. of their taxable income, especially if many of one family were applying, would be a prohibition. The point that I have made time after time is that although we can be flexible about the cost and although we lay down no specific provision of what it should be, the principle that governs what it should be is that it should not be so high as to prevent the legitimate applicant from making an application and receiving British citizenship.
  The charge should not be so high, especially in the circumstances of applications today. The service is deteriorating. As it becomes increasingly expensive to exercise the rights to which I refer, it becomes administratively increasingly difficult to exercise those rights.
  In 1976, when the cost was £35 or £70 at most, it took 18 months for a citizenship application to be processed. It now takes at least two years if we are to rely on the answer that the Minister gave to my hon. Friend the Member for Liverpool, Scotland Exchange (Mr. Parry). If we are to have that high price and if a profit is to be made on the deal in the Home Office, surely it is reasonable for the applicants to say that some of that profit should be used to recruit enough members of staff to enable the applicant to have his application processed in a few weeks or a few months but certainly less than two years. The idea of a profit is anathema to us. It is equally so if that profit is being used when intolerable waiting periods are being imposed on the applicants.
  I say for the third time, believing it to be worth repeating, that it is no good our saying to residents in Britain, "You have a statutory right", if they are incapable of exercising that right partly because they cannot afford to do so and partly because the time that it takes to exercise that right makes it worthless once it has come into absolute operation.
  As a result of Mr. Speaker's ruling, and the rules of order that have rightly been drawn to our attention, it is impossible for me to give anything like a comprehensive description of our general criticisms of the processes by which United Kingdom citizenship is obtained. I therefore conclude with three comments. First, if we are to have a proper, decent and respectable system for obtaining citizenship, it must be obtained as a result of an objective, rather than a subjective test. Secondly, that test must be subject to the right of appeal. Thirdly—a point that is most important and relevant to this debate—if the objective test has been passed and if an appeal is unnecessary because citizenship has been potentially granted, citizenship must be within the range and reach of every applicant, irrespective of his income group or financial circum
  948
  stances. At present, many potential citizens are theoretically offered the right but practically denied it. We shall rectify that when we return to power. In the meantime, we shall vote against the regulations.
  10.47 pm
  The Minister of State, Home Office (Mr. Timothy Raison): There are moments when I think that the aim of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) seems to be to emulate the right hon. Member for Manchester, Ardwick (Mr. Kaufman) in his mastery of hyperbole. This evening he has given us an example of that.
  I accept that there is a problem that the House should consider. From my contacts with members of the ethnic minorities and others, I know that there is anxiety and that questions have been asked. I shall pick up the point made by the right hon. Member for Sparkbrook that we should look at the merits of the argument and explain why we are following this policy.
  In no sense do we intend the fees to be a deterrent. Neither the Secretary of State nor I seek to stop people from acquiring our citizenship. If people make a commitment to live in this country, it is right that they should move towards our citizenship. It is important that British citizenship should be available to those who belong here. We are not trying to deter people from acquiring our citizenship. There are quite different reasons for the fees.
  I must emphasise the fact that, with one small exception, no fee is increased by the regulations. There are some new fees which apply to new provisions which appear for the first time in the British Nationality Act 1981, but where that Act contains provisions that are similar to those in the present nationality legislation—and this is the overall pattern—the regulations repeat the fee that applies now. The only exception is that for renunciation of citizenship, where a fee of £35 is introduced for the first time since 1976. Therefore, we are debating, not increases in fees in these regulations, but the fees that were introduced by regulations made earlier this year, and which apply from 1 April. Those regulations also introduced a new procedure requiring payment of the fee with the application.
  The fact that we are having this debate is, of course, largely due to a change which the Government made in the Bill that became the 1981 Act. Formerly, the regulations on fees were not subject to parliamentary procedure. The Government felt that that was wrong. The proposal in the Bill therefore was that the regulations should be subject to negative resolution. This was enacted as section 41(7). As my right hon. Friend the Home Secretary said on 4 June 1981, this is a significant advance. It enables the House to give careful consideration to this important matter.
  My right hon. Friend also said at that time that there would have to be an increase in fees, but he undertook to do what he could to keep costs down. My right hon. Friend has kept his undertaking, because, although fees were increased from 1 April, the rises were, I would argue, reasonable. That was the first increase for two years as well as the first occasion in recent years on which any Government made a serious attempt to recover the full costs through fees.
  I stress again that the regulations that we are discussing do not go beyond the fees that came into force earlier this year. Over the years, successive Administrations have raised the fees for citizenship. In 1975 the fee for

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  naturalisation was £40. For registration as an entitlement it was £10. In October 1976 these fees were raised to £70, a rise of 75 per cent., and £25, an increase of 150 per cent. By April 1979 they had reached £90 and £37·50, so it can clearly be seen that a significant increase in the level of fees is no new phenomenon and that it was the Labour Government who raised fees by these proportions.
  We are getting used to hearing the right hon. Member for Sparkbrook expressing his regret at the things that were done by the Labour Government when he was apparently busy doing I know not what at the Foreign Office. He must face the fact that the fees were increased on this scale by the Government of whom he was a member. It is no use blaming the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) either. [Interruption.] The hon. Member for York (Mr. Lyon) was Minister of State at the time. He is the one hon. Member who cannot escape a share of the blame. Ministers of State must bear some responsibility for the policies of their Departments.
  Mr. Alexander W. Lyon: As I am called in aid of a fellow junior Minister, I should point out that junior Ministers may also plead that they did what they could to get rid of this absurdity at the time. It might serve the present Minister as a useful example if he would analyse how the cost of an application was calculated. The Home Office simply takes the cost of the whole of the Department's work on nationality and divides that by the number of applications. That is how such a high fee is produced.
  Mr. Raison: The present Minister intends to continue with his explanation of why we have adopted the policy that we have. I think that that is the best course for me to take.
  The Government's policy is to keep a firm control on public expenditure and to limit the burden that this places on the economy. Citizenship is an area in which the initiative is taken by the applicant because he or she wants to acquire our citizenship. The State admittedly has an interest in ensuring that the applicant meets the requirements or criteria for citizenship, but even this is in the applicant's interests, as he or she then knows that what is being acquired is in no sense devalued. It is fair, therefore, that the fees charged to applicants should cover the costs of the system.
  Fees for citizenship were raised in April 1980 to £150 for naturalisation and discretionary registration and to £50 for registration as an entitlement. There was then a period of. two years in which no changes were made. In April this year the fees were again increased, to £200 and £70 respectively, with the fee for the registration of a minor child going up from £25 to £35. Those are the fees which we intend should continue in force on 1 January. As I have said, the increases were comparable in percentage terms with those introduced by the Labour Administration.
  The right hon. Member for Sparkbrook suggested that increases in fees deter would-be applicants for our citizenship. He said that categorically, but I do not think that he is justified in doing so. In fact, the precise effect is difficult to pin down. The increases in fees since 1976 certainly do not seem to have prevented people from applying for citizenship —rather the reverse. Intake has
  950
  increased considerably over that period and unfortunately there has been a consequent increase in arrears of applications awaiting processing.
  There has, however, been some falling off in the rate of applications since the regulations were made in April. Equally, the coming into force of the regulations was preceded by a very substantial jump in the numbers applying. People are also understandably taking some time to get used to the new system of payment with the application. It is too soon yet to say how far demand may or may not have been affected by the rise in fees. Current indications are, however, that the great majority of applicants who did not send in their fees with their applications initially did, in fact, later send in their fee on request.
  I hope the House will bear with me if I now quote figures that have already been given in another place. They are of considerable significance in the context of waiting times and costs.
  Five years ago, in 1977, the intake of applications was about 32,000. The nationality division then had 184 staff. In 1981 intake reached 70,000, and in the middle of last year the staff totalled 231. So far this year, up to the end of October, 51,500 applications have been received and the staff now totals 243. As can be seen, the Home Office has been able to approve modest increases in staff to reflect the rising number of applications. Much has also been done to improve and simplify working procedures. Despite all that, delays continue to be a serious problem. I do not deny that.
  Mr. William Pitt: Can the right hon. Gentleman give an assurance, in view of the profit made by the Government from the continued increase in registration fees and the appalling backlog at Lunar House, where postbags are sometimes three or four months old, that the delay will be reduced? Will he enable those awaiting citizenship to obtain it in a proper time?
  Mr. Raison: I shall deal in a moment with the question of the so-called profit. I have stated that we have been able to make some increase in the number of staff dealing with the applications. A careful scrutiny of the operation has been made by Sir Derek Rayner, which is leading to improvements in the handling of applications.
  The previous fees procedure of payment on approval of the application also meant that fees were always chasing costs. With increasing delays, the fees collected represented only a small proportion of costs. In the financial year 1980–81, recovery of costs was as low as 30 per cent. Even last year, following the increases made in April 1980, we achieved only 56 per cent. recovery. To illustrate what I mean, one has only to look at naturalisation applications. An application for naturalisation made in 1979 cost, on average, £230 to process. But the fee received when the application was approved was only £90. Those figures show the extent to which the taxpayer generally was subsidising fees, and it seemed to the Government to be an unacceptable situation.
  If we had kept the system whereby the fee was paid only when the application was approved, much larger increases in fees would have been necessary last April were costs to be recovered. As it is, by introducing the new system of payment at the time of making the application, we should be able to recover all the estimated costs of processing the applications made in this financial year.

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  We shall also be receiving this year fees from applications made before 1 April. These relate to applications made in previous years and the fee will be collected when the application is approved, not at the beginning as under the new system. I stress that nothing that we have done over the introduction of new fees has been retrospective, and the old system therefore operates for applications received before the regulations were amended. This means that, in addition to the fees that we collect to cover the cost of this year's applications, we are also receiving fees that relate to applications received in earlier financial years. Therefore, the estimated receipts of £6·9 million may exceed the costs of processing applications for the current financial year by about £1·2 million, as the right hon. Member for Sparkbrook correctly stated.
  I emphasise the fact that this is a "once and for all" situation this year. It reflects the fact that under the previous system the fees were collected too late to have much bearing on the current costs of the operation. This factor will have largely disappeared next year.
  Mr. Edward Lyons: Does the right hon. Gentleman agree that on the basis of a two-year delay between application for naturalisation and the granting of it the payment of £200 in advance instead of in arrears means that the applicant is making an interest-free loan to the Government of £200 for two years? If one takes a notional rate of interest of 10 per cent., that means that £40 interest in the hands of the applicant is handed to the Government, and the real increase is not to £200, but to £240, which is a disgrace.
  Mr. Raison: The answer is simply that it is not a disgrace, because the fee that is charged at the beginning—when the application is lodged—will clearly be less than the fee would be if we were to charge at the time when the application is completed. Obviously costs will have gone up between the first and second period. Therefore, it is not true to say that it is disadvantageous to applicants to pay their fee at the beginning rather than at the end. That is a matter of simple arithmetic.
  Mr. Ian Wrigglesworth: Does the right hon. Gentleman accept that if the Department is delaying applications for naturalisation, it is stimulating an enormous amount of paper work and other administration as a result of all the inquiries and the checks that are taking place? Eleven thousand telephone calls in a month because people cannot get through to the Department is part of the cost for people who are waiting and having to pay their fees.
  Mr. Raison: The hon. Gentleman is going rather wide of naturalisation in talking about the number of telephone calls. However, the granting of naturalisation is a serious business. Quite rightly, Parliament has decided that people have to satisfy certain criteria, and in particular have to satisfy criteria relating to good character and language tests. If that is to be properly carried out, it cannot be done without a certain amount of paper work and investigation.
  We are fulfilling the duties laid on us by Parliament in carrying out these duties. In doing so we use great care, but we also respond to the fact that a large number of people want British citizenship. The reason for the delay has been the great demand to acquire British citizenship.
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  It is an attractive citizenship to work for, and that is why there has been this large inflow and the amount of work with which we have had to cope.
  The right hon. Member for Sparkbrook spoke about the burden which the increases in fees may impose on many families. It is also said that the need to send the fee with the application will deprive some people of the opportunity to make an application. We have been told about those Commonwealth citizens who have been settled here for many years and are entitled to registration on application but find it difficult to find the money to send with their application. It has also been suggested that fees should be reduced or waived in appropriate cases, or that there should be facilities for the making of staged payments.
  As I have said, I do not deny that there is concern about some of these points, but there is, however, a limit to how far the Government can go in the present economic climate towards providing subsidised access to citizenship. I am afraid that we cannot agree to waive or reduce fees for particular categories. To do so would require additional administrative machinery and would mean adding to the delays and costs that have already been referred to. These schemes have been considered in the past, and they are not workable or capable of being administered fairly.
  The regulations do, however, contain certain important provisions which reduce the cost to married couples and to families. For example, we decided that it would be right to continue the provision whereby a wife applying with her husband for naturalisation should pay a lower fee, now £70. This will continue also from 1 January, and the total fee payable for a joint application by husband and wife will be £270. Also, the fee of £35 for the registration of a minor child will continue to cover the registration of however many children there may be of a marriage, provided application is made for their registration together. It is therefore as cheap to acquire citizenship for two or three or four or even more children as it is to acquire it for one.
  The right hon. Member for Sparkbrook talked about women who might wish to acquire citizenship as a prelude to bringing in a husband. We are unlikely to be talking here about people who can be described as really poor. After all, the man will have to be able to pay the cost of his fare to this country, the wedding costs, and very likely the initial costs of setting up a household, and so on. It is therefore obvious that he will not be a pauper. I do not believe that in these cases the alleged deterrent effect is likely to apply.
  Hon. Members will be aware that an unsuccessful applicant has the fee refunded. The question of making such refunds with interest has been raised. We do not believe that the payment of interest could be justified. As with proposals to waive fees, the overall cost of processing applications would become more complicated. Fees overall would therefore have to go up still further. Moreover, the greater the interest payable, the more work is likely to have been done on the application. However. there is also an argument for saying that even unsuccessful applicants should make some contribution. After all, that used to be the case before 1976, when naturalisation applicants had to pay a preliminary fee. The fact that no interest is paid with refunds should be regarded as a means whereby the unsuccessful candidate makes a modest contribution to the cost of processing his application.
  To sum up, the increases in fees that were made last April were necessary after a two-year standstill. The change in the payment procedure means that this year we

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  can eliminate the element of public subsidy with citizenship applications, which had continued for so many years. If we had not changed the method of payment last April, increases in fees of about 80 per cent. would have been necessary, rather than the 30 to 40 per cent. increases that were made. I have explained to the House how the Home Office has not been content simply to continue its existing procedures. It has taken new measures which, as we all know, have led to a 76 per cent. rise in the number of applications granted in 1981.
  I am confident that our approach to these difficult matters has been right, and I therefore strongly recommend the House to reject the motion.
  11.7 pm
  Mr. Ian Wrigglesworth: I shall be brief. First, I am disappointed that, despite all the representations that the Minister receives, week after week, from hon. Members, and the letters that he receives from people applying for citizenship, he expressed no regret for the two years' delay that people are facing, and the hardship and uncertainty that that causes. Even if we accept, as I do, that there are administrative problems, the delay and the terrible uncertainty have caused great hardship to many people and their families. I should have thought that any Minister who was responsible for these matters would show some compassion and have some care for the people who are involved in those delays.
  My right hon. Friend the Member for Glasgow, Hillhead (Mr. Jenkins) was mentioned. There was another Home Secretary after him—the right hon. Member for Leeds, South (Mr. Rees)—and the record will show that in 1976, at the end of my right hon. Friend's term, the backlog of applications was about 26,000. It has gone up now to almost 80,000. The time that people have to wait has also increased. In view of what the Conservative Party said in its manifesto about the Civil Service, there was no way in which the Government would increase the number of civil servants working at Lunar House. Nor was there any possibility of the Government reinforcing the services provided at Lunar House to reduce the backlog. It is bogus to suggest that any serious attempt was to be made to overcome those problems.
  I do not object, and nor does my party, to a fee being paid, but we object to the extent of the increase in the fee since the Government took office. In 1980 the fee jumped £60 from £90 to £150. This year it has been increased by £50 to £200. One might accept that the fee should be increased in line with inflation, but the increases that have been made are unjustified and will inevitably cause considerable hardship to applicants.
  If the proposal is that the fee should cover the cost of administration, those who pay the fee should receive some service in return. They should receive replies to their telephone inquiries and letters. As has been pointed out so urgently, people who do not receive replies to their letters do not know what is going on. They come to our surgeries so that we can find out from the Minister. That causes more expense and difficulty. There is no justification for increasing fees to their present level.
  The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) made the fundamental point, which emerged also from the Minister's remarks, that people applying for citizenship and naturalisation are not being
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  given generous favours. It is their right, and one would expect people who are applying for their rights to be treated properly and not be deterred or barred by the fee or administrative problems. For that reason, I view with sympathy the proposal to waive fees for those applicants on supplementary benefit or family income supplement or for those who are not earning. Such people have the right but do not have the means to obtain it. They should have their right, whether or not they can afford it.
  I hope that the Minister and the Government will look at the proposal again so that people who cannot afford the substantial fee can claim what is theirs.
  11.12 pm
  Mr. Ivor Stanbrook: The bogus indignation that has been stirred up by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) is deplorable and gives people a poor impression of the merits of this proposal. The Labour Party's present attitude towards immigration is pure humbug, because in the past it has always taken a realistic attitude towards the payment of fees for the grant of registration and naturalisation.
  Why do the Opposition now say that there is something wrong in charging fees when they happily charged them? Why they should say that fees should not be increased when they increased them regularly defies imagination.
  Since 1948, if not before, the people about whom they have been speaking so tenderly have been able to obtain citizenship, or its equivalent, by filling in the form and paying the money. Why should it be so different now that we are establishing a new terminology and setting a realistic fee? Indeed, that was set earlier this year. It is no different in principle. The Labour Government knew that.
  I suppose that the Government, with their realistic attitude towards the cost of public services, have assessed the correct fee—£70 for registration and £200 for naturalisation. That seems to be a proper ratio, although I cannot say to what degree it may be related to the overall cost or the individual application.
  It was absurd for the right hon. Member for Sparkbrook to say that the fee should be means tested in some way and that people should pay what they could afford. The most fantastic idea came from the hon. Member for Thornaby (Mr. Wrigglesworth). British nationality is not a right. It is the most precious gift that we can confer on anyone who does not possess it. It is a wonderful thing. It is worth every penny that people must pay for it. Those who are not prepared to pay that price should not be allowed to have it. Some sacrifice should be made for such a privilege.
  It is perfectly reasonable and proper that people who are entitled to that privilege should pay £70 towards the cost of registration. It is perfectly proper that foreigners with an allegiance to another country and another sovereign should pay £200 because there must be investigation into their antecedents and qualifications.
  Have we lost all sense of reality in suggesting that a person who wishes to qualify for the privilege of being a British citizen should not be required to pay a realistic price? It is absurd for hon. Members to waste the time of the House on such a subject.
  11.16 pm
  Mr. Alexander W. Lyon: I agree that there is a good deal of humbug in the House tonight, but I suspect that it is largely centred on Conservative Members and a little on the Front Bench below the Gangway. A fair

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  amount came from the Government Front Bench. The Minister is becoming adept at speaking with a forked tongue. When he goes to talk to the minority communities he is bland, charming and sensitive to their difficulties. He was so in his opening remarks tonight. However, there was not one hint of sensitivity about the problems that unemployed people—disproportionately unemployed because they are members of minority communities—face upon being asked to pay these fees.
  When I was doing jurisprudence, I read of a supreme court judge in America defining law in terms of the capacity of the miscreant to pay the fine. He reckoned that the owner of a Rolls-Royce, who was convicted of a motoring offence but fined the same as the owner of a mini, was in a better position to commit an offence.
  This matter is rather like that. For the Minister £200 may mean nothing, but to an unemployed person with a large family to feed, it is an enormous sum of money. I accept that the Labour Government increased the amount, and I protested about it at the time. However, there is a marked change in the nature of the application.
  When the matter was considered in the mid-1970s, the great majority of applications came from Commonwealth citizens who were registering and the charge then was small. Now there are a disproportionate number of applications for those who come to be naturalised. It is that change in the burden of the work which is throwing more work on to the Department.
  Quite apart from that, there is the question of what the Minister means when he talks about not subsidising the cost of the operation. That is computed in the most elementary way. The Under-Secretary in charge of the Department tots up the total cost of running not Lunar House but the nationality department of the Home Office. Then he divides that by the number of applicants in any one year. On that basis the applicant is charged a fee.
  In the days of the Labour Government we did not charge the full cost of each application because we recognised that the applicant was not causing the full cost of it. There were the cleaners in the Department, the cars in the Department, the heating of the Department and all the other work that the Department did apart from dealing with applications for registration or naturalisation. The Minister is saying that every applicant must pay toward these costs. In a sense, it is not the taxpayer who is subsidising the applicant, but the applicant who is subsidising the taxpayer.
  It may be that the £1·2 million profit is a temporary phenomenon arising from the change in depositing the fee when the application is made, but, overall, under the scheme that the Government are pursuing of charging the full cost to the Department of the applications, the applicant is paying something towards costs that his application did not cause.
  If we are discussing a gift of undiluted virtue, according to the hon. Member for Orpington (Mr. Stanbrook), why is it that the Americans, the Australians and the Canadians, who regard their nationality in exactly the same way as we regard ours—especially the Americans—do not feel it necessary to charge these huge fees? It was not the practice of the United Kingdom to charge such fees until the Government of the right hon. Member for Sidcup (Mr. Heath) in the early 1970s, decided that there should be a fee for such applications to lower public expenditure. The truth is that we should not have these fees at all.
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  My former PPS, the hon. Member for Thornaby (Mr. Wrigglesworth), will remember only too well the times that we had under the stewardship of the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), who was Home Secretary in a Labour Government. If he is saying that the Social Democratic Party is concerned about the plight of immigrants in paying these fees, I only wish that the right hon. Member for Hillhead had accepted tile advice that he was given as Home Secretary and abolished the fees. The right hon. Gentleman, who came straight from the Treasury, was among the first to talk about public expenditure. It does not come well from the SDP to advance the immigrants' case in this debate.
  11.23 pm
  Mr. Eldon Griffiths: It has emerged in the debate that the fees have been increased mainly by Labour Governments. I do not like the level of the fees.
  Mr. A. W. Stallard: Does the hon. Gentleman mean that they are too high?
  Mr. Griffiths: I do not like the fact that the numbers of those engaged in this business steadily increases. The methods by which the Home. Office manages this business remain extremely backward. Conservative Members are committed to improving the efficiency of Government and everything that my right hon. Friend has said tonight proves to me that the efficiency of Government is extremely low and getting lower.
  In the past 10 years there has been an office revolution in private industry. The ways in which paper work, information retrieval and computer methods are dealt with in private industry have caused a drastic reduction in the numbers of employees required to process paper, and there has been a great acceleration in the way in which information is processed. The evidence presented by my right hon. Friend of the way in which the job is done is a deplorable example of Government remaining incompetent. If private industry were to run its affairs in anything like this sloppy fashion, it would be far less able to pay the taxes that are helping to carry this incompetent bureaucratic machine.
  I support the policy of full cost recovery. It is exactly right and the comments that have been made from the Opposition about means testing and about letting off certain people are irrelevant, but there is one corollary which should apply across the public service—if there is to be full cost recovery there should be full disclosure of the make-up of Government charges on the citizen.
  The hon. Member for York (Mr. Lyon), speaking with some experience of the Home Office, is correct. In Department after Department, full cost recovery is not accompanied by any demonstration to the House of how the charges are made up. Will my right hon. Friend provide some precise figures? How does he arrive at the hourly pay of those who are handling this paperwork? My suspicion is that the hourly pay is a great deal higher in the public sector in general, and in the Home Office in particular, than it could possibly be in the private sector. How much of the overheads are lumbered on to this service when they arise from the remainder of the operation of that department of the Home Office?
  Those figures can be known. I have already had discussions with the Treasury about the charges that are

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  now being made on the weighing machine industry. Once the Treasury and the Comptroller and Auditor General started to examine these matters, we discovered that the overheads with which the citizen was lumbered were unacceptable.
  The Minister said that Sir Derek Rayner had been looking into this matter. I hope that he will make some progress because it has been revealed tonight that the machine is exceedingly inefficient.
  My final point concerns the proportion of costs that are now being recovered. I understood my right hon. Friend to say—this is only one of the many figures that he fairly gave to the House—that last year it cost a staggering £230 to process each case. The United States has far more experience of handling naturalisation than any other country in the world. It has to deal not only with people from half a dozen racial and cultural backgrounds—as we do in Britain—but with the most extraordinary melting pot in the world, including in Los Angeles at the moment about 250,000 people from different parts of South-East Asia. I suggest to my right hon. Friend that the American problem of naturalisation is infinitely greater than the one with which we must cope in Britain, but the Americans manage to process them in a matter of weeks rather than in a matter of years. The revelation that it is taking up to two years and costing up to £230 in Britain to process a single naturalisation demonstrates to me that we have too much incompetent, inefficient, bureaucratic machinery. That is the answer to the Opposition because they want more of it. They want to run the whole country in that way. That is why I sit on the Conservative Benches and not on the Opposition Benches.
  The Conservative Party came to office to improve and to make more efficient the processes of government. I should like to hear from my right hon. Friend a better description of the job that we are doing than the one we have had tonight.
  11.30 pm
  Mr. John Fraser: I should like to declare an interest, first, because as a commissioner of oaths I will receive £2 under article 10 of the regulations and, secondly and much more important, because many of my constituents deeply resent the imposition of fees at such a level.
  When the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) first thought about imposing these fees my hon. Friend the Member for York (Mr. Lyon) and I were deeply opposed to them and I remain so opposed to any fee.
  Mr. Edward Lyons: The hon. Gentleman knows that the fees were introduced by the Conservative Government. When the hon. Gentleman embarks on a vendetta, he should stick to the facts.
  Mr. Fraser: My hon. Friend the Member for York and I made representations to the right hon. Member for Hillhead when he was Home Secretary, but he was so arrogant to his junior Ministers that he would not even listen. Members of the SDP will soon learn that, because the right hon. Gentleman's reputation for being arrogant is percolating throughout the country.
  I am opposed to fees in principle. I fail to understand how the Government can charge £200 for discretionary
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  registration. What has to be done? First, Lunar House—sometimes called "Lunatic House"—has to check that the application is in order. I have some experience, so I know that provided that the papers are reasonable it does not take more than a few minutes to look at passport markings to check whether the five year absence condition has been satisfied. Secondly, the Home Office has to establish that the person has a command of English. If hon. Members are worried, perhaps they would like to privatise that part of the operation. People have only to go to an institute in my constituency to obtain for next to nothing a certificate to prove that they have a command of English.
  Thirdly, the Home Office has to be satisfied that the person is of good character. That normally means that the person has no criminal record. That is relatively easy to check using the police computer. Some policemen, even without authority, have no difficulty in finding out whether someone has a criminal record.
  What on earth do Home Office officials do for the rest of the two years? We are entitled to an explanation of why it costs £200 and what on earth goes on for two years? Of course, the real answer may lie with the Treasury, but if the Minister cannot explain I hope that hon. Members who sit on the Select Committee on Home Affairs will take up the issue and explore it in detail.
  11.33 pm
  Mr. William Pitt: I declare two interests. First, "Lunatic House" is in my borough but fortunately not in my constituency, and, secondly, many of my constituents are affected by the regulation. I am appalled that a profit is made. I failed to receive a satisfactory explanantion when I intervened earlier. Lunar House is in an appalling mess.
  A Mr. Shah came to my surgery last Saturday. I shall write to the Minister about him in more detail later. He applied for British nationality and waited 18 months. Lunar House told him that he was out of time by a couple of days. He re-applied on 24 May 1981 and is still waiting for a reply.
  I am told that sometimes sacks of mail three months old can be seen at Lunar House. Their arrival is noted, but no one opens the envelopes. That is appalling and it must be stopped.
  We charge a person the incredible sum of £200 to become a naturalised citizen when Australia and America charge much less. No country could be more proud of its nationality than the United States. We must consider what is done for the £200 and process the applications in weeks not years, otherwise we are being immoral and fatuous. That is why I shall support the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) tonight.
  11.34 pm
  Mr. James Lamond: I should be sorry if the debate developed into a clash between two or three political parties, because I am worried about individuals, including many of my constituents, who have real fears and real difficulties.
  Some hon. Members believe that there should be full cost recovery. That is a wonderful idea, but why is it not applied to everything we do? If we applied full cost recovery along the corridor in the Members' Dining Room, perhaps we need not fiddle the figures to try to show a profit. But everyone accepts that. Everyone accepts that those who borrow money from building

  959
  societies do not repay its full cost. We accept that, because we realise that we cannot charge the full cost for that which is desirable and which we encourage people to have. We believe that no one should be debarred from having those things because of the cost.
  Perhaps there can be a political argument about that, but there can be no political argument about the need for efficiency at Lunar House. Some of my constituents have been driven to despair by the long wait after application, with no acknowledgment of letters and the impossibility of getting through on the telephone. I tried to get through to Lunar House every half hour one day, but nothing happened. It is even more frustrating if one is telephoning from Oldham or further afield. I cannot believe that the Minister is insensitive to the fears of those who must wait such a long time.
  I hope that the Minister will apply the same energy to this matter as his right hon. Friend the Secretary of State for the Environment applies when he receives complaints from people who are waiting to purchase their council homes. If they must wait two years for their application to be processed, there is a row in the House and legislation is brought forward to cut the waiting time. If we can do that for those who are waiting to buy council houses, why cannot the Minister take the point that is being made even by his own colleagues? It is not a political matter, but a matter of dealing fairly with people.
  It need not take two years to process an application if the system is efficient. Are the bags of mail opened when they arrive at Lunar House? If they are not, envelopes containing £200 must sit unopened for weeks. Is that efficient? The delays are due not to investigation but to inefficiency and the Minister must accept responsibility for that.
  11.37 pm
  Mr. John Page: I am sorry that I was not in the Chamber to hear the earlier part of the debate and I shall intervene in only about three sentences.
  British nationality is the greatest privilege and the greatest pride that can be invested in a human being. To cavil at a price of £270 for the greatest privilege on earth is remarkable. The cost of a Rolls-Royce—about £27,000—is suitable. I hope that my right hon. Friend the Minister will not be forced into hurrying by exhortations from hon. Members on either side of the House. The hon. Member for Norwood (Mr. Fraser) said that his idea of proof of being a fit and proper person was the absence of a conviction. One should consider the matter much more deeply than that, and I hope that my right hon. Friend will continue to do so.
  11.39 pm
  Mr. Sydney Bidwell: There is not much point in our digging into the past. One cannot say that a lovely Labour Party and a rotten Tory Party introduced the present system.
  I shall address my remarks specifically to the Minister of State. The fees are being raised alarmingly. The current delay in processing the applications means that we are discouraging applications for naturalisation and eventual citizenship. It follows that, with a new British Nationality Act on the Statute book, whether it was introduced under a Labour Government or a Tory Government, the applications will begin to come flooding in. When the Act is under way in the new year the numbers of applications
  960
  will increase again. We shall not face the problem of keeping people waiting for two years—that period might extend to three years and more.
  There is also expenditure on advertising, which is part of the regulations. A public declaration of intention is being made. There is also the question of stateless persons. In some families one person may find it difficult to get out of the country because he needs travel documents to do so. The numbers of such people are increasing.
  We said in our controversial report in the last Parliament that we sought to encourage people of another nationality who had lived in this country for many years to go for naturalisation and to make up their minds whether they thought that they belonged to this country. I do not know whether there is any logic in what the hon. Members for Orpington (Mr. Stanbrook) and Harrow, West (Mr. Page) say, but I am on their side when they say that it is a privilege to be a British citizen. I am a British patriot. We do not suggest that all patriots sit on Conservative Benches by a long chalk. The true patriots are members of the British working class.
  If the new workers from overseas want to become members of the British working class and enjoy the privileges of being a citizen, but there is delay or extra fees, or it takes a long time to apply for naturalisation, they are continuing in an underprivileged position. Therefore, one cannot have it all ways. If true Tories believe in the equality of opportunity, they should be in the forefront of those criticising the Minister's proposals.
  11.42 pm
  Mr. Alfred Dubs: When a constituent asks me whether he should apply for British citizenship, I invariably advise him that it would be in his best interests to do so, and there then follow the difficult discussions on the high cost of pursuing the task of applying for citizenship.
  It is within the experience of most of us who represent inner city constituencies that people were made anxious by the passing of the British Nationality Act and are resentful and upset by the high charges that are being imposed on them if they seek to become citizens of the country in which they have made their home.
  The inefficiency of the nationality division of the Home Office is almost a byword. I wonder when the Minister last looked at the procedures in the part of the Department that is his responsibility. Let me give him an example. A couple of days ago I was telephoned by my local community relations council, which could not get hold of copies of form R1A anywhere in Wandsworth. This is one of the forms that people must fill in when they apply for registration as citizens. In the end I had to telephone the Minister's private office to ask his staff whether they could get hold of the form. I was happy to do that on behalf of my local people, but it is ludicrous that because they could not get through to Lunar House on the telephone they had to resort to the device of contacting me and I had to ask the Minister's private office to obtain the form.
  Mr. Jack Straw: Is my hon. Friend aware that that is a widespread problem? I had exactly the same problem this week.
  Mr. Dubs: I hope that the Minister's Department will be able to send the forms quickly, because people are asking for them as they wish to make the necessary applications.

  961
  What is the basis for the assessment of the cost of applications? Is a fair charge being made? Is it not a fact that the nationality division does a great deal more than process applications for citizenship? Is it not true that it advises on policy? It is not the case that a fair proportion of its work is nothing to do with such applications, and that to impose the whole cost of that division on people who apply for citizenship is grotesquely unfair and will not ensure that people pay for the true costs of the service? I suggest that if the Minister were to review the efficiency of, and the proper costings for, the service he would end up with much lower charges than those that we are discussing.
  11.45 pm
  Mr. Edward Lyons: The increased fees have an adverse effect not only on the ethnic minorities; they also affect the substantial East European community. In Bradford, for example, in addition to Pakistanis who are seriously affected by the fees, there is a large population of Poles and others who were deterred from applying for naturalisation even by the previous fees. They are after all effectively stateless and do not, as has been suggested, owe allegiance to any other country.
  Many people in industrial areas such as Bradford are unemployed. The Government are putting a burden of long delays and high costs on unemployed people. That must be wrong. As I argued on the British Nationality Bill 1982, the Government should think about fees that are as high as these.
  There is no point in going into the past. There was no demur at the increase in fees in 1979, but the fees then were nowhere near as high as they are now. The Government should think again especially as many of the affected people will have to make interest-free loans to the Government. In many cases the unsuccessful applicants will get their money back a year or two later. That must also be wrong. The Government do not need to make a few pounds out of poor people by taking 10 per cent. interest from them for two years. At compound interest that works out at a £42 surcharge on the £200 naturalisation fee. That must be wrong. The Government should think again.
  11.47 pm
  Mr. Hattersley: With the leave of the House, I shall make only three points, the final one of which I hope the Minister will find partially emollient.
  I fear that the Minister has not begun, or attempted, to deal with the Opposition's main charge against this policy—that a theoretical right is provided to all people who live in Britain who qualify for British citizenship but that it is exercisable only by those who can pay a substantial fee, and that right that is exercisaable only by those who can afford it is not a right of which a free society can be proud.
  The Minister did not deal with that matter at all, not least, I suspect, because of what many of my hon. Friends will regard as an extraordinary statement that he made. He said that he knew of no evidence to suggest that applicants were being deterred by the fee.
  Every Opposition Member who has constituents among whom the immigrants number can give examples from every weekend's surgery of applicants who intended to become British citizens but who, when they found that a
  962
  fee of £200 was required of them, said that they could not afford to do it. I assure the Minister that such people exist. It is a matter of surprise to the Opposition and a matter of some shame to the Minister that he does not know that such people exist, for they exist in substantial numbers.
  The Opposition have repeatedly told the Minister that the cost that each person is now being required to bear is more than the simple cost of that person's application and that it also carries costs that are not legitimate to that act. We have told him that the applicants are being required to subsidise the general running of one division of the Home Office. Is that true, and is it right in principle and in fact?
  I shall not comment on the speech made by the hon. Member for Harrow, West (Mr. Page). However, there has been unanimity among all serious speakers that there is something very wrong with the organisation of the system of processing nationality applications. Every hon. Member has been deeply critical of the organisation of Lunar House and the processing of applications.
  Will the Minister look at those processes? Does he share our concern about the two-year delay? Is he concerned about those applicants who receive no acknowledgment of their applications? Is he worried that the telephone lines are blocked because so many people are ringing in? Does he share our belief that it is wrong that applicants can find out where they stand only through their Members of Parliament? Will he give an assurance that there will be an investigation into what goes on at Lunar House? Will he promise to find out how to introduce greater efficiency into the service? If the right hon. Gentleman can assure us about those points he will go a long way towards uniting the House, which would be a thoroughly healthy thing for him to do.
  11.50 pm
  Mr. Raison: At the beginning of the debate I said that I well understood the concern that is felt. I made it perfectly clear that I am not happy about the delays in the process of granting registration and naturalisation. They are fundamentally linked to the great pressure of demand in the past year or two. In the short time left to me, I shall deal with the way in which we organise the service.
  The case against what we are doing has not been made. I remind the House that the percentage increase is not out of line with the increases imposed by the previous Labour Government in 1976. They increased the naturalisation fee by 75 per cent. and the registration entitlement fee by 150 per cent. Those are very substantial percentages. Although I acknowledge the problem of delays, they cause hardship in only a few cases. By definition those who apply for our citizenship have a residence requirement to meet and also have to meet the requirement of an intention to remain in this country. Although I quite understand that it is annoying to have to wait, their status in this country is hardly ever affected by the delay. It is important to bear that in mind.
  It has been suggested by Opposition Members and by my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) that the operation is not efficient. My hon. Friend asked me several specific questions, and I shall be happy to write to him about them. I have the greatest respect for my staff at Lunar House and Apollo House who handle the work. They have a difficult job, but I have every reason to believe that they apply themselves to it with great care, skill and intelligence. We have had an extremely careful analysis made of the processes of

  963
  handling naturalisation. It was carried out by Sir Derek Rayner. A copy of the report is in the Library and I would be more impressed by Opposition Members if they had read the report before coming to the Chamber to give their strictures. When the debate is over I suggest that they should go to the Library to study the problem.
  To my hon. Friend the Member for Bury St. Edmunds and others I shall cite a figure that does not show a bad productivity record. In 1980, 218 staff gave citizenship to 27,500 people. In 1981, 231 staff processed 48,500 successful citizenship applications. In terms of crude productivity, that is a sensational achievement. It is right to pay tribute to those who did that work.
  The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) and the hon. Member for Thornaby (Mr. Wrigglesworth) asked about the right to citizenship. It is said that it is wrong that there should be any impediment to exercising that right. First, in no case is the £200 fee charged to people who have the right of citizenship. It is the fee for naturalisation when the discretion to grant citizenship lies entirely with the Home Secretary, as it did under the Labour Government and has done since well back into the nineteenth century. Those with an entitlement to citizenship pay a fee of £70 at most, so there is a clear distinction between citizenship as an entitlement and citizenship at discretion. Before talking about hardship, the hon. Member for Thornaby should consider a little more carefully what the nature of the hardship, if any, really is.
  A number of hon. Members, including my hon. Friend the Member for Bury St. Edmunds, referred to the volume of work covered by the fee. It covers the work of the nationality division as a whole. In our view, it would be unrealistic to divide that into work on applications and work on nationality matters generally. All the work is relevant to the scheme of citizenship operated under the Act, and the applicant is seeking that citizenship and all that it entails. Therefore, we believe that it is proper to take all that work into the calculation.
  I reiterate that I do not believe that it has been proved that our proposals are in any way unfair or impose great hardship. I remind the House again that wives and children are subject to a much lower fee than the normal rate and that an entire family of children can come in under the £35 level. I believe that our proposal is entirely right and I urge the House to reject the Opposition motion.
  Question put:
  The House divided: Ayes 198, Noes 257.

  Division No. 17]

  [11.56 pm

  AYES

  Abse, Leo

  Buchan, Norman

  Adams, Allen

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

  Allaun, Frank

  Campbell, Ian

  Alton, David

  Campbell-Savours, Dale

  Anderson, Donald

  Cant, R. B.

  Archer, Rt Hon Peter

  Carmichael, Neil

  Ashley, Rt Hon Jack

  Clark, Dr David (S Shields)

  Ashton, Joe

  Clarke, Thomas(C'b'dge, A'rie)

  Atkinson, N.(H'gey,)

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

  Bagier, Gordon A.T.

  Cohen, Stanley

  Barnett, Rt Hon Joel (H'wd)

  Concannon, Rt Hon J. D.

  Beith, A. J.

  Cowans, Harry

  Benn, Rt Hon Tony

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

  Bennett, Andrew(St'kp't N)

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

  Bidwell, Sydney

  Crawshaw, Richard

  Booth, Rt Hon Albert

  Cryer, Bob

  Bray, Dr Jeremy

  Cunliffe, Lawrence

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

  Dalyell, Tam

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

  Davies, Rt Hon Denzil (L'lli)

  964

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

  Maynard, Miss Joan

  Dean, Joseph (Leeds West)

  Meacher, Michael

  Dewar, Donald

  Miller, Dr M. S. (E Kilbride)

  Dixon, Donald

  Mitchell, Austin (Grimsby)

  Dobson, Frank

  Mitchell, R. C. (Soton Itchen)

  Dormand, Jack

  Morris, Rt Hon A. (W'shawe)

  Dubs, Alfred

  Morris, Rt Hon C. (O'shaw)

  Duffy, A. E. P.

  Morris, Rt Hon J. (Aberavon)

  Dunnett, Jack

  Moyle, Rt Hon Roland

  Dunwoody, Hon Mrs G.

  Mulley, Rt Hon Frederick

  Eadie, Alex

  Newens, Stanley

  Eastham, Ken

  Oakes, Rt Hon Gordon

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

  O'Neill, Martin

  Ellis, Tom (Wrexham)

  Palmer, Arthur

  English, Michael

  Park, George

  Ennals, Rt Hon David

  Parker, John

  Evans, Ioan (Aberdare)

  Parry, Robert

  Evans, John (Newton)

  Pavitt, Laurie

  Ewing, Harry

  Pendry, Tom

  Faulds, Andrew

  Penhaligon, David

  Field, Frank

  Pitt, William Henry

  Flannery, Martin

  Powell, Raymond (Ogmore)

  Ford, Ben

  Prescott, John

  Foster, Derek

  Race, Reg

  Foulkes, George

  Radice, Giles

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

  Rees, Rt Hon M (Leeds S)

  Freeson, Rt Hon Reginald

  Richardson, Jo

  Freud, Clement

  Roberts, Albert (Normanton)

  Garrett, John (Norwich S)

  Roberts, Allan (Bootle)

  Garrett, W. E. (Wallsend)

  Roberts, Ernest (Hackney N)

  George, Bruce

  Roberts, Gwilym (Cannock)

  Gilbert, Rt Hon Dr John

  Robertson, George

  Golding, John

  Robinson, G. (Coventry NW)

  Graham, Ted

  Rooker, J. W.

  Hamilton, James (Bothwell)

  Ross, Ernest (Dundee West)

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

  Ross, Stephen (Isle of Wight)

  Hardy, Peter

  Rowlands, Ted

  Harman, Harriet (Peckham)

  Ryman, John

  Harrison, Rt Hon Walter

  Sever, John

  Hart, Rt Hon Dame Judith

  Sheerman, Barry

  Hattersley, Rt Hon Roy

  Sheldon, Rt Hon R.

  Heffer, Eric S.

  Shore, Rt Hon Peter

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

  Silkin, Rt Hon J. (Deptford)

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

  Silkin, Rt Hon S. C. (Dulwich)

  Home Robertson, John

  Skinner, Dennis

  Homewood, William

  Smith, Cyril (Rochdale)

  Hooley, Frank

  Snape, Peter

  Howell, Rt Hon D.

  Soley, Clive

  Hoyle, Douglas

  Spearing, Nigel

  Huckfield, Les

  Spellar, John Francis (B'ham)

  Hughes, Mark (Durham)

  Spriggs, Leslie

  Hughes, Robert (Aberdeen N)

  Stallard, A. W.

  Hughes, Roy (Newport)

  Steel, Rt Hon David

  Janner, Hon Greville

  Stoddart, David

  John, Brynmor

  Stott, Roger

  Jones, Rt Hon Alec (Rh'dda)

  Strang, Gavin

  Kerr, Russell

  Straw, Jack

  Kilroy-Silk, Robert

  Summerskill, Hon Dr Shirley

  Lambie, David

  Taylor, Mrs Ann (Bolton W)

  Lamond, James

  Thomas, Dr R.(Carmarthen)

  Leadbitter, Ted

  Thorne, Stan (Preston South)

  Leighton, Ronald

  Tilley, John

  Lewis, Ron (Carlisle)

  Tinn, James

  Litherland, Robert

  Torney, Tom

  Lofthouse, Geoffrey

  Urwin, Rt Hon Tom

  Lyon, Alexander (York)

  Varley, Rt Hon Eric G.

  Lyons, Edward (Bradf'd W)

  Wainwright, E.(Dearne V)

  McDonald, Dr Oonagh

  Walker, Rt Hon H.(D'caster)

  McGuire, Michael (Ince)

  Wardell, Gareth

  McKay, Allen (Penistone)

  Watkins, David

  McKelvey, William

  Weetch, Ken

  Maclennan, Robert

  Welsh, Michael

  McNamara, Kevin

  White, Frank R.

  McWilliam, John

  White, J. (G'gow Pollok)

  Marks, Kenneth

  Whitehead, Phillip

  Marshall, D(G'gow S'ton)

  Williams, Rt Hon A.(S sea W)

  Marshall, Dr Edmund (Goole)

  Winnick, David

  Marshall, Jim (Leicester S)

  Woodall, Alec

  Mason, Rt Hon Roy

  Woolmer, Kenneth

  965

  Wrigglesworth, Ian

  Tellers for the Ayes:

  Young, David (Bolton E)

  Mr. Frank Haynes and

  Mr. George Morton.

  NOES

  Adley, Robert

  Fairgrieve, Sir Russell

  Aitken, Jonathan

  Faith, Mrs Sheila

  Alexander, Richard

  Fell, Sir Anthony

  Alison, Rt Hon Michael

  Fenner, Mrs Peggy

  Amery, Rt Hon Julian

  Finsberg, Geoffrey

  Atkins, Rt Hon H.(S'thorne)

  Fisher, Sir Nigel

  Atkins, Robert(Preston N)

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

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

  Fletcher-Cooke, Sir Charles

  Baker, Kenneth(St.M'bone)

  Forman, Nigel

  Baker, Nicholas (N Dorset)

  Fowler, Rt Hon Norman

  Banks, Robert

  Fox, Marcus

  Bendall, Vivian

  Fraser, Rt Hon Sir Hugh

  Benyon, Thomas (A'don)

  Fraser, Peter (South Angus)

  Benyon, W. (Buckingham)

  Fry, Peter

  Best, Keith

  Gardiner, George (Reigate)

  Bevan, David Gilroy

  Gardner, Edward (S Fylde)

  Biggs-Davison, Sir John

  Garel-Jones, Tristan

  Blackburn, John

  Glyn, Dr Alan

  Blaker, Peter

  Goodhart, Sir Philip

  Body, Richard

  Goodhew, Sir Victor

  Bonsor, Sir Nicholas

  Goodlad, Alastair

  Boscawen, Hon Robert

  Gorst, John

  Bottomley, Peter (W'wich W)

  Grant, Anthony (Harrow C)

  Boyson, Dr Rhodes

  Greenway, Harry

  Braine, Sir Bernard

  Grieve, Percy

  Bright, Graham

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

  Brinton, Tim

  Griffiths, Peter Portsm'th N)

  Brittan, Rt. Hon. Leon

  Grist, Ian

  Brooke, Hon Peter

  Gummer, John Selwyn

  Brown, Michael(Brigg & Sc'n)

  Hamilton, Hon A.

  Browne, John (Winchester)

  Hamilton, Michael (Salisbury)

  Bruce-Gardyne, John

  Hampson, Dr Keith

  Buchanan-Smith, Rt. Hon. A.

  Hannam, John

  Buck, Antony

  Haselhurst, Alan

  Budgen, Nick

  Hastings, Stephen

  Bulmer, Esmond

  Havers, Rt Hon Sir Michael

  Burden, Sir Frederick

  Hawkins, Sir Paul

  Butler, Hon Adam

  Hawksley, Warren

  Carlisle, John (Luton West)

  Heddle, John

  Carlisle, Kenneth (Lincoln)

  Henderson, Barry

  Channon, Rt. Hon. Paul

  Heseltine, Rt Hon Michael

  Chapman, Sydney

  Hicks, Robert

  Churchill, W. S.

  Higgins, Rt Hon Terence L.

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

  Hogg, Hon Douglas (Gr'th'm)

  Clark, Sir W. (Croydon S)

  Holland, Philip (Carlton)

  Clarke, Kenneth (Rushcliffe)

  Hooson, Tom

  Clegg, Sir Walter

  Hordern, Peter

  Colvin, Michael

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

  Cope, John

  Howell, Ralph (N Norfolk)

  Corrie, John

  Hunt, John (Ravensbourne)

  Costain, Sir Albert

  Hurd, Rt Hon Douglas

  Crouch, David

  Irvine, Rt Hon Bryant Godman

  Dickens, Geoffrey

  Jenkin, Rt Hon Patrick

  Dorrell, Stephen

  Johnson Smith, Sir Geoffrey

  Dover, Denshore

  Jopling, Rt Hon Michael

  du Cann, Rt Hon Edward

  Joseph, Rt Hon Sir Keith

  Dunn, Robert (Dartford)

  Kellett-Bowman, Mrs Elaine

  Durant, Tony

  King, Rt Hon Tom

  Dykes, Hugh

  Kitson, Sir Timothy

  Eden, Rt Hon Sir John

  Knight, Mrs Jill

  Edwards, Rt Hon N. (P'broke)

  Knox, David

  Eggar, Tim

  Lang, Ian

  Elliott, Sir William

  Latham, Michael

  Eyre, Reginald

  Lawrence, Ivan

  Fairbairn, Nicholas

  Lawson, Rt Hon Nigel

  966

  Lee, John

  Rhodes James, Robert

  Lennox-Boyd, Hon Mark

  Rhys Williams, Sir Brandon

  Lester, Jim (Beeston)

  Ridley, Hon Nicholas

  Lewis, Kenneth (Rutland)

  Ridsdale, Sir Julian

  Lloyd, Ian (Havant & W'loo)

  Roberts, M. (Cardiff NW)

  Lloyd, Peter (Fareham)

  Roberts, Wyn (Conway)

  Loveridge, John

  Rossi, Hugh

  Luce, Richard

  Rost, Peter

  Lyell, Nicholas

  Rumbold, Mrs A. C. R.

  McCrindle, Robert

  Sainsbury, Hon Timothy

  MacGregor, John

  Shaw, Giles (Pudsey)

  MacKay, John (Argyll)

  Shelton, William (Streatham)

  Macmillan, Rt Hon M.

  Shepherd, Colin (Hereford)

  McNair-Wilson, M. (N'bury)

  Shersby, Michael

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

  Silvester, Fred

  McQuarrie, Albert

  Smith, Dudley

  Madel, David

  Smith, Tim (Beaconsfield)

  Major, John

  Speller, Tony

  Marland, Paul

  Spence, John

  Marlow, Antony

  Spicer, Jim (West Dorset)

  Marshall, Michael (Arundel)

  Spicer, Michael (S Worcs)

  Marten, Rt Hon Neil

  Sproat, Iain

  Mates, Michael

  Squire, Robin

  Mather, Carol

  Stainton, Keith

  Mawby, Ray

  Stanbrook, Ivor

  Mawhinney, Dr Brian

  Stanley, John

  Mayhew, Patrick

  Steen, Anthony

  Mellor, David

  Stevens, Martin

  Meyer, Sir Anthony

  Stewart, A.(E Renfrewshire)

  Miller, Hal (B'grove)

  Stewart, Ian (Hitchin)

  Mills, Iain (Meriden)

  Stradling Thomas, J.

  Mills, Sir Peter (West Devon)

  Tapsell, Peter

  Miscampbell, Norman

  Taylor, Teddy (S'end E)

  Mitchell, David (Basingstoke)

  Temple-Morris, Peter

  Moate, Roger

  Thompson, Donald

  Moore, John

  Thorne, Neil (Ilford South)

  Morris, M. (N'hampton S)

  Thornton, Malcolm

  Morrison, Hon C. (Devizes)

  Townend, John (Bridlington)

  Morrison, Hon P. (Chester)

  Trippier, David

  Mudd, David

  Trotter, Neville

  Murphy, Christopher

  Vaughan, Dr Gerard

  Myles, David

  Viggers, Peter

  Neale, Gerrard

  Waddington, David

  Needham, Richard

  Wakeham, John

  Nelson, Anthony

  Waldegrave, Hon William

  Neubert, Michael

  Walker, Rt Hon P.(W'cester)

  Newton, Tony

  Walker, B. (Perth)

  Onslow, Cranley

  Waller, Gary

  Oppenheim, Rt Hon Mrs S.

  Ward, John

  Osborn, John

  Warren, Kenneth

  Page, John (Harrow, West)

  Watson, John

  Page, Richard (SW Herts)

  Wells, Bowen

  Parris, Matthew

  Wells, John (Maidstone)

  Patten, Christopher (Bath)

  Wheeler, John

  Patten, John (Oxford)

  Whitney, Raymond

  Pattie, Geoffrey

  Wiggin, Jerry

  Pawsey, James

  Wilkinson, John

  Percival, Sir Ian

  Williams, D.(Montgomery)

  Pink, R. Bonner

  Winterton, Nicholas

  Price, Sir David (Eastleigh)

  Wolfson, Mark

  Prior, Rt Hon James

  Young, Sir George (Acton)

  Proctor, K. Harvey

  Raison, Rt Hon Timothy

  Tellers for the Noes:

  Rathbone, Tim

  Mr. David Hunt and

  Rees-Davies, W. R.

  Mr. Anthony Berry.

  Renton, Tim

  Question accordingly negatived.

  Social Security
  12.10 am
  The Minister for Social Security (Mr. Hugh Rossi): I beg to move,
  That the draft Social Security (Contributions, Re-rating) Order 1982, which was laid before this House on 8th November, be approved.
  Mr. Deputy Speaker (Mr. Ernest Armstrong): I understand that it will be for the convenience of the House if we consider at the same time the draft Social Security (Contributions) Amendment (No. 2) Regulations 1982.
  Mr. Rossi: The draft order and the Social Security (Contributions) Amendment (No. 2) Regulations 1982 have to be read together with the Social Security (Contributions) Amendment Regulations, which my right hon. Friend made on 4 November but which are not before the House this evening. The three measures form the basis of what is generally known as the contributions rerating exercise for 1983–84. It may be for the convenience of the House if I deal with the three instruments together.
  The rerating exercise is, as hon. Members will know, very much an annual routine event. It arises from the review which my right hon. Friend carries out each year both of the general level of earnings—which is a duty laid on him by the Social Security Act 1975—and of the state of the national insurance fund, which the same Act empowers him to review. It is in the light of this review that the earnings limits and rates for national insurance contributions for the coming tax year are set.
  My right hon. and learned Friend the Chancellor of the Exchequer announced the new earnings limits and rates for class 1 contributions for 1983–84 in his autumn statement on 8 November. On the same day, my right hon. Friend the Secretary of State gave details of these and other contribution rates for 1983–84 in reply to a question from my hon. Friend the Member for Orpington (Mr. Stanbrook). He also laid before the House a copy of the report of the Government Actuary on the effect of the changes that we are proposing, as he is required to do by the 1975 Act. The instruments which are the subject of tonight's debate give effect to those changes.
  Essentially, the rerating is an exercise in good housekeeping or, if it is preferred, in responsible management of the national insurance fund. Its basic purpose is, and always has been, to ensure that there will be enough money in the fund to cover the expected expenditure from it on benefits for the year in question. To put it another way, the aim is to achieve a reasonable balancing of the books.
  In proposing the changes for 1983–84, we think that we have achieved this balance while keeping extra burdens on employers, employees and self-employed people to the minimum compatible with the kind of good management that I have just mentioned.
  I begin by considering the lower and upper earnings limits for class 1 contribution liability. The House will know that our discretion in setting these limits is closely circumscribed. The Social Security Pensions Act requires the lower limit to be no more than 49p below the basic pension rate and the upper limit to be between six and a half and seven and a half times that rate. Accordingly, with the basic pension rate for next year of £32·85, the choice of a lower earnings limit of £32·50 was almost automatic.
  968
  An upper earnings limit of £235 for 1983–84 will be, as it has been for 1982–83, in the upper half of the range of six and a half to seven and a half times the basic pension rate. The multiple is a little under 7·2, compared with 7·4, following last year's review. This will involve increasing the upper earnings limit from £220 to £235 a week.
  In essence, the tying of the earnings limits to the pension rate ensures a degree of buoyancy in income of the national insurance fund; in other words, it allows for an element of inflation. The increases in the contribution rates, which are provided for in the rerating order, are aimed at meeting the needs of the fund which are not attributable solely to inflation.
  Mr. Andrew F. Bennett: Will the Minister confirm that he could have gone another £10 higher with the upper earnings limit and say how much extra would that have raised?
  Mr. Rossi: There is no norm. It is a matter of judgment. I cannot give the hon. Gentleman the exact figures off the top of my head. If he wishes, I shall write to him. Certainly at this time of night my mental arithmetic is not all that it might be.
  Mr. Bennett: Will the Minister confirm that that sum would have helped pay back the 5 per cent. abatement for unemployed people?
  Mr. Rossi: I am not in a position to confirm or deny that. The hon. Gentleman is at liberty to make that point later.
  We have been at some pains to keep the increases for both employers and employees to the minimum compatible with protecting the fund. Hon. Members who have studied the report of the Government Actuary will see that, even with the changes that we propose, a deficiency in the fund is expected during the coming year. I shall have more to say about that in a moment. The essential point is that, given the likely effect on the fund, we could not reasonably contemplate a net increase in contribution rates of less than 0·25 per cent. for both employers and employees, taking account for the latter of the 0·1 per cent. reduction in the employment protection allocation, about which again I shall have a little more to say.
  The House will want me to say something about what these increases will mean in concrete terms for employers and employees. In doing so I shall take account of the reduction in the national insurance surcharge which ray right hon. and learned Friend the Chancellor announced in his autumn statement. To do otherwise would be misleading, since hon. Members will be concerned about the actual amounts that employers will have to pay in 1983–84, compared with what they are paying at the moment.
  In giving those figures I am taking as a basis for comparison the 2 per cent. surcharge which employers have been paying since August of this year, in order to give them the effect of a full year's reduction of 1 per cent. This does not fully reflect the position taking the years 1982–83 and 1983–84 as a whole. For 1982–83 the average rate would have been 2½ per cent. before allowing for the extra temporary relief. As my right hon. and learned Friend the Chancellor said, the combined effect of the NIC and NIS changes which he announced will mean a considerable saving overall for employers in 1983–84 compared with what they would otherwise have paid. I do not take

  969
  account of the extra relief for the current year which my right hon. and learned Friend the Chancellor announced in his statement.
  For those who are not contracted-out, all employers will pay less in contributions and surcharge during the coming year than they are at present, except on earnings of just under £225 a week or more. For example, on weekly earnings of £60, 15p less a week will be payable, on £170—the expected average for next year—43p a week less will have to be paid and on earnings of £220 a week 55p less. For an employee on those earnings the increased weekly contribution will be the same as the decrease for the employer—15p, 43p and 55p respectively.
  For employers who are contracted-out, extra contributions will be payable on all earnings—except, obviously, those that are below next year's lower earnings limit. The reason for that is, however, not the rerating exercise which is the subject of tonight's debate. It is because of the reduction in the amount of the contracted-out rebate, which was the subject of separate regulations approved by the House earlier this year. As an illustration, the extra weekly contributions payable on earnings of £60, £170 and £220 respectively by employers will be 9p, 25p and 33p respectively.
  The increases for employees on those earnings will respectively be 31p, 98p and £1·27p. I must stress again that the reduction in the rebate which is the cause of that has nothing to do with tonight's debate.
  Before I leave the subject of class 1 contributions, it may be for the convenience of the House if I say something about the increased employee's rate for so-called "opted out" married women and widows, who retain the right to pay reduced rate contributions.
  The regulations that we are debating provide for an increase in the contribution of rates for those women from 3·2 per cent. to 3·85 per cent. The increase is needed solely and entirely to provide for the inclusion of such women in the statutory sick pay scheme which will come into operation next April. At present, opted out women do not qualify for sickness benefit. Therefore, it was reasonable to expect that their entitlement to statutory sick pay, the cost of which will come out of the national insurance fund, should be paid for by an increase in their contribution rate.
  Hon. Members will recollect that I said consistently during the passage of what is now the Social Security and Housing Benefits Act that that would be so. At the time, I estimated that there would be an increase of between 0·5 per cent. and 1 per cent. in their contribution rate. In the event, I am glad to say that we have been able to keep the increase nearer the lower limit.
  The full cost of including opted-out women in the statutory sick pay scheme would have suggested an increase of 0·75 per cent. However, since those women's contributions include in full the employment protection allocation, which this year is being reduced by 0·1 per cent. we thought it only fair to abate the increase in their contribution accordingly, hence the 0·65 per cent.
  Mr. Andrew F. Bennett: Many married women who have opted out are unclear about the changes. How will the Minister ensure that all such married women are aware that they will qualify for the new sick pay as opposed to receiving none at all?
  Mr. Rossi: Information on sick pay will be sent to employers before the scheme is introduced. I hope that the scheme will be adequately advertised. The position of such women will be made clear at that time. However, if the hon. Gentleman feels that that is not the case we shall be prepared to discuss the matter with him further when the time is right.
  As a purely procedural footnote, the House may wish to note that the Social Security Advisory Committee has agreed that, since the regulations that give effect to this increase form an integral part of this year's re-rating, it will not wish to consider them when made.
  I deal next with the proposed contribution rates and profits limits for those who are self-employed. The House will know that there is an established formula for calculating what the flat-rate class 2 and the profits-related class 4 contribution should be, which was introduced in 1977 with all-party support. The strict application of that formula, which derives self-employed rates from the class 1 rates applicable to contracted-out employments, would have suggested a weekly class 2 rate of £4·60. However, my right hon. Friend the Secretary of State felt that it was right to continue for the coming year the modest relief to the smaller self-employed business man which he was able to offer last year by abating the full rate shown by the formula. Therefore, we are proposing a weekly class 2 rate of £4·40 for 1983–84. The class 4 rate of 6·3 per cent. is that suggested by the formula.
  We felt that it was right to apply it in full to the class 4 rate, which, by definition, is payable only by the higher-earning self-employed, rather than to depress the application of the formula artificially. To have done that would have resulted in an unacceptably sharp increase in later years. The report of the Government Actuary on his first quinquennial review suggested that over the years there will have to be a disproportionate rise in class 1 contracted-out rates and, accordingly, in the rates for self-employed people. As that occurs we shall naturally want to keep the fairness of the formula under review. For the present, however, it is pretty clear that there is no rational way of deriving contribution rates for self-employed people that is more favourable to them than the present one.
  The profit limits between which class 4 contributions will be payable in 1983–84 are to be £3,800 a year and £12,000 a year. The percentage increase in the lower limit from £3,450 to £3,800 is virtually the same as the increase in the lower earnings limit for class 1. The upper profits limit for class 4, like the upper earnings limit for class 1, is being increased by a percentage slightly lower than the increase in the basic pension rate, and will go up from £11,000 to £12,000. The small earnings exception limit, below which exception from class 2 liability may be granted, will rise from £1,600 this year to £1,775 next. The rate of voluntary class 3 contributions has in recent years tended to be 10p a week less than that for class 2. We are continuing that this next year, with a proposed class 3 rate of £4·30 a week. Clearly, it would be absurd to raise the class 3 rate above the level for class 2, when it brings less benefit rights.
  The special class 2 rates for share fishermen, to reflect their entitlement to unemployment benefit, for which other self-employed people do not qualify, will be the subject of separate consequential regulations which will be laid before the House in due course. This rate forms no part of tonight's debate.

  971
  I mentioned earlier in the context of the class 1 contribution rates that my right hon. Friend the Secretary of State for Employment had found it possible to reduce the employment protection allocation in the employee's contribution by 0·1 per cent., from the 0·35 per cent. introduced last year to 0·25 per cent. I know that this news will be welcomed by both sides of the House. It results from a drop in the number of claims for redundancy payments, which my right hon. Friend anticipated when he introduced last year's contributions Bill.
  The House will have noticed that we are not this year proposing any change in the level of Treasury supplement to the national insurance fund. As the report of the Government Actuary shows, retaining the present level of 13 per cent. will result in an increase of just under £200 million from the supplement next year. We judge that this will maintain the proper sharing of the cost of contributory benefits between contributions and general taxation that recent years' changes in the level of the Treasury supplement have been designed to achieve.
  I deal finally with the effect of the changes that we have proposed on the national insurance fund. The Government Actuary in his report estimates that the financial effects of the provisions in the regulations and order that we are debating will be to create a deficit in the national insurance fund for 1983–84 of £262 million. The detailed assumptions upon which that estimate is based will be found in his report. The estimated balance in the fund at the end of 1983–84 will be £3,261 million.
  My right hon. Friend has considered these estimates and is satisfied that the increases that we have proposed are entirely compatible with the proper protection of the fund. The forecast balance in the fund will not be far below the level of about 10 weeks' benefit which the Government Actuary recommended in his quinquennial review as a working balance, and hon. Members will know that the Public Accounts Committee, in its twenty-third report to the House, recommended a thorough review of the right level for the balance.
  When we have carried that out we shall be able to make arrangements for future years accordingly, but hon. Members may rest assured that in proposing these changes my right hon. Friend has at all times borne in mind the paramount need to ensure a reasonable balance between expenditure and income and the preservation of a safe reserve in the fund.
  That leads me to end as I began, by stressing that the order and regulations are matters of routine good housekeeping. We shall be paying out just under an estimated £20 billion in benefits from the national insurance fund in 1983–84, well over £14 billion of it in retirement pensions. The purpose of the annual rerating of contributions is always to ensure that there will be enough in the kitty to pay for these benefits.
  We believe that the changes contained in the order and regulations provide this guarantee and at the expense only of the minimum extra burden possible on contributors. What they aim to do—and what we think they achieve—is to strike a balance between the protection of the national insurance fund, with these huge benefit calls upon it, and the protection of those who contribute to that fund.
  12.30 am
  Mr. J. W. Rooker: The Minister has given us a run around of the two regulations in the Government Actuary's report. I do not intend to play
  972
  around with the national insurance surcharge because it is irrelevant to our discussion. It is not, I believe, mentioned in the Government Actuary's report because that is concerned solely with the operation of the national insurance fund.
  I should like to examine the figures in respect of employees and employers. Once again, for the fourth time since the Government came to office, we are here to increase taxation, via the national insurance fund, on those at work. One quarter of 1 per cent. does not sound very much for the employee and the employer, but one must judge what the Government are doing against the position when they came to office. In 1979–80 the employer was paying 10 per cent. into the national insurance fund. From April 1983, he will be paying 10·45 per cent. In 1979–80, the employee was paying 6½ per cent. From next April he will be paying 9 per cent. The employer's impost has increased by about 5 per cent. The employee's impost has increased by no less than 38 per cent. That is the measure of the increased burden of national insurance in the rates alone since the Government came to office.
  If, for that extra impost, extra benefits were being paid and increases in benefits in real terms were being made, there would be no need for me to make the point that in the current year 1982–83 there have been cuts in national insurance benefits, which are paid for out of the insurance fund by the very contributions that we are debating, to the tune of approximately £1 billion. That amount has been taken from the benefits paid out of the national insurance fund while the national insurance rate has increased under this Government.
  That £1 billion is made up of cuts in the retirement pension, unemployment benefit, sickness benefit, industrial injury benefit, the freezing of the earnings rule for pensioners, the change in the waiting days for those who are away from work sick, the abolition of the earnings-related supplement, the abatement of unemployment benefit to occupational pensioners over the age of 60 and the fiddling of the children's addition to short-term national insurance benefits. Added together, those amount to about £1 billion of cuts in benefit. They are itemised for hon. Members who wish to study them in an updated parliamentary answer of 18 November in c. 281 and 282 of the Official Report.
  For a massive increase in contributions for employees from 6½ per cent. to 9 per cent., there is £1 billion cut in benefits to those employees. That is one of the reasons why we intend to vote against this further increase in taxation on employees.
  The system is less fair than when the Government came to office. I should like to illustrate that by giving examples of what will occur from April 1983 for someone on average earnings. As the Minister has made clear, from next April those on average earnings will be paying 9 per cent. of their income in national insurance contributions. Those who are fortunate enough to be earning twice national average earnings—in excess of £300 a week—will be paying only 6½ per cent. of their income in national insurance contributions. Those who are well-heeled enough to be on five times national earnings will be paying from next April only 2½ per cent. of their income in national insurance contributions. That is hardly fair.
  That is brought about because of the operation of the upper earnings limit which—I make no bones about it—was introduced—as the regulations clearly imply—by the Labour Government.

  973
  Not operating the pension payment to the maximum advantage is grossly unfair, for the reasons that the Minister gave earlier. The upper earnings limit for next year could have been £245 a week, but it has been settled at £235. I understand that the £245 level is practical, as was admitted in an answer yesterday to my hon. Friend the Member for Thurrock (Dr. McDonald).
  If the Government had chosen to levy national insurance contributions on incomes up to £245 a week instead of on incomes up to £235 a week, they would have drawn in an extra £87 million. They could restore the 5 per cent. cut in unemployment benefit with £87 million and still have a few million pounds left. Why should people earning over £235 have an extra bonus from the Government. I suspect that the decision is Department rather than Treasury inspired. Ministers should take every opportunity to garner every penny that they can from people at the upper end of the earnings scale.
  The low-paid contribute a disproportionate amount in national insurance contributions because there is no threshold as there is in relation to tax payments. From next April, someone earning £32 a week will pay no national insurance contributions. Someone earning £32·50 a week will pay about £2·90 a week in contributions. It cannot be worth earning the extra 50p.
  Many employers pitch their part-time payments so that they are not caught for national insurance contributions either. If an employee pays the contribution, so will the employer. The system is double-edged because the employee gains no credits for future national insurance benefits.
  Mr. Jim Craigen: Is that not another example of how the Government's job-splitting scheme will push more employers into the loophole?
  Mr. Rooker: Unless there is a radical change in part-time working in relation to the national insurance fund millions of people will be unfairly treated. It will be grossly unfair if the earnings in the job-splitting scheme are fixed so that people are deprived of accruing pension benefits and are penalised through pay rises. Ministers do not need lectures at this time of the night. They are aware of the circumstances and they cannot plead ignorance.
  The system means stoppages for workers. Tax and national insurance contributions are calculated differently, but they are both stoppages. When in Opposition today's Ministers often said that national insurance payments were taxation and should be treated as such.
  Two parliamentary answers about that are of interest. The first was published on 27 November last year in reply to my hon. Friend the Member for Birkenhead (Mr. Field) in c. 495-98 of Hansard. An updated version was given in a reply to me on 18 November this year and appeared in c. 233-34. We asked what the tax and national insurance take was as a percentage of earnings, using 1978–79—the last full year of the Labour Government—as a base. It is remarkable how the extra imposition of tax, both national insurance and income tax, has been shifted to the low paid since the Government came to power.
  I shall not recite all the examples, because I am sure that my hon. Friends will bring them to the attention of the House. However, in 1982–83, a married couple with two children—the mythical average family—on two-thirds average earnings pay 25 per cent. more a week in income
  974
  tax and national insurance than they did in 1978–79. The same couple on average earnings pay 12 per cent. a week more in tax and national insurance contributions than they did during the last year of the Labour Government. The couple on five times average earnings pay 11 per cent. less compared with the last year of the Labour Government. The well-heeled married couple with two children and on 10 times average earnings pay 21 per cent. less a week now than they did under the Labour Government. That is a sample of this Government's fairness. I have not juggled the figures. They are the Government's figures given in parliamentary answers.
  The same pattern is repeated for the single person, and for the married couple with no children, and it is even worse for the married couple with four children. There are massive increases in taxation for those on two-thirds average earnings and massive decreases for those on five or 10 times average earnings. That is the damage done by the Government.
  When the Labour Government left office the marginal rate of tax for the low paid was 6½p in the pound for national insurance and 25p in the pound on the first £750 of taxable income—a total of 31½p in the pound. In 1983–84, they must pay 9p national insurance and the lowest rate of income tax will be 30p in the pound—a total of 39p in the pound. The Government have the brass neck to talk about a Labour Government being one of high taxation for the low paid. There have also been cuts in the spending power of what are now the working poor—those who are still lucky enough to have work under this Government.
  The Government's record is a sorry one. That is slowly coming home to the country, although it has taken a little time. Those on the receiving end of the cuts know about them. The well-heeled members of the media, who report or do not report events, are beginning to get the message that the Government have brought in massive increases in taxation for the low-paid and massive decreases for the very well paid.
  The Government Actuary's report also mentions the Government's clawback proposal. The Prime Minister spoke about that on several occasions recently and I have entered into correspondence with her about some of her grossly misleading statements. I shall await her answers before I deal with the matter again. In table 2 and paragraph 11 of his report, the Government Actuary makes it plain that he was told to use assumptions about the clawback that lead one to believe that next November the Government intend to cut the rate of increase of pensions and other benefits by 1·6 per cent. They estimate an increase of about 5 per cent., so in November 1983, retirement pensioners and others will receive a 3½p in the pound increase. It is nonsense for the Government to say that they have made no decisions when paragraph 2.25 of the Chancellor of the Exchequer's autumn statement and table 2 of the Government Actuary's report make it clear that they have done the arithmetic and that it is set out on paper. That point must be made clear.
  We would not be here tonight, were it not for the fact that the Government need to bring in this extra increase. It is not just good housekeeping, as the Minister said. It is good housekeeping in the sense that there is a greater call on the national insurance fund, but part of the reason is the massive increase in unemployment that has taken place under the Government.

  975
  The Government Actuary has been told that, when calculating the figures on which the increase is based, he should reckon on average unemployment next year being 300,000 more than this year. That is what the Government are assuming. Were it not for that, I suspect that it would not be necessary to make the percentage increase, although I accept that the earnings levels, both upper and lower, require to be changed each year as the pension is changed.
  Mr. Andrew F. Bennett: Is that the number of people who will receive unemployment benefit or the number who will be unemployed?
  Mr. Rooker: We know that the Government are discounting many people from unemployment figures, and are basing the count on claimants. My hon. Friend will see in the Government Actuary's report that the number of unemployed, excluding school leavers, will average 300,000 more.
  On the basis that the Government are assuming that on average 300,000 people presently in work will be out of work, when they lose their jobs, more likely than not, they will be entitled to national insurance unemployment benefit. They may also be entitled to supplementary benefit because of other cuts that the Government have made. That would not affect directly the operation of the national insurance fund.
  The fact that 300,000 more people will lose their jobs cannot be denied. Their first port of call will be the national insurance fund. That is where the extra money will be needed to fund the over-inflated dole queue that has built up over the past three years.
  I want to ask the Minister one question, which I hope he will not think is unfair or seek to dodge. I am not trying to be tricky at this time of the morning. The matter is referred to in paragraph 11 of the Government Actuary's report. The Minister will remember that during the passage early this year of the Social Security and Housing Benefits Bill, we were working on figures that are in legislation for the operation of sick pay. There are three rates of sick pay from next April. It is within my memory and that of my hon. Friends that the Minister gave us a categorical assurance, and we had a financial memorandum in addition to the Bill and the notes on clauses, saying that those rates of sick pay in the Bill would be increased before the sick pay scheme started to operate.
  I remember the Minister agreeing with me in answer to a question that I asked that the appropriate time to announce what the sick pay rates for next April would be was around the time of the year, in November, when the Minister has to make a judgment to the House about national insurance contributions from next April. I tabled a parliamentary question last week on that matter. I received an answer that said that the matter had not been decided. No decision was announced.
  It is clearly stated in paragraph 11 of the Government Actuary's report that he was told to assume that the higher rate would be uprated to £39.50. The Minister made a commitment. Employers will want to know about the scheme. Many of them have not heard of the sick pay scheme. Therefore, there will be considerable difficulties when it comes into operation.
  Employers are entitled to as much warning of the rates of sick pay as of the increase in national insurance contributions. The Minister said so in Committee. I hope that he will be able to say within days rather than weeks
  976
  what the rates will be. It would be unacceptable to employers if they had to wait until 1983 for that information.
  Mr. Rossi: I shall assist the hon. Gentleman as far as I can now. The £39.50 to which he referred is a working assumption. The matter is still under consideration. There will be a revision. I hope that the House will be told as soon as possible what the figures will be. I reaffirm the assurance that I have given the hon. Gentleman previously that the figures will be uprated and new figures will come into effect in April.
  Mr. Rooker: I am grateful for that assurance. I am glad that the Minister has put it on record that the figures will be uprated before the Act comes into operation. It is in the interests of employees and employers to know the figures as soon as possible, simply because of the interaction of company sick pay schemes and for the good conduct of good industrial relations after the scheme comes into operation.
  Mr. Andrew F. Bennett: Does my hon. Friend agree that it is also important for wage negotiations in the next few months involving people on low pay? The amount that is received may affect which band they go into and which levels of benefit they are entitled to in future.
  Mr. Rooker: My hon. Friend has made my final point for me and I shall not repeat it. The Opposition will vote against the regulations because they are another gross and unfair burden placed on working people by the Tory Government.
  12.51 am
  Mr. Frank Field: In a powerful speech, my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) knocked aside my first point. Before the debate I was in the Library trying to find an acceptable face of Thatcherism in these regulations. On examining the increase in the lower rate of contributions and the increase in the ceiling, it emerged that the Government had increased the ceiling more rapidly than they had increased the lower earnings band for contributions. That seems to be a point in the Government's favour, and I am surprised that the Minister did not make anything of it.
  As every hon. Member present knows, the national insurance scheme is not a progressive tax. In the band of income that we are debating, it is a proportional tax. By raising the earnings ceiling more rapidly than the lower band in which people are brought into contributions, one increases the area in which proportional contributions are collected for the Exchequer.
  As always with this Government, every cloud has a black and sombre lining. By increasing the lower level more slowly than the ceiling, the burden of taxation has been shifted from higher to lower income groups. Having bent over backwards to try to be fair to the Government, and having examined one aspect that might be construed as the acceptable face of Thatcherism, I shall examine the unacceptable face that appears in the regulations.
  The national insurance contribution is a regressive tax and the Government are making more and more use of it. The figures have already been put on the record, but I wish to underline them by repeating them. When the Government came to power, contributions were at a level of 6.75 per cent. We are now debating an increase that will bring that level to 9 per cent. That massive increase,

  977
  together with the low level at which contributions start to be paid, helps to explain the changing burden of taxation under this Government.
  My hon. Friend the Member for Perry Barr looked at the effect of tax, and, more importantly, at national insurance contributions as they affect the horizontal distribution of income. I shall look at the effect on the vertical distribution of income. I shall take some of the very poorest workers, who are on two-thirds of average earnings. I shall use the parliamentary answers that my hon. Friend used. I shall use the answers that I was given, and those which my hon. Friend received more recently, updating that information. Both of us had, in our answers, a starting base of 100 for the last year of the Labour Government.
  Those of us who entered the House after the last general election will know that we fought a campaign against the background of the Tory claim that a Conservative Government would make significant tax cuts. If the Government had fallen after their first year—and many of my constituents probably wish that they had—they could have proudly said that they had fulfilled their election pledge. For all income groups there was a significant decrease in the burden of taxation. However, as my hon. Friend the Member for Perry Barr said, the projected tax burden for 1982–83 is higher. In the Government's first year of office the index fell from 100 in 1978–79 to below 96 for a single worker on two-thirds average earnings. In 1982–83, the index rises to 110. For a married couple, with two children, there is a rise to 125 in 1982–83.
  So much for the Government who will cut taxation and who still claim to be the party of the family. Therefore the first unacceptable face of Thatcherism under debate is the significant increase in the burden of taxation that falls on those with the lowest incomes.
  The second unacceptable face of Thatcherism is the twofold change in the distribution of the tax burden which the Government have brought about by reducing the Exchequer contribution to the fund. The Minister proudly said that the Government were making no change compared with last year, but we must consider the life of the Government as a whole.
  There has been a twofold change in the burden of taxation. There has been a decrease in the Exchequer contribution, taking funds away from those with the broadest backs and putting the burden on those with the weakest backs, and a further transfer of the burden of taxation from employers to employees. That is reflected in tonight's debate. There has been a move from the Exchequer to the employed community, and from employers to employees. The Minister almost proudly says that the Exchequer contribution stands at 13 per cent., but almost 40 years to the day the Beveridge White Paper was published with a table showing what he calculated the Exchequer contribution should be by 1975.
  Beveridge accepted that everyone should pay some contribution from their wages, because that would underline that they were earning their benefits, which was an important factor in overcoming the stigma of means-tested benefits. His view was that by 1975 the Exchequer contribution would be 67 per cent. of the fund. Let us compare that with the Minister's figure of 13 per cent.
  Mr. Rossi: Beveridge did not envisage the extent to which non-contributory benefits would increase in the intervening years. Rather than compare 67 per cent. with 13 per cent., the hon. Gentleman should compare it with 46 per cent., because that is the total contribution which the Treasury now makes to contributory and non-contributory benefit. That is a more apposite comparison.
  Mr. Field: It is only half apposite. Summing up the total social security budget, the Minister proudly said that a large percentage of that went to the national insurance pension, which is contributory, so to a large extent his earlier argument undermines the point that he sought to make in his intervention.
  In that White Paper of 40 years ago, Beveridge was suggesting that the scheme would be unfair if the Exchequer share did not increase year by year. Under this Government and, sadly, under the Labour Government, there has been a decrease. Therefore, we are now debating an increase in taxation that will hit hardest the poorest wage earners and those with children.
  We should be debating how best to reform the system. I shall describe briefly three reforms. First, although I accept that there should be a funded scheme, there should be a massive increase in the Exchequer contribution, not only to make the scheme more progressive, but for one of the reasons which the Minister himself advanced—that the scheme is under increasing strain because of the growing number of unemployed. That factor affects the social security budget not only in this country but throughout the Western world. To meet that problem, resources should be drawn from general taxation rather than place the contribution burden almost entirely upon those lucky enough still to be in work.
  The second reform—if only we could debate it today—might be to scrap the national insurance contribution altogether and combine it with the income tax system. We should then be debating how to make our taxation system progressive.
  Finally, I return to the example of the poverty-wage earner—the single person on two-thirds of average earnings. In the last year of the Labour Government, such a person paid just under 27·7 per cent. of his income in tax and national insurance contributions. Under the Conservative Government, who promised to decrease the burden of taxation, that proportion has risen to well over 30 per cent. The idea of combining national insurance contributions with income tax thus opens the way for a wide debate on how we should reform the income tax system along progressive lines.
  1.3 am
  Mr. Peter Bottomley: I shall be brief. It is ridiculous to have extended debates on minute details of a scheme of this kind and to give far too little time to the major reforms to which the hon. Member for Birkenhead (Mr. Field) refers. I do not agree that we should try to make the income tax system progressive over a broad band of middle incomes, because simplicity is highly to be desired. Nevertheless, I believe that any serious consideration of our tax allowance and benefit contribution system by Government or by major political parties would mean getting rid of the anomaly whereby adding the tax and benefit contributions together shows that the burden is reduced for those on higher than average earnings.

  979
  I do not argue for that today or even this year, but we need to review the matter so that the House may consider the various stages of the analysis and work towards a more progressive system. I use the word "progressive" not in any technical sense but to describe a system that would meet some of the criteria that a tax and benefit system ought to meet. I recognise that this is not easy. If it had been easier, the previous Government or the present Government might have done it.
  The only really progressive system of taxation is value added tax which is worthwhile provided that exemptions are made for essentials. It would be sensible for the Government to adopt the suggestion that I have made as an individual and through Family Forum of getting tax and benefit analysis over the family cycle at different income levels and in different circumstances. Only by that process will sufficient public interest be created to bring pressure on the Government and civil servants to do what they know to he right. They should get rid of much of the present cock-eyed system and lead to the adoption of a more sensible one. That will not happen if hon. Members spend all their time discussing 2·5 per cent. of this, that and the other in a virtually empty House.
  1.5 am
  Mr. Reg Race: The debate is not only about the taxation of low-paid and employees generally through national insurance contributions. Hon. Members have also to consider the pay received by individuals in employment. Low-paid workers have seen their burden of taxation increase and their position relative to average earnings decline during the Government's term of office.
  In 1979 the lowest decile of male workers earned 66 per cent. of the average male wage. This year they earned only 64·5 per cent. It is important for hon. Members to consider the issue before the House tonight in the context of the Government's broader policy. The Government are intent on screwing the living standards of the low-paid even further into the ground. Their action over national insurance contributions is part of that process. They are also intent on reducing the bargaining power of the low-paid by abolishing the fair wages resolution of the House.
  A tradition that has lasted for almost a century is abolished by the Government's reduction in the number of wages inspectors for wages councils. This attacks the ability of the wages councils to impose fair wages on recalcitrant employers. The position of all low-paid workers is therefore undermined. The measures before the House are part and parcel of the wider attack on low-paid workers and employees generally.
  I wish to deal mainly with the philosophical question of the Government's intentions towards the improved benefits generated by the benefit scheme introduced by the Labour Government and with the consequences for future taxation levels and the national insurance fund of the increase in the number of claimants. The Government have had to ask themselves whether they can afford relatively modest levels of social security benefit financed through the national insurance fund when the number of old-age pensioners, of the short-term unemployed and of those claiming supplementary allowance is increasing for various reasons.
  The answer that the Government have come up with is interesting. There are various choices. Governments do not have only one option. The Government had the option of doing four different things. They had the option of
  980
  cutting benefits, and my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) correctly drew attention to the way in which the Government have cut national insurance benefits, supplementary benefits and other benefits by £1·8 billion this year, of which £1 billion comes from national insurance. That is one option which the Government have been keen to adopt.
  The second option for the Government was to increase national insurance contribution for both employers and employees. They have taken that course as well, as is shown by those measures, to try to jack up the contributions to the fund.
  My hon. Friend the Member for Birkenhead (Mr. Field) referred to the third option, which was to increase the Treasury contribution to the national insurance fund. The Government were not prepared to do that, because that comes from general taxation, and their key objective is to get down the rate of general income tax before the next general election, irrespective of the impact of that policy on the national insurance contribution. Therefore, that option was not available to them.
  The fourth option, which was also not available to them but which bears on these measures, was for the Government to change their general economic policy. The Government are in difficulty with the national insurance fund. This stems from the fact that so many people have stopped paying national insurance contributions because they are unemployed. The greater the number of unemployed, the fewer there are to pay national insurance contributions. The Government could change their basic economic policy to get people back to work so that they could begin to pay taxes and national insurance contributions. That would avoid the need for rises in the contribution levels to the national insurance fund. But these measures show that the Government are not prepared to do that.
  The changes brought about by these proposals are not inevitable. The Government were faced with choices, and they funked the challenge. They funked the option of expanding the economy and creating jobs and of paying for the fund through an increase in general taxation.
  The problem is that the fund is based on a false premise. Beveridge said that peoples' self-respect would be increased if they paid for their benefits through their contributions and their employers' contributions. That is a valid point, but it is important to have a funded scheme if one has a private employer who could go broke. It is crucial in that case, because there is no guarantee for the employee that his employer will still be around in 30, 40 or 50 years' time, at the end of his working life, to pay out the contributions paid in by the employee.
  Governments do not go broke. They do not need a national insurance fund as such to pay pensions and other benefits at the end of the day when someone reaches the age of 60 or 65. Governments do not go broke, and therefore it is nonsense to have the kind of national insurance fund that we have. We should combine taxation through income tax with national insurance contributions.
  As my hon. Friend the Member for Perry Barr said, our system of taxation is regarded by ordinary people as unitarist. It is the bottom line that matters. People are concerned with what they take home at the end of the week or the end of the month. That is the reality. We should say that we are in favour of decent benefits paid for by general taxation, and of an end to this economic policy which the Government are pursuing, which is producing not only

  981
  increased unemployment but further burdens of taxation of the poor and those on low incomes. That is the consequence of their policy, and we must ram that home firmly tonight by voting against these measures.
  1.15 am
  Mr. Andrew F. Bennett: I shall not detain the House long. Although these orders appear technical, they nicely illustrate this Government's major shortcomings. The Government's mismanagement of the economy has produced massive unemployment and many of the problems of the national insurance fund. The Government have deliberately made our tax system less fair by increasing the burden on the least well off and reducing the burden on the richest people. It also illustrates the meanness of many regulations to people on the lowest incomes.
  I shall start with the meanness. In these regulations the Government should tackle the problem that has been repeatedly pointed out of the people who are caught with earnings close to the lower earnings limit. Those people pay national insurance contributions for perhaps half the year, and when the Government raise the lower earnings limit such people stop paying contributions for a period, but then, as a result of a pay increase, they start to pay contributions again. Often they do not pay enough contributions in the year to qualify for any benefit. So for a part of the year they pay contributions which achieve little for them. Certainly, they do not achieve any right to unemployment benefit, although people in those earnings groups are often the most likely to lose their jobs and therefore require unemployment benefit.
  If people pay for part of a year and then do not pay because of an increase in the lower earnings limit, surely their contributions should be refunded. For those groups, the contributions are the highest proportion of their total income. Those people are meanly treated as a result of the upward movement of the lower earnings limit, which takes them out of contributions, breaks their record, and thus renders them ineligible for unemployment benefit. It is an illustration of the way in which regulations are often mean to some of the lowest-paid people in our society.
  Many of my hon. Friends have said that the Government's creation of unemployment has had a major impact, in the number of people who do not work and therefore do not contribute to the fund, and in the increasing number of people who have to be paid out of the fund. That is unfair. In addition, last year the Government manipulated the Treasury contribution to the fund, to reduce it, so that more was paid from national insurance and less from general tax revenue. That, too, is unfair.
  There is also the unfairness to the individual, whose contribution has been increased by almost one-third, while his benefits have been savagely cut—the £1 billion of which my hon. Friend the Member for Wood Green (Mr. Race) spoke. Moreover, by increasing the national insurance contribution and reducing the income tax level, the marginal rates of tax have been savagely increased for the low paid and cut for the rich.
  This measure illustrates the Government's unfairness in encouraging inequality and their meanness to most of the people on the lowest incomes. It deserves to have a big vote against it tonight.
  1.20 am
  Mr. Rossi: I do not know to what extent the House wishes me to detain it. Opposition Members were here to raise the points that they wished to make. In an intervention, the hon. Member for Stockport, North (Mr. Bennett) asked me for a figure that I was unable to give at the time. The raising of the upper earnings limit to £245 would have brought in another £87 million—£39 million from employees and £48 million from employers. Of that sum only £70 million would have gone into the national insurance fund.
  Mr. Rooker: When I gave the figure of £87 million I was quoting the Minister's answer yesterday to my hon. Friend the Member for Thurrock (Dr. McDonald) in c. 445 of Hansard.
  Mr. Rossi: I know that was my answer. I told the hon. Member for Stockport, North that I was not able to recall the figure when he asked me. I am giving it to him now to ensure that it is on the record.
  Mr. Andrew F. Bennett: That is a helpful figure, but would the Minister tell us what that would do if we wanted to get rid of the 5 per cent. abatement?
  Mr. Rossi: It is too early in the morning for me to—
  Mr. Peter Bottomley: It would be £60 million—there would be a saving of £27 million.
  Mr. Rossi: I am grateful to my hon. Friend. I was asked why the level was set at £235. That will be 7·15 times the pension rate and represents an increase of 6·8 per cent. on the present upper earnings limit. The figure has been pitched at that level because it is in line with the rise in earnings.
  I believe that the House will agree that we should use our achievement in reducing the rate of inflation to keep the extra contributions from employers to the minimum needed for the good housekeeping of the national insurance fund.
  Mr. Field: Why?
  Mr. Rossi: Because employers provide jobs. It is as simple as that. If we impose too great a burden upon employers, jobs will be lost in consequence.
  Mr. Field: I intervened from a sedentary position because the Minister was saying that the Government should make the most of the falling rate of inflation. By putting the burden on employees the increase is put into the retail price index calculation. By putting the increase on to the employer it is not put into the retail price index calculation. The Minister was again undermining his argument.
  Mr. Rossi: We are treating both sides—if one wants to call them sides—equally with this uprating of the contributions.
  Mr. Field: They are not being treated equally.
  Mr. Rossi: They are both going up at the same rate. The hon. Member for Birmingham, Perry Barr (Mr. Rooker) made much of the relationship between employers' and employees' contributions. He is right. Between the mid-sixties and 1980–81 the balance between employees' and employers' contributions was changed progressively in favour of the employee. The loading of the 1981–82 and 1982–83 increases on the employee

  983
  readjusted what had taken place earlier and struck the balance as it was originally intended to be—and the Beveridge report was quoted.
  At the moment we are keeping the two contribution rates in line. This uprating is not putting a disproportionate burden on either side. The point was made that this is a regressive form of taxation, but the lower earnings limit is tied to the basic pension rate. That is a basic feature of the new pension scheme which had all-party support. Therefore, the £32.50 lower earnings level for 1983–84 is automatic and avoids low earners being caught for contributions.
  The upper earnings limit can only be regarded as regressive if one ignores the contributory principle.
  Mr. Rooker: As the lower earnings limit is tied to the pension rate and pensions are now only raised in line with prices rather than with earnings, what will happen if there is a divergence between earnings and prices in the near future if the earnings limit is linked to a pension which is not linked to earnings? Will not that create massive contradictions in the operation of the national insurance fund?
  Mr. Rossi: That would cause problems which we would have to meet as and when the time arose by looking at the rates to see what adjustments should be made. Those are all matters to be taken into account when judgments are being made on a year-to-year basis. The hon. Gentleman cannot complain about the lower earnings limit when it was originally introduced by the Labour Government with all-party support.
  Mr. Rooker: It is not fair to use that argument, because when it was introduced the basic pension rate was tied to prices or earnings, whichever was the higher. Therefore, tying the lower earnings limit to the pension rate was justified. It is not any longer.
  Mr. Rossi: The hon. Gentleman has made his point.
  Mr. Race: If we are talking of the regressiveness or otherwise of the national insurance contributions for the employed, will the Minister tell the House about the simple fact that, when someone crosses the national insurance contribution threshold, payments are made on the whole income, not that part above the limit? That must be a wholly regressive tax on the low paid. Does the Minister agree that it is foreign to anything in the income tax provisions?
  Mr. Rossi: Yes. When people come above the lower earnings limit they must pay the full amount. That is a well-known feature of the scheme which has operated ever since the scheme began. That again is a problem that must be considered at some point by the House. As long as we adhere to the contributory principle—it would be an enormous step were we to decide to abandon it—there will inevitably be the kind of effects that we are now discussing. Hon. Members must accept that.
  When hon. Members talk of unifying the tax and national insurance systems in order to remove altogether the regressive nature of the national insurance contributions, it abrogates the contribution principle. There will not then be a relationship between what people are paying and the benefits they are likely to receive.
  Mr. Field: What about earnings-related supplements?
  Mr. Rossi: All non-contributory benefits are breaches of the principle. It is a principle that has been eroded over
  984
  the years by Labour and Conservative Governments in different ways. Nevertheless, there is still a link between contributions paid to and benefits received from the national insurance fund.
  Mr. Race: Is it not clear that the Government are maintaining earnings-related contributions to the national insurance fund while abolishing earnings-related benefits? Does not that scupper the Minister's argument?
  Mr. Rossi: Not entirely. That is so in respect of unemployment benefit. Payments out of the fund for unemployment benefit amount to about 9 per cent. of all payments out. Labour Members have made great play of the "enormous" increase in contributions, which they claim is due to the increase in unemployment, but that is not so. The increase in benefits is related directly to the increase in pensions, and those are still earnings-related.
  The hon. Member for Birkenhead (Mr. Field) talked about the percentage of the total social security benefits that is payable. He was making a false point. I was talking earlier of the relationship and the proportion of the pension payments to the total contributory benefits that are paid out, which is an entirely different matter. It is £14·5 billion compared with £20 billion. This is why, on a pay-as-you-go basis, which the fathers of the scheme decided was the right way in which to proceed, the workers of today have to pay that much more in their contributions as we pay out higher benefits and greater pensions, which are the largest element of all contributory benefits. That is something that Labour Members find it convenient to avoid and ignore for the purpose of debate.
  This is why we have had to ask for increases in contributions by employers and employees. The increases will be necessary to meet the increases in benefits that have started this week, on 22 November. I have not heard the Opposition argue that we should reduce the benefits and pensions, but that would be the concomitant of reducing the contributions that we are asking people to pay. It is in that context that I ask the House to approve the order.
  Question put:—
  The House divided: Ayes 93, Noes 40.

  Division No. 18]

  [1.31 am

  AYES

  Alexander, Richard

  Goodhart, Sir Philip

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

  Goodlad, Alastair

  Bendall, Vivian

  Griffiths, Peter Portsm'th N)

  Benyon, Thomas (A'don)

  Gummer, John Selwyn

  Berry, Hon Anthony

  Hamilton, Hon A.

  Biggs-Davison, Sir John

  Hampson, Dr Keith

  Blackburn, John

  Hawkins, Sir Paul

  Boscawen, Hon Robert

  Hawksley, Warren

  Bottomley, Peter (W'wich W)

  Heddle, John

  Bright, Graham

  Henderson, Barry

  Brinton, Tim

  Hogg, Hon Douglas (Gr'th'm)

  Brooke, Hon Peter

  Hunt, David (Wirral)

  Brown, Michael(Brigg & Sc'n)

  Jopling, Rt Hon Michael

  Browne, John (Winchester)

  Knight, Mrs Jill

  Bruce-Gardyne, John

  Lang, Ian

  Buck, Antony

  Lester, Jim (Beeston)

  Butler, Hon Adam

  Lloyd, Peter (Fareham)

  Carlisle, John (Luton West)

  Lyell, Nicholas

  Carlisle, Kenneth (Lincoln)

  MacGregor, John

  Colvin, Michael

  Madel, David

  Dorrell, Stephen

  Major, John

  Dover, Denshore

  Marshall, Michael (Arundel)

  Dunn, Robert (Dartford)

  Mates, Michael

  Dykes, Hugh

  Mather, Carol

  Fairgrieve, Sir Russell

  Mellor, David

  Fenner, Mrs Peggy

  Meyer, Sir Anthony

  Fowler, Rt Hon Norman

  Miller, Hal (B'grove)

  985

  Mills, Iain (Meriden)

  Stanbrook, Ivor

  Moate, Roger

  Stanley, John

  Murphy, Christopher

  Stevens, Martin

  Neale, Gerrard

  Stewart, A.(E Renfrewshire)

  Nelson, Anthony

  Stewart, Ian (Hitchin)

  Neubert, Michael

  Stradling Thomas, J.

  Newton, Tony

  Taylor, Teddy (S'end E)

  Osborn, John

  Thompson, Donald

  Page, John (Harrow, West)

  Townend, John (Bridlington)

  Page, Richard (SW Herts)

  Trotter, Neville

  Patten, Christopher (Bath)

  Viggers, Peter

  Pattie, Geoffrey

  Waddington, David

  Proctor, K. Harvey

  Waller, Gary

  Rhys Williams, Sir Brandon

  Watson, John

  Rossi, Hugh

  Wells, Bowen

  Rumbold, Mrs A. C. R.

  Wheeler, John

  Sainsbury, Hon Timothy

  Wolfson, Mark

  Shaw, Giles (Pudsey)

  Shepherd, Colin (Hereford)

  Tellers for the Ayes:

  Smith, Tim (Beaconsfield)

  Mr. John Cope and

  Speller, John Francis (B'ham)

  Mr. Tristan Garel-Jones.

  Spicer, Jim (West Dorset)

  NOES

  Atkinson, N.(H'gey,)

  John, Brynmor

  Beith, A. J.

  Lyons, Edward (Bradf'd W)

  Bennett, Andrew(St'kp't N)

  McKelvey, William

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

  Penhaligon, David

  Campbell-Savours, Dale

  Prescott, John

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

  Race, Reg

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

  Robertson, George

  Cryer, Bob

  Rooker, J. W.

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

  Ross, Ernest (Dundee West)

  Dean, Joseph (Leeds West)

  Sever, John

  Dormand, Jack

  Skinner, Dennis

  Eadie, Alex

  Snape, Peter

  Eastham, Ken

  Soley, Clive

  Evans, John (Newton)

  Spearing, Nigel

  Ewing, Harry

  Wainwright, E.(Dearne V)

  Field, Frank

  Welsh, Michael

  Hardy, Peter

  Whitehead, Phillip

  Harrison, Rt Hon Walter

  Wrigglesworth, Ian

  Haynes, Frank

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

  Tellers for the Noes:

  Hooley, Frank

  Mr. George Morton and

  Hoyle, Douglas

  Mr. Allen McKay.

  Question accordingly agreed to.
  Resolved,
  That the draft Social Security (Contributions, Re-rating) Order 1982, which was laid before this House on 8th November, be approved.
  Resolved,
  That the draft Social Security (Contributions) Amendment (No. 2) Regulations 1982, which were laid before this House on 8th November, be approved.—[Mr. Brooke.]

  College of Education (Hamilton)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Brooke.]
  1.44 am
  Mr. George Robertson: I am grateful for the opportunity to raise the matter of the Government's conduct in disposing of the buildings and land of the former college of education in Hamilton. The issue, which was described so graphically by the Glasgow Herald last week as a "sorry and squalid episode" has left the local community and the wider population of central Scotland shocked and dumbfounded. People of all sorts and stations, from all political parties and none, were appalled when they heard that a fine set of buildings in a large and beautiful site in the centre of an industrial town could be sold at a jumble sale price.
  Moreover, there is dismay at the way in which the sordid exercise was conducted with official silence amid a cloud of rumours and leaks that ultimately revealed that the lowest bid for the college was accepted by a Government whose Minister with responsibility for education in Scotland claims to be a chartered accountant. The indecency of the secrecy that covered up—it is a cover-up—the catalogue of unsavoury dealings that led to the decision is surpassed only by the incredible outcome of the sale.
  The first is the bargain basement price for the college, the land, the playing fields, the swimming pool, the giant sports hall and the rest. They were gift-wrapped and presented to Mr. Charles Oxley's new private school for the staggering sum of £270,000. The second was the disposal of the student residences to Miller Homes for a trifling £410,000. When there is an acknowledged chronic shortage of student accommodation locally and in nearby Glasgow, it is little short of criminal for 600 custom-built student rooms to be handed over to property speculators for little or nothing—barely the price of the land. When there is still the suspicion that part of the valuable buildings could be demolished—an eventuality that the Minister refused to rule out—the displaced students can be rightly aggrieved.
  The cynically cavalier way in which the Government have dealt with the genuine public concern about the sale serves to underline the deep suspicion generated by the affair. The startled announcement shaken out of the Scottish Office as a result of multiple leaks in all the newspapers and the Minister's grossly flippant, irresponsible and questionably legal offer last Wednesday to sell the buildings to me for £3 million, displays a contempt for sincere public disquiet at the mysterious disposal of public property. Public feelings have been further rattled by the disclosure that higher offers were submitted but rejected.
  Mr. Martin J. O'Neill: Does my hon. Friend agree that the Government's approach to the sale was in keeping with the way in which they announced the closure of the college? The announcement was made at the fag end of a parliamentary Session at a time designed to cause the maximum inconvenience to Scottish Members. We have come to expect such almost under-the-counter dealings and sleight of hand from this Minister when he is dealing with unsavoury and unpopular decisions for Scotland.
  Mr. Robertson: I am grateful to my hon. Friend, who pinpoints the historical context of the debate. The House

  987
  has well chronicled the events from 1977, from when the Minister campaigned so vigorously with the hon Member who now represents Southend, East (Mr. Taylor) against the Labour Government's intention, later changed, to close down some colleges of education, to the disgraceful decision to close Hamilton college of education. The Government have resisted concerted public opinion in Scotland, especially in Lanarkshire. That is characteristic and only the tip of a nasty iceberg that covers up many of the Government's dealings in public affairs.
  The Minister's explanations of the background to the sale and those of his officials carry no conviction. An un-named spokesman told The Scotsman last week that two offers were made in addition to the accepted one. He said:
  "In neither case were the offers attractive because of the conditions attached to the offers."
  The Minister told the House last week during Scottish Question Time that
  "The strings attached to the other offers were unacceptable."—[Official Report, 17 November 1982; Vol. 32, c. 271.]
  What were the conditions? We have heard nothing about them. When shall we be told what the conditions were? We know that one other offer was from a company called Hamilton Property Developments Ltd., a consortium of local business men, which offered £95,000 more than the successful bid, but which was turned down. What was the company's unacceptable condition? It made only one condition—that it be granted outline planning permission. The question must therefore be: why was that unacceptable? What was it that made it wholly unattractive?
  I have also to disclose that since the Minister, in his ebullient, rash generosity offered the college to me in the House last Wednesday, Hamilton Property Developments Ltd. has written to him again, withdrawing even the minimal condition in the original offer.
  If the Minister can offer the buildings to me, will he now accept the additional £95,000 from Hamilton Property Developments Ltd., condition-free? Will the Minister give me an answer to that question this evening?
  I also want to know why Hamilton Property Developments Ltd. was asked to increase its first offer of £500,000, which it did, on 23 July, to £650,000, yet it was not asked to increase it again. Why was the next word that it received the newspaper story that the college had been sold to a lower bidder? Is that the way that this Government of parlour accountants conduct their business?
  Why will not the Minister tell Parliament what he is doing? Why is he so determined to continue the cover-up when the stones already turned have produced enough crawling things to disquiet most normal people?
  There is the reserve price, a concept that even the Minister's accountancy training, however threadbare, cannot have missed out. Was there any reserve price? Was there any bottom line to the deal? Would, for example, the Minister have accepted an offer of £1,000 if it had been the only one that had been made without conditions? If not—I bet that it would have been "not"—what was the bottom line? Why was it not far higher than the inconsequential £680,000 that was finally achieved?
  Who advised the Government on selling that property? Did that body not put a reserve price on the property? Did it not advise that a better price could be obtained inevitably
  988
  when the market was not so depressed? If it did not—it apparently operates in the commercial market—one hopes that it does not sell houses in the same incredible fashion.
  It is only fair to clarify with the Minister whether he cares about the purchaser's credentials for the college.
  I believe that Mr. Charles Oxley, the successful bidder, is a sincere and dedicated man, even if he is importing an alien and unnecessary form of elitist schooling into Lanarkshire. However, it is the economics of his operation that disturb me. They seem strange, even bizarre. Even when his school eventually has a full complement it must lose a lot of money. Calculations that I have made and which are based on Mr. Oxley's fees show an annual income of £480,000 a year but a minimum expenditure of £591,000 a year. Has the Minister bothered to examine that, or does he not care about the commercial viability of a purchaser? What happens to the college and the land if the venture fails? Were those factors taken into account when the offers were being considered?
  Even the parlour accountants in New St. Andrew's House, and even the loving intentions of Sir Hugh Fraser's fiancée, who has apparently offered her services as a teacher in the new school, cannot make a huge loss break even.
  I shall now deal with the value of the college. Last week, the Minister dared to ridicule my valuation of the college at £12 million. He allowed his ridicule to take him into the uncharted territory of offering me the property that he had already sold. Is it unrealistic to value land and first-rate buildings at a mere six times the building cost of 18 years ago? What is the value of 52 acres of prime town centre land alone? Land in Hamilton in the town centre is selling today at £52,000 an acre. The land value, even allowing for demolition of the buildings, is about E2½ million.
  It was 18 years ago that Hamilton college of education was built for £2 million. A Public Accounts Committee investigation of that time records the details of the building costs. The £12 million is a conservative valuation for rebuilding, replacement or even alternative use. I challenge this chartered accountant Minister to put a book value of any less on it.
  Several local issues arise out of this sordid issue. One is the Holy Cross high school, which is adjacent to Hamilton college of education. It has enjoyed the use of the swimming pool, the gymnasium and other facilities In the college buildings and it is now to be denied them by the new owners of the college. That will create a major accommodation crisis for one of the finest educational establishments in the Lanarkshire area. I know that, when I see the parent teacher association of that school next week, its grievance against the Government will be clear and justified.
  This has been a sorry and squalid affair. The Minister owes the House, the people of Hamilton and the taxpayer an explanation for his conduct. We look forward to learning something about the mysterious and sordid way in which he disposes of public assets.
  1.58 am
  The Under-Secretary of State for Scotland (Mr. Alexander Fletcher): Like the hon. Member for Hamilton (Mr. Robertson) I welcome the opportunity to put on record the circumstances regarding the sale of Hamilton college.

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  The hon. Gentleman has used much emotive language tonight and elsewhere when discussing the case. He talks of a sorry and squalid episode, a jumble sale price and a cover-up, but I assure him that there is absolutely no basis for the type of language that he has been using. There is no cover-up. The hon. Gentleman is looking for a scandal where none exists. He may think that it is good fun or good local politics to do this, but it is not helpful to his constituents or to the House.
  The hon. Gentleman has topped up the price to £12 million and has stuck to that figure. At least he is consistent in his exaggeration. There is no foundation for that price. I cannot understand why the hon. Gentleman does not appreciate that the price of any land or building is determined by what people are prepared to pay for it—no more and no less. This is a simple example of offers being made, and of the best offer being accepted. With respect, the scandal and "sorry and squalid episode" to which the hon. Gentleman referred consist in the fact that he has topped up and exaggerated the figure. That is the scandal. That is the irresponsibility of which he accuses the Government.
  It may be helpful if I remind the House briefly of the events which led to the sale of the Hamilton buildings to Christian Schools (North West) Limited and to Millers Homes (Northern) Limited. In so doing, I can reply to the hon. Gentleman's points. There was never any intention that the Hamilton property should remain for long in the ownership of Jordanhill college—to which it was transferred on closure—since there was no college of education function for which the Hamilton buildings were required. The regulations that closed Hamilton as a separate college therefore empowered Jordanhill college, in due course, to dispose of the property.
  In December last year, the property was advertised publicly as available for disposal after 15 September 1982. Over the next two or three months a substantial number of people—more than 30—expressed some interest in the property. In June, those who had expressed a real interest were invited to submit firm offers to purchase by 23 July. Two of those offers were for the whole property: the offer by Millers related only to the hostel accommodation and the offer by Christian Schools to the teaching block.
  At the end of the day the offers by Millers and Christian Schools were accepted. The offers accepted were the best offers received. There has been great talk about disposing of the college at less than its value, but the value of any property is what it will fetch in the market. There was no offer for this property that was more than a small fraction of the £12 million at which the hon. Gentleman estimates the value. The two unsuccessful bids for the property were not accepted, because each was subject to conditions that introduced a high risk that at the end of the day a sale would not have taken place. I emphasise, however, that decisions were reached entirely on commercial grounds. There was no question whatsoever of giving preference to a particular party.
  I should stress that Jordanhill college found it expensive to keep the buildings going. At present, the cost is more than £300,000 per annum just for keeping the empty college in existence. That had some bearing on the Government's decision when considering the offers.
  Mr. George Robertson rose—
  Mr. Fletcher: I must answer the point that the hon. Gentleman has raised.
  Mr. O'Neil: The college should not have been closed in the first place.
  Mr. Fletcher: It would have cost much more for the college to continue to train teachers, for whom there were no jobs in Scottish schools. I believe that the hon. Gentleman taught economics, and he should not need any further explanation.
  The two unsuccessful bidders for the Hamilton property have stated publicly that they offered more than the total price that was eventually accepted, and I confirm that that is so. However, I repeat that each offer was subject to conditions that made it unacceptable. One of the two unsuccesful bidders has declined to discuss the matter further in public, so clearly it would not be right for me to disclose any details of his offer. The other unsuccessful bidder, Hamilton Property Developments Ltd., has, however, made certain statements on which I feel obliged to comment, some of which were repeated by the hon. Gentleman.
  Press reports would suggest that this offer was subject only to a condition that the purchasers first obtained outline planning permission to convert the hostels for housing accommodation and to convert the main teaching block for use as a hotel and conference centre, with the implication that none of this would have given rise to any difficulty. In fact, the sale would have been subject to the condition that the hostels be converted for housing and also that Hamilton Property Developments Ltd. should have obtained outline planning permission for three different interchangeable planning consents to convert the main teaching block for use as a hotel and conference centre, as a private clinic or as commercial offices.
  The idea was that the prospective purchaser should hold all four of the planning permissions simultaneously and no sale would have taken place unless that were so. It seemed to us that there was a considerable risk that these consents would not have been obtained in this way and that there was an unacceptable risk that a sale would not have taken place. Furthermore, during the time that would have been needed to seek, and perhaps obtain, planning permission, Jordanhill would have had to maintain the property at a cost which would have made the offer by Hamilton Property Developments Limited, even on strictly financial terms, a good deal less attractive in relation to the offers which were eventually accepted. As I said earlier, the cost of maintaining the college in its present condition is more than £300,000 per year.
  I understand that Hamilton Property Developments Ltd. has submitted to Jordanhill college's solicitors an offer, received on 22 November, to purchase the Hamilton property for £775,000 without any conditions attached. I am not clear what the purpose of this offer is as the final exchange of missives for the sale of the property took place on 8 November and Jordanhill is not in a position to sell it to someone else.
  Mr. Robertson: So why did the hon. Gentleman offer it to me?
  Mr. Fletcher: I was trying to make the hon. Gentleman understand the absurdity of the £12 million on which he insisted when I said at Question Time that even one-quarter of that would have been of great interest to the

  991
  Government. If the hon. Gentleman is seriously asking why I made that comment, it was simply to show the utter absurdity of the price on which he insisted.
  Mr. Robertson: Do not be flippant.
  Mr. Fletcher: The hon. Gentleman accuses me of being flippant, but he has repeatedly insisted that his valuation of the property is £12 million. Yet the people whose offer he is now defending offered £775,000. I do not recommend that he stretch his absurdity any further than he already has.
  Mr. Tom Clarke: Ask the district valuer.
  Mr. Fletcher: Another important point is that, during discussions with Jordanhill at an earlier stage, Hamilton Property Developments Ltd. was asked if it would be prepared to withdraw the conditions that were eventually found to be unacceptable, but it refused to do so. It had the opportunity to reconsider its offer. It was pointed out that the offer as it stood would not be accepted. It was entirely a matter for Hamilton Property Developments Ltd. whether it withdrew the offer with those conditions attached. It has now done so, but unfortunately, from its point of view, it has done so after the offers to which I referred have been accepted.
  The hon. Gentleman has also exercised his financial and arithmetical prowess today by doing some sums to satisfy himself that Christian Schools could not operate in the Hamilton area otherwise than at a loss. Again, he must appreciate that questions of viability are entirely a matter for the new proprietors of the school. As I have said, the decision to sell the teaching block and playing fields to Christian Schools was taken entirely on commercial grounds because its offer for that part of the property was the best and was entirely free from conditions, and questions about the future use of the property did not arise.
  I stress that my Department had no direct contact with Christian Schools and suggestions that there was an irregular bargain to ensure that the property was used for a private school are unfounded. No special treatment or financial aid has been sought by or offered to the school. In due course, like any other private school, it will have to register with the Registrar of Independent Schools. I cannot anticipate any discussions that may take place at that stage.
  The sale does not cast any reflection on the adequacy of the public sector schools in Hamilton provided by Strathclyde regional council. The offer from Christian Schools came out of the blue. It ran two schools in England. I assume that it knows its business and that it has done its sums regarding the viability of the project.
  I should like to stress the importance of the savings that will result to the taxpayer as a result of closing Hamilton
  992
  college. In the evidence I gave to the Select Committee on Scottish Affairs last year, I suggested provisionally that the savings from the closure of the college would be about £250,000 in the first year after closure and about £800,000 a year thereafter. At current prices this amounts to £300,000 in the first year and £1 million in subsequent years. We now expect that savings will amount to more than £500,000 in the current year and well over £1 million next year and in later years.
  Those savings would, however, have been significantly reduced if the buildings had been retained for any length of time. This was an important element in the decision to dispose of the buildings at the price which has been realised. That is an important consideration which the Government, with responsibility for taxpayers' money, was obliged to take into account in making a final decision to dispose of the property.
  To those who ask if there was a reserve price on the property, I would say that a reserve price was unnecessary. We were under no obligation to accept any of the offers received. As the disposal of the property saved well over £300,000 a year on maintaining the property as it is at present, it was obviously well worth our while to take an offer without conditions that would expedite the sale and the taking over of the premises by the parties concerned.
  The Lanarkshire branch of the Educational Institute of Scotland has issued a statement opposing the sale and claiming that the education of children in Lanarkshire has suffered because of the closure of the college. The teachers resource centre located at Hamilton college was run not by the college but by Strathclyde regional council. Complaints that it has not reopened elsewhere should be directed to the regional council and not to me. The continued provision of in-service training for teachers in Lanarkshire is a proper matter of concern to the Secretary of State and myself. I am happy to say that there has been no decline in provision as Jordanhill college has taken over responsibility for in-service training.
  Mr. O' Neill: What about the difficulties of travelling time?
  Mr. Fletcher: There is no decline in the provision of in-service training. That is what matters. In the debates on closure, assurances were sought that in-service training would be maintained at the standard to which the Lanarkshire area had been accustomed. That commitment was given and carried out. There is no justification for the exaggerated and irresponsible remarks that have been made. The House can be satisfied that the Government have acted prudently and properly, in the best interests of the taxpayer.
  Question put and agreed to.
  Adjourned accordingly at thirteen minutes past Two o' clock.

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Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Chichester.
The Lord Hemingford—Sat first in Parliament after the death of his father.

Social Security Benefits Uprating
Lord Harris of High Cross: 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 acknowledge their miscalculation in raising social benefits by more than the declining rate of inflation, and whether they can now inform the House how quickly the necessary correction will be made.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne): My Lords, the uprating of social security benefits which takes place this week was based on a forecast price movement of 9 per cent. made at the time of the Budget, which because of our successful strategy against inflation has turned out to be too high. My right honourable friend the Chancellor of the Exchequer made clear on 8th November in another place that the Government will make an adjustment to the 1983 uprating having regard to this; but the extent of that uprating for individual benefits will be decided, as usual, at the time of the Budget.
Lord Harris of High Cross: My Lords, I thank the Minister for that brief factual reply. Before we are deluged by emotions from a certain quarter, I would like to ask a simple question, if I may. Are the Government not the least bit worried about the effect on employment incentives of tilting the balance still further against net take-home pay, which has risen less, and often much less, than this 11 per cent. by which all benefits have now been increased?
Lord Trefgarne: My Lords, the noble Lord is, of course, quite right to say that many people have settled for wage increases considerably less than the 11 per cent. by which most benefits were uprated earlier this week; but, of course, it was not the intention to uprate benefits by this excess, whatever it may turn out to be, over and above inflation. The target is always, as it was of course in the time of the previous Administration, to match the increase with the rise in prices.
Lord Wells-Pestell: My Lords, may I ask the noble Lord the Minister this: if the Government are going to contemplate clawing back some of the over-expenditure, is it not disgraceful, considering that the
886
amount involved is only £180 million a year and £90 million of that will come from old-age pensioners who never enjoy a high standard of living?
Lord Trefgarne: My Lords, the sum of money which the noble Lord mentions is not yet properly established. The figure which my right honourable friend referred to in the other place was the amount by which he was proposing to adjust the social security budget as a whole for the part year, not a whole year, running from the uprating next year to the end of March 1984. It was never the intention of the Legislature—it was certainly never the case when noble Lords opposite and their right honourable friends were in power—that pensions should be uprated above the rate of inflation.
The Earl of Onslow: My Lords, is the noble Lord aware that by increasing benefits by 11 per cent. and trying to hold wages to 4 per cent. the Government have in fact radically increased the dangers of the poverty and unemployment traps? Is he aware that there is a solution, which is to raise the tax thresholds and the starting point of tax by higher than that amount? That will obviate the poverty trap and unemployment trap effects, which he has unintentionally initiated by this 11 per cent rise in benefits.
Lord Trefgarne: My Lords, the poverty trap and the problems which it brings in its wake are a pretty wide subject on their own, perhaps a little wide for Question Time, particularly on a day when we have a debate on these matters to follow shortly. But I take note of what my noble friend says.
Lord Kilmarnock: My Lords, is it not the case that 2 per cent. of the 11 per cent. referred in the Question of the noble Lord, Lord Harris of High Cross, is in fact a repayment for a previous shortfall?
Lord Trefgarne: Yes, my Lords, the noble Lord is quite right; we did add this year a small percentage to make up for a shortfall last year.
Lord Blyton: My Lords, may I ask the noble Lord whether he is aware that the Government took 5 per cent. off the unemployed three years ago, which they have now refused to refund? Is he further aware that two years ago they gave the pensioners a 53-week year, thereby depriving them of one week, to give them a Christmas box of £10? Does he not think the attitude of the Government is really nauseating?
Lord Trefgarne: My Lords, there are a number of improvements in social security benefits which we would like to make when the necessary funds are available. As to the 5 per cent. abatement to which the noble Lord referred, my right honourable friends in the other place have acknowledged and accepted the principle of restoring that abatement as soon as resources allow.
Lord Molloy: My Lords, can the noble Lord perhaps in due course inform the House, apropos the present clawback from the old-age pensioners, how much of that clawback and of other reductions over the past

887
three years will go to enhancing the tax relief of the very wealthy?
Lord Trefgarne: My Lords, we have not yet made any detailed anouncement in respect of the adjustment which the noble Lord asks about. It is perhaps worth noting that since we came into office, retirement pensions, for example, which are, of course, a very important, if not the most important, benefit, have increased in real terms by something approaching 4 per cent.
Lord Wells-Pestell: My Lords, may I ask the Minister whether he is aware, as I am sure he is, that a large number of old-age pensioners are living below the poverty line because they are not taking up the various benefits to which they are entitled? To claw back from 9 million or 10 million people an amount of £90 million in those circumstances is quite deplorable.
Lord Trefgarne: My Lords, no announcement has been made about the rate of any adjustment which may be made next year. That is a decision which will be taken along with all others when my right honourable and learned friend the Chancellor of the Exchequer formulates his Budget proposals next spring.
Lord Glenamara: My Lords, is the Minister aware that many of us believe there is a case for excluding retirement pensioners from the clawback because their spending pattern is quite different? For example, in the ordinary retail price index, mortgage repayments are a big element but retired people rarely have mortgages. Is there a case for looking at retirement pensioners separately from the rest of the community and excluding them from the clawback?
Lord Trefgarne: My Lords, it is of course the case that the recipients of different types of benefit will wish to advance their own case to be shielded from any adjustment. My right honourable and learned friend will take all these thoughts into account when formulating his proposals.

Horticulture: Effect of Spain's Entry into EEC
2.44 p.m.
Viscount Sidmouth: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are aware of the serious impact the accession of Spain to the EEC would have on the market for horticultural products, and what proposals they have to mitigate this.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): My Lords, Her Majesty's Government accept that Spanish accession is likely to affect British producers in a limited number
888
of horticultural products. We have made it clear that accession arrangements must include transitional provisions to help safeguard the interests of such producers.
Viscount Sidmouth: My Lords, I thank the Minister for that declaration of intent. Is he aware that Spain has a great potential, through protective cropping and irrigation, to produce fruit and vegetables during the North European season? Does he agree that if that potential is developed, as is being done now, it would have a serious effect on jobs in horticulture, which is a labour intensive industry, in this country?
Earl Ferrers: My Lords, clearly, if there are possibilities for Spain when it joins the Community to increase its exports or production, no doubt it will do so. However, expert opinion is that there are limitations to that increased output in the Spanish horticultural and agricultural sectors.
Lord Shinwell: My Lords, leaving aside the effect on horticulture, does the Minister agree that instead of inflating the EEC, as we seem to be doing, we should do far better, in our own interests—excluding the interests of other people who, in my opinion, perhaps do not count so much—to deflate it instead?
Earl Ferrers: My Lords, the noble Lord, Lord Shinwell, is a master at taking advantage of Questions. The Question refers merely to horticultural products. I take the noble Lord's point, but the Government believe that Spain is a part of Europe and it is part of the structure of Europe. It is now involved in NATO and it is quite right that Spain should become part of the European Community.
Lord Harris of Greenwich: My Lords, is the Minister aware that many of us welcome what he has just said in the latter part of his Answer and that we, like him, look forward to welcoming a democratic Spain into the European Community?
Earl Ferrers: My Lords, I am glad to note that, not for the first time, the noble Lord, Lord Harris of Greenwich, agrees with the Government.
Lord Davies of Leek: My Lords, can the noble Lord tell the House whether, before the accession of Spain and Portugal to the Community, the Government have discussed with the British horticultural industry any problems that might arise? Secondly, can the Government assure the House that they will do all they can, as the Germans requested in their case, to ensure that the accession of Spain and Portugal to the EEC will not involve any increase in our own provision of resources, or otherwise increase the budget to a further extent, but will be financed entirely by economies in the common agricultural policy? This is a point that I think—
Several noble Lords: Question!
Lord Davies of Leek: My Lords, please let me complete my last sentence without interruption. I have been putting a question all along, but I will sit down now, because the noble Lord knows my intention.
Earl Ferrers: My Lords, of course we are aware of Spanish problems and we certainly wish to see those problems as far as possible mitigated as between Spain and the United Kingdom. I remind the noble Lord that the conditions of entry are between Spain and the European Community. With regard to our own resources, it is our view that expenditure on agricultural support needs to be reduced, especially in relation to surplus commodities, rather than increased. Any question of increasing the Community's own resources raises much wider issues, including the amount of the United Kingdom's net budget contribution to the EEC.
Lord Cledwyn of Penrhos: My Lords, the Commission has made proposals for variable transition phases. In his opening reply the noble Lord referred to a transition phase. Was he referring to the same thing? If not, could the noble Lord tell the House what the Government's attitude is to the Commission's proposals, in view of the undoubted effect of the accession of Spain and Portugal in certain sectors of British horticultural and agricultural industry?
Earl Ferrers: My Lords, at the moment the agricultural chapters have not been discussed in full with the Community and Spain. Clearly, anything that comes as a result of the discussions will have to be considered very carefully. It is our intention and desire to see that there should be a proper transition arrangement during which time all the countries involved will be able to make their own arrangements as regards the future full membership of Spain.
Lord Gladwyn: My Lords, would it not be desirable not always to concentrate entirely on what are considered to be British interests, but sometimes to consider what are the interests of the Community as a whole?
Earl Ferrers: My Lords, that is precisely the reason why we welcome Spain into the Community. On the other hand, one must realise that there are certain effects which could be harmful to United Kingdom interests and we wish to see that those are made as small as possible.
Lord Leatherland: My Lords, can the Minister assure us that no punitive measures will be taken against Spain in regard to the export from Spain to this country of what is known as "Sherry"?
Earl Ferrers: My Lords, I cannot imagine that the export of sherry would have a punitive effect on anyone, unless he took too much of it.

Litter
2.51 p.m.
Lord Beaumont of Whitley: 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 propose to bring into force the first three subsections of Section 24 of the Control of Pollution Act 1974 (dealing with litter).
The Earl of Avon: My Lords, it is our intention to implement these provisions as the public expenditure situation permits. In the meantime, the Government continue to give financial and moral support to the Keep Britain Tidy Group, who campaign against litter on many fronts in collaboration with local authorities, voluntary groups, industry and commerce.
Lord Beaumont of Whitley: My Lords, will the Government give some estimate of what they think it might cost, and therefore when they are likely to do it, in view of the fact that the sections in question only require the local authorities to consult, to prepare statements and to give adequate publicity, none of which one might think was particularly expensive?
The Earl of Avon: My Lords, the costs of drawing up plans are unlikely to be great, but implementing them would depend upon the cumulative decisions of local authorities across the country. I gather that the last estimate some years ago was £250,000 for the plans and probably something like £1.25 million for the implementation.
Lord Monson: My Lords, can the noble Earl say whether Her Majesty's Government have sought the advice of the Government of the tidiest nation on earth—that is to say, Singapore—on how to combat the litter menace, with particular reference to the penalties imposed in that country?
The Earl of Avon: My Lords, I am afraid I have no information on that particular point.

NHS: Expenditure in Scotland
2.53 p.m.
The Earl of Lauderdale: 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 state the amount of National Health Service expenditure in Scotland in the years 1978–79 and 1981–82 respectively both in the money of the day and in real terms.
Lord Lyell: Yes, my Lords, In 1978–79 total expenditure on the National Health Service in Scotland was £883 million; last year it was £1,517 million. These figures are respectively, at November 1980 prices, £1,355 million and £1,411 million.
The Earl of Lauderdale: My Lords, I thank my noble friend for that reply. Would he not agree that this represents a very substantial increase not only in money terms but in real terms? Can he say what is the percentage improvement?
Lord Lyell: My Lords, it is something over 4 per cent. I understand that to the nearest decimal point it is 4·1 per cent. We believe that this is, indeed, a real improvement and we are very grateful for the support of my noble friend.
The Earl of Lauderdale: My Lords, I thank my noble friend for that further information. Would he not agree that that figure might come in very handy for this afternoon's debate? Would he not also agree that it tends to refute some of the arrant nonsense which is spoken from the other side and elsewhere about the effect of so-called cuts of the health services?
Lord Lyell: My Lords, I am very grateful for the forthright and robust support of my noble friend, but I am a little worried as to which debate he refers—whether it be the first debate or the second.
Lord Wells-Pestell: My Lords, is the noble Lord in a position to say how many hospitals have been closed in Scotland since this Government have been in power; how many wards have been closed and how many other medical institutions have been closed in Scotland as a result of shortage of money?
Lord Lyell: My Lords, I believe that that question is in danger of going a little wide of the original Question.
Several noble Lords: Oh!
Lord Lyell: My Lords, noble Lords' opinions are their own; I shall attempt to answer the question of the noble Lord. I am afraid that I do not have precise answers to the three questions which the noble Lord, Lord Wells-Pestell, has asked me, but I shall write to him.
The Earl of Lauderdale: My Lords, on the therapeutic qualities of the whisky debate to which allusion was made indirectly, can my noble friend say whether he has comparable figures for general expenditure on the social services?
Lord Lyell: My Lords, indeed I do have them and I am very grateful to my noble friend for asking that question. For the same period as that in which there was a 4·1 per cent. increase in real terms, the net current expenditure has increased in real terms in Scotland by 11 per cent. for social work, as far as that is defined. However, I would correct one point that my noble friend made. I wonder whether the therapeutic effect comes from the debate on whisky or from the substance itself.
Lord Jenkins of Putney: My Lords, is it not lucky chance that the noble Lord happened to have that answer so handy? As his planting is so successful, will he not transfer his attentions to horticulture?
Lord Lyell: My Lords, I am no green fingered Lord in Waiting, but certainly I think the noble Lord would agree that fortune flies with the brave.
Lord Elwyn-Jones: My Lords, when general election Questions come up could there be some machinery for the sounding of a trumpet or something of that kind?
Lord Lyell: My Lords, I shall make arrangements through the usual channels for trumpets to be sounded, but of course in line with your Lordships' usual decorum.
Baroness Trumpington: My Lords, as long as it is not Trumpingtons!
Lord Glenamara: My Lords, how much longer are the Government going to trot out these entirely misleading figures which seek to show that there has been an increase in real terms? They are completely inaccurate and misleading without also bringing into the equation the growth in population and the increase in unemployment since this Government came into office. To quote the figures by themselves is entirely misleading.
Lord Lyell: My Lords, the noble Lord is of course entitled to his opinion, but I believe that the rest of your Lordships will agree that we have answered the Question which was set out on the Order Paper.
The Earl of Lauderdale: My Lords, would my noble friend not agree that the implication that the population has grown 11 per cent. in one year is very unlikely to be true and is another example of inaccurate propaganda from the other side?
Lord Lyell: Yes, my Lords.

EEC Foreign Affairs Council: Brussels Meeting
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon, my noble friend Lord Belstead will, with the leave of the House, repeat a Statement that is to be made in another place on the Foreign Affairs Council in Brussels on 22nd and 23rd November.

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

Bacon, B.

Beaumont of Whitley, L.

Brandon of Oakbrook, L.

Cawley, L.

Collison, L.

Cork and Orrery, E.

Drumalbyn, L.

Fletcher, L.

Lee of Newton, L.

Sligo, M.

Stamp, L.

Teviot, L.

Wise, L.—

(Lord Aberdare)
On Question, Motion agreed to.

Standing Orders (Private Bills): Select Committee
Lord Aberdare: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That a Select Committee on the Standing Orders be appointed; and that, as proposed by the Committee of Selection, the Lords following, with the Chairman of Committees, be named of the Committee:—

Cawley, L.

Hailsham of Saint Marylebone, L. (L. Chancellor)

Houghton of Sowerby, L.

Lloyd of Hampstead, L.

McNair, L.

Mowbray and Stourton, L.

Nugent of Guildford, L.

—(Lord Aberdare.)
On Question, Motion agreed to.

The Welfare State
2.58 p.m.
Lord Banks Lord Banks rose to call attention to the need to maintain in real terms the general level of benefits provided by the welfare state while reforming its structure, and to the economic feasibility of achieving this; and to move for Papers.
The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. The House will be aware that on these Benches we have been very critical of the cuts in welfare spending and particularly critical of the cuts in social security. Those cuts have cut £1·5 billion from the social security budget each year. Many noble Lords will have seen the figures given earlier this week in the Guardian and supplied by the Child Poverty Action Group. Those figures showed that, even allowing for the overestimate for inflation this year, almost every group of claimants is worse off than it would have been without the Government's cuts. Even where it can be shown that a benefit has increased in real value it has almost invariably—not invariably, but almost invariably—not increased as much as it would have done but for the Government's cuts. I do not propose to catalogue those cuts again this afternoon. We have had many debates about them in the past; we shall undoubtedly have more debates about them in the future.
I should like to try to look beyond the cuts to the arguments about spending on welfare which lie behind them. The Motion implies three things: first, that there is a need to maintain benefits in real terms; secondly, that there is a need to reform the structure of benefits; and, thirdly, that it is feasible to do both these things. This afternoon I am thinking of primarily social security, as social security accounts for 28 per cent. of total Government expenditure.
The Government case has been that we are spending too much money overall on everything that the Government have to spend money on; that we must, therefore, cut back; that too much has been spent on social security and we must cut back on that; and that in any case, if there are to be cuts, each branch of expenditure must take its share. I should like to begin
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by looking briefly at that argument that each section of the community must take its share.
The Liberal yellow book, Britain's Industrial Inquiry, published in 1928, had this sentence in it:
"The man who would curtail social expenditure is advocating a more unequal distribution of wealth".
The Liberal yellow book went on to say that that man must have his arguments scrutinised particularly carefully on that account. We on these Benches do not accept that, if there are to be cuts, the unemployed, the sick, the disabled and the elderly should share in them. So we have opposed the cuts and in doing so we have been conscious of the fact that the existing benefits are not over-generous.
A recent report entitled Despite the Welfare State 1982—a report of a big DHSS-sponsored research project—said this:
"It is impossible to resist a reiteration of the general conclusion from much of the work, that benefit rates, particularly of supplementary benefit and child benefit, are simply too low at present for some families to avoid real hardship and damaging consequences to the health and other life chances of their children.".
So we say that there is a need to maintain the real value of benefits and, indeed, to improve some benefits significantly.
There is a need, but is it feasible to maintain benefits? Do we, in fact, spend too much overall? In his mini-budget Statement a week or so ago, Sir Geoffrey Howe pointed out that next year public expenditure will take 44 per cent. of the gross domestic product and that that compared with 45 per cent. this year. It is true, of course, that that figure has gone up under the present Government, but it has not gone up to as high a point as the 46 per cent. at one time under the last Government.
During the last years of the last Government that figure declined, but under this Government it increased again. However, the fact remains—and this is the point that I want to drive home—that over the last seven years there has been no runaway increase in that percentage; in fact, there has been no overall increase at all. That percentage is lower in the United Kingdom than it is in any of the other member states of the European Community, at least according to the figures which I have, which, I should say, do not include Greece, which only recently joined the Community.
If we take 1974–75 as having an index figure of 100, our gross domestic product in this country rose to 110 in 1978–79 and has fallen back to 106. But, over the period of seven years at which I was looking, there has been an increase in the gross domestic product. According to the Economist of 18th September, the famous, or notorious, Think Tank paper says this:
"On present plans and assuming low annual economic growth, public spending will continue to gobble up at least its present 45 per cent. of gross domestic product for the foreseeable future.".
Provided that there is no decided actual decline in our real GDP, I see no reason why we cannot sustain that level of expenditure and allow for some modest increase in some benefits and some increase in cost for demographic reasons. I believe that, if we were to allow the percentage of gross domestic product to rise a few points, that would not be a disaster. Indeed, we might do it with advantage.
If that modest increase in expenditure on social security were part of a controlled and limited reflation of the economy, we should argue from these Benches that that reflation would lead to a further increase in growth, which would allow as required for some further expansion of the social security budget in real terms. The viability problem with regard to social security is not an immediate one, although of course increased unemployment is an additional burden. The real viability problem relates to the earnings-related pension and the problems with regard to it in the first two decades of the next century. But, as regards providing for the benefits that we want to pay to people in the years immediately ahead, I submit that there is not a viability problem.
If we look at the social security budget, of course, we see that over the past 11 years it has increased from 17 per cent. of the total to 28 per cent. of the total, and this gives rise to fears that there may be a continuation of this and that, if there is, it will be disastrous. I think that there are some mitigating factors. First, we must remember that in that period child benefit replaced family allowances and child tax allowances, and that, while child tax allowances do not show as Government expenditure, though they represent a loss of income to the Government, child benefit does count as Government expenditure.
Then there has been an increasing number of beneficiaries—more old people—during that period. That was known about in advance and has not taken us by surprise. There has also been an increase in the number of unemployed. I think it is fair to say that in part at least that is due to policies pursued by the Government. There has been some increase in the real value of long-term benefits. That was likely to occur so long as long-term benefits were increased in line with prices or earnings, whichever was the highest. The Government, of course, have put a stop to that and the link with earnings has been abandoned.
Then, the last Government introduced some new benefits which, of course, added to the expenditure, mobility allowance and non-contributory invalidity pension among them. We must also bear in mind that social security benefits make no claim on resources. They are a transfer of income; they are a means of redistribution of income. But, except from an administrative point of view, they do not make any demands on manpower and resources. Again, as I have already pointed out, the gross domestic product has increased in spite of a fallback in recent years, which it seems we have overcome, and there is a slight tendency to move upwards. If we again take 1975 as the basic year of 100, the GDP over the 11 years has increased from 93 per cent. to 106 per cent. So we would expect social security spending to increase as a percentage of the whole in those circumstances. If we look at the EEC as a whole, we see that our spending on what is called social protection, which includes social security, is, in fact, lower than that in all the other EEC countries except Ireland. Again I have not got the figures for Greece.
Those are eight mitigating factors which can reduce our nervousness, or panic, whichever it is, when we look at the increase which has taken place in social
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security benefits over the last 11 years. But I would add another one to it, and that is that approximately two-thirds of social security is made up of expenditure on contributory benefits, and those contributory benefits are largely financed by contributions from employers and employees. That provides a buoyant source of income.
It is not entirely clear how far national insurance contributions should be regarded as public expenditure. Think for a minute of the position with regard to motor insurance. The Government compel people to insure their motor cars and themselves when they are in them, rightly as I am sure we should all agree. The premiums from that come to somewhere round about £2,000 million a year. That is a Government compelled payment, but, on the other hand, it does not appear in Government expenditure at all. If the Government were to hand over, shall we say, to the Prudential the running of the national insurance fund and to say that contributions would be compelled on the same basis to the Prudential, the figures would not appear in Government expenditure at all, although everybody's position, if the Prudential ran it on similar lines to the Government, would be exactly the same. It would only be if there were a Government subsidy to the Prudential that that would appear in Government expenditure. It seems to me there is a case for saying that only the Treasury supplement to the national insurance fund is proper Government expenditure in the sense in which we normally think of it.
For all the reasons which I have been giving since I began to speak, we believe that we should maintain the benefits at their present level and increase them where we can and where it is necessary. We believe that we can do this—that we can maintain the benefits. But that is not to say, of course, that the present operation of the social security system is satisfactory. Far from it. There are serious defects in the present benefit system. First of all, it is incredibly complicated and complex in its structure. Benefits come from many sources: from national insurance, from supplementary benefit, from family income supplement, from child benefit, from housing benefit and from a further range of means-tested benefits.
Then there are problems of overlapping benefits, and there is the interaction of the tax and benefit systems which gives rise to anomalies. The poverty trap results from that interaction which I have just described, and from the degree of dependence on means-tested benefits. The extent of that dependence on supplementary benefit is alarming. For example, whereas supplementary benefit accounted for 46 per cent. of benefit expenditure on the unemployed in 1975–76, it is expected to reach 63 per cent. in the year 1983–84. Then, again, some benefits are clearly inadequate, as we have already seen.
There is a need for a thorough-going reform of the social security system, and we on these Benches believe that the reform of the tax system which is required is the introduction of a tax credit system. Under that system all allowances against income tax are turned into positive credits, as has already been done with child benefit which has replaced the income tax allowances. Then present social security benefits will be turned into additional credits, and we would tax all income from the first pound. For an individual

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we would add up all the credits; add up the tax too; if the credits exceed the tax pay out the difference, and if the tax exceeds the credit pay in the difference. We would put the credits, personal and additional, at levels sufficient to take the bulk of supplementary benefit.
In 1979 we worked out a scheme in some detail, which we costed. We came to the conclusion that this could be done with a standard rate of tax only slightly in excess of the current standard rate of tax and national insurance contributions. We were going to employees' national insurance contributions to combine the two. The impact of the credits on the tax would have meant that for most people their effective rate of tax, which is the important thing, would have been lower, but there would have been, under the scheme as we then had it, some slight increase in indirect taxation. We used this system, we adjusted this system, to concentrate help on particular sections by increasing the credits available in particular circumstances. We are now in the process of recosting that to take account of changes which have taken place in benefits and taxation since that was first introduced.
The advantages of a tax credit scheme, as we see them, are these. The tax credit scheme rationalises and unifies the tax and social security systems, brings them into one, and abolishes the concept of contributory benefits. It simplifies the system, replacing overlapping benefits by a few simple, straightforward credits which will be received as of right. It makes most of the present means-tested benefits unnecessary, and thereby abolishes the poverty trap. It restores the supplementary benefit scheme to its intended role of discretionary extra provision for a few special cases. It treats women and men on an equal basis as taxpayers, regardless of their marital or employment status. It can be used to secure a substantial redistribution of income, and in the example which we have presented we did have such a redistribution in favour of the elderly, of children of school age, and of those at present caught by the poverty trap.
In conclusion, I reiterate that there is a need to preserve the real value of benefits, to resist any further cuts, and to improve certain benefits. Secondly, there is a need to reform the whole structure of social security; and thirdly, it is perfectly feasible to achieve these important goals. My Lords, I beg to move for Papers.
3.18 p.m.
Lord Trefgarne: My Lords, in rising at this point in the list of speakers, I should like to offer my profound apologies to the noble Lord, Lord Cledwyn, for not having indicated more clearly my wish to speak at this juncture, and indeed to other noble Lords who have been thus displaced, and to apologise for not having made my intentions clearer. I am grateful to the noble Lord for giving way so readily.
My Lords, I welcome this opportunity to debate the future of the welfare state and to set out the Government's philosophy and record of achievements. The benefits and services provided by the welfare state are greatly valued and appreciated by the people of this country. We are determined to see this service improve and grow and prosper. But the welfare state is not a self-contained entity, independent of the rest of
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the economy. It is an integral part of the economy and its future is bound up with the prosperity of the nation as a whole. If the economy falters and declines, that malaise must eventually infect the welfare state also, The benefits and services which the welfare state provides will also decline eventually if the nation can no longer afford to maintain them. The welfare state may help to deal with individuals' problems, but it cannot cure the deep-rooted problems of the economy as a whole: other remedies are called for.
It is our determination to apply the necessary remedies that form the central context of our policies towards the welfare state. We are determined to arrest the decline of this nation's fortunes; to restore prosperity, confidence and self-respect. Restoring the health of the economy has to be the first priority in this process. We have set out our policies to achieve that, the same policies on which the Government were elected to office. It is not my purpose to discuss these policies now—they have been very fully discussed by your Lordships in recent weeks—but the signs of success are now beginning to show through. Inflation is coming down, interest rates are coming down, productivity is improving and public borrowing is under firm control.
We are always bound to be affected by world trading conditions, but, by the means I have described, we are laying the foundation for sustained economic growth in the future. It is only by such growth that the resources can be found for improving the services of the welfare state and for the many other urgent tasks which need to be undertaken. This is the context in which realistic policies on the welfare state must be pursued. There is no getting away from that context. It is an inescapable constraint.
My right honourable friend the Secretary of State has spelt out in another place the principles on which our policies are based. First, the foundation of our approach, as I have said, is the strategy to create new resources by sustaining and improving the productivity of industry and its capacity to compete in world markets. Secondly, we are determined to ensure that the welfare services and those most in need of them benefit from the regeneration of British industry, just as over the past years we have sought to protect those services and individuals from the effects of the recession. Thirdly, we believe strongly that improvements can and should be made to the structure of the welfare state even where we cannot devote substantial additional resources to this task. We have made very significant progress in reducing administrative bureaucracy, streamlining procedures and management structures and increasing efficiency, all of which directly benefit the recipients of the services.
Finally, we have been concerned to promote partnership between the state sector and the voluntary, private and informal sectors. The main providers of care and support in our society are, and always will be, individuals—family and friends and the community at large. The state services and the private and voluntary agencies exist to assist and support in this provision of care. All these resources must be harnessed in a cooperative and constructive venture to meet the many needs evident in our society, and let me demonstrate the application of these principles in the social security field.

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The size of expenditure on social security is enormous—the provision for the 1983–84 programme amounts to £34,111 million—by far the largest public expenditure programme, accounting for 28 per cent. of the planned total. Over the decade to 1980, the cost of social security grew by more than 50 per cent. in real terms. During this Administration, it has continued to grow. This demonstrates the Government's commitment to protect the needs of those who rely on social security benefits. But the size of the social security commitment also underlines the importance of ensuring the success of the Government's economic strategy. In the short term, that means limiting the growth in social security so far as that is possible.
Benefits have to be paid for by the working population. Benefits paid for out of the national insurance fund depend on contributions from employers and employees. If the overall cost of benefits rises, contributions or the level of taxation have to go up, too. If we are not to damage incentives and the process of industrial recovery, we have to be very careful about the contribution which employers and the working population are asked to make.
The need for economies in public expenditure has required us also to take steps directly to limit the growth of social security expenditure. During this Administration, we have introduced measures to effect savings in the social security programme. If these measures had not been adopted, the programme would cost about £1·5 billion more in 1982–83 than is currently estimated. Inevitably, these were painful economies to have to make, but they were necessary to help bring public expenditure under control.
In spite of these savings, we have stood by our commitment to social security beneficiaries as a whole. We have fully maintained the value of pensions and related long-term benefits, and we are committed to do so during the lifetime of this Government. The effect of this month's uprating is to give pensioners and other beneficiaries an increase over and above price protection. As the Chancellor explained, when the Government consider the details of next year's uprating at the time of the Budget, they will decide to what extent these gains should continue after November 1983 and what adjustments should be made at that time.
In making that decision, the Government will have to decide the relevant priorities to be given in any adjustment for pensioners and other social security payments and to the many benefit improvements being called for. But there should be no misunderstanding about one thing: social security recipients are receiving increases this year which are much higher than the current rate of inflation and higher than the percentage wage rises that many workers are settling for. Pensioners are likely to receive about £1 increase over and above the amount needed to protect their pension from price rises.
The Government have also sought to protect the most needy in our community in spite of the severity of the recession. The value of supplementary benefit—the safety net of the welfare state—has been fully protected against inflation. The change we made last year in the basis for uprating supplementary benefit by excluding housing costs from the
900
calculations was logical given that housing costs are calculated and met separately from, and in addition to, supplementary benefit scale rates. We have also improved the help we are providing towards fuel costs. We are now spending over £300 million per annum on help with fuel costs for families on supplementary benefit. That is more in real terms than the previous Administration ever spent.
Furthermore, the mobility allowance has been increased by more than the rise in prices since we took office and is no longer subject to tax. The earnings limits for retirement pension, invalid care allowance and the therapeutic earnings limit for invalidity benefit have been increased this very week. Moreover, supplementary benefit capital disregard is being raised from £2,000 to £2,500. We have given special protection to one-parent families through real improvements in the value of family income supplement and the one-parent benefit. We have also made useful small changes in the industrial injuries scheme.
I believe that these measures demonstrate the Government's concern to protect the living standards of the most needy in our society, within the limits of the current economic circumstances, but the Motion for today's debate calls attention also to the need for reform. Here, also, the Government have a very substantial record of achievement, in spite of the constraints of money and manpower, and I will mention some of the most important developments. First, in 1980 we undertook a complete revision of the supplementary benefit scheme, moving from a scheme based largely on discretion to one set out in regulations giving claimants firm legal entitlements. And although, inevitably with such a major change, there have been problems, even critics have not generally suggested that we should go back to the old discretionary arrangements. The reformed scheme also introduced a number of changes intended to shift resources towards families with children, and one-parent families in particular.
Secondly, there is the new sick pay scheme. Following Royal Assent last June, we are working hard with both sides of industry to ensure that the scheme gets away to a good start next April. The change will avoid a wasteful area of duplication between the DHSS and employers, and save 3,000 staff in the administration of state benefits. Thirdly, we have introduced self-certification. Sickness benefit is now available to claimants for the first week of any illness on the basis of their own claim, unsupported by a certificate from the doctor. This is not only an easement for the sick person; it also frees the doctors from issuing certificates to people with minor, short-term ailments, and releases his time for his proper role of treating the more seriously ill.
Fourthly, we have brought in a new housing benefit scheme which will introduce one source of help with housing costs instead of two, and enable an extra £10 million from administrative savings to be spent instead on housing benefit. Fifthly, we are making a major reorganisation of our regional offices to improve operational efficiency and increase local decision taking. As well as helping to improve the services given, this process of shifting responsibility to the proper level is also saving the taxpayer large amounts

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of money. The cutting down of the regional apparatus alone will save 1,000 Civil Service posts.
Sixthly, we are also undertaking a number of changes which will help to improve the quality of service, as well as produce administrative savings in some cases. Most important is the postal claim form for unemployed people who wish to claim supplementary benefit. From 6th December people claiming unemployment benefit will be given a form by the unemployment benefit office, which they will be able to send in by post to the local social security office. It will not be necessary for them to have an interview at the office, unless they need help in completing the form. Results from a pilot exercise carried out early this year have been encouraging. Not only did most of the claimants involved prefer to fill in a form rather than be interviewed, but they made a good job of it, and only in a few cases were follow-up inquiries necessary.
In addition, new arrangements have been introduced to pay benefits on request direct into bank accounts by automatic transfer. We are also devoting efforts to improving advice and information available to claimants. We are experimenting with advice computers, with a free phone service, and with advice points.
I have mentioned only some of the areas where we have already implemented, or legislated for, change. There are a number of other fields where we have drawn up detailed plans for future reform. For example, we have published a White Paper outlining proposals for radical change in the industrial injuries scheme. We have introduced regulations in the current Session to streamline and improve the system of social security adjudication. Perhaps most significant of all, last September we published a consultative document outlining long-term plans for introducing computers into our local and regional operations on a very large scale. The document sets out a strategy stretching into the 1990s, which should produce a significant improvement in the quality and efficiency of the service that we provide, and enable staff to spend more of their time giving a better and faster service. This is a major initiative by Government in Information Technology Year. It is an investment for the future.
Our strategy and our achievements on social security are a testament to the principles that I enunciated at the outset. We are determined to maintain the living standards of those most in need, but within a strategy to improve the prosperity of our economy as a whole. We are determined also to secure better value for money by increasing efficiency and concentrating resources on benefits. We are engaged in a drive to reduce administration and bureaucracy by streamlining procedures and management structures. We have set out, and are implimenting, practicable proposals for improvement across the whole field of social security.
3.35 p.m.
Lord Cledwyn of Penrhos: My Lords, we are indebted to the noble Lord, Lord Banks, for raising a matter of the utmost importance; namely, the future of what has come to be known as the welfare state. The noble Lord expressed the Liberal Party's viewpoint, and I thought that there was much sense and merit in what he had to say—for example, about preserving the
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real value of benefits and, in some cases, increasing benefits where the need is greatest. That is what we would expect from a Liberal spokesman, because the Liberal Party played a great part in laying the foundation of the welfare state, and David Lloyd George takes place with honour as one of its founders. It is always interesting to read of his bitter struggle as Chancellor of the Exchequer when he introduced his Budget in 1909, and the obdurate opposition then to his proposals. But Lloyd George had his priorities right. He insisted on making provision for the poor and the under-privileged—and how poor and underprivileged they were in those days!—in the face of the most hostile onslaught suffered by any British politician in this century. Therefore, it is right in a debate on the welfare state to pay a tribute to Lloyd George. He was responsible for the Liberal yellow book of 1928, to which the noble Lord, Lord Banks, referred.
But that, my Lords, was only the start. The suffering of the years between the wars, which most of us remember, created a new atmosphere and a new determination. The poverty, misery and despair of those years of the means test and the soup kitchens remain with us. The fear of illness and of the workhouse was real. I remember the closure of the workhouses in 1947. The transition from the workhouse to the old people's home was one of the most compassionate measures of modern times.
But to mention that is merely to illustrate the change that took place as a result of the reaction of people to the terrible waste of the pre-war years. It led to the Beveridge Report and to the Attlee Government's attack on two of the report's great giants: disease and want. We believed, and the nation believed, that the dread and hardship caused by illness, unemployment and old age should be removed, and that those who were able should help those who were less fortunate. That was the principle upon which the post-war Labour Government acted, and it is as valid today as it was 35 years ago.
We believe that we can survive as a civilised community only if we are also a caring community, and notwithstanding what the Minister said in his interesting speech—he gave us a long list, and we appreciate many of the benefits that he enumerated—I regret to say that our experience over the last three and a half years has made us apprehensive about the future of the welfare state, if the Government continue on their present course. Of course I realise that the Conservative Party is sharply divided on this issue. There are the "dries" and there are the "wets"; or, to put it another way, there are moderates and extremists in the Conservative Party. What frightens us is that the extremists are in the ascendancy today.
Let me give a few examples—and the noble Lord, Lord Banks, has already referred to some of these. On 9th September the Cabinet had before it a paper from the Central Policy Review Staff—the Think Tank—which outlined schemes, including dismantling huge chunks of the welfare state. I understand that on that occasion the moderates in the Cabinet succeeded in having the matter postponed for the time being. But our concern is that that might not be the end of it. The Think Tank argued that the Government should consider some radical alternatives in the four areas

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that account for the biggest share of public expenditure—and this, I believe, is what the House should be considering today.
The areas are education, social security—with which the noble Lord, Lord Banks, dealt fully—health and defence. The suggestions of the Think Tank were certainly radical. On education it suggested the end of state funding for all further education and the setting of fees at market rates, with about 300,000 state scholarships, and a system of student loans for those who do not win a scholarship. The Think Tank also discussed the system of educational vouchers, which Sir Keith Joseph is said to favour. On social security the Think Tank mentioned the big savings that would result if all social security payments, from pensions to supplementary benefits, no longer rise in line with inflation. Again on health, the paper suggested replacing the National Health Service with private health insurance, thus achieving a saving of £3 billion to £4 billion in the 1982–83 health budget of £10 billion.
These proposals are a straw in the wind, and the fear is that they will emerge again at some stage in some new guise. There is ample evidence that some Ministers would favour a change. For example, the noble Lord's right honourable friend Mr. Patrick Jenkin said in 1977:
"In the longer term I believe we should seek ways of transferring more of the cost of the health service from taxes to insurance";
and the Chancellor of the Exchequer, Sir Geoffrey Howe, is known to favour a two-tier health service. It is true that there are distinguished Conservatives, such as Mr. Edward Heath and Sir Ian Gilmour, who would strongly resist such drastic measures, and no doubt there are others in the Cabinet itself. I am quite sure, too, that there are many noble Lords on the Benches opposite who sympathise with them. But the dangers are there, and if there is a Conservative Government after the next election they could well pursue this reactionary course. This is the fear that we have on this side of the House.
The immediate problems facing the National Health Service are a matter of acute concern. I do not think that the Government have handled the current dispute with the National Health Service workers competently. It should never have been allowed to polarise in this way. Again, hospital closures and the closure of important units are causing much public anxiety. I am thinking particularly of the early-scan unit of the Royal Marsden Hospital, which we discussed at Question Time yesterday; and, of course, of the Tadworth Children's Hospital, about which we had an exchange last week. There also appears to be some doubt about the future of a very famous London hospital, St. Mark's. As has been said, these are not local hospitals; they are also internationally known centres of excellence, and their closure would cause hardship and a loss to medical knowledge and research.
My Lords, the health service, which was for so many years admired throughout the world, is suffering grievously at present from lack of confidence. There is no certainty about the future. The Government have made no pronouncement on the Black Report on inequalities in the health service, and they have had
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that report in their hands for two years. They have made no comment on the Acheson Report, which they have had for 18 months. I hope the Minister can give us an undertaking on these matters; and I am very willing to give way to him because he himself is always courteous in these matters, but I hope that at the end of the debate he will comment on the questions I have put to him and also on those which are put by other noble Lords.
I turn now to the older section of the community, to which the noble Lord himself referred, and to the proposition, with which I am sure every noble Lord in the House will agree, that the pensions of pensioners should at all times be adequate—and to be adequate they must keep pace at their own lower level with the average industrial wage. The fact is that the pensions have fallen back because the alternative link with earnings has been cut, with the result that the pension of a married couple is about £3 a week less and of a single person £1·85 less than it would be if the previous formula had been retained. In the light of what he said about pensions, I would be grateful if the noble Lord would comment on those figures.
Again, fuel charges are a heavy burden on pensioners. I need mention only increased gas bills, which were a direct result of Government instruction. These have fallen heavily on old people. The Minister may mention the special help scheme of last winter for old-age pensioners. I would remind him that only about half the people who needed it were eligible for it, and I understand that only 6 per cent. of those entitled claimed it. I hope he will tell us later on how the Government are proposing to improve the scheme, if they introduce it for this coming winter, so as to make it really effective and to ensure that it reaches the people who need it.
To return again to pensions, I am still unclear about the real effect of the Chancellor of the Exchequer's Statement of 8th November. Will the pensioners get the whole of the 5 per cent. related to inflation in November next year (this, if I may refer the Minister to it, is paragraph 2.25 of the Chancellor's document) or will there be a clawback, leaving the pensioner with half that amount; that is, 2½ per cent? I would be gtrateful for some clarification on that important point.
There are other aspects of the welfare state to which I should like to refer, but we had two major debates last week, one on unemployment, opened by the noble Baroness, Lady Seear, and the other on disablement, in both of which noble Lords on all sides expressed their deep concern about these problems. I shall not, therefore, pursue them further this evening. Nor shall I deal with education, another pillar of the welfare state, save to say that the nation will pay heavily in due course for the short-sighted extraction of savings on further education. We are spending less per capita on further education than our major competitors, and we shall suffer from the loss of scientists, technologists and engineers in a few years' time unless we reverse this trend. They will be vital if we are to expand and compete in a difficult world. This is absolutely essential, and I cannot stress it too much.
Therefore, the overall picture as I see it is not a happy one. We recognise, of course, that there is a world recession and that we suffer our share of the

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misery. There are also members of the party opposite who are deeply concerned to preserve much of the welfare state, and I believe the noble Lord, Lord Trefgarne, is one of them. But even allowing for world recession, I do not think we are doing well in this country. The Government's Treasury spokesmen remind us that inflation has been conquered, and we know that the inflation figures are down. But the Government's cure for the disease is also killing the patient.
Let us look at the facts. Unemployment stands at 3.3 million; a large number of good industries have gone to the wall; manufacturing output is at its lowest level for 15 years, about 14 per cent. below the rate inherited from the Labour Government in May 1979; over one in five jobs have disappeared in manufacturing industry over the past three years, and there is no prospect of early recovery. Britain, once the workshop of the world, is running its first trade deficit in manufactured goods in its history—and the Minister said that success was beginning to show through! For the first time since the Industrial Revolution we are making a loss on manufactured goods—and success is showing through! The Minister's vision is different from that of the rest of us, because the fact is that the red light is there for all to see.
Britain's decline at present is being concealed behind the huge North Sea oil surplus. That is the reality of the situation. I mention all this because the argument at its root is one about resources, and how those resources should be used. Of course the welfare state has to be paid for, and it has to be paid for with real money and not with paper money. Of course I readily acknowledge that; but men and women are being wasted, and money is being wasted, paying billions of pounds in unemployment and supplementary benefit, which could be far better used if people were in work.
I do not honestly believe that the Government have a coherent policy any more. As the election approaches we shall see some spending by the Government. It is said that the Chancellor will have some £3 billion to give away in his Budget next spring. We must wait to see what he has and what he will do with it. Will some of this money go to the disabled, to the elderly, to the health service, to essential education? Will there be policies to invigorate the economy so as to bring down unemployment? Or will it be another tax handout, as in 1979? These are the essential questions in this debate.
My Lords, Government spokesmen say time after time that there is no alternative to the policies they are pursuing, and the noble Lord said it again today. We do not agree with this philosophy, which has caused so much damage and so much misery. The Government's obsession with cutting the PSBR has turned the clock back 50 or 60 years. There is, of course, a need to tackle the economic crisis in partnership with our friends, but we on this side believe that planned increased public spending would be fully justified in order to create new jobs—and this is a point which was well made by the noble Lord, Lord Banks, in his opening speech. Money spent in this way creates jobs and increased spending power. Increased demand in the public sector will generate more jobs, and public
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expenditure can begin the process of economic expansion which will help Britain to get back to work.
Let me specify some of the measures which we believe should be taken, and which we, a Labour Government, would in fact take. We will reaffirm the right to free medical treatment for all. We will support and strengthen the National Health Service, and pbase out prescription and dental charges. We will give a new emphasis to promoting good health, and we will do more for the elderly, the mentally ill and the handicapped. We will widen opportunities for all age groups; free nursery schools for all three- to four-year-olds; give the right to educational training for all 16-and 17-year-olds with a £20 a week grant to those in full-time education and a new entitlement to further and higher education for adults who want a second chance. We want a fairer society where the fear of poverty is eliminated. This means better benefits: child benefit raised by at least £2 a week, higher pensions pegged once more to earnings as well as to prices, and extra help for the disabled and the one-parent families. It also means fairer taxes for all. We believe in first-class local services and will provide funds to support them. We will spend at least 4 per cent. more on personal social services, on home helps, on meals on wheels, on child care, on the care of the elderly, the handicapped and the mentally ill.
My Lords, we on this side therefore believe in a compassionate society, in certain fundamental rights, in comprehensive health and social care, in decent housing, in an adequate income and full educational opportunities which should be available to all. The nation should not be divided by blatant inequalities. Cicero wrote over 2,000 years ago that the welfare of the people is the ultimate law. People will respond to fair and just government. If this Government do not change their course quickly and radically, we are heading for disaster—and by disaster I really do mean 3½ million, 4 million, 4½ million unemployed and the total dismantling of the welfare state. That will happen if the Government are not prepared to change course, and the results of that will be incalculable. If they are not prepared to change course they should at least have the decency to go to the country at once.

The Foreign Affairs Council
3.53 p.m.
The Minister of State, Foreign and Commonwealth Office (Lord Belstead): My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Secretary of State for Foreign and Commonwealth Affairs. The Statement is as follows:
"With permission, Mr. Speaker, I will make a statement on the Foreign Affairs Council held in Brussels on the 22nd and 23rd November. The Council dealt with a heavy agenda and reached agreement on a number of issues.
"The Council had a first exchange of views on the Commission's paper on the budget solution for 1983 and later. It was agreed that the Committee of Permanent Representatives should get to work on this immediately and report back to the Council at its January meeting.

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"We discussed East-West trade issues and agreed that we should carry forward the studies approved in the recent Washington talks. Our objective is to improve our co-operation in this field and to achieve a greater cohesion in our approach to East-West trade.
"The Council also discussed developments in the final preparations for the GATT Ministerial meeting. The Community will continue to press for improvements in certain areas and the Council will meet again in Geneva if necessary. My honourable friend the Minister for Trade, who was present at the Council, is now in Geneva for the GATT Meeting.
"The Council agreed in principle on the details of the Community's Generalised Scheme of Preferences for 1983. Ministers noted the progress made in the past month in the bilateral textile negotiations under the Multi-Fibre Agreement with the ASEAN countries and Brazil. The Council also agreed that the Commission should proceed with negotiations with the three dominant suppliers (Hong Kong, South Korea and Macao) making full use as necessary of the flexibility available to them within the global ceilings.
"Ministers discussed the Community's external steel régime for 1983. They agreed that the Commission should open negotiations on Voluntary Restraint Arrangements (VRAs) with main third country suppliers of steel to the Community, on the basis of a cutback of 12½ per cent. in import volume in relation to the 1980 base year.
"We raised the problem of the trading imbalance under the European Community/Spain Agreement and asked for a Commission report with proposals for action on Spanish implementation of the Agreement, and on the unequal and unjustifiable tariff imbalance in certain sensitive areas.
"Ministers agreed a special aid programme for Central America. They approved a new management regulation designed to improve the procedures governing the Community's Food Aid Programme. Discussions will continue on other subjects, including the Community's research programme on nuclear safety, the European Parliament's proposals for a uniform electoral system, and a Commission memorandum on the follow-up to the second Lomé Convention.
"A Ministerial conference with the Portugese in the margins of the Council reviewed progress in the accession negotiations.
"Ministers also met in the framework of political co-operation and discussed a number of foreign policy issues, including East-West relations and the Middle East. It was agreed that the Danish Foreign Minister should visit Israel shortly in order to put the Ten's views on the current situation. As applicant members of the Community the Spanish and Portuguese Foreign Ministers were present for part of the meeting."
My Lords, that concludes the Statement by my right honourable friend.
Lord Cledwyn of Penrhos: My Lords, we are grateful to the noble Lord for repeating the Statement. It is
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clear that the Foreign Secretaries covered a great deal of territory although they did not come to any firm conclusions at this stage. May I put a few short questions to the noble Lord? First, on the question of EEC steel policy and the proposed cutback of 12½ per cent., could the noble Lord say whether this is uniform throughout the Community? In view of the fact that the British steel industry has been truncated and has lost far more jobs than the industry in any other EEC countries, are we not entitled to ask for a smaller cutback than the average for the Community as a whole?
On the question of the EEC budget referred to in the Statement and the prospect of negotiating a very desirable longer-term arrangement, is it proposed that this, in addition to the action which is described in the Statement, should go to Copenhagen where the Prime Minister herself will be able to raise the matter? We on this side of the House warmly welcome the attention paid to the food aid programme and to Lomé III and to the help to the three Central American countries. Can the Minister indicate what the improved procedures are which are referred to in the Statement? As the Minister is well aware, there is great interest in the multi-fibre arrangement in this country. Could he tell us whether any further talks on this subject are in prospect so that the matter can be brought to a satisfactory solution?
We are glad that the imbalance between the EEC and Spain is being studied carefully. Will he agree that this has a special significance for us and particularly for our motor car industry, where the tariff disparity is grossly inequitable to our industry? On the Middle East, could he say more specifically what is the object of the Danish President's visit to Israel at the present time?
Lord Gladwyn: My Lords, we, too, should like to thank the Minister for repeating the Statement, and in many respects we welcome the result of the Foreign Ministers' Conference. Notably, I think, we would welcome the fact that the budget solution is being actively studied. Here I would merely repeat what I said the other day; namely, that we do not think that we ought to go out for 100 per cent. satisfaction of our claims but we ought in the long run to consider some reasonable compromise on the budget.
We welcome the idea that there will be greater cohesion in the approach to East-West trade and we welcome the suggestion that there is going to be some reform of the food aid programme. Here, I think that the Minister would undoubtedly want to consult the report which the EEC Committee published last year on this point, in which we said that progress was necessary on this particular matter. On the other hand, on the whole question of GATT the Statement seems to be remarkably bland, if I may say so. It says:
"The Community will continue to press for improvements in certain areas".
It notes the progress made in regard to the Multi-Fibre Arrangement but it does not say what it is. It talks about making full use if necessary of the flexibility available within global ceilings in respect of the three dominant suppliers, Hong Kong, South Korea and Macao, without saying whether there will be any difficulty about that. As the noble Lord, Lord

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Cledwyn, has said, it makes a reference to the voluntary state arrangements without answering the questions which the noble Lord has put.
When one thinks that lately in the informed press there have been grave apprehensions about a failure in Geneva on GATT with a possible breakdown apparently of the entire world trading, may I ask whether the Minister is able to say if he shares in any way the apprehensions made by these important critics about the grave dangers of collapse of the whole system in Geneva which this Statement seems to gloss over to a large extent? Does he share those views or not?
I note that the European Parliament is going to study the proposals for a uniform electoral system, and here I beg the Government to consider the possibility that it would be disastrous if the proposals of the European Parliament are not accepted. Is the noble Lord able to say what chances there are that the Government will look favourably on them when it comes to the final solution?
I note that the Danish Foreign Minister is going to put forward the Ten's views on the Middle East. Presumably they have a common policy and a common view. How far does this policy and common view coincide with the American view which was put forward by President Reagan the other day, or is there any substantial difference between the two approaches?
4.2 p.m.
Lord Belstead: My Lords, I am grateful to the noble Lords, Lord Cledwyn and Lord Gladwyn, for the questions they have asked. As the noble Lord, Lord Cledwyn, said, it was quite a considerable agenda. I will endeavour to answer the questions both as satisfactorily and as briefly as possible. The first question from the noble Lord, Lord Cledwyn, was: Will the budget problem be discussed in Copenhagen? The answer to that is, yes. The intention is that the presidency of the Community will raise this issue in Copenhagen at the European Council and will report agreement by the Foreign Ministers in the Council on which I have just read my right honourable friend's Statement about the handling of the recent paper by the Commission on the solution for 1983 and later.
The noble Lord also asked me about the Multi-Fibre Arrangement. The situation there is that substantial cut-backs in the clothing quotas of the dominant suppliers will be necessary to remain within the global ceilings. My right honourable friend the Minister of Trade has emphasised, however, that we believe that the European Community should recognise that Hong Kong is the only dominant supplier to offer a completely open market to European Community exporters. But within that general parameter nonetheless there are the global ceilings, and it is within those that the European Community is continuing to negotiate.
The noble Lord asked me a question about steel. Perhaps I did not make myself clear. The figure of 12½ per cent. which is quoted in my right honourable friend's Statement is the cutback of the volume of imports coming from outside the Community into the Community as a whole. Therefore, it is a 12½ per cent. cutback for each country which is exporting into the
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European Community.
The point which the noble Lord was putting to me was about the desirability of controlling capacity of production within the Community, a most important matter which has been the subject of newspaper articles recently. On that, I would say to the noble Lord that it is true that the United Kingdom has borne the brunt of capacity and manpower cuts. Let us be fair, however. We made those cuts because we had to do so and it was not done as a favour to the rest of the Community. We are now pressing our partners to do their fair share so that the benefits of the sacrifices already made are not squandered, and we intend to take a very firm stand on this issue. That really was the point which the noble Lord was putting to me.
The noble Lord asked me about improved procedures, which are referred to in the Statement, so far as the regulation of the food aid programme of the Community is concerned. This relates to trying to shift the basis and administration of food aid from dumping surplus production and instead trying to encourage agricultural development in the countries concerned. My honourable friend the Minister, Mr. Neil Marten, said some words about this in another place on 15th June. This really is another step in that particular story in a direction which I must say the Government believe is desirable.
Both noble Lords asked me about the reference made in my right honourable friend's Statement to Spain. The fact of the matter is that the Government feel that certain Spanish domestic taxes—and indeed some administrative practices, including for example fiscal discrimination against tobacco imports—are incompatible with the 1970 agreement. On the other hand, Spanish tariffs are unjustifiably high in relation to Spanish export competitiveness; for example, in areas such as—and I think the noble Lord, Lord Gladwyn, asked me this—automotive products, footwear and steel. It is these things which we are trying to get put right. That is why the Statement refers to Britain raising the problem of the trading imbalance under the European Community/Spain agreement and asking for a Commission report with proposals for action.
Both noble Lords asked about the Middle East. The aim of Mr. Ellermann-Jensen's visit to Israel representing the presidency of the European Community is to manifest to both sides of the dispute European willingness to contribute to the achievement of a peaceful solution. While there, I understand that Mr. Ellermann-Jensen will also express continuing European concern about Israeli policies in the occupied territories. The European view is that settlements are both illegal and an obstacle to peace. If I may answer Lord Gladwyn's specific point, we strongly support President Reagan's call for a settlement freeze.
The noble Lord, Lord Gladwyn, asked about the GATT discussions, which of course are going on at this moment. I understand the criticisms of the noble Lord about the very considerable difficulties which are attending these most important talks at the present time. The situation is that the Commission are in what amounts to negotiation on the basis of guidelines adopted by the Council. I am sure that your Lordships will understand when I say that I do not think that the

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position of the Community is in any way more difficult at this rather sensitive moment; but it is well known that the European Community concerns include the language of the political declaration, the whole subject of agriculture, the subject of services, the difficult but very important subject of safeguard action, disputes on settlements and the question of the trade of developing countries, among other problems.
I hope that that gives the noble Lord, Lord Gladwyn, an indication of where I think the particularly sensitive points lie in this difficult area. Finally, the noble Lord, Lord Gladwyn, asked about the unified electoral arrangements. The latest position on this is that the Council of Ministers had a brief discussion on proposals regarding the common electoral system and will consider them again in December. A number of difficult questions remain to be resolved and it is clear that final agreement will not be easily or quickly reached.
Lord Brockway: My Lords, the Minister's Statement covered an extraordinarily wide ground: East-West trade, the Middle East, the Far East and Hong Kong; relations with the USA, Central Africa and the GATT. It had only five words dealing with the most serious economic problem in the world. That was a reference to the fact that there is to be consideration of the Lomé Agreement. Is it not the case that in the third world 30 million people are dying every year from hunger and the absence of medical attention and should not the meeting of Ministers have given first attention to the most serious problem of death in the world?
Lord Belstead: My Lords, I am not sure that the noble Lord is being quite as characteristically fair as he normally is. I say that because agreement was recorded on a special aid programme for Central America, which is in fact Costa Rica, Honduras and the Dominican Republic. That is new. Then there was a new management regulation designed to improve the procedures governing the Community's Food Aid Programme, about which the noble Lord, Lord Cledwyn, asked me. Then there was the reference to the Lomé Convention. So that there shall be no misunderstanding, I should say that we are of course talking about Lomé III, which will not come into effect until 1985. This really is a reference to the preliminary run-up work to see that the Community is ready to get Lomé III into position three years from now, when Lomé II comes to an end.
Lord Oram: My Lords, further to that question on the Lomé Convention, will the Government, in making their contribution to these preparations, bear in mind that there is a report of the Select Committee on the European Communities of this House dealing with this question? It includes the view that the provisions of the Lomé Convention should be extended beyond their present ACP coverage, and in particular to include the Indian sub-continent. Will the Minister give the House the assurance that that view will be taken fully into account by the Government in considering the contribution they will make to the preparations for Lomé III?
Lord Belstead: My Lords, I cannot give an undertaking that either Her Majesty's Government or the Community will agree with the point of view expressed in the report, but the report, of course, is valuable and important, and I certainly give the undertaking for which the noble Lord asks.
Lord Soames: My Lords, in the Statement, I noticed the phrase:
"will continue to press for improvements in certain areas".
That phrase refers to the General Agreement on Tariffs and Trade. It seems to me that the phrase could cover a multitude of sins, and I should like to ask my noble friend whether Her Majesty's Government will continue to press for the continuation of the principles of the GATT. Is he aware that, if we do not do that and if we yield and try to take different types of action in regard to various countries which have been mentioned from time to time by the noble Lord, Lord Cockfield, though we could perhaps get some tactical gain, if we move towards protectionism we shall lose out badly in the long run?
Lord Belstead: My Lords, I will not repeat in answer to my noble friend what I said to the noble Lord, Lord Gladwyn, regarding the particularly sensitive areas which are under close discussion at the moment in which at the moment there is no solution. But I would say to my noble friend that any meeting of this sort must ultimately reflect a balance of varied views. We attach great importance to the success of the meeting as a contribution to the maintenance of the open trading system. That must be our primary objective.

The Welfare State
Debate resumed.
4.14 p.m.
Lord Campbell of Croy: My Lords, if we may return to the debate on the Motion, I should like to thank the noble Lord, Lord Banks, for having enabled us to discuss this subject today. It follows suitably a very good and timely debate which we had last week on the Charter for the '80s. That concentrated on disabled people. Today, we widen the discussion to take in the whole range of disadvantaged citizens. I was particularly interested in the noble Lord's references to a tax credit scheme, and would like to say a few words about that in a moment.
We must have in mind the plight of some of those disadvantaged people in our community. Those who are not only disabled but are at the same time elderly, ill and alone need our special attention. Another example is the single parent having to bring up a family of small children with no other source of income than what the state can provide, and certainly with no time to do a job. The noble Lord spoke of the level of benefits, as did the noble Lord, Lord Cledwyn, from the Opposition Front Bench. My noble friend the Minister has already replied to much of the criticism of the level of benefits, and no doubt if he speaks again towards the end of the debate he may answer any other points on behalf of the Government. In my view, this

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Government have done remarkably well on the question of the level of benefits, at a time of recession and when public expenditure of this kind has to be carefully measured and allocated.
I should like to address myself to another part of the Motion; that is, a reform of the structure of the system. Here I am in great agreement on many points with the noble Lord, Lord Banks. The system has now become immensely complicated. It is very difficult for the applicant to find his way through a jungle of procedures. It is difficult also for those who are trying to help an applicant to find his way. The sort of questions that arise are: What is he entitled to, and is it taxable?—because some are and some are not. Also, if he receives a benefit what will he be disqualified, in the way of other benefits, from receiving? These are some of the problems that arise.
It is a paradox that the reasons for this complexity have been good intentions. The system has evolved, if I may give an example from the area with which I am most familiar; that is, disablement. New benefits have been introduced in order to fill the gaps in the national insurance system. When that system was devised and introduced—that is, the present one which succeeded the pre-war limited systems—it did not cover, for example, someone who had been severely disabled from birth or from early youth, because it was completely attached to employment or unemployment. A person who was not available for work did not have an insurance number and did not start in the system at all. The same thing applied to a disabled housewife—someone who was overcome suddenly by an accident or some physical ailment which meant being in a wheelchair. Such a person was not covered because she was not in the national insurance system except through her husband. As a result, non-contributory benefits have been introduced and they have been welcomed. They were introduced, of course, largely as a result of pressure within Parliament. The invalidity pension, the attendance allowance (which was a very sensible addition) and the mobility allowance—these are all non-contributory benefits and they have been introduced to help, but they have all added to the complexity of the system. I should point out that the introduction of these allowances does erode the insurance principle and, of course, that has been a factor with successive Governments They have had to consider the large body of citizens who are within the national insurance system and who are paying their contributions and expect to receive reasonable benefits at the end.
The profusion of benefits has led to a profusion of medical tests as well as means tests. There are now many more medical and means tests than would be required in a single co-ordinated scheme. So I say to the Government—rationalise and simplify. This may seem a massive and daunting operation, but it would be well worth while in the long run.
Again, in the field of disablement, from the statements that have been made in your Lordships' House and elsewhere, it is clear that the Government and the official Opposition are both, in principle, in favour of a comprehensive disablement benefit. It is something which it is difficult to bring in and it will need time. I suggest that this should, in due course, be incorporated in a scheme to co-ordinate all benefits
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based upon a single return of income. This would avoid a multiplicity of means tests.
I should like to draw attention to the Green Paper of 1972 Proposals for a Tax Credit System (Cmnd. 5116) which was produced by the Conservative Government of that time. I was associated with it, because I was a member of the Cabinet at the time. I should like to quote a short piece from the foreword by the then Chancellor of the Exchequer and the Secretary of State for Health and Social Security. They said:
"If such a scheme were adopted, fewer people would be means-tested and others means-tested less often, and for the community there would be a large saving in administrative staff".
This scheme, which was put forward for discussion in a Green Paper at that time, would have brought together the Pay-As-You-Earn system and the social security system. It would not have replaced all benefits. It suggested that nine-tenths of the population would have been covered by it. It would not have removed the basic supplementary benefit or special measures for those in greatest need; they would have continued. The Green Paper also suggested that it would take about five years to bring in, once it was decided upon.
In my own inquiries in the last three years, I have discovered that the Government of today, while still, in principle, in favour of introducing such a scheme, find that it would be too costly to introduce in the near future. I should be grateful if my noble friend—if he is to reply at the end of the debate—could give me any more information about the present Government's view.
I noted that within the last few days the SDP have put forward proposals of a similar kind, and I heard them described on the radio as a new concept. I should like to point out that it certainly is not a new concept, and that that Green Paper 10 years ago was the start of a considerable national debate on the subject.
I should also like to touch on the question of advances in technology. The computers which are at our service today could revolutionise the whole system of social security. There should be no problem about keeping data up-to-date or about making it immediately available. There has to be confidentiality. Tax returns are supposed to be kept by the Inland Revenue for their purposes only. Means tests of various kinds, also, are supposed to be confidential. As my noble friend reminded us just now, the Government have issued a consultative document about the introduction of computers. They have also stated that they are hoping to bring in legislation about confidentiality of computers and to pass it through during this Session. I believe that we must use these methods. However, the information must be used for the authorised purposes only.
The Government, in the changes which they have made so far—and some were described by my noble friend earlier this afternoon—have aimed in the direction of simplification and rationalisation. In their reforms, the benefits have been amalgamated and simplified. To the extent that they have done that so far, I welcome what they have done, but there is a great deal more to be done in the simplification of the structure. Besides meeting the requirements and making the benefits as valuable as the country can afford, we ought to ensure that the system is one in

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which everyone in the country can have confidence, and that all who are eligible can benefit from it without doubt and without difficulty.
4.26 p.m.
Lord Kilmarnock: My Lords, I also should like to express my gratitude and that of my noble colleagues to the noble Lord, Lord Banks, for introducing this debate with his usual unrivalled command of this complex subject. Perhaps it is the very complexity of it that has deterred more people from putting their names down. Unemployment commanded 24 speakers recently, and disablement over 20 a few days ago, while the welfare state and social security has mustered only 12. Yet it would be a pity if this subject were always to be confined to a handful of regulars, and I am delighted to see that the noble Earl, Lord Onslow, for example, has put down his name, together with the noble Lord, Lord Harris of High Cross, who will no doubt approach the subject in his customary trenchant manner.
It is the second half of the Motion, which is concerned with reform of the structure, to which I want to address most of my remarks. First, however, something has to be said about the Government's record in relation to the first half of the Motion. Despite the able apologia of the noble Lord, Lord Trefgarne, this record leaves much to be desired. Through the two Social Security Acts of 1980 and the Act of 1981, about £1½ billion in real terms was taken out of the system and this must go down on the record; it was mentioned by the noble Lord, Lord Banks. This was probably done in the ideological interests of rolling back the frontiers of the state, while failing to distinguish between state trading and utilities, on the one hand, and social security or basic livelihood, on the other.
The Government claim that total social security expenditure has risen—I think the noble Lord, Lord Trefgarne, mentioned a total of £34 billion—but this has little to do with improvement of benefits or even with the maintenance of their level. It is largely the result of unemployment. The sick, disabled, retired, unemployed and mothers and children have all suffered. Child benefit, at its last up-rating, was still well below the level inherited by the Government. Earnings-related unemployment benefit, to which some people had contributed for years, has been abolished.
The Government have pigheadedly continued to resist pressure, not only from Opposition parties but also from a significant number of their own Backbenchers, to restore the 5 per cent. cut made in unemployment benefit in 1980, on the clear assurance that this would be restored once the benefit was brought into tax. And there is also the question of the basic pension component in invalidity pension which was similarly abated, but has not been restored pending interminable Treasury cogitations on suitable tax arrangements.
Many invalidity pensioners are more adversely affected by the abatement, which is a flat rate, than they would be by tax, which would be eased by allowances. Can the Government say when they plan to bring the invalidity pension into tax, and whether the abatement will be restored when they do? And if
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this is their intention, can they say where the logic is in refusing to restore the unemployment benefit to its proper level, now that they have brought that into tax? Will they give an undertaking in this House this evening to make this good in the next Budget, as they are in honour and fairness bound to do and should have done in the last one?
I want to turn for a moment to disregards—that is, the question of small earnings compatible with certain benefits. The present policy on disregards makes it difficult for poor families to improve their position greatly without being guilty of an abuse of the regulations. In particular, single women with dependent children need to be able to earn more without losing their entitlement to benefit.
As regards the recommendation of your Lordships' Unemployment Committee, that the earnings disregard for the unemployed should be raised from £2 to, say, £4 a day, the Government, in their response at paragraph 75, say that,
"the level of disregards is not immutable but there are risks in increasing this. Substantial increases would … narrow or even eliminate the gap between income in and out of work."
But it is not the fault of the vast majority of the unemployed that they are out of work. And this gap has already been narrowed by the poverty trap, to which I shall revert later. Furthermore, a more flexible policy on disregards would not be incompatible with, and indeed could flow from, the Government's policy of taxing short-term benefits. Can the Government not be a little more forthcoming here? I shall be grateful to the noble Lord, Lord Trefgarne, if he will, when he comes to wind up, devote a few words to this question. I know he has already spoken about the disregard allowed to pensioners, but I should like to hear the Government's attitude to other groups in this respect.
I turn to the second part of Lord Banks Motion, which addresses itself to reforming the structure of the system, which everyone agrees is excessively complex—a point made by the noble Lord, Lord Campbell of Croy. There are over 40 means-tested benefits run by a variety of different departments, each requiring to be claimed separately. Every year about 24 million new claims are processed. Every week some 23 million individual benefits are paid. Even so, benefits, as we all know, are often not claimed, perhaps out of pride, perhaps through unawareness of entitlement, or even because the entitlement under a particular heading is very small. It is estimated that some 4 million pensioners are entitled to additional means-tested benefits, but the take-up of supplementary benefits and housing benefits by the elderly is only in the region of 65 per cent., as a result of which many elderly people are living below the poverty line. Family income supplement is notorious for its low take-up. Yet low take-up of benefits defeats the entire object of the social security system. Most studies point to complexity as the prime reason for low take-up. Simplification must, therefore, be one of the first objectives of reform.
Any really radical reform requires a merger of the tax and social security systems, and it so happens that a golden opportunity will be offered by the computerisation of the Inland Revenue, due to take place, I gather, in 1988 or thereabouts. Any responsible political party should, in my view, be working on proposals

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designed to take full advantage of this new technological capability as soon as it becomes operational. One of the most important advances that will become perfectly feasible will be an automatic system of calculation and redistribution without the necessity of claiming. Most of the complexity and all of the stigma attaching to the present system can thus be removed and the take-up problem eliminated.
It is, of course, well known that the Liberal Party has long favoured a system of tax credits, as excellently outlined by the noble Lord, Lord Banks. The noble Lord, Lord Campbell, reminded us of the Conservative scheme of 1972. The Unemployment Committee in its report (paragraph 12.55) recommended that serious consideration of the Liberal tax credit scheme should be reopened. My party has in a recent discussion paper sketched the possible shape of a tax benefit scheme. I hasten to assure the noble Lord, Lord Campbell, that we do not claim total originality here. What is certain is that the debate on the best method will undoubtedly continue among all those who are convinced of the necessity of putting our social security and tax systems on a fairer and more rational basis. This debate has already received a most valuable impetus in your Lordships' House this evening.
There is no reason, whatever our long-term aims, why we should wait on computerisation before we do anything. Undoubtedly, the most absurd and offensive of all the present anomalies is what is generally known as the "poverty trap". This has a double bite. The main disincentive to some of the unemployed to seek work is not that they have never had it so good but that their earnings in work will not be much different from their earnings out of work. Then there is the disincentive to many people who are in work to earn more. Both these conditions are caused by the ruthlessly regressive nature of national insurance charges and the suddenness with which benefits are withdrawn.
The poverty trap is at its worst for people in work who have children. This is clearly shown in Table 2 of my party's Green Paper, Attacking Poverty, which I think is the proposal to which the noble Lord, Lord Campbell, was referring. Under the present system, a couple with two children paying £15 rent and £5 rates and receiving only the husband's earnings has a net income of £91·97 if the husband earns £50. But if his earnings rise to £80 the family's net income falls to £90·69, and if he reaches the giddy heights of £100 they are only very minimally better off" at £92·80. In other words, such a family has virtually the same net income whether it earns £50 or £100 per week.
How on earth could such an extraordinary situation arise? The answer in the above case is that, for every additional pound earned, the family pays not only 38·75p (shortly to be 39p) in extra tax and national insurance contributions but also has 73p deducted from benefits. When it is said that a redistributive tax credit or similar scheme can only be introduced at a very high marginal rate of tax, that is simply to overlook that the very poorest people are in some circumstances already paying an effective total tax rate of 112 per cent. on each additional pound of their earnings. This cannot possibly be allowed to continue.
I will not go into our scheme in any great detail because it has not yet been adopted as party policy, but
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the essence is that the benefit withdrawal rate must be low enough for a family to improve its position by moving from unemployment into employment or by earning more. We therefore propose a basic benefit whose effect is illustrated in the bottom half of Table 2 of this paper. It was also printed on the front page of The Times a few days ago. The family improves its net income position steadily between £50 and £120 per week and it is only when it is approaching £200 that the scheme becomes neutral and the family sees no improvement.
This basic benefit is intended to replace family income supplement, rent and rate rebates and free school meals, and will be calculated according to the number of children and housing costs. Everyone will be entitled to the benefit, and it will be gradually withdrawn as income rises, smoothing out the worst effects of the poverty trap. Child benefit will still be paid to everyone. One-parent families will get extra help, especially with housing costs. Unemployment and sickness benefit will be increased by 10 per cent. The earnings conditions compatible with disablement benefit and old age pension will be removed.
How is this to be paid for? Although the plan I have very roughly outlined could serve merely as the first stage of a more ambitious scheme with wider resource implications, it is feasible as it stands, largely through the redistribution of existing resources. The married man's tax allowance would be ended; there is no justification in logic or fairness for giving a married man 1½times a single person's allowance regardless of whether there are any children or not. At the same time there would be a single year's freeze of all personal tax allowances. Only a relatively small balance, after these two measures, would be a charge on the PSBR.
Commenting on these proposals in a leading article, The Times wrote:
"There is, it will be seen, a hefty redistributive element in this in favour of the poor and at the expense not only of the rich but of everyone who is not poor. That is not a very popular line to take. The SDP respresents itself as a radical party wedded to greater equality; even so, it will require some electoral courage to accept the full implications of what is proposed here".
I think electoral courage is precisely what is needed, and I wish we could attract more press comment of this kind.
There will always be people who believe that the welfare state is an excrescence on the body politic and will seek to dismantle it or reduce it to the most minimal kind of safety net. We may even hear that view expressed in your Lordships' House this evening, though it has not been so far. Certainly, anything so large and with so many ramifications is bound to lead to some abuse and waste. That is a just reason for vigilance, and the noble Lord, Lord Trefgarne, is quite correct in speaking of the need for administrative efficiency. But it must never be forgotten that, just as the primary purpose of the NHS was actively to promote the health of the people of this country, not just to tend the sick and dying, so the purpose of the social security system and of the social services was and should remain actively to promote the welfare of the people of this country, and the quality and dignity of their lives. That is what the welfare state means. It is not just a question of picking people up when they fall by the wayside. The more people suffer ill-health

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and poverty and unemployment, the more likely their children are to do so, and thus the vicious cycle of deprivation widens and deepens and in the long run more and more expenditure is incurred in picking up the pieces.
I am not sure that the present Government really understand this. That is why in the debate on the Queen's Speech I criticised them for their lack of a social policy. I spoke earlier about the poverty trap. There is another poverty trap and that is the trap of poverty of thought into which I fear the Government is in danger of falling unless the noble Lord, Lord Trefgarne, can pull them back from the brink. I am equally clear that the Social Democratic Party and the Alliance will always avoid that trap and keep the need for a fair and far-reaching social policy always clearly in view.
Baroness Gaitskell: My Lords, before the noble Lord sits down may I ask him a very short question—I was fascinated by his speech. Is not this a case for cable television to unravel?
Lord Kilmarnock: My Lords, I am grateful to the noble Baroness. I am afraid I had the misfortune not to attend the debate on cable television. Perhaps I may direct her attention to that debate.
4.40 p.m.
Lord Harris of High Cross: My Lords, I join other noble Lords in thanking the noble Lord, Lord Banks, for the opportunity to discuss this important issue. I was only disappointed, if I may say so, in his rather unadventurous approach to this challenging question. I found myself in much agreement with what the noble Lord, Lord Campbell of Croy, said and I am delighted to follow for the first time the spokesman for the Social Democrats, the noble Lord, Lord Kilmarnock.
I reserve my main admiration for the noble Lord, Lord Cledwyn of Penrhos, for the manner, if not the content, of his splendid assault. Although his chief gift to the poor and handicapped was to shower them with the familar promises of other people's money after the election, it was delivered as a magnificent peformance. I hope he will not mind my saying that his admiration for Lloyd George is well based because his lilting phrases establish him as a contemporary Welsh wizard in our midst. If he ever considers giving lessons to tongue-tied mortals like myself, I would pay for them from my own pocket and not charge it against Lords' expenses.
I thought I caught him out in a verbal contradiction. In referring to the Central Policy Review Staff paper—the invisible paper that we are not allowed to see—he referred to it as proposing radical reforms and went on to tease the Government against taking what he called that "reactionary course". That would provide me with a good banner for my contribution because the flag I would fly is the flag of radical reaction. I believe that we should be reactionary—we should be deeply conservative—about the fundamental principle of welfare, in helping the poor and others who need our assistance, but I believe we should be radical and adventurous about the framework of policy that would be necessary to achieve that goal.
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It seems to me that the trouble with the defenders of the current welfare state is that they so prostrate themselves before the sacred, if somewhat tarnished, structure that they cannot see the central reality that indiscriminate state charity has created an unsustainable burden. It is an unsustainable burden not only in Britain but in many Western societies. I recently looked at the Beveridge report, which was published 40 years ago, in November 1942. It pitched the cost of the National Health Service at £170 million in 1945 pounds. That compares with the present bill of £14,000 million. After the most generous allowance I can make for inflation, the real cost of the NHS has escalated five-fold. Likewise, his estimate of pensions has gone up four-fold and sickness and disablement pay has doubled in real terms. Yet, none of us is satisfied with the provision that is thus expensively provided.
I have my own figures that are different from the Minister's on the cost of the welfare state. If we include education, health and social security, the figure in 1981 from the Blue Book exceeded £63 billion, which is more than half of all Government spending. Since, on my calculation, Government spending comes out at more than half of the net national income, it does not take much mathematics to calculate that welfare spending accounts for 29 per cent. of the total national income.
My complaint is that the greater part of this massive, crippling burden has nothing whatever to do with helping the poor. The true source of this indiscriminate generosity has less to do with compassion than with competition for votes. I believe that since the war we have witnessed a shameless process of electioneering, pensioneering and compassioneering. In a modern version of Eatanswill, we have encouraged the fatal illusion of democracy that everyone can enrich themselves at the expense of everyone else.
The reality to be discovered in the figures published each February by the Central Statistical Office is that families with quite modest incomes pay more in total taxes than the value of all the benefits they get back from the welfare state. The dilemma for the hard-pressed taxpayer as a voter is whether he should press for reduced taxes, which he would like, or join a lobby for sectional benefits in the hope of enriching himself further at someone else's expense. We must not think that the proliferation of claimants has yet been exhausted. We all know what the DHSS defines as "the female-headed single parent family", but it was at the Social Democrat conference where one earnest, if anguished, delegate looked forward to claims from,
"as yet undiscovered minorities".
The inevitable result of bribing people with their own money is that income tax now reaches down, as the noble Lord, Lord Kilmarnock, said, to rob workers below the official poverty line. Perhaps I should declare an interest in the research monograph entitled The Moral Hazard of Social Benefits, to which I subscribed a brief introduction. The author, Mrs. Hermione Parker, estimated that there were more than 5 million victims of taxation who are at risk from the poverty and unemployment traps. Can we seriously doubt that this wholesale annihilation of incentive explains something of the unemployment statistics as well as the growth of the black economy?

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Whatever our differences in detail and in larger issues, it seems to me there should be no dispute that to restore work incentives requires opening up or widening the gap between social benefits and take-home pay. In this context, indexation is doubly damaging at a time when net wages are often falling behind the rise in prices. But if we shrink from holding down benefits we have no choice but to raise the tax thresholds, which turns out to be very expensive. To restore the pre-war position, whereby people on average earnings paid no income tax, would cost about £25 billion, which is a large slice of the total yield from income tax. To move some way in that direction we would have to impose severe curbs on central and local government spending. To my mind, the prize is that lower taxes would do more than anything else simultaneously to abate wage demands, galvanise the economy, and thereby check unit costs of production and restore jobs.
I believe that we must go back to the debate that was conducted in the 1960s and 1970s about the structure of the welfare state and concerning the relative merits of selective versus universal benefits in cash and kind. The opponents of selective welfare used to get rather steamed up about the hated means test. Well, today, we appear to have about 57 varieties of means test when, in principle, we need only one. My argument is for a reverse or negative income tax. Under this system a single all-embracing test of income and need for each family would determine how far they are sufficiently well-off to afford to pay tax, or how far they are poor enough to require a subsidy. By confining state help to topping-up low incomes we would be able to leave the majority of people with more of their own money in their pockets to pay their own way in welfare.
It is in my view pure moonshine to pretend that most people would not be able to survive without the welfare state. It is nearer the truth to say that most people have been so impoverished by taxes to pay for so-called "free" services that they cannot afford to pay directly for the services of their choice. We have returned with a vengeance to the pauperisation of the old Poor Law, whereby millions are made appendages of the state and prevented from acting responsibly to take care of themselves and their families. As the great jurist Dicey warned in the early years of this century: state help has killed self-help.
Since teaching social economics at a Scottish university some 30 years ago, I have come to the conclusion that the wrong turning was taken not in 1945 after the Beveridge Report, but in 1906, because it was after 1906 that a nominally Liberal Government began the debasement of the political coinage with the great rallying cry of "Ninepence for fourpence".
I wish to raise a nobler vision, which was set forth at about the same time by the Professor of Economics at the University of Cambridge. Towards the end of the last century Professor Alfred Marshall went out of his way to oppose the provision of universal pensions. He did so on the following exemplary grounds. He said:
"Universal pensions do not contain the seeds of their own disappearance. I am afraid that, if started, they would tend to become perpetual".
How right he was. He went on—and I commend these
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thoughts to your Lordships' reflection in leisure times—
"I regard poverty as a passing evil in the progress of man; and I should not like any institution started which did not contain in itself the causes which would make it shrivel up as the causes of poverty shrivelled up".
I conclude with a straight question from the Cross-Benches. Can we any longer afford to ignore these more discriminating, selective and responsible approaches, when politicians of all parties have made such an unholy mess of the present welfare state?
4.52 p.m.
Baroness Ewart-Biggs: My Lords, I, too, should like to thank the noble Lord, Lord Banks, very much indeed for instigating this debate. I greatly enjoyed his presentation of it. I should also like to apologise to the Minister, the noble Lord, Lord Banks, and your Lordships as I may have to leave the debate early if it does not conclude by 6.30, because I have to attend a meeting of the parent/teacher association at the school which my child attends, and I dare not miss it because I must face my child afterwards.
I should like to make one brief contribution to this debate, and that is to reflect a few ideas about the present position of children within the welfare state, while perhaps at the same time pointing out how in some cases what is presently being provided is totally inadequate. I hope that I shall not be accused by the noble Lord, Lord Harris of High Cross, of doing this in a compassioneering way. I assure him that I will be merely trying to state a few facts.
However, before doing that, I should like to say something about the welfare state in general terms. During the number of years that I spent abroad, serving in various postings with my husband, we always felt secure in the knowledge that there was at any rate, whatever else happened, one British institution to be proud of—and that was our welfare state. Other countries, far from having achieved such a system, had indeed not even aspired to such a system. So although there were at times incidents in British politics which were difficult to represent and defend, we knew that our particular system of guaranteeing communal provision for everyone in Britain, regardless of their position in society, was a source of envy to our host countries. We were proud of it and took a great deal of satisfaction in talking about it and describing its function. So if the welfare state continues to be eroded, as it has in the last three and a half years by some mean and petty cuts, apart from the obviously adverse effect this will have on Britain's least privileged families, that source of justified national pride will also disappear.
I should like to turn to the specific points I wish to make regarding the circumstances of certain groups of less privileged children in Britain today. For there is growing and unequivocal evidence that the extent of poverty among children here in Britain in the 1980s has been substantially underestimated. Surely our children are part of our country's future; but, if some of them continue to be treated in such a miserly way, they might well represent a highly destructive element in that future. So we must surely make a greater investment in today's children in order to try to safeguard that future.

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Thus, accepting the fact that childless couples and single people have over recent years fared much better from benefit and taxation policies, let us try and see what are the best remedial measures needed to restore the balance between single people and families. In my view the arguments for increasing child benefit are quite overwhelming. There seems no doubt that at present the provision for children in families dependent on social security are not adequate to meet the costs of a child. Research has brought out irrefutable proof of this. Among the conclusions in the recent issue of a Child Poverty Action Group publication it is stated that:
"The evidence that existing scale rates are more inadequate for families with children confirms that it is the children's rates that are most out of line with needs".
It goes on to say that the extent of poverty inevitably depends on how it is defined, but a more realistic allowance for the basic needs of children indicates that the extent to which children are the victims of poverty has been seriously underestimated.
I was going to quote an extract from Despite the Welfare State, but the noble Lord, Lord Banks, got in first. I was going to quote exactly the same extract as he quoted. Nevertheless, I should like to reaffirm what it says because it was, after all, a Government sponsored research project. It stated:
"that it is impossible to resist a reiteration of the general conclusion that benefit rates, particularly of supplementaty benefit and child benefit, are simply too low at present for some families to avoid real hardship and damaging consequences to the health and other life chances of their children".
If that is the conclusion of Government sponsored research, why, indeed, do the Government not take heed and act on such recommendations?
I should like very briefly to give your Lordships some of the arguments which prove that a rise in child benefit and an adjustment in the supplementaty benefit rate are the only ways of helping our poorest children and restoring to families some of the resources which have been redistributed towards the childless over the past two decades. First, an increase in child benefit, if it is seen, as it were, as tax relief, is the only way in which help can be directed specifically to families with children. It is more redistributive to the low paid than raising personal allowances or cutting tax rates.
Secondly, child benefit is also the best way of dealing with the poverty trap and the unemployment trap. The number of children who are dependent on unemployed parents stands at present at 1 million and will doubtless rise. Thirdly, it is also a fact that increasing family income supplement is no substiltute, as such an increase benefits only a small proportion of those in need of help, as I understand that only about half of those eligible for it do indeed claim it.
Fourthly, child benefit allowance, going as it does directly to the mother, has an additional importance in the positive effect it has on her weekly budgeting. Any increase would doubtless be very easily and rapidly absorbed on the basic needs of the children. And on this point I would like to ask the Minister his views on the wisdom of disallowing the choice to certain mothers of drawing child benefit in weekly or monthly instalments. I know that mothers who were previously
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eligible for child benefit were given the choice of drawing it either in weekly or in monthly instalments, and that certain categories of mothers still have the same choice. But why not give this freedom of choice to all mothers? Otherwise it would seem to me that some young housewives might well fall into that terrible snare of overspending at the beginning of the month, when they have their whole allowance, and having nothing left for the end of the month.
Finally, in my view, everything points to the increasing need for priority to be given to child benefit in the next Budget. If, as has been widely suggested, personal tax allowances are increased by more than the rate of inflation, it is surely imperative that child benefit is increased by at least as much, otherwise there would be a further deterioration in the relative position of families with children. Whatever happens to tax allowances, there can be no doubt of the vital importance that child benefit should be restored to its April 1979 value. Further to this, it could be argued that the phasing-out of the married man's tax allowance, to which the noble Lord, Lord Kilmarnock, referred, would indeed make provision to increase the real value of child benefit above its 1979 value.
When one reflects on the fearful reality that 6½ million people in Britain are now dependent on supplementary benefit—a number which represents over 11 per cent. of the total population—and when one further reflects on the ensuing poverty that this must bring into so many of our children's lives, then one cannot but wonder what the members of the Cabinet, who I seem to remember were asked to go off and think about the family during the Recess, came up with. Perhaps for holiday reflection it was more agreeable and comforting to think of the conditions of life enjoyed by Britain's more well-to-do families.
Lastly, I should like to ask the Minister one question about the plight of social security offices in various parts of the country. As he knows, the coincidence of the increased number of claims which unemployment has brought about and the 2 per cent. cut in the social security workforce has brought the system near to breaking point. The situation in the Birmingham offices is critical and last week I read of similar conditions prevailing in Penzance, where it appears that unemployment is nearing 20 per cent. Social security officials there say that they cannot process any more claims for supplementary benefit before January. The manager in the Penzance office is quoted as saying:
"It's a problem which is building up in social security offices throughout the country. We have only 51 staff and 2,500 people claiming supplementary benefit. We simply cannot cope."
Therefore, will the Minister say whether the Government are planning to take action on staffing these offices adequately in order to meet the exceptional needs brought about by their economic policies? The Minister referred to this streamlining, but I do not think that he means it to have this effect. Imagine being a mother at this time of year, with the special demands that providing a nice Christmas for her family brings. Think of her not being able to get possession of the benefit to which she is fully entitled. I cannot help feeling that such a thought might well take the gilt off some of the festivities being enjoyed by more well-to-do families this Christmas. Therefore, I

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conclude by saying that, all in all, I fear that perhaps that great flame of pride in our welfare state hitherto nurtured by our overseas representatives may just be beginning to flicker a little.
5.4 p.m.
Earl Grey: My Lords, I, too, am most grateful to my noble friend Lord Banks for raising this important subject, especially at a time of year when the needs of pensioners are at their most critical. I am pleased that the pensioners are to receive their bonus this year, but I am disappointed that next year the Government propose to take that bonus away. It seems to me that that is an unfair and a totally unnecessary action to take, as there is considerable agreement that the retirement pension is too low. This is borne out by the fact that a large number of pensioners have to resort to supplementary benefit, which to many is undignified and embarrassing.
Liberals have argued for 20 years that the single person's pension should represent 33 per cent. of average national earnings, and the married couple's pension 50 per cent. of average national earnings. In June of this year they were 22·45 per cent. and 33·3 per cent. respectively. This falls far short of what we are aiming for. We welcome the bonus as a step towards that aim and, in doing so, deplore its planned removal. Under the present system, pensioners are enabled to catch up a bit this year, but they will fall back next year. It does not seem fair to raise their standard of living for a while and then let it fall below that level.
All this is caused through having a reference period six months in the past and six months in the future. This involves forecasting the future rate of inflation and, as we all know, mistakes are inevitably made. It would be far better to have a reference period of 12 months in arrears, so that a fairer assessment could be made. It was on that basis until the last Labour Government altered it, adversely affecting the pensioners in so doing. I urge the Government seriously to reconsider their actions, especially now when inflation is falling and it would be far easier to revert to the old system.
5.7 p.m.
The Earl of Onslow: My Lords, it was a great pleasure to listen to the noble Lord, Lord Cledwyn, advocating scattering gold like Danae to provide extra payment after extra payment as if money was no object, and complaining of the fact that her Majesty's Government had presided over the first manufacturing trade deficit since the Industrial Revolution. We did not hear him wax quite so lyrical over the fact that we had exported grain for the first time since the Battle of the Nile, but then he might have had to give credit to my noble friend, and I am sure that nothing could have allowed him to do that.
The noble Lord, Lord Kilmarnock, was advocating the plan of the Social Democratic Party to abolish the poverty and unemployment traps. I believe that this has been put through various computers and it has been found that it does not achieve either of those particular worthwhile objectives. I think that one must give credit to my noble friend Lord Trefgarne, because in his opening speech he made an extremely important point which we must all wear firmly and permanently
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at the front of our minds. It is that the welfare state can and will only be as good as the amount of wealth created by the rest of the country to pay for it. It is impossible to have a welfare state with nobody working; it is impossible to have a welfare state in a populated desert, because there is nothing to pay for that welfare state. Until we realise that, it is no good advocating more pensions, more hospitals, more this or more that, because they do not grow on trees.
The present Government have done their level best to maintain benefits and be as generous as they can be in the present world and British trade depressions. But the British social security and tax system, like the British people themselves, is of mongrel descent. Its ancestors include William Pitt, Bismarck, Beveridge and Lloyd George, and that is quite a jolly mixture. As both the noble Lords, Lord Banks and Lord Campbell of Croy, said, it is almost incomprehensible and fails in its job of redistributing income in a fair and equitable fashion.
This is not too surprising, as four authorities do the redistributing. First, there is the Treasury, exacting its income tax and national insurance contributions, with their allowances and tax thresholds. Surely the noble Lord, Lord Banks, is wrong in pretending that national insurance has anything at all to do with insurance; it has not. It is a straightforward method of taxing and it is a hangover of the hypothecating of revenue, which the Treasury normally disapproves of in every other sense. If it was insurance, then, like motor insurance, it should be run by an insurance company and not by the Treasury.
Secondly, there is the DHSS, with its massive social security payments. Incidentally, according to very well-informed sources, the staff are low paid, sometimes taking home less than they pay out to clients. In one out of two offices the staff are so demoralised that there is a 60 per cent. turnover of people every year. Thirdly, there is the Department of Education for free school meals, student grants and school maintenance allowances and benefits, and, fourthly, the local authorities with their social security payments, housing benefits, et cetera. The present cost of income redistribution is £69.18 billion for 1981–82, made up of £31.42 billion direct support—that is, social security, student awards, free school meals, MSC benefits and allowances—£33.3 billion for tax reliefs and allowances, and £4.46 billion on housing expenditure.
I tried to explain to your Lordships in the debate on the Queen's Speech some of the dottinesses and unfairnesses which have been found by Mrs. Hermione Parker's monograph to the Institute of Economic Affairs called The Moral Hazard of Social Benefits. Since that time she has received letters of complaint from aggrieved citizens. These range from a pensioner claiming not only that his income from a combined state and superannuation scheme was less than that of the state pension and supplementary benefits of a neighbour but also that he paid tax on his £44.63 per week and his neighbour paid no tax on £55 per week. Another correspondent complained that her niece had had a job sewing knickers, but the niece was better off lying in bed all day. This is not surprising at all. The escape point from the poverty trap for a single woman is £97 per week, which is 124 per cent. of the

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average female worker's wage in this country. I am prepared to bet, my Lords, that knicker sewing pay in the North West is not 124 per cent. of the national women's wage.
The poverty trap, as most of your Lordships are probably aware, is when earnings from work are subject to income tax, even when those earnings are below the entitlement levels of means-tested benefits. Add to that muddle the fact that to go to work incurs expenses and it is possible to see the massive incentive for the combination of idleness or the black economy which our present system generates. Can we really be serious in our desire to encourage learning and training if a school leaver who registers for unemployment loses his supplementary benefit if, instead of hanging around billiard halls or street corners, he studies for more than 21 hours a week? University students get mandatory grants, trainees almost certainly nonexistent discretionary grants. Why?
The Economist newspaper last week showed that a man with two children earning £60 a week has a net income of £100.5. If his wage increases by 100 per cent. to £120 a week his net income is £104.44. Surely that is disincentive. Incentive is what we all want, with a floor, and a good floor, below which no one can fall. The noble Earl, Lord Gowrie in his winding-up speech on the Queen's Speech on 10th November stated in column 346:
"We have to work away at this poverty trap difficulty. It is of course extremely expensive. The best answer is to get a more competitive economy and get the overall level of wages up."
My noble friend was very badly advised as to that answer. The economy has to grow by a phenomenally large amount to allow wages to rise above the poverty trap level, and Her Majesty's Government are at the moment preaching wage restraint like mad. I heard the Chancellor doing it on the wireless at lunchtime.
By increasing index-linked social security benefits and others by 11 per cent. and trying to hold wages to 4 per cent. the Government have increased the poverty trap and made the problem worse. In other words, the total number of adults estimated to be at risk from the poverty and unemployment trap has been increased from the horrifying figure of 5½ million souls. Another muddle surfaced in yesterdays's Guardian newspaper. Supplementary benefit, it appears can be claimed for district heating schemes. However, councils have the power to reduce the amount charged, but the tenants are entitled to the full amount from supplementary benefit, which is fixed. Did the Government mean to contribute this extra payment or was it a mistake? If it was intentional it is odd that they did not boast about it. And why suddenly benefit this one group?
A pledge for a tax credit scheme was part of the Tory policy at the 1974 election. I suggest that there is an alternative, and that is its lineal descendant, the basic income guarantee scheme. This has been proposed by Sir Brandon Rhys Williams to the Treasury and Civil Service Committee sub-committee in another place. His scheme is cash neutral. In other words, the costs are the same as today's non-system. It proposes that everyone should be given money by the Treasury as of right. There would be a payment for each householder, each adult, each child, each expectant mother, and probably each lone parent, and old people's payment
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that varies from £5 at 65 to £15 at 85 in excess of the normal basic income guarantee, because growing old costs more, as has already been said. There would be home care and invalidity and disability payments. There would have to be one small residual means-tested benefit for housing costs in certain circumstances over £10.75 per week. All of this evidence is in fact in the evidence to this sub-committee, but it is so important that it is worthwhile hearing it again.
To pay for this, all wages over the basic income guarantee are taxed, probably from 30 per cent. up to 60 per cent., but with no allowances and no thresholds. The total cost of the scheme at its widest is £118 billion, but that includes the abolition of the present income tax and national insurance contributions, and off that comes £32 billion made up by abolishing social security—that is, pensions, superannuation benefits, family incomes supplement, free welfare milk, unemployment pay, disability allowances, et cetera—which comes to £29·48 billion. Administration, student awards, free school milk, MSC grants and allowances, and rate rebates make up the rest. Therefore, the total bill would in fact be about £86 billion, and that would come from a tax base, excluding the black economy, of approximately £170 billion.
This produces an overall tax amount needed to be raised for it to be totally cash neutral of 50·53 per cent., if it is all paid by the employee; but, as I have previously said, the same money could be raised with rates of 30 per cent. to 60 per cent. and a payroll tax paid for by the employer of 10 per cent. That scheme is cash negative. It is a scheme which allows people to work as much, or as little, as they like, but it is always profitable to work. At the moment we have a system where on very frequent occasions it is not profitable to work, and that is not good for us; and considering the fact also that we are going to be faced with a lot more leisure time as automation and various other things come into being, this is an important point.
The costs have in fact been calculated on a basis that there is no change in the black economy, but by the administration of the basic income guarantee the black economy would be discouraged very considerably, and so the tax base could widen by anything between 4 per cent. to 15 per cent. It would lead to easier work-sharing schemes, blur the edges between employment and unemployment and allow people to retire, or not to retire, when they liked. It would allow the disabled to contribute to society more than they do at the moment, and it would end the unfair discouragement of effort and pride which our present methods generate. Above all, it would discourage legitimate fiddles like the one of doing no overtime in the week that family income supplement is assessed so as to qualify for it, and then going back after the family income supplement has been fixed for the year to the full overtime allowed.
5.19 p.m.
Lord Hatch of Lusby: My Lords, the whole House is grateful to the noble Lord, Lord Banks, for introducing this Motion and giving us the opportunity to discuss the crucial issue of the welfare state. I do not intend to take up the second part of his Motion on the reform of the welfare state. Perhaps we can discuss that another time. What I should like to do is to follow him and the

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noble Lord, Lord Kilmarnock, in their argument that really contradicts a great deal of what the noble Earl who has just sat down has said, and equally what the noble Lord, Lord Harris of High Cross, had to say.
There is a great misunderstanding on the Benches opposite—indeed, in many parts of the country—as to the real meaning of the welfare state. It is not a charity or state hand-out. It is not even mainly dependent on the contributions of the present producers, the workers of today. It is a return to those who—many of them, most of them—have spent a lifetime's work in contributing to the wealth of the nation, plus a contribution from the taxation of other workers. It is a community, communal, effort to maintain ourselves as one nation, and it should be recognised as such.
Above all, we should get away from the concept that welfare state benefits are charity. A great deal of the benefit that is paid out comes from the money that has been paid in by the recipients, and—this will, no doubt, be pointed out—the extra amount that is necessary has also been contributed to by the workers through the often 45 to 50 years' work of the recipient workers. That concept of the welfare state, going back into the 19th century, was put into practical form in the work of Lloyd George, but above all in the work of people like Nye Bevan and Jim Griffiths in the Attlee Government.
I intend to concentrate this evening on two issues regarding the present conduct of the welfare state by the present Government, the first being unemployment benefit. Two years ago, unemployment benefit was reduced by 5 per cent. under the Social Security (No. 2) Bill 1980, and the then Secretary of State said:
"As the unemployment benefit comes into tax, so the rationale for the 5 per cent. abatement ends".—[Official Report, Commons, Standing Cttee B; 30/4/80; col. 526.]
Unemployment benefit came into tax in July of this year. Is it unfair to ask the Government when they will honour their pledge? Is it unfair to accuse them of having already broken that pledge? It was a clear statement, made by the Secretary of State in 1980, that the rationale would come to an end when unemployment benefit came into tax. It has now been in tax for the last four months. It is estimated that that tax will bring in £660 million in a full year and that to restore the 5 per cent. would cost only £60 million. What is the Government's rationale now? Has it changed since April 1980? What is their rationale for maintaining that 5 per cent. for four months after taxation has been applied to unemployment benefit? Is it not a form of double taxation on the unemployed? Or is it, as one honourable Member of the Conservative Party suggested in the other place, that the Government are waiting for the revenue from the extra 300,000 who, it is estimated, will be unemployed next year? Are they waiting for that before restoring the rightful level of unemployment benefit and the 5 per cent. which they took away in 1980?
The Government did not just take away the 5 per cent. They also abolished the earnings-related rule which linked benefit either to prices or to earnings, whichever was the higher; and if one takes the two together—the 5 per cent. and the abolition of the earnings-related rule—it is estimated that the average unemployed person today gets £11·60 less a week. May I ask the Minister to confirm that figure and to
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say what the Government's justification is for taking from the unemployed—the unemployed who are the Government's responsibility and whose numbers have been more than doubled since the Conservatives took office—that £11·60 per week? We are entitled to an answer.
The second point I wish to raise is that of pensions. This week 9 million pensioners had an increase of 11 per cent., and we all welcome that. But if the cuts that have been made in the last three years—during the life time of this Government—are taken into account, then pensioners are worse off, in real terms, after their 11 per cent. rise has been added, than they were three years ago. They, too, have suffered from the abolition of the earnings-related rule. It is estimated that by the simple act of abolishing the earnings-related rule in relation to pensions, the Government have taken £500 million from them. Again, what is the rationale for that? How can the Government excuse taking £500 million away from the pensioners? What does it mean? For the pensioner it means, on average, £3·25 less a week, or £169 a year. That is what the Government are taking away from pensioners as a result of the abolition of the earnings-related rule.
As the noble Lord, Lord Kilmarnock, rightly said, the Government's actions become even meaner when they are applied to invalidity pensioners and beneficiaries. Remember, the beneficiaries have to pay; not only do they lose from the abolition of the earnings-related rule, but they, too, were included in the 5 per cent. deduction in lieu of taxation, costing them, on average, £5·50 a week. Are the Government really so mean that they cannot see that it is wrong to penalise those who are suffering to such a degree as to qualify for the invalidity pension, or the invalidity benefit, so that they are again to be deprived not only of what was agreed by Parliament on the earnings-related rule before the Government took office, but also of the 5 per cent. that was deducted in lieu of taxation?
So I want quite directly to ask—and I think that the House is entitled to ask—the noble Lord who is to wind up what is the justification for maintaining the 5 per cent. deduction, and when is the 5 per cent. to be restored? Is it going to be restored to the long-term unemployed who will be out of normal benefit after their year on benefit, and who will be dependent upon supplementary benefit? Are they going to have their 5 per cent. restored? These are specific questions. What is the rationale for maintaining the deduction after the promise was made that it would be restored as soon as unemployment benefit came into taxation? When is it to be restored, and is it to be restored to those who have passed out of benefit, who are the long-term unemployed? Will it be restored to them also?
Finally, the noble Lord, Lord Banks—I think it was—has already mentioned the report of the Child Poverty Campaign, which has been published this week in the Guardian. According to an estimate in the report, over the past three years, since the present Government came into office, the value of benefits within the welfare state has been reduced in real terms—that is, taking into account all the cuts, inflation, et cetera—by £2 billion. Will the noble Lord confirm, or deny, the figures? If he denies them, will he prove his denial? The figures have been worked out by

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these experts in the subject of poverty, in the realities of poverty as it exists under the present management of the welfare state by the Government. Will the noble Lord show where, and how, they are wrong?
When it comes down to the real bread and butter of the family life that the party opposite claims, so hypocritically, to represent, let me give your Lordships one final little cameo. At last year's benefit rates, a married couple with two children, with earnings of £75 a week, paid as much in income tax and in national insurance as they received in family income supplement and child benefit. Is that the kind of welfare state in which the present Government believe? Can it be defended by the noble Lord who is to reply?
5.34 p.m.
Baroness Seear: My Lords, we on these Benches are grateful to so many Members of the House who have expressed appreciation of the Motion put forward by my noble friend Lord Banks. In particular, I should like to thank the noble Lord, Lord Cledwyn of Penrhos, first, for giving us a preview of the Labour Party manifesto—plainly, on all sides of this House we are working up for an election before so very long—and for reassuring us that, as one would expect, the Labour Party has definitely come down on the side of Shore's madness, rather than Howe's meanness. We are also grateful to the noble Lord, Lord Cledwyn—I am sorry that he is not here at the moment—for the fact that his enthusiasm for his fellow countryman Lloyd George overcame the Labour Party's usual antagonism towards the point of view of people on these Benches. I notice that his generosity did not extend to reminding the House that Lord Beveridge, too, was a Liberal. The noble Lord, Lord Cledwyn, went on to claim for his party credit for most of the development of the welfare state ever since the year 1906. However, be that as it may.
Most of the arguments in your Lordships' House this afternoon have demonstrated the need for welfare state provision, with the exception of the few—I can only call them starry-eyed dreamers—who really believe that the market economy, left to work its way, will somehow or other get rid of poverty in God's good time. Well, it might in God's good time, but that is rather too long a time for most of us. Only very few people have taken the view that there is no need for any provision because poverty is something that is induced mainly by taxation and the machinations of psuedo-socialists, and that, if you really let capitalism rip, all will be well. I do not believe that more than a very small proportion of your Lordships' House believe that. With the exception of those who have expressed that view, there has been universal agreement that some provision is necessary.
However, the speeches, whether from the noble Lord, Lord Hatch of Lusby, or the noble Earl, Lord Onslow—and I am sure your Lordships will agree that that is a wide range—have made it crystal clear that the welfare state is in an unholy mess and that nobody in their senses would ever have designed the ridiculous collection of means-tested benefits that we now have. We know how it happend. It "grow'd", like Topsy, as most things in this country do. Whether it be on the Government side or on the Labour side, we never will
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take a radical look at the thing and really knock some sense into it. So we go on tinkering and tinkering, and each time we tinker we put one thing right and two things wrong. So the net result at the end of the day is infinitely worse.
The noble Lord, Lord Trefgarne—I know that he is to speak once more at the end of the debate, and perhaps he will then give us a little more encouragement—again did a very good tinkering job. He showed us how the Government had improved a little here and adjusted a bit there. You could see him going around with his little spanner, tightening the screw in one direction, knocking in a nail in the other—producing at the end of the day an even worse mess than before.
Surely what has emerged from a number of speakers, in one way or another, is the need for a really radical look at the way in which we arrange for the necessary welfare provision. I do not often agree with the noble Earl, Lord Onslow, but for once he has been reading the right stuff. The fact of the matter is that at one time or another all parties have realised the sense of some form of—call it basic citizen income, call it tax credit; I do not much mind what you call it—basic payment to all citizens, male and female, by virtue of their citizenship, that is not altered by virtue of what they subsequently earn, except in so far as they all pay a graduated tax. That proposal was previously looked at under the Heath administration—but I do not think that the noble Lord, Lord Trefgarne, is so narrow-minded that that damns it out of hand and prevents him from having another look at it. I believe that when the Conservative Government previously looked at it, the noble Lord, Lord Cockfield, in a previous career—incarnation is the word that I am looking for; though somehow I do not quite associate that with Lord Cockfield—decided that it was too expensive.
However, there are a great many different ways of working out the sums, and it depends on the values that you put in. You can have a higher level of citizen income or a lower level of citizen income. You can adjust the ways of paying it. You might even cut back on the mortgage payments, which, really, are one of the most curious benefits paid to citizens. You might provide a great deal of money if you start tampering with them, though I know it would be remarkably unpopular electorally. But the point I am trying to make is that there are a very great many different ways in which you can do these sums.
The noble Lord, Lord Banks, and, I think, the noble Earl, Lord Onslow, because he has been reading the Brandon Rhys Williams work, which is very thorough, have both shown that you can develop a scheme which is virtually financially neutral. I had the pleasure and the interest this week of studying this problem in the European setting, in Holland, and we were coming to the same conclusion, that it was perfectly possible to have a scheme which, in financial terms, is neutral. It depends how you do the sums.
I beg the Government, as a result of today's debate, to think very seriously about setting up an all-party group—perhaps that is not the right way to do it, though I think it would be a very sensible way to do it—to have a look at the possible variations of credit tax that could be put forward as alternatives to the present quite indefensible way of financing welfare benefits. I believe I am right in saying that even the

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great Tory guru Milton Friedman once advocated this idea. What could make it more acceptable to put to the Conservative Party than that?
However, there really are a number of very important reasons why we ought to go along this line, quite apart from the dog's breakfast of benefits which we have at the present time. There is the problem of incentives. It is perfectly true that it is very difficult for a proportion of those who are unemployed, especially if you add in transport costs, which are now horrendous in many parts of the country. You really have to be a very high-minded person to decide that it is worthwhile to go to a not very exciting job instead of staying at home on benefit. This is ridiculous, and it is ridiculous on the part of a Government who, I understand, want to encourage people to work. So you surely want a system which has more incentives built into it.
The second point I want to make is that, with the level of unemployment which we all know we are going to have—we believe we can reduce it to some extent, but we know we are going to be left with a residue of unemployment—the development and encouragement of opportunities to do part-time work is going to be very important indeed for a whole variety of reasons. I will not go into them now, but part-time work is wealth-creating, it gives self-respect, it gives activity and it gives purpose to a lot of people. If you had even quite a modest citizen's income paid individually to both husband and wife and, on top of that, both husband and wife were able to have a part-time job and therefore to add to the citizen's income, the family income you would get from two quite modest citizens' incomes plus two part-time earnings, or the earnings from some small business which would not be enough totally to sustain the family but would provide a very valuable topping-up of a citizen's income, would be an extremely good way of dealing with the inevitable residue of people who are not going to get full-time jobs.
Once we have taken it fully on board that we are going to be left with people who are not going to get full-time jobs—and this must be the truth for a very considerable time to come—then surely we must reshape our welfare state to give every possible encouragement to people to go and do that kind of part-time work which would give a decent family income and a meaningful kind of existence, instead of positively discouraging them from doing it, which is what the present system does. Indeed, if, as Brandon Rhys Williams has said—and Brandon Rhys Williams got this from his mother, who was a very good Liberal and worked on it years ago; that is perfectly true, and, in fact, I worked with her on it at one stage—there was a very good case for doing it in the time of Lady Rhys Williams, though they did not then have the strong argument of a residue of people who were not going to be absorbed into full-time employment, that enormously strengthens the case for going ahead in this direction.
It would also have the result of making it sensible for people (it would give them some encouragement, at any rate) to get out of the black economy. As I think I said in the debate last week, if we had sat down and thought out how to develop a black economy, we could hardly have done better. We have the kind of
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welfare provisions that I have described and on top of that we have a 15 per cent. VAT, which means that there is a built-in incentive to both the purchaser and the provider of the service to go black. Of course, people are going black in shoals, and who can blame them? On the other hand, if you had this system, there would not be this tremendous incentive to work in the black economy.
Personally, I do not take a terribly hostile view to working in the black economy. The only thing that is wrong with it that I can see is that people do not pay taxes and the rest of us have to make up the difference. It would be sounder on the whole if more people were doing their black operations in the clear and paying their taxes, rather than doing as they are at the present time; and you will not have this happen so long as the present welfare provisions go on combined with a 15 per cent. VAT.
What I am urging on Her Majesty's Government, therefore, is that they really should not brush off, as they always do when this comes up, the urgency of reopening investigations into the possibility of some kind of tax credit—I am sorry I am boring the noble Lord so much—or a citizen's income. There should be a really serious study done on it, as is being done in other countries, because it is urgent to get rid of the quite indefensible system of benefits that we have at the present time and to bring in welfare provisions more adapted to the kind of economy and the social problems that we face.
5.48 p.m.
Lord Wallace of Coslany: My Lords, I, too, should like very much to thank the noble Lord, Lord Banks, for introducing this debate today. Of course, we should listen to the noble Lord with some great care, because the House must recognise that he is an expert in the field in which he was speaking today. I would also congratulate the noble Lord, Lord Trefgarne, who had a difficult brief but who read it extremely well—and I would compliment him on that fact. I would not go as far as the noble Baroness, Lady Seear, who, if I heard her correctly, seemed to indicate that the noble Lord had a screw loose somewhere. The noble Earl, Lord Onslow, who has now left the Chamber, referred to the creation of wealth. Of course, the big problem is who creates the wealth, and the greater problem is who shares in it. Certainly, today, 3 million unemployed are not creating wealth, but, unfortunately, because of their situation, they are taking it from the economy.
So far as the noble Lord, Lord Kilmarnock, is concerned, I agreed with him when he seemed to complain that fewer people are speaking in social security debates. That, unfortunately, is very true indeed. It is something I cannot understand, but it seems to be always the same, that when we come to social security debates there appears to be a lack of interest. If it were a defence debate or a debate on foreign affairs or even animals, I am sure the House would be crowded. My noble friend, from a relaxed position on the Bench, says "or a debate about pornography". Of course, being an innocent sort of fellow I rather ignore that.
The noble Lord, Lord Kilmarnock, referred to the SDP proposals. Let me be quite clear and honest and say that they are quite an interesting contribution to

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the general debate which I hope will take place. The noble Lord quoted a leading article from The Times. I would refer him, however, to a better one in the Guardian of 13th November. Its conclusion was not too favourable, but I want to be fair and say that at least the proposals are worthy of consideration. They are not party policy, in fact: so far as he is concerned and those proposals are concerned, they are points for discussion.
Going back to the general debate, listening to the speeches during this debate, I could not help recalling in my mind the days of my childhood, because memories came flooding back to the time—and my noble friend Lord Cledwyn has already made some reference to this—when the workhouse was the ultimate threat of poverty, even to the separation of husbands and wives in their old age. I speak personally here because I have experienced it. Illness and unemployment were disasters of the greatest magnitude, with charity, soup kitchens and free blankets and boots the main sources of relief. That was the picture until comparatively recently during my lifetime. Yet today, with our welfare state, modern technology, more extensive education and rising living standards, the problem of poverty amidst wealth remains. It has even increased and we are still a divided society with the have-nots increasing. I will not proceed further on these personal memories. At least, I know what poverty really means, and I know it practically and not from theory.
During the Second World War and towards the end of it the Beveridge Report came to the fore. I was a corporal in the RAF at the time and took part in many informal discussion groups in hangars, while on fire picket and on other occasions. The interest was intense. It certainly led to the Labour landslide in 1945. Now, my Lords, I know and I accept that the late Lord Beveridge was a Liberal Peer; but to their eternal credit, it was the Labour Government of 1945 that brought in the welfare state in spite of the devastating aftermath of war. Furthermore, the returning members of HM Forces came back to an orderly society—far different from the situation after the 1914–18 War. In other words, in that Government of 1945 to 1950 a bloodless social revolution took place. I am proud to have been a member of that Government and also proud of the fact that I made my maiden speech on the National Insurance Bill on Thursday, 7th February, 1946, and welcomed then the introduction of the welfare state and the fact that we were keeping faith with the people in the matters arising from the Beveridge Report.
My Lords, I referred to the fact that I took part in discussion groups, both official and informal, in various units of the RAF during that period of the war. During the latter years of the Second World War I purchased a book for six shillings. I have it here. It is called Pillars of Security by Sir William Beveridge. If it is still available, I would recommend noble Lords to get a copy of it and read it, for it is just as applicable now as it was then. I want to quote from it, because it is particularly relevant to our debate today. I quote from pages 131 and 132:
"My plan is not simply a plan to develop social insurance; it is a plan to give freedom from want by securing to each citizen at all times, on condition of service and contributions, a minimum
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income sufficient for his subsistence needs and responsibilities. It interprets, as any modern democracy must interpret, freedom from want, to mean, not a claim to be relieved by the state on proof of necessity and lack of other resources, but having, as of right, one's own income to keep one above the necessity of applying for relief. My plan takes as its aim abolition of want. The Government in regard to pensions wholly and in regard to children's and to unemployment and disability benefits to a lesser extent, abandon that aim".
My Lords, he was talking not about the Labour Government of 1945 but of the Government in power at the time and a Conservative Chancellor of the Exchequer. These aims are, or should have been, the very purpose of our debate today.
I come to a very difficult point that I must make because so little has been said about it up to now. The Prime Minister, in a speech on 17th November in Westminster Hall, argued that defence expenditure should have priority over the demands of the welfare state. I have a copy of the speech so I know that she said it. I have heard used in the past, the phrase "Guns before Butter", but now we have another one, "Guns before the War on Want". The fading out of priority for the handicapped, the sick, the unemployed and the underprivileged I cannot accept. I accept the need for defence measures. After all, I served in the Royal Air Force during the war. But national defence measures and measures for the defence of the underprivileged, unemployed and sick should be and must be on an equal basis of priority. Perhaps the Government may recall their rush after the election of 1979 to give away millions of pounds in tax relief to the better off. They should restore now some of the cutbacks they have made in social security benefits.
There have been vague promises but vague promises are not enough. Action is well overdue. We should not, as has been hinted, have to wait for the next Budget, if and when we get it, for some possible relief. This brings me to another point. Tax concessions made so far in tax relief appear to have benefited the better off at the expense of others in the lower income group. I will give an example. Let us take those state pensioners with an additional pension based on past contributions amounting to (let us say, for arguments sake) £3,600 per annum for that private pension. Such people, a week before this week's state pension increase, will have received from their tax office a notice of coding increasing their code by about 2 per cent. Such a pensioner will have paid in the last tax year, I would estimate, over £1,000 in income tax. That is one point.
My Lords, VAT at 15 per cent. also seriously affects the lower income group and must be reviewed. The cost of living index—both the old one and the new one which has been brought in by the Government and upon which benefits are based—does not fully cover the needs of people receiving benefit. There is obviously a need for a graded index covering the essential needs of lower income groups. Some action has been taken on low pay, but a lot more needs to be done. We have to think more seriously about establishing a national minimum wage geared to living costs and adjusted accordingly. There are demands by employers' organisations for tax cuts, and, furthermore, extra defence spending has been and will be increased. To meet this, the Chancellor proposes to claw back benefits from the poorest in the community; but, even so, benefits will be worth less than in 1979. Yet poverty is still widespread in our society. The 1979

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family expenditure review revealed that 11,290,000 people (over 20 per cent. of the population) were living on incomes on or within 40 per cent. of the poverty line as defined by the supplementary levels.
This unsatisfactory situation has worsened since then. Cuts in national insurance benefits and the growth of unemployment to over 3 million have led to a dramatic increase in the numbers of people living on means-tested supplementary benefit. At December 1981, 3·7 million people were involved. On 6th April 1982 the Government estimated the figure had risen to nearly 4 million, and it must be greater now. These figures do not include dependants. Supplementary benefit is now a main source of income for more than one in 10 of the population, yet there have been cuts. Housing costs are now excluded from the index used to protect benefit rates against inflation.
Subsistence levels must be re-examined and cuts restored. There must be a realistic index. The main increase in numbers claiming supplementary benefit has come from those under pension age. In other words, unemployment on a massive scale is the root cause. The reduction of the numbers of those unemployed should be given overall priority just as much as that given to defence, which incidentally has become almost an obsession in some quarters.
The "get on your bike" approach is negative, insulting and disgraceful. It is a national disgrace that so many qualified young people are vainly seeking work. Paying people to remain workless is a wicked, inhuman waste of national resources and as such presents an obvious threat to the maintenance of the welfare state. I go further: it is also creating a dangerous apathy born of despair. If continued, it could lead to the breakdown of society. This is the internal threat as distinct from the external threat which has been given so much priority.
It is no good pointing to our neighbours and, with a shrug of the shoulders, talking about a world recession. We have a war on our hands: the war against want, the battle against unemployment. These constitute a challenge to the nation and to all members of our society. We need, too, another inquiry and report on the Beveridge lines. We came through a devastating war and yet created a welfare state and a more just society: not a nation of scroungers, as some called it, but a nation of compassion and dignity. We can overcome our difficulties. What we need is a Government with the idealism and determination of that in 1945.
6.3 p.m.
Lord Trefgarne: My lords, I must first ask for your Lordships' permission to speak for a second time in this debate. Owing to some administrative slip-up, my name was not included earlier in the list. The noble Lord, Lord Cledwyn, very graciously gave way to allow me to speak at that time and thus I now need your Lordships' leave to speak again.
I was much fascinated by references from the Liberal Bench and elsewhere to the little yellow book of 1928. I fancy that if Lloyd George were still alive and in his prime, I too might be a member of the Liberal Party. In any event, my father was a member of the Liberal Party in 1928, and I fancy that he
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contributed to the little yellow book to which reference has been made.
I am grateful to the noble Lord, Lord Banks, for providing this opportunity to debate questions about the welfare state, and for his customary stimulating opening remarks. I should not be surprised if the noble Lord is the greatest expert among the experts in your Lordships' House on this subject; and his speeches on the matter are always very informative and illuminating, not only of the Liberal point of view on these matters but also on the issue more generally.
Also, I am grateful to all who have contributed and who have helped to make this an absorbing and useful debate. I shall try to deal with as many points as I can. I may not manage to deal with then all but I shall cull the pages of Hansard tomorrow and write on a later occasion to those whose points I think ought to be replied to.
May I start with the speech of the noble Lord, Lord Banks. It was a wide-ranging and informed one. Among the points that he raised was a suggestion that we should not be unduly concerned about the rise in the proportion of public expenditure devoted to social security. The noble Lord mentioned a number of mitigating factors, and suggested also that benefits financed from contributions should not count as public expenditure. As the noble Lord said, these are transfer payments. However, for whatever reason social security expenditure has risen, all benefits have to be paid for by the working population. That is true whether they are paid out of taxation or from contributions.
There is a limit to how much the working population and employers together can be asked to contribute if we are not to damage incentives and the process of industrial recovery. As I have said, the Government have sought to protect the living standards of social security beneficiaries, but our success in the long term depends, above all, in getting the ecomomy right. Keeping the levels of taxation and borrowing under control and getting inflation down are vital parts of our stategy to achieve that.
The noble Lord, Lord Banks, also referred to the question of tax credits. I am aware that the noble Lord and his colleagues are deeply committed to a tax credit system. When the Green Paper on tax credits was published in 1972, it was estimated that the cost of a tax credit scheme at the rate of credits and tax then proposed would be some £1,300 billion. The cost of an equivalent scheme today would naturally depend on the details of the scheme, but the cost would certainly be several times the figure suggested in 1972. I believe that the 1979 Liberal proposals envisaged income tax at 40 per cent., a pay roll tax of 21 per cent. and increases in VAT and certain excise duties. I am certain that such increases would not be justified and I do not think that they would be welcomed by the population as a whole, either. The Government have no plans at present to bring forward a full tax credit scheme. The idea of a tax credit scheme was very much in the mind of the noble Baroness, Lady Seear, as well, and those remarks therefore apply equally to what she said on that point.
Turning now to the speech of the noble Lord, Lord Cledwyn, who asked me a number of points but particularly about the CPRS Think Tank report on the

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future of the welfare state, so far as the health service is concerned, our commitment to the NHS has been made absolutely clear. My right honourable friend the Prime Minister used the famous words at our party conference recently: "The health service is safe with us". The Government certainly have no intention of changing the basis on which the National Health Service would be financed. As my right honourable friend the chairman of our party said, the Think Tank report is a dead duck. I hope that the noble Lord will find that observation satisfactory.
The noble Lord, Lord Cledwyn, also described in fairly graphic detail—and we have heard quite a lot of this recently—the measures which a future Labour Government would introduce. I certainly listened with great interest to what the noble Lord said on that score. It was an impressive list, my Lords, and it is only part of the proposals to which the party opposite are committed. But the noble Lord did not say how much such a programme would cost. Our own estimate is that their proposals on social security alone would cost more than £20 billion. I doubt whether it is possible to take such proposals seriously.
The noble Lord, Lord Cledwyn, also asked about help to pensioners over fuel costs, as happened last winter. The Government are looking at the scheme in the light of the experience of last winter, but in the meantime it is the case that under the present supplementary benefit regulations decisions about payments under this scheme are a matter for the independent adjudicating authorities; that is, the chief supplementary benefit officer and his officials.
A number of your Lordships referred to the possibility or the need or the desirability of simplifying and rationalising the social security scheme. I think what was particularly in the mind of my noble friend was the introduction of some comprehensive disabilities scheme. Of course we do try to simplify and rationalise wherever possible, and I agree with my noble friend that a simpler system to administer would be to pay a single benefit to everyone. However, I fear that that would cost an enormous amount of money and in many cases would be paid to people who had no need of it. In a time when we are seeking to ensure that help goes to those most in need, we need to have a more sophisticated system in which account is taken of the circumstances of the individual claimant. The Government are committed to a more coherent system of benefits to disabled people when resources are available, but I fear there is no prospect of that at present. It would probably cost between £3 billion and £4 billion, or maybe more.
I turn now to the remarks of the noble Lord, Lord Kilmarnock, who asked particularly about the abatement of invalidity pension and unemployment benefit. The question of the abatement of unemployment benefit was also in the mind of the noble Lord, Lord Hatch. We have promised that invalidity benefit will be restored to the same level as retirement pension when the former is brought into tax. Retirement pension, of course, is taxable now and it is right that the abatement of invalidity benefit should continue at present. We have already restored the abatement of the invalidity allowance as an earnest
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of our intention. We have not yet any idea of when we shall bring invalidity benefit into tax.
On the question of unemployment benefit which, as the noble Lord, Lord Hatch, reminded us, was brought into tax in July this year, we did not promise to restore the level of unemployment benefit when that was brought into tax: we promised to review the position, which is what we did. As my right honourable friend the Secretary of State said in another place as recently as last Monday, the matter is not only under review but benefit will certainly be restored as soon as the time is right. In other words, the argument, in the words of my right honourable friend, is not one of principle. The case for restoration is accepted. It is a question of timing.
Lord Hatch of Lusby: My Lords, will the noble Lord give way? So far as the unemployed themselves are concerned, it is quite clear that whether or not the Government consider this to be a matter of principle will not affect them: they are concerned about the money. The noble Lord has just said that his Government did not promise that they would restore the 5 per cent. when benefit came under tax; but the quotation that I gave from the then Secretaryof State in April 1980 said specifically that the rationale for that tax ends as soon as benefit comes under tax. The benefit came under tax in July. If the rationale has ended, why has the practice not ended?
Lord Trefgarne: My Lords, as my right honourable friend said in the quotation given by the noble Lord, that the rationale has ended—as indeed it has—we have accepted the principle that the 5 per cent. abatement ought to be restored, and we will do so just as soon as resources allow. The noble Lord said that what was important to those in receipt of this benefit was not the principle but the money. The money is also important to those in receipt of other benefits and we have to establish an order of priorities in this matter. I should say that the restoration of this abatement is a very important matter and we shall certainly wish to do it just as soon as we possibly can.
The noble Lord, Lord Kilmarnock,—and this view was echoed by my noble friend Lord Onslow and by the noble Lord, Lord Harris of High Cross—referred to the illogicalities of the tax benefit scheme as outlined in the Institute of Economic Affairs paper, The Moral Hazard of Social Benefits, by Hermione Parker. The Government are, of course, aware of the interaction of income tax and social security benefits on the income of individuals and families, and in particular of what are called the unemployment and poverty traps. However, we do not take such a pessimistic view as, for example, the paper which has been referred to. That paper suggested that as many as 20 per cent. of the workforce were affected by the poverty and unemployment traps; but in arriving at that figure they included people who are not in the labour market at all, such as the sick, the disabled, lone parents and wives looking after young children. However the Government's most recent research suggests that perhaps 3½ per cent. of working families with children were at risk of being affected by the poverty trap, to the extent of losing half or more of an increase in pay through increases in tax and reductions

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in benefit, and about 6 per cent. of unemployed men were affected by the poverty trap. That is not to say that we do not recognise there can be a problem, but proffered solutions such as the one from the Social Democratic Party are so costly that any responsible Government would have to rule them out, especially at a time like now, when resources are scarce.
Lord Kilmarnock: My Lords, will the noble Lord give way for one brief moment? He said that when calculating the number of people in the poverty trap there had been a tendency to exclude lone parents with two children. Surely if you get the case, which I believe to be true, that a woman can earn £20 or £30 a week and be no better off until she earns £120 a week, she is essentially, if she is a lone parent with two children, in the poverty trap. Therefore she does not work at all. That is what the paper was talking about, and that is one of the cases where she is saying that it is in the poverty trap and the Government are saying that it is not in the poverty trap.
Lord Trefgarne: My Lords, I will come to the speech of my noble friend in a moment, but the point I was trying to make was that a number of the people considered by the paper to which my noble friend referred are people who are not actually available for employment in the normal sense of the word, and so the problems described as affecting them really do not, in the sense that my noble friend has suggested, arise.
Lord Kilmarnock: My Lords, will the noble Lord give way again? In his reference to the proposals I put forward, I think he used the term "vastly expensive". In fact I was at some pains to explain that the interim proposals in our green paper are specifically designed to be feasible, largely within existing resources, and with only a very small charge on the PSBR.
Lord Trefgarne: My Lords, I was addressing myself to some of the other proposals that have come forward from the party of the noble Lord. I would accept that some of the more modest proposals coming from the noble Lord himself—and he said they were simply part of a consultative paper, I think—might on the face of it appear less costly, and doubtless therefore they will be less effective. However, I will certainly study what the noble Lord has said, with the hope of giving him a more detailed critique on another occasion.
The noble Lord, Lord Kilmarnock, also asked specifically about particular earnings disregards. He was suggesting that they ought to be increased. The Government are keeping under review the question of the level of earnings disregards; but there are difficulties even there, as the Government's response to your Lordships' committee report on unemployment indicated. There would again be significant extra cost and real problems about the gaps between the incomes of people who are in full-time work, and those who are on benefit. This is an issue of equity, as well as of incentives.
Radical proposals for reform have come from several of your Lordships during the course of this debate—some of them in detail and some, if I may say so, pretty ambitious. Your Lordships will not expect me to provide a detailed account of each tonight, but
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I shall certainly want to study what has been said, perhaps for response on another occasion. But the variety of different solutions is, in itself, an indication that there are no clear-cut answers to the problems of the tax and social security systems.
I turn now to the noble Baroness, Lady Ewart-Biggs, who particularly asked about the payment of child benefit at four-weekly intervals. We have recognised that those on low incomes, on supplementary benefit or family income supplement—for example, single parents—are in need of special consideration and they are, therefore, able to continue to receive child benefit on a weekly basis. Even outside these groups, we have made provision for mothers to ask for payment to be made weekly, if payment every four weeks is causing them hardship. The noble Earl, Lord Grey, asked en passant whether pensions should be increased to one-third of average earnings for a single person and to half of average earnings for a married couple. That would cost about £11·5 billion—one-third of current total expenditure on social security.
I come now to the speech of my noble friend Lord Onslow. I must say that there were times during his remarks when a visitor to your Lordships' House might have been puzzled about the place in it where my noble friend was sitting, because some of the remarks that he was making did not seem to me to be wholly in accordance with the pure Tory policy on these matters. But knowing my noble friend as I do, and particularly his independence of thought on these occasions, perhaps that is not surprising.
My noble friend suggested, among other things—and he has questioned me on some of them already—that the tax threshold should be increased so that fewer people would be caught in the poverty trap. This would help only if the threshold was increased very substantially, at enormous cost. Even so, many families not in the poverty trap would also receive help, and I am not in favour of indiscriminate assistance, particularly at a time of scarce resources.
My noble friend referred to the Guardian story that housing benefit has produced an unexpected windfall for some supplementary benefit claimants who pay heating charges with their rent. I hate to have to disappoint my noble friend, but the department has not been caught napping and so given some supplementary benefit claimants an unexpected windfall. The so-called new procedure, which certain newspapers have been reporting, was clearly set out in a circular which was issued to local authorities as far back as last May. Nor have we any reason to believe that the procedure will lead to extra expenditure. We are confident that authorities will operate it fairly and sensibly. But, of course, we shall monitor what is happening and, if any particular difficulties or anomalies arise, we will see what we can do to put them right.
The noble Lord, Lord Hatch of Lusby, asked me about the 5 per cent. abatement of unemployment benefit, which I have already dealt with, and the abolition of earnings-related supplement. Under successive Governments, the real value of the earnings-related supplement has declined since its introduction in 1966. By the time it was abolished, there was less need for the supplement than when it was introduced, because of the growth and

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improvement since then of occupational sick pay schemes, maternity protection and redundancy schemes. In November, 1980, the earnings-related supplement was actually received by only about one-fifth of all unemployed claimants. Supplementary benefit is, of course, available for those who need additional help. Indeed, restoration of the 5 per cent. abatement of unemployment benefit will not help those who are on supplementary benefit, because their requirements are, of course, already being met.
The noble Lord also asked whether those who have received abated benefit would get the extra when the abatement was restored. It is, of course, the benefit which would be increased when the time came, and when the abatement was restored. Whoever was in receipt of the benefit at that time would, of course, receive the increased rate.
I think that I have dealt with a large enough number of points now, particularly for a second speech during the course of this debate. It has been an interesting and constructive debate, by and large. I shall certainly want to study very carefully all the contributions that have been made, particularly, if I may say so again, the contribution of the noble Lord, Lord Banks, who initiated this debate, because he is such an expert in these matters, and I certainly undertake to write to those noble Lords whose points I have not dealt with but with which I ought to have dealt.
Lord Hatch of Lusby: My Lords, before the noble Lord sits down, and while appreciating that he has dealt quite explicitly with the questions that were asked, may I ask him again—in order to be absolutely sure that I have got it right—whether he believes that there is any public morality in both taking taxation from the unemployed and maintaining the 5 per cent. cut, which was supposed to be in place of that taxation?
Lord Trefgarne: My Lords, as was made clear at the time, and as I have made clear in your Lordships' House on more than one occasion, the 5 per cent. abatement was also a matter of containing public expenditure at that time, and those constraints are still with us.
6.26 p.m.
Lord Banks: My Lords, we have had an interesting and useful debate this afternoon, and I should like to thank all those who have taken part, whether they agreed with what I said at the beginning or not. I should also like to thank the noble Lord, Lord Trefgarne, for his reply. Of course, I am tempted to start replying to all the points that have been made during the course of the debate, but I must not do that. In any case, it has already been done very effectively, from our point of view, by my noble friend Lady Seear.
I should just like to say to the noble Lord, Lord Trefgarne, that I do not think he had quite correctly the basis of the financing of the 1979 Liberal plan. Since then, of course, there have been changes in Government taxation, VAT has been increased by the Government and there has been a very great increase in unemployment, which would make an increase in
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payroll tax—because employers' national insurance contributions are a payroll tax—very unwelcome at the present time. Therefore, in our recosting of the scheme, we are hoping to put the burden on to a slightly higher standard rate of income tax and higher taxation than we now have. But one has to bear in mind the impact on that rate of the credits, and the effective rate for a great many people at the bottom end of the scale would be lower than now.
I must not pursue that any further at this stage, but I was encouraged during our debate to find that there was support for the tax credit idea from my noble friend Lord Kilmarnock, who mentioned the new plan of the Social Democratic Party, and from the noble Lord, Lord Campbell of Croy, who referred to the Green Paper of 1972. Those two documents are not so comprehensive as the plan which I outlined at the beginning of our debate. But each is a step along the same road, as, indeed, is the proposal of Sir Brandon Rhys Williams, which was elaborated by the noble Earl, Lord Onslow. I regret that the Government have no plans at the moment to proceed in this direction. But I hope that all those who have expressed an interest this afternoon, and others who share that interest, will continue to press them to look again and again at this subject, because, as my noble friend Lady Seear pointed out, we have at the moment a most extraordinary muddled-up system which cries out for reform.
In concluding, I should like to reaffirm that we on these Benches maintain that the real value of benefits should be maintained and some benefits increased, that we should reform the structure and that it is feasible to achieve both those goals. Having said that, I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

The Scotch Whisky Industry
6.30 p.m.
Lord Tanlaw Lord Tanlaw rose to ask Her Majesty's Government what effect the depressed state of the Scotch whisky industry is having on the Highlands and Islands of Scotland and what financial assistance is being given to the industry. The noble Lord said: My Lords, I am most grateful to those who arrange business in your Lordships' House for having found time to include this Unstarred Question on the Scotch whisky industry. In case there is any misunderstanding because it has been given to me on a Liberal day, so to speak, may I say that this is not an annex to the very interesting and important Liberal debate just introduced by my noble friend Lord Banks, though only where the social element is concerned in this subject is there perhaps a link in that direction. It is completely on a non-party basis that I am speaking, I am very pleased that the Scottish Peers Association have supported this Question, and I am glad for the concern which has been shown for the industry in the parts of Scotland which are so well represented by noble Lords in this House.
I regret that my noble friend Lord Mackie of Benshie has been unexpectedly called North and so is unable to take part in the debate this evening, but he mentioned to me that he hoped that at least one noble

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Lord would make the point that the habit of drinking brandy after dinner should perhaps be replaced by using the wide range of malt liquors that are available, for the simple reason that they are much better for one's demeanour and one's digestion than French brandy. No doubt this point will be taken up later on. I should like to thank all noble Lords who have put their names down to speak on this important Question, which is divided into two parts: the first covering the effects on employment and future employment in the Highlands and Islands of Scotland which are connected with the Scotch whisky industry, while the second part concerns Her Majesty's Government's attitude towards taxation of spirits in general.
Some people might ask, Why raise this question now; why should the Scotch whisky industry be different from other industries, engineering for instance, which have been suffering from the recession, from unemployment and from lack of orders? This question was put to me outside the Chamber earlier this afternoon. It may be helpful if I give a brief outline of the state of the industry today and how it has reached its present predicament, with the consequent effects on employment in Scotland.
Over the last three years the Scotch whisky industry has been experiencing a period of extreme difficulty, primarily owing to the world recession, but aggravated by the heavy taxation at home. These two factors have had a serious effect on the sales of Scotch whisky, with the inevitable result that distillation has had to be drastically curtailed. It is this last point which is affecting the prosperity of the Highlands and Islands. Out of a total of 130 distilleries in Scotland no fewer than 106 are situated in the Highlands and Islands. The cut-back in distillation has caused several closures and long-term unemployment, while the majority of distillers remaining open have been forced to introduce short-time working. There is hardly a single distillery which has not been affected by one or other of these factors.
The reason can be found in the nature of the process by which Scotch whisky is produced. Noble Lords will be aware that before it can be consumed Scotch whisky must, by law, mature for a minimum of three years. Usually whiskies are matured for several years longer than this, which means that it must be distilled and left to mature to meet forecasts several years ahead of actual demand. The heyday of Scotch whisky sales, as no doubt noble Lords will recall, was from the mid-1950s up until the 1970s. The annual growth rate of this industry varied between 8 and 10 per cent., with no reason to suppose at the time that this was not to continue into the 1980s. No one foresaw at the time how deep the world economic recession was to bite and in particular how this would affect the long-term projections of the consumption of Scotch whisky. Even as late as 1978 a working group set up by NEDO, on which both the industry and the Government were represented, forecast that world sales would continue to grow through the 1980s by a compounded annual rate of 4·4 per cent. Those forecasts have proved hopelessly inadequate. Most other industries, in spite of that, have been able to adapt to reduced sales, but the Scotch whisky industry was unable to do this effectively for the reasons I have given, namely the long lead time required for the distillation process.
The situation has been further aggravated owing to a fall in home sales as a result of three successive increases in excise duty imposed by the Chancellor of the Exchequer. It may be of interest to noble Lords to know that these additional tax burdens amounted to £1·36 per bottle, including VAT, which makes the total tax content of a single bottle of whisky about 80 per cent. of its selling price. It is not surprising, therefore, that the United Kingdom duty paid clearances of Scotch whisky have fallen drastically. The Treasury's own estimate for 1983 suggests that the volume of Scotch whisky sold in the United Kingdom will be less than 12 million cases.
Furthermore, the traditional export markets are also suffering from lack of demand, coupled with tax discriminations for national beverages against imported spirits. This policy is, unfortunately, practised by some of our EEC partners. I would like my first question to Her Majesty's Government to be: are they willing to take more action than they have done hitherto in this area, action which can be based on the recent judgments passed by the European Court of Justice?
As a result of this rather unfair treatment, both at home and abroad, the Scotch whisky industry is now grossly over-stocked in maturing spirit, which is far in excess of current and anticipated demand. The companies concerned have of course cut back in distillation in order to match their production levels with revised sales forecasts, so the amount of whisky distilled in 1982 will be only slightly more than half of the total which was produced in 1979.
As I said earlier, the whisky producing companies have shut down distilleries only as a last resort and have, wherever possible, introduced short-time working. Even so, this is causing hardship through loss of earnings in the communities affected, as well as the long-term worry about the whole future of the Scotch whisky industry, which has both directly and indirectly maintained these isolated communities. For instance, in places like Dufftown in Banffshire some 500 people out of a community of only 1,500 are dependent in one way or another for their livelihood on the distilleries. On the island of Islay three out of its eight distilleries have been temporarily closed and the remainder are on short-time working. Two years ago this island alone produced about 10 million gallons of whisky a year. Today it may not be distilling more than a mere 3 million gallons. Other noble Lords will no doubt be in a position to give examples of the problems in the localities with which they are familiar in Scotland and the worries that are being expressed by community leaders.
It is particularly difficult to know what advice to give young people in these areas, whether or not they should move South or to a larger town and join the unemployed there, but hopefully find some future in some career, or stay on in their local communities in the hope that the distilleries will one day be able to offer a long-term career for those who are prepared to work in the industry just as their fathers and grandfathers have done. This is the important point as far as employment goes. Once these young men and women have moved from their areas of rural Scotland they will not come back; they will have to make their way abroad or down South or in the big cities. But,

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more often than not, they are lost forever from those small communities of which they have been an individual and proud member. This is one aspect which the Government should look at as a special category of case from those of other industries because it provides the foundation of local communities in Scotland.
The question is: what measures should the Government take to ensure the stability of these communities and the industry on which they are dependent? The companies concerned must expect some form of guidance as well, in order that their long-term plans of capital and investment can be secured. The Scotch whisky companies are indeed relieved that the long delayed payments of production refunds from the EEC have at last begun to flow. This can have an alleviating effect on cash liquidity. Regrettably, I am informed, it is not enough to alter the real financial problems that the industry faces today.
The industry also welcomes the recent announcement by Her Majesty's Government that there will be a provision for deferment in the payment of duty of four weeks, which is much more in line with the provisions already in force for beer, cider and cigarettes. The industry also appreciates the Economic Secretary to the Treasury's recognition of the outstanding export achievements in increasingly difficult markets.
However, the present crisis concerns more funds that are urgently required for overseas promotion of Scotch whisky if the return to the export figures of the past is to be maintained and exceeded. The Scotch Whisky Association is already financing public relations campaigns in the United States and Japan, and may also find it necessary to do so in other markets, simply to maintain the existing Scotch whisky percentages.
The industry is not looking for any form of subsidy or direct financial aid from the Government but more a greater recognition of its problems in relation to the other sections of the consumer market. I refer in particular to excise duty which at present discriminates against all spirits, including Scotch whisky, because they are much more heavily taxed proportionately than wines, and even more so than fortified wines such as sherry and vermouth. Surely the only fair and logical way of taxing spirits of all kinds is on a flat rate per degree of alcoholic strength. Unfortunately, it seems to have been the practice of successive Chancellors of the Exchequer, irrespective of party, to look upon the taxation of whisky as a balancing factor in their books on Budget day. It would appear that the levels of duty on spirits have been of a discriminatory and arbitrary nature, brought in at the last minute, especially when they are compared to the taxation on beer and wine.
I am sure that it is not just the Scotch whisky industry which feels it has been singled out by successive Chancellors. I suspect the consumer also feels that he has lost out. The consumer would surely appreciate paying the Government the same duty, regardless of whether he is drinking wine, beer or spirits, if the amount payable is based on the degree of alcoholic strength. This would also strengthen the industry's case and, indeed, her Majesty's Government's case,
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when taking action in the EEC. This would be a basis for looking at all our consumer drinks in the Community. I should like the United Kingdom to take a lead in this direction rather than just use the spirits industry—I refer not only to the Scotch whisky industry but to the whole range of them—merely as a milch cow at Budget time. That does a disservice to the whole country as well as to the industry unless there is a new basis on which the Government can look for taxation.
The Chancellor may select whisky yet again in his forthcoming Budget as a source of funds for the central Exchequer. The plea I make on behalf of the Scotch whisky producers, as well as consumers, is that if any further tax is envisaged it should be based on the reasonable assessment of the degree of alcoholic strength, whether for spirits, wine or beer. I should like the industry to consider coining the phrase, "There should be no taxation without equalisation". They could pursue that with effect on the Government's ears or, more particularly, the ears of the Lord Chancellor.
The three latest duty increases have sharply reduced the level of clearances in the United Kingdom without enhancing the revenue obtained for spirits. Therefore, any further increases in the present level of taxation would be self-defeating in revenue terms. In terms of this Question under debate this evening, Her Majesty's Government's attitude might also affect the future employment in the Highlands and Islands of Scotland by causing permanent closure of distilleries which have been the backbone support of these isolated communities. The Government's re-assurances would be most helpful, but what is even more important is to ascertain the Government's attitude towards the whole future of the Scotch whisky industry as an earner of much needed foreign exchange and as a source of future taxation.
Finally, one point brings me back to the Liberal debate we had earlier. In every element of pleas to Government for any particular industry there is a social element, a matter of social conscience. That is also the responsibility of the whisky producing industry itself. The industy feels, as I hope the Government will, that it has a responsibility to these isolated communities in Scotland. If the Government do their bit in reassuring the industry on its long-term future I have no doubt that the commercial companies concerned will give those communities the benefit of their doubts and add an element of social conscience into their future planning. That is the main reason why I have put this Question down for consideration this evening.
6.46 p.m.
Lord Ross of Marnock: My Lords, the House is grateful to the noble Lord, Lord Tanlaw, for raising this matter which is so dear to the heart of every Scot and, sadly enough, becoming dearer to the pocket of every Scot. He will appreciate that he is only obeying probably the most historic injunction ever given to representatives of Scotland at Westminster. On the very same subject of the tyrannous attitude of the Department of Excise and the closing down of distilleries in Scotland there was quite an outcry and Scotland's national bard penned some words "An

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Earnest Cry and Prayer to the Scotch Representatives":
"Some of ye nicely ken the laws
To round the period and pause
And with rhetoric clause on clause
To mak' harangues
Then echo through St. Stephen's wa's
Auld Scotland's wrangs."
Of course, it was a subject that he knew a little about. It was a subject that led him in the final verse to give expression to a phrase that has probably been linked with Scotland, and Scotland's attitude to whisky, over very many years. He said:
"Freedom and whisky gang thegither"
Your Lordships can all get ready for the Burn's suppers on that.
I did not give any guidance to the Question. It is far too easy for the Government to answer. What financial assistance is being given to the industry? The answer is, none. The industry does not want it either. All it wants is fair play. It would be much more interesting if the Government would tell us what financial assistance the whisky industry is giving to the Government. Just imagine it, four-fifths of the cost of every bottle of whisky goes straight to the Treasury in excise duty and in VAT. The last three increases have added—I repeat, added—£1.36 to the Government's take on the price of a bottle of whisky. It reaches the point where that is pretty penal and it has had its effect.
The noble Lord gave figures relating to Islay. I am sorry that my noble friend on the other side is not here because he could tell us about this. In the eight distilleries on that small island production, which was 10 million gallons, is down this year and is likely to be only 3 million gallons. The implications for employment in these places are extremely serious. I am looking round the chamber for all the people who were interested in the integrated plan for the Western Isles the other week; but they are not here. I am interested in what will happen to people. This situation is having an immediate effect. There have been some closures, not all that many, but there have been lay-offs and short-time workings. If this continues there may be further closures affecting employment in those areas into which it is most difficult to introduce employment. I hope that the Government will bear that in mind.
The record of the industry is not only supported through home consumption, because its export record is quite fantastic. Indeed, it is so much so that the Government take it for granted. My interest in this subject is not as a consumer. After all, for 33 years I was the Member of Parliament for Kilmarnock. Your Lordships will find Kilmarnock on an awful lot of whisky bottles, because that is where Johnnie Walker is blended. So I know a lot about it. I am sure my noble friend will appreciate that, although there is a cutback to meet the decline—the unexpected decline—in consumption and exports, the immediate cut-back is at the distillery. There is distilled whisky galore; it is all there in store. It is maturing. Until there is a rise in consumption it will not be increased to the same extent.
However, that leads to the question of where it is blended. It does not always take place in the Highlands and Islands. It is in places like Paisley, Glasgow,
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Kilmarnock and round about that it is blended, bottled and is shipped away to the ports. There are thousands of jobs involved. Indeed, that is the next step; the loss of jobs in those areas. It is an extremely serious matter and one to which I shall return, because I believe that it is even more serious than people imagine. Of course it is due to the recession at home and abroad, but more than that it is due to the activities of the Government who are taking more and more from this industry. We cannot add £1·36 to a bottle of whisky without its having an effect upon sales. Whereas people used to enjoy a glass of whisky with their half-pint, now they are probably lucky if they are able to afford the half-pint. This is not a time when the Government should be further increasing the tax. Indeed, I think that the Treasury themselves realise that they have reached the point of diminishing returns and they should be thinking again about any further taxation on whisky. Enough is enough.
There is also the question of exports. It is in spite of very considerable difficulties that record exports have been achieved by the whisky industry. The Government have tried to help in many cases, but not with success in respect of even some of our EEC partners, because, unlike Britain, they have been protecting the production of their own brands. For example, there is France and brandy. There is discriminatory taxation in respect of that. There should not be, but there still is. I think it would be only fair if the Government equalised the excise taxation on spirits and fortified wines in this country, because then they would have a better argument for asking people to do that abroad. It would be real harmonisation. So there is something to be done there.
The Government should be looking at ways of removing what we consider to be unfair treatment of the industry. If they were to remove that unfairness they would be helping financially. We are grateful for what is being done. The EEC deferred payments had to come some time, and it is lucky that, at this time of cash flow difficulties in the industry, the back payments are coming now. Moreover, there will be the continued payment of the production grants. As regards what they have done about the four weeks deferment of duty, that applies already to cigarettes and other things. So it is only being fair to the industry.
I hope that the Government will appreciate the difficulties. People have been switching to wines. There is no doubt that there has been a change in tastes and maybe because wines are cheaper. I cannot say that one could suggest that Scots would prefer that—they may prefer it as a supplement, but if you have any sense you will never mix anything with your whisky; you would just spoil it. We are the only country in the world which discriminated in favour of imported products, and so it would be only fair to get rid of that discrimination.
I am interested in the bottling aspects and the question of employment in other areas. There are probably more jobs around Glasgow involving whisky than there are in the Highlands and Islands, whether it is Buchanan's, Teacher's, Chivas, Paisley and so on. I can assure your Lordships that one of the matters that has been concerning us and should have concerned the whisky industry—and this is where they could do something for themselves—has been the question of

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bulk exports. Can your Lordships imagine that Scotch whisky is being exported in bulk to Japan? A very considerable amount of it is being sent there. And what happens to it? Is it further blended? Mind you, a Scot would not say "blended"; he would say "adulterated." All that, to my mind, has a long-term effect on the reputation of the quality of Scotch whisky. In the short term it has an immediate effect upon the employment of people bottling whisky in Scotland. It is exported in bulk not only to Japan; the same applies to America as well. It was only last week that 200 people were made unemployed in Paisley directly owing to the bulk export of whisky.
From the short-term point of view of employment and from the long-term point of view in respect of the quality and value of Scotch whisky being consumed worldwide, the industry is being shortsighted. It may well be that in the early 1970s or before that when it started, it did not matter so much, from an employment point of view, when consumption was rising by 8 per cent. to 10 per cent. a year. But now consumption is falling. Now there is competition from other so-called whiskies and the Scotch whisky industry should be aware of the effects.
However, the Government can do quite a lot. They can help with the level of taxation. They can adjust the incidence of excise duty to end the discrimination, and I think that they should strive further to end the discriminating tariffs that we have even among our EEC partners. There is a great deal that the Government can do without giving direct. The Government have a big stake in this matter. If the noble Lord, Lord Lyell, would examine it and I think he is close enough to the subject (I should say "where he lives"; I did not imply anything else), he would realise exactly what it means financially to the Government to maintain the income they get from this hard-pressed industry. So thanks again to the noble Lord, Lord Tanlaw, for having raised this historic subject.
7 p.m.
Lord Mottistone: My Lords, I too should like to thank the noble Lord, Lord Tanlaw, for introducing this important subject to debate in your Lordships' House. I would ask your Lordships to forgive me if I do not stay right to the end of the debate because I have an important engagement which will involve, among other things, drinking whisky: I shall, however, stay as long as I can. I apologise in particular to my noble friend on the Front Bench, whose reply I may not fully hear. The point I want to re-emphasise, because much of the ground has been covered by both earlier speakers, is the fact that 85 per cent. of Scotch whisky is exported. It is to that area that I believe the Government have to direct their attention. I am sure it would be helpful if they had a more equitable way of handling the problem of internal taxation, but I shall concentrate my remarks on exports.
There is no doubt that the protectionism overseas is at an extraordinary level, and in particular within the EEC, where the principal offender, as has already been mentioned, is France. In passing, I would mention to your Lordships that I gave up drinking brandy when President de Gaulle refused to let us into the European Community and only started drinking it again when we were members of the Community. I would
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recommend that to all my fellow countrymen against the present practices exercised by the French.
Since 1st January 1978, when the transitional period ended and the United Kingdom became a full member of the European Community, our European partners have levied over £250 million in unlawful taxation on Scotch whisky; that is to say, taxation at a higher rate than that imposed on locally-produced competing spirits such as grappa, cognac and aquavit. The impediment which this unlawful tax disadvantage has caused for Scotch whisky is only too self-evident.
In February 1981 the European Court of Justice condemned French taxation of Scotch whisky at a higher rate than brandy. Today, more than two and a half years later, France still taxes Scotch whisky more heavily than brandy and has passed clever legislation to make challenges in the European Court more difficult. The success of this has not gone unnoticed. The Italian Government, for example, levies at least two unlawful taxes on Scotch whisky. I really think that the Government might take more positive action than they have taken hitherto to make sure the French realise that this is something which we cannot stand, particularly as it is contrary to the Treaty of Rome, and that practices such as finding some excuse in a clever sort of way, as the French do, to make it difficult for their types of products to come into this country, will perhaps be the only alternative that we can use. I think that we must start thinking about taking the same sort of retaliatory action, sad though that is for a trading nation to have to do.
The situation is, of course, due to the Community having a large over-production of wine and an embarrassingly expensive wine lake. The surplus of wine leads to increasing demands for more subsidies to wine producers. Unfortunately, the subsidies tend to encourage even greater over-production. This is in stark contrast to the reduction in output and employment in the Scotch whisky industry. It is, therefore, desirable that Her Majesty's Government should be alert to the danger that over-production of wine in the Community will lead to an increasing distortion of the competiton between wine and spirits—spirits such as Scotch whisky—in order to increase consumption of the former at the expense of the latter. So we are not only in difficulty with brandy; we are also in difficulty with wine.
Your Lordships may be interested to know that I have some statistics which show that the wine-drinking countries consume more litres of pure alcohol per head of population in a year than either the beer-drinking countries or the spirit-drinking countries. The wine-drinking countries, which include France, Hungary, Italy, Portugal, Spain and Switzerland, consume an average of 13 litres of pure alcohol per head of population in a year. The beer-drinking countries, which include Austria, Belgium Czechoslovakia, Denmark, Ireland, the Federal Republic of Germany and the United Kingdom—and the United Kingdom is near the bottom of this table—consume an average of 10·4 litres of pure alcohol per head of population. The brandy and spirit drinkers, which include Finland, the German Democratic Republic, Iceland, the Netherlands, Norway, Poland, Sweden and Yugoslavia, consume an average of 7·9 litres of pure alcohol per head of population.

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The reason for spelling that out to your Lordships is to show that if the French are telling us that they want to encourage wine drinking because it is healthier for us, the answer is that it is not. The healthiest countries are the ones which are mainly spirit drinkers. This is a matter of considerable importance and one which might, indeed, be reflected in the thinking of the Government in the way in which they treat the taxation within this country.
I would suggest that the point made by the noble Lord, Lord Ross, and, indeed, by the noble Lord, Lord Tanlaw, that the only fair and logical way of taxing alcoholic drinks is at a flat rate per degree of alcohol strength, is the solution to the problem. It is the solution that ought to be applied both nationally and on a harmonised basis within the EEC. What one must say to the Government above all else is that they must bring pressure to bear on their fellow members of the EEC for all sorts of reasons, which include not only fair treatment of important industries like the whisky producers of Scotland, but also the health of the nation. That formula is the solution which must be pressed forward without any delay throughout the European Community.
7.8 p.m.
The Earl of Halsbury: My Lords, in common with those who have preceded me in the debate, I am extremely grateful to the noble Lord, Lord Tanlaw, for bringing forward this subject. I speak as a Sassenach with a mother who was pure Scots, but also as an ex-director of the Distillers Company on whose board I sat for many long years. It is now, of course, forgotten that the Distillers Company was once upon a time the second biggest chemical manufacturer in this country and the fourth biggest in Europe. Those days have gone because they sold their interests to BP, by which time I had become so interested in the whisky production side that I stayed on with them for a long time and became accustomed to all their problems.
I agree with every word, with knobs on, which the noble Lord, Lord Mottistone, said. I want to see a Government that are very much tougher in the interests of Britain. I could add to what the noble Lord, Lord Mottistone, said. Someone has to take the Commission by the scruff of the neck and shake it out of its dogmatic attitudes towards distribution problems. No proprietary liquor company of any kind whatever is big enough to manage worldwide sales and distribution on its own without agencies. No clos, no chateau, can export worldwide with its own sales staff; it has to sell through factors, wholesale houses, to whom in each market it gives exclusive representation.
The Commission dislikes exclusivity in these contexts; but if you do not have exclusivity, then what interest does your distributor have in making a good show of the product that he is distributing? Does the noble Lord want to intervene? The noble Lord, Lord Lyell, has caught my eye and I wonder whether he wants to rise.
Lord Lyell: My Lords, no.
The Earl of Halsbury: The Commission has to be taught that the pattern of an established trade must not be wrecked for dogmatic reasons. This, of course, was the reason that Johnnie Walker had to be withdrawn
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from the English market—because of the entirely arbitrary action of the Commission. The Distillers Company is in a rather sensitive position compared to any of its competitors, because nearly all of them have either a flourishing home trade or a flourishing export trade; but only this large company, the Distillers, has a balance of trades which are equally susceptible to interference. Many of its competitors can forget the home market and do whatever the Commission tells them abroad, others can forget the Commission because they do not export anything, but DCL is extremely sensitive to this.
I want to draw attention to the cockeyed situation we have over the excise on spirits. I want your Lordships to imagine that I have five bottles in front of me, each containing one litre of pure alcohol. They are labelled 100 per cent. pure alcohol with a small postscript: prepared from whisky; prepared from imported table wine; prepared from British fortified wine; sherry; and beer. The excise paid on those five bottles of pure alcohol would be as follows: on that derived from whisky, £14·47; imported table wine, £8·90; British fortified wine. £7·66; sherry, £7·38; beer, £6·80.
Notwithstanding everything that the noble Lord, Lord Ross, said in the way of good advice to whisky drinkers, what do the great balance of whisky-drinkers do with the whisky they have bought which has paid £14.47 per 100 per cent. of pure alcohol? They dilute it with soda water, or burn water, or distilled water, or Malvern water, or whatever it may be, until the actual alcohol they are drinking is of the same strength as beer or sherry. Why do not the producers sell whisky and soda in bottles? They would pay much less excise, and, if they did, it would almost bankrupt the Government in lost revenue. It is simply that people like taking the whisky and adding the water in the proportion that suits them. Some people like it 50/50, others 2 to 1, others 3 to 1, and so on. I think that that reduces this differential excise on whisky to proportions which are, quite literally, ludicrous.
But for all the brave words the noble Lord, Lord Ross, spoke, if he found himself on the Treasury Bench, he would find that the excise and the Chancellor's little fingers were thicker than his loins, and he would not be able to do anything about it because of the loss of revenue to the Exchequer. The only thing one can do is to start a process of compression; bringing whisky slowly down and bringing the others slowly up until we tax alcohol on the alcohol content of what the consumer buys. Here we have a Government that are said to be pledged to the free market, to non-interference—all the best Adam Smith traditions—with the structure of trade, but they are going to be just as impotent as every Government before them because of the immense amount of revenue locked up. Nevertheless, with determination and goodwill, justice could be done to this industry which provides a livelihood for a very important section of the Scottish nation, which is a very important kingdom in the joint kingdom of the United Kingdom. And, not only that, a delicious drink, whether you dilute it with soda, of which the noble Lord, Lord Ross, disapproves, or drink it with a chaser such as Guinness.
7.13 p.m.
Baroness Elliot of Harwood: My Lords, I find this debate most fascinating. I was a little doubtful whether I ought to put my name down to speak, for the simple reason that I am no expert on whisky. However, I have been very generously elected chairman of the Scottish Peers Committee in your Lordships' House and I thought it only right that I should support the noble Lord, Lord Tanlaw, in the admirable subject that he has put down and has led to this fascinating discussion. I listened to the noble Earl, Lord Halsbury, with the greatest possible interest, because I have never before heard put forward half the things that he said, but I agree completely with him. I thought his speech fascinating. The noble Lord, Lord Ross of Marnock, like me, has a great interest in Scottish literature. His quotations from our national bard were most apt and important.
I am speaking because I feel keenly about this matter. This is such an important industry, as has been demonstrated by what has been said. It affects the Highlands and Islands, and if there is one area we want to try and help it is that one. From the EEC we have got this admirable scheme financed by, I think, two-thirds by the EEC. But to reduce one of the most important industries in the Highlands and Islands at the same time seems to me to be really cutting our own throats.
"Whisky" in all my life has been a joyful word. Whisky adds pleasure to life, provided it is not abused by people turning themselves into alcoholics. It is a healthy drink. It is important for our export trade. Somebody in this debate said that 85 per cent. of Scotch whisky is exported. All that is of vital importance today. Therefore, it is depressing to hear and read of the drop in production because of the drop in consumption. This, as the industry tells us, is due largely to very high taxation. There have been three successive increases in excise duty in the last few years, and, in addition to that, VAT has to be paid on the duty. This has led to a reduction of 15 per cent. in whisky consumption, and naturally a further drop in sales arising from that in 1981 and 1982.
Inevitably, this drop will affect particularly the areas of the Highlands in which we are extremely interested where, as the noble Lord, Lord Ross, said, he is interested in the question of employing people. We are all interested in that. Undoubtedly if this continues there will be a heavy drop in employment in the areas we are trying to help, and the people leaving the Highlands and Islands will find great difficulty in finding work elsewhere.
In the island of Islay there are eight distilleries, and three are temporarily closed. Two years ago Islay produced 10 million gallons of whisky. In 1982 it distills only 3 million gallons. These figures come from the brief which we have all been sent by the whisky organisation. But there are many other areas, as the noble Lord, Lord Ross of Marnock, has said, where whisky is important in many ways, and these are going to be cut back too.
It is vital that the Government should realise that this reduction is cutting our own throats. The level of taxation on whisky must be changed so that, at the very least, Scotch whisky is not taxed more than any other wine or spirit coming into this country. The
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noble Lord, Lord Mottistone, has given us excellent details of cost, taxation and so on. These figures are important, and I hope that the Government will take them to heart and will see that this is something that must be dealt with now.
I know that the Government have tried hard to get trade barriers against our whisky removed, especially in EEC countries, These barriers, as I understand it, have been ruled illegal, but still they continue. I hope that the Government will continue to fight against discrimination of this kind, whether from the EEC countries or any other country, because it is doing a great deal of damage. We have this splendid scheme for the development of the Highlands and Islands, which we debated in this House, but it is going to be severely affected by what is happening in the whisky trade.
I should like to see such alteration in taxation as would help the whisky trade to expand. They are not asking us for subsidies. They are not asking us for money. What they are asking for is fair play. If there is one thing that this country has stood for in many generations and in many centuries, it is fair play. I beg the Government to realise that this is of vital importance and that we must see that the whisky industry has fair play.
7.20 p.m.
Lord Belhaven and Stenton: My Lords, I am grateful, as I am sure we all are, to the noble Lord, Lord Tanlaw, for raising this subject and for getting it on the Order Paper at such a reasonable time of day—and, I must say, not before time. I lived in the island of Isla until just over a year ago. The situation when I left there was critical and I have no reason to believe it is any better yet. I never thought I should be attending even a short debate in your Lordships' House in which I would agree with practically everything that had been said, including every word uttered by the noble Lord, Lord Ross.
Lord Ross of Marnock: Delighted!
Lord Belhaven and Stenton: I agree with some of the things the noble Lord says but I do not usually agree with everything. The only trouble, my Lords, is that I have been left as what I would call the last lay, or Back Bench, speaker with very little to say because your Lordships have summed up the situation so well.
Having lived in Isla for seven years, I do not think people who have not lived in remote areas, and particularly in islands, understand the knife-edge on which the economy of such areas is balanced. When one is living there—it does not matter who one is—one is definitely afraid about what is going to happen. If any industry is affected, be it agriculture or any other, it affects everybody in the island, and the recession in the whisky trade has affected Isla very badly. It has affected Port Ellen, where I used to live, more particularly than many of the other areas; it is one of the two biggest villages. I ran a small tourist hotel there and most of the people who worked for us were the wives of distillery workers. Their husbands were quiet, hardworking men who had never been on strike or anything of the like, although they belonged to unions. They worked quietly all their lives. Yet suddenly, out

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of the blue, they were hit by unemployment and short-time working.
It is not easy for them. If such a situation occurs in, say, Hammersmith or Birmingham there is the possibility of getting a job five miles away, but in a place like Isla one is nearer the possibility of getting a job in Glasgow—and the prospects there are not too good—and that is 100 miles and a six-hour journey away—not the sort of place to go to work and come home in the evenings. Therefore one must move. For those reasons I say that people who have not lived in the Hebrides and places like that do not realise that there is a real danger of dereliction. We who live there see the results of past dereliction, in the pathetic villages with only some walls standing. Nobody is there, just the cows and sheep grazing over them. So we see what happened in the past. No wonder the people living in those areas fear what may happen in the future.
Coming to the Question asked by the noble Lord, Lord Tanlaw, one asks what are the Government to do about he situation? In many ways successive Governments have done quite well. We have the Highlands and Islands Development Board, a rather bureaucratic and expensive body but in fact it does a good job, and I have had experience of that. But it all seems to be, to some extent, negative in relation to the attitude of successive Governments. And I must say, although I sit on this side of the House, that we must consider the way in which this Government in particular have dealt with the Scotch whisky industry: three successive increases in the tax at a time of extreme difficulty. As I understand it, those increases have actually become counter-productive and the Government are not actually getting any more money. I may not be as clever as some, but that seems to be the economics of the padded cell. I fail to understand the logic of it. The Government should give themselves a self-denying ordinance not to put up the tax on whisky for, say, four years. Even better—though I do not expect this to happen—they might even consider reducing it, and then they might increase Government revenue and make things slightly easier for the industry.
There is in the remote areas a feeling that the Government do not care and do not know anything about what is going on. Indeed, one sometimes feels one is not living in the same country when one is living there. It is a very bad situation because I am sure the Government do care—not just this but also the previous Government—because they have tried to do things. However, in respect of the whisky industry they have behaved as if they were dealing with a foreign country, and that is deplorable.
Local politics in the sort of areas about which I am speaking hardly exist. The local councillor we had in Port Ellen was a most estimable man, widely criticised locally by people who would not have thought of doing the job he did, which I considered he did very well. He once explained his politics to me. He said he was really a Conservative but was a paid-up member of the Scottish National Party, that his sympathies were basically Socialist, but he had always been a Liberal.
Lord Blease: Was he under the influence?
Lord Belhaven and Stenton: My Lords, that is very much the way people feel when they live in such an
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area, because everybody must pull together and the interests of the area in which one lives and has one's job or property are paramount.
May I comment on an argument which I have always thought to be specious; namely, that while the Government put the tax up by, say, £1 a bottle (or whatever the case may be) in fact the price has not increased in real terms since 1969, 1975 or whatever other date people care to mention. That does not seem to be a sensible way of dealing with an industry which has actually kept its prices down. I thought we were trying to bring inflation down. To penalise an industry for maintaining its prices by saying that what it produces is cheaper in real terms now than it used to be seems to me to be the most inflationary argument one could possibly put.
The Treasury and Her Majesty's Government—whichever party is in Government—should realise that the Highlands and Islands are part of the United Kingdom just as much as Hampstead, Croydon, Coventry or anywhere else, and should make a little more effort, particularly in respect of the whisky industry, to encourage the people who live in the remote areas to feel that the Government, whatever their colour, are on their side.
7.28 p.m.
Lord Lyell: My Lords, I am sure the whole House is grateful to the noble Lord, Lord Tanlaw, for providing this opportunity to discuss one of the most renowned products of our islands and for his fine and, I would say, optimistic speech. I wish also to thank him for the care he took in making his remarks and for the kind things he said about not wishing to make a partisan or political speech, a note which has been echoed by every speaker. We are indeed grateful for the great interest that has been shown by so many of your Lordships, both in speaking and in listening.
We believe it is indeed fortuitous that we have been discussing the great industry of distilling whisky, selling it and exporting it, so soon after the announcement that, as from February 1983, a deferred payment system will be introduced for excise duty. We understand that the industry has indeed welcomed this proposal, since it means that the distillers will be able to defer payment of duty for an average period of four weeks. This will provide considerable cash flow advantages for the industry, and there has been an estimate that it will represent something in excess of £100 million.
Duty deferment under the Finance Bill legislation will not become operative until after Royal Assent. However, in order to give relief to the industry at the earliest practicable date, Customs and Excise has been authorised to introduce duty deferment arrangements for wines and spirits from 15th February 1983 on an extra-statutory basis. In order to assist the smooth transition to the new duty deferment arrangements, Customs and Excise has also been authorised, exceptionally, to extend the average period of deferment to five weeks for wines and spirits that are cleared between 15th February and 14th May 1983. That is in addition to the welcome injection of funds that many distillers will have received as a result of our successful negotiation of export refunds for Scotch whisky. Again the sum is about £100 million paid out

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since last autumn. If I may say so, those are not insignificant sums, especially to the hard-pressed industry about which we have heard so much this evening.
However, it would be foolish to deny that the industry has been affected by the recession which has hit the whole world. After years of steady growth the industry is facing smaller current and indeed projected demand, and the long maturation period that is required, and the high level of stock that has to be carried, have compounded the problem. This has of course led to cutbacks in production, with—as we have heard from my noble friend Lord Belhaven and Stenton, in a very eloquent speech—consequent layoffs, as well as the problem of short-time working.
The drop in production between 1980 and 1981 was much sharper than the drop in sales. That clearly reflects a rundown of stocks in bond, and to us it seems to represent both a reaction to the interest charges entailed in stockholdings, as well as an effort to reduce stocks in line with a more modest assessment of market prospects. For that reason an unchanged level of demand should in the medium term lead to some small recovery of output. Indeed, some independent commentators see growth in demand for the rest of the decade, which should lead to yet more marked recovery in the medium term; and that is speaking in whisky terms.
Only this week there was published a new review of the Scotch whisky industry, and that expressed a confident view of the industry for the future. The review claimed that the industry has coped extremely well with the recession and that whisky will continue to be one of the world's major liquors, with further growth to be expected. While consumption and exports have fallen, whisky has increased its share of the home spirits market to over 55 per cent; and I understand that the latest figure is 55·5 per cent. The Government, and I believe the industry, as well as the great country of ours which produces it all, will be grateful for every entire percentage point increase in its share of the home spirits market. Despite a small drop overseas, the United States still accounts for 30 per cent. of the exports of whisky.
During the past few months there have been many examples of companies announcing good results. Pretax profits of £2·7 million, with sales up 8½ per cent., have been reported by one very famous distiller near to my home, and indeed the home of my noble friend the Minister. Profits have more than doubled in the half year, with sales up from £4·5 million to £4·7 million, in a major group in the North of Scotland. At the beginning of August the Scotch Whisky Association announced that in the first five months of this year—1982—exports were close to record levels. They were 3 per cent. better than in 1980, and were within 2 per cent. of the levels achieved in 1978, which, as your Lordships will know, and indeed the Scotch Whisky Association knows, was the best year ever for exports. Another company recorded pre-tax profits up almost 11½ per cent. I understand that, among its other products, this company produces a very famous blend of, I think, single malt—though I fear that I am not a great expert on this particular brand. A further company announced that it had experienced a drop of
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10 per cent. in home sales, but it found that that was more than offset by an increase of 14 per cent. in export sales.
As the noble Lord, Lord Tanlaw, pointed out, the industry has also taken its own steps to improve its prospects by introducing major public relations campaigns in the United States of America and Japan. Both the campaigns are due to last for three years and will concentrate on maintaining and developing the already superior and very great image of Scottish whisky.
However, it is the production side and its effects on the Highlands and Islands that mainly concern us this evening. As your Lordships may be aware, the Scotch whisky industry employs about 21,000 people, which represents about 4 per cent. of all employment in manufacturing industry in Scotland. Of course a substantial part of the employment is to be found in areas where there is little other industry, and for that reason it is particularly valuable to the regional economy. One example which was clearly spelt out by the noble Lord, Lord Tanlaw, is that, of 130—give or take one or two—distilleries in Scotland, 106 are already located in the area administered by the Highlands and Islands Development Board. According to the Scotch Whisky Association, employment fell by a total of 4,300—that is, about 17 per cent.—in the two financial years of 1980–81 and 1981–82.
I am sure that your Lordships will previously have been told—but I have to reiterate it once again—that Governments cannot simply create jobs in this industry, or indeed in any others, and our experience in the past of trying to pick winners has not, I regret, always been crowned with success. While the Government do not rule out constructive intervention at the margin where industrial support may help to promote adaptation of the economy, we consider that industrialists, rather than civil servants or—dare I say?—Government Ministers, are best placed to identify the investment opportunities that create new jobs. Having said that, I must point out that the Government's economic strategy will give priority to the control of inflation and the creation of a climate that is favourable to enterprise. These are the necessary conditions for a resumption of sustainable growth in output and employment, as well as in consumption of this great liquid that we are discussing tonight. The success of our policy is central to the long-term interests of the whisky industry. This is a policy which has to be sustained over a period, because there are no short cuts.
But there is no complacency either in the Government or in their agencies about the need to maximise additional investment to help to provide secure jobs. For example, following the 1979 review of assisted areas, all the Highlands and Islands Development Board areas with three exceptions retained development area status. However, following a further review, even those three exceptional areas retained intermediate status, so that firms anywhere in the area of the Highlands and Islands Development Board meeting the criteria of the various schemes are eligible for assistance in creating or safeguarding employment.
To ensure that the benefits to be derived from the various schemes are widely published, my noble friend the Minister of State will early in the New Year launch

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an industrial development drive for the Highlands and Islands. My noble friend will himself be closely involved in this programme, which will be undertaken by the HIDB. The drive will be similar to the extensive and, we believe, successful, campaign that has been carried out for the rest of Scotland over the past few months by the Scottish Economic Planning Department, and it will involve a series of seminars at selected locations throughout the Highlands and Islands area. The seminars will ensure that companies throughout the board's area are fully aware of the generous financial incentives that are available for investment and the creation of employment.
I should like to turn to one or two of the specific points that have been raised in what all of us believe has been a very stimulating and interesting discussion. It has been claimed by, I think, every single speaker in your Lordships' House this evening that excise duty discriminates against spirits and, above all, that tax should be levied per degree of alcoholic strength. I have to admit that in this country spirits have traditionally been taxed more highly than other drinks, and that is a matter which has gone on for many years—certainly for the whole of my lifetime. These taxes are an important source of revenue. The provisional total of receipts for 1980–81 amounted to £1,222 million, of which Scotch whisky accounted for about half. So the noble Lord, Lord Ross, can see that Scotch whisky contributed about £610 million, or thereabouts, to the Exchequer in the last financial year.
A source of revenue of this magnitude is clearly an important consideration that my right honourable friend the Chancellor of the Exchequer would find almost impossible to forgo. But there is no real reason why duty should be related to alcoholic strength, as we believe that customers, drinkers, do not in the main buy their drinks on this basis. But I would stress that in the last two Budgets spirits have been relatively lightly treated in comparison with other drinks. I would remind your Lordships that had duty gone up in line with inflation, then the extra duty would have been more than 50p per bottle. Instead, in recognition of the important role that this product plays in the economy of Scotland especially, as was described by my noble friend Lord Belhaven, the rise in duty was pegged at 30p. I would say that in real terms the value of duty on Scotch whisky has fallen substantially in recent years from the peak year of 1975, but no doubt my right honourable friend the Chancellor of the Exchequer will carefully note all your Lordships' comments on this particular point in tonight's debate.
The noble Lord, Lord Tanlaw, and other Members of your Lordships' House—I think my noble friend Lord Mottistone also raised this point—had a query on what we call unfair trade barriers. I would assure your Lordships that the Government share the industry's concern, and we find these barriers which are erected by our Community partners to be particularly distressing. To ensure that we are fully aware of the industry's problems, a high-level steering group was set up comprising the Department of Trade, the Ministry of Agriculture, Fisheries and Food—which, I am reminded, is the major sponsoring department for the industry—and, thirdly, the Scotch Whisky Association. This group meet regularly to discuss what they
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call priority areas.
In the Community context we have made full and very strong representations to the Commission to ensure that member states honour their obligations and that the European Court of Justice rulings are complied with speedily. To aid the industry we have taken the unusual step of intervening in three European Court of Justice cases, and we shall be attending the oral hearing in the Italian VAT case. I assure your Lordships that we shall continue to press for equality of treatment for all spirit drinks.
Perhaps I may now try briefly to cover some of the points that have been raised in the course of your Lordships' debate. I hope I shall cover most of them, but if I miss any of them I assure you Lordships that we shall carefully scrutinise all the remarks that have been made this evening and I shall write to any noble Lord missed out, lest he should feel aggrieved. The noble Lord, Lord Tanlaw, raised the problem of what we call the European barriers and unfair discrimination. As I have said, in the Community context the Government have made very strong representations to the Commission to ensure that they honour their obligation. We intend to keep up our pressure on this line, and I am sure the support given by your Lorships this evening will considerably aid us in our efforts.
The noble Lord, Lord Ross, as we have all come to expect of him, but not necessarily in the Chamber, showed that he is a great champion of our national poet Robert Burns. Of course, all of us are particularly proud in this respect; and I am sure we are all equally convinced that it is the poet with whom the noble Lord, Lord Ross, will forever be associated. Indeed, I am given to understand that the addresses given by the noble Lord, Lord Ross, at Burns Suppers are legend throughout Scotland, but so far I have not had the pleasure of hearing the noble Lord in (if I may so put it) full flow.
I would join with the noble Lord, Lord Ross, in commending the tremendous efforts made by the industry itself to increase our export sales. I would also join with the noble Lord in mentioning my own abstemiousness in relation to this particular liquid, but I would stress to him and, indeed, to your Lordships, that when abroad I always do as the Romans do. I do have occasion to visit friends in Rome from time to time, and I support my local industry very considerably. The trouble is that my friends seem to think that I am a great expert, and they ask me which particular brand—single malts, blended malts, liqueur whiskies or others—will give them the least possible after-effects the next morning. I am afraid it is very much their trial, my error.
My noble friend Lord Mottistone gave us his customary robust support, and we are very grateful for it, in our efforts to persuade the French Government to change their outlook on the treatment of spirits. My noble friend indeed has great expertise in this field, and many of your Lordships may have heard my noble friend broadcasting last night, giving his views on the current meeting of the General Agreement on Tariffs and Trade in Geneva. Because, of course, my noble friend is a major spokesman for, I believe, the Food and Drinks Industry Council. My noble friend made an interesting comment on what I think he called the whisky lake. Those of your Lordships who travel north

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of the Border will know of this great loch at Campbeltown which is made famous in song, but I hardly think that the whisky mentioned in that song or, indeed, contained in that great loch befits the quality we have all come to expect of Scotch whisky.
The noble Earl, Lord Halsbury, gave us great encouragement to increase our efforts to persuade the Commission of our just cause and, above all, in implementing the decisions of the European Court of Justice, and we are grateful to him for his support in this area, particularly in view of his great expertise. I must say that I was not aware, as I am sure many of your Lordships were not, that he was for many years—indeed, he may still be—on the board of the Distillers Company. He shakes his head. I am sure that will be the loss of that great company, the Distillers Company; but they and all of us are, I know, grateful for the support he has been able to give to the industry. The noble Earl caused my mind to boggle slightly in imagining five bottles—I think he mentioned litre bottles—of varied alcohol in front of him. I am sure your Lordships' House would not wish to be seen as a place where every noble Lord brings five bottles brewed from various sources into debates. Nevertheless, we were very grateful for the robust support of the noble Earl.
I must congratulate my noble friend Lady Elliot on her new distinction as leader of the Scottish Peers. Indeed, this is one more of the hundreds of similar distinctions which she has acquired in her public life. My noble friend referred, naturally, to the problems of production and employment in Scotland. We take her point, and we regard them as very important. But I was a trifle puzzled—though I was full of joy—when she mentioned that she regards whisky as being allied to happiness. Perhaps she and other noble Lords have not yet had to endure what is known as the weird amalgam of William Wallace, who is so beautifully commemorated in St. Stephen's Hall, of Harry Lauder and of advertisements for Alcoholics Anonymous, which descends upon London in some weird way at the end of May in the odd-numbered years. I am afraid that Scotland does not always display the attitude of happiness allied to drink.
My noble friend Lord Belhaven I believe made one of the most interesting and, indeed, the most poignant speeches this evening. All of us understand the major problem of a predominant industry in particular islands or, indeed, in particular areas of Scotland. My noble friend mentioned one island—I think it was Islay—of which he has special knowledge and I think the noble Lord, Lord Tanlaw, mentioned Dufftown, which is, of course, right across the other side of Scotland. This, too, is particularly dependent on one industry, and that is the distilling industry. Above all, my noble friend Lord Belhaven introduced the dark side (if I may call it that) to our debate, as opposed to many interesting and amusing anecdotes. My noble friend stressed the major problem of employment and short-time working in what one can call a one-industry area or a one-industry town. We are very grateful to him for his warning. Once again, my noble friend made a significant plea to my right honourable friend the Chancellor. I am quite sure that we shall ensure that my right honourable friend knows of the concern
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of your Lordships' House for this major industry.
My Lords, from what I have said this evening—I hope at not too great length—I hope that it is abundantly clear that we are conscious of and concerned about the whisky industry's present difficulties and about the effects on the Highlands and Islands of Scotland resulting from the worldwide recession. But I hope that it will also be accepted that we are taking action through our economic strategy in general and our programme of assistance available in the Highlands and Islands in particular.
House adjourned at nine minutes before eight o'clock.

  THE ADOPTION (SCOTLAND) ACT 1978
  THE ADOPTION (SCOTLAND) ACT 1978
  MEMORANDUM OF UNDERSTANDING ON STANDARDS
  MEMORANDUM OF UNDERSTANDING ON STANDARDS
  MEMORANDUM OF UNDERSTANDING BETWEEN THE UNITED KINGDOM GOVERNMENT AND THE BRITISH STANDARDS INSTITUTION ON STANDARDS
  MEMORANDUM OF UNDERSTANDING BETWEEN THE UNITED KINGDOM GOVERNMENT AND THE BRITISH STANDARDS INSTITUTION ON STANDARDS
  Article 1
  Article 1
  Article 2
  Article 2
  Article 3
  Article 3
  Article 4
  Article 4
  Article 5
  Article 5
  Article 6
  Article 6
  Article 7
  Article 7
  Article 8
  Article 8
  FARM CAPITAL GRANTS
  FARM CAPITAL GRANTS