Sitting of 4 July 1983

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

    Domestic Electricity Charges
    Mr. Strawasked the Secretary of State for Energy what has been the percentage increase in standing order and unit charges for electricity, since May 1979.
    The Under-Secretary of State for Energy (Mr. Giles Shaw): The standing charge for electricity supplied under the standard domestic tariff has increased by 127 per cent. since May 1979 and the unit rate by 80 per cent. but smaller consumers benefit from the standing charge rebate scheme. Standing charges have not increased since April 1982, and domestic unit prices have not increased on average this year.
    Mr. Straw: Does the Minister accept that these are quite disgraceful figures which show that as a direct result of the Government's policy the standing charge for electricity has gone up by almost three times the rate of inflation and the charge for electricity unit prices by getting on for double the rate of inflation? Will he now give an undertaking that not only will there be no increase in standing charges for the rest of this Parliament, but that he will use every endeavour to get a reduction in standing charges?
    Mr. Shaw: The hon. Gentleman will be aware that my right hon. Friend the Chancellor of the Exchequer, when he was Secretary of State for Energy, introduced an examination of standing charges through the Electricity Council. The report is now available in the Library of the House, and discussions on that will no doubt continue within the industry, looking for ways of improving the situation.
    Mr. Greenway: Notwithstanding the excellent effort of the last Administration in reducing standing charges on bills of £9 or less to 50 per cent. of the bill, does my hon. Friend accept that pensioners in particular face hardship in the standing charge that they pay for electricity and gas —and, indeed, water—and will he do all that he can to mitigate that hardship?
    Mr. Shaw: I entirely accept what my hon. Friend says. It is true that many people on smaller incomes, particularly pensioners, suffer substantially because of the high standing charges. That was the reason for the benefits that were introduced by my right hon. Friend the Chancellor of the Exchequer when he was Secretary of State for Energy.
    Mr. McNamara: Is the Minister aware that standing charges are a cause of great concern, not only for pensioners—understandably so—but for all other people who receive any state benefit, whether unemployment or otherwise? Does he accept that if unemployment benefit is cut by the Government the standing charge will be an increasing burden on those people? Would it not be a good idea for the Government to take a lead in abolishing the standing charge and go back to proper price fixing for the nationalised industries, instead of the artificial prices fixed by the last Government?
    Mr. Shaw: The hon. Gentleman is incorrect in suggesting that somehow the standing charge is a wholly false charge. Many of the costs incurred by the board have to be passed on, including capital charges, interest charges, and the cost of the connection itself, as well as the costs of metering and billing. Those charges have to be correctly assessed and costed. The Deloittes inquiry looked into those matters, and I suggest that the hon. Gentleman examines the report, which is in the Library.
    Mr. Ward: I do not, of course, wish to pre-empt anything on which the inquiry might report, but is my hon. Friend aware of the considerable satisfaction that was felt at the reduction in standing charges for electricity and gas during the last Parliament, which was a great help to many elderly people? Will my hon. Friend proceed with caution before abolishing those charges, because he may well find that the cost per unit will go up, and that will inflict hardship on the very people whom he is trying to help?
    Mr. Shaw: My hon. Friend is right. All hon. Members should realise that if the standing charges correctly convey the charges which the board incurs are removed, the money would have to be found from elsewhere in the system. My hon. Friend is right to draw attention to the steps taken by the last Administration, which have already brought substantial benefits to consumers.
    Mr. Rowlands: We have been reviewing this matter endlessly. When can we expect the results of the Government's conclusions on the review, which has now been made available to us?
    Mr. Shaw: The report itself is a matter for the electricity supply industry, and I strongly urge it to make early recommendations based on the findings, which have only just been made available.

    Oil and Gas Resources
    Mr. Viggersasked the Secretary of State for Energy if he is satisfied with the current development programme for oil and gas resources in the United Kingdom.
    The Minister of State, Department of Energy (Mr. Alick Buchanan-Smith): Yes. Twenty-one offshore and two onshore oilfields, and seven offshore gasfields are currently in production.
    Mr. Viggers: Does my right hon. Friend agree that his many right hon. and hon. Friends will miss the previous right hon. Member for Ross and Cromarty (Mr. Gray)? I am sorry that he is no longer a Member of the House, but rejoice in his translation to another place. I also welcome my right hon. Friend to this portfolio.
    Is not the centre point of the Government's policy on the oil and gas industry to maintain the momentum of success, especially in the British element of this important industry, which employs over 100,000 people?
    Mr. Speaker: Order. We must have shorter questions, please.
    Mr. Buchanan-Smith: Yes, I agree with my hon. Friend. I shall certainly find it hard to follow my former right hon. Friend, who was particularly active in obtaining a high degree of participation by British firms in North sea oil. I am only sorry that the Labour party does not appreciate the result that has been achieved so far.
    Mr. Douglas: Will the Minister say something about the nature of the development of Marathon's Bray field? Will he confirm that at present that field does not have an annex B and that, therefore, it is a little presumptuous of the company to make wholesale press announcements on the development? In particular, will he give an assurance that British steel will be used in any construction on the field?
    Mr. Buchanan-Smith: As the hon. Gentleman knows, we want to see the maximum participation of British
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    industry. I intend to continue that policy as vigorously as possible. I shall certainly scrutinise the annex B proposals carefully.
    Mr. Beaumont-Dark: Bearing in mind British Petroleum's recent 8p increase in the price of its petrol, the third increase this year, which will almost certainly be followed by other major companies, will my right hon. Friend refer the matter to the Monopolies and Mergers Commission? Does he agree that capitalism and Conservatism are about genuine competition, not price-fixing at the public expense? Does he further agree that a company with a £30,000 million turnover a year can in large degree decide what is a profit and what is a loss?
    Mr. Buchanan-Smith: Only one company has announced an increase and there is considerable competition. We shall wait to see what happens to that and other companies. As my hon. Friend knows, this matter was looked at recently and it was concluded that there was adequate competition.
    Mr. Budgen: Does my right hon. Friend agree that the new experiment of allocating licences by auction is much to be preferred to the dangers of allocation by ministerial or executive discretion?
    Mr. Buchanan-Smith: Different systems have their place in different circumstances. I do not want to be dogmatic about it at this stage, but I shall bear in mind what my hon. Friend said.

    Coal Industry
    Mr. Willie W. Hamiltonasked the Secretary of State for Energy what plans he has for the privatisation of the coal industry.
    Mr. Adleyasked the Secretary of State for Energy if he will introduce proposals for privatisation in the coal industry.
    The Secretary of State for Energy (Mr. Peter Walker): I have no such plans at present.
    Mr. Hamilton: Is the Secretary of State aware that that reply will be met with great satisfaction by Labour Members, but are there not skinheads on the Conservative Benches who want to hive off the profit-making sections of the coal industry? Will he resist the blandishments of those wretched people?
    Mr. Walker: I know of no skinheads in the Conservative party. If, at some time in the future, the president of the National Union of Mineworkers pleaded with me to provide some co-operative for miners, I should have to consider that carefully.
    Mr. Stokes: Might it not be a good idea to sell the coal industry to the miners?
    Mr. Walker: Yes, but I do not think that the miners would consider it an equally good idea.
    Several Hon. Members rose—
    Mr. Speaker: Order. I apologise. I should have called the hon. Member for Christchurch (Mr. Adley), who had a linked question.
    Mr. Adley: Thank you, Mr. Speaker. Does my right hon. Friend recall his excellent proposal some years ago for giving council houses to the people who live in them?

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    Does he not seriously think that the proposal put forward some years ago by our former colleague, Mr. Benn, to put the ownership of the pits into the hands of some of the miners has some merit and could advantage the miners, the taxpayers and the production of coal?
    Mr. Walker: It is important that Britain has a successful coal industry. Therefore, I have replied to the question by saying that there is no such proposal at the present time. I was not aware that a predecessor of mine, Mr. Benn, had made this proposal, but that makes it rather more dubious than I had previously thought.
    Mr. Janner: Will the right hon. Gentleman confirm that there is no proposal to resell the resources of the Vale of Belvoir to the Duke of Rutland or anyone else? If that is not his proposal, why is there the present delay, and when will work begin in Asfordby?
    Mr. Walker: I agree that the project is of immense importance to the coal industry, and I hope that decisions will be made speedily. I have had no application from the Duke of Rutland.
    Mr. Rost: Will my right hon. Friend at least consider the Monopolies and Mergers Commission's recent recommendations that the Coal Industry Nationalisation Act 1946 should be amended and, in particular, that opencast coal mining should be more privatised and the monopoly marketing organisation, which it regards as against the consumers' and industry's interests, got rid of?
    Mr. Walker: As my hon. Friend knows, the private sector already has quite an interest in opencast mining. Several activities connected with that take place in the private sector. I have not yet had time to study the commission's proposals, but I shall certainly do so.
    Mr. Eadie: Has not the Secretary of State given an important answer to the question that has been addressed to him today? Does he agree that to some extent it is addressed to the miners' conference, which is now meeting in Perth? Is the right hon. Gentleman specifically telling the House that he and the Government have no plans to sell off the coal industry to their friends in private enterprise?
    Mr. Walker: Yes, there are no such plans. I can say to the miners' conference that a successful mining industry is of immense importance to Britain and is one of our great resources. I shall do all that I can to see that it is a success.

    National Coal Board
    Mr. Canavanasked the Secretary of State for Energy what subjects he expects to discuss at his next meeting with the chairman of the National Coal Board.
    Mr. Beithasked the Secretary of State for Energy when next he plans to meet the chairman of the National Coal Board to discuss the future contribution of the coal industry to the United Kingdom's energy requirements.
    Mr. Ioan Evansasked the Secretary of State for Energy when next he proposes to meet the chairman of the National Coal Board; and what matters he expects to discuss.
    Mr. Peter Walker: I have already met the chairman twice and I shall meet him regularly to discuss all aspects of the board's business.
    Mr. Canavan: Now that the Secretary of State has a new job, will he try to find a better man than MacGregor for the chairman's job? Will the right hon. Gentleman show more faith in the coal industry than his predecessor did by giving enough investment to stop the hit list of 70 pit closures, involving 65,000 jobs? Will he make a start by reversing the decision to close Cardowan?
    Mr. Walker: I hope, devoid of any prejudice or previews, that the hon. Gentleman and members of the mining industry will judge Mr. MacGregor's chairmanship according to the results. He is a man of immense ability, with a deep desire to see the coal industry succeed.
    No criticism of the Government's investment in the coal industry can be made. Capital investment is running at £800 million a year, despite a loss of nearly £500 million in 1982–83. That cannot be discounted, nor can it be said that the Government are not willing to invest in the coal industry's future.
    Mr. Beith: When the Secretary of State meets the chairman of the NCB, will he tell him that he now recognises that it would be quite wrong to put a nuclear power station in the middle of the Northumberland coalfield at Druridge bay? Does he realise that such proposals are part of the background against which miners are judging the closure of Lynemouth colliery, which was announced this weekend? That, as well as the fact that some of the men at Lynemouth will not be transferred to the highly profitable Ellington pit, is leading to great opposition to the proposal.
    Mr. Walker: Whether a colliery remains viable and economic is a matter for the NCB and there is a procedure by which the NUM is fully consulted. At a meeting that I had last week with leaders of various unions representing the mineworkers one of the leaders urged that that procedure should continue, and it will.
    Britain's nuclear programme must be considered in terms of our long-term energy demands.
    Mr. Evans: Does the Secretary of State realise that there are deep anxieties in the South Wales coalfield at reports of 70 pit closures, with 70,000 miners to lose their jobs and the coal industry's capacity to be cut by about 25 million tonnes? When the right hon. Gentleman talks to the chairman of the NCB, will he try to get him to understand that, despite the present recession, we should not run down our industry so that when there is an economic upturn we shall not have the necessary coal?
    Mr. Walker: The hon. Gentleman knows full well from his long connection with and interest in the coal industry that throughout its history pits have closed because they were uneconomic. If I wished to make a party point I could compare the volume of closures since the war under Labour Governments with the volume of closures under Tory Governments. But that would be embarrassing for the Labour party, so I shall refrain from doing so.
    It is in the interests of the mineworkers to ensure that we have a viable and successful industry, which is what I wish to see.
    Mr. Skeet: Will my right hon. Friend bear in mind that stocks of coal now total 55 million tonnes, a 9 million tonnes increase on last year, and that the main job of the new chairman is to market coal and not necessarily to produce it? Does he agree that the future of a viable industry must rest on the sale of coal?
    Mr. Walker: My hon. Friend is completely correct. In the one discussion that I have had with the future chairman of the National Coal Board he expressed to me the immense importance of improving the marketing of coal. If he succeeds, I know that he will be supported by miners and all connected with the future of the mining industry.
    Mr. Lofthouse: When the Secretary of State next meets the chairman of the National Coal Board, will he instruct him to come clean with the miners who much prefer the truth to a veil of secrecy? Will the Secretary of State also ask the chairman to let the miners know what the production capacity of the industry will be at the end of his three-year contract, and how many men over the age of 50 years will then be employed in the industry?
    Mr. Walker: I agree with the hon. Gentleman that miners wish to know the facts and to examine the position on its merits. As far as I know, Mr. MacGregor, and, indeed, his predecessor have attempted to do that. The industry is important to the country's long-term future. I believe that the present chairman and the future chairman wish it to succeed in that goal.
    It is my view, having spoken to both gentlemen, that the suggestion that there is a great hit list of pits is unreal. There is a need to examine each pit to see whether it is economic and sensible, and if not to close it, but also to invest in future production methods.
    Mr. Forman: When my right hon. Friend next meets the chairman of the coal board, will he tell him that his Department will give its full support to the board's efforts to sell more coal to our EC partners? Will he also bear in mind that the excellent scheme for converting industry's oil-fired boilers to burn coal needs the support of his Department as well?
    Mr. Walker: The conversion scheme has been important. The matter is partly the responsibility of my right hon. Friend the Secretary of State for Trade and Industry and I shall discuss it with him. The sale of coal, whether to Europe or elsewhere, is of immense importance to the future of the National Coal Board and the miners. I shall be examining the issue with the chairman of the board.
    Mr. John Smith: The Secretary of State will be aware of Mr. MacGregor's reputation in the steel industry, where, to put it mildly, his industrial relations style was highly provocative and where he was responsible for the destruction of thousands of jobs. Will the Secretary of State give an assurance that Mr. MacGregor will not be allowed to develop his own nostrums and will be kept under firm check and control by the right hon. Gentleman as Secretary of State for Energy?
    Mr. Walker: The job of the National Coal Board in its entirety is to try to pursue policies which are in the interests of the future of our coal-mining industry. From the one discussion that I have had with Mr. MacGregor, I believe that his objectives in improving sales, efficiency and productivity, and of course in continuing a massive capital investment programme, are the policies required for the future of the industry.

    Coal Industry
    Mr. Tim Smithasked the Secretary of State for Energy if he will make a statement on policy towards the future of the coal industry.
    Mr. Peter Walker: The Government are committed to the development of a modern efficient and viable coal industry.
    Mr. Smith: Following the publication of the Monopolies and Mergers Commission's report, is it not clear that the coal indsutry has moved into a wholly unsustainable position? Is there not, therefore, a need for a new "Plan for Coal" which recognises the realities of the market and ensures that investment is directed to new and profitable pits rather than to uneconomic and old ones?
    Mr. Walker: Yes, Sir, but I think, in fairness to the present chairman of the National Coal Board, that a great deal has been done to try to attract investments to the more viable coal-producing areas of the country. Exciting and important investment programmes are available for the future which should be pursued. It is also true that, with proper consultation with the National Union of Mineworkers, the uneconomic pits, which do not have a future, have to be closed.
    Mr. Hardy: Either now or in his speech on the Petroleum Royalties (Relief) Bill later today, will the Minister comment convincingly on the point that, while the country must now expect to forfeit perhaps considerable income from the offshore oilfields to maximise the take from those fields, at the same time we can expect to see coalfields or collieries closed, where reserves will be locked away to save expense? Will the right hon. Gentleman consider the point in order to maintain his view, which appears to be a trifle more progressive than those of the barbarians behind him?
    Mr. Walker: We have some exciting prospects for investments in the mining industry. I was fortunate enough to be responsible for this subject when the Selby coalfield was first discovered and gave the original go-ahead for its development. Now, in other parts of the country, there are similar opportunities. It must be in the interests of miners and the mining industry that the substantial investment that is needed for the long-term development of exciting resources is made. Long after oil disappears, the coal industry, like agriculture, for which I previously held responsibility, will remain.
    Sir Dudley Smith: In view of the exchanges today, will my right hon. Friend take time when he meets the chairman of the coal board to discuss the development of future coalfields and whether they are really necessary, bearing in mind their severe environmental impact? I have particularly in mind the proposed development in mid-Warwickshire.
    Mr. Walker: Yes, environmental impact must be carefully considered in any planning application, but, as a former Secretary of State for the Environment, I know of few organisations that have done more than the National Coal Board to retrieve the environment after development has taken place.
    Mr. Eadie: The Opposition welcome the Secretary of State's comments about new exciting areas for coalfield development, but is the right hon. Gentleman aware that since the Government took office in May 1979 not one new pit has been sunk? Is he further aware that if that policy continues it will inevitably mean a contraction of the coal industry?
    Mr. Walker: The hon. Gentleman must know that since the Government came to office there has been a

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    massive capital investment programme in the collieries in new plant and machinery. The Selby field has been developed and similar fields are now available. The National Coal Board, which has a massive investment programme this year of £800 million, must decide where that money is best invested.

    Electricity Disconnections
    Mr. Tom Coxasked the Secretary of State for Energy if he will have discussions with the chairman of the Electricity Council about disconnection of supply.
    Mr. Giles Shaw: My right hon. Friend meets the chairman of the Electricity Council from time to time as necessary but he has no immediate plans to discuss this matter with him.
    Mr. Cox: I note that reply, but is the Minister not aware that disconnection is a real problem because, despite all the supposed promises and the supposed codes of conduct, many people, especially the elderly and disabled, often face the disconnection of supplies? Is it not time that, at local area level, clear guidelines are given before disconnections take place? Will the Minister seek to make this point to the chairman of the Electricity Council?
    Mr. Shaw: I understand the hon. Gentleman's anxiety about disconnections. He and the House will be pleased to note that the volume of disconnections this year is about 25 per cent. down on last year. In the first quarter of this year a further 10 per cent. reduction took place compared with the first quarter of last year. The electricity industry is seeking to reduce the difficulties. The Electricity Consumers Council is monitoring the new code of practice and is specifically examining the problem.
    Mr. Cartwright: Does the Minister accept that when the procedures under the code of practice and the fuel direct scheme break down families can be disconnected and remain so for lengthy periods? Does he accept that that must cause hardship? What steps is he taking to establish the extent of the problem and to ensure that when consumers are disconnected they are not forgotten?
    Mr. Shaw: The hon. Gentleman is right. I appreciate the extreme hardship that is caused by delays in reconnection. The Electricity Consumers Council will be looking at that problem when it examines the operation not only of disconnection and the duress that some people must suffer, but the speed with which they can be reconnected.

    Electricity Prices
    Mr. Hannamasked the Secretary of State for Energy what representations he has received concerning the price disadvantage United Kingdom heavy users of electricity face against some European countries; and if he will make a statement.
    Mr. Peter Walker: The latest evidence is that energy prices to United Kingdom industry compare well in general with those on the continent.
    Mr. Hannam: Does my right hon. Friend accept that some vital industries experience grave disparities compared with similar companies on the continent? Will he consider whether the tariff structure can be tilted to give greater discounts to heavy industrial users of high load electricity?
    Mr. Walker: I shall examine the problems connected with energy supply to industry. About 98 per cent. of firms in Britain pay advantageous prices for electricity compared with firms in Germany, Italy and Holland, and the same as firms in Belgium. Only France, mainly because of its nuclear development, can claim to have lower energy prices. I shall examine carefully any particular problems.
    Mr. Hoyle: Will the Secretary of State re-examine his figures? Is he aware that it is said that electricity prices in Italy are 50 per cent. lower than they are here, in France about 40 per cent. lower, and in Germany 25 per cent. lower? If that is so, does it not place British industry at an unfair disadvantage? Other Ministers have fiddled while electricity has burned. May we have an assurance that the right hon. Gentleman will not follow their example, but will do something positive so that British industry can compete fairly with other countries in the EC?
    Mr. Walker: I dispute the hon. Gentleman's figures. My advice is that prices in Germany and Italy are above prices here. Complaints have been made in Germany and Italy about the advantage that British industry has over their industries. I shall examine the matter carefully.
    Mrs. Jill Knight: Does not the use of nuclear power, particularly in France, help to keep power costs low for industry? Will my right hon. Friend see what can be done to bring home to those in the United Kingdom who campaign against nuclear power the disastrous effect that the implementation of their policies would have on industry and, therefore, on employment?
    Mr. Walker: France has obtained considerable advantages from the development of its nuclear programme, which is reflected in the prices offered to its industry. Governments of any complexion must examine the possible role of nuclear energy in Britain.
    Mr. Rowlands: I have listened for two or three years to the same answers to the same question. Is there not a major gap between sections of industry and the Department of Energy? As the new Secretary of State, will the right hon. Gentleman bring fresh thinking to the issue instead of repeating the stale old answers that we have had for years?
    Mr. Walker: I shall repeat stale old answers if they are correct. In the last four years I have spent much time in Germany and other countries. I have read their press and heard their Ministers complain about the advantages that we have in terms of energy prices. Perhaps they, too, should look at their stale old answers.

    Energy Conservation
    Mr. Moateasked the Secretary of State for Energy if he is satisfied with the level of his departmental resources allocated to encouraging energy saving in industry.
    Mr. Buchanan-Smith: Yes. Moreover, I am implementing a number of organisational changes within my Department as part of our commitment to set up an energy efficiency office to increase the effectiveness with which the resources are used.
    Mr. Moate: The announcement about setting up an energy efficiency office will be widely welcomed. Is there

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    not a strict limit to what industry can achieve by better load management techniques and the like, and cannot many investment projects produce dramatic savings, often in industries which are short of investment resources—for example, the paper industry? Will my right hon. Friend consult the Department of Trade and Industry about the possibility of stimulating a major investment programme in energy-saving projects?
    Mr. Buchanan-Smith: I shall consider anything that is economically viable. The Government already have a number of incentive schemes which are going quite well. This year we are spending over £103 million on various conservation measures. I agree that the matter is important. I shall bear in mind my hon. Friend's remarks.
    Mr. John Smith: Is the Minister aware of the concern about the needs not only of industry but of individual consumers, such as motorists, and think again about his response to the request to refer the petrol price increase to the Monopolies and Mergers Commission? Is it not disgraceful that petrol prices should be increased at the start of the holiday period, when the consumer is most vulnerable? As the Government are keen to refer all public sector organisations to the scrutiny of the Monopolies and Mergers Commission, will the right hon. Gentleman make a start by referring this large private sector organisation to ensure that justice is done?
    Mr. Buchanan-Smith: I remind the right hon. and learned Gentleman of the competition in that industry. Many companies are involved, whereas the right hon. and learned Gentleman speaks of an announcement by only one company.

    Alternative Energy Supplies
    Mr. Chapmanasked the Secretary of State for Energy what is the current cost of Government research undertaken into alternative forms of energy.
    Mr. Buchanan-Smith: I expect my Department to spend between £13 million and £14 million on research into new and renewable sources of energy in 1983–84.
    Mr. Chapman: I welcome the proposed increase compared with what was spent five years ago. Alternative forms of energy can form only a small and marginal part of total national energy needs, but will my right hon. Friend use his good offices to encourage research and development? Will he bear in mind that it is beneficial for us to have as wide a range of alternative forms of energy as possible and to encourage Britain to have what are known as clean and renewable forms of energy?
    Mr. Buchanan-Smith: I agree with my hon. Friend. I hope that he welcomes what my right hon. and learned Friend the then Chancellor of the Exchequer said in May about assistance to the Severn barrage study and the announcement last week of the £11 million that we are giving to the Camborne school of mines for research there. They are two recent examples of the Government's commitment. I am grateful to my hon. Friend for his support.
    Mr. Corbett: Does the Minister accept that we are playing with the problem compared with the massive expenditure on the nuclear programme? Does he agree that if money were put into research and development we could not only save on existing forms of energy but could open up export markets for alternative energy?
    Mr. Buchanan-Smith: I agree that the matter should not be ignored, but one should not go overboard either. I hope the hon. Gentleman will recognise that we are spending four times as much as the Labour Government were spending five years ago.

    National Coal Board
    Mr. Eggarasked the Secretary of State for Energy if he will make a statement on the future structure of the National Coal Board.
    Mr. Peter Walker: I shall endeavour to see that the structure of the coal board is appropriate for it to achieve the strategic objective that the Government have set for it.
    Mr. Eggar: When will my right hon. Friend publish the objectives for the new coal board chairman? Will he confirm that they will cover at least two matters—an undertaking from the Government that they will not prevent the NCB from closing loss-making pits and that the chairman will be obliged to publish the financial results for individual pits as soon as possible?
    Mr. Walker: I shall certainly examine my hon. Friend's second suggestion. A procedure already exists under which the NUM and other mineworkers' unions agree that any proposal for closure is discussed by the management and union representatives. I believe that that should continue.
    Mr. Bermingham: As the structure of the coal board should cover the open cast executive as well, will the Minister give the same answer as he gave earlier in respect of the coal board—that there are no plans to privatise the open cast sector?
    Mr. Walker: I said that there were no plans at present to privatise any of the activities of the NCB, but that does not mean that I exclude any consideration of it in future. —[HON. MEMBERS: "Oh!"]—Obviously not. As I said in reply to an earlier question, if the president of the NUM were to put forward a constructive idea, I should certainly consider it.
    Mr. Kenneth Carlisle: Does my right hon. Friend accept that it is essential for all parties to keep an open mind on the question of the introduction of private capital? Is he aware that several peripheral businesses, such as Sankey in the building merchants' sphere, compete with the private sector, and that there is no reason for them to remain within the perview of the NCB.
    Mr. Walker: My earlier reply made clear the present position. The main activity, as my hon. Friend's remarks make clear, is mining. I am anxious that the coal industry should succeed in the decades to come because it is an industry of long-lasting and immense importance to the British economy. That is why I believe that the approach that has been made in recent years by the present chairman, and will I think be made by the future chairman — namely, getting an economic and sensible coal industry—is of immense importance to this country.

    Domestic Gas Charges
    Mr. Rookerasked the Secretary of State for Energy what is the average domestic quarterly standing charge for gas at the latest convenient date; and how this compares with 1979.
    Mr. Buchanan-Smith: The average domestic quarterly standing charge for gas is at present £9.46; in June 1979 it was £1.91, but, as a result of changes in the tariff structure, the two figures are not directly comparable.
    Mr. Rooker: Will the Minister assure the House and gas consumers that, unlike the previous Parliament, there will be no tax on gas in this Parliament?
    Mr. Buchanan-Smith: Certain planned increases in the price of gas took place over three years. That process has now been completed and in the corning year we would not expect increases to be more than the rate of inflation.

  HOUSE OF COMMONS

    Procedure
    Dr. M. S. Millerasked the Lord Privy Seal whether he will set up a Select Committee on Procedure to cover all aspects of House of Commons business.
    The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): I am aware of the interest in a general review of procedure that has been shown in all parts of the House. I am still considering this matter in the light of the views that have been expressed.
    Dr. Miller: I thank the right hon. Gentleman for that reply. Does he appreciate the necessity for a review of procedure? Does he agree that one matter that should be considered is the way in which Back Benchers do not have the facility to have urgent matters which occur in their constituencies debated in the House? Will he consider either changing the Standing Order No. 10 procedure to permit that to happen or recommending that some other procedure be implemented so that a legitimate matter of concern to an hon. Member may be debated quickly and briefly, but with a Minister present?
    Mr. Biffen: Should it be the decision of the House to set up a Select Committee on Procedure with a very general remit, I am certain that one matter that would receive urgent attention would be the present Standing Order No. 10 arrangements.
    Mr. Wilkinson: Regardless of whether a Select Committee on Procedure is established, and as it will be an urgent task of this Parliament to establish the Select Committees of the House, will my right hon. Friend reconsider re-establishing the old interdepartmental Select Committees, such as those on the nationalised industries and science and technology, which did an outstanding job in the past?
    Mr. Biffen: I congratulate my hon. Friend on recognising a side wind whenever there is one. The question deals with a Select Committee on Procedure, and I am afraid that I cannot go further than what I said in reply to the hon. Member for East Kilbride (Dr. Miller).
    Mr. Maclennan: Does the right hon. Gentleman recognise that the handling of Scottish Bills is a matter requiring attention by the Procedure Committee? Does he appreciate that it would be wholly unsatisfactory if the Government were to bring back the police and Criminal Evidence Bill with substantial proposals to amend the Scottish law without proper consultation with Scottish Members and representation of Scottish interests on the Committee?
    Mr. Biffen: The Government's views on the reintroduction of the Police and Criminal Evidence Bill are well known, but I take note of the hon. Gentleman's reservations. On the wider issue of dealing with Scottish matters in the House, I find it inconceivable that any Select Committee on Procedure would survive without having to address itself to those matters.
    Mr. Tim Smith: Does my right hon. Friend agree that an important matter which should be referred to a Select Committee on Procedure is the question of Standing Committee procedures? Is it not complete nonsense that a Standing Committee, such as the one on the Telecommunications Bill earlier this year, should spend 120 hours considering three clauses followed by 50 hours considering the remaining 81?
    Mr. Biffen: I must remind my hon. Friend of Mrs. Beeton's dictum—"first catch your hare". Once we have resolved to have a Select Committee on Procedure with general terms of reference, I have no doubt that timetabling will be a matter for consideration.
    Mr. Silkin: If and when the House decides to set up a Procedure Committee, will the right hon. Gentleman advise that Committee to look at the way in which the parliamentary year is now conducted? Many hon. Members—as I look round the Chamber now, more perhaps than for some time past—have young families whose holidays are not as well catered for as they should be.
    Mr. Biffen: The right hon. Gentleman and I are profiled as "usual channels", and he will recognise that that is a matter that we would have to discuss through those channels. However, I say at once from this Dispatch Box that I have a very lively sympathy with the point that he raises.

    Northern Ireland Office
    Mr. Arnoldasked the Lord Privy Seal if he will bring forward proposals for the setting up of a separate Select Committee to examine the expenditure, administration and policy of the Northern Ireland Office.
    Mr. Biffen: I have no plans to do so.
    Mr. Arnold: I hope that my right hon. Friend will not take offence when I say that, coming from a staunch friend of the Union, I find that a somewhat puzzling and ambiguous reply. Has he noticed that although Standing Order No. 99 permits many departmental Select Committees to look into the expenditure of the Northern Ireland Office, with few exceptions they have so far refused to do so, on the ground that Northern Ireland has nothing to do with them? Has he also noted that in terms of the way in which business in the House is conducted, the Government have come forward with proposals that have resulted in a massive increase in the expenditure of the Northern Ireland Office? What does he intend to do to uphold the rights of the House of Commons in the matter?
    Mr. Biffen: I say at once that I am anxious to meet the anxieties of my hon. Friend, and I hope he does not find that too controversial a reply. Hitherto, departmental Select Committees have been able to look at Northern Ireland affairs, and the Northern Ireland dimension, if one may put it in those terms, has been examined by both the Education and the Trade and Industry departmental Select

    15
    Committees. The question is whether we want a specific Committee, as suggested by my hon. Friend. At present I am not persuaded that there is an imperative for that, but I am happy to examine that and other problems which concern him.
    Mr. Winnick: As there is no chance—and there has not been for some years—of any progress with Northern Ireland policy, would it not be wise to set up a Committee to look at the whole question of future policy for Northern Ireland, bearing in mind some of the initiatives which have been taken by the Government of the Irish Republic in the last few months, mainly the forum.
    Mr. Biffen: That suggestion and the source from which it comes would give rise to great anxiety on the part of those in Northern Ireland concerned to maintain the Union, and on that basis alone I must resist the temptation.
    Sir John Biggs-Davison: Does my right hon. Friend realise that the development of Committees of this House, and perhaps the other place, for Northern Ireland would be warmly welcomed by those of us who believe that there should be one legislative assembly for the whole United Kingdom, and should not such Committees, if set up, sit both at Westminster and at Stormont?
    Mr. Biffen: I accept that as a legitimate point of view. It is also legitimate to say that a departmental Committee of this United Kingdom Parliament should have within its ambit the consideration of Northern Ireland affairs.
    Mr. Michael McNair-Wilson: Bearing in mind that Northern Ireland now has its proper representation in the House and has an Assembly, unlike any other region of the United Kingdom, would there not be a danger, if we set up a Select Committee, that Northern Ireland would have a disproportionate amount of parliamentary scrutiny?
    Mr. Biffen: That underlines admirably the measured caution of my original answer.

  CIVIL SERVICE

    Financial Management Initiative
    Mr. Eggarasked the Minister for the Civil Service if he will make a statement on the financial management initiative.
    The Minister of State, Treasury (Mr. Barney Hayhoe): Good progress is being made, but work on the White Paper reporting on Departments' programmes of work was held up somewhat by the general election. We hope to publish it soon, although it may not now be possible to do so this month.
    Mr. Eggar: If it is not possible to publish the White Paper this month, will my hon. Friend confirm that it will be possible to do so before September? Will he also confirm that it is vital to have good and efficient people in the Civil Service, and good systems, and that senior Ministers should take an active interest in management? What will the Department do to ensure that this happens?
    Mr. Hayhoe: I assure my hon. Friend that the drive for better management has the full support of my right hon. Friend the Prime Minister, who continues to take an active and close personal interest in this work. Since the election my right hon. Friend has drawn this issue to the attention of Ministers who are in charge of Departments and asked them to give it their personal attention.
    Mr. Tim Smith: What progress is being made with the introduction of MINIS, or similar management and accounting information systems, in Whitehall?
    Mr. Hayhoe: Considerable progress is being made. My hon. Friend will know that the adoption of systems similar to MINIS is part of the financial management initiative. I assure him that good progress is being made.

    Dispersal Policy
    Mr. Campbell-Savoursasked the Minister for the Civil Service whether he will make it his policy to establish a Civil Service dispersal policy which can benefit the northern region.
    Mr. Hayhoe: The Government remain committed to the dispersal programme announced on 26 July 1979 and have no plans for any further dispersal. Regional needs will continue to be taken fully into account should there be a need to locate work in future.
    Mr. Campbell-Savours: Is the Minister aware that the Government's refusal to implement the Hardman report's proposals, irrespective of the statement that he made in his main answer, has caused resentment throughout the northern region? To what extent do we in the northern region figure in the Government's consideration of Civil Service placements in future? Will we get our share?
    Mr. Hayhoe: The Government made clear their attitude to the Hardman report's recommendations in July 1979. Their attitude was widely welcomed, especially by many of the civil servants concerned. The amended dispersal programme, which was announced in July 1979, is being continued. The interests of the northern region will be taken into account if there is a need to relocate existing work or to locate new work.
    Mr. Arnold: Is my hon. Friend satisfied that we have a sufficient number of senior civil servants at under secretary and assistant secretary level in the north-west and other regions?
    Mr. Hayhoe: I hope that there are sufficient to carry through the work that is required of them by the Departments. It is for Ministers to take responsibility for staffing levels in their own Department's work in any particular area of Britain.
    Mr. Dormand: Does the Minister recall that I raised this issue with him on dozens of occasions in the previous Parliament and received no satisfactory response? As the number of unemployed in the northern region is the highest in the United Kingdom, with the exception of Northern Ireland, is that not a sufficient reason for the Government to reconsider their attitude and to cease being so inflexible and stubborn?
    Mr. Hayhoe: I recognise and acknowledge the hon. Gentleman's persistence. He has asked the same question and I have given the same answer on many occasions. I recognise the problem of unemployment in the northern region, but I hope that he will recognise that, compared with other regions, the northern region has a fair share of Civil Service jobs.
    Mr. Beith: As the Minister is not bringing new jobs to most of the north-east, will he make it his business to persuade other Ministers not to take jobs away from the hard-hit communities within the region? Does he realise

    17
    that the transfer of senior posts from Newcastle to Leeds and the closure programme for tax offices is hitting many communities in the north-east that are much affected by unemployment?
    Mr. Hayhoe: It is important that Departments should seek to get better value for money and have more efficient methods of working. I do not believe that they should artificially preserve jobs that are not required and thereby act against their efficient running. Those must be the right criteria. It would be wrong if the Government, or a particular Department, subsidised and retained unnecessary jobs in the Civil Service at taxpayers' expense.

    Confidential Papers
    Sir Kenneth Lewisasked the Minister for the Civil Service whether he is satisfied with the security of documentation inside the Civil Service with regard to confidential papers.
    Mr. Hayhoe: Not completely, but considerable efforts are made to keep classified material secure and to identify those who break the rules; and security arrangements are kept under constant review. The unauthorised disclosure by any employee of information entrusted to him in confidence by his employer is a deplorable breach of professional trust which calls in question his right to continue in that employment.
    Sir Kenneth Lewis: Will my hon. Friend confirm that, following the general election, there is now nothing left to leak in Whitehall? Will he try to stop discussion papers being leaked in the name of policy papers? Has not the time come to stop marking discussion papers "secret" or "confidential" in order to avoid this happening?
    Mr. Hayhoe: I assure my hon. Friend that many secrets are kept soundly in Whitehall, and that should be so. Having had some connection with the Ministry of Defence, I am pleased that security measures for such documents are, in the main, fully maintained. I think that there would be concern throughout the House if the result of the leaking of confidential documents was that Ministers received less frank advice than that to which they are entitled. The Labour party's attempts during the election campaign to exploit some of the leaked and stolen documents brought great discredit upon the individuals concerned. I am glad that their attempt to make political capital was a dismal failure.
    Mr. Maclennan: I recognise that there is a need for clarification, but does the Minister accept that Britain is more secretive in its processes of government than any other democracy in the Western world? Is it not time that we had a review of the freedom of information provisions of the law and became altogether more open about the processes of government so that Parliament could operate a more effective scrutiny of the Executive?
    Mr. Hayhoe: I should not seek to make the value judgment that the hon. Gentleman has attempted to put before the House. Since 1979 the government of the United Kingdom has been more open. The Conservative Government have made more information available to hon. Members and to Select Committees than did the Labour Government, which the hon. Gentleman supported before 1979.
    Mr. Williams: Were not the leaks during the election at least as much an indictment of the Government as of those who caused the leaks to take place? Was not the leaking the reaction of those who were utterly frustrated at the shameful fraud that they could see Ministers committing against voters? They knew that while those same Ministers were making announcements about unemployment benefit they were meeting behind closed Committee doors and considering options that refuted the cynical statements that they had been making on election platforms.
    Mr. Hayhoe: If the right hon. Gentleman is attempting in any way to condone civil servants' breach of the trust that rests in them by leaking classified documents, I must repudiate everything that he has said.

    Non-civil Servants
    Mr. Viggersasked the Minister for the Civil Service if he is satisfied that sufficient opportunities exist for the employment of non-civil servants within the Civil Service on temporary appointments; and whether he is satisfied that civil servants are able to gain experience outside the Civil Service on a similar basis.
    Mr. Hayhoe: Good progress is being made, as is shown in a report on our interchange programme, which I am placing in the Library' of the House, but of course we always welcome further opportunities. The results for 1982 are very encouraging. The total number of secondments continues to grow, and rose by 20 per cent. between 1981 and 1982 to very nearly double the level when the initiative was launched in 1977.
    Mr. Viggers: I thank my hon. Friend for that helpful response. Will he undertake to keep an open and receptive mind towards increasing the number of such schemes, because there are great advantages to be gained for the Civil Service and industry if each has direct experience of working in the other medium?
    Mr. Hayhoe: I am grateful to my hon. Friend. I can give him that assurance. It is good for industry and commerce and the Civil Service that we have more exchanges and secondments. It is beneficial for all concerned.
    Mr. Williams: Has not the Prime Minister, in her appointments to top Civil Service posts, her sacking of the Think Tank and her axing and humiliation of Ministers who dared to disagree with her, displayed an obsession to surround herself with boot-licking yes-men? Is not the blinkered style and personality of the Prime Minster the great deterrent — [HON MEMBERS: "Reading."] I am not reading, as hon. Members can see. I say this with passion. Is not that the greatest deterrent to the recruitment of people of real ability to the Civil Service? Does not that mean that only neutered clones will search for such posts?
    Mr. Hayhoe: I utterly reject that criticism of the present recruits into the Civil Service. As far as I can judge, the right hon. Gentleman was reading a question that he drafted before the general election. Does he not recall that he had it wrong then? Would it not he wise to make a resolution, now that he has been readopted and re-elected, to forget his silly vendetta of criticism against the Prime Minster before the election?

Statutory Instruments, &c.
Mr. Speaker: By leave of the House, I shall put together the four Questions on the motions relating to statutory instruments.
Ordered,
That the draft Sex Discrimination Act 1975 (Amendment of Section 20) Order 1983 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Weights and Measures Act 1963 (Wine and Grape Must) Order 1983 be referred to a Standing Committee on Statutory Instruments &c.
That the draft Weights and Measures Act 1963 (Amendment of Schedule 3) Order 1983 be referred to a Standing Committee on Statutory Instruments &c.
That the draft International Jute Organisation (Immunities and Privileges) Order 1983 be referred to a Standing Committee on Statutory Instruments &c.—[Mr. Donald Thompson.]

Orders of the Day

  Petroleum Royalties (Relief) Bill
  Order for Second Reading read.
  3.33 pm
  The Secretary of State for Energy (Mr. Peter Walker): I beg to move, That the Bill be now read a Second time.
  In his Budget statement the former Chancellor of the Exchequer remarked on the changes that he was making in taxation in the oil industry. He paid tribute to the industry's remarkable achievements. I think that both sides of the House will agree that the enterprise that has been shown, the application of new technology and the way in which the considerable dangers in the North sea have been overcome are a remarkable tribute to all those in the industry.
  When I had the privilege in 1972, 1973 and at the beginning of 1974 of having responsibilities in this sphere, when North sea developments were beginning, I visited some of the sites and I could not help but he impressed by all those involved and the way in which the remarkable extraction of oil took place from the depths of the North sea.
  It is important that a measure such as this is carefully considered by the House. We must compare the likely returns from future development both to the Government and to the industry, and the ultimate results. That is an important comparison. The fact that the Almighty placed the oil in the North sea and we did not discover it until the world faced its energy crisis is of considerable benefit to the United Kingdom. Any Government of any complexion must ensure that the nation obtains the appropriate benefit.
  The demarcation line between the direct benefit to the nation and the benefit to the industries that carry out the work is such that, after the Budget measures and taxation proposals and the measures that will be put into operation as a result of the Bill, we can claim that the nation will obtain the lion's share. Petroleum revenue tax is 75 per cent., and thereafter there is a corporation tax of 52 per cent. The measure will mean that substantial benefit from any other discoveries and developments will come to the nation as a whole. As a result of the application of royalties for future developments outside the southern basin, the marginal tax rate for a field paying petroleum revenue tax will be reduced from 89·5 to 88 per cent. Therefore, I hope that the House will get into perspective the dimension of of the changes that will result from the Bill.
  Mr. John Smith: What is the right hon. Gentleman's estimate of the cost to the Exchequer of the concession? Parliament must have an idea of the amounts involved as well as the percentages.
  Mr. Walker: That would be difficult. One could argue strongly that if the Bill, combined with the tax changes, were not passed, developments would not take place, so there would be a substantial loss of revenue to the Exchequer and the taxpayer. If the right hon. and learned Gentleman, with his considerable experience in this field, had the wisdom to decide the extent to which decisions will be changed as a result of the Bill, no doubt he could publish accurate figures. However, I do not think that even he, with his remarkable ability, has that talent.
  Mr. John Smith: With respect to the Secretary of State, he told the House that the effect of the change would be to reduce the taxation by a specific percentage point. He must have made an estimate to arrive at that percentage. The House should be told, even in the roughest form—to the nearest £100 million will do—the loss to the Exchequer as a result of legislation that it is asked to approve.
  Mr. Walker: It would be a bogus estimate. I was about to say that I was grateful to the right hon. and learned Gentleman, because in the debate last week he used a number of the arguments that he was likely to use today. I was fascinated by them. One argument was that it was outrageous to take away the royalties payment on a profitable field. Therefore, I was kind enough at the beginning of the debate to illustrate the percentage loss on a profitable field. I said that instead of taking 89·5 per cent. the Government would take 88 per cent. The extent to which that affects the decisions taken by the oil companies and the extent to which, as a result, developments take place that otherwise would not, is something that we can see only in the years ahead.
  Mr. Dick Douglas: Will the right hon. Gentleman concede that not to assess a marginal rate of tax is poor North sea oil economics? Will he tell us what will be the loss in Government take as a result of the measure?
  Mr. Walker: I could make a vague guess and say that if the measure were not passed a mass of developments would not take place and there would be a considerable loss in Government take. I shall give a vague, inaccurate figure if the hon. Gentleman wishes. If the Opposition have their way, the Government take will be less. The Government's only objective is to see that there are developments. This is of interest not only to the oil industry but, in Scotland, to all the offshore supply industries for the fields.
  Mr. T. H. H. Skeet: Does my right hon. Friend agree that there are about 2·4 billion barrels of reserves in the 37 undeveloped fields examined by the UKOOA? Is not the whole purpose of the legislation to secure the development of those fields, which would not take place if the taxation were too heavy?
  Mr. Walker: I shall not comment on figures, but certainly the sole objective of the Bill and of the taxation measures announced by my right hon. and learned Friend the previous Chancellor, and supported by the present Chancellor, who was then Secretary of State for Energy, was to secure this development, which is of immense interest to the Chancellor in terms of income and to all the industries in Scotland and elsewhere which supply the oil industry. It was agreed that this was the only successful way to achieve that and that the measures were therefore right.
  In his interesting speech last week the right hon. and learned Member for Monklands, East (Mr. Smith) came up with a figure of £20 billion, which he said we had obtained from the North sea and had spent entirely on unemployment. That was his choice. To broaden the area of choice, I mention certain other areas to which that money might be said to have gone. It might be said that £3·4 billion went to increase expenditure on education — [HON. MEMBERS: "Private education."] No, public
  22
  education. It could be said that £5 billion went on the increase in public expenditure on health. To take an example related to energy, one might say that £3 billion went into the capital investment programmes of the National Coal Board during that time. One might also say that £1·3 billion was injected into British Leyland to ensure that that company survived. If we are to go into that rather crude type of argument, which is unexpected from the right hon. and learned Member for Monklands, East, we can all make our own choices about where the £20 billion went.
  Mr. John Smith: I am glad to know that the Secretary of State pays such great attention to my speeches, but does he accept that, although £20 billion went into the Exchequer from North sea oil, more than that was paid out in unemployment benefit uniquely under the Conservative Government? That money could indeed have been spent on British Leyland and the rest if the Government had not mortgaged all the North sea oil revenues to pay for an obligation that was uniquely theirs.
  Mr. Walker: I pay great attention to the right hon. and learned Gentleman's speeches, because they provide such useful ammunition for my own. This is a classic example. He says that we could have put the money into, say, British Leyland or the National Coal Board, the Health Service, the education service or training programmes for young people. That is exactly what we did. It is a crude argument simply to single out the area of public expenditure that one most wishes to criticise and say that that is where the money went. If the right hon. and learned Gentleman has exhausted his arguments, I do not blame him for using such tactics, but he should not blame me for choosing other examples.
  The right hon. and learned Gentleman made another interesting point. I take this up not as a point of repartee or party difference. He said that the rate of production from the North sea was too high and should be lower. That is a perfectly reasonable position and there are arguments for and against it. I was genuinely surprised, however, that it had become the position of the spokesman for the Opposition, in view of the position taken by the Labour Government when they considered these matters. The so-called Varley assurances embodied a judgment that we then made for a period of years about the importance of not reducing North sea oil production. When my predecessor continued those assurances in 1982 they were considered reasonable and were not criticised by the House.
  I hope that those who now advocate an arbitrary reduction in production from existing fields, or the alternative of stopping the development of new fields, will consider the substantial arguments against that proposal. Projections for oil prices provides no cogent argument for a reduction in current production or against the development of those areas that we now wish to encourage. I believe that my right hon. Friend was correct to continue the Varley assurances. Having considered the matter closely, I, too, believe that they should continue.
  Mr. Tony Marlow: What evidence has my right hon. Friend of the oil companies' investment intentions for further exploration as a result of the reasonable and sensible measure that he is now putting forward?
  Mr. Walker: There is likely to be more activity, which will be important in several ways, not purely in the supply of oil or the continuation of oil supplies. On any of the criteria currently available to the Government, production at the present levels should continue. Further, production from oilfields yet to be developed should be encouraged, although many of them are less attractive, smaller and have geological difficulties. Unless we do that, whole sectors of the supply industry will face considerable difficulty. I hope that that industry will have an enormous international future in exports.
  Unless changes are made in taxation and royalty payments, there will be a sudden drop in development, which will be of considerable disadvantage to an important section of British industry. For that reason I enthusiastically support the proposals that I inherited. As the new Secretary of State, I have examined them carefully and I believe that they are perfectly correct and will result in considerable action and economic activity in the years immediately ahead. We must recognise the considerable importance for our offshore supply industry of ensuring that these developments and export opportunities take place. [Interruption.] The hon. Member for Aberdeen, North (Mr. Hughes) used constantly to interrupt me during fishing debates, and is continuing to do so during energy debates. These measures were welcomed by the fishing industry, which has quite a connection with the activities of the offshore developers.
  Mr. Robert Hughes: The fishing industry is very depressed about the common fisheries policy negotiated by the right hon. Gentleman.
  Mr. Walker: I am more inclined to look at the letter sent to me only last week by the Scottish fishermen saying how much they applauded all that I had done for them. As the hon. Gentleman with his considerable information on these matters will be aware, I did rather better for that industry than my predecessors did.
  The present measures deal with the smaller and geographically more difficult fields to be developed in the future. The Bill is introduced against a background of asking our own oil industry and indeed the world oil industry to move into areas of the North sea which present more difficulties than earlier sites at a time when there is considerable speculation and concern about the future of oil prices. It was against that background that the Department carefully examined the prospects of impending developments. It considered in detail those fields likely to be developed in the future, and 10 such fields were considered in great depth. On the basis of that examination, my right hon. Friend the present Chancellor and my right hon. and learned Friend the then Chancellor decided upon the range of actions propounded first by the Chancellor in taxation changes and now in the Bill. It is right to recognise the importance of taking measures to continue those developments.
  If the result of taxation, in all its forms, and royalty payments, were to be to deter the industry from its development activities, there would be a delay that would considerably affect jobs and also many industries. If, at a later stage, we decided to give the appropriate incentive and encouragement, the cost of recreating the capacity that might now be lost would be considerable. For those reasons, I strongly advocate the measure and ask the House to give it a Second Reading.
  Mr. Robert Maclennan: The Minister has not yet answered the question of the right hon. and learned Member for Monklands, East (Mr. Smith) about the take for the Government. Has the Minister estimated the value to the industry of the reliefs being offered?
  Mr. Walker: When we are considering the future development of oilfields where the capacity and difficulties are unknown, it is absurd to talk of estimates of what that will mean in monetary terms. The Government considered the cost of developments and the general speculative figures and, after careful examination, judged that further incentive was required. If the Social Democratic party opposes that additional incentive, I shall be interested to hear its reasons. Obviously, for any such judgment it is important to decide on a range of measures that will on balance result in the desired activity. The cost to the Exchequer will be far greater if the measures are not taken.
  The take of the Government includes petroleum revenue tax of 75 per cent. and corporation tax of 52 per cent. Any benefits obtained by the lapsing of the royalties will affect the profits of the oil companies concerned, which will be hit by those taxes. Therefore, the effect will be minor.
  If a field paid 75 per cent. petroleum revenue tax on a large proportion of its net revenue, and corporation tax at 52 per cent., we would be considering the difference between 88 per cent. and 89·5 per cent. If a field had reserves of about 55 million tonnes— a medium-sized field by the standard of existing fields—with a life of about 12 years and development costs of just over £1 billion, the real rate of return would be a little over 30 per cent., without taking into account tax or royalties, or just over 15 per cent. when taking them into account. The net revenue over the life of the field might be just under £6 billion at 1980 prices and undiscounted. Over the life of the field, the Government would take in royalties between £4½ billion and £5 billion of that sum, and the company would take just over £1 billion. The abolition of royalties would transfer about 3 per cent. of the total net revenue to the oil companies.
  I hope that there will be no more talk of the measure making a massive concession and of giving away the rents to the oil companies, when the improvement to an oil company on that sizeable development will be about 3 per cent. and the great mass of the rent will continue to be paid to the Government.
  Mr. John Smith: The Minister has at last disgorged some figures. He said that the putative loss to the Government would be 3 per cent. of the £4·5 billion. [Interruption.] I do not understand how that can be described as rubbish when it is a direct quotation from the Secretary of State. Will the Minister do the simple mental arithmetic that is involved and agree that it comes to about £120 million?
  Mr. Walker: What is involved here is a shift of 3 per cent from the Government to the oil companies—if they are fortunate enough to get it. As the right hon. and learned Gentleman will understand from his knowledge of the industry, the chance of having fields on that scale is not very great and there are many problems involved. Many fields will be much smaller and much more difficult to develop. We have to bear in mind all the hazards involved.

  25
  If the right hon. and learned Gentleman considers a switch of 3 per cent. from the Government to the oil companies to be wrong, he will passionately argue his case, but he must also bear the accusation from the Government Benches that in arguing his case he is unwilling to take account of any marginal differences that might encourage a great deal more activity and development than would otherwise take place.
  Mr. Marlow: I am grateful to my right hon. Friend for giving way yet again. Is it not the case that, if the measure does not pass through the House, development will not take place in some marginal fields? Then not only will there be no oil and no jobs in subsidiary industries; there will be no revenue for the Government anyway.
  Mr. Walker: I am delighted to find that I am much more in agreement with my hon. Friend the Member for Northampton, North (Mr. Marlow) than I was when I was in my previous Department.
  Obviously, the whole reason for making the shift is that in the Government's judgment, after very careful study and analysis, it was believed that several changes were required to obtain maximum development. My hon. Friend is right in saying that if those steps are not taken not only will there be a loss of revenue from the oil fields, because some developments will not take place, but there will be an effect on all the ancillary industries supplying the oilfields, with a consequent loss of jobs.
  If the cost of unemployment is considered, that must also be measured if the sort of inducement that is proposed for development to take place is not given. That is the basic argument for doing what is proposed, and for doing it now.
  The Chancellor of the Exchequer, in his Budget, announced improved reliefs against petroleum revenue tax, particularly the gradual phasing out of advance petroleum revenue tax, for all fields, and the doubling of the oil allowances for all offshore fields outside the southern basin whose development was approved after 1 April 1982. The Government also announced their intention to abolish royalties for new fields in the latter category.
  I have been asked why we do not propose to use the provision that is available to repay royalties, so that, if a field proved to be successful, all the royalties could be kept, and if it proved to be unsuccessful, some of the royalties could be repaid. In reality, if we are to give an inducement for all the fields to be developed, to say, "If you are successful we shall pour back the royalties, and if you are unsuccessful we shall not," is not a way of encouraging the development to take place. We have advocated something that will secure the bulk of the rents without impeding the developments that would otherwise take place. We have tried to obtain that balance. It is a judgment that has to be made.
  The Bill is short and simple and comprises two clauses. Clause 1 provides that petroleum won and saved from a relevant new field, as defined in section 36 of the Finance Act 1983, shall be disregarded in determining the amount of royalty payable to the Secretary of State or the quantity of petroleum to be delivered in lieu of royalty.
  It has been argued that the chance of taking the oil instead of the payment gives further support to our security of supplies, but here we are talking of about 6·5 per cent., because there is already the 51 per cent. that we have the
  26
  right to take, and that has to be let in terms of the amount taken as a result of the royalty payments. Therefore, we are talking of 6·5 per cent. in lieu of payments. In terms of security of supplies, the proposed developments are important, because they will have a much greater impact upon our future security of supplies than the possibility of taking the additional 6·5 per cent.
  Clause 1 also specifies the licences to which the Bill applies, that is to say, seaward production licences which incorporate all or any of the model clauses mentioned in it.
  Clause 1 also ensures that should the definition of "relevant new field" in section 36 of the Finance Act be amended by later legislation following a decision to extend the tax concessions—for example, to some field in the southern basin of the North sea that is excluded by the current definition—such an amendment would apply for the purpose of the Bill. In effect, the clause abolishes royalties on future oil and gasfields lying wholly offshore, outside the southern basin of the North sea. That is defined as an area east of the United Kingdom between latitudes 52 degrees north and 55 degrees north, no part of which, before 1 April 1982, has been served with a development programme or received consent or approval for a development programme.
  Clause 2 gives the short title, commencement and extent of the Bill. The provisions of the Bill apply to England, Wales and Scotland, but not to Northern Ireland. The Petroleum (Production) Act 1934, which enables licences to be granted, does not apply to Northern Ireland, whose authorities have their own petroleum licensing arrangements.
  The Bill provides relief only for those areas defined in section 36 of the Finance Act; that is, those offshore fields outside the southern basin of the North sea. We excluded onshore fields because costs are much lower and no further incentives for those developments seem necessary. On the limited evidence available, the new southern basin fields also seem very profitable. However, we have said that we are prepared to consider any evidence put forward by operators on the profitability of such fields, and if we were persuaded that similar reliefs should be given for new fields in the southern basin, that would be achieved by amending the definition of "relevant new field" in section 36 of the Finance Act.
  We have also excluded from existing fields developments approved prior to 1 April 1982 and satellites within such fields. The evidence produced during our studies suggested that in general those remain reasonably profitable under the existing arrangements.
  The Government are satisfied that the Bill is an essential element in the provision of the fiscal regime under which the development of the oil and gas reserves on the continental shelf can proceed with greater benefit to the United Kingdom economy.
  4.2 pm
  Mr. John Smith: During the debate on the Gracious Speech I made it clear, as the Secretary of State noted, that the Labour party opposes the proposals in the Bill. Nothing the Secretary of State has said today by way of explanation or apology moves me to amend that judgment in any way. The Government are saying that henceforth the nation is to abandon its right to receive a royalty for the exploitation of its oil resources for any of the new oil discoveries and developments that occur in the

  27
  largest part of the North sea. That is a major departure from the whole approach to the obtaining of a proper return for the nation from North sea oil. It is my submission that it upsets significantly the balance between a proper return for the state and a reasonable encouragement of exploration and development that must be at the heart of any sensitive North sea policy.
  The justification offered for the startling departure in policy is that the development of marginal fields must be encouraged and that most of the fields where the development decisions are contemplated are in the marginal class. That ignores the fact that ever since the tax and regulation scheme for the British sector of the North sea was put in place by the last Labour Government it has been possible for oil companies—at least since 1975—to seek relief on royalties in appropriate cases. The companies require—
  Mr. Tim Eggar: Before the right hon. and learned Gentleman goes off down that path, will he tell the House why he has completely changed his mind from what he said when the Budget proposals were put forward about three months ago? Could it be that before the election he was not willing to oppose proposals that he knew would create employment, but now that the election is over he could not care less?
  Mr. Smith: I wish that the hon. Gentleman would not repeat that boring rubbish. I think that I will send him a copy of my speech so that he can read it again and, perhaps, understand it. He will recollect—he can check by studying Hansard—that I did not oppose the proposals in the Finance Bill. I thought that some encouragement was necessary, especially because of the problems facing the offshore supply industry. I made it crystal clear at that time that we were resolutely opposed to the propositions in this Bill. This legislation did not get through the last Parliament because of Opposition objections that I articulated.
  The point is absolutely clear and I hope that the hon. Gentleman will not repeat his remarks. The Opposition did not oppose the provisions in the Budget, but we have always resolutely opposed the remission of royalties. The hon. Gentleman claimed that I had changed my mind, but I have shown the House that I have done nothing of the sort. Indeed, I have been firmly consistent in my view. I hope that the hon. Gentleman will not persist with his daft allegations.
  When seeking a remission of royalties under the Petroleum and Submarine Pipe-lines Act 1975, a company had to establish its case. It had to prove that the remission of royalties was necessary for the field to be developed. Of course, that means that an oil company must give information to the Government—something that it is never keen to do. But the Government should insist upon it and obtain the maximum information, especially if a company is seeking concessions from the state through either taxation or remission of royalties.
  Mr. Skeet: Companies made no applications under section 41 of the 1975 Act because they knew that they would not be considered by the Government. Oil prices were rising steeply at that time, but it is rather different when oil prices are falling.
  Mr. Smith: My information is obviously different from that of the hon. Gentleman. I understand that a number of applications for remission of royalties were made to the Department of Energy, but that none was granted by either the last Labour Government or the present Government. That leads me to conclude that either the companies did not think that they had a good case to put forward or that they were unable to make a good case. That should put us on our guard. If a provision that is favourable to companies depends upon their proving their case, but they have been unable or unwilling to do so, we should be careful before giving them that concession without requiring any justification from them.
  As the hon. Member for Bedfordshire, North (Mr. Skeet) and other Conservative Members keep telling us, we are entering a period in the development of the North sea when the finds and development will relate to smaller fields, where the geology is more complex and the financial risks greater. It is precisely the time when we could expect applications for relief from royalties to be made, perhaps successfully. The provision is especially appropriate to companies thinking of embarking upon a development at this time. Is that not the more sensible way to go about matters? The provision has existed for eight years, and the Government should allow it to operate rather than throw away the right of the state.
  If an operator can make a case for relief, he can obtain it. If he cannot make a case, why on earth should we give him relief? Under the current provision, the nation knows that it is not forgoing income where the incentive is not justified.
  The Government are marching in the opposite direction with their Bill. For all new fields, large or small, profitable or unprofitable, complex or straightforward, the right to royalties is thrown away with no conditions, no qualifications and no criteria. That is where the first and most obvious problem arises. If a company discovers a major new oilfield—and who, among the many experts in the House, can say that that is either impossible or unlikely — no royalties will be payable even if it is manifestly absurd that such a concession is given. The position would be so bizarre that the Government would have to make yet another swerve in policy—and, my goodness, they have made many—and either reintroduce royalty or increase taxation to recoup what was being lost.
  If a company found a Forties field or a major new development in the North sea, surely the Secretary of State could not argue that it was proper that royalties should be demanded. He has already made it clear that the Government are not remitting royalties on existing fields that have already been developed. Would it not be much more sensible not to forswear royalties for all discoveries in the North sea for ever and a day, but to consider the need for incentive on a field-by-field basis depending on the weight of the case, as is provided for in the 1975 Act, which I had the privilege of taking through the House?
  In the general area of taxation—and I suppose that we should regard royalty as a form of taxation—the Government propose a major concession to a major interest without being able to offer any figures of the cost to the taxpayer. The Secretary of State has almost created a precedent in legislation of this kind of being unable to give the House, which authorises the collection of taxes and superintends their spending, any sensible calculation of the cost to the nation.

  29
  I suspect that the Secretary of State knows or has a fair idea of the cost to the Exchequer. I hope that the Chancellor of the Exchequer has some idea of the cost to the nation of this concession. I am sure that the United Kingdom Offshore Operators' Association, which has been lobbying the Government for some time on such matters, gave figures to the Government of the cost to the nation. It would hardly believe it possible that the Chancellor of the Exchequer or a Secretary of State for Energy would say "Yes. You can have this concession without a price tag applied to it." If a price tag was mentioned in the discussions between the industry and the Government, that information should be made available to the House of Commons.
  Mr. Marlow: The right hon. and learned Gentleman describes this as a significant concession. Will it not change the prospective pattern of development in this extractive industry? What is likely to be got out of an extractive industry is speculative, anyhow. If the pattern of development changes, is it not impossible for my right hon. Friend to bring forward the figure for which the right hon. and learned Gentleman asks? Is he not asking for a figure that he knows my right hon. Friend does not have? Indeed, would the right hon. and learned Gentleman be able to make anything of it if he had it?
  Mr. Smith: I say the very opposite to the hon. Member for Northampton, North (Mr. Marlow). I am certain that a figure emerged during the discussions between the industry and the Government. I have dealt with the United Kingdom Offshore Operators' Association in the past. It is a highly expert body, especially when it is pursuing a matter which is of interest to it. It would have put a figure on it and, when the Secretary of State for Energy and the Chancellor of the Exchequer were weighing up whether the proposed change should be math, I am certain that someone somewhere asked "How much will it cost us?" If that is not the way in which government is conducted, it is alarming. I cannot believe that any Government would propose giving concessions by way of taxation or royalty without knowing the consequences. The estimates may be imperfect, but imperfect estimates are better than no estimates for this Parliament.
  Mr. Peter Rost: Does not the right hon. and learned Gentleman realise that it is impossible to guesstimate what the tax relief will be, because we are talking about fields which have not yet been developed? We do not even know the size of the fields. Many of them have not even been discovered. The right hon. and learned Gentleman is trying to make a ridiculous point.
  Mr. Smith: If that is ridiculous, why did the Secretary of State talk about a notional field and give us figures for it, saying that the difference in take would be 3 per cent.? If the right hon. Gentleman can talk about a notional field and give us the gross income from it, surely he can work out the percentage and give us the figure for which I asked.
  The Government introduced tax changes in the last Finance Bill and in the Red Book they gave their calculations of the impact of those changes. Surely if there is a change in tax designed to encourage development, the same possibility of ascertaining what will be the result applies. The Government gave figures in the Red Book, and they were used in our discussions on the Finance Bill. I do not understand why we cannot be shown the same
  30
  courtesy by the Department of Energy as the House has come to expect from the Chancellor of the Exchequer when we discuss these important financial measures—[Interruption.] I dare say that the Secretary of State finds my reference to the Chancellor of the Exchequer amusing. We all share his amusement. But in case there was too much optimism rising in the right hon. Gentleman when he got the job of Secretary of State for Energy, I ought to point out to him that in all the political circumstances he is unlikely to follow the present incumbent into the post of Chancellor of the Exchequer. But, between them, surely the present Secretary of State for Energy and the present Chancellor of the Exchequer, whether he was acting as Secretary of State or Chancellor, had the wit to ask someone these questions. I do not believe that they were not asked. However, the House of Commons is not being given the answers at which they must have arrived.
  It is not surprising that the Government exhibit a lack of balance in their approach to revenue from future fields. Their record in dealing with our North sea oil revenues and the whole of their North sea oil policy in the major fields already being exploited is little less than a national disaster. First, as the Secretary of State noted, the Government have received more than £20·5 billion in North sea oil revenues since 1979. They have squandered the lot. In all their period in office, the previous Labour Government got only £800 million out of the North sea. No Government in British history have had such a windfall as the present Government have had since 1979. The figure of £20·5 billion — the figure given in a parliamentary answer towards the end of the last Parliament—shows the size of it. It is the equivalent for the nation of a pools win for an individual.
  Mr. Peter Walker: Can the right hon. and learned Gentleman say whether the £800 million that his Government received was sufficient to meet the cost of the doubling of unemployment which occurred during their period in office?
  Mr. Smith: I am happy to operate on that basis. The answer is that we simply did not have substantial North sea oil revenues under the last Labour Government. Surely the right hon. Gentleman has grasped the point that the present Conservative Government are unique amongst western Governments. No Government in modern history have been given a bonanza of £20·5 billion, and the right hon. Gentleman knows that the only reason why the Government were able to get away with 3 million unemployed was the £20·5 billion of North sea oil revenue that they had. If they had not had that £20–5 billion, either they would have had to cut benefits — which will probably come our way in any event—in which case they would have courted social revolution, or they would have had to increase taxes, in which case they would have courted political defeat.
  Along came the £20·5 billion to bail the Government out of the consequences of their unemployment policies, and it is quite fair and legitimate to say that the Government have an extra income which they did very little to deserve. The present Government had very little to do with the crucial period of development in the North sea between 1974 and 1979, and we know that they incurred heavy extra expenditure. I am sure that the Secretary of State for Energy still has sufficient of his Tory middle-way conscience to be sensitive to unemployment

  31
  and to know the huge cost that that has imposed on the nation. We have income coming in and expenditure going out caused by the same Government. It is quite fair to set one against the other.
  What is more, it goes on. We are getting about £8·5 billion a year in North sea oil revenues as a whole, and the cost of the extra unemployment created since 1979 is well in excess of that. The extra unemployment means about £12 billion a year, the total cost of unemployment being about £17 billion a year. When the history of our times comes to be written, people will hardly believe it was possible for Britain to use £20·5 billion not to modernise its industry, rebuild its welfare state or even give tax incentives to its citizens but to pay for its Government's foolish policy on unemployment.
  Mr. Bryan Gould: Surely the position is even worse. It is not so much that the Government have used these revenues to pay for unemployment. Because of their financial policy, they have allowed North sea oil revenues to displace manufacturing output and, therefore, to create unemployment.
  Mr. Smith: I am grateful to my hon. Friend the Member for Dagenham (Mr. Gould). I am afraid that my way of moderately stating a case sometimes leads me to underestimate the true impact of my arguments. If my hon. Friend sees me falling into the serious error of moderation in the future, I hope that he will not hesitate to correct me. Government supporters will have noted that my hon. Friends regard me as a very moderate expounder of a case.
  The second disastrous feature of the Government's policy is that they have become so dependent on the oil revenues to pay for their unemployment policy that they have permitted production levels, especially in the major prolific fields such as Brent and Forties, to soar to the highest levels ever. We are now overproducing in the North sea so excessively that, even allowing for all the imports which are necessary to get the mix right in the refineries, we are exporting net 30 per cent. of the total North sea production. Oil is being forced out of the North sea as if it were going out of style. There is no balance of present as against future needs, of present against future levels, or of present against future oil values. In short, there is no sensible depletion policy. The Government are simply raiding the North sea larder in order to get the revenue. That becomes all the more incredible and alarming—
  Mr. Skeet: If we followed the right hon. and learned Gentleman's argument, and there were no encouragement of private industry to develop new fields, by the end of the century — because of the time lag — we would be importing oil heavily at very high prices and we would be twice as badly off as we will be if we adopt these measures.
  Mr. Smith: As the hon. Gentleman knows, I am in favour of approaching in two ways the problem of maintaining our oil resources for as long as possible. First, we need to have some sensible controls on the large and prolific fields at present being exploited, and, secondly, we need to encourage the marginal fields—although not in the way suggested in the Bill. The reason behind my attitude to the measures in the Finance Bill is that I
  32
  recognise sensible and balanced measures when they are offered, and I recognise foolish measures when they are offered instead.
  If the hon. Gentleman is worried about the fact that we shall hit peak production in 1985–86—and every hon. Member ought to be worried about that—he should ask not only how we should encourage future fields but also whether it is sensible to export 30 per cent. net of all our oil when we know that, within a few years, production will hit a peak and begin to decline. It does not make sense to mortgage the future in order to enjoy the benefit now. The Government are well aware that after 1985–86 we shall face the problem of falling production. However, instead of moderating over-production from the existing fields, they have panicked about the lack of development of future fields and introduced over-extravagant concessions.
  For most of their period of office, the Conservatives' main objective has been to extract as much money as possible from the North sea. They increased the level of taxation considerably and brought in measures such as the advance petroleum revenue tax, which amounted to payment of tax before it legitimately fell due. They then suddenly realised that they would face an awkward problem in the future, and we have therefore seen a rapid about-turn of Government policy over the past year or so.
  Mr. Marlow: It would help the House if the right hon. and learned Gentleman would make up his mind. On the one hand, he says that there should be a massive panic because we are running out of oil. On the other hand, he says that if we introduce this measure there will be massive exploitation by the oil companies. He must be assuming that the oil companies will dig up oil all over the place, that oil will be bursting out of our ears and that they will be able to get away with murder. Will he please make up his mind? Will there be more oil or not? If there is to be no more oil, why is the right hon. and learned Gentleman so concerned about this measure?
  Mr. Smith: I do not believe that the hon. Gentleman listens carefully to anything said in the House unless he says it himself. His intervention is a good example of that characteristic. Throughout our discussions on this subject, I have made clear my belief that we must be careful about both the management of existing fields and the development of new fields. I am in favour of sensible and reasonable incentives where they can be justified. I object to giving away royalties, as the Bill provides, without even a pretence of justification.
  Mr. Peter Hardy: My right hon. Friend is being relatively kind to the Government. He has ignored the fact that the Bill represents the twelfth change of the financial rules for the North sea game since the Conservatives took office.
  Mr. Smith: I thank my hon. Friend for pointing out another of the arguments that I can deploy against the Government. Over the past four or five years, the pattern of North Sea taxation has been bedevilled by shifts and turns in Government policy. The structure of taxation is the most complicated that could have been devised, and is the subject of repeated complaints by those who operate in the North sea. Every time that the Government needed more money — every time that the Chancellor had a problem — they simply took more money out of the North sea. On one occasion, they did it by means of advance petroleum revenue tax.
  Mr. Eggar rose—
  Mr. Smith: The hon. Gentleman must not assume that every time he gets up and bays in his ill-mannered way at whoever is at the Dispatch Box, and in the middle of a sentence, he should automatically be allowed to make an intervention. The hon. Gentlemen is probably seeking to ask why I criticise the Government for raiding the oil companies when I also say that they are getting away with too much. The point is simple. The Government took a risk in over-raiding the oil companies, but now they are going too far in the opposite direction. As we have seen in a number of previous cases, it is quite possible for the Goverment to be inconsistent.
  Mr. Eggar: That is not the point that I wish to make. The right hon. and learned Gentleman criticised the Government for introducing APRT. Why, then, did his party support the introduction of APRT? Secondly, if he considers the tax system too complicated, why is he opposed to the withdrawal of royalty, which is one of four layers of taxation paid by the oil companies?
  Mr. Smith: I am opposed to this measure because it is a concession that could get out of control and has not been justified.
  The irony of the Government's policy is that they have indulged in injudicious overproduction from existing fields because they needed the tax revenue, and yet, at the same time, they are proposing to indulge in injudicious concessions to the oil companies ever future royalties because they desperately need future production. That is no way to conduct an oil policy. The problem about future oil sources has been obvious for at least five years, and the profile of likely production levels has been available for as long as that. However, it is only in the past year or so that the Government have paid any attention to the problem. Previously the Government had concentrated on squeezing every penny out of the North Sea in order to mask the failures of their economic policy.
  Perhaps the most serious point is that the Government have thrown away vital levers of national control and initiative. They have made the nation completely dependent upon the decisions of oil companies, many of which owe no allegiance to this country or to its national needs and purposes. I refer in particular to the wanton destruction of the British National Oil Corporation, which had been built up by the last Labour Government into a highly successful, proficient and profitable oil company.
  In its last year, BNOC made over £400 million for the British taxpayer. More important from the point of view of the Bill, BNOC provided unbiased and critically important information for the Government about the real trends—the problems as well as the opportunities—in our oil province. BNOC gave Britain an independent national capability to develop our own resources if the multinationals withdrew their interest. If the multinationals sought to influence Government policy on taxation, royalties or development by the often-muttered threat of leaving the North sea — as they frequently do — the Government could respond by saying that, if they left, BNOC would develop the interests and assets in their place.
  Although it was a highly successful company, BNOC was only a small public sector presence in an industry largely dominated by the private sector. It represented an interesting archetype of what a public sector company
  34
  could do in such an area. Because it was successful, it was destroyed. That was the overriding reason. If a public sector company makes a loss, the Government's policy is to publicise the loss and excoriate the enterprise. But a public sector company must not be allowed to make a profit; if that happens, it must be sold off. Whenever a success is identified in the public sector there is a howl from the Conservative party that it should be sold off as soon as possible.
  Not only did we lose a company that made money for Britain and for the British taxpayer, but the Government now have no independent initiative left. Therefore, to encourage the development of marginal fields, they are forced to consider concessions. The Government cannot tell the companies that if they are not prepared to develop the fields BNOC will develop them instead. The Government cannot say that they will make up their own mind without being bullied, pushed or threatened into making concessions in return for development of the resources.
  There is one further aspect of the Bill that is relevant to national control. Until now, the Government have always been able to take royalties in oil instead of money. They will now reduce further—by, say, 12·5 per cent. of all the oil discovered in future fields—their capacity to influence the disposition of North sea oil. They will diminish the amount of oil that is under the Government's direct control. Therefore, it is a question not only of money, but of the nation's capacity and will to safeguard its most important national resource.
  In an interesting study of North sea taxation published today by the Financial Times, a comparison is made between the petroleum exploitation taxation systems of the four North sea countries — the United Kingdom, Norway, Denmark and the Netherlands. The study concludes that the United Kingdom's system is already one of the least burdensome to oil companies, particularly given the concessions made in the final Finance Act of the last Parliament. The authors of the study argue for a resource rent tax, which would direct attention to the circumstances of a particular field, so that the Government's take would increase depending on profitability, and diminish when high costs were incurred, such as might occur with a marginal field. That is an interesting idea, as it concentrates on the reality of the outcome rather than on a guess about the future.
  However, interestingly enough, the authors comment on the idea of abolishing royalties and note that the other three Governments concerned in the North sea are likely to think it too radical a proposal. In other words, no other North sea Government think it necessary, desirable, or in their interests to take the foolish step proposed in the Bill of throwing away royalties for all future finds. It is worth bearing in mind the report's general tenor, that the United Kingdom's system of taxation is not severe on oil companies.
  Mr. Peter Walker: The right hon. and learned Gentleman has argued cogently about that splendid report, which states that taxation should depend upon a field's success, or lack of success. The article then went on to say that three other countries rejected that idea. Does he reject it?
  Mr. Smith: The royalties proposal was rejected. Perhaps I should explain the position again carefully to the

  35
  Secretary of State — [Interruption.] The right hon. Gentleman is entitled to the benefit of hearing what I have to say and should listen carefully. The report's authors said that the other three Governments were likely to consider the proposal to abolish royalties too radical a step. They argue for a resource rent tax. If the Secretary of State is not familiar with that idea, he will become familiar with it. It is argued that, instead of making a projection, one should wait to see what happens, give the companies a guaranteed return on their capital and then tax the surplus. It is thought that that is a better way of approaching the matter. I dare say the authors do not want to offend the Government too much, and so say that the others will think that that is too radical a proposal. I hope that the Secretary of State has got that.
  Mr. Peter Walker: Yes, I have.
  Mr. Smith: If the right hon. Gentleman has understood that, we have made some progress in the right direction. We know from the report that the Government are not over-taxing oil companies at present, even without the royalties concession proposed in the Bill.
  Of course, all Governments have to consider a balance. If royalties are not taken from the North sea, as proposed in the Bill, the money is likely to be found from somewhere else. Someone else will have to make up the money that the Government would otherwise have received. If the system is over balanced in favour of the oil companies, the individual and corporate taxpayers will be the inevitable losers. Oil companies are extremely realistic about such matters. That can be seen, for example, in the attempt made—led by British Petroleum —to put 8p on the price of petrol. I must profess to some profound scepticism about the timing of the increase, which comes just at the beginning of a holiday period. In exchanges at Question Time today, the Minister suggested that this was just a case of an isolated oil company endeavouring to increase the price, but that does not square with recent history. Oil companies do not operate independently. I think that they sometimes draw lots to see which company is to go out in front first. As sure as eggs is eggs, if BP gets away with its price increase, Shell, Esso and the others will propose almost identical price increases within a few days. Indeed, they may have said as much already. It may be a matter of minutes and hours, rather than of days, before that happens.
  We are told that that is all right, because there is competition. But there is not much competition at the petrol pump. The oil companies tend to move together in their pricing policies. Why was there no reference to the proposed price increase in the recent election campaign, just as there was no mention of a building society mortgage increase? [Interruption.] I am comparing the oil companies' attitude towards their interests with the Government's attitude towards our interests.
  Mr. Albert McQuarrie: I trust that the right hon. and learned Gentleman will accept that the recent increase was proposed by BP and not by the Government. I am sure that he is aware that many of us who represent rural areas have consistently and vigorously opposed such increases and will continue to do so. In the election campaign much mention was made of the fact that those of us who represent rural areas are not prepared to stand for such increases.
  Mr. Smith: I am glad to have a recruit and ally in my plea to the Government to refer this matter to the Monopolies and Mergers Commission, and I am glad to see the hon. Member for Banff and Buchan (Mr. McQuarrie) nodding in agreement. Of course, the price increase was proposed not by the Government but by the oil companies. However, the Government have some powers. Under section 13 of the Competition Act they can refer the issue to the Monopolies and Mergers Commission for investigation. Indeed, I do not know why they are not prepared to do so. Earlier, the Minister told us that he was not prepared to do that and that he was satisfied with the existing competition. I do not think that the hon. Member for Banff and Buchan is satisfied with it, because if he was he would not have made that complaint.
  Mr. Skeet: Let us get back to the Bill.
  Mr. Smith: I have been asked to return to the subject of the Bill, but I must do the hon. Member for Banff and Buchan the courtesy of answering his question.
  The oil companies will wait for a strategic time, and have indeed done so. It is wrong that they should, in effect, tell those families setting off on holiday that, because they are weak, they will be forced to pay another £1 every time that they fill up their tanks. In the past, consumers have won battles against the oil companies, but this time the oil companies picked their time carefully in order to cause the maximum inconvenience to the public and to put them in the weakest position. There is almost a defiant anti-consumerism about the way in which they have made the proposal. They say that they are making a loss on their petrol operations, but we know perfectly well that they are making considerable profits on the production side. Indeed, reference has been made to the profits that they make. We also know that they have integrated operations. For example, BP takes oil from the North sea. That passes along the chain of production, refinery and distribution, ending in a sale to the consumer at the petrol pump. We know that such companies make very large profits in some parts of their operations.
  It is not beyond speculation that profits and losses can be moved round among group accounts to produce whatever result a group of companies wishes to achieve. The Government are ready to criticise public sector industries and to refer them to the scrutiny of the Monopolies and Mergers Commission. There is hardly a publicly owned industry that has not been referred to it since the Conservative party came to office in 1979. However, I am not aware of any important private sector reference to it. British Petroleum is a most suitable candidate, and it might enable the Government to recover some sort of reputation for holding an unbiased view about the public and private sectors. The Government might then be seen to be taking some action on behalf of the consumer. If they do not take that action, they will be seen to aid and abet a price increase that takes us dangerously close to £2 per gallon.
  Mr. Marlow: What has this to do with the Bill?
  Mr. Smith: For many people, the result of the Government's oil and gas policies is increased costs. If the boot were on the other foot and a Labour Government were in power, I can think of no hon. Member more likely than the hon. Member for Northampton, North to make the most awful fuss about such a matter. It would be just the sort of populist cause that is dear to his heart.

  37
  The Bill, after all, proposes major reliefs and concessions to the oil companies. It is disgraceful that the scale of relief is not known. However, it must run into hundreds and millions of pounds, if not more. The Government have neglected the interests of the consumer, the taxpayer and the nation as a whole through their unbalanced and misdirected policies, and in this Bill they threaten to go even further in that direction. We do not intend to acquiesce in this folly. We shall argue against this piece of nonsense with all the force at our command, and divide against it in the Lobby.
  4.39 pm
  Mr. Peter Rost: I congratulate my right hon. Friend the Secretary of State on his promotion, but I must warn him that one of the penalties of his new job is that he will have to listen to the irrelevant ravings of the right hon. and learned Member for Monklands, East (Mr. Smith). We have just had a good example of one of the right hon. and learned Gentleman's outrageous, exaggerated and long-winded outbursts.
  It would be tolerable if those outbursts were not so ill-informed, but, as we have discovered on previous occasions, the right hon. and learned Gentleman does not do his homework. Once again he has shown his lack of knowledge about the North sea oil industry, and he displayed his ignorance at great length.
  We heard a jumble of contradictory criticisms from the right hon. and learned Gentleman. For example, he said that the Opposition want to encourage the development of marginal fields, yet they do not want to encourage it enough to allow any profits to be made The Opposition's alternative to the relief on royalties proposed in the Bill is an assessment of field-by-field considerations, regardless of the uncertainty that such an assessment would continue to provide for the oil industry.
  The factor that has created the most delay in the development of new oilfields in the North sea has been the uncertainty of the tax regime. Yet the Opposition, not content with opposing the relief proposed by the Government, want to continue the uncertainty.
  When the Opposition argue against the Bill they are excelling themselves in hypocrisy, because Labour Members joined Conservative Members on the Select Committee on Energy in producing a report that spelt out in detail why it was necessary to reconsider the tax regime. Labour Members supported those proposals, made just over a year ago, and the Government responded to the report by accepting the proposals. The Chancellor of the Exchequer was persuaded that some relief was required.
  The Labour Members who supported that report were not hoodwinked by the case presented by the oil companies. They saw the evidence. If the right hon. and learned Member for Monklands, East had been on the Select Committee, instead of conducting his outrageous, exaggerated ravings in the House, he could have done his homework. He would have seen the evidence showing that new oilfield developments were being held up because of uncertainty over the tax regime. That uncertainty was exacerbated by the reduction in the oil price. The right hon. and learned Gentleman would have seen evidence presented by the oil industry and by independent experts who argued that if we are to continue to develop North sea oil we must ameliorate the tax regime.
  Mr. Ted Rowlands: I was not a member of the Select Committee, but I have
  38
  gone through all the evidence and the Committee's findings. I do not recall that the Committee recommended the abolition of royalties on future fields.
  Mr. Rost: I have a copy of the Select Committee report with me. If the hon. Gentleman reads it, he will see that we did not propose detailed changes because we did not regard that as our responsibility. We said that there had to be some relief in the tax regime. We did not feel competent enough to outline how reliefs should be implemented, but we made a number of important recommendations about why reliefs should be allowed and the broad context in which they should be granted. I shall say more about that later.
  There were so many inconsistencies in the so-called argument of the right hon. and learned Member for Monklands, East that I cannot deal with them all. However, I must take up his claim that the legislation should not proceed because my right hon. Friend the Secretary of State was not able to quantify the amount that taxpayers would lose if we abated royalties. That is one of the most nonsensical arguments that I have ever heard from the right hon. and learned Gentleman. We cannot quantify the tax loss because we cannot quantify the number or size of the fields involved. We are talking about future developments. I remind the right hon. and learned Gentleman that the main reason why many developments have not gone ahead is that the tax regime has become too burdensome.
  Rather than talking about how much the taxpayer might lose if we were to relieve oil companies of royalty payments, it would be more constructive to talk about how much the taxpayer will benefit if we provide the incentives for North sea oil developments to proceed. But the Opposition are not interested in that. They are out to score cheap party political points, almost as if the election had never taken place.
  The Government, the oil industry and the public understand that the future of the North sea oil industry is crucial to the future of this country. If we do anything to endanger that development or frustrate further exploitation, we shall not only prejudice our economic future, but be unworthy to continue in government.
  If the Opposition were in government, which heaven forbid, they would be talking differently. They would be doing exactly what the Bill proposes, because they know the facts, even if they are not prepared to admit them. Our future depends on continuing to encourage the development of North sea oilfields and maintaining the momentum for self-sufficiency, with the employment that results from that.
  Moreover, most people know, even if the right hon. and learned Member for Monklands, East does not, that the discoveries in the North sea will be almost exclusively smaller, more marginal fields. Many of those that have already been discovered have not been developed. The upfront capital costs of development mean that the return on smaller fields is much more marginal.
  The Bill is directly geared towards providing incentives for the development of smaller fields which it had not been economic to develop and with which we must press on. If we are to remain self-sufficient in oil when the major fields, such as the Forties, begin to pass their production peaks, we can do so only by providing incentives for the exploitation of smaller, more marginal fields.

  39
  The country should be grateful for having a Government who are honest, pragmatic and realistic enough to accept that, through advance petroleum tax, we taxed the oil industry too much two years ago. We have now made amends for that. We have had to adjust for the fact that the real price of oil has declined, rather than increased as seemed likely at the time. We have been realistic enough to make the necessary adjustments to the tax regime to provide the vital incentives that are required.
  I referred to the Select Committee on North sea oil depletion policy reaching the conclusion that we needed not a depletion policy but a repletion policy. In other words, the evidence that came to us from a wide range of sources made it clear that, even if the tax regime was not intended to act as a disincentive to new developments, it was in practice doing so. The evidence could not be disputed. There had been hold-ups in new developments, as well as much uncertainty due to the fact that the real oil price was declining at a time when the tax regime was becoming more severe.

  The Government acknowledged the greater part of the recommendations in our report in July last year. In their response they admitted everything, in effect, except that the tax regime was designed to clobber the oil companies. They did not go so far as to accept that. However, they admitted that it was necessary to review the tax regime as it appeared to be affecting the economic viability of new marginal field development. The Government have now done that, and come forward with this legislation which, together with the other tax changes, will provide the necessary incentive for which the oil industry has been urgently waiting. We can now move ahead with new developments.
  This legislation is important because it accepts that the Government are prepared to take a realistic view. It is a pity that my right hon. Friend did not say—perhaps this is not the right moment to do so—that there is a case at least for stating Government policy on the future of the tax regime on North sea oil and admitting perhaps that the policy should provide stability for the system. There have been far too many changes in taxation by successive Governments. Admittedly, they have had to accept the changing price of oil, but the oil industry does not like uncertainty. The industry cannot afford uncertainty, bearing in mind the long lead times that are required to develop North sea oil investments—the huge sums that have to be raised, the security that has to be provided, and the long time that it takes before a return can be obtained. Moreover, there are great uncertainties on the geological side as well as in the economics of oil prices from the time that a project is planned until a return is obtained, and those uncertainties increase if the time involved has to be extended.
  I am sure that my right hon. Friend understands those problems. I hope that he will reconsider the other proposals in the Select Committee report about the desirability of having a simpler, more stable and neutral tax regime. The Bill goes a long way to achieve that. It is a radical and important change. I hope that we shall go further and restructure the tax regime so that it is more directly linked to profitability. We think that the Government would do well to make that move.
  I am sure my right hon. Friend will agree that, as well as providing an incentive for smaller marginal fields and
  40
  their development, it is important from the national point of view to improve recovery ratios. We should not allow fields to be developed in a way that will endanger the recovery ratios. That means, for example, that pressure maintenance techniques will have to be employed at an early stage of a field's development, at high cost. Therefore, it is important for smaller marginal fields that the right incentives should be provided to allow the optimum investment to be made, which would not be made unless such incentives were provided.
  Mr. Skeet: My hon. Friend will, of course, appreciate that only about 40 per cent. of the oil in place is recovered, and that therefore secondary and tertiary methods should be sought. So far, however, those are not allowable against petroleum revenue tax.
  Mr. Rost: I am grateful to my hon. Friend.
  I am saying, and I think that my right hon. Friend and his advisers have taken it on board, that we are concerned about the future of the North sea oil industry. We believe that most of the fields in future will be relatively smaller. It would be nice if we made major discoveries— no doubt we shall make some — but the pattern in any mature oil province is always the same. One gets the larger discoveries in the early years, and they are followed by the smaller fields—the satellite and more marginal fields—that make up the continuing flow of oil for a number of years. We are moving into that pattern in the North sea. Therefore, the tax regime must increasingly be geared to provide incentives for marginal field development. The regime must also be geared in such a way that the ratio of exploitation reaches its optimum, and the high cost involved in achieving that has to be put into the field in the early stage so as to achieve optimum recovery at the later stage. Unless the incentive is there, oil companies will not find it worth their while to make the initial investment which will achieve optimum recovery in later years. For that reason, if for no other, the Bill represents an important change in the tax regime, which I wholeheartedly support.
  My right hon. Friend said that the Government would consider how the legislation worked, perhaps in relation to existing fields and satellites of existing fields. I hope that he will bear in mind that developments that do not come within this legislation, because they are already under way, may be treated unjustly in the tax regime because some will pay royalties, whereas new developments will not. The economics can change unpredictably in fields that are already being developed and therefore are not eligible for the tax relief on royalties under this legislation. Special consideration might have to be given if a field that should be profitable became marginal. I hope that my right hon. Friend will bear that point in mind.
  I hope that the Opposition will not discredit themselves —even more than the initial speech from their Front Bench has already discredited them— by a bogus and outrageous outburst of indignation against the legislation. They know that it is necessary. Many Labour Members on the Select Committee have admitted it. If they were in the Government's position, they would have to do the same thing. Therefore, it does them no credit at all to take the hypocritical stance that they have taken this afternoon, except perhaps to provide them with one or two cheap headlines. I hope that, in the interests of sensible and constructive debate, those who follow the right hon. and

  41
  learned Member for Monklands, East will adopt a more positive approach and accept that what the Government are doing is just and sensible.
  5 pm
  Mr. James Wallace: It is an honour to address the House for the first time.I apologise if in doing so I appear to be more nervous than is perhaps usual, but this is the first of two maidens that figure prominently in my life this week. The second maiden I am to marry on Saturday afternoon.
  To be elected I had to inflict defeat on two previous Members, Mrs. Winifred Ewing and Mr. David Myles. David Myles was a Member of the previous Parliament whose seat was absorbed in the boundaries changes. Lest his departure from the House might otherwise go unmentioned, let me say that during the election I found him to be a fair and honourable opponent. His interest lay in farming and he served on the Select Committee on Agriculture. His keen interest in and knowledge of farming was reflected in the fact that he achieved the highest Conservative poll in Orkney and Shetland in over 30 years.
  It is the tradition of the House that in a maiden speech a Member should pay tribute to his predecessor and I am proud to honour that tradition. I understand that I am the first Liberal in over 20 years to pay tribute to an immediate Liberal predecessor. Jo Grimond represented Orkney and Shetland for over 33 years, and for one third of that time he was leader of the Liberal party. I ant too young to say that I came into the Liberal party beaus of Jo Grimond, but the Liberal party that I joined in 1971 had been given a fresh hope and a new sense of direction by Jo.
  I have in my study a calendar, a sheet of which is torn off each day, giving a new motto. One which appeared recently said that a politician is one who looks towards the next election and a statesman is one who looks towards the next generation. By that criterion it would be fair to say that Jo Grimond can rightly claim to be described as an outstanding statesman. When he led the Liberal party some 20 years ago, he saw the need to reintroduce Liberal values and principles to the government of Britain. He was a man of vision who realised that that could not be done overnight, but he sowed the seeds for the realignment of British politics, the first fruits of which we tasted at the election. It is a challenge to me and my Liberal and Social Democratic colleagues to ensure that in the next election we reap a full harvest.
  Although Jo Grimond was a man with a national reputation, he was also a diligent constituency Member. Wherever I campaigned in Orkney and Shetland I was told by constituents, often from firsthand experience, of the amount of work and effort that he put into representing his constituency and individual constituents. As a new Member, I can do no better than seek to aspire to the high standards that my predecessor set.
  I represent the most northerly constituency in the United Kingdom. It is not, as some people still mistakenly believe, in a box somewhere to the east of the Moray Firth. Although in the past 10 years Orkney and Shetland have perhaps been most associated in the public mind with oil developments, that should not blind us to the fact that there are there many other profitable and worthwhile economic activities which make a valuable contribution to our
  42
  nation's economic welfare. There is a prosperous agriculture industry in Orkney, fishing in Shetland and the traditional knitwear and craft industry.
  The people of Orkney and Shetland show an enterprising and independent spirit, combined with a great commitment to the community and its welfare. That was well illustrated during the election campaign when I attended the opening of a community co-operative guest house and youth hostel on the small island of Papa Westray in Orkney, with a population of only 100. That venture showed me the determination that one fines in the islanders to sustain a viable community in spite of pressures of population decline, and it also showed the spirit of enterprise to which I have already referred.
  Oil development should not blind us to the fact that Orkney and Shetland have suffered economic problems. The recent herring fisheries crisis is only the latest of these. One of the most fundamental problems is that of transport costs, not only for bringing goods into Orkney and Shetland, but for exporting fresh produce. When the right hon. and learned Member for Monklands, East (Mr. Smith) a short while ago expressed considerable horror at the prospect of petrol reaching £2 per gallon, I. was tempted to remind him that for some time that has been the cost of petrol in my constituency.
  When we are dealing with a Bill that gives such substantial tax concessions to oil producers, it is about time that we started to think more seriously about giving concessions to all oil and petroleum consumers. A cry that has often come from the Liberal Benches is that there should be a differential rate of duty for petrol in remote and rural areas where a car is a necessity. It is not administratively impossible. If the political will were there, it could be done.
  Unemployment has hit Orkney and Shetland, as it has hit many other places. Although for some time the averages lay well below the national average, they have been increasingly creeping up. One person in eight in Orkney is unemployed. In Shetland at the weekend I met a man who informed me that out of his class of 20 who left school last year only three had managed to find full-time employment. It is against that background of considerable economic difficulty, which is perhaps looming more and more in the islands, that I give a general welcome to the Bill.
  Judging from reports and comments, the Bill, together with other measures that have already been enacted in the Finance Act and those which we are promised in an oil taxation Bill later this year, encourages the oil companies to undertake new exploration and developments in marginal fields. The question of what loss in revenue there will be to the Exchequer as a result has been raised. I have great sympathy with the Secretary of State in being unable to quantify this. We cannot tell what will happen without this measure. We cannot tell whether certain fields will not be brought into production, thereby producing no revenue in 10 or 15 years' time. It is not so much the monetary value of the Bill which is of particular help, but the incidence of the royalties. The oil companies have to pay royalties before a field is necessarily profitable and the cash flow assistance which the Bill gives is one of the most important factors. It has been welcomed by the oil companies as giving them the incentive to exploit and develop marginal fields.
  The rate of development may not be as exciting as the previous Secretary of State suggested. I think he said that

  43
  there would one new discovery or development every six weeks. None the less, during the election I was informed by oil representatives in Orkney that the effect of having to shelve some of the proposals because of the dissolution of Parliament had led at least one oil company to hold back from announcing new developments pending the outcome of the election to find out whether the proposed measures would be enacted.
  Nevertheless, there are prospects that new developments such as the Balmoral, Glamis, Andrew and Bruce fields could benefit from the Bill. The increased activity, with the prospect of new fields coming on stream in the 1990s when production from existing fields is diminishing, must be welcome news to those who are directly involved in the oil industry, particularly those of my constituents who work at the Flotta and Sullom Voe terminals. It also offers opportunities for onshore operations, about which I shall say more in a moment.
  Before doing so, I want to express two reservations. The right hon. and learned Member for Monklands, East suggested that we could lose the funds of huge new oil discoveries. The oil industry believes that it is extremely unlikely that another Forties field will be found. None the less, as a result of the Bill, we shall have two strands of oil taxation—one for the old fields and one for the new fields. If, in 1992 or 1993 a new field is making huge profits, it will not be beyond the wit of the Government to find a taxation device to ensure that some increased revenue is taken from it.
  The Bill relates to "new fields". It highlights the difficulties that are sometimes found in trying to define what constitutes a new field. The problem has already arisen in connection with certain developments that are arguably new and separate, but have already fallen within an existing ring fence. With these new concessions the definition of "new fields" becomes more important. While I accept that this is a complex issue, it might be helpful if the Secretary of State could tell the House whether he is working towards a clearer definition of "new fields" which will remove ambiguity and uncertainty.
  I referred to possible onshore developments as a result of the Bill. The measure would be all the more welcome if we could be certain that it marked a new Government approach to our North sea oil and gas industry and was not just another example of tinkering with the oil taxation system which has been so much a feature of our oil taxation regime over the past decade.
  It is not unfair to say that, to date, oil and gas related activities—offshore and onshore—have not been treated as an industry in its own right. Rather, Governments have seen the industry as a beast to be milked whenever revenue demands required it—an approach that has been made all the more attractive by the fact that soaking the oil companies for more taxation can always guarantee some electoral appeal. The 10 or 11 alterations in North sea oil taxation over the past decade appear to have been made without any regard to the destabilising effect that they can have on the industry, particularly the onshore industry. The changes have been made, apparently oblivious of the employment opportunities that can be offered by having a consistent policy geared to promoting offshore development.
  In Shetland, the recent downturn in oil activity has contributed to unemployment, particularly around the
  44
  Sumburgh area, where an almost ghost-town atmosphere has been created, but planned and continuous development is obviously preferable to boom-slump. A consistent tax regime allowing such planned development will allow the oil-supply bases which already exist in Shetland to seek new openings in specialised services and will give them the long-term confidence and incentive to provide more training for young people, and avoid any need to fly in skilled labour. Consistent policy will also open up the possibilities of oil-rig servicing and repair work for supply vessels. Indeed, even agriculture in Shetland is looking towards the offshore working population as a new market for the produce from their farms and crofts.
  This should not be seen as a parochial approach. Increased offshore activity can give great benefits to the nation as a whole. It will lead to greater orders for oil-rig construction. It will stimulate the engineering industry for the supply of such basic engineering components as pumps, valves and compressors, thus opening up employment opportunities throughout the United Kingdom.
  Furthermore, over the past 10 years we have as a nation developed considerable expertise in offshore technology, which will no doubt be extended even further when we start to exploit the deeper waters to the west of Shetland. When one considers that estimates suggest that during the next 20 years offshore discoveries could account for between one third and one half of all the world's new oil reserves, surely we in Britain have a great opportunity to obtain a significant share of a growing market. But to do so we must ensure now a continuous policy and continuous level of demand and development at home. The green light which has been signalled by the Government in their recent measures must stay at green and must not, because of a shift or a new need or requirement, be switched back to amber or red.
  I am grateful to the House for having had the courtesy to listen to my maiden speech in silence. It is probably too much to hope, Mr. Deputy Speaker, that the next time I am successful in catching your eye I shall be given such a clear run.
  5.14 pm
  Mr. Peter Viggers: It is indeed a privilege to follow such a clear and attractive speech as that made by the hon. Member for Orkney and Shetland (Mr. Wallace). The hon. Gentleman had the attention of the House throughout his speech. He impressed us with his knowledge of his constituency and of the oil industry, a technical subject on which few hon. Members choose to speak in a maiden speech. The mantle of his predecessor, Mr. Jo Grimond, is a heavy one and it has, if I may say so, fallen well. We look forward to hearing the hon. Gentleman speak on many occasions in future. If he is as successful with his maiden at his wedding on Saturday as he has been in his maiden speech, I am sure the whole House will know that he will have a long and happy marriage as well.
  I made my maiden speech many years ago — and have not improved since—on the oil and gas industry and on the importance of the development of its service and supply side. My speech was based on my knowledge and experience of the industry. I was then, and still am, a director of an oil company and have other oil and gas interests, so I can speak with a small amount of direct knowledge of the subject.

  45
  The offshore oil and gas industry is now very large, employing more than 100,000 people in all areas of activity, including some that are at the forefront of engineering knowledge throughout the world. It is important that this large industry should have stability. We must ensure that, as the hon. Member for Orkney and Shetland pointed out, we do not have a stop-go policy. Stability will enable the industry to move forward with certainty.
  In the Bill, the Government have proposed measures which will enhance the profitability of marginal fields. Those are specifically new marginal fields, not fields in the southern sector of the North sea. The royalty basis has been changed so that in future, on a marginal basis, the Government take will be about 88 per cent. as opposed to 89·5 per cent. The right hon. and learned Member for Monklands, East (Mr. Smith) demanded that we should be told exactly how much the Government's tax take will increase or decrease as a result of this measure. I can give the right hon. and learned Gentleman an answer which is as relevant as anything that he put forward—88 per cent. of something is more than 89.5 per cent. of nothing.
  There is no doubt that the oil industry has been discouraged from proceeding with the development of marginal fields. Anybody who studies the industry knows that. The industry has been voting with its feet. It has not been developing fields that could be developed. Undoubtedly, there will now be development of some fields which previously have not been capable of development.
  Mr. Douglas: Perhaps the hon. Gentleman, with his great knowledge of the industry, will be able to tell us of any submission from the United Kingdom Offshore Operators Association, or any other oil company office, asking for the total abolition of royalties.
  Mr. Viggers: The hon. Gentleman knows that UKOOA put forward a reasoned case to the Department of Energy and to the Treasury based on the development of 31 fields. The hon. Gentleman knows, because my right hon. Friend the Secretary of State has told him, that the Department of Energy studied carefully 10 profiles of field development and came to the conclusion that it was necessary to have relief of this nature. I believe that the Bill will enhance oil and gas development and increase the Government's tax take.
  The right hon. and learned Member for Monklands, East said that it would be possible for royalty to be lifted on a concessionary basis. That point can be answered clearly. The oil industry considers the whole of the risk-reward ratio when considering whether to go ahead with development. It considers the possibility of finding oil or gas as a result of seismological development and then decides whether the potential size of that held will enable it to go ahead and take the risk. It will not go ahead unless it is able to calibrate its reward, should it be successful in finding oil and gas as a result of development.
  It is not good enough for the right hon. and learned Member for Monklands, East to say that the oil industry should go ahead and that, if it seeks a concession, the Government should weigh the balance and then decide whether to grant the concession. The oil industry needs to know on a global basis whether the reward is worth the risk. The large amounts of money involved in oil and gas
  46
  development will not be put on the line unless the oil industry can decide, in advance, what the rewards are likely to be.
  Our oil and gas fields are developed predominantly by private enterprise, which has served us well in North sea oil and gas development. When the Labour Government were in power, we had a nationalised oil industry. The British National Oil Corporation took a major share in oil and gas development. We even heard — reductio ad absurdum — hon. Members demanding that BNOC should seek oil offshore west of the United Kingdom when none of the oil companies wanted to proceed because they believed that little oil and gas existed in that area. Labour Members demanded that oil and gas should be sought, whether or not it was there. In such circumstances the oil industry can be thought to be under the Secretary of State's thumb. We are confident that we are well served by private enterprise in North sea oil development
  Having dealt with the concessions in the Bill and the enhancement of oil and gas development that we can expect from it, I shall deal with a different subject—where the tax take will go. I shall not say anything new or original because I have made the point before in the House. I regard oil and gas, since they are minerals, as capital assets. If oil and gas are depleted, capital resources are involved. It is technically wrong to talk about revenue from the North sea when it is a depletion of capital. It is wise for us to regard North sea oil and gas as capital benefits, the money from which should be reinvested in capital assets.
  It may be unattractive to the Treasury, but it is arguable that there should be, if not the hypothecation of income, which is blatant heresy, an awareness that we are using capital resources of a finite nature and that, therefore, we should apply the funds generated from those capital assets in a capital manner. There should be a capital element in the application of the funds from North sea oil and gas. I am speaking of a simple idea which is no more complicated than the way in which any company approaches its assets. A company always distinguishes between capital and revenue, as does any frugal housewife. The Government should also distinguish between the depletion of capital assets and crdinary revenue items.
  Our finite oil and gas resources will last 20 or 30 years. Nobody knows exactly when, but there is no doubt that they will run out in our children's lifetime. I do not want to say to my children, "Yes, we had the precious finite resources of oil and gas, but I am afraid that we have used them. Now we are reduced to looking for the small pockets of oil and gas in the more difficult and expensive places, such as deep water." Anathema though it may be to the Treasury, there is an argument for thinking in terms of a capital element in the spending of these important funds from North sea oil and gas.
  The Treasury Red Book describes the way in which money is spent by the Government on our behalf. The amount spent on capital assets is diminishing, rather than increasing, at a time when we are deriving benefi: from the North sea and when we have a unique privilege in the receipt of oil and gas funds.
  The Arab countries may be unpopular because of their increasing of oil and gas prices in the last decade or two, but often they are more far-sighted than we are in considering how their finite resources should be used for the benefit of present and future generations.

  47
  We are entitled to say that the Government's depletion policies have not been enunciated as clearly as they might have been. The United Kingdom is the fifth largest producer of oil in the world, but it is not the fifth largest in terms of reserves. Therefore, although I support the measure, I think that more thought should be given on a long-term basis to the application of the funds from North sea oil and gas. If my small contribution can help in that thinking, I am grateful to have had the opportunity to intervene briefly.
  5.26 pm
  Mr. Peter Hardy: The hon. Member for Gosport (Mr. Viggers) offered a proper appreciation of the sensible contribution by the hon. Member for Orkney and Shetland (Mr. Wallace). Since the hon. Gentleman espoused the cause of consistency in energy policy, I was glad to hear his speech and look forward to his taking part in energy debates, especially when Sassanachs such as myself are allowed to be involved.
  The hon. Member for Gosport made the least and speech that I have heard from the Conservative Benches for a long time. I agree with his argument about capital. He reminded the House of the fall in investment. Labour Members perhaps were not heard by the electorate, but we pointed out during the election campaign that industrial investment had fallen by about two fifths in four years and that the enormous gain of North sea oil actually brought little advantage to Britain. I hope that the hon. Gentleman's argument will be given attention by the present Administration.
  The hon. Gentleman's contribution reminded me of the words of the Secretary of State when he spoke about the way in which offshore revenue is being used. The Secretary of State did not finish his explanation. Perhaps we were too eager to interrupt him. He said that about £3½billion of the revenue was spent on education, £5 billion on health, £2 billion or £3 billion on the National Coal Board and another £1 billion on British Leyland. That amounts to about £12 billion, but he was supposed to be explaining what happens to £20 billion. Where has the other £8 billion gone? We believe that it is being used to finance the decline of British industry, the ruin of the British economy and the obscenity of unemployment. That may not be relevant to the Bill, but it is of such importance to the British economy that no debate in the House of Commons can ignore the nature of that decline and the cost to the community.
  It would have been better if, in the weeks of the election campaign, the Government had talked more about policies for the offshore regime. We heard more about polls than about petroleum. We certainly did not hear about petrol being £2 a gallon. The hon. Member for Orkney and Shetland reminded us that in remote areas people already pay that amount. I suppose that petrol will cost £2·50 a gallon in those areas. My constituency is not remote, but the prospect of paying £2 a gallon does not please me.
  I am making a kind of maiden speech, because I now represent a new constituency. Wentworth comprises a large part of my old constituency. I live in that area and I am delighted to have the chance to address the House as the hon. Member for Wentworth for the first time.
  48
  Wentworth is a long way from the North sea, but my constituents' interests are bound up in the Government's attitude to energy.
  The Government are arguing that they must introduce the Bill to take out all the oil from the larger and middle-size fields and ensure that the smaller fields are developed. At Question Time I suggested, but the Minister did not respond, that the attitude being displayed towards oil was not being repeated for the coal industry.
  The Government are saying that the smaller fields must be developed, and there is a good case for doing that. They are saying that the oil from the larger and middle-size fields must all be taken out and that the taxpayer must forfeit enormous sums to enable that policy to be pursued. It may be sensible to pursue that policy, but at the same time we must consider the report of the Monopolies and Mergers Commission, not to mention the ravings of Conservative Members — some of whom are in the Chamber today — to the effect that the coal industry must be contracted and that collieries which have substantial reserves should be closed because they are not at present making a profit.
  If Government policy on oil is sensible, their policy on coal is not. We suggest, not that a colliery must be given immortality —because it is an extractive industry and pits will close, just as oilfields will be drained—but that we should be sure that it is a wise Bill and view the Government's energy policy as a whole. If their attitude to oil is prudent, their attitude towards coal is imprudent. The burden of our case basically has been that the fiscal regime for oil should serve the national interest.
  The result of Government policy on energy will not assist proper depletion arrangements and ensure a proper attitude towards the conservation of our energy resources. The hon. Member for Erewash (Mr. Rost) is not in his place, but he suggested that he had been making consistent speeches on the subject. Their only consistency has been that they have praised the Government regardless of the shifts of policy. My speeches about offshore policy have been consistent in advocating sensible depletion and conservation policies.
  It would be consistent with a conservation policy to ensure the development of the small fields, with the larger fields being properly exploited, but one must note, for example, what was said in the Financial Times today about other countries having adopted a more sensible approach to energy. It is a pity that the Secretary of State has not shown any evidence of a willingness to adopt a more sensible approach to energy matters.
  When the Oil and Gas Enterprise Bill was in Standing Committee a couple of years ago, I did not receive a reply to a question that I asked then and repeated in a debate last year. On those occasions I reminded the House that soon after the 1979 election Dr. Hammer and the present Prime Minister had a love-in on television in which Dr. Hammer demonstrated his faith and confidence in Britain by announcing an enormous investment programme from Occidental which would maximise the take from the Piper and Claymore fields. There was enormous fuss and publicity over that at the time, with the newspapers referring to what they called an act of confidence and faith in Britain and the mutual affection that was felt between the Prime Minister and Dr. Hammer of Occidental.
  When, about 18 months later, Occidental decided rather dramatically to reduce its investment programme, there was scarcely a word about it in the media. Does the

  49
  Secretary of State have any confidence that this measure will persuade Occidental, BP or any of the other companies involved in our offshore industry to increase investment in existing fields to ensure that a larger percentage from those fields may be extracted?
  Unless the Secretary of State is able to give that sort of evidence to the House, it suggests that the Bill has been insufficiently prepared. Ministers should be able to tell us, "We have consulted the experts in the industry. They tell us with confidence that we can look forward to a more sensible depletion policy and a proper rate of extraction resulting from adequate investment in the fields now under development." We might have taken a kinder view of the Bill had the right hon. Gentleman been able to adduce such evidence.
  I trust that before the measure reaches the Standing Committee the Department will have done more homework on the subject and will be able to provide the information we need, and that when it leaves the Standing Committee we shall have had demonstrated to us evidence that the Government will apply to other sectors of energy the sort of longer-term view they are seeking to convince us now applies to oil.
  In view of the enormous number of changes that there have been in tax and fiscal policy towards the offshore industry, I have no confidence that the Bill is more than the latest round in an inconsistent and varying policy and that it will not be succeeded by yet mother set of rules causing great uncertainty and damage to an industry which should be bringing greater benefits to Britain than has been the case as a result of the vagaries and incompetence of the Conservative Administration.
  5.37 pm
  Mr. Tim Eggar: I apologise for being out of my place for about half an hour, but my absence was unavoidable. It is pleasant to speak following the hon. Member for Wentworth (Mr. Hardy) in his new guise, having spent much of my time in the last Parliament speaking after him when he was the Member for what was then Rother Valley.
  It has long been recognised that the United Kingdom would cease to be self-sufficient in oil by about 1990. It was assumed that the effect of rising oil prices since 1974 would guarantee that new oil developments would come on stream of their own accord and that the sole function of the Government was to ensure a fair share for the nation by way of the economic rent which accrued from the producers in the North sea.
  It became obvious to the Government this year—I regret that it did not become obvious a year earlier—that the take from the companies, the economic rent, was out of proportion and that the effect of the level of taxation was to slow down development in the North sea. There are probably four reasons why we did not see the speed of development continue at what we had come to accept as the norm.
  First, there was the oil price uncertainty. After about three years, there was a fall in the real value of oil. Secondly, the companies were faced also with rising capital and operating costs. Much has been made of the vast overruns on capital costs, most of which tended to be due, in the second phase of the North sea development, to an underestimate of the annual rate of inflation. The oil industry vastly underestimated operating costs in the North sea. Not so much has been made of that because it was
  50
  never significant when the price of oil was reasonably high in real terms, but as soon as the price started to fall operating costs, especially when set against the Government's taxation take, were a significant factor. They were considerably higher than anticipated.
  The third reason for lack of development was changing geology. The new fields that were discovered were very much smaller and much more difficult to appraise. New technology was needed—mainly sub-sea completions—and many of them were satellites of existing fields. Above all, the recoverable reserves in the newly identified areas were significantly smaller than in the first generation of fields.
  The fourth factor that impeded development was the Government's high tax take. In addition, the companies were worried by the uncertainty that the Government's oil taxation policy was creating. Changes were being made almost yearly.
  I am delighted that the Government realised at the turn of the year that a change was needed to ensure development of the new smaller fields. The package that was announced in March by the then Chancellor of the Exchequer was widely welcomed. It was recognised that the package was extremely cleverly constructed to ensure that the major tax relief went, first, to satellite fields, by which I mean fields that can be developed from existing platforms, and, secondly, to marginal fields.
  I am surprised by the view taken by the right hon. and learned Member for Monklands, East (Mr. Smith). When we were debating the Finance Bill before the general election he said, in effect, that it would be necessary to generate more development if there was to be more employment. That was the main thrust of his argument. It seems that he has stepped back from that position today. He said, in effect, "I do not like the segment of the Government's taxation proposals that relates to royalties." By drawing out royalties for his opposition. he is attacking the part of the proposals which were introduced by the previous Chancellor of the Exchequer which w ill be of most benefit to marginal fields. The abolition of royalties will assist marginal fields, because most of them will never attract petroleum revenue tax.
  The effect of withdrawing the royalties is especially beneficial—because royalties can be offset against PRT —to marginal fields. I am surprised that the right hon. and learned Gentleman should argue that we muit secure development to increase employment, while attacking the part of the tax package that will ensure, if the Bill is enacted, that the marginal fields will be assisted. He did not explain his concern about that particular part of the package. Instead, we were presented with a regurgitation of his speech on the Finance Bill about the oil revenues that the Government had received over the past three years.
  I have one general criticism of the Government's package. There are, perhaps, two classes of company operating in the North sea. One class of company has production and, therefore, can shelter behind its production in meeting most of its exploration expenditure and tax liabilities. There are other companies—mainly small United Kingdom exploration companies — that have not yet found anything, despite many attempts to do so. That means that they do not have any production.
  Operations in the North sea, including the eighth round, have been costing the smaller British exploration companies £1 for every £1 that they spend on exploration.

  51
  They are costing many of the established operators, including multinationals and companies such as Britoil, a great deal less than that. I suspect that in some instances they are costing those companies less than 40p for every £1 spent on exploration. That is because their exploration costs can be offset.
  My general criticism of the way in which the Government are proceeding—it is a minor criticism in the context of the overall achievement— is that they have not done enough to ensure that the minor exploration companies can compete on a proper basis with the established multinationals.
  That criticism makes one assumption, and it is one that is open to criticism. By saying that more independent exploration companies are needed in the United Kingdom's part of the North sea, we are assuming that they have a major role to play. It is arguable that the minor companies are a hindrance to development in the North sea and major developments of that sort. How can a company that is capitalised at £5 million contemplate taking on even 10 per cent. of a development which will cost $1 billion or S500 million in round figures? The answer is that it cannot. If it does take on a development on that scale, it has to look for farm-outs or enter into complicated financial packages. It may be that such companies are more of a drag on the development of the North sea than a benefit.
  Mr. Douglas: Brindex will not like this.
  Mr. Eggar: It may not, but that is no reason for not making a speech along these lines. The argument seems to be fairly finely balanced. If a minor United Kingdom exploration company has success and generates income, one then has the LASMO example. LASMO is now one of the biggest North sea oil companies in the country and a significant producer of wealth for the United Kingdom. Against that must be weighed the possible cost of development within the North sea and the difficulties that small companies have in taking part in it.
  The Government should weigh these considerations in the balance before coming down firmly once and for all in favour of or against United Kingdom exploration companies having a role in the development of the North sea. If they are in favour of them having that role, we must ensure that they are not penalised through the tax system. Their taxation should not be adverse when compared with that of the established producers. If the Government continue to say nothing, the rhetoric from our side will be that we want a greater role for the exploration companies, while the reality is that the companies cannot afford to explore and develop in the way that their larger competitors can. I am asking the Government to reexamine their position. I ask that they make a clear statement and act in the light of that statement. That was a general point about the Government's taxation proposals.
  Mr. Viggers: I wish to make two points that are ancillary to my hon. Friend's comments on small British companies. If the Government were to proceed on the basis of auctioning blocks, that would be a disincentive to small companies. My second point is different. Does my hon. Friend appreciate the dramatic growth that has been
  52
  made possible by the elimination of exchange controls, which has enabled small companies to invest overseas and so build up their size?
  Mr. Eggar: I accept both my hon. Friend's points. If we are to continue with a policy of having small exploration companies active in the North sea, we have to take account of that national policy when we decide the balance between auctioning and licence awards. I should not like all the blocks to be auctioned or to award only licences. I accept my hon. Friend's second point. There is a considerable improvement because of the relaxation in exchange controls, but there is a curious quirk in the rules. To commence trading, a North sea exploration company, encouraged by the Revenue, has to buy producing acreage abroad to get trading status. It is extraordinary to have a tax system that encourages small exploration companies to go to the United States —where most companies go—to buy small producing oil or gas properties, to get trading status, to become tax efficient for their expenditure in the North sea. There is something wrong there.
  We have got ourselves into a minefield. We owe more clarification of their position to the small independent companies. Personally, I am totally in favour of the purchase by small independent companies of Wytch Farm. One of the reasons why that is advantageous to them is that they are acquiring producing property within the United Kingdom and there are knock-on tax benefits for the North sea as well as for most of onshore United Kingdom.
  The right hon. and learned Member for Monklands, East said, "We may not be against remission of royalties in all cases. Under Ministers' present discretion, we might concede that in certain cases Ministers should agree to a remission of royalties." That is highly undesirable. The right hon. and learned Gentleman is arguing that it should be an administrative decision whether a company makes a significant profit on a field, no profit or a loss, and that it should be at the whim of a Minister. That does not make much sense and is not desirable. It goes against the House's approach to taxation. The consistent argument of the House and the Inland Revenue is that we must have certainty in taxation. The taxpayer must be able to say, "My tax bill in this particular area will be X." Yet the right hon. and learned Gentleman is arguing against that. He is saying, "Let the Minister decide what the tax bill will be." As a matter of principle, that is thoroughly undesirable.
  There is an additional commercial point. Is it sensible from any point of view that there should be administrative involvement in North sea activities so that a decision on whether to go ahead depends on a Minister's fiat? Is that right? Should we promote that commercial approach so that the industry puts the Minister under tremendous pressure and says, "We shall proceed if you give us back the royalties or a proportion of them."? With all the implications that the right hon. and learned Gentleman knows that that has for employment, on balance that is undesirable. Therefore, apart from the inherent argument in favour of the remission of royalties, which is the only way in which we shall get development, particularly in the marginal fields, I also believe that the present discretion is undesirable.
  I have another specific concern about the Bill. It does not include the southern sector of the North sea, which is mainly gas-bearing. We are told, in a somewhat airy-fairy way, that the discussions about the whole southern sector

  53
  are continuing, but that gives the industry considerable problems. What has happened in the southern sector of the North sea is an appalling story. Gas was discovered in the late 1960s. It was immediately made clear that there was one buyer only, the British Gas Corporation, so the companies that had made the discovery had to negotiate against British Gas. A price was agreed which, at the time, appeared to satisfy most parties, but because of the time when the contracts were written proper escalation clauses for inflation were not inserted. By the mid-1970s the price was so low that it was impossible for the companies that found the gas to justify additional capital expenditure to maximise the amount that they got out of the southern gas reserves. Rather than turning round to those companies and saying, "We shall pay you more if you are prepared to invest more," British Gas disappeared to Norway and bought Frigg gas at an extraordinarily high price. It did that rather than encourage extra production from the southern gas fields, or additional exploration for more gas.
  Then British Gas realised that the Frigg gas would not be adequate to fulfil the likely demand, so it went back to the southern field developers and offered them a higher price so that there could be more capital investment. Now we are almost in the same position. British Gas has a choice between buying Norwegian gas from the Sleipnir field—
  Mr. Rowlands: A very good idea.
  Mr. Eggar: So the hon. Gentleman is advocating that British consumers should pay high prices for Norwegian gas, which would provide jobs in Norway, rather than encouraging development of the southern gasfields, which would provide jobs in the United Kingdom.
  Mr. Rowlands: There is value and importance in getting contracts such as the one for Frigg gas and the new one that is being negotiated. We trust tha: the Government are not interfering. The value is that one gains access to gasfields outside one's own basin, thereby protecting our fields and reserves to the maximum extent. That, combined with some development of the southern basin, is an excellent plan for the depletion of gasfields over a long period. The hon. Gentleman has continually demanded that British Gas pays the highest price to oil companies. For the consumer, that is the deadly one.
  Mr. Eggar: The hon. Gentleman is arguing that we should set the cost of gas in the southern sector by reference to Sleipnir. He is saying, "We shall pay the Norwegians 27p or 28p per therm." Once British Gas has paid that price, not surprisingly the oil companies in the British sector will say that they want the same price. They will do so quite legitimately. Why should they not? If British Gas purchases highly priced gas from Norway, why on earth should not the British producers in the southern sector of the North sea sell to Holland? Presumably the hon. Gentleman will be in favour of that and sees no reason against it.
  Mr. Rowlands: The real sell-out of the interests of British Gas and the consumer would be if the gas were released to Europe and sold to the highest bidder, as the oil companies and the hon. Gentleman. wish. So far, however, the Government have been unwilling to sell out our interests to that extent.
  Mr. Eggar: The Opposition are behaving in a curious way. They are encouraging British Gas to bid up the price
  54
  of Sleipnir gas and to pay an artifically high price for it, thus setting a price for the entire southern and central North sea gas sector. That makes no sense at all. If Britain has sufficient gas in the southern sector, why should we buy Norwegian gas? There may be an argument (or doing that if the whole North sea sector is to be looked at as one unit and the gas directed to the cheapest point of delivery. It might well be cheaper to deliver southern sector gas from the United Kingdom sector to Holland than to deliver Norwegian gas to the United Kingdom. I do not den), that. If that course is to be taken, however, those involved in the North sea—the Dutch, the British. the Norwegians, the Germans and the Danish—must agree that we intend to treat the entire North sea as one area and to make contracts on the basis of the cheapest delivery route.
  The Opposition cannot have it both ways. Why should the British consumer pay higher prices for Norwegian gas while leaving our reserves undeveloped, with the inevitable loss of jobs that such a policy will entail? The Opposition seem happy to advocate a policy that means more Norwegian jobs at the price of fewer British jobs. That is most curious. I hope that the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) gets his act together by the time he winds up the debate so that we can have a coherent approach from the Opposition.
  In examining whether royalities should cover the southern sector as a whole the pricing policy within that sector must be examined. There are two ways of locking at this. If royalties are not payable, it seems reasonable that British Gas should negotiate a lower price with the supplying companies, as the cost of production by the supplying companies will be lower. If, on the other hand, royalties are payable on the southern sector, a higher price should be paid. Either way, the Government must make a decision. The Government's key criterion must be to obtain a reasonable level of economic rent from the southern sector of the North sea. Whether they choose to do that by charging royalties with a higher price paid by British Gas to the producing companies and no additional taxes on British Gas, or no royalties and higher taxes on British Gas, is neither here nor there.
  The Government must make their position clear. The many companies that have reserves in the southern sector face difficulties when negotiating with British Gas because they do not know how they will be taxed. So Long as discussions continue about the application of the Bill to the southern sector, the position will remain unclear. Will my right hon. Friend the Secretary of State make a categoric decision on this? I express no opinion as to which course is preferable, but if the Bill does not apply to the southern sector the way in which the additional economic rent will be taxed, whether through an extension of the monopoly levy or some other avenue, must be made clear to British Gas. That is extremely important.
  The Bill is part of a package and should be judged as such. I am convinced that this proposal, which helps the marginal fields, is in the country's best interests because we shall continue to be self-sufficient for longer and because additional developments will be created in the next two or three years which will lead to more jobs. I am sure that the whole House will wish for that.
  6.6 pm
  Mr. Dick Douglas: It is difficult to follow the hon. Member for Enfield, North (Mr. Eggar) on this issue. I do not wish to argue with him about the

  55
  way in which British Gas should negotiate, but if he thinks that Sir Denis Rooke will be deluded in complex negotiations with the Norwegians or anyone else into selling the British consumer down the river, the hon. Gentleman is very much mistaken. The Government dislike Sir Denis and the corporation because under his leadership the corporation has been a very good protector of its consumers. The Government have used the corporation and its activities as a means of raising taxation to supplement Government revenue, while laying the blame and odium on the corporation.
  I have views about how we should negotiate with the Norwegians, but I am not the negotiator. In all my discussions with Sir Denis Rooke on this, however, it has been clear that he is well aware—far more aware than Ministers have been—of the overall implications for the United Kingdom economy. In this context, I refer with some regret to the activities of the former Member for Ross and Cromarty, now departed to the House of Lords, when he was at the Department of Energy.
  The Bill is small, but, as the hon. Member for Enfield, North said, it is part of a package. The package derives directly from the requests made by the United Kingdom offshore operators in their submission. In no previous case have a Government conceded virtually everything that the oil companies sought. Indeed, the Bill concedes more than everything that the operators sought.
  On royalties, the UKOOA asked for the introduction of an automatic royalty repayment method. It said:
  "As a positive measure to promote development, the general mechanism for Royalty repayment is already provided in the Petroleum and Submarines Pipeline Act, but the provision is discretionary and thus unreliable as a basis for investment commitments".
  That was also the view taken by the Secretary of State in promoting the Bill.
  The UKOOA proposal continued:
  "An automatic procedure for Royalty repayment can be defined to vary inversely with production, i.e. full repayment would apply below a defined level (e.g. 20,000 b/d) with linear decrease in the repayment to nil at a higher level (e.g. 60,000 b/d)".
  The operators asked for royalties to be related to the production potential of the field, but the Government are not interested in that. They have decided to remit royalties regardless of the production potential of the field. Why have they conceded more than the industry sought? Where is the public benefit in that? I am willing to concede that there may be some public benefit, but the Secretary of State spoke in very broad terms. He said that the Government would protect the onshore industry. Where is the evidence for that? What deals have been done with the oil companies to ensure that that industry will be assisted?
  I declare an interest in drilling. The United Kingdom gets 30 per cent. of exploration and appraisal drilling. That estimate has been given during the development of the North sea. Where is the evidence to suggest that, if there is an increase in exploration and appraisal drilling, the rigs will be used by United Kingdom drilling companies?
  The hon. Member for Enfield, North mentioned tax concessions and showed us that the burden of exploration and appraisal drilling would be borne by the taxpayer, who would pay 88 cents in the dollar. Some rigs are at present lying idle. If there is an increase in exploration and appraisal drilling, the rigs called into activity will not be
  56
  British-manned or British flag ship rigs, but will probably be American rigs. Nevertheless, the Government, having made concessions to the oil companies, cannot come forth with any quid pro quo, because they emasculated the British National Oil Corporation and in so doing denied themselves an instrument to guide such activity fruitfully.
  Great claim has been made about what Britain could do concerning exports. An area of fruitful export is the south China sea, but, despite BP's great will, the Chinese will never allow BP or anyone else to develop and appraise the south China sea without some quid pro quo. If we go there to drill, we shall be asked to engage Chinese companies and to embark on joint ventures with them. That nation is in the early stages of its development and is not a reasonably mature nation as we are, yet it adopts a stiffer bargaining attitude than we do, because it has its own national oil company—something that we have denied ourselves directly.
  Wood Mackenzie estimates that the effect of the Bill and its tax package would be to raise the oil price from 30 dollars to 40 dollars a barrel in terms of payback. That is an increase in present value of 80 per cent., which is a substantial benefit to the companies, but where is the benefit to our onshore industry? Can the Government guarantee that drilling rigs and production platforms will be built in United Kingdom yards? The real incentive, of which I approve, is to remove some of the front-end loading from the so-called marginal, "uneconomic" fields, which are the 25 million to 150 million size fields. How will those fields be developed? Will they be developed? Have the Government taken cognisance of the 31 fields? Will they be developed by means of fixed structures, will they be tied in with existing platforms, or developed by means of floating structures? If there are to be new floating structures, can the Government guarantee that the United Kingdom's onshore industry will benefit?
  If there are smaller fields — the hon. Member for Gosport (Mr. Viggers), who is not present now, made interesting points about oil revenues — and we need secondary and tertiary recovery, it will be advantageous to design floating structures that can be moved from one field to another. It would be possible to have a number of floating structures. One of them could be designed for deck loading to produce the initial production from the field. That could then be moved to another field, so that there would be secondary and tertiary recovery on different platforms. Where the fields were smaller—we are not here talking about the depths — obviously the platforms would be smaller. Is that aspect covered by the Bill and by the tax provisions?
  There is little point in moving towards a remission of royalty that will leave some of the possible recoverable reserves in the ground. If we can devise other incentives that are within the tax structure—I think that some of them can be, although I have not studied the matter carefully — it will be possible to move a production platform and to have leasing deals between companies in order to achieve the full advantage of the concessions. If that is in the Government's mind—or if I can put it into their mind—there should be an interrelationship with industries such as shipbuilding, which are crying out for such orders. They could design platforms specifically for those fields, so that it would be possible to get the full advantage of the Government's tax and royalty concessions.

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  The Government have difficulties because of their own greed. During their period of office they have embarked on a large number of tax changes. Those changes have been produced at a rate that is detrimental to our long-term interests. The real criticism relates not to what is in the Bill, but to the Government's delay in introducing such a measure.
  In energy debates in this House, some of us have been arguing for three years for some concessions to be made —not necessarily of the nature of those in the Bill—for marginal fields. The Government, because of their greed, have waited until almost the last minute before saying, "We must make these concessions," and they have gone further than they need to go because of the desperate position in which they have put themselves by their greed for revenue. That is bad enough, but they have put the nation in a desperate position, because the likelihood—
  Mr. Marlow: In view of what the hon. Gentleman has just said, will he tell the House whether he will be supporting the measure or voting against it? If he is arguing that the oil companies need concessions, although he does not entirely agree with the concessions on offer in the Bill, is he saying that he will vote for the Bill, or against it? If he votes against it, he will be trying to stop the concessions coming forward, yet he has brilliantly put a case for giving concessions.
  Mr. Douglas: The Government have gone further in making concessions than even the oil companies desire. I shall not vote for the concessions, because they give the oil companies carte blanche —a blank cheque. As to whether or not the oilfields might be profitable without concessions. I concede fully that there are some fields that would need remissions in terms of front-end loading, but that—
  Mr. Marlow rose—
  Mr. Douglas: The hon. Gentleman has been peripatetic enough and hon. Members have been extremely generous to him. I have made my points clearly and the Minister of State has been courteous and listened attentively. I am saying that there are fields that require concessions, but, even if it were necessary to make the concessions that are contained in the Bill, where is the deal with the companies? Where are the concessions from the companies that will assist industry and assist onshore development?
  Mr. Marlow rose—
  Mr. Douglas: No, I shall not give way. I believe that the hon. Gentleman has a drilling school in his constituency. He will understand that if we are to make this concession to the industry we should ensure that we can build up our capacity to drill in the United Kingdom. I am talking not just about platform drilling but about offshore drilling generally. No other nation would have behaved as stupidly as we did in not using the benefits from the oil industry to build up our onshore developments.
  We do not want what happened with multipurpose support vessels to recur. For example, orders were given to Finland and elsewhere for goods MI: ch should have been produced within the United Kingdom. The Government have the opportunity to guide and assist our onshore industry to increase development. My criticism is that they have probably mistimed the legislation and gone
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  too far. But they have the opportunity, even at this juncture, to redeem themselves by proving beyond doubt that they have taken cognisance of the arguments put forward, so that there will be substantial benefits onshore to industry.
  6.21 pm
  Sir Peter Mills: I congratulate my right hon. Friend the Minister of State on his new position. He is another former Minister in the Ministry of Agriculture, Fisheries and Food, which shows how some hon. Members seem to be involved in every area of the business of the House.
  I am no expert on oil exploration, except as a user of oil. I am concerned about its price. Because agriculture is a major purchaser of oil, those involved in farm activities should have some say in these matters. I hear of nothing else but North sea oil. Anyone would think that there was no possibility of a development in oil exploration elsewhere. I remind the House that in the United Kingdom there is a region known as the south-west of England where we are concerned about what is happening off shore. The Bill will provide the extra incentive needed to encourage oil exploration in the south-west. Many of us believe that there is oil offshore in the south-west.
  As the North sea wells dry up more encouragement must be given to find oil in other areas. I am told that the south-west of England is a difficult area in which to find oil, although already some drilling has taken place in the approaches to the Channel. If we found oil off our shores in the south-west that would be advantageous. We rave the facilities to service the rigs and so on. There are excellent facilities at Falmouth for ship repair, servicing and tendering — I hope that those are the correct terms. There are adequate facilities at Plymouth as well. If oil were found off the south-west coast, it would be of enormous benefit to the area—especially in providing employment. The people of the south-west are adaptable to new jobs. Although they may find it strange working in the oil industry, they would adapt quickly. I welcome what the Government are doing in that area.
  I hope that the large companies will vigorously pursue exploration in the south-west. Will my right hon. Friend the Minister tell me the exact position? I appreciate that he may need notice of the question, but it is important to know the results of the drilling and testing in that area. If oil is found in the south-west we shall have to learn from some of the mistakes made in other areas. I understand that problems arise from the sudden influx of new wealth and the consequent economic changes.
  Mr. Marlow rose—
  Sir Peter Mills: I shall give way to my hon. Friend provided that he does not ask me any technical questions.
  Mr. Marlow: I am interested to listen to my hon. Friend who, like myself, comes from a part of the country where traditionally oil has not been sought or found. During his speech, will he address himself to a couple of points made by Opposition speakers? The right hon. and learned Member for Monklands, East (Mr. Smith) said two things. First, he said that one of the great benefits of royalty was that it forced oil companies to go through the large, bureaucratic rigmarole of providing Government with a great deal of information. Secondly—although he was quite wrong about this and became very muddled—

  59
  he said that the Government would gain more revenue without the provisions of the Bill. Of course, the Government will gain more revenue because of the incentive provided by the Bill.
  It would be a great help to Conservative Members whose constituencies are not traditionally involved with oil or its extraction if my hon. Friend could tell us to what extent people in his part of the country would wish not to be borne down with bureaucracy and not to have to pay large taxes in areas where the extraction of oil could be fairly marginal. It is important that we should know—
  Mr. Speaker: Order. I well understand that the hon. Gentleman is seeking to be helpful this afternoon, but it is rather a long intervention
  Sir Peter Mills: I am not sure whether my hon. Friend the Member for Northampton, North (Mr. Marlow) is being helpful. He is the very man to answer his questions. Should he be lucky enough to catch your eye, Mr. Speaker, I am sure that he will develop his argument and deal with the Opposition. I agree with my hon. Friend that the Opposition are always in a muddle, and my hon. Friend is the man to deal with them. I do not think that it would be wise to give way to any further interventions.
  The south-west must learn from the mistakes of other areas. If it is fortunate to find oil, the balance must be right. The south-west has a good tourist trade, and we do not want oil development to spoil that. It has good agriculture and many retired people live in the area. Although I would strongly welcome the finding of oil in the south-west, we must get the balance right. In his Budget statement, my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) said that these proposals would be part of a package of measures to encourage future offshore development. I make a strong plea to my right hon. Friend the Minister of State to think, perhaps for the first time, about the south-west so that we may have the advantages that oil exploration can bring.
  A newspaper report said that the Budget would breathe new life into the North sea oilfields. I want it to bring some life to the south-west of England. If anyone thinks that I am biased, I confess that I am. I want to see my region becoming economically viable and obtaining some of the benefits that have accrued to other areas following the discovery of oil. We want to share in these fortunes and, although it may be expensive business, especially in the south-west, it is obvious that in time the oil in other areas will run out and we shall need to be ready to find other supplies.
  Mr. Eggar indicated assent.
  Sir Peter Mills: I am glad that my hon. Friend the Member for Enfield, North (Mr. Eggar) agrees. It is rare to see an hon. Member doing that in a debate of this kind. However, I think that I have made my point clearly. I hope to learn from the Minister the exact circumstances of oil exploration in the south-west. If this measure does anything to encourage that, I shall be extremely pleased.
  6.32 pm
  Mr. Geoffrey Lofthouse: Like the hon. Member for Torridge and Devon, West (Sir P. Mills), I do not profess to be an oil expert. In fact, I confess to being even less of an expert than he. However,
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  I am aware that the Bill means that the nation is to abandon the right to receive royalties for future North sea oil. That is not refuted. Unfortunately, however, the Secretary of State was unable to tell the House the likely cost to the Exchequer. We have been told why figures are not available, but I cannot believe that no assessment has been made, and I cannot understand why figures cannot be provided for our guidance. In their absence we can only guess, and my guess is that the Bill will give away the nation's assets without Parliament knowing what we are giving away.
  It is clear from the debate so far that the Government have given the offshore companies all that they have asked for, and my main reason for intervening is to remind the House and, I hope, people outside of the inconsistency of the Department of Energy, under the same Secretary of State, in its attitudes to the private sector and the public sector.
  We talk glibly about investment in the North sea and of how essential it is that the oilfields should be worked. Unfortunately, the Government do not operate the same criteria when they deal with the mining industry. The Government are prepared to help the private sector, in this case the oil industry, but we are told repeatedly by the Chancellor of the Exchequer of the money that subsidies to the mining industry cost and that the country cannot afford it. We cannot afford to keep our mining industry alive, but we can afford to forfeit revenue from the North sea.
  Mr. Marlow: Will the hon. Gentleman give way?
  Mr. Lofthouse: No, I will not. The hon. Gentleman has been on his feet six times already. I think that he has had his fair whack.
  As a result of Government policy, the mining industry is going through complete turmoil. Men do not know what their future is. Men who are now 50 and over are told that in the next two or three years they will no longer be required for work, because the Government say that they are no longer prepared to offer subsidies. In this morning's Yorkshire Post, MacGregor himself is reported as saying that Ministers always require our nationalised industries to break even. If that is the case, someone should come clean and tell us that it is a fact of life, because the Government are not prepared to give as generously to the mining industry as they are to the North sea, that 70,000 jobs will go. They should tell us that any uneconomic pit will be closed—
  Mr. Speaker: Order. I understand the hon. Gentleman's difficulty, but that is a track down which we should not go too far.
  Mr. Lofthouse: With respect, Mr. Speaker, I am only comparing the Government's attitude in the Bill with their attitude to the mining industry and attempting to emphasise what it means for the mining industry. However, I bow to your ruling.
  I hope that even at this late stage the Government will give the same sympathetic treatment to our mining industry so that we may save our miners their jobs and their families the distress that they are going through at present.
  Mr. Eggar: Will the hon. Gentleman give way?
  Mr. Lofthouse: No.
  Mr. Eggar: I am trying to be helpful—
  Mr. Speaker: Order. The hon. Member for Pontefract and Castleford (Mr. Lofthouse) is not giving way.
  Mr. Lofthouse: I listened to the speech of the hon. Member for Enfield, North (Mr. Eggar). I do not attempt to pit my wits against his knowledge of the oil industry. I do not expect him to attempt to pit his wits against what I know to be happening in the mining industry as a result of the Government's failure to be as sympathetic towards it as they are in the Bill to the oil industry.
  Mr. Eggar: It is not true.
  Mr. Lofthouse: It is true. At the end of the day there will be a cutback in the mining industry which will savage 70,000 jobs. If the Government woulJ give the mining industry the sympathetic treatment that they intend to give the oil companies, there would be no need for these jobs to be butchered.
  Mr. Marlow: The hon. Gentleman said that the Government were being generous to the oil companies and mean to the mining industry. How much money does he think the taxpayer pays each year to the mining industry, rightly or wrongly—in other words, how much does the mining industry get for capital investment— and how much does the oil industry pay towards it?
  Mr. Lofthouse: The Chancellor of the Exchequer and the former Secretary of State for Energy talks about £1·25 million a day going to the mining industry, but no one will say what will be the loss to the Exchequer following the passage of the Bill. The Government should come clean and tell us. The Government say glibly that they intend to run down the mining industry because it is costing £1·25 million a day in subisidies, but that they intend to relieve the oil companies of royalties, while giving us no figures. Clearly there is one law for the private sector and another for the public sector, and we see a stark example in the mining industry. The Government are inconsistent, and the miners are aware of it. They feel that they are being treated unfairly and. when Bills of this kind come before the House, they only add fuel to the fire. They make our miners believe that a lot of the propaganda sent to them is right.
  Measures such as this do no good. I hope that the Government will withdraw it, give sympathetic consideration to our mining industry and out a locker in MacGregor's wheel when he becomes chairman of the National Coal Board.
  6.40 pm
  Mr. Richard Needham: This is the first time that I have had the privilege of following—if I can call it that—the hon. Member for Pontefract and Castleford (Mr. Lofthouse), although in the 1974 election I followed his predecessor by some 30,000 votes. I have a high regard for his constituency and for those who have represented it, although I have not always agreed with everything that they said or how they said it. There was once a Mr. William Needham who was Conservative Member of Parliament for Pontefract. That was before coal was discovered. I am sure that at some time in future another Mr. Needham will represent the constituency.
  The hon. Member for Pontefract and Castleford and my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) have made their "maiden" speeches on this subject. As I am well aware of the great expertise and technical knowledge on this subject on these Benches. I
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  trust that I shall be the last "maiden" speaker in this debate. The right hon. and learned Member for Monklands, East (Mr. Smith), the hon. Member for Dunfermline, West (Mr. Douglas) and the hon. Member for Pontefract and Castleford should not be allowed to get away with all the points that they made. There seems to be considerable disarray in the Labour ranks. The hon. Member for Pontefract and Castleford said that no one knew how much this measure would cost in terms of royalties not collected. If he had listened to his right hon. and learned Friend, he would have heard that he, too, was concerned abouT that. One of the right hon. and learned Gentleman's arguments was that another great field might be lurking in the northern region of the North sea, out of which could come vast amounts of royalties. If so, how can anyone conceivably know how much the royalties would amount to? As the right hon. and learned Gentleman, or one of his hon. Friends, pointed out, until the field is developed, no one can know what will come out of it. It is therefore impossible for the right hon. and learned Gentleman or, indeed, for the Minister — brilliant mathematician, statistician, economist and oil expert though he is—to make any judgment on the royalties that will be lost. No one knows whether, in the words of the right hon. and learned Member for Monkton, East, an enormous field is lurking out there.
  Mr. Lofthouse: Surely that means that we are giving away royalties — taxpayers' income — and we do not know how much.
  Mr. Needham: I understand the hon. Ger Oman's point, but unless the oil companies believe that they can get a return on their money— unless they have some incentive—they will not develop the fields.
  The hon. Member for Pontefract and Castleford asked the Minister to tell the House what the cost would be, although his right hon. and learned Friend had made it perfectly clear that he did not know. Perhaps the right hon. and learned Gentleman and the hon. Gentleman should discuss the matter.
  Mr. Eggar: Is it not curious that the hon. Member for Pontefract and Castleford (Mr. Lofthouse) should have made that point? When estimating the cost of the subsidy given to the mining industry, he failed to point out that the National Coal Board charges artificially high prices for the coal that it sells to the electricity board, and those costs are then passed on to industrial and domestic consumers. Effectively, the mining industry receives a large chunk of subsidy which neither the hon. Gentleman nor any other Labour Member mentioned.
  Mr. Needham: Another important point is that the oil industry provides the Government with enormous revenue, whereas the mining industry is a great burden on the taxpayer.
  Mr. John Smith: I hope that the hon. Gentleman will not persist in his puzzlement about the Opposition's attitude, which is quite straightforward. Before a tax concession is given, Parliament should have some idea of the amount involved. For example, the Secretary of State could have told us what the effect would be on two fields already approved for development—Alwyn and Clyde. Those fields will be covered by the concession, so there must be some projection. Even minimal information such as that would have given us a rough idea of what is

  63
  involved. I hear the Minister of State muttering that we have had some information. That is a point for the hon. Member for Wiltshire, North (Mr. Needham) to puzzle over. If it is impossible to produce information, as he says, how is it possible for the Minister of State to do so? Would it not be reasonable for the Government to give us some idea—even to the nearest £100 billion—of the effect of the legislation?
  Mr. Needham: The right hon. and learned Gentleman cannot have it both ways. It would be fair enough for information to be given to the right hon. and learned Gentleman by the Government about fields where oil is likely to be found, but that is not the point that he made. He said that there might be another great field lurking out there. If so, not even the right hon. and learned Gentleman — if he were Secretary of State for Energy — could suggest what the royalties would be. He could not possibly know. He should not even contemplate asking the Government to mislead the House on this question, when he himself does not know the amount of the royalties.
  There was an inconsistency between the right hon. and learned Gentleman's argument and that of his hon. Friend the Member for Dunfermline, West. The hon. Gentleman seemed to be saying that there was some merit in the Bill. However, all Opposition Members must say that a Bill provides too little or too much, and that it is too complicated, too simple or too late. The hon. Gentleman said that the Government were giving too much away and doing so too late. He should therefore vote for the Bill in principle and try to improve it in Committee. I have so far heard three Opposition Members speaking about the Bill. and each has taken a different line. Given the state of the Opposition, that is not altogether surprising. I hope that in future they will seek agreement before taking part in a debate.
  The right hon. and learned Member for Monkton, East made two further points which I should like briefly to challenge. He said that we have wasted an oil bonanza on unemployment benefit. However, he must know that the major reason for the increase in the value of this country's currency has been the increase in the oil price. Equally, he must know that we abandoned exchange controls to try to keep a proper balance in our economy. If the Government had followed the Opposition's policy of import and exchange controls, the value of the currency would have been very much higher and our manufacturing industry would have been much worse. In this area, the right hon. and learned Gentleman's alternatives would have been disastrous. Instead of a massive oil import bill, we now have a balance of payments that is greatly improved by oil. That has put enormous constraints on our ability to handle our currency and to maintain our competitiveness.
  According to the right hon. and learned Gentleman, the cost of the bonanza that we have thrown away on unemployment is about £17 billion, of which £5 billion could be regarded as paying for the unemployment created during the lifetime of the Labour Government and the remaining £12 billion for unemployment caused by this Government. When the right hon. and learned Gentleman left office, unemployment was 1·3 million. It is now 3 million. Therefore, if the cost was £5 billion under the Labour Government, it could not conceivably be more
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  than an additional £6·5 billion under this Government. Of course, the right hon. and learned Gentleman has forgotten to take inflation into account. Therefore, the House should listen to the points made by the right hon. and learned Gentleman with great care and caution. If his statistics for that are so awry, they cannot be trusted in too many other areas.
  Mr. Derek Foster: Is not the hon. Gentleman failing to take account of the fact that the average length of unemployment is much greater now than when the Labour party was in office? He will recall that the number of long-term unemployed has tripled during the past four years. The average length of unemployment is much greater nowadays. Therefore. the resulting cost is much higher.
  Mr. Needham: I accept that the average length of unemployment is much greater now. However, I am talking about the annual cost, not the length of time for which people are unemployed or the amount of benefit.
  Mr. John Smith rose—
  Mr. Needham: With respect, I have given way to the right hon. and learned Gentleman. Other hon. Members wish to speak, and I want to be brief.
  There is an article in the Financial Times of 13 May which was written by a journalist called Ray Dafter. I hope that he is not aptly named. The article is entitled
  "Election hits oil tax concessions."
  He points out that the fact that the previous Bill was lost put some oil companies' plans for developing the northern fields at considerable risk. Interestingly, he points out:
  "Oil companies are confident that the legislation will be reintroduced early in the next session of parliament irrespective of the outcome of the election."
  I imagine that Mr. Dafter had some grounds for making that statement. Perhaps he had words with the hon. Member for Dunfermline, West, or a whisper in the ear of the right hon. and learned Member for Monklands, East. The Opposition must tell us whether Mr. Dafter was correct. Would the Labour party have introduced such a measure? If not, why was the article not refuted? One is forced to the conclusion that the Opposition's heart is not in their hostility to the Bill. They may cavil a little at the margin, but they know that the Bill is worth while. It would seem from what is said that if they had had the opportunity, they would have introduced such a Bill themselves.
  6.53 pm
  Mr. Robert Hughes: The hon. Member for Orkney and Shetland (Mr. Wallace) is not in the Chamber, for understandable reasons, and I make no complaint about that. However, I join those who have congratulated him on his maiden peech. He concluded by saying that next time he spoke he would probably not get such a clear run. I think that we can promise him that. I say that as a tribute to his maiden speech, because several of us had to hold ourselves down in our seats in an attempt not to interrupt him. That shows that the hon. Gentleman gained our interest, even if we did not necessarily agree with all that he said, and I look forward to debating with him in future.
  I begin on a rather sombre note, because about four or five hours ago a Bristow's helicopter crashed at Dyce airport, Aberdeen, on its way back from an oilfield in the North sea. Such crashes are a constant reminder to us of

  65
  the high cost of recovering the oil from the North sea. It can be measured not only, as we used to say, in terms of pounds, shillings and pence, but in the number of lives lost. However, I am happy to say that in this case the 16 passengers and two crew have been taken to hospital for treatment and, as far as I am aware, there are no fatal casualties. It is understood that the helicopter spiralled down from about 90 feet and caught fire once it had hit the ground.
  I trust that there will be a full inquiry into the accident, and I have asked the Department of Transport to ensure that one is held. We all knpw that every day there is a tremendous amount of traffic between the North sea and Dyce.
  Mr. Bill WalkerI can assure the hon. Gentleman that every time an aircraft crashes there is a full and proper searching inquiry.
  Mr. Hughes: fully understand that. However, with the transfer of departmental responsibilities, we wish to be assured that the inquiry will take place at the earliest possible moment. Indeed, we all need to be assured that every safety precaution is taken and that every effort is made to ensure that helicopters flying to and from the North sea are properly serviced and so on. I do not suggest that there is any blame to be attached ir this instance, but I am worried because helicopter incidents seem to be more frequent. Given the many helicopters in service, it is perhaps not surprising to have a period with two or three crashes and then years without any crashes. Nevertheless, everyone will want the matter to be fully investigated and all hon. Members will want to pass on their regards to the injured.
  I hope that the Minister of State is not leaving the Chamber. As the Secretary of State is out of the Chamber, my compliments to the right hon. Gentleman and the Minister of State on transferring to their new Department will have to be read, rather than heard, if the Minister leaves. However, I suppose that I should welcome the Secretary of State and the Minister to their new posts at the Department of Energy. I wish that I had their attention. I have a particular message for the Minister of State. He should take heed of the electoral demise of his predecessor at the Department of Energy.
  I refer, of course, to Hamish Gray, the former right hon. Member for Ross and Cromarty, who failed to be returned as the candidate for Ross, Cromarty and Skye. The fact that he lost his seat is not unconnected with the fact that he went out on a limb in saying that the gas-gathering pipeline would be built anJ funded by the Government. Of course, at the end of the day, he was unable to deliver, and I think that that had something to do with his electoral defeat. Another factor was his inability to defend the jobs of the worker; at the aluminium smelter at Invergordon. His excessive loyalty to the Government was rewarded in the election result. I can only hope that the new boys at the Department do a bit better than they did when they were twins together at the Ministry of Agriculture, Fisheries and Food.
  It is all very well for the Secretary of State to tell me this afternoon that he has had a letter from the fishing organisations thanking him for all that he did as Minister of Agriculture, Fisheries and Food. He should be aware that those letters represent a triumph of courtesy over
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  common sense. The fishermen are far from happy about the way in which the common fisheries policy has been carried out since its inception.
  A Bill produced by the Department of Energy as its first Bill in a new Parliament should be a bit more ambitious and all-embracing than this very narrow measure. However, that is not to say that it is not an important Bill. Indeed, it is important, but I should have thought that wider aspects of Government policy on energy should be engaging the Government's attention. One of the issues that should engage their attention is the scandal of the price of petrol at the pumps. They should consider the scandalous way in which, willy-nilly, without any apparent proper consultation with the Government or consumer organisations, and without any thought whatever for the needs of consumers, 8p—or whatever is the desired figure—has been put on to the price of petrol.
  There was a time, during the palmy days of a Labour Government, when, if the price of petrol increased by 1p or 2p a gallon there were demands for emergency debates and for the resignation of the Government. There was the sort of noise from Tory Back Benchers which has been conspicuous by its absence today. An increase of 8p a gallon has been slapped on at 24 hours' notice. It is disgraceful. In the previous Parliament, a number of Conservative Back Benchers from rural areas expressed considerable vocal opposition to the proposal to increase the tax on petrol. Unfortunately, with one or two notable exceptions, they did not withdraw their support from the Government, which is the only sort of action that the Government understand. If they withdraw their support this time, it will be because they are comforted by the size of the Government majority. In the words of the well-known phrase, they are
  "Willing to wound, and yet afraid to strike"
  We can be sure that the loyalty of Tory Back Benchers will remain undiminished.
  Indeed, the loyalty of Conservative Members has to be seen to be believed. It is difficult to accept that their naive speeches on the Bill represent their true views. The Bill includes no estimate of its financial consequences and I cannot understand how it can be greeted with dumb acceptance. One after another, Tory Members have repeated, parrot fashion, that no one can estimate the cost of the Bill because no one knows how many oilfields will be developed.
  There is a certain rudimentary logic in that approach. If we do not know what fields will be developed or discovered we cannot calculate the cost of the Bill. But someone must have an idea. The Bill did not appear suddenly. The Secretary of State said that it was promised by his predecessor and was lost because of the election. The right hon. Gentleman did not wake up one morning and say, "Let us do away with royalties on all new fields." Government does not work like that. I cannot believe that the Government are so profligate with our national resources that they hand out money without estimating the cost.

  The oil companies must have estimated the cost. If it is significant enough for a Bill to be brought before the House, it must be important to someone. The oil companies must have made a case to the Government and someone, somewhere must have made an estimate. I do not expect precision in these matters—indeed, unlike my right hon. and learned Friend the Member for

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  Monklands, East (Mr. Smith), I do not even want to know the cost to the nearest hundred million pounds; I will be much more generous—but an estimate must have been made of the lower limit and the upper limit of the cost of the Bill. The Government should give us a rough idea of the bottom end and top end of the scale. The figures must exist. If they do not, the Bill represents a dereliction of duty by the Government.
  The Secretary of State, anxious, as always, to play both ends against the middle, said that the Government have no idea of the cost, but he gave us an illustrative example of how the new scheme would work in a hypothetical field. From the figures that he gave, my right hon. and learned Friend the Member for Monklands, East calculated the cost at £130 million.
  The Secretary of State said that the cost for that hypothetical field would be 3 per cent. and he described that as "minor". The right hon. Gentleman cannot have it both ways. If 3 per cent. is minor, it must be minor in terms of the activities of oil companies. I do not believe that they operate on such small margins that 3 per cent. will make the difference between development and non-development.
  However, that 3 per cent. represents a large sum which could be of great value to those who need the money. Why has the cost been omitted from the Bill? Why have the Government made the concession? Of course, Tory Governments have always given in to the oil companies sooner or later, but there are provisions in existing legislation for oil companies to seek relief on royalties in marginal fields. The only condition was that the case for relief should be proved. The Bill allows automatic relief.
  I have tried to think of another sphere of Government policy, whether in fiscal matters or social benefits, where applications are approved automatically. I have been unsuccessful. If someone asks for rate relief, he does not get it automatically. He has to prove his case. The same is true of rent rebates and social security claims. People have to prove that they are entitled to the money. A similar provision should apply in this case, and claims for royalty relief should be justified. The fact that relief is automatically to be given demonstrates the weakness of the Government's case.
  However much or little the cost may be— we are surely talking of hundreds of millions of pounds — the money could be used to improve the infrastructure and to develop indigenous industries in the north-east of Scotland. I am sure that, like me, the hon. Member for Banff and Buchan (Mr. McQuarrie) would be grateful for more money to improve the infrastructure in his constituency. We have both complained about, for example, the state of roads through Aberdeen, Peterhead and Fraserburgh in our part of the country. The money that the Government could use to improve those roads is being handed away.
  Mr. Needham: Will the hon. Gentleman explain how we can spend all that money if it is not forthcoming because fields are not developed because royalty costs are so high?
  Mr. Hughes: I have dealt with that, but I will repeat what I said. The Secretary of State referred to a cost of 3 per cent. and I do not believe that that will make the
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  difference between development of a field and non-development. I do not believe that the margins are that tight. After all, the Secretary of State said that it was a "minor" matter.
  Of course, if fields are not developed, we will not get royalties, petroleum revenue tax or corporation tax. But no one is suggesting that. We say that a more sensible course would be to ask companies to justify their claim. Why is that not being done? Why are we providing automatic relief? It has not been justified so far.
  As I was saying, we need money to develop indigenous industries and the infrastructure in the north-east of Scotland. I do not blame this Government alone, but there has been a failure to identify the needs of Aberdeen and to deal with them. In the period since North sea oil was developed, when there has been much onshore development in Aberdeen, unemployment has increased dramatically. The hon. Member for Torridge and Devon, West (Sir P. Mills) said that he hoped that there would be oil developments in the south-west of England. I can tell him that oil developments are not the complete answer. I recall making a speech as long ago as 1971 in the Scottish Grand Committee about the need for the oil revenues and corporation tax, or whatever the take was from North sea oil, to be kept separately and identified as investment money, because otherwise the money would be wasted and frittered away. That is precisely what is happening.
  It is wholly inconsistent for the Government to speak on the one hand about reducing public expenditure and seriously to think about cutting the value of unemployment benefit — it is a very serious matter to consider penalising the unemployed even more than they are being penalised at present—and on the other hand to say, "We are so hard up that we must start cutting public investments and unemployment benefit, but we are not so hard up that we cannot hand out hundreds of millions of pounds to oil companies automatically without their having to justify it." That is what makes this Bill so disastrous.
  I know that many other hon. Members wish to speak, so I shall not transgress on the House's time, but I want to make two points. We should not consider the Bill on its own. We should consider the whole Government strategy and the way in which it has helped oil companies. One reason—if not the prime reason—for the Government's massacre of BNOC was simply that the private oil companies did not like it and did not want state competition. In particular. they did not want BNOC to follow through its original proposition in not only developing fields, but continuing right through into refining and petrochemicals. It was not just a holding company. It was intended to be a direct competitor, in all its aspects, of the private oil companies. Those companies did not like that, and they therefore persuaded the Government to break it up.
  The Government have one answer all along the line. If a nationalised industry loses money, it is to be pilloried wherever possible. If a nationalised industry makes money, it is to be sold off, because the Government's friends in the City and elsewhere cannot wait to get their snouts in the gravy trough. This Bill is an example of Government weakness, pandering to their friends in the oil companies, and in my opinion it should be opposed root and branch at every stage of its parliamentary proceedings.
  7.12 pm
  Mr. Bill Walker: The hon. Member for Aberdeen, North (Mr. Hughes) drew attention to the sad happening today of the helicopter crash at Dyce. That must worry all of us, because, as he said, it brings vividly to us an awareness of the constant dangers that people face in bringing the oil and gas ashore. One should not forget that when talking about oil and gaslields. These fields have been developed by men taking enormous risks, often on the edges of technology, and we should be thankful that they have developed in the way that they have.
  The hon. Gentleman also said that Government Back Benchers had not commented on the price of petrol at the pumps. I can only conclude from that that he does not read the Sunday Post, otherwise he would have read the comments that I personally have made about petrol prices at the pumps.
  Mr. Robert Hughes: I must confess that I do not find the Sunday Post compelling reading.
  Mr. Walker: The hon. Gentleman must be one of the very few Scots, both at home and abroad, who does not, but, as he lives mostly in London, I can understand it. He is not so well conditioned to the thinking of Scots in Scotland as the Scots who live in Scotland.
  Mr. Hughes: That remark was as cheap as the hon. Gentleman, and I hope that he will reflect on that. It was quite unnecessary, and he knows that it is quite untrue.
  Mr. Walker: If what I said is untrue, I unreservedly withdraw it, but I based my remark on something that the hon. Gentleman said to me a long time ago, when he told me that he had moved his home and his family from Aberdeen to London.
  Mr. Hughes: I have never hidden the fact. There is nothing to be ashamed of if my wife and family live in London, as indeed many others do. However, I resent what the hon. Gentleman said, and it was extremely cheap of him to imply that I am not attuned to what is happening in Scotland. If there is a political dinosaur about, it is the hon. Member for Perth.
  Mr. Walker: As I am no longer "the hon. Member for Perth", I conclude that that remark was not aimed at me. I find the hon. Gentleman's remarks rather disturbing, because he must be aware that the Sunday Post is the most widely read Sunday newspaper in Scotland. I was merely commenting that as he had moved his home to London he had become conditioned to the thinking in the capital, where I understand the Sunday Post is not the most widely read newspaper.
  Mr. Hughes: The hon. Gentleman knows perfectly well that my aversion to the Sunday Post stems from the fact that it is a non-trade union paper and because, in my view, its political views represent all that is worst in the gutter journalism of Scotland. I know that many people in Scotland share that view.
  Mr. Walker: I am sure that many readers of the Sunday Post will wonder, when they read the hon. Gentleman's remarks, just who is out of step.
  I return to what I was saying, before the hon. Gentleman intervened some four interruptions ago, about the price of petrol at the pumps. The hon. Gentleman will know that I and my hon. Friend the Member for Banff and Buchan (Mr. McQuarrie) have constantly spoken of our
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  concern about the price of petrol in rural areas. We have expressed that concern in the only way that Back Benchers can, and that is by the way we vote. I have not changed my views on this matter, because I believe that the duty on petrol is penal for people who live in rural areas. It is regressive taxation, because those people have little option or choice. Public transport is frequently non-existent, and for that reason people often have to use their cars. In the days when fuel was cheap it was perfectly possible and feasible to do that, but today, with the quadrupling, tripling or doubling of oil prices, that is no longer so, and the price of petrol at the pumps reflects that.
  An ingredient in the price of petrol at the pumps is, of course, the Revenue take. It was always my intention that the public should be aware that I was homing in on the amount of money that the Revenue takes on each gallon of petrol that is sold at the pump, because the revenue that we take at the pumps has a regressive effect. As I said, it is penal taxation, and that is what I was drawing attention to.
  It has always been recognised by those in Government and by people outside that the stage would be reached in the development of the offshore oilfields when it would be necessary to do something to encourage the development of marginal fields. It comes as no surprise to those of us who have studied the matter that we have now reached the stage when it is obvious to everyone, other than those who do not want to see it, that something has to be done to encourage the development of those marginal fields, otherwise exploration in the North sea, and particularly the northern sector of the North sea, which is turbulent and difficult to explore, will come to a halt and no new fields will be developed. So it is right and proper that the Bill should be introduced to encourage the oil companies to develop.
  The hon. Member for Dunfermline, West (Mr. Douglas) said that the Government were giving the oil companies just what they wanted. Oil companies are in the business of getting, finding and extracting oil. If they were deterred by whatever measures the Government imposed in the past, in the days when fields were easier to exploit, we must surely do something to help them. There is nothing odd about giving the oil companies what they want. It is a sensible way to encourage the development of those marginal fields. I make no apology fo- the fact that, as a Member of Parliament for a Scottish constituency, I have a large interest in what is happening in the oilfields, because they mean jobs for many of my constituents. Jobs in Scotland are in short supply, as they are in every other part of the United Kingdom. We want the oil companies to develop the marginal fields so that there will be more job opportunities for the Scottish people.
  Tayside, which has not done so well out of the oil boom in the past, may now have an opportunity as a result of the location of the marginal fields. In particular, Dundee has a splendid harbour and other facilities and could now have the opportunity to benefit from those fields that have not previously been developed. I hope that the oil companies, by taking up the opportunities presented by the Bill, will see that Dundee, with its harbour and its new roll-on, roll-off facility, will be ideal for servicing the marginal fields.
  In addition, Tayside has developed at Dundee an airfield with a new hard runway which was laid some two years ago and which has since been extended, with new navigation aids, more of which are on the way. I hope that

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  all that will mean that the oil companies will find Tayside to be a place which they can get to and from easily. Dundee airport will not be nearly as congested as Aberdeen airport and its facilities will help the oil companies to develop the marginal fields.
  I have never been able to understand why Labour Members think that it is right and proper to bring jobs to an area through Government assistance while saying that it is wrong to do the same thing simply by reducing the amount of taxation on companies to encourage them to do something. Both are designed to achieve the same end. The one takes away in order to give to another and the other gives opportunities to develop. I see Labour Members shaking their heads. I am a simple business man, not one of the intellectuals on the Labour Benches who have studied the theory of these matters. I have had the problem of creating wealth and jobs, and it is not so easy and simple as some suggest.
  The enterprise zone which has been located in Dundee at the harbour and airfield will be another opportunity for oil companies. It will be free of local authority rates for 10 years. That would apply were they to be located in either the harbour area or at the airfield. The oil companies should consider that carefully.
  The hon. Member for Pontefract and Castleford (Mr. Lofthouse) is no longer in the Chamber. He contrasted the Government's treatment of the oil companies under the Bill with their treatment of the mining industry. The difference is that the oil companies do not ask for or get handouts from the Government, whereas the coal industry, for historical and other reasons, receives substantial public funds. [Interruption.] I agree with Labour Members. They are always a little quick at shouting without waiting to hear what is said. Energy policy must be more co-ordinated than it has been, not in the immediate past, but before that, when it was very unco-ordinated. Real efforts were made by the Labour Government to make their energy policy meaningful and sensible, but there is still a long way to go.
  No one would doubt that while we want to develop and open up new oilfields, particularly marginal ones, in the North sea, we should at the same time look at marginal mines and many that are no longer able to compete effectively. If the miners believe that those mines are viable, the Government can be just as generous to the miners as they are being to the oil companies. They can give those mines to the miners for nothing, to work as miners' co-operatives.
  If the miners believe those mines to be viable, they should put their money where their mouths are. That is the message to the miners meeting at Perth today. Perhaps they should consider more carefully how to present their case. If the Government were able to follow the example in the Bill, they could end up by saying to the miners that they would be generous and give the miners the pits which the National Coal Board judges are due to be closed. I hope that the miners would respond positively by saying that they were confident that the pits could be made to work and make a contribution to an all-embracing energy policy. Indeed, I go further and say that the Government could be just as generous as the miners would like them to be by giving the miners the working capital to sustain one of the uneconomic pits for 12 months. In that way, we might have some sanity in our approach to the problems.
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  Earlier, I commented on the helicopter crash. We must recognise that, sadly, energy never comes cheaply, either in the cost of exploring for it or in human lives. It is easy in this Chamber to forget the people who sail and fly out to the oilfields or who go down mines and put their lives at risk every day so that we can have the energy that we require.
  I hope that my comments have been noted by the oil companies and that they will recognise the potential for them at Dundee and on Tayside. I shall be happy to take representatives from any of the interested oil companies to look at the facilities there, as I am sure will other Members of Parliament who represent Tayside. I am sorry that the hon. Member for Dundee, East (Mr. Wilson) is not in the Chamber. I should have thought that as he speaks so much about oil, Scotland's oil, oil prices and everything else to do with oil, this is a unique opportunity for him to put on record the views of the Scottish National party. It is rather sad that he has not taken the opportunity to do so. However, I shall be generous and say that I am prepared to go with him, as, indeed, I am with the hon. Member for Dundee, West (Mr. Ross) whom I find much more helpful and co-operative in the battle for jobs on Tayside.
  I am prepared to go with either or both of those hon. Gentlemen and any other hon. Member who represents Tayside to meet the oil companies in the hope that they will use the advantages that will obviously be brought about by the Bill. When they are exploring and developing the new marginal fields, I hope that they will recognise that there is also a massive untapped human resource available on Tayside, in addition to the other resources that I have mentioned. I hope that they will take advantage of that and do something positive.
  7.28 pm
  Mr. Terry Patchett: As an ex-miner of 26 years' standing and with many years' association with the National Union of Mineworkers, it is appropriate for me to make my maiden speech on a Bill dealing with energy. My constituency of Barnsley, East is new and carries a third of the old Dearne Valley constituency which was for years represented by my friend, Edwin Wainwright. He was a man much loved in his constituency, as he was in the House which he holds so dear. He has asked me to express his best wishes to his old friends here. It is apparent to me that Edwin Wainwright's quarter of a century in the House was not wasted. However, I represent a constituency of many mining communities—angry communities who feel that we are now being governed by deceit.
  A few months ago a ballot by individual and private vote—as is so often advocated by the Government—was conducted of which we all know the result. The House is well aware of that decision, so let me make the House aware too of the anger felt by the miners at certain admissions by the coal board. Miners now know what is meant by the term "government by deceit". The Bill is a deceit as it seeks to slice off revenue due to this country from oil. The Conservatives criticise a great deal the subsidies paid to nationalised industries. Their criticisms take no account of the interest that those industries must reply back. The miners and the general public will not be deceived by the indirect subsidy to the oil industry provided by the Bill, no matter how the Government attempt to disguise it. I hope that Conservative Members recognise the extreme cost of the Bill to this country in

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  terms of jobs, which will be borne by the taxpayer through the cost of the dole. That added cost should be considered with the Bill before us. The Govrnment are seeking unfairly to interfere with free competition, which is very much against Tory dogma.
  What do the Government mean by "helping the oil industry"? I suspect their motives to be based more on political dogma—a dogma which is emphatic in trying to bring the National Union of Mineworkers to its knees at any price. That is no way for any Government to establish policies or priorities. However, one riddle has been answered in the debate today. When is a subsidy not a subsidy? When it takes the form of an abolition of royalties.
  The Government, because of their narrow outlook, have taken sides in the competition on energy. The Government would be better occupied trying to get people back to work, thus creating the demand for energy.
  It appears that there is no money to be made by the coal industry or Conservative Members would be fighting to privatise it. We are well aware of the lucrative prospects for Selby and the Vale of Belvoir. The greed that brings forward such Bills is of no help to the country. My right hon. and learned Friend the Member for Monklands, East (Mr. Smith) pointed out that the Bill may create jobs in one part of the country but that jobs will be lost elsewhere, particularly in the mining industry. If money is the incentive in such policies, Conservative Members are on the wrong road. The Bill will not create jobs; it is designed only to lose them. I hope that Conservative Members will bear in mind the full implications of this hasty action. I have grave doubts that they can be so :persuaded because when money is flying about it creates strange bedmates.
  It would appear that the great patriotic feeling in the country has withered in some quarters A great deal has been made of patriotism over the past 12 to 18 months. Why do the people who play on patriotism appear to run away if the country makes something out of an industry? It is unpatriotic to take a paying proposition out of public ownership and give it to private ownership.
  We oppose the Bill not only because of the subsidies it gives to the Conservatives' friends in the money market but because of the job implications. The country is well aware that some Tories are happy with unemployment at 3·5 million as it helps the free market, but they do not want a free market in industrial relations. The country is well aware that the biggest part of that 3·5 million total is the result of political dogma. I hope that Conservative Members will think seriously before they support the Bill.
  7.33 pm
  Sir Hector Monro: I should like warmly to congratulate the hon. Member for Barnsley, East (Mr. Patchett) on his maiden speech. He spoke with great knowledge of, and feeling for, the coal industry. I am sure that we shall hear a great deal more from him on this important subject in the years ahead.
  The hon. Gentleman spoke delightfully about his predecessor, the former hon. Member for Dearne Valley, who most of us know better as Edwin Wainwright, a distinguished Member who won the British Empire Medal and was a special character in this place. He had many friends on both sides of the House, and shall miss him.
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  The hon. Member for Barnsley, East, as a Yorkshireman, bowled a fine maiden over and we look forward to many more Yorkshire centuries for England in the near future.
  The hon. Member for Aberdeen, North (Mr. Hughes) referred to the helicopter crash in Aberdeen earlier today. I share his concern about the accident, but he can rest assured that the air accident investigation branch will go into the accident in the greatest detail, as it does with every accident involving passenger-carrying aircraft. It is a fact of life that helicopters are much more complicated pieces of machinery than fixed-wing aircraft and carry out particularly arduous work. I am afraid that from time to time we must be prepared for accidents, even allowing for the high standard of maintenance and airmanship of the crews looking after and flying the helicopters.
  I welcome the Bill. It is a boost to the oil industry, which is such a vital component of our economic future and balance of payments. My hon. Friend the Member for Tayside, North (Mr. Walker) pointed out its importance to jobs in Scotland and futher afield. It gives worthwhile encouragement to petroleum companies to develop the resources under the sea and around our coast. I listened carefully to the right hon. and learned member for Monklands, East (Mr. Smith), but I am at a complete loss to know why the Opposition should oppose the Bill.
  The hon. Member for Orkney and Shetland (Mr. Wallace) made a very competent speech. We come from the same town, Annan, in Dumfriesshire, and he opposed me in the 1979 election. He was a fair opponent, but he was wise and right to seek election elsewhere. To follow in Mr. Jo Grimond's footsteps is a daunting task. but I am sure that the hon. Gentleman will do it well. We enjoyed what he said to the House today.
  The hon. Member for Orkney and Shetland paid a warm tribute to Mr. David Myles, the respected Member for Banff in the last Parliament. It is sad that the boundary commissioners abolished his seat and that he was not selected to serve another constituency not far to the south of his former constituency. We all recall with envy his knowledge of agriculture and his winning ways with Ministers. We shall miss him.
  The Bill brings welcome relief to the oil companies in terms of royalties which they have been forced to pay. It will encourage the oil companies to press on with exploration around our coast. I hope that we shall be told what is in store for the west coast of Scotland, particularly in the Solway Firth area. One often hears rumours, but not many facts, about oil exploration.
  If there is to be exploration there, planning decisions and conservation implications will be important. Any exploration must be undertaken only after careful consideration. It is a confined area with tourist potential, which must be developed further, and important fishing interests. We must find a balance between the jobs and economic benefits that could come from oil exploration and the possible spoiling of an attractive area.
  We welcome the vital economic developments in the North sea and the brave decisions by the oil companies and workers in the industry, but we must consider the objective of the whole operation—the consumer. People v^ ho live in rural areas, such as my constituency, which are hungry for tourists, will have experienced shivers down their spines at the prospect of another increase in the cost of petrol.

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  We live in a free economy and the petroleum companies must fix their own prices, but there should be some pressure on them to be reasonable in their increases. When the price of petrol goes up, so does the income for the Treasury through VAT. I hope that the Chancellor of the Exchequer will bear that in mind when he considers petroleum taxation. If income from VAT continues to rise, the revenue from petrol tax should come down. Petrol and diesel are the life-blood of rural areas. I hope that places far from urban areas will be given careful consideration. The discount system, which can have a severe impact on rural suppliers and small garages in remote areas, should be borne in mind.
  The Government's proposals should give oil companies immense encouragement and confidence to press ahead. They should bear in mind what I have said about prices and consumers. With that in mind and because oil is such a vital component of our economy, I shall give the Bill every encouragement.
  7.45 pm
  Mr. Bryan Gould: I congratulate my hon. Friend the Member for Barnsley, East (Mr. Patchett) on his maiden speech. He spoke with the authentic voice of his constituency and industry. Many of us remember with affection his predecessor, Eddie Wainwright. I am sure that my hon. Friend will make an equally valuable contribution to our proceedings.
  I was tempted to speak briefly in the debate when I realised that it might be possible to consider the sorry tale of what has happened to North sea oil revenues in the last four or five years. It is an astonishing and tragic story—almost one of stupidity and culpability. It takes me back to 1977–78 when a great debate took place about what should happen to North sea oil revenues. Many people thought that North sea oil would provide manna from heaven, a disposable surplus, a means of breaking free from the constraints from which we had suffered and open up new options. People considered whether to use the money to improve social services, cut taxation, regenerate British industry or pay off our debts. All that was thought possible in the new situation created by oil revenues.
  I was one of those who said, "Wait a moment. Unless we are careful and pursue sensible economic policies, it will not turn out that way." In an article in The Guardian I warned that if we got it wrong
  "not only will we have frittered away the oil revenues in an import-led consumer boom, but we will have done so in such a way as to inflict maximum damage on our own industrial base. The flood of imports will inevitably displace domestic production, while the disincentive to exporting will further reduce investment, employment, and production in our own industry."
  When I wrote that on 4 January 1978, I did not realise that in little over a year we would have a Government of such stupidity that even my worst expectations would be substantially exceeded.
  Not only did I look forward with apprehension to such consequences, but others on the opposite side of the argument said that the consequences were inevitable, right and even desirable. In 1980 the Institute for Fiscal Studies said that this was the right way to take advantage of North sea oil revenues. It said that it would mean a fall in industrial output and a rise in unemployment. It forecast that North sea oil revenues would result in a fall in
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  manufacturing output of 8·9 per cent. and that perhaps 700,000 jobs would be lost. Not only were my expectations exceeded, but those of the Institute for Fiscal Studies.
  Manufacturing industry has lost not 8·9 per cent. output, but nearly 20 per cent. More than 2 million jobs, not 700,000, have been lost. We did not have the option of tax cuts, because in the past four years the tax burden on the ordinary family has been substantially increased. We did not even have the option of improving services, because we have endured four years of cuts, and we know what is in store for the next four years.
  Even with the immense benefit to our balance of trade, brought to us by £8 billion savings on our balance of payments in a year, we are rapidly running into deficit. That has happened because for the first time in our industrial history we are importing more manufactured goods than we are selling abroad.
  How did that happen? How did over £20 billion of revenue, that enormous advantage to the balance of payments, produce such dreadful results? It can be explained only in terms of the most incredible stupidity and doctrinaire nonsense by the previous Government—nonsense which the present Government seem prepared to perpetuate. They reinforced the inevitable results of having oil in terms of the exchange rate by their lunatic monetarist ratchet which created a tight money supply and which, to do that, drove up interest rates, thereby reinforcing the already upward movement of the exchange rate. That destroyed the competitiveness and profitability of British industry, with the result that nobody in his right mind would think of using North sea revenues to invest in manufacturing industry. Nobody did, and manufacturing investment has fallen by 36 per cent.
  There were those who argued consistently that there was no escape from that trap, that it was a dilemma into which we had to walk as bravely as possible. But that need not have been the case, because, for example, Norway, which has an oil asset even more important to its economy than ours, has not suffered such a tremendous reduction in its industrial base.
  If we allied North sea oil and the tremendous opportunities it offers with a sensible expansionary economic policy, we could use that money and resource to free us from the traditional constraints through the balance of payments on the better economic performance which we have been seeking for so long. We could use the money to invest in British industry and buy in more imports to provide industry with the semi-manufactured components that it needs to expand our industrial capacity. Instead, we have got ourselves hooked on a downward contractionary spiral.
  I was glad that my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) permitted me to intervene earlier to point out that North sea oil revenue is not a fortuitous sum of money on the side that enables us to confront the problem of unemployment. North sea oil is a major and integral part of the process that has created that unemployment. It has been allowed to operate in that way through the terrible mistakes in economic policy followed by the Conservative Government.
  It is a truism that the oil will run out. The problem for us, often referred to, is that, when that happens, we shall be left stripped of our major means of earning a living. British industry wil be not leaner and filter, but smaller and weaker. The fact that North sea oil, which should have

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  been such an opportunity, has been a snare and delusion which has led us to that parlous state is another reason for taking a jaundiced view of this legislation.
  7.54 pm
  Mr. Michael Howard: When I made my maiden speech last Wednesday I little imagined that I would be addressing the House again so soon. Indeed, I did not realise it as little as an hour and a half ago. I have been encouraged to contribute tonight, and I shall do so by pursuing a theme that I took up in my maiden speech.
  In doing that, I hope that the hon. Member for Dagenham (Mr. Gould) will forgive me if I do not follow him into the highways and byways of his argument, the kind of argument that was put before the country during the last election and on which the country gave its verdict. Indeed, many of the speeches in the House during the last couple of weeks have been a repetition of the arguments that formed the basis of the general election campaign. I want to move away from those arguments.
  In my maiden speech I expressed the need for simplicity in legislation. I referred to recent observations of Lord Diplock and the Master of the Rolls, who have put in pleas to Parliament for simpler legislation. "Let us have," they have said, in effect, "legislation that the ordinary man or woman in the street, the ordinary person on the shop floor, can understand". It was from that standpoint that I recently examined, I confess for the first time, the Bill now before the House.
  The Bill makes a good start in that it is short; it extends to two pages containing but two clauses and a total of 34 lines. But after that good start its standard falls more than somewhat because in only two pages we are constrained — if we are to have even the most elementary understanding of what the legislatior means—to look at three other statutes and one statutory instrument. Clause 1(2) says:
  "This section applies to any licence granted under section 2 of the Petroleum (Production) Act 1934".
  Off one scurries to that Act, but wher one digs up section 2 of that, thinking that it will provide the key to this enactment, one is sadly disappointed, for clause 1(2) of this measure goes on to refer to a licence granted under section 2 of the 1934 Act
  "which incorporates all or any of … the model clauses set out in Schedule 5 to the Petroleum (Production) Regulation 1982 (production licences for seaward areas); or … the model clauses referred to in section 19(1)(a), (d) or (e) of the Oil and Gas (Enterprise) Act 1982 (corresponding licences issued in accordance with previous legislation)".
  Only if one has ready access to all those documents can one begin to make sense of clause 1(2). I regret, however, that it does not end there, because if one reads on in subsection (3)—and, remember, one has not got beyond clause 1—one finds a further reference to the 1934 Act and one learns that
  "'relevant new field' has the meaning given in section 36 of the Finance Act 1983".
  In other words, before one has got beyond clause 1 one must have recourse not only to the Petroleum (Production) Act 1934 and the Finance Act 1983 but to one other statute and one statutory instrument, both of 1982, to make sense of only a part of the Bill. That is a sad state of affairs.
  Members of my profession do not object to being paid to search for such documents. They are happy to spend their time at the behest of their clients. whether they be oil
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  companies or others, scurrying around digging out statutes and statutory instruments to make sense of these measures. Surely it is wrong that the House should cause the public to pay their lawyers to scurry around in that fashion. I should like to see simpler legislation which is not so free in its references by incorporation. I want to see legislation that is simpler and more comprehensible to the man and woman in the street or on the shop floor.
  The instances of abuse that we find in the Bill are not new. Perhaps the Bill is not a particularly bad example. It is not an example that is likely to warrant the court's attention in the same way as, for instance, section 72 of the Housing Act 1980, which I cite as an example of legislative complexity which is to be avoided. Hon. Members may not be aware of the details of that section. That being so, I shall draw them to their attention. Section 72 states:
  "Rent tribunals, as constituted for the purposes of the 1977 Act, are hereby abolished and section 76 of the 1977 Act, (constitution etc. of rent tribunals) is hereby repealed.
  (2) As from the commencement of this section the functions which, under the 1977 Act, are conferred on rent tribunals shall be carried out by rent assessment committees.
  (3) A rent assessment committee shall, when constituted to carry out functions so conferred, be known as a rent tribunal."
  I must be careful of my language, and I shall not describe that piece of legislation in words that perhaps come most easily to the tongue. However, that sort of legislative obstacle race is not something that we should encourage in the House. If that section of the Act is a particularly bad example, I am bound to say that the Bill does not greatly improve upon it.
  I was further encouraged to participate in the debate, quite apart from the contents of the Bill, by the observations of my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills), who was anxious to say that the Bill will not be confined in its operation to the North sea. He was anxious also to take up the claims of areas off the south-eastern coast which have an equal claim for resources for exploration and which he hopes will be encouraged by the Bill. When his remarks were taken up by the hon. Member for Wiltshire, North (Mr. Needham), I wondered which offshore field my hon. Friend would claim as his own for the purposes of the Bill. However, he was rather more restrained and inhibited in his remarks.
  As I told the House only last Wednesday, I represent Folkestone and Hythe. What is good enough for the southwestern approaches is good enough for the south-eastern approaches. It would be wrong for me to let my hon. Friend the Member for Torridge and Devon, West get away with his plea for the application of the measures that are contained in the Bill to areas offshore of Devon without it being suggested that they might have equal application to areas off the south-east coast of England.
  The measures in the Bill will encourage exploration and production. They will encourage the offshore oil industry to make a contribution to Britain's economy in the areas where the oil is found and to the economy generally. Despite the shortcomings of its drafting, which means that it is necessary to have recourse to all the other legislative measures to which I have referred, I shall support the Bill if there is a Division.
  8.5 pm
  Mr. Kevin Barron: I do net intend to take up the remarks of the hon. Member for Folkestone and Hythe (Mr. Howard), who appears to be lost in a legal

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  maze. It is my responsibility to say that I am honoured to represent Rother Valley, which I hope to represent for many years.
  It is the custom to comment on one's predecessor. I am pleased to say that my predecessor is now the hon. Member for Wentworth (Mr. Hardy), who is sitting on one of the Benches behind me. This shows that the people of south Yorkshire show good sense when it comes to boundary changes. I thank my hon. Friend for the many years of hard work that he undertook and the level of representation that he gave to Rother Valley from 1970 until the end of the previous Parliament. I have not heard it suggested outside the House, or inside it, that he did other than a good job for Rother Valley.
  The waste of North sea oil revenues seems to be growing annually. My hon. Friend the Member for Dagenham (Mr. Gould) talked about the need to invest, and it is clear that the misuse of North sea oil has led to an imbalance in the economy. If the Government are finding it difficult to decide where to invest North sea oil revenues, I suggest that Rother Valley would be a good place to start. The constituency has nearly double the average adult unemployment level. Two out of three of the young people are without work. Indeed, I cannot remember our youth ever being given a real future.
  The main industries in the Rother Valley are steel and coal, Over the past three years the steel industry has been ravaged by the Government's policies. This has had a detrimental effect on the coal mining industry. Some hon. Members have talked about coal stocks, but over the past three years the mining industry has lost 10 million tonnes of coking coal a year.
  There are some extremely good steel plants in south Yorkshire that are most efficient. Why do the Government want to privatise the steel industry in south Yorkshire? They say that it will create more efficient plants, but we already have some of the best plants in Europe. It is more likely that the Government want to make a quick profit out of the steel industry. They know that they cannot expand industry to save jobs elsewhere. Their policy will not save the steel plants that are not the most efficient.
  Six mining communities in my constituency are under threat. One of the Government's obsessions is running down the coal mining industry. That, of course, goes contrary to what the Secretary of State and Conservative Members have said during the debate.
  The share of coal in inland energy consumption in 1981–82 was 37·4 per cent. That is not a high share of the market. The under-use of coal-fired power stations is a crime, while at the same time oil imports cost us 30 to 40 per cent. more to generate electricity. Then we hear Conservative Members talk about the cost of electricity for those in need in society and in industry. The Government should look critically at the way in which the energy industry is run.
  The coal industry needs a commitment to build more coal-fired power stations. That will affect not only the coal industry, but the future of this country. We know one thing about energy—oil and gas have their limitations. We know also that we have used coal for 300 years and that the island is built on coal. It would be wrong to put people's future at risk by starting to close down the coal industry.
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  I refer now to what has happened in the mining industry in the past four years. In 1979 the Government adopted a policy of tight control of the external financing limit. That created many problems in the coal industry, including the current rundown in manpower. Tens of thousands of jobs have been lost each year over the past three years. The strengthening of the pound was a deliberate act by the Government in 1979–80. It meant that we could not compete in the world coal market against other coal industries, which are heavily subsidised. Those countries receive higher subsidies per tonne than are available here.
  The rundown in manpower over the past four years has created great problems in terms of social costs for the industry. Redundancies, pensions, transfer and travelling allowances have all gone up. In 1981–82, social costs rose by 128 per cent. If the closure programme envisaged by some Conservative Members is carried out in the coal industry, those problems will only get worse. We must ask what the costs are of running the industry down. They are not just for subsidies on coal stocks. There could be a case for keeping the coal mining industry at its present level. We have not looked at that matter. That is something that I hope to do in the next few months.
  No one will thank us for closing down collieries that are supposedly uneconomic now and sterilising millions of tonnes of coal that may be of immense value in 20 or 30 years' time. We must consider the long-term effects before telling the new chairman of the National Coal Board about the need to make the industry efficient. Conservative Members have said that we must make sure that uneconomic pits close. Some 90 per cent. of the British coalfields might close down if they used that crude way of measuring how profitable the industry is. It is important to recognise that fact.
  There has been a rundown in the mining industry in the past three years, but we must recognise that output per manshift has increased. The miners have worked harder. I was a miner until four weeks ago. Output has gone up by a colossal amount. There has been a rise of efficiency in the past financial year of between 4 and 5 per cent. I hope that the Government will not thank the British miners for that efficiency and the level of production over the past three years by starting the closure programme mentioned by Conservative Members. It would not be right for the British miners to have to suffer for all the hard work that they have done over the past three years.
  My constituency needs a Government who will take action to protect it, not a Government who are hiding behind political and economic dogma. The people in my constituency have helped to create this country's wealth for many generations and they deserve better than the level of unemployment and the expectations that they have at the moment.
  8.16 pm
  Mr. Albert McQuarrie: I congratulate the hon. Member for Rother Valley (Mr. Barron) on his maiden speech. I am sure that he will not think it remiss of me if I say that I was deeply pleased that he mentioned the former Member for Rother Valley, now the hon. Member for Wentworth (Mr. Hardy), who has had a great career in the House and contributed to debates on many occasions. I am sure that the new Member for Rother Valley will live up to the reputation of the former Member. I also congratulate the hon. Member for

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  Barnsley, East (Mr. Patchett) on his maiden speech and his tribute to Eddie Wainwright, who was well respected in the House.
  Some of my Scottish colleagues have already mentioned the accident at Dyce airport, in which a helicopter was involved. We understand that there have been no deaths, and we hope that there will be none. Dyce airport is the largest heliport in Great Britain, if not the world, so it is gratifying to know that there are so few accidents. but we would rather have none at all. I sincerely hope that the inquiry will determine the cause of the accident. We give our sympathy to the people who are worried about their relatives.
  My right hon. Friend the Secretary of State said that this was a short Bill. It is a short Bill, but it is important. Unfortunately, on the last occasion it fell because of the Dissolution of Parliament. It represents the most important tax concession for marginal oilfields introduced by any Government. It is widely welcomed in my constituency of Banff and Buchan where, at St. Fergus and Cruden bay, the largest proportion of North sea oil is pumped ashore to the mainland of the United Kingdom.
  The main effect of the Bill is to back development consents first given after 1 April 1982—a pre-election promise by the Government to ensure the abolition of royalty for new oilfields. As we have seen today, the Government have made this a first priority in legislation and it represents a major tax concession to stimulate North sea oil development. The House should therefore welcome the proposals, despite the comments of Labour Members. The abolition of royalties for new oil and gasfields other than in the southern basin will give help where it is most needed—that is, in the small, high-cost fields. I am somewhat disappointed, however, that my right hon. and learned Friend the former Chancellor in his last Budget speech and my right hon. Friend the Secretary of State today have continued the exclusion of the southern basin oilfields.
  Until now, a royalty of 12·5 per cent. has been a condition of the exploration licence and can be taken in cash or in kind. There was a difference between the first four licence rounds and subsequent rounds, in that in the earlier rounds certain treatment and conveying costs were allowable against the well heads. That is the general practice in other countries in which royalties apply. In effect, royalty is a turnover tax for which liability is incurred on production. It is not related to profitability. The Governent take is therefore a larger element for a small field than for a large field.
  In partial recognition of the last point, the Petroleum and Submarine Pipe-lines Act 1975 gave the Secretary of State for Energy discretionary powers to award tax-free refunds on royalties paid.
  Mr. John Smith: I, too, have read the brief, which says:
  "The key words are"—
  Mr. McQuarrie: The right hon. and learned Gentleman is quite right.
  "The key words are 'discretionary' and 'tax-free:"
  That underlines the importance of the matter. As the right hon. and learned Member for Monklands, East (Mr. Smith) said, applications were made by a number of oil companies but no refunds were awarded by the Labour Government or by the last Conservative Government. Such discretionary powers in relation to a major feature of
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  the tax system are a potential source of arbitrary discrimination between taxpayers and add one more uncertainty to the assessment of project viability.
  Mr. Rowlands: Will the hon. Gentleman be going on to define the words "tax free"?
  Mr. McQuarrie: Yes. They mean without tax. I hope that that satisfies the hon. Gentleman.
  The words "tax free" meant that royalty remissions would not be liable to PRT or corporation tax. They were thus potentially of significant benefit, although the positive features did not offset the objection of uncertainty and the possibly discriminatory nature of the powers. [Interruption.] Perhaps the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) will have the courtesy to allow me to finish my speech.
  These conditions still apply to fields developed prior to 1 April 1983. [Interruption.] It is common for companies to prepare briefs to assist hon. Members on particular Bills. If an hon. Member chooses to use part of such a brief, that is no discourtesy to the company and should not be ridiculed by the Opposition. If the points are not brought out by a Member, the brief prepared by the company in the interests of the House cannot properly be taken into account. I make no apology for using parts of a brief prepared by a certain oil company in relation to the Bill.
  The proposals contained in the Bill, arising out of the 1983 budget, are such that the Government would effectively abolish royalties on offshore fields approved for development after 1 April 1982 except in the North sea south of 55 degrees and north of 52 degrees. The 12·5 per cent. of sale value forgone will be largely clawed back later by the Government in the case of profitable fields, as the extra profits will be liable not only to PRT but to corporation tax, which, as my right hon. Friend the Secretary of State said in opening, are 75 and .52 per cent. respectively. At the margin the Government take is reduced only, as he rightly said, from 89.5 to 88 per cent.
  The later payment to the Government, resulting from the change from a turnover tax to a profits tax, results in a significant improvement in the investment-earning power potential and has been estimated by the United Kingdom Offshore Operators Association at about 2 per cent. That relates only to a field that is sufficiently profitable to pay PRT. The Bill's proposals, however, are especially helpful to fields at the margin, which will pay only corporation tax, because the proposals remove the regressive features of a turnover tax. Highly profitable fields will continue to pay heavy taxes, but those which are barely profitable will be taxed more lightly.
  Oil companies welcome the Bill and believe that its imaginative proposals will stimulate development, because the typical field now discovered in the North sea is much smaller than those discovered previously. It may even encourage oil companies to consider developing some of their existing discoveries which were previously considered to be uncommercial.
  The United Kingdom Offshore Operators Association analysed the impact of taxation on four fields that were carefully chosen to simulate the likely pattern of future development. The smallest of them, with only 38 million barrels of reserves, will remain unprofitable under the Bill and requires a major breakthrough in cost reduction and a massive rise in oil prices. Fields 2 and 3 have 62 million

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  and 88 million barrels of reserve respectively and come into the category of marginals under the Bill's proposals, of which the royalty abolition is the most important. Field 4, with 125 million barrels of reserves, will be improved from a marginal to a profitable position. In terms of earning power the abolition of the royalty will account for approximately half of that improvement. For that reason, it is disappointing that the Government feel unable to extend immediately the benefit of the new proposals to the gasfields in the North sea south of 55 degrees.
  The nation is not currently self-sufficient in gas, and will not be, unless there is a major increase in exploration and development. Although there are undoubtedly potentially profitable fields under the existing tax regime, there are many small accumulations of an especially complex nature on low permeabilities which will make their development expensive. It would be most unfortunate if the development of indigenous resources were delayed by inefficient incentives, and import supplies grew. We would suffer not only in regard to job opportunities but there would be a loss of content for the oil-related service industries, many of which are located in my constituency of Banff and Buchan and in the Grampian region as a whole.
  Whether or not the Bill meets with the general approval of oil companies, I hope that it will be a first step in removing the uncertainty about royalties for future gas development. That uncertainty puts the producers in a difficult position for negotiating prices in a market where there is no independently set market price, and it can only cause delay.
  The proposals for the abolition of royalities for the many new fields are welcome, but the additional complications introduced by different rules for exisiting fields and the two patterns for new fields are unfortunate and could slow down the development of the United Kingdom's gas resources at a time when major developments should be considered. I hope that my right hon. Friend will remember those matters when he considers further improvements to the Bill, because the prospects for offshore development and associated related employment are less optimistic than they were last year.
  The triangle of forces will be with us for some time, and Bills such as this must keep coming before the House if we are to remove the clouded uncertainties of price, taxation and technology. Offshore development can still be one of the few steady growth sectors in the latter years of this century if we are to take notice of its needs.
  I close with a quotation from the May issue of the oil and gas journal Noroil:
  "The acid test for commerce is whether companies quit Britain completely. That they have not done, and whatever the grumbles, they are unlikely to do so."
  But that will be only so long as the Government of the day pay attention to the future of the oil and gas industries. I commend the Bill to the House.
  8.31 pm
  Mr. Lawrence Cunliffe: I congratulate the maiden speakers on having helped to relieve the pressure upon me, as a Whip, in trying to ensure some form of continuity in the debate. I am associated with my hon. Friends the Members for Rother Valley (Mr. Barron) and
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  Barnsley, East (Mr. Patchett) through my mining background — I was a mining engineer — and my relationship with the National Union of Mineworkers.
  The hon. Member for Banff and Buchan (Mr. McQuarrie) made an original speech. I had to scrap brief No. 3 on the same subject. Nevertheless, I am sure that three of us will not repeat the same speech this evening, and I relish the opportunity to bridge the energy gap once again to achieve continuity in the debate.
  Whips can be useful, despite what the Prime Minister said during the election campaign. Indeed, our role has been somewhat diversified today.
  The Opposition are resentful because the Bill contains no degree of accountability. That is our main criticism of it. It is understandable that the Government should be motivated to ensure that there are impending developments in oil exploration and that there should be some financial encouragement, but it is reckless of them, in the national interest, to introduce a Bill with no strings attached to it. It is not often that a Conservative Government give us, as we would say in the north, something for nothing, but on this occasion they appear to have neglected an opportunity to raise revenue which could have been used in many other respects for the creation of jobs. Conditions could have been imposed that would not necessarily have narrowed the Government's intention to encourage oil exploration in the marginal areas, but helped to reinforce the belief that investors in oil exploration would honour certain pledges. As part of the freeing of companies from tax or royalties, the Government could have insisted on using British technology, drilling rigs and labour.
  The Secretary of State said that there could be problems in the ancillary industries if developers did not go into the marginal areas. We could have offered another service in the ancillary industries. We could have attached strings to the Bill and insisted on the petrochemical industries, if successful in oil exploration, refining their products in British refineries. It is inconceivable that we should be producing 2,000 barrels of North sea oil a day and refining only one third in Great Britain—the rest being refined in Europe and the United States of America. It would be reasonable to suggest that if the fields proved to be rich the companies could undertake to put the oil into British refineries, thus creating jobs and security.
  Many of our oil refineries face closure. There is a large degree of insecurity and morale is low. Many of the multinationals involved in the refining sector have no scruples. Shell and Esso are moving their oil refining activities elsewhere in Europe, for obvious reasons. That is one reason for accepting some form of accountability for—
  Mr. McQuarrie: It is unfair of the hon. Gentleman to accuse Esso and Shell of sending their oil out of the country when they are building a huge petrochemical complex at Moss Morran.
  Mr. CunliffeI accept that information with acclamation. I have been talking only about past performance. I am sure that the House welcomes Shell's initiative. Great Britain has not built large petrochemical factories and, as a result, it is now the biggest net importer of plastic products and feedstock for the petrochemical industry. We are paying for that in international currency, which we badly need. In 1977 we imported £577 million

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  of feedstock and in 1982 more than £1,000 million. We could have avoided that by having our own petrochemical industry with a modern structure and high technology, thus giving security and wealth to the nation.
  Let us consider energy planning and fiscal rewards in the energy industry. There is no doubt that during the past 10. 15 or 20 years this country has lacked a sensible, planned, energy policy co-ordinating all our energy industries and energy requirements for the future. Criticism has been levelled by hon. Members on both sides of the House at the lack of a stable depletion policy for our fuels.
  The hon. Member for Tayside, North (Mr. Walker) made some comments about the mining industry. It was hard to define whether he had sympathy with the interests of the miners, because he was certainly alien to some of their views.
  The hon. Gentleman mentioned the possibility of giving the pits to the coal miners, but he mentioned only the uneconomic pits. For many years the miners' unions have believed that those who produce the wealth of the nation should be its possessors. That is an understandable attitude. If the Government want to give the whole of the mining industry to its workers, it would be their most sensible move since they took office. The workers would accept it tomorrow with far greater acclamation than I can express tonight. The National Union of Mineworkers' conference is being held in Perth. If the Government feel inclined to give the industry to its workers, I am sure that the conference could table an emergency resolution within 24 hours.
  The best and largest oilfields have been explored and exploited. I understand that the abolition of royalties will include the marginal fields. We must draw a comparison between what the Bill proposes and what happened to the rich coalmines which were exploited by aristocratic pit owners. Many of the collieries were left with only the bad seams, which were costly to develop.
  The granting of subsidies really means the granting of loans. The National Coal Board, like any other enterprise, needs to borrow money. It rightly prefers to be supported by the Government, but it pays ordinary market rates for its loans. During the past 22 years the mining industry has made a profit over operating costs. Unfortunately, it has been burdened with high interest rates, especially since 1979 when the Government took office. That has meant that it has sometimes made a loss or only a marginal profit.
  We have 55 million to 57 million tonnes of coal underground. Coal stocking means that the NCB must borrow more and pay additional interest. Many of us believe that the recession has been brought about by the Government. Conservative Members should not bellyache about the miners. They bear a large degree of responsibility for the stagnated economy and interest rates at an unprecedented level during the past decade. A reduction in manpower has made it more difficult for the mining industry to be as viable and commercial as it once was.
  One hon. Member spoke with some regret about the current increase in petrol prices. He said that it was a pity that the free market economy and the market mechanism that regulates prices could not be controlled. I thought that he made a strong case for the introduction of a price commission. If we had had such a commission, we should have had the full inquiry for which he called into related costs and how they can fluctuate so rapidly in weeks or
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  months. Petrol prices today are so unstable that it is impossible to assess economically how transport authorities or private car owners should budget over a given year.
  The latest price increase has come at a very bad time. My constituents are at present embarking on their annual holidays, as are many others in the north-west of England. Many family motorists will be in great difficulty. Some will have left already for their holidays and others are about to go. It was not a very responsible action to increase petrol prices when many families, some of them unemployed, are struggling to make ends meet and still wish to enjoy some sort of family holiday and relaxation at weekends.
  My comments about depletion apply to gas, oil and coal. The Labour party believes in an alternative energy strategy. It is high time that we recognised that we cannot go on trusting to luck. Energy forecasting has been extremely unpredictable over the past 20 years. That is an amazing thought when we know now that we have only about two decades of discovered oil reserves and a decade and a half of gas reserves. But still we are not planning to use them in a sensible and prudent way which will ensure that our future energy requirements are assured. We ought to be working on a long-term resource plan for our fuel industries. If we carry on as we are, we shall be a net importer of oil again in another 15 years or so.
  The sooner that the Government produce a new energy plan for the future, the better. We badly need for our energy industries—deep-mined and opencast coal, oil, gas and nuclear energy — a sensible, planned energy policy in the near future. It is imperative that we have it so that all our industries may know how to invest for the nation's future when at last we have an upsurge in the economy after the Government's imposed recession comes to an end.
  8.49 pm
  Mr. Keith Best: It is an unexpected pleasure to hear the hon. Member for Leigh (Mr. Cunliffe). He is an Opposition Whip, and it is not often that we have the pleasure of listening to him. I hope that we shall have the opportunity of doing so repeatedly in the future and not just when the Opposition are short of speakers to take part in a debate.
  I appreciate what the hon. Gentleman and his colleagues said about our oil being a national asset and about the need to have it refined here. However, the purpose of the Bill is to ensure that the oil is extracted in the first place. The hon. Member for Leigh answered his question himself when he said that the Bill might be designed to help the marginal fields. He was right. It is designed to give an incentive to ensure the extraction of oil that might otherwise not be extracted because of taxation. I am sure that the Government and the Opposition can agree on this matter. If no oil is extracted, there is no oil to be taxed. The House of Commons must concentrate on providing incentives and opportunities for the oil to be extracted, and that is what we shall do by means of the Bill.
  The Government first introduced the Bill in April, and it fell only with the calling of the general election. The Opposition cannot therefore claim that it has taken them by surprise. On 18 March my right hon. Friend the then Secretary of State for Energy, now the Chancellor of the Exchequer, made a speech in which he predicted that such

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  a Bill would be brought in. His speech led to much speculation in the press, and much of the press comment was favourable. It was felt that such legislation would have a highly beneficial effect on extraction prospects.
  I do not speak from as profound a knowledge of the subject as my hon. Friend the Member for Banff and Buchan (Mr. McQuarrie) who made a most interesting speech. I was most encouraged by the comments made from a sedentary position by the right hon. and learned Member for Monklands, East (Mr. Smith) and the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) during my hon. Friend's speech, which showed that they were in agreement with him. So strong was that sense of unanimity that the hon. Member for Merthyr Tydfil and Rhymney actually anticipated what my hon. Friend was about to say. I hope that the Bill will be accepted in the spirit of unanimity so generously demonstrated by the hon. Gentleman.
  The Bill cannot come as a surprise to any hon. Member or to any member of the electorate. It is fairly and squarely in line with the Government's philosophy of providing greater incentives for people to work and to exploit our natural resources. It will give freedom to exploit resources — a freedom which might otherwise be denied by taxation. I find it hard to understand why — even after the general election—the Labour party always considers that all assets must be taxed. The same philosophy determines Labour policy on the wealth tax, and a variety of other plans. Everything must be taxed, not simply in order to raise revenue but for ideological reasons.
  That is unacceptable to me. The companies that extract oil from our fields are of great benefit to this country, and not only in their primary task of extracting the oil. In Amlwch, in the northern part of Ynys Môn in my constituency, there is a single buoy mooring operated by Shell. It is extremely successful. Large tankers that could not otherwise put into port discharge their oil onto the single buoy mooring. It then goes by flexible hose to the shoreline and is conveyed underground 78 miles to the Stanlow oil refinery. As a result of the contruction of that single buoy mooring the Ynys Môn borough council is richer by some £500 million a year, which is paid by Shell. That money has been spent on local facilities, on helping local organisations and on a whole variety of individual projects. Without the single buoy mooring, we would not have had that money.
  Although our debate has centred on North sea oil, I hope that the Bill will encourage marginal fields not only in the North sea, but elsewhere. The House will understand if I place particular emphasis on any prospect of oil extraction in the Irish sea. If it were possible to extract oil from the Irish sea, it would mean a boom time for my constituency and for the construction of oil rigs. With the likelihood of drilling there, the employment prospects would be very good.
  We have heard that the Bill is likely to ensure that one new project in the North sea will come forward every six weeks. It will probably double the number of projects in the next two years. I hope that it will do far more than that, and that it will open up the prospect of extraction in areas in which people have hitherto thought there was little opportunity. I hope that that will benefit my constituency,
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  as well as the country as a whole. Indeed, the single buoy mooring has undoubtedly greatly benefited my constituency already.
  I commend the Bill to the House and I hope only that the hon. Member for Merthyr Tydfil and Rhymney will not ruin the sense of unanimity that I detected a moment ago, and that the Bill will go through unopposed.
  8.56 pm
  Mr. John Hannam: I shall relieve you, Mr. Deputy Speaker, of the embarrassment of not recognising me, as I am wearing my glasses. However, I take up the remarks made by my hon. Friend the Member for Ynys Môn (Mr. Best) in his general approach to the Bill. I am relieved that he pronounced his constituency's name, as I should not have known for a moment how to pronounce it if he had not done so.
  In the few moments remaining I should like to welcome the Bill and its proposals for giving royalty payment relief to new oilfields outside the southern basin. During the past 18 months it has become apparent to most of us involved in energy that something would have to be done in this year's Budget to reduce the overall tax burden on our oil industry if important investment decisions, which are crucial to the future development of the North sea, were not to go against us in the near future.
  Demand for oil in the industrialised world has fallen quite dramatically since 1973. Indeed, in this country it has dropped by about 35 per cent. That is partly due to the recession, but it is also due to structural energy changes of a more permanent nature. The advent of North sea gas has obviously had a big impact. Energy saving and the substitution of other fuels for oil have also been important. I share the view of the chairman of Shell, Mr. Raisman, who said in a recent address that oil demand was unlikely to return to 1973 levels.
  If we look at the new investment opportunities in the North sea we see a new generation of oilfields which will be much smaller and more expensive structures than those that we have seen in the past. It is therefore understandable that the decision-makers on financial oil investments—be they in Dallas, Houston, Denver or Aberdeen —should be pretty cautious at present about new developments in what are bound to be considered the fairly inhospitable waters of the North sea, especially if the tax regime is still based on the prices and profits that occurred in the 1970s. So, despite the ever-present risk of a middle east crisis, or a growth in oil demand—both of which could cause an escalation of oil prices and profits—the prevailing view today, in the short term at least, is that world oil prices are unlikely to increase, at least in real terms, and will probably even decline further. Therefore, the Government were right — and I believe that in principle the Opposition accept this—to ease the oil tax burden in line with this decline in oil profits and prices.
  In Britain, we can easily see the dilemma that we face. Our North sea oil production will start to decline in a few years' time and there is nothing that we can do about that. However, we can bring on sufficient new fields in the late 1980s to help keep us on target for oil self-sufficiency in the 1990s. Otherwise, we shall find ourselves having to import more and more oil and that will lead to balance of payments and tax revenue problems. Opposition Members talk of wasted oil revenues, but taxation is revenue wherever it comes from. If the Labour party had been in

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  power, it would most certainly have used its oil tax revenue to maintain social and welfare services during the recession, just as we have done.
  When looking at the oil industry, we see a clearly identifiable diminution of interests in new North sea oil developments, with projects being deferred and a much cooler response to licensing rounds. Something had to be done and I congratulate the Government on the steps being taken to ease the tax burden.
  The right hon. and learned Member for Monklands, East (Mr. Smith) accepted that marginal fields need encouragement and that royalty relief was a good idea in principle. That is not surprising, because he introduced it in a discretionary form in his 1975 Act, but he wants it to continue on a discretionary basis, although all the evidence points to the fact that that has not worked and is unlikely to stimulate investment by the hard-headed oil chiefs throughout the world.
  The Government had to make a choice between maximising short-term revenues and forgoing part of the £4½ billion revenue from oil taxes to create the incentive for further investment in the North sea. Only by such investment can we maintain self-sufficiency in the 1990s, with all the benefits that will accrue in revenue, jobs and supply industry activity. Surely success in one part of the economy strengthens the whole economy. For many and varied reasons, this vital part of the engine must be kept going.
  I regret that the southern basin is not included in the Bill, but I accept that great interest is still being shown in those shallower waters and, in any case, the Bill allows for an amendment if circumstances warrant it.
  Therefore, I congratulate my right hon. Friend the Secretary of State on his presentation of the case for the Bill, which I fully support. I know that it will produce the increased activity and investment that we need in the North sea if our target of self-sufficiency in the 1990s is to be achieved.
  9.1 pm
  Mr. Ted Rowlands: It may be a sign of coming of age that I have the pleasant duty of congratulating the three hon. Members who have made their maiden speeches in this debate. My hon. Friends the Members for Barnsley, East (Mr. Patchett) and Rother Valley (Mr. Barron) spoke with the authentic voices of representatives from the coal fields. As one who represents four pits in the fast-diminishing Welsh coal field, I more than appreciated the powerful emotional expressions contained in their speeches. We will want them to speak frequently to press home the message to the Government that the coal industry is important and does not deserve to be emasculated or destroyed as some of the wilder elements on the Conservative Back Benches would wish. I welcome my two new hon. Friends with pleasure.
  Both my hon. Friends paid tribute to their predecessors, one of whom, the hon. Member for the new constituency of Wentworth (Mr. Hardy), is still here and spoke in the debate. I will not testify to his qualities; they are well known. However, all of us recall with great affection the many contributions of Eddie Wainwright who, for many years, was also the authentic voice of his community and of the coal industry, which he knew so well.
  I also congratulate the hon. Member for Orkney and Shetland (Mr. Wallace) on his maiden speech. As he said,
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  he has the awesome task of trying to follow that great figure in British politics, Jo Grimond, but I am sure that he will rise to that task.
  The hon. Gentleman said that he had two maidens to overcome. The first was his maiden speech and the other is his wife-to-be. I understand that the hon. Gentleman is getting married on Saturday. The hon. Gentleman may not believe it when he looks at me, but I was even younger than he is when I was first elected to the House in 1966. I was also single then, and I can give the hon. Gentleman some personal advice. He will find it easier to speak in the House than to maintain a good family life in the circumstances in which hon. Members have to work. However, I am sure that the hon. Gentleman's marriage and parliamentary career will survive.
  There is another maiden speech to come, that of the Minister of State, Department of Energy, who will be making his maiden speech in that new capacity—unless, of course, he spoke last week, but I do not believe that he did.
  The Minister of State, Department of Energy (Mr. Alick Buchanan-Smith): I have a new constituency as well.
  Mr. Rowlands: I did not know that. I am not up-to-date on my Scottish political geography.
  One of my hon. Friends said that he should not follow his predecessor too closely in certain respects. Having spent two or three years in saying not very nice things about the right hon. Gentleman's predecessor, Hamish Gray, I should add that I never found Hamish in personal terms anything but a most pleasant and delightful person to argue with. [HON MEMBERS: "Hear, hear."] During the 150 hours or so that we spent together on the Oil and Gas (Enterprise) Bill we built up a personal respect for him. As one of my hon. Friends advised the new Minister of State, we strongly recommend that he does not close smelters or abandon gas-gathering pipelines, because the misfortune of doing so is to go to another place and become another Minister in another Government job.
  The debate has ranged widely, as hon. Members on both sides have sought to set the Bill in the context of our national energy needs, and in particular our needs for North sea development. I intend to do the same. However, at the beginning I wish to make it clear why we oppose the Bill. The Secretary of State in opening and other Members set out the wrong reasons for our opposition to the Bill. We believe that the Bill is a big error because in our view the principle of royalties, and their abolition on future fields, raise fundamental issues both in principle and practice. We believe that they are separate, and can be identified as being separate, from changes in taxation. An important distinction can be made between the character and nature of concessions on royalties and concessions on taxation allowances and reliefs. After I have replied to some of the issues that have been raised in the debate, I intend to underline the specific reasons why we believe that the Government have erred in taking this means to achieve the objective of stimulating North sea oil development.
  As my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) pointed out repeatedly to the hon. Member for Enfield, North (Mr. Eggar) and others, we did not oppose the changes that were proposed and made in oil taxation in the March Budget. We shall wait

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  to see the new oil taxation legislation that we understand will be coming forward in the autumn, and again we shall look at it in the same positive spirit. For reasons that I shall adduce later, we make a clear distinction between the concept of abolishing royalties and creating a tax regime for development in the North sea.
  Hon. Members on both sides have rightly sought to set this Bill and the debate on the abolition of royalties in future fields in the context of the development of the North Sea and, as my hon. Friends who represent constituencies with coalfields have said, of the future of our energy needs. It is important to underline what is and has been for many years a common objective. As the Secretary of State said, successive Governments have attempted to discover the proper balance between fiscal arrangements to encourage and stimulate development in the North sea and the nation's justifiable right to control its oil supplies, and the right to taxation to achieve benefits for the nation as a whole from those developments. That is the balance. That is what has been at the heart of many debates in recent years.
  We all agree that in many respects the North sea has been a marvellous success story. It has been a technological, production and, up to a point, investment success story. It is not for Conservative Members to chide the Labour party for the failures or difficulties in developing the North sea. I remind them that more than half the investment that has gone into the development of the North sea took place under a Labour Government between 1974 and 1979—not the easiest of times—by private enterprise with contributions from public enterprise through BNOC and BGC. Those private and nationalised bodies operated within a political and fiscal arrangement that was clearly successful and helpful. That is important. Some Conservative Members have spoken as if they have been the great saviours of North sea development. They have spoken as if they created the environment — the tax regime — that has produced the great oil bonanza of recent years. That is not so.
  The major part of the £19 billion of investment—£29 billion in 1982 terms—that went into the North sea was within the fiscal regime, the political and economic environment, for which the Labour Government from 1974–79 were responsible. We successfully created the right environment for development. We combined proper and effective control of our oil through the participation arrangements and royalties, and, as has been said, through the growing, profitable and vibrant BNOC.
  It is right, as my right hon. and hon. Friends have sought to do, to point out the importance of BNOC's role in the development of the North sea. Despite all the jibes, BNOC gained great respect within industry. It was poised to make powerful contributions in the very areas about which we are now talking—many of the marginal fields that were the subjects of the fifth and sixth rounds—in partnership with multinational companies. Its destruction was a meaningless act of vandalism, wholly unrelated to North sea oil development or needs. It is ironic that one field that will benefit from the retrospective nature of the Bill which goes back to April 1982 is the Clyde field which was developed by BNOC. It has little to do with Britoil's efforts; it is the product of the successful BNOC which has been destroyed.
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  We accept that it is one of the ironies of life, both political and economic, that those efforts to encourage development in the 1970s bore fruit, at least in taxation terms, in the 1980s. I trust that the Secretary of State and the Minister of State will have the grace to admit that they received a gratuitous tax windfall of some £20 billion, for which they have done little. All that they did was to try to screw more and more out of the oil companies. Just how much of a gratuitous windfall it has been is illustrated by the Budget papers—the financial statement and Budget report — of 1982–83 which underestimate Government revenues by £1·5 billion and projected revenues for 1983–84 by £1·75 billion. That is, by any standards, a windfall. It is the allegation of Labour Members that the Government have squandered and frittered away that gratuitous windfall which they did little to achieve.
  It is also rather strange that Conservative Members should suggest that the Bill and the taxation measures are part of some coherent grand plan; that it has all been a normal consequence of previous policy. Let us face it; it has been nothing of the sort. From 1979 until 1983 the Conservative Government sought to wring as much as they could out of the oil companies in a series of often bewildering tax changes and instant imposts. The Bill, in part, contains some kiss-and-make-up measures for the oil industry—the Government's conscience money.
  The Government came to the conclusion late in the day that they were strangling the potential development of North sea oil. The oil price explosion of 1979–80 changed the context and the score. It was right and proper that the Government should seek to obtain a full share of any windfall profits that accrued or flowed from oil price increases. Those of us who have debated these issues over the past two or three years will testify that the Government's handling created confusion and uncertainty in the industry and in development. The confusion was caused not so much by the total amount taken from the oil industry as by the wholly capricious character of taxation.
  The results that the Minister said would happen if the Bill did not go through and if the taxation changes did not occur were already happening. It was a consequence of some aspects of the Government's policy that had led to developments being postponed, to yards being orderless and to a genuine and growing fear that the hiatus would lead to a major shortage of oil in the late 1980s. That is especially so, as my right hon. and learned Friend pointed out, when we are pumping oil from mature fields at an alarming rate.
  We have heard today, as on previous occasions a discussion about depletion policy but the figures are staggering. In 1982 we extracted 103 million tonnes of oil when our actual needs in 1982 were 75 million tonnes. That is not just a margin but a fantastic, excessive production over and above our requirements. The Government's attitude to depletion policy has been nothing less than reckless. We have recklessly used our cheapest oil from our largest and most mature fields at an alarming rate.
  The hon. Member for Gosport (Mr. Viggers), in a rather tongue-in-cheek fashion, underlined the consequences of such a policy. He pointed out not only that the capital expenditure had not been used for capital development in other industries — my hon. Friend the Member for Dagenham (Mr. Gould) said so again in a powerful speech — but that we have been depleting unnecessarily and that there was a case for a depletion

  93
  policy. The hon. Gentleman drew an interesting analogy with the way in which OPEC and the Gulf states had exercised a form of depletion policy. In some ways we should go down on our prayer mats and praise the fact that the Gulf states exercised such a depletion policy because had they released their potential on to the market there would have been no oil development in the North sea last year or the year before. We should realise that Saudi Arabia is producing 3·5 million barrels a day with a total capacity of almost double that already in place without any requirement for investment. Therefore, depletion policy is a genuine issue and should not be brushed aside by the Secretary of State.
  We face a challenge in the late 1980s — an investment challenge as much as a technological challenge. We must realise the scale of the challenge. It has taken £29 billion in 1982 money to extract what we have extracted so far. It will take £60 billion in 1982 money to extract the same amount of oil in the next range of marginal oilfields. We should be considering ways and means to stimulate the development of marginal fields. The investment challenge faced by the industry could be met by different aspects of taxation policy but should not be met by abolishing royalties in the way the Government now propose.
  I noticed, incidentally, although the Secretary of State did not mention it, that one of the grand consequences of the Government's changes was that we should have one new oilfield every six weeks — that was said by the Government Chief Whip when he was the Minister of State, Treasury. At least when the Secretary of State introduced the debate he did not make such an extravagant claim. Does the Minister of State now subscribe to the incredible, nonsensical proposition that one new oilfield will be developed every six weeks? That was the claim by the present Chief Whip. It was part of the "Keep Hamish Gray in the House" campaign because Hamish "Boom" Gray went around preaching that there would be a tremendous boom on every Scottish doorstep if only we agreed to these measures.
  A more cautious view was expressed by the Secretary of State. He made no such extravagant claim. If the taxation and royalty provisions are to have such a dramatic effect, why is the assumption made that capital expenditure will fall in the next two years rather than increase as expected? What is the Minister of State's interpretation of the Treasury statement on the tax changes? In paragraphs 14 and 15 of the statement accompanying the proposals the Treasury states:
  "Since the 1982 Budget there have been some reductions in the assumptions about future capital expenditure for 1983–84 and 1984–85 in the North Sea."
  That is not the language of boom. That is not the expectation of planning for a great sudden take off of development — one oilfield every six weeks. The Treasury's calculation behind its tax take proposals for the next two years is
  "some reductions in the assumptions about future capital expenditure".
  The assumptions were not all that high at the time. What reductions in assumptions about future capital expenditure were made by the Treasury for 1983–84 and 1984–85?
  Mr. Hannam: Is the hon. Gentleman aware that reports after the tax changes from leaders of the major companies stated that the future lay in the development of smaller fields? It is, therefore, apparent that, although
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  there may be a reduction in the total coverage, the target of a new oilfield every six, eight or ten weeks is still possible.
  Mr. Rowlands: If that is so, let the Government give the figures. Let them explain exactly what paragraph 15 of their statement means. That paragraph is in the Treasury document that accompanies proposals for the great changes and that makes the assumption about £800 million tax relief over four years. The former Secretary of State for Energy, now the Chancellor, should know what it means. I hope that he will have time to tell the Minister of State. Then we can calculate whether the hon. Member for Exeter (Mr. Hannam) is accurate in what he said in his intervention. Does the Minister of State still believe in the claim, made a fortnight before the general election, that one oilfield will be developed every six weeks?
  We have made it clear that we support and advocate appropriate assistance to oil companies to develop the marginal fields. We believe that it should be tied to future development. My hon. Friend the Member for Dunfermline, West (Mr. Douglas) made two important points. First, he said that this extraordinary provision bears no relationship to onshore facilities, the development of the rig industries or other onshore industries accompanying the development of oilfields. Secondly, he said that UKOOA did not ask for the abolition of royalties. It welcomed it with open arms, but did not ask for it. It appreciated the case for maintaining the principle of royalties.
  We suggested that there should be royalty payments, related to the size of production in certain fields. We shall pursue that aspect in Committee because it was a reasonable point for us to have made. Not only was it a point the industry accepted, but the industry did not expect the complete abolition of royalty as a principle on all future fields.
  The concept of royalties is as old as the hills, as old as the sedimentary basin, as contained in legislation handed down and refined. The principle of royalty oil underlines the principle of ownership. With royalty goes the concept of ownership and, as the nation owns the oil, it has a right to royalties on it. Royalties are the simplest and most direct affirmation of ownership. Because the nation owns the oil, its right to those royalties should be upheld.
  We appreciate the flexibility that is necessary in dealing with oilfields and the situations that can arise. That was the point made by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) when he pointed out that in the 1975 Act provison was made to waive royalties. It was also the flexibility sought by UKOOA in its recommendations, namely, that there could be a basis for royalties on the size of a field and its production.
  Above all, royalty oil is an important part of our right to control oil supplies, yet the right hon. Gentleman dismissed that in a curious aside. I remind him of what happened to his predecessor when faced with the sort of crisis that we could face in the future. Think back to the summer of 1979, when the then Secretary of State found petrol filling stations throughout the country running short of supplies. Hon. Members in all parts of the House were crying out for action to get oil supplies; to their constituencies, particularly the rural areas. In the midst of that crisis, the then Secretary of State, with his back to the wall and being attacked on all sides, said:

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  "I am also considering taking royalties in kind which may help United Kingdom refineries, suppliers and their customers' demands."
  In the summer of 1979, the then Secretary of State appreciated the value of being able to exercise some control over supplies through royalty oil. He repeated that statement a month later, when he said:
  "I can take powers under the Energy Act 1976 to control oil movements in conditions of limited shortage, but BNOC's direct access to participation oil, together with royalty oil, strengthens our position."
  In other words, at a time of real crisis in the supply of oil — at a time when hon. Members representing all constituencies were pleading with the Government to do something and when they were even faced with the prospect of rationing — the then Secretary of State rightly turned to, and understood the importance of, royalty oil as a means of influencing supplies. He said twice that he could do it, and then he did it. I urge the present Secretary of State to remember the way in which, in 1979, his predecessor immediately sought to switch from royalty in cash to royalty in kind from the oil companies. By the end of 1979, 1½ million tonnes of royalty oil had been collected by the power exercised by the then Secretary of State over royalties in kind.
  Mr. Skeet: The British National Oil Corporation will exercise the right on behalf of the Government. It will receive about 270,000 barrels a day. The companies will be absolved only after the crucial date.
  Mr. Rowlands: Is it being argued that there will not be another crisis of the sort that faced us in the summer of 1979? The importance of royalty oil was not dismissed in 1979. The then Secretary of State changed the arrangement so that he could collect the royalty oil.
  Mr. Peter Walker: In securing the future supply of oil for Britain, it is much more important to get on with the development of new fields. That is more important than retaining the additional 6·5 per cent. for which the hon. Gentleman is arguing.
  Mr. Rowlands: It is, of course, always important to get on with development. The Opposition acknowledge the importance of that, but we do not accept that the right approach is the abolition of royalties. The right to take royalty oil has been important when crises have arisen. That was important in 1979 and it could be important in future. If we allow the Bill to be enacted as it stands, a future Secretary of State will be denied the power that was exercised in 1979. It is for that reason and others that we shall oppose the Bill now and in Committee.
  9.31 pm
  The Minister of State, Department of Energy (Mr. Alick Buchanan-Smith): First, I thank the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) for his kind remarks in welcoming me on this my first occasion on the Government Front Bench with my new energy responsibilities. As the hon. Member for Aberdeen, North (Mr. Hughes) knows, I represent a constituency in which more people are involved in the North sea industry than in possibly any other except, perhaps, his own. I have been involved in the North sea oil industry as a constituency Member of Parliament for a considerable time, but I have had cause to reflect on whether a little knowledge at a local level is a good thing. That knowledge enables one to know
  96
  what is going on, but when one assumes ministerial responsibilities it becomes apparent how little one knows about an industry that is so complex and so important to the United Kingdom's economy.
  I, too, pay my personal tribute to Hamish Gray, who served the interests of the United Kingdom as my predecessor. I think that we all appreciate the real contribution that he made.
  I wish to pay my tribute to those who have made their maiden speeches during the debate. I pay a particular tribute to the hon. Member for Orkney and Shetland (Mr. Wallace). We welcome him to the House and I look forward to hearing more of his contributions in these debates. It was obvious that he spoke from first-hand experience of his constituency, and we know that that experience will grow. The hon. Gentleman's predecessor, Jo Grimond, was one of the most respected Members of the House. He was recognised as a good constituency Member and a statesman. That was recognised throughout the United Kingdom, but he enjoyed particular affection in Scotland.
  The hon. Member for Merthyr Tydfil and Rhymney was kind enough to make some courteous remarks about David Myles. David was in a position in which tribute could not be paid to him formally in the House at an earlier stage. Those who watched David over the past few years and recognised the contribution that he made to our debates and our work will deeply regret his failure to return to the House. Perhaps I miss him more than most, having been associated with him for many years. At one time he was my constituency association chairman.
  The hon. Members for Barnsley, East (Mr. Patchett) and for Rother Valley (Mr. Barron) also made their maiden speeches. They brought to the debate qualities which the House enjoys and welcomes — not only considerable experience of the industry and the communities that they represent, but strength of feeling and commitment to the causes on which they were elected to the House. I congratulate them on what they said. Although I am certain that I shall not agree with everything that they say in future, I shall listen with interest to their views, which they put forward with sincerity.
  I acknowledge what the hon. Member for Aberdeen, North said earlier, and I share his thoughts about the helicopter crash at Dyce today. I extend to those who were injured and their relatives our sincere regrets and hope that they will recover fully as soon as possible. I have been associated with the North sea oil industry right from the beginning, watched its development and got to know many of the individuals in it. A great endeavour such as North sea oil is not only expensive in capital and all the other things that have been mentioned in the debate, and difficult in terms of the financial risks and the speculative nature of the industry, but is expensive in terms of human lives and safety. Lives have been lost. The accident at Dyce airport is a timely reminder when, as in the debate, the talk is more of money than of people. It is still people who are involved in the industry, and people who, first and foremost, have made the industry not only a resounding success in the United Kingdom but an example to many other areas in the world.
  Because of the nature of the North sea, and increasingly because of the more difficult and deeper waters to which we are going, we are developing new technologies and techniques. We are looked to by the rest of the world, not only for knowledge and experience, but for the individuals

  97
  who have trained and developed the new techniques, who now have something to offer. I shall return to that point and mention other areas and developments.
  We have had a wide-ranging debate. I make no complaint that we have talked about the coal industry. It is important that we see oil within the wider energy perspective. The hon. Members for Wentworth (Mr. Hardy), for Pontefract and Castleford (Mr. Lofthouse), for Rother Valley and for Leigh (Mr. Cunliffe) talked about the coal industry and the developments that they wished to see. I enjoyed hearing their remarks. I have no doubt that in future we shall have the opportunity to return in more detail to what has been said.
  The debate has ranged widely over different parts of the United Kingdom. I am glad that my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) could not resist the temptation of following me from more pastoral scenes to energy. I listened with interest to what he said and look forward to his future contributions. I am sure that he will be just as trenchant on energy, with his new-found interests, as in other areas, and will represent equally well his constituents in the south-west of England. My hon. Friend asked about developments in the Channel and the south-western approaches. Five exploration wells were undertaken in the south-west last year, but developments there are still on a very limited scale, although it is certainly an area in which interest may arise in the future.
  My hon. Friend the Member far Dumfries (Sir H. Monro) clearly hoped that there would be developments in the Solway area. There has been considerable speculation about an area of the Clyde in recent weeks, but press reports last week related purely to seismic surveys for which appropriate authority had been given. No authority has been given for exploration or other drilling and it is only at that stage that any knowledge about oil resources there can be obtained.
  Ranging still more widely, I listened with interest to my hon. Friend the Member for Folkestone and Hythe (Mr. Howard). I am glad that he welcomed the legislation and that we pleased him by producing a short measure, but I was rather disappointed at the criticisms that he made. I warn him in the friendliest possible way that if he continues in that vein he will ensure that he qualifies for Standing Committee duties. As the Minister who will have to steer this Bill through Committee, I shall not be entirely sorry if he is not a member of that Standing Committee. However, being a short Bill, it might be a good one on which to begin with co-operation from the Opposition.
  The right hon. and learned Member for Monklands, East (Mr. Smith)—[Interruption.] I shall come to my other hon. Friends in a moment. They will have to wait a little longer. I have waited all day for the opportunity to speak, whereas others waited far less long for their chance to contribute. The right hon. and learned Gentleman did a disservice to the entire oil industry today in the fierce attack that he launched on the Bill. There was a great deal of rhetoric, but very little substance in his criticism. He may have sought to justify his position in the Opposition leadership contest by the strength of his criticism — [HON. MEMBERS: "He is not a candidate."] He is not a candidate, but we all know of his role in the matter. If he wishes to impress his hon. Friends he should arrange for more of them to be present to hear the strength of his case.
  98
  His speech today was rather wasted on the empty Benches behind him. He should make sure of his audience before developing the kind of speech that he made today.
  Opposition Members, especially those on the Front Bench, must make up their minds exactly what they want. They encourage us to keep up the pace of development for a whole series of reasons, but out of the other side of their mouths they say that we must thump the oil companies and take as much from them as we can. They say that we must strike a balance, but they entirely fail to say what that balance should be.
  The hon. Member for Dunfermline, West (Mr. Douglas) is especially guilty of this. On 28 February he was emphatic that incentives were needed, and the right hon. and learned Member for Monklands, East wanted to know why the Government had done almost nothing in this respect. Yet to hear him today one would hardly have thought that only four or five months ago the Opposition were urging us to take action along the general lines that we are now taking. That is why from the Opposition Benches — and particularly from the Opposition Front Bench—we have heard so many inconsistencies between one hon. Member and another. The lack of argument has been covered by requests for information and statistics about matters that were hardly relevant to the debate. All the time the Opposition have hidden behind a total lack of argument.
  The hon. Member for Merthyr Tydfil and Rhymney was as guilty as any of his hon. Friends when he went into matters that we have debated previously in this House concerning the disposal of the assets of BNOC He ranged over the whole area of royalties and ownership and into very much more academic and abstract arguments. He showed the same inability as his hon. Friends to grasp the real problem that we have before us in the House concerning the proper development of North sea oil.
  Earlier in the debate the right hon. and learned Member for Monklands, East spoke of the use of revenues and of the Government making an excuse about unemployment benefit. I treat unemployment, as he does, as a very serious matter, but he was dealing with only 3 per cent. of the total of Government expenditure, totally ignoring the other 97 per cent.
  It is interesting to note what has happened in Norway, Denmark and the Netherlands. None the less, Opposition Members completely fail to grasp the fact that we have to consider the circumstances in which we organise our industry in the United Kingdom. I am interested in the United Kingdom context. Some people are always glad to compare the United Kingdom with other countries, such as Norway, but that is not comparing like with like, because the countries have different economies and are different in size and in population.
  Whereas the Government talk of producing in excess of our needs, the Opposition talk in terms of mere self-sufficiency, completely ignoring the fact that we are a trading nation and that our background is different from that of other countries in so many ways. Once again we saw the barrenness of comparisons between one country and another. I am interested in what happens in the United Kingdom and on our continental shelf. I am also interested in what happens onshore to United Kingdom companies which supply our North sea oil industry.
  The right hon. and learned Member for Monklands, East asked, as did the hon. Member for Merthyr Tydfil and Rhymney, for information about the effects of what we are

  99
  proposing. The right hon. and learned Gentleman said that he had made certain calculations in relation to the proposals in the Budget. That again demonstrated the false comparisons that the Labour party has made, because the Chancellor of the Exchequer gave a figure over a four-year period, which related to the effect of the budgetary changes upon present fields or fields that were under development.
  As my hon. Friend the Member for Wiltshire, North (Mr. Needham) said, we are dealing not with that position but with the effect of royalty relief on new fields. The number and value of the new fields cannot be predicted. When the Labour party was in goverment it loved making predictions of one sort or another based on the most dubious of information. I shall not be tempted into that area.
  We have produced this legislation because we are concerned about the rate of development. The precise effect is impossible to quantify.
  Mr. Rowlands rose—
  Mr. Buchanan-Smith: When the hon. Gentleman asked his question he was talking not about the number of fields but about the effect on the revenue to the Exchequer. Again, that shows the muddle that the Opposition are in. They do not even know the difference between the number of developments and wells that are drilled and the revenue that comes comes from those wells. They asked about the actual revenue. The moment that we try to show what a foolish question was asked they try to ask a different question. We all know that that is an old technique, and I am surprised that the right hon. and learned Member for Monklands, East should use it tonight.
  The effect of the Bill is simply to reduce the marginal rate of tax from 89·5 to 88 per cent. My hon. Friend the Member for Gosport (Mr. Viggers) said how much better it was to have 88 per cent. of something than 89·5 per cent. of nothing, which is the alternative. That is what makes the effect of this type of calculation so difficult to work out.
  The hon. Member for Dunfermline, West asked about discussions which the Government had with the United Kingdom Offshore Operators Association. The Opposition Front Bench spokesman echoed what he said about giving the oil companies even more than they had asked for. I ask Opposition Members to study the position, because the UKOOA asked for an automatic formula for royalty repayments, not just a discretionary repayment, which is quite different.
  The association was asking for an automatic provision, thus taking away the discretionary element. Opposition Members must realise that if one is to have an automatic provision it is important that guidelines are laid down about the circumstances in which that will apply. One of the main objections to using that method of refund or repayment is the uncertainty in the way it is applied. If there is any uncertainty and someone is paid on a discretionary basis there will be doubts when a development is planned about the various tax and royalty liabilities. If we do nothing to alleviate that uncertainty we will not achieve the objective of the Bill, which is to remove that uncertainty.
  Mr. Douglas rose—
  Mr. Buchanan-Smith: Let me finish this point. If we have an automatic provision, we must have guidelines. That is the real gap in the Opposition's argument. There was no attempt tonight to specify what those guidelines should be. Now it all comes out. The Labour party is not prepared to put its arguments on the Floor of the House. Its members want to wait until the legislation goes before a Committee. That demonstrates the thinness of their argument. They are afraid to put it before the House tonight. They cannot say what the guidelines should be. The drawing up of such guidelines would be extremely difficult. I look forward to our arguments in Committee. Had it been practical and sensible to go down that road, we might have done so, but we felt that it was too difficult.
  Mr. Douglas: It is only when we probe the matter that we gain information about the background. The Minister should not try to give the impression that there are no uncertainties in the Bill. There is uncertainty in the definition of new fields and in the fact that royalties are related to licence terms and conditions, which are not waived in the Bill.
  Mr. Buchanan-Smith: The hon. Gentleman would be a miracle worker if he could remove all uncertainties from life. Of course there are uncertainties and there always will be. However, the Government are seeking to reduce the uncertainties and stimulate development.
  The Opposition completely ignore the fact that the Petroleum and Submarine Pipe-lines Act 1975 provided for refunds free from tax. Where full refunds were given, it reduced the marginal rate of tax to 77 per cent., compared with the 88 per cent. in the Bill. If the Opposition intend to reduce the marginal rate of tax to 77 per cent. they should come clean and say so. They will be going beyond the Bill's proposals.
  The real purpose of the legislation is to ensure that we maintain the momentum of development of North sea oil. As my hon. Friends the Members for Enfield, North (Mr. Eggar) and for Tayside, North (Mr. Walker) and others said time and time again, we want that momentum to be maintained, not only for the revenue form North sea oil, but for the sake of the oil itself.
  My hon. Friend the Member for Tayside, North referred to Dundee and the oil development taking place there. We must maintain momentum where developments are taking place onshore and where jobs are being created. It is worth having a slightly smaller Government take in total revenue. If a field is successful, it is only a tiny reduction in Government take. If a field is unsuccessful, we ensure that the rate of development continues.
  We need flexibility in North sea oil development, but the Opposition are trying to deny that to the industry. They rely on doctrinaire arguments, dogma and royalties to demonstrate the ownership of the country's assets. The Government do not take that approach. We take a flexible approach that gains the best benefits for Britain, not only in revenue, but in jobs.
  Question put, That the Bill be now read a Second time:—
  The House divided: Ayes 260, Noes 103.

  Division No. 7]

  [10 pm

  AYES

  Alexander, Richard

  Ashby, David

  Alton, David

  Ashdown, Paddy

  Ancram, Michael

  Aspinwall, Jack

  101

  Atkins, Rt Hon H. (S'thorne)

  Heddle, John

  Atkins Robert (South Ribble)

  Henderson, Barry

  Beaumont-Dark, Anthony

  Hickmet, Richard

  Beith, A. J.

  Hicks, Robert

  Bellingham, Henry

  Hogg, Hon Douglas (Gr'th'm)

  Bendall, Vivian

  Holland, Sir Philip (Gedling)

  Blackburn, John

  Holt, Richard

  Boscawen, Hon Robert

  Hooson, Tom

  Bottomley, Peter

  Hordern, Peter

  Bowden, Gerald (Dulwich)

  Howard, Michael

  Brandon-Bravo, Martin

  Howarth, Gerald (Cannock)

  Brooke, Hon Peter

  Howell, Ralph (Norfolk N)

  Brown, M. (Brigg & Cl'thpes)

  Hubbard-Miles, Peter

  Buchanan-Smith, Rt Hon A.

  Hunt, David (Wirral)

  Budgen, Nick

  Hunt, John (Ravensbourne)

  Bulmer, Esmond

  Hunter, Andrew

  Burt, Alistair

  Jenkin, Rt Hon Patrick

  Butterfill, John

  Jessel, Toby

  Carlile, Alexander (Montg'y)

  Jones, Gwilym (Cardiff N)

  Chapman, Sydney

  Jones, Robert (Herts W)

  Chope, Christopher

  Kershaw, Sir Anthony

  Clark, Michael (Rochford)

  Key, Robert

  Clegg, Sir Walter

  King, Roger (B'ham N'field)

  Cockeram, Eric

  Kirkwood, Archibald

  Conway, Derek

  Knight, Gregory (Derby N)

  Cope, John

  Knight, Mrs. Jill (Edgbaston)

  Cranborne, Viscount

  Knowles Michael

  Crouch, David

  Knox, David

  Currie, Mrs. Edwina

  Lang, Ian

  Dorrell, Stephen

  Latham, Michael

  Douglas-Hamilton, Lord J.

  Lawler, Geoffrey

  Dover, Denshore

  Lawson, Rt Hon Nigel

  du Cann, Rt Hon Edward

  Lee, John (Pendle)

  Dunn, Robert

  Leigh, Edward (Gainsbor'gh)

  Dykes, Hugh

  Lennox-Boyd, Hon Mark

  Eggar, Tim

  Lester, Jim

  Emery, Sir Peter

  Lewis, Sir Kenneth (Stamf'd)

  Evennett, David

  Lilley, Peter

  Eyre, Reginald

  Lord, Michael

  Fairbairn, Nicholas

  Luce, Richard

  Fallon, Michael

  Lyell, Nicholas

  Farr, John

  McCurley, Mrs Anna

  Favell, Anthony

  McCusker, Harold

  Fenner, Mrs. Peggy

  Macfarlane, Neil

  Finsberg, Geoffrey

  MacGregor, John

  Fookes, Miss Janet

  MacKay, Andrew (Berkshire)

  Forman, Nigel

  MacKay, John (Argyll & Bute)

  Forsyth, Michael (Stirling)

  McNair-Wilson, M. (N'bury)

  Fowler, Rt Hon Norman

  McQuarrie, Albert

  Fox, Marcus

  Major, John

  Franks, Cecil

  Mallins, Humphrey

  Fraser, Peter (Angus East)

  Malone, Gerald

  Freeman, Roger

  Maples, John

  Fry, Peter

  Marshall, Michael (Arundel)

  Gale, Roger

  Mates, Michael

  Galley, Roy

  Mather, Carol

  Gardiner, George (Reigate)

  Maude, Francis

  Gardner, Sir Edward (Fylde)

  Mawhinney, Dr Brian

  Glyn, Dr. Alan

  Maxwell-Hyslop, Robin

  Goodhart, Sir Philip

  Mayhew, Sir Patrick

  Goodlad, Alastair

  Meadowcroft, Michael

  Gorst, John

  Mellor, David

  Gower, Sir Raymond

  Merchant, Piers

  Gregory, Conal

  Meyer, Sir Anthony

  Griffiths, Peter (Portsm'th N)

  Miller, Ha (B'grove)

  Ground, Patrick

  Mills, Ian (Meridan)

  Gummer, John Selwyn

  Mitchell, David (Hants, NW)

  Hamilton, Hon A. (Epsom)

  Moate, Roger

  Hamilton, Neil (Tatton)

  Monro, Sir Hector

  Hampson, Dr Keith

  Montgomery, Fergus

  Hanley, Jeremy

  Moore, John

  Hannam,John

  Morris, M. (N'hampton, S.)

  Hargreaves, Kenneth

  Morrison, Hon C. (Devizes)

  Harvey, Robert

  Morrison, Hon P. (Chester)

  Haselhurst, Alan

  Moynihan, Hon C.

  Hawkins, C. (High Peak)

  Murphy, Christopher

  Hawkins, Sir Paul (N'folk,SW)

  Neale, Gerrard

  Hawksley, Warren

  Needham, Richard

  Hayward, Robert

  Nelson, Anthony

  Heathcoat-Amory, David

  Neubert, Michael

  102

  Newton, Tony

  Stewart, Andrew (Sherwood)

  Nicholls, Patrick

  Stewart, Rt Hon D. (W Isles)

  Norris, Steven

  Stradling Thomas, J.

  Oppenheim, Philip

  Sumberg, David

  Osborn, Sir John

  Tapsell, Peter

  Ottaway, Richard

  Taylor, Teddy (S'end E)

  Page, John (Harrow, W)

  Tebbit, Rt Hon Norman

  Page, Richard (Herts, SW)

  Temple-Morris, Peter

  Penhaligon, David

  Terlezki, Stefan

  Percival, Rt Hon Sir Ian

  Thomas, Rt Hon Peter

  Pollock, Alexander

  Thompson, Donald (Calder V)

  Powell, William (Corby)

  Thompson, PatricK (N'ich, N)

  Prentice, Rt Hon Reg

  Thorne, Neil (Ilford, S)

  Price, Sir David

  Thornton, Malcolm

  Proctor, K. Harvey

  Thurnham, Peter

  Raffan, Keith

  Townend, John (Bridlington)

  Rathbone, Tim

  Tracey, Richard

  Rees, Rt Hon Peter (Dover)

  Trippier, David

  Renton, Tim

  Trotter, Neville

  Rhodes James, Robert

  Twinn, Dr Ian

  Ridley, Rt Hon Nicholas

  van Straubenzee, Sir W.

  Ridsdale, Sir Julian

  Viggers, Peter

  Rifkind, Malcolm

  Waddington, David

  Robinson, Mark (N'port W)

  Wakeham, Rt Hon John

  Roe, Mrs Marion

  Walden, George

  Ross, Stephen (Isle of Wight)

  Walker, William (T'side N)

  Rossi, Hugh

  Walker, Rt Hon P. (W'cester)

  Rost, Peter

  Wall, Sir Patrick

  Rowe, Andrew

  Wallace, James

  Ryder, Richard

  Waller, Gary

  Sackville, Hon Thomas

  Ward, John

  Sayeed, Jonathan

  Wardle, C (Boxhill)

  Shaw, Giles (Pudsey)

  Watts, John

  Shaw, Sir Michael (Scarb')

  Wells, Bowen (Hertford)

  Shelton, William (Streatham)

  Wheeler, John

  Shepherd, Colin (Hereford)

  Whitney, Raymond

  Silvester, Fred

  Wilkinson, John

  Sims, Roger

  Wilson, Gordon

  Skeet, T. H. H.

  Winterton, Mrs Ann

  Smith, Tim (Beaconsfield)

  Winterton, Nicholas

  Soames, Hon Nicholas

  Wolfson, Mark

  Speed, Keith

  Wood, Timothy

  Speller, Tony

  Woodcock, Michael

  Spencer, D.

  Yeo, Tim

  Spicer, Michael (Worcs, S)

  Young, Sir George (Acton)

  Stanbrook, Ivor

  Stern, Michael

  Tellers for the Ayes:

  Stevens, Lewis (Nuneaton)

  Mr. Tristan Garel-Jones and

  Stevens, Martin (Fulham)

  Mr. Tim Sainsbury.

  NOES

  Archer, Rt Hon Peter

  Davis, Terry (B'ham. H'ge H'I)

  Ashley, Rt Hon Jack

  Dewar, Donald

  Atkinson, N. (Tottenham)

  Dixon, Donald

  Bagier, Gordon A.T.

  Dormand, Jack

  Banks, Tony (Newham NW)

  Douglas, Dick

  Barnett, Guy

  Dubs, Alfred

  Barron, Kevin

  Eastham, Ken

  Beckett, Mrs. Margaret

  Evans, loan (Cynon Valley)

  Bermingham, Gerald

  Evans, John (St. Helens N)

  Bray, Dr Jeremy

  Ewing, Harry

  Brown, Hugh D. (Provan)

  Fields, T. (L'pool Broad Gn)

  Brown, Ron (E'burgh, Leith)

  Fisher, Mark

  Caborn, Richard

  Foster, Derek

  Callaghan, Jim (Heyw'd & M)

  Foulkes, George

  Campbell-Savours, Dale

  Freeson, Rt Hon Reginald

  Canavan, Dennis

  Gould, Bryan

  Clark, Dr David (S Shields)

  Gourlay, Harry

  Clay, Robert

  Hamilton, W. W. (Fife Central)

  Cocks, Rt Hon M. (Bristol S.)

  Hardy, Peter

  Cohen, Harry

  Harrison, Rt Hon Walter

  Conlan, Bernard

  Hattersley, Rt Hon Roy

  Cook, Frank (Stockton North)

  Haynes, Frank

  Cook, Robin F. (Livingston)

  Heffer, Eric S.

  Cowans, Harry

  Hogg, N. (C'nauld & Kilsyth)

  Craigen, J. M.

  Holland, Stuart (Vauxhall)

  Crowther, Stan

  Hoyle, Douglas

  Dalyell, Tam

  Hughes, Robert (Aberdeen N)

  Davies, Rt. Hon. Denzil (L'lli)

  Hughes, Roy (Newport East)

  Davies, Ronald (Caerphilly)

  Hughes, Sean (Knowsley S)

  103

  John, Brynmor

  Pike, Peter

  Kaufman, Rt Hon Gerald

  Prescott, John

  Lambie, David

  Randall, Stuart

  Lamond, James

  Redmond, M.

  Leadbitter, Ted

  Rees, Rt Hon M. (Leeds S)

  Lewis, Ron (Carlisle)

  Robertson, George

  Lloyd, Anthony (Stretford)

  Rowlands, Ted

  Lofthouse, Geoffrey

  Silkin, Rt Hon J.

  McCartney, Hugh

  Skinner, Dennis

  McKay, Allen (Penistone)

  Smith, C.(Isl'ton S & F'bury)

  McKelvey, William

  Smith, Rt Hon J. (M'kl'ds E)

  MacKenzie, Rt Hon Gregor

  Soley, Clive

  McNamara, Kevin

  Spearing, Nigel

  McTaggart, Robert

  Thomas, Dr R. (Carmarthen)

  McWilliam, John

  Thorne, Stan (Preston)

  Madden, Max

  Tinn, James

  Marshall, David (Shettleston)

  Wardell, Gareth (Gower)

  Mason, Rt Hon Roy

  Wareing, Robert

  Michie, William

  Winnick, David

  Milian, Rt Hon Bruce

  Young, David (Bolton SE)

  Miller, Dr M. S. (E. Kilbride)

  Nellist, David

  Tellers for the Noes:

  O'Brien, William

  Mr. James Hamilton and

  Patchett, Terry

  Mr. Laurence Cunliffe.

  Pavitt, Laurie

  Question accordingly agreed to.
  Bill read a Second time and committed to a Standing Committee pursuant to Standing Order No. 42 (Committal of Bills).

Scotland (Rating and Valuation)
10.11 pm
Mr. Donald Dewar: I beg to move,
That an humble Address be presented to Her Majesty, praying that the Rating (Timetable and Procedures) (Scotland) Amendment Regulations 1983 (S.I., 1983, No. 862), dated 17th June 1983, a copy of which was laid before this House on 23rd June, be annulled.
Mr. Speaker: With this, I understand that it will be. convenient to discuss the next motion,
That the Local Government (Scotland) Act 1973 (Section 111) Amendment Order 1983, a copy of which was laid before this House on 23rd June be approved.
Mr. Dewar: Thank you, Mr. Speaker.
Before I plunge into the intricacies of the issue, I must first welcome the hon. Member for Edinburgh, South (Mr. Ancram) to the Dispatch Box, as I think that he is making his debut as a Minister. We should welcome him because, as my hon. Friend the Member for Falkirk, West (Mr. Canavan) will realise, some of us have been anxiously watching the hon. Gentleman for some time. His friends must have felt that he had served his time on the Back Benches and, indeed, that he had served rather a long time. Most of us are relieved, for his sake, that he is now safely home, if somewhat breathless.
The hon. Gentleman has one considerable advantage in starting his ministerial career, because he is certainly not one of those whose Back-Bench careers give many hostages to fortune. He has not got any of those little indiscretions, flashes of imagination or impulsive moments of honesty in speaking from the Back Benches—
Mr. Dennis Canavan: On a point of order, Mr. Deputy Speaker. I cannot hear a word that my hon. Friend is saying, because some Tory hooligans are disturbing the peace.
Mr. Deputy Speaker (Mr. Ernest Armstrong): I, too, am anxious to hear the debate and am having some difficulty in hearing the hon. Member for Glasgow, Garscadden (Mr. Dewar).
Mr. Dewar: I am grateful, Mr. Deputy Speaker, for your protection but not for that of my hon. Friend the Member for Falkirk, West, although his intervention was no doubt well meant.
The hon. Member for Edinburgh, South comes to the Dispatch Box with a clean sheet. He is not the sort of Back Bencher to have caused Ministers to sit up, disconcerted and embarrassed, at the prospect of him rising behind them. We shall have to hope that he is a little more imaginative and a little braver now that he is at the Dispatch Box.
The hon. Gentleman has made a very bad start to his ministerial career with these two measures. I take no great pleasure in saying that. On the face of it, the two measures are simple, but I do not think that I am being in any way mock modest when I say that they were almost incomprehensible to me when I began to look at them. They are a jungle of cross-references, amendments and legislative complications. At the end of the day it is almost impossible, with only the order in front of one, to discover exactly what the Government are about.
The regulations start with a reference to regulation 3A of the Rating (Timetable and Procedures) (Scotland) (No. 2) Regulations 1975. One goes eagerly to the 1975

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regulations, but finds that regulation 3A is not there. Undeterred, we go on to the Rating (Timetable and Procedures) (Scotland) Amendment Regulations 1981 and, fortunately, find that they add regulation 3A to the 1975 regulations.
However, we must also have regard to the Local Government (Rate Product) and Rating (Timetable and Procedures) (Scotland) Amendment Regulations 1979, which amended the 1975 regulations before regulation 3A was added by the amendments embodied in the 1981 regulations.
All that is done under the authority of section 111(1) of the Local Government (Scotland) Act 1973. The House will be relieved to know that that Act exists. One finds section 111(1) in that Act, but it does not refer to the subject of the regulations before us. To get the reference for them, we have to go to schedule 3 to the Local Government and Planning (Scotland) Act 1982. That adds the vital reference to section 5(4) and (5) of the Local Government (Scotland) Act 1966.
If one goes to the 1966 Act as I, encouraged by my Whip, eagerly did, one finds that section 5(4) does not exist. To find that subsection, which is the crux of the argument on the regulations before us, one has to go to section 1 of the 1982 Act, which added it. To understand what it is about, one must go back to the Local Government (Miscellaneous Provisions) (Scotland) Act 1981 and what it did to the 1966 Act.
I know that the Minister will tell me that the regulations are simple. I think that someone has told him so, but to understand these "simple" regulations one has to examine three sets of regulations and four Acts.
I understand that there is a Scottish Office "crib" which is pieced together with the aid of photostat machines, scissors, paste and much ingenuity. It would help us if that were made available, as a consolidation measure, so that we could read in a coherent form exactly what this sort of legislative nonsense is all about. I make that complicated and rather lengthy point because I feel strongly about it after having suffered over the past few days while trying to understand what we are debating.
The inevitable result of that jungle of legislative provision is confusion. The regulations and the order are the product of that confusion. They are consequential amendments following the "excessive and unreasonable" expenditure provisions that were finally grafted on to section 5 of the 1966 Act.
The Government took power to mace regulations, but then discovered that they did not covet section 5(4)(b) of the 1966 Act. Similarly, when looking at the dates for the determination and notification of rates, they found that there was no provision for rate poundages to be reduced under the amended section 5 of the 1966 Act. It is to put right that mess and those omissions that these consequential amendments have been brought forward.
No doubt the Government will say that these are minor, consequential matters, that they merely tidy up what has gone before and that it would, therefore, be reasonable for the Opposition, if we wanted to be constructive and helpful, to nod through the regulations and the order so that we can all get home early and perhaps save a few ministerial blushes. There is no chance of that. However simple the statutory instruments may be in essence, when one has cut through all the complications and amendments, they are part of a consistent and determined attack launched by the Government over the past three
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years on the basis of local government democracy in Scotland. They are part of the section 5 "excessive and unreasonable" machinery, which we regard as obnoxious, unnecessary and based on fallacious arguments.
The House will know that, under the section 5 procedure, the Secretary of State, largely on his own whim and based on his own prejudices — it is almost impossible to discover any other rational basis for the decisions that have been taken — may decide that an authority's expenditure is "excessive and unreasonable" and he can either provide for the rate support grant to be reduced by order during the current financial year or, which is even more startling—and this is what section 5(4) of the 1966 Act embodies — say that the rate poundage should be reduced, in defiance of the decision taken by democratically elected councillors who will probably have a much more impressive and effective mandate from their electors than the Secretary of State is likely to have from his.
In the next three or four weeks — I do not know exactly when—we are threatened with four orders which will penalise four Scottish local authorities. No doubt, we shall be invited to rubber-stamp them. On behalf of the Opposition, may I say that we shall not do that, but no doubt they will be steam-rollered through the House. Tonight we are putting through some necessary preliminaries, clearing the deck for that parliamentary bullying, and because we are doing that, we regard these measures as objectionable, equally objectionable as the main legislation which they buttress and support.
I accept that tonight I cannot debate the measures that will come up affecting Glasgow, Kirkcaldy, Stirling and the Lothian region. I shall not try to go into the details, but I am entitled to ask why we need this oppressive legislation at all, and to ask why this great engine has been constructed by Ministers in a series of statutes over the past three or four years. If we do not need the whole machinery, clearly we do not need the consequential amendments that are embodied in these measures.
One of the troubles, as I think the Minister will accept, is that it is extremely difficult to get information out of the Scottish Office. I asked some questions the other day which he answered on 30 June. I asked him, for example, to update the various appendices that were attached to the letters dated 5 May that were sent to the so-called hit-list authorities. I asked him to recalculate the figures because, in almost every case, in circumstances that were sometimes a little mysterious, there has been a change in the rather unpleasant bargains that were offered to those authorities. Glasgow, for example, was told that the 5p rate reduction is now only 3p. We are reduced to a threepenny threat, if I may put it in that way. Of course, one reason for doing it that way is that the Government now accept that the £4 million that was included in the so-called excessive and unreasonable expenditure was incorrectly included, because it referred to housing improvement grants, which should never have been taken into account. That was conceded in the letter of 29 June that was sent to Glasgow, saying that it would affect all the calculations and appendices that were attached to the original intimation of action against that local authority.
When I asked the Secretary of State in a written question whether he would recalculate the appendices to take account not only of that £4 million but of other controversial categories that we argue should be omitted from the excessive and unreasonable calculations —

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although it is clearly said in the correspondence that all the appendices, which form a report which by statute must be laid before Parliament, are now inaccurate and do not add up to the deductions that he wishes to make—he said in his answer that he would not recalculate those appendices. That type of dog in a manger attitude is a bad start to the career of the new local government Minister in Scotland, and although it may be a short and giddy career, at this stage we must dignify it with the word "career".
If we recalculate in the case of Glasgow and some of the other authorities—we shall do our best with these calculations, but it would be much better if the Secretary of State had given them the imprimatur of his civil servants' calculations — we shall probably find, for example, that Glasgow's excess over guidelines is back in the ruck, and that the case for using the section 5 machinery against Glasgow and the other authorities has been totally undermined and invalidated. I hope that the Minister will think a little more about providing the information that I seek.
Mr. Jim Craigen: My hon. Friend is too kind to the Scottish Office. Does he not recollect the £8 million contingency fund that was originally put down in error, which the Scottish Office subsequently admitted should not have been included in the figures that were given to my hon. Friend the Member for Cunninghame, South (Mr. Lambie)?
Mr. Dewar: Indeed, there was the £8 million contingency fund, there was the £4 million that we know was an error relating to housing improvement grants, there is the matter of the area budget funds of £5 million, and there is a borough collection of £1 million. I promise the House that these matters will be properly aired when we come to consider those measures.
Having asked for that further information, may I briefly ask whether we need such machinery at all or whether the exercise is not based upon a fallacy and misconception? As I understand it, we are finally completing the present machinery in section 5 of the Local Government Planning (Scotland) Act 1966 by these orders because the Government believe that over the past few years local authorities in Scotland have been spendthrift and irresponsible and must be brought to heel even at the expense of attacking the basis of democracy as we know it in local government.
For the benefit of Conservative Members, I want to take one example — Glasgow. That is a concession to the Government because, after all, Glasgow has been put on the hit list. It has been picked out as one of the sinners which is to be the subject of sanctions and penalised. The decissions as to whether it is irresponsible and spendthrift will no doubt be apparent to anyone who looks at the figures.
Let me draw the attention of the House to a parliamentary answer on Thursday 30 June. The Government, very helpfully on this occasion, gave the expenditure on services in Glasgow in constant terms at November 1982 prices from the years 1979–80 through to 1983–84. In constant prices they show what has been spent by this spendthrift and irresponsible authority which has been brought to heel by the Secretary of State by the use of penal sanctions. No doubt we shall see exactly why.
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In 1979–80 the amount spent by Glasgow on services was £82·27 million. In 1983–84 it was £82·92 million. In other words, in that period there was an increase on a budget of over £80 million in real terms of only £700,000. We know from the Secretary of State's admission, leaving aside all the matters of argument between the authority and the Secretary of State, that £4 million should not have been included in 1983–84. A special one-off housing figure was put in for housing improvement grants because of Government incompetence which had not been included in previous years. Leaving aside all the controversy and taking out that £4 million which it is agreed should not be there, the irresponsible and spendthrift Glasgow authority, which has been attacked root and branch in the four years between 1979–80 and 1983–84, reduced expenditure on services in real terms from £82 million to £78 million.
I put that to the House as an example of the hypocrisy — I believe that that is the right word to use — or vindictiveness of the attack that has been launched on local councils in Scotland. On the Government's answers and concessions the figures show that Glasgow is spending significantly less on servicew than four years ago. I do not know whether we should be proud of that, but, to be fair, it has been done under enormous Government pressure. Despite that, Glasgow is the target for attack by the Government.
Ministers say that they are doing this because they are the champions of the ratepayers. There is no doubt that Glasgow's rates in that four-year period have increased by almost 130 per cent. Why? Is it because it has spent wildly more on services? No, because we know from the Government's figures that it has spent less. It is because the Government have been cutting their contribution to local government ruthlessly year after year and then blaming local government when, inevitably, that has forced substantial increases in the rates.
If one takes the percentage of the Glasgow budget which is met by Exchequer grants, between 1979–80 and 1983–84 at a time when the services provision has remained static or fallen as I have submitted, the Government's percentage has fallen from 41 per cent. to 31 per cent. of the total. That is why the Glasgow ratepayer has had to face substantial increases. It is not because of an irresponsible and spendthrift council but because we have a parsimonious, cheeseparing, and, it its presentation, an essentially dishonest Secretary of State for Scotland.
A broadening of the argument to include the COSLA figures across the whole of Scotland — I mention the figures only in passing — from 1975–76 to 1981–82 shows that local government expenditure has fallen over that period by 16 per cent. while central Government expenditure has increased by 10 per cent. The overall figures for Glasgow—the authority that the Secretary of State has picked out for punishment—show the same position. The exercise of which these orders are a small but dishonourable part is vindictive and, worse still, totally unnecessary.
The orders are part of the mechanism of oppression. We object to that in principle. It is not an argument about the decision of individual councillors over certain budgets. It is not a matter of whether we think the people who run Glasgow, Stirling or Kirkcaldy or, indeed, the Lothian region, are men of wisdom whose activities we entirely support. Even if we did not think that, even if we disagreed with them, there is a principle involved about the right of

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local democracy, and the right of local councillors to assess their local needs and to be answerable at the end of the day at the ballot box. If Glasgow, Kirkcaldy, Stirling or Lothian are making a mess of affairs, if they are wrong, the people who should judge them are their own electorates, who will have that chance in May 1984. It is not right that the electorate should be pre-empted in this way by a dictatorial action of the Secretary of State.
It may be said that, by voting against what are at the end of the day merely trimming measures to bolster up and put in order the edifice of oppression that legislation has placed on the statute book, we are conducting a vendetta against Government policy. Perhaps we are. I am prepared to concede that there is a vendetta against this legislation, but I say to the House that the vendetta is justified and it is one that we will mark by voting in the Lobby tonight and by continuing this operation, this argument, throughout the months ahead until we get from Scottish public opinion a resounding vote of no confidence in the activities of the Secretary of State in the district council elections next May.
10.32 pm
The Under-Secretary of State far Scotland (Mr. Michael Ancram): I start by thanking the hon. Member for Glasgow, Garscadden (Mr. Dewar) for what I took to be kind remarks at the beginning of his oration. They bore all the hallmarks of his usual trend for understatement. I am not sure that I have ever before been called "short", although there may have been occasions when I have been called "crazy", "giddy", and "unimaginative". I hope that the hon. Gentleman will not misunderstand me if I wish him over the coming months many such debates and I look forward to debating against him.
Although the debate is about two orders, which make minor technical changes in connection with selective action, it is perhaps not surprising, knowing the hon. Gentleman's interest in Glasgow, that the general principle of selective action has been raised. It might be helpful if I remind the House why the Government felt it necessary to take and use the powers of selective action.
First, it is important to stress that these powers are not taken out of a desire to centralise or to undermine local democracy. There is no question about our belief in the importance of local government. However, we also believe that central and local government are not two separate organisations working in isolation, one from the other. They are designed to work in co-operation and central Government has a responsibility for national objectives, including national economic objectives. Local government is responsible for pursuing local objectives within the framework of national objectives. With local government accounting for a quarter of public expenditure, there cannot be any question—indeed, there was not when the hon. Gentleman and his right hon. Friend the Member for Glasgow, Govan (Mr. Millan) were in Government before 1979 — of its being left out of account in the Government's public expenditure policy.
The central Government are entitled to expect cooperation in their pursuit of public expenditure policies. When the argument of local democracy is used, it is sometimes overlooked, and was overlooked by the hon. Gentleman, that central Government are also democratically elected to pursue national policies.
The basis of our policy is the need to control local authority expenditure—an aim which has been common
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to all Governments. Selective action sets out to do that in an effective and fair way by concentrating on high spending authorities and ensuring that the savings go back to the ratepayers in the form of reduced rates.
The instrument which is the subject of the first motion received comparatively scant attention from the hon. Member for Garscadden. I can understand why, but if right hon. and hon. Members will bear with me, I shall say a few words about the Rating (Timetable and Procedures) (Scotland) Amendment Regulations 1983. I hope that I may bring light upon the darkness which obviously enveloped the hon. Gentleman's mind when he was considering these issues.
As is apparent from the amendment regulations, they will amend the Rating (Timetable Procedures) (Scotland) (No. 2) Regulations 1975. These regulations prescribe dates for determination and intimation of requisitions and rates and certain other matters in respect of rating transactions between local authorities. The provisions with which the 1983 amendment regulations are concerned involve the last date prescribed for determining rates and the last date prescribed for district councils to intimate the district rate to regional councils. These dates are 5 and 7 March respectively and are appropriate to the normal rates which local authorities levy each year in terms of section 108 of the Local Government (Scotland) Act 1973.
The 1975 regulations were amended in 1981 by amendment regulations of that year. That amendment was required because of the enactment by section 15 of the Local Government (Miscellaneous Provisions) (Scotland) Act 1981 of a new section 108A of the Local Government (Scotland) Act 1973. This measure allows a local authority which is subject to action for excessive and unreasonable planned expenditure or which has reason to believe that such action might be taken, to re-assess its total estimated expenses for the year and to determine a new, lower rate. The dates of 5 and 7 March are obviously inappropriate to such a rate and the regulations were amended in 1981 to disapply these dates for these new rates. The 1981 amendment regulations also added a new provision —paragraph 3A — which provided that where a district council determines a lower rate under section 108A the last date for intimation of that rate to the rating authority is the second day after the day on which the new rate was determined by the district council concerned. The amendment ensured prompt notification of rates determined under section 108A and in turn that the process of levying and collecting the new rate could be initiated timeously.
The current amendment regulations make a similar disapplication in respect of 5 and 7 March and amend the revisions relating to notification of a new rate determined under section 108A to the rating authority, to take account of lower rates determined by a local authority in terms of the Local Government (Scotland) Act 1966. Section 5(4)(b) as inserted last year by the Local Government and Planning (Scotland) Act 1982 [HON. MEMBERS: "Boring."] As the hon. Member for Garscadden found the matter so difficult and complicated I thought that hon. Members would welcome the chance to be led gently through this apparently complicated, matter so that they can see how simple it really is.
As right hon. and hon. Members are well aware, action is currently being taken by the Secretary of State which could result in some local authorities being required to reduce their rates as provided in section 5(4)(b) All the

111
amendment regulations do is to insert a necessary reference to statute so that the regulations will make the necessary provision in respect of any local authority required to determine a reduced rate in terms of section 5(4)(b).
Mr. Craigen: Why were the Shetlands dropped in relation to action? Is it true that the Secretary of State—who is not here tonight, although other Ministers are present—said that if an oilfield has been discovered in the Glasgow area, that might have made a difference to the Glasgow case?
Mr. Ancram: As the hon. Gentleman will be aware, matters of this sort are usually spoken to by my hon. Friends and Ministers like myself; the Secretary of State does not normally speak on such instruments. As we may —and I say "may"—have to be debating these orders in the future, I do not think that this is an appropriate moment to look at particular cases.
In regard to Shetland, as hon. Members will be aware, following the intimation given by the Secretary of State to the five councils, he was obliged to consult those councils and receive submissions from them. That procedure was followed; the cases presented by those councils were listened to with care and attention by my right hon. Friend and in the case of Shetland it was decided, in the light of the submissions made, that no further action would be taken.
The powers under which these amendment regulations are made require prior consultation with the Convention of Scottish Local Authorities. This has been done. The convention conveyed to my right hon. Friend the Secretary of State when he met it on 17 June that it had no observations on the amendment regulations, but in fairness I should record that it signified that it was not in favour of the overall action being taken by the Secretary of State.
These amendment regulations are required so that the provisions relating to reduction of rates following action by the Secretary of State for excessive and unreasonable planned expenditure can be put into effect. They follow on from measures already enacted. Accordingly, I ask the House to reject the Prayer.
As the title of the Local Government (Scotland) Act 1973 (Section 111) Amendment Order 1983 indicates, its purpose is to amend section 111 of the Local Government (Scotland) Act 1973. Section 111 enables the Secretary of State to make regulations with respect to rates. The order itself is made under powers conferred on the Secretary of State by section 5(6) of the Local Government (Scotland) Act 1966. The House might find it helpful if I spoke about these powers.
Subsection (6) is part of the measures introduced last year into section 5 of the Local Government (Scotland) Act 1966 by section 1 of the Local Government and Planning (Scotland) Act 1982. The House will recall that section 5(4)(b)—which the hon. Member for Garscadden said he had so much trouble finding—requires a local authority to reduce its rate when the Secretary of State is satisfied that it plans to incur excessive and unreasonable expenditure. This is, of course, subject to the approval of a report laid by the Secretary of State before Parliament.
Mr. Dewar: The Minister is referring to a report which must be laid before Parliament. Will he give some thought
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to re-calculating the appendices that were sent to local authorities—and which will constitute the report which will be laid before Parliament — so that they take account, for example, of the £4 million that it has been agreed should be left out of the Glasgow calculations and any other adjustments for other authorities? Undoubtedly the appendices as presently calculated will not give Parliament a true picture of the situation.
Mr. Ancram: The hon. Gentleman can take it that if we reach the stage of having to lay an order in relation to any of the four councils that still remain to have action taken against them, the Government will put forward their arguments in the most concise and accurate way possible.
I return to the lesson which I was giving the hon. Member for Garscadden in the matter with which he was finding so much difficulty. The purpose of this order is to amend primary legislation. The provision in question is section 111(1) of the Local Government (Scotland) Act 1973, which enables the Secretary of State to make regulations with respect to rates, at that time rates determined under section 108 of the same Act. The Local Government (Miscellaneous Provisions) (Scotland) Act 1981 allowed a local authority to determine a lower rate than that determined under section 108 and amended section 111(1) of the 1973 Act to allow the Secretary of State to make regulations as regards a rate determined under section 108A(1) for the repayment of sums paid in respect of a rate determined under section 108; and for the cost of levying and collecting to be borne by the authority. This new provision became section 111(1)(f). No such provision was made by the Local Government and Planning (Scotland) Act 1982 with regard to a rate determined by an authority under section 5(4) of the 1966 Act as amended by the 1982 Act, and the purpose of this order is to make it clear beyond doubt that the Secretary of State may, with regard to a rate determined under section 5(4), make a regulation under the new provision 111(1)(f) with regard to the repayment of sums paid under section 108 and to the cost of levying and collection to be borne by the authority concerned. [Interruption.] I hope that I am proving instructive to the hon. Member for Falkirk, West (Mr. Canavan).
The Rating (Repayment Procedures Etc.) (Scotland) regulations 1981 were made in 1981 in exercise of the power in section 111(1)(f) of the 1973 Act. These regulations were needed because one district council—Renfrew — exercising good sense and showing consideration for its ratepayers in a constructive way, reduced its planned expenditure and its rate in 1981–82 following intimation to it that my right hon. Friend was satisfied that its planned expenditure was excessive and unreasonable and that he proposed a reduction in rate support grant. This sensible course allowed Renfrew to return to its ratepayers the difference between its first rate and second lower rate and to avoid suffering a reduction in rate support grant which would have benefited mainly the Exchequer. The regulations made in exercise of the power in section 111(1)(f) were necessary to allow certain mechanical operations to be carried out to convey to the ratepayers of Renfrew the cash benefit of the reduction in rate. I know that the right hon. Member for Govan has no interest in returning cash benefits to any ratepayer. These regulations also allowed the sensible decisions taken last year by Lothian regional council and Stirling district council to be translated into reduced rate bills.

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This order is a minor part only of the procedures necessary to hold Scottish rates at a reasonable level. The fact that these procedures and so this order are necessary is, stress, regrettable but I make no apology for seeking the approval of the House to the order. It is the circumstances which make it necessary that are to be regretted.
As hon. and right hon. Members will be aware, my right hon. Friend has been obliged to exercise the powers in section 5 of the 1966 Act as extended last year in the 1982 Act. He intimated, accordingly to five Scottish local authorities that, on the basis of the in formation available to him, he was satisfied that each authority's estimated expenses for the year 1983–84 were excessive and unreasonable and in view of this was of the opinion that the rates determined by each council for 1983–84 should be reduced by specified amounts.
Mr. Dewar: The hon. Gentleman will no doubt remember that a few minutes ago I referred to the figures that appeared in a parliamentary answer for which he was responsible. It showed that between 1979–80 and 1983–84 the expenditure on services in real terms in Glasgow remained almost static. If we remove the £4 million that he now accepts should not have been included in the calculation, there has been a considerable reduction in expenditure. How does that square with what he is saying about "excessive and unreasonable" planned expenditure?
Mr. Ancram: The hon. Gentleman heard me say that tonight would not be the appropriate moment to discuss individual cases. I hope that all the councils against which action still remains will act with common sense and that we shall not have to lay the orders against them. That is something that they will have to consider before 6 July. I am sure that the hon. Gentleman will agree that in all the circumstances it would not be appropriate to discuss specific issues.
We await replies from the councils, and until they have been received and we know what view they take of my right hon. Friend's intimation last week it will not be proper to discuss individual authorities and the actions.
Mr. Craigen: I understand that Glasgow district council has requested a meeting with the Secretary of State for Scotland. May we take it that that will be agreed to by the right hon. Gentleman?
Mr. Ancram: As the hon. Gentleman knows, the Glasgow district council came to see me some time ago. It put all the points that it wished to make at that meeting. In the light of those points my right hon. Friend the Secretary of State reconsidered the amount that he was asking for. There may be other points that the Glasgow district council did not raise with me—there were many —but the ones that it raised have been fully considered by my right hon. Friend, in arriving at the decision that he intimated last week.
Mr. Craigen rose—
Mr. Ancram: I have given way on many occasions. I shall not give way any more.
Mr. Craigen: Will the hon. Gentleman give way?
Mr. Ancram: I am not giving way any more. If he is lucky enough to catch your eye, Mr. Deputy Speaker, the hon. Gentleman will be able to make his own points.
Amendment of the principal regulations relating to repayment of rates and the cost of levying and collecting
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rates is required so that necessary mechanical operations with respect to rates determined — or deemed to be determined—in terms of section 5(4)(b) of the 1966 Act can be properly prescribed and so that ratepayers in authorities who are the subject of a report to this House seeking approval to a rate reduction can benefit from such a lower rate as may be specified in the approved report. The amendments which it is required to make to the regulations for that purpose are minor, technical and, in themselves, non-controversial. They will comprise simply the insertion in the existing regulations of a reference to a rate determined under section 5(4)(b): an amendment similar in style and nature to the amendments set out in the order now before the House. The necessary amendment of the regulations requires the minor and technical extension of the regulation-making power in section 111(1)(f) of the 1973 Act. As I have already shown this is what the order will do. Subject to approval of the order by Parliament, it is intended to lay before Parliament, as soon as possible, the Instrument required to amend the principal regulations.
The order is a minor technical paving step that will allow to be put into effect measures that the House has already approved and that the House may be asked to approve. I commend the order to the House.
10.52 pm
Mr. Gregor MacKenzie: I came along to the debate in the hope that I would be enlightened by our new Under-Secretary of State. I should be less than honest if I now said that I understood anything better than when I came in. Therefore, I shall now make the speech that I had intended to make before I heard his explanation. Though he described the order and regulations as minor and technical in character, they go deeper than that.
The late George Buchanan, when Under-Secretary of State for Scotland, was not sure what an amendment was all about. He would stand up in the Scottish Grand Committee—a long time before I arrived in the House —and say, "This is just a wee drafting amendment, so I would not be bothered too much about it." There is much more to this amendment than being simply a technical paving amendment. It strikes us in the Opposition that over the past few weeks the Secretary of State has been acting in a way which, not to put too fine a point on it, was well beyond the powers given to him by Parliament. Now he has come here in the hope that we shall give him the powers that he has been taking upon himself since 5 May. Those powers were questionable from the beginning, from a legal point of view, but there is one thing about which Opposition Members have no doubt. It is that the right hon. Gentleman was opposed to the action of the Glasgow district council and other district councils. That is the real issue, and is fundamental.
The people of Glasgow have elected their own district council. It is made up of people who understand the problems of Glasgow, and the people's needs. It wants to proceed in the way for which it was given a mandate. The Secretary of State—and presumably the Under-Secretary —does not like the composition of the Glasgow district council. It is made up in the main of Labour councillors who do not bow the knee at the name of the Secretary of State. They sometimes act contrary to his hopes and aspirations for them. We also have a few Conservatives and three Liberals — I know, because they are in my constituency — but the latter can certainly be dismissed

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from the argument, because when the matter was discussed by the council they did not regard it as important enough to turn up to speak or even to vote.
Mr. Canavan: There are no Liberals here now either.
Mr. MacKenzie: That is not untypical.
Fundamentally, we are questioning the right of the Secretary of State to override the people of Glasgow and their elected representatives on the district council. In an off moment today the Under-Secretary of State said that he had a national mandate. I shall not go into whether the Government have a Scottish mandate. Suffice it to say that the people of Glasgow showed recently, and decisively, that they had no confidence in the Government when not one Conservative member of Parliament was returned for a Glasgow constituency. I hope that the Secretary of State and the Under-Secretary of State, who are not known for their knowledge of Glasgow, will therefore pay some attention to the views of those of us who represent Glasgow seats.
The Secretary of State appears to us to be trying to undermine the whole democratic system in Glasgow. Even the Glasgow Herald commented the other day:
"Mr. Younger's limited concession will make no difference since more is seen to be at stake than the actual amont of the cuts. There is a sense that local democracy itself is under threat".
Many of us—on both sides of the House, I imagine—think that when the Conservative party talks so much about local government, democracy, extremism and the rest, it is a bit rich for the Secretary of State to take unto himself powers to dominate over all the district councils. He seems to think that a district council is no more than an executive arm to carry out his bidding whenever he wishes. That is not the view of the people of Glasgow.
The Minister said that the Government took action because the rate poundage was excessive and unreasonable. Like my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar), I found that very difficult to understand. The Secretary of State seems to have got into a great muddle with the figures. I have heard of two mistakes—involving about £8 million in one case and £4 million in the other — in the past few weeks. If he makes mistakes of that magnitude, heaven knows what will happen when the matter is finally examined in depth.
The Secretary of State should be honest enough to admit that he has been under pressure from interest groups in Glasgow to reduce the rates. Having been defeated on every possible political occasion, they now want him to reduce the rates, whatever the cost to the people of Glasgow. We know that the Secretary of State has been under pressure on this, not just because of the rate poundage, but because of the various rating reforms.
If the Minister had said that this measure was a precursor to a genuine change in the rating system some of us might have understood it better, but he did not say that. He talked about unreasonable and excessive rate increases, without having fully examined all the circumstances in Glasgow—decreasing population, high unemployment, serious housing problems, and so on. If the Under-Secretary of State were to spend some time looking at those problems, he would appreciate the degree of real concern and anger about them in the city.
In my view—and, I am sure, in the view of many of my right hon. and hon. Friends—the people of Glasgow
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and their councillors are the people who know their problems. They had hoped that the Secretary of State would be sympathetic to them and understanding of them. Instead, they have a Secretary of State who has cut their rate support grant and housing support grant and has in every way sought to frustrate the genuine aspirations of the people of Glasgow. I do not think that the Opposition can tolerate that, and that is why I support my hon. Friend the Member for Garscadden.
11 pm
Mr. Bill Walker: I take this opportunity of welcoming my hon. Friend the Member for Edinburgh, South (Mr. Ancram) to the Government Front Bench. Some of us on the Government Benches think that the move was long overdue.
I was interested in what the hon. Member for Glasgow, Garscadden (Mr. Dewer) said. I had the impression that he was suggesting that somehow the amendments to the law were a negation of democracy, but the very fact that we are debating them tonight shows that democracy is functioning. I remind the hon. Gentleman that not everyone who is entitled to vote in local government elections is a ratepayer. Therefore, there is always an element of voting but not paying, and that has to be considered.
Why are the amendments to local government law needed? The Opposition spokesmen tell us that they are for the destruction of democracy or, as they would say, of local democracy. Those are serious charges and must be examined very carefully. In the Conservative party we care deeply about local democracy and about the way that councils are managed and administered. The first point to be noted is that this is the legislative part of Government, not local government, and that local government has a statutory duty to manage and administer its regions or districts within the law; but the law is made here.
Secondly, we have to take into account the impact of the decisions made by regions and districts on each other and on other Government bodies, including quasi-Government bodies.
Thirdly, we have to consider the impact of decisions made by regions and districts on wealth and job operation sectors within them.
Fourthly, we have to consider the impact on the individual ratepayers of decisions made by regions and districts.
Mr. Craigen: The hon. Gentleman makes the point that the law is made here, and I agree with him. Our objection is that the goalposts have been moved because the Secretary of State cannot score a goal against the authorities without introducing the orders.
Mr. Walker: That is exactly my point. We make the law here. The law is not made in the regions and the districts. If we here judge that the law requires to be changed, this is the place where it is changed, and the only place where it can be changed.
I wish to draw the attention of the House to the impact of rates in one authority on another authority. If a district council increases its rates by 1p, the impact on the region can be an increase in rates of many tens of thousands of pounds. That can mean a dramatic increase in the running costs of major schools and a pre-empting of education expenditure. It substantially reduces the funds available

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for classroom expenditure. That is one good reason why the Government must take careful note of what is happening.
If districts or regions increase their rates the impact on the health boards can be dramatic, to the extent of many hundreds of thousands of pounds. Dundee district rate is a good example. If it was at the same level as Perth and Kinross district, the Tayside health boards would have an additional £1 million to spend. There would then be no threat to hospitals, especially the cottage hospitals that serve my constituents. The rural areas find that they are subsidising the towns and cities—for example, Glasgow or Dundee—through their hospitals. We must not ignore that aspect in this place. It is here that we determine whether we want more hospital or school provision, and not at local authority level where our decisions should be administered.
Opposition Members are vocal about services. But it is only at national Government level that we can predetermine how much money we want spent on which services. If we leave that exclusively to the wishes of local authorities, the profligate authorities will feed off the ratepayers in the surrounding areas. Those areas share the services of schools, hospitals and other government agencies. The high-rate local authorities are like vampires —they get their sustenance from the lifeblood of others.
Mr. George Foulkes: I cannot find any reference to vampires in the rating and valuation order. The hon. Gentleman is straying from the point—
Mr. Deputy Speaker: Order. The Chair will decide when a Member is out of order.
Mr. Walker: I repeat for the sake of the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) that high-rate local authorities are like vampires. They gain their sustenance from the lifeblood of others. That is why the Government must act to bring a balance into local government funding and expenditure. That is why I welcome the orders.
Several Hon. Members rose—
Mr. Deputy Speaker: Order. I remind the House that the debate ends at 11.30 pm.
11.8 pm
Mr. Gordon Wilson: I do not know what is worse—the rigmarole of rubbish that the hon. Member for Tayside, North (Mr. Walker) has just produced or the Byzantine meanderings of the Minister. The hon. Member for Tayside, North should note that for the second or third consecutive year Dundee has escaped the privilege of being on the Government's hit list. That has enabled me to approach the debate without having to defend the interests of my local authority.
The Minister got off to a bad start when he sought to take us through the various stages of the regulations, and then to pretend that they were nothing more than paving amendments that would allow the Government to impose their ideas on what expenditure should be within Scottish local authorities. The Minister did not deceive the House about that. We all know what the Government are attempting to do. They are producing a whole set of regulations intended to remove power from democratically
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elected local authorities to fix their priorities, rates and the level of services to be provided in each local authority area.
We have to go back to the Wheatley report to understand how much that is at variance with the concept of the local government reforms introduced in 1973. One of the Acts which are quoted is the 1973 legislation, and that did not envisage the trend towards centralisation. It was intended to make incidental changes by way of regulation, and some of the matters detailed relate to interest rates and other minor matters. But from 1975–76 onwards, with the onset of the IMF cuts, the cash limits devised for central Government were extended towards the financing of local government and with each successive Act of Parliament the powers of local government were trimmed.
That is not acceptable. It cuts across the tradition in Scotland of local authorities—although they have to pay attention to Government policy—being able to provide services in their areas according to the wishes of their electors. The hon. Member for Tayside, North said that not everyone who paid rates was an elector. That is true. But the Government cannot take refuge in that since they have promised for the past four or five years to abolish rates and reform local government finance.
We have reached the stage where the screw has been turned again and again. But the Government can no longer justify their actions. The Secretary of State for Scotland has become more arbitrary with each step that he has taken over the past three or four years. He finds it difficult to explain why certain areas have been singled out for inclusion on the hit list and why certain other local authorities may be taken off it. We have a jungle from which any logic and common sense has long since departed.
These regulations may be just the first step in the presentation of orders seeking to force Government diktat on certain local authorities against their wishes. But it would be wise and proper for those who are interested in the democracy of local authorities to contest proposed changes. We know that the Government's majority will steam roller them through, but it is worth saying at the outset of this Parliament that the Government do not have a mandate to impose these matters on Scotland and to override the interests of the democratically elected local authorities.
Sooner or later, that argument will hit home, and the Government will realise that they are nothing more than a colonialist administration without any moral foundation for the policies that they intend to impose on the long-suffering people of Scotland.
11.13 pm
Lord James Douglas-Hamilton: The hon. Member for Dundee, East (Mr. Wilson) took as his theme the need to safeguard local democracy. I shall return to it later in my remarks.
I congratulate my hon. Friend the Member for Edinburgh, South (Mr. Ancram) and wish him every success in his new role.
The first of these instruments deals with local authorities which accede to the Government's request on a voluntary basis, and I believe that it introduces an element of flexibility. The second applies when orders are to be made governing the repayment of rates and the cost

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of levying and collecting the reduced rates in the cases of rates being reduced by selective action, which results in approval of a report to the House of Commons.
It is not clear into which category the Lothian regional council will fall, but the administration there has confirmed its willingness to work with and co-operate with the Government on the basis of 6p reduction. However, the administration does not hold the overall balance of power, and those holding it will have to commit themselves one way or another very soon.
After considering the representations from the Lothian regional council, in the course of the election campaign I told my right hon. Friend the Secretary of State that in my view the 8p reduction was going too far and that I hoped he would show some flexibility. Since then my right hon. Friend has met council representatives, and I am glad to say that he has responded to their views and reduced the 8p to 6p. I have received an undertaking from the administration on Lothian regional council that the 6p reduction can be operated without compulsory redundancies, if the council falls in with the Secretary of State's wishes, and that services can be adequately maintained to the satisfaction of the consumers.
Mr. Dewar: Does the hon. Gentleman approve of what happened in Lothian? Two budgets were put forward, one by the Tories and one by Labour. It became clear that neither could command a majority, and ultimately a compromise was worked out. The supporters of three parties came together to carry the budget. The Secretary of State then overruled the decision of that coalition of interests, which represented a wide range of opinion in the region, and enforced upon the council the original Conservative budget, which has been agreed in a back stairs deal. Is that good for local democracy? How does the hon. Gentleman square that with his conscience?
Lord James Douglas-Hamilton: The hon. Gentleman will appreciate that compromise is the essence of politics. The Secretary of State is fully entitled to take the necessary action to safeguard the ratepayers. I am very much encouraged by the assurances and undertakings that I have been given that there will be no compulsory redundancies and that services can and will be adequately maintained.
One of the reasons for the problem in Lothian region is that over four years the rates escalated by more than 160 per cent. The social work department in Lothian was one of the most grandiose in Scotland. In May 1982 it was over 25 per cent. more expensive per head than the department in Strathclyde. It cost about £61 per head of population, while Strathclyde, with many more deprived areas, cost about £48 per head, and I understand that other Scots authorities operated at under £40 per head of the population.
The social work service in Lothian region escalated much more rapidly than other social work departments in Scotland. Social workers in Lothian are the highest paid in Scotland, and much of the funds go in wages. Substantial reductions have been made, reductions this year in services should, in my view, be minimal, because the social work department needs time to adjust. Furthermore, there is now a shortage of bed space for elderly persons in hospitals in Lothian, and over the next 10 years the number of people aged over 65 will grow by not less than 5 per cent.
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To ease that burden, the policy of more care in the community should be followed. Over the years this will inevitably result in an adjustment in the funds between the health boards and the social work departments. It should be noted that the increase in the number of sheltered housing projects for the elderly will inevitable have consequences for the social work departments.
The hon. Member for Glasgow, Garscadden (Mr. Dewar) and other Labour Members are concerned about whether the principle of local democracy is being infringed in any way. I believe that the House is fully entitled to approve the regulations and the order. The issues were much more sharply focused some years ago, on 21 July 1981, when the Under-Secretary of State for Scotland, my hon. Friend the Member for Edinburgh, Pentlands (Mr. Rifkind) summed up the kernel of the issue very well. He said:
"The House should reflect that Governments, whether Labour, believing in an increase in public expenditure, or Tory, wishing to reduce it, have always accepted that the totality of public expenditure is an essential and legitimate part of the Government's economic strategy … a settled part of the relationship between the Government and local authorities over many years has been that when the Government requested local authorities to moderate their expenditure in the national interest —as the last Labour Government did—local authorities have responded." — [Official Report, 21 July 1981; Vol. 9, c. 254–55.]
In view of the undertakings that I have received that there will not be compulsory redundancies and that services will be adequately maintained, I believe that the ratepayers are entitled to be fully protected against unreasonable increases, especially as the employment prospects of many are tied up with keeping the rates under reasonable control.
11.19 pm
Mr. Gavin Strang: It is quite monstrous that the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) should stand there and talk about services being adequately maintained in Edinburgh and Lothian when the reality is severe cuts in services. In the last couple of weeks thousands of parents have had letters from their children's schools saying that there will be fewer teachers and that there will be no physical education or music. We are witnessing a dramatic cut in the level of provision for our school children in Lothian, and it has been imposed by this Government.
That is what these regulations are about. They are about the imposition of draconian and dictatorial powers.
When we started down this road, we were told by the then Under-Secretary of State for Scotland, the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), that these powers would be used only when a local authority demonstrated a desire to increase dramatically expenditure above the level that the Government wished, and by an extent that meant implications for the national economy and an intolerable burden on the ratepayers. We have come a long way since then. The policy has been wholly discredited not only because it undermines local democracy but because it is clear that no rational and objective case can be made for the selection of the local authorities on the hit list.
For example, in Lothian, expenditure has been cut by £33 million in response to the Government's powers, and more than 3,000 jobs have been destroyed in Lothian regional council alone as a result of the cuts. We are now asked to make a further cut. The main reason for that

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request has nothing to do with Lothian region's needs or expenditure. The reason is that the Government have altered the guideline. They have had to reduce the guideline to keep Lothian on their hit Fist. That is why it is so distasteful that these authorities should be singled out for political reasons, or for reasons other than those based on an objective consideration of the needs of the people in those areas.
Mr. Barry Henderson rose—
Mr. Strang: As has been said, we have a budget that has been agreed by all the parties with the exception of the minority Conservative party. Only 22 Out of a total of 49 Lothian regional councillors are Tories. Just 10 days ago a deputation of Labour, Liberal, SDP and Scottish National party councillors appealed to the Secretary of State to respect the democratic decision of that local authority. Instead, we are seeing the imposition of the wishes of the minority Tory party on the people of Lothian.
11.22 pm
Mr. Dennis Canavan: I listened very carefully to what the Minister had to say, but I was forced to the conclusion that it was the worst ministerial maiden speech that I have ever heard made from that Dispatch Box. Even if the hon. Member for Tayside, North (Mr. Walker) or the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) had got the job at the Scottish Office, they could not have made a worse job of it. Of course, the hon. Member for Tayside, North would not have got the job, because he has not got enough blue blood. Even the hon. Member for Edinburgh, West has not got enough blue blood. He is just the brother of a Duke, whereas we are now lumbered with the son of a Marquess. The mantle has been left with him to clabber the Scottish local authorities. We have reached the ridiculous position that the son of a medieval Marquess of Lothian is contravening the democratically expressed wishes of those elected to represent the people of Lothian region.
Despite what the Minister and his Back-Bench collaborators say, these measures represent a serious threat to local democracy. They set the way for the further orders that will probably be debated in the next few weeks. They will dictate the rate levels to certain Scottish local authorities. Many of us have great sympathy with those who say that rates in general are too high. However, the reason for that is that this Government will not give adequate rate support grant to the local authorities. The Government are to blame for high rates. Now they are denying Scottish local authorities the opportunity to obtain revenue in order to maintain or improve the essential services that the people voted for.
I am a ratepayer in the Stirling district, which gives me something in common with the Secretary of State, who, unfortunately, is not here. However, the right hon. Gentleman and I differ in our approach to the statutory instruments. Presumably he will vote for them to put money in his pocket; he wants a rate rebate. I shall vote against these instruments and any subsequent orders, because I want better services, better housing, better environmental services and better leisure and recreation facilities for our children. That is what local government is all about.
The Under-Secretary and his henchmen are dictating to the elected representatives of Stirling and other local
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authorities and are virtually saying to local people, "Sorry, but you will not get the services that you voted for in the district council elections." That is a serious threat to local democracy.
The Government were rejected by over 70 per cent. of the Scottish electorate at the general election and have no mandate from the people of Scotland for the statutory instruments or any of the other draconian legislation that they have up their sleeve. Those elected to local authorities have a far better mandate to represent the people of Scotland.
We hear hypocrisy from the Tories about the negation of democracy in Eastern Europe, but the Under-Secretary is destroying what democracy is left to the people of Scotland. Under the present over-centralised, bureaucratic, system, he is the Jaruzelski of Scottish politics, with his jackboot tactics, dictating to local people and negating local democracy. It is a scandal.
Unfortunately, it is not only the blue bloods in this House who are dictating to the people of Scotland. The instruments have to be approved by another place and no doubt "Lord Hamish", who was rejected by the electorate in his constituency, will be in charge of orders over there. It is making a farce of democracy. The sooner that we get a Scottish Parliament or Assembly to deal with these matters, the better it will be.
11.27 pm
Mr. Ancram: By leave of the House, I shall respond to some of the comments made in the debate. Had I not received the normal compliments and invective from the hon. Member for Falkirk, West (Mr. Canavan), I should have been disappointed. I have heard him pay those compliments to all my predecessors in this office.
My hon. Friend the Member for Tayside, North (Mr. Walker) was right to spell out the effects of one authority's high rates on another. Opposition Members would do well to remember those effects.
The hon. Member for Dundee, East (Mr. Wilson) seemed to see a black purpose in the instruments. If he had followed my argument he would have understood that they merely allow a procedure that was endorsed by a Parliament of which he was a Member and can be implemented only with the approval of the Parliament of which he is now a Member. If that is not democracy, I do not know what is. After the general election results, perhaps SNP Members should be a little careful about talking about mandates.
I listened with interest to the speech of my hon. Friend the Member for Edinburgh, West (Lord James Douglas-Hamilton). I hope that he will forgive me if I do not take up the specific case of the Lothian regional council. As I said earlier, this is not the appropriate time to discuss specific actions of local authorities.
The right hon. Member for Glasgow, Rutherglen (Mr. MacKenzie) and the hon. Members for Edinburgh, East (Mr. Strang) and Falkirk, West made the extraordinary accusation that, by seeking a reduction in local authorities' expenditure, we were undermining democracy. That falls ill from the lips of a party which, in 1976, was the first party to reduce rate support grant so as to control expenditure, and which in 1977–78, reduced Ole rate support grant by the largest amount ever. It smacks of hypocrisy for that party to talk about our controlling local authority expenditure as if it were something that had never been done before. Of course, local authority

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expenditure is relevant to the national economy and the economy policy of the Government at national level. No Government can afford to sit back and watch overspending by councils without trying to do something about it.
Finally, it is worth remembering—
It being half-past Eleven o'clock, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 4 (Prayers against statutory instruments, &c. (negative procedure)).
The House divided: Ayes 84, Noes 194.

Division No. 8]

[11.30 pm

AYES

Alton, David

Hughes, Robert (Aberdeen N)

Ashdown, Paddy

Hughes, Sean (Knowsley S)

Barron, Kevin

Kaufman, Rt Hon Gerald

Beckett, Mrs. Margaret

Kirkwood, Archibald

Beith, A. J.

Lambie, David

Bermingham, Gerald

Lewis, Ron (Carlisle)

Bray, Dr Jeremy

Lloyd, Anthony (Stretford)

Brown, Gordon (D'f'mline E)

Lofthouse, Geoffrey

Brown, Hugh D. (Provan)

McKay, Allen (Penistone)

Brown, Ron (E'burgh, Leith)

McKelvey, William

Caborn, Richard

MacKenzie, Rt Hon Gregor

Callaghan, Jim (Heyw'd & M)

McNamara, Kevin

Campbell-Savours, Dale

McTaggart, Robert

Canavan, Dennis

McWilliam, John

Clay, Robert

Madden, Max

Cocks, Rt Hon M. (Bristol S.)

Marshall, David (Shettleston)

Cohen, Harry

Michie, William

Cook, Frank (Stockton North)

Millan, Rt Hon Bruce

Cook, Robin F. (Livingston)

Miller, Dr M. S. (E. Kilbride)

Cowans, Harry

Nellist, David

Craigen, J. M.

O'Brien, William

Crowther, Stan

O'Neill, Martin

Cunliffe, Lawrence

Patchett, Terry

Dalyell, Tam

Pavitt, Laurie

Davies, Ronald (Caerphilly)

Penhaligon, David

Davis, Terry (B'ham, H'ge H'I)

Prescott, John

Dewar, Donald

Redmond, M.

Dixon, Donald

Robertson, George

Dormand, Jack

Silkin, Rt Hon J.

Eastham, Ken

Skinner, Dennis

Evans, John (St. Helens N)

Soley, Clive

Ewing, Harry

Spearing, Nigel

Fields, T. (L'pool Broad Gn)

Stewart, Rt Hon D. (W Isles)

Fisher, Mark

Strang, Gavin

Foulkes, George

Tinn, James

Gould, Bryan

Wallace, James

Hamilton, James (M'well, N)

Warden, Gareth (Gower)

Hamilton, W. W. (Fife Central)

Wareing, Robert

Hardy, Peter

Wilson, Gordon

Harrison, Rt Hon Walter

Young, David (Bolton SE)

Hart, Rt Hon Dame Judith

Haynes, Frank

Tellers for the Ayes:

Heffer, Eric S.

Mr. Norman Hogg and

Holland, Stuart (Vauxhall)

Mr. Hugh McCartney.

NOES

Alexander, Richard

Cranborne, Viscount

Ancram, Michael

Currie, Mrs. Edwina

Aspinwall, Jack

Dorrell, Stephen

Beaumont-Dark, Anthony

Douglas-Hamilton, Lord J.

Bellingham, Henry

Dover, Denshore

Blackburn, John

du Cann, Rt Hon Edward

Boscawen, Hon Robert

Dunn, Robert

Bottomley, Peter

Evennett, David

Bowden, Gerald (Dulwich)

Eyre, Reginald

Brown, M. (Brigg & Cl'thpes)

Fairbairn, Nicholas

Bulmer, Esmond

Fallon, Michael

Butterfill, John

Favell, Anthony

Clark, Michael (Rochford)

Fenner, Mrs. Peggy

Clarke Kenneth (Rushcliffe)

Finsberg, Geoffrey

Conway, Derek

Fletcher, Alexander

Cope, John

Forman, Nigel

124

Forsyth, Michael (Stirling)

Moate, Roger

Fox, Marcus

Monro, Sir Hector

Franks, Cecil

Montgomery, Fergus

Fraser, Peter (Angus East)

Moore, John

Freeman, Roger

Morris, M. (N'hampton, S.)

Gale, Roger

Morrison, Hon C. (Devizes)

Galley, Roy

Moynihan, Hon C.

Gardiner, George (Reigate)

Murphy, Christopher

Glyn, Dr. Alan

Neale, Gerrard

Good lad, Alastair

Needham, Richard

Gower, Sir Raymond

Neubert, Michael

Gregory, Conal

Newton, Tony

Griffiths, Peter (Portsm'th N)

Nicholls, Patrick

Ground, Patrick

Norris, Steven

Gummer, John Selwyn

Oppenheim, Philip

Hamilton, Hon A. (Epsom)

Osborn, Sir John

Hamilton, Neil (Tatton)

Ottaway, Richard

Hampson, Dr Keith

Page, Richard (Herts, SW)

Hanley, Jeremy

Pollock, Alexander

Hannam, John

Powell, William (Corby)

Hargreaves, Kenneth

Prentice, Rt Hon Reg

Harvey, Robert

Proctor, K. Harvey

Hawkins, C. (High Peak)

Raffan, Keith

Hawksley, Warren

Rathbone, Tim

Hayward, Robert

Rees, Rt Hon Peter (Dover)

Heathcoat-Amery, David

Renton, Tim

Henderson, Barry

Rifkind, Malcolm

Hickmet, Richard

Rossi, Hugh

Hogg, Hon Douglas (Gr'th'm)

Rost, Peter

Holland, Sir Philip (Gedling)

Rowe, Andrew

Holt, Richard

Ryder, Richard

Hordern, Peter

Sackville, Hon Thomas

Howard, Michael

Sainsbury, Hon Timothy

Howarth, Gerald (Cannock)

Sayeed, Jonathan

Howell, Ralph (Norfolk N)

Shaw, Giles (Pudsey)

Hubbard-Miles, Peter

Shaw, Sir Michael (Scarb')

Hunt, John (Ravensbourne)

Shelton, William (Streatham)

Hunter, Andrew

Shepherd, Colin (Hereford)

Jessel, Toby

Silvester, Fred

Jones, Gwilym (Cardiff N)

Sims, Roger

Jones, Robert (Herts W)

Soames, Hon Nicholas

Kershaw, Sir Anthony

Speed, Keith

Key, Robert

Speller, Tony

King, Roger (B'ham N'field)

Spencer, D.

Knight, Gregory (Derby N)

Spicer, Michael (Worcs, S)

Knowles, Michael

Stanbrook, Ivor

Lang, Ian

Stern, Michael

Latham, Michael

Stevens, Lewis (Nuneaton)

Lawler, Geoffrey

Stevens, Martin (Fulham)

Lawson, Rt Hon Nigel

Stewart, Andrew (Sherwood)

Lee, John (Pendle)

Stradling Thomas, J.

Leigh, Edward (Gainsbor'gh)

Sumberg, David

Lennox-Boyd, Hon Mark

Terlezki, Stefan

Lester, Jim

Thomas, Rt Hon Peter

Lilley, Peter

Thompson, Donald (Calder V)

Lord, Michael

Thompson, Patrick (N'ich, N)

Luce, Richard

Thorne, Neil (Ilford, S)

Lyell, Nicholas

Thurnham, Peter

McCurley, Mrs Anna

Townend, John (Bridlington)

Macfarlane, Neil

Tracey, Richard

MacGregor, John

Trotter, Neville

MacKay, Andrew (Berkshire)

Twinn, Dr Ian

MacKay, John (Argyll & Bute)

van Straubenzee, Sir W.

Major, John

Viggers, Peter

Mallins, Humphrey

Wakeham, Rt Hon John

Malone, Gerald

Walden, George

Maples, John

Walker, William (T'side N)

Marshall, Michael (Arundel)

Wall, Sir Patrick

Mates, Michael

Waller, Gary

Mather, Carol

Wardle, C. (Boxhill)

Maude, Francis

Watts, John

Mawhinney, Dr Brian

Wells, Bowen (Hertford)

Maxwell-Hyslop, Robin

Wheeler, John

Mayhew, Sir Patrick

Whitney, Raymond

Mellor, David

Wilkinson, John

Merchant, Piers

Winterton, Mrs Ann

Meyer, Sir Anthony

Winterton, Nicholas

Miller, Hal (B'grove)

Wolfson, Mark

Mills, Ian (Meridan)

Wood, Timothy

Mitchell, David (Hants, NW)

Woodcock, Michael

125

Yeo, Tim

Tellers for the Noes:

Young, Sir George (Acton)

Mr. David Hunt and

Mr. Tristan Garel-Jones.

Question accordingly negatived.

Scotland (Rating and Valuation)

  RATING AND VALUATION
  Resolved,
  That the Local Government (Scotland) Act 1973 (Section 111) Amendment Order 1983, a copy of which was laid before this House on 23rd June, be approved.—[Mr. Ancram.]

Petition

  Cruise Missiles
  11 42 pm
  Mr. Robin Cook: I am pleased to submit to the House this petition signed by several thousand residents of Edinburgh and the vicinity opposing the deployment of cruise missiles.
  I am particularly pleased that it is possible for me to present the petition on 4 July since it is appropriate that on the day the people of America celebrate their independence from Britain we should reflect that there are many people in Britain who now feel that Britain is developing too intimate a relationship with the nuclear posture of the United States.
  The petition is the result of the work of more than 30 peace groups in Edinburgh and the immediate vicinity who approached up to 40,000 residents of Edinburgh, representing more than 10 per cent. of the electorate of that city and its immediate environs. The petition has been signed by a clear majority of all those approached, who signed without reservation and thus demonstrated yet again that a clear majority of the population are opposed to the deployment of Cruise missiles in Britain. In particular, I draw the attention of the House to the fact that the petition is signed by many residents living in streets which in Edinburgh are regarded as bastions of the Conservative party, and that it is the experience of those collecting the signatures that many of those approached said that they were Conservative voters but that in voting for a Conservative candidate they did not intend to give the Government any mandate for the deployment of Cruise missiles in this country.
  The petition showeth:
  "That Her Majesty's Government has agreed to a NATO Council decision to base 160 nuclear Cruise missiles in Britain;
  That any increase in nuclear armaments in Europe would be directly contrary both to the safety and interests of the people of Britain, and also to the spirit of current disarmament negotiations;
  and That recent polls of public opinion indicate that a majority of citizens are now opposed to the siting of Cruise missiles in Great Britain.
  Wherefore your Petitioners pray that your Honourable House will request Her Majesty's Government to announce that the NATO Council decision of 12 December 1979 to station Cruise missiles in Western Europe is no longer acceptable to Great Britain;
  And your petitioners, as in duty bound, will ever pray."
  To lie upon the Table.

Liverpool (Unemployment)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lang.]
11.44 pm
Mr. David Alton: I begin first by thanking you, Mr. Deputy Speaker, for giving me the opportunity to raise the important issue of unemployment and its effects on the people of Liverpool.
It is two years ago to this very day that violence erupted on the streets of Liverpool, following the disturbances in Brixton. While I do not believe that unemployment was the sole factor in provoking those riots I do believe that it was a contributory one. Two years later I regret to tell the House that unemployment in Liverpool is worse than ever. The picture is bleak and depressing. In the Liverpool travel-to-work area the latest jobless figures tell their own story. About 88,000 people are registered as unemployed and only 2,025 jobs are advertised as available.
The situation nationally is bad enough with one person having become unemployed every minute of every day since the Government were first elected in 1979. Imagine life in a city where one in five people are on the dole, where half the people in some districts are without a job and where young people face a lifetime without employment. Imagine life in an area where the major employer—such as United Biscuits—suddenly decides to pull the rug from under the feet of its 2,000 employees. What prospects do those people have of finding another job? At their local Old Swan employment office 15,610 people are shown to be without work and a miserable 130 jobs available. At the Toxteth office 9,405 people are jobless with only 110 vacancies. At Garston 9,148 people are without work with only 103 vacancies. At Everton 3,795 people are unemployed and only 32 jobs are available.
Since the general election on 9 June the situation has become worse. A further 3,000 redundancies have been announced in the last three weeks. The city planning officer says that a further 30,000 could go the same way by 1986.
Liverpool has been losing jobs hand over fist, at the rate of as many as 10,000 a year recently. A host of firms have shed jobs or left Liverpool and its hinterland. The litany of names includes Kraft, Bowyers, Lyon's Maid, Plessey, the Harrison Line, Barker and Dobson, Tate and Lyle, Courtaulds, Kellogs, Peyton Calvert and, more recently, Binns, United Biscuits, Schweppes and the Liverpool Central Oil Company.
The latest round of announcements has left Liverpool with a deepening sense of dismay and unparalleled despondency. For generations now, there has been a feeling of insecurity in the city. All live with a question mark over their head. Will they be next? Since 1971 unemployment has risen by a staggering 200 per cent. and the lives of citizens have been destroyed and their family lives decimated. One by one whole families succumb to the creeping plague of unemployment.
Abraham Lincoln said that a nation cannot survive half slave and half free. In the north of England, in Liverpool, life is different from parts of the leafy suburbs of the southeast where unemployment is only 4 per cent. or 5 per cent. Liverpool people are becoming the slaves of the employment exchange. This is a different world —
128
another nation—and its case is rarely listened to in the House. If it goes on much longer, the area will become the Siberia of western Europe.
I do not blame this, or any other Government, for every person who is out of work. But I blame them for abandoning the unemployed, for simply blaming the victims and for failing to show sufficient compassion for their plight. The Government appear to be bystanders rather than effective participants in trying to turn the tide of unemployment.
Jobs and a more just society, like the kingdom of God, do not come by observation alone. The Government do not have a choice between fighting inflation and fighting unemployemnt. They must do both. If they do not, the scourge of unemployment will threaten order in our free society.
The Prime Minister rightly said in 1980 that poverty, wherever it exists, is the enemy of stability. Unemployment breeds poverty and that in turn breeds instability.
After the disturbances two years ago, Lord Scarman reported that unemployment was
"a significant factor in the causation of the disorders".
Last week the Select Committee on the Environment confirmed that view.
The Prime Minister claimed that she had not been warned about the seriousness of the situation in our inner cities. I remind the House that on 7 April 1981, three months before the riots, in a debate on youth unemployment I told the House that forces are at. work in the city of Liverpool which were praying on the disadvantages of our young people. I also wrote privately to the Prime Minister and raised the matter again in a letter to The Times published on 18 April. I raised the matter yet again in a debate on unemployment on 25 June when I said that a timebomb was ticking away in the heart of our city. How much warning do the Government need before they act? In answer to my appeal at the time that she meet civic and church leaders, the Prime Minister refused to see that delegation.
It is that refusal to listen which I find most disturbing of all. The greatest tragedy, however, is that two years later the Government appear to have learnt nothing. Only today I received word from Downing street that the Prime Minister will not meet a delegation of workers from the United Biscuits Company factory.
Mr. Terry Fields: I am sure that my hon. Friend will allow me to intervene on behalf—
Hon. Members: Order.
Mr. Fields: I wish to make a contribution on behalf of Labour supporters on Merseyside who—
Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. The hon. Member for Liverpool, Mossley Hill (Mr. Alton) is not giving way, and therefore the hon. Member for Liverpool, broadgreen (Mr. Fields) cannot make an intervention.
Mr. Alton: Many of the people at that factory have given 40 years of their lives in loyal service to the company. There has not been a strike there since the turn of the century, and last year productivity rose by about 20 per cent. In showing so little interest in the plight of these decent, hard-working men and women, the Prime Minister

129
is playing right into the hands of political extremists in Liverpool. She has unwittingly become Militant's best recruiting agent.
She does not seem to realise what being unemployed really means. It is about being deprived of what so many in society take for granted, the ordinary things in life so intimately associated with what is termed "the normal standard of living" as powerfully presented through the media. It is about not being able to take the children to the seaside; about longing for a good mead with a joint, two veg and a sweet; about the absence of a full pantry; about the lack of savings in the bank for a rainy day; about going to someone else's home and seeing what they have, then going home and seeing what one does not have.
Being unemployed is about girls like Janet Williams, who is 22 and slightly handicapped. Janet's mum and dad came to see me at my weekly advice centre last Saturday. Janet has been working in a voluntary capacity at a home for the handicapped, having been passed from pillar to post, from one scheme to another. Each time she leaves a scheme, her parents told me, she leaves with good references and a broken heart. In six years she has had one interview for a proper job. Perhaps she should go to the Falkland Islands and help build an airstrip, her parents suggested.
Being unemployed in Liverpool is a deeply debilitating and degrading process. Geoffrey Coyne of Allerton wrote to me saying:
"Since the leaving of my last job at Dunlop, Speke, at approximately the beginning of 1979, I have been unable, despite a tremendous amount of effort, to secure a position anywhere. As a 27-year-old individual who has not worked for over four years, I would like to know at what point I'm supposed to crack."
Unemployment drives people into extreme political positions. It is a breeding ground for militants, but it is also a breeding ground for criminals. During the weekend I spoke to Merseyside's senior probation officer, Mr. David Mathieson, who told me:
"Almost 100 per cent. of offenders under our supervision are unemployed. If a few do have jobs, that is a bonus. this means that we can no longer use work as a means of rehabilitating offenders. As well as providing alternatives to imprisonment, we are now having to provide alternatives to employment. Our task in relation to crime prevention is in danger of becoming much less effective, and that would be very harmful to society on Merseyside."
Yet the Prime Minister continues to assert that there is no clear link between unemployment and rising crime rates. Clearly, she has not listened to the former Home Secretary, Merseyside's chief constable and Lord Scarman, all of whom disagree with her. The facts show that for every 1,000 increase in youth unemployment, 23 additional young males are sent to borstal or prison. On Merseyside alone last year about 42,000 homes were broken into. The Devil has not just been making mischief for idle hands. He has been having a field day.
Seen as a challenge rather than a curse, unemployment can become an instrument for social change. That requires imagination and determination by central and local government, private enterprise and the people of Liverpool themselves. Beginning with the people, Liverpool has for too long been dogged by a militant, strike-happy image. The current dispute at Cammell Lairds reinforces that impression. A minority of trade unionists are more interested in making a political point than in ensuring long-term security for their members.
There must be a determined effort to replace confrontation on the factory floor by a sustained effort to
130
produce co-operation and harmony. The rest of the world does not owe us a living and the remedy to Liverpool's appalling industrial image lies in our own hands.
Secondly, private enterprise must be more responsible, too. Sir Hector Laing, the chairman of United Biscuits, said in 1980 that
"wealth would only be created if management inspired trust in the work force."
Presumably that does not include letting a loyal work force first read about the closure of its factory in the national press. When Sir Hector was given the Hambro business man of the year award in 1979 he was cited for his
"tireless commitment to communication; and for breaking down barriers between management and shop-floor workers."
In the light of the events at his Liverpool factory, he should re-read that citation and demonstrate to his work force that it was not merely a string of words. It is not too late for him to do that.
Thirdly, the city council must realise that without an increase in the rate support grant there is no future in pumping ratepayers' money into increased public sector expansion if that is at the expense of jobs in the private sector. In May, Mr. T. F. J. Galley, the chairman of the Liverpool chamber of commerce, said at the chamber's annual meeting that
"an increase of £7,000 in the rate bill can mean the loss of one job in industry and commerce, and it is small consolation if that £7,000 ultimately goes towards financing a job in local or national government or, even worse, an increase in the wages of local government employees. That kind of trade is just not acceptable."
If the Liverpool Labour party's election manifesto is implemented, the city treasurer estimates that it could add 50 per cent. to the rate bill. That would be downright irresponsible. United Biscuit's current rate bill is £371,000. A 50 per cent. increase next year would increase its bill to over £500,000. The rates on large city stores are equally crippling. Binns paid rates this year amounting to £374,000. Cuts in rate support grant of £109 million over the past four years have not helped, but if rates are driven up the effect is to drive out business.
The people of Liverpool are fed up to the back teeth with a city council that practises financial irresponsibility, and by appalling behaviour such as that seen last week, which gives the impression of mob rule. If we are to attract new enterprise and retain employment in Liverpool, that sort of behaviour must stop. It was simply to downgrade the city by sacking the lord mayor against the overwhelming wishes of the people. That has nothing to do with—
Mr. Eric Heifer: On a point of order, Mr. Deputy Speaker. I have listened carefully to the hon. Gentleman's speech. I thought that it was directed to the problems of Liverpool's unemployment, but it seems that it is being turned into an attack on the Liverpool city council, which has only recently been elected. We had a Liberal city council for eight years and that council was responsible, basically, for what the hon. Gentleman has described. I am asking — it is not usual for me to intervene in Adjournment debates and I would not do so normally—for a ruling that the hon. Gentleman keeps to the subject and does not continue to abuse the opportunity that has been afforded to him.
Mr. Deputy Speaker: This is an Adjournment debate and, therefore, is fairly wide-ranging.
Mr. Alton: I was saying that the city's image, as demonstrated by the Liverpool city council, is being damaged, mob rule at the town hall and demonstrations do nothing for the city's image. Sacking the lord mayor of Liverpool does nothing for the city either. It simply smacks of the iron-fist approach of Eastern European states and does not help to repair the city's battered image.
I urge the local authority not to abandon the joint venture scheme, which has been a great success. Instead of turning away private investment we should be encouraging it. I understand that 46 per cent. of Liverpool people now live in their own home compared with 31 per cent. about 10 years ago. However, Liverpool is turning away private firms that would invest their own money and provide jobs for those in the construction industry. That is giving way to blind dogma rather than employing common sense.
The council has been successful in promoting new factory and office development through partnership schemes. About 1·1 million sq ft of new factory and office space has been built during the past four years. The chief executive of Liverpool, Mr. Alfred Stocks, whom I met last Friday, tells me that two thirds of it has been let and that the other third is being let. We need more of that sort of development. I hope that the city's new economic development committee, whose establishment I welcome, will press on with these sort of projects.
We in Liverpool are looking for some signals of hope. This is not the moment to take away our Cabinet-ranking Minister on Merseyside, a post which I advocated should be created in my maiden speech in 1979. Instead the job should be revamped with the emphasis being placed on employment rather than the environement. The Secretary of State for Employment has a great deal to say about Merseyside workers. He and his Department should take on the task of spearheading the drive to create more work opportunities.
We are not asking for more short-term schemes. The only growth industry on Merseyside has been in acronyms —WEPS, TOPS, YOPS, MSC and so on. We need to look at what made Liverpool prosperous in the first place. That was the river. I suggest that we look at imaginative schemes—for instance by impounding the Mersey by the construction of a barrage, thousands of construction jobs could be created. At the same time new deep sea water port facilities could be provided. By placing turbines in the barrage, electricity could be generated and a third estuarial crossing could be provided. Perhaps linked to a free port, that would help to revitalise our marine industry. Both the local authorities and the university believe that such a project would be feasible. All that I do is ask for an assurance from the Minister that that scheme might be considered.
There should also be direct job subsidies to employers instead of more bureaucratic short-term work experience projects. In the longer term, we must share the work that is available. As Bacon observed some 400 years ago, wealth, like manure, is most effective when spread as widely as possible. Surely the same principle applies to spreading work around.
At present we have a crude system of work sharing. It is called unemployment. Some 88 per cent. of the people have some sort of job and 12 per cent. have none whatsoever. In Liverpool, the figures are worse. Surely we can organise things so that everyone has a chance of doing some sort of job. The Government should also calculate
132
the costs of not tackling unemployment and balance them against the £17·5 billion that it now costs to keep people out of work. That is not the sensible way to use our precious resources.
Those are all matters that I hope that the Minister will turn his attention to, to give hope to the people of Liverpool. Over several generations the people of Liverpool have made a magnificent contribution to the life and well-being of the nation. That battle of the Atlantic was fought and won from the port of Liverpool. The people of Liverpool still have a great contribution to make to the future of the country. What they need is practical help and encouragement. There needs to be a national war on unemployment and our objective must be total victory.
12.2 am
The Under-Secretary of State for Employment (Mr. John Selwyn Gummer): The hon. Member for Liverpool, Mossley Hill (Mr. Alton) has rightly drawn attention to an issue that he cares about deeply and that all Members on both sides of the House are concerned to face and solve. He will agree that in the junior capacity that I hold in the Department of Employment, almost the first visit that I made was to the port of Liverpool. That is a centre where unemployment is a particular difficulty. The port has suffered perhaps more than many others.
I commend some of the hon. Gentleman's remarks, which I hope will be listened to in all parts of the House. It is not helpful merely to catalogue the depressing scene that has been Liverpool for some time, nor is it helpful to place the blame on one side or the other. We need to seek the best ways to solve the problem, which we jointly feel to be there.
Therefore, I take this opportunity of joining the hon. Gentleman and suggesting that some of his remarks, which were objective, were close to the point. There are grave enough difficulties in Liverpool without making it a laughing stock of the rest of the country by trying to impose upon it policies that will make the situation much worse—
Mr. Dave Nellist: It has an elected council.
Mr. Gummer: Elected council or not, to use the position of the council to make it more difficult to bring jobs to the area is something that even those of extremist Militant Tendency ought to think about seriously. They are putting their party political, narrow, extremist views in front of people's jobs, lives, homes and families. That is an attitude that all people in the House should be concerned to set their face against. We would be opposed to that if they were black Fascists. We would be opposed to that if they were red Fascists.
Mr. Nellist: The Minister should withdraw that.
Mr. Gummer: It is time that we spoke about extremism—
Mr. Nellist: On a point of order, Mr. Deputy Speaker. Is it in order for a political term such as "Fascism" to be applied to democratically-elected Members of the House? Will you give a ruling?
Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. As I understand it, it was not a direct allegation against any individual hon. Member. [Interruption.] The hon. Gentleman must listen. It was not a direct allegation against an hon. Member.
Mr. Gummer: As the hon. Gentleman was opposite me at the time it would have been difficult not to say it directly to him. As my mother would say, if the cap fits let him wear it.
Mr. Nellist: The Minister has admitted that he was saying it in this direction.
Mr. Gummer: Given the very serious situation in Liverpool and the fact that all political parties in local or national government have to admit that they have failed to solve the problems, we must ask everyone not to make the problems worse. I hope that those who seek to make it more difficult for private industry' to come to Liverpool will think again and consider whether they should put the needs of the people of Liverpool before their own policies, however much they feel that they may have been supported.
Mr. Robert N. Wareing: Will the Minister give way?
Mr. Gummer: I shall not give way as I have very little time and I must answer the points raised by the hon. Member for Mossley Hill. As the hon. Member for Liverpool, West Derby (Mr. Wareing) will discover, it is usual not to interrupt in an Adjournment debate except with the permission of the hon. Member who introduced the debate.
Mr. Heffer: It is quite something for the Minister to suggest that a Labour council elected only in May is responsible for the situation in Liverpool. There has been a Conservative Government for the past four years and there was Liberal-Conservative alliance in Liverpool for eight years. The Tory Government are basically responsible for what has happened in Liverpool, and the previous local council helped them.
Mr. Gummer: I am sure that the hon. Member for Liverpool, Walton (Mr. Heffer) with his customary fairness, will think back to what I actually said. I did not lay all the blame on the Labour party ar d refuse any blame for my own party or for that of the proposer of the Adjournment debate. I said that we should approach the situation in Liverpool with a degress of corporate humility as none of us in our various capacities has managed to solve the problem. I began my making a plea that we should not make things worse. In a situation as serious as that in Liverpool, those who seek to drive away jobs that would otherwise come are making the situation worse and have very little to contribute to the debate.
On the allegations about United Biscuits, I hope that the hon. Member for Mossley Hill will look closely at the facts in two regards. First, we must consider the future not just of the works in Liverpool but of the company's other works. It is perfectly reasonable for the hon. Gentleman to disagree with the management of United Biscuits, and it would not be suitable for me to give a view as to whether the management is right or wrong, but it has made a commercial judgment as to whether it is possible to continue employment on Merseyside as well as in east Glasgow. The difficulty is that both are areas of high unemployment. United Biscuits has a record of taking considerable care about the conditions of those who work for it and the problems of unemployment. I think that the hon. Gentleman will agree that in general that is true.
The difficulty facing the company is that there is a decline in demand for biscuits and considerable
134
competition from Nabisco and other companies which have spent and are spending very large sums on re-equipment. United Biscuits has to compete. It must therefore decide whether to hang on to a very uneconomic building and site in Merseyside and put at risk the jobs not just of the people employed on Merseyside but of their employees in other centres, especially in Glasgow where unemployment is also very high, or to undertake an orderly rundown to protect jobs elsewhere. It is perfectly reasonable for people to try to make a judgment, but I ask the hon. Member for Mossley Hill to accept that the management has given the undertaking that it has made the decision in order to protect as many jobs as possible Short of forcing people to eat more biscuits or to pay higher prices for biscuits to avoid mechanisation, I see no other way to deal with a smaller market and greater competition without imperilling many more jobs than those already in danger on Merseyside.
The hon. Gentleman should consider carefully the way in which the announcement was made. I understand that the arrangement was made not to make the announcement publicly, in order that the details and the discussions could be carried through the proper channels. It was not the management that released the information to the press; that information was released elsewhere. The management, concerned with good communications, is extremely embarrassed by that. It sought to do it in the right way. It may have failed, but that is what it sought to do.
I hope that the hon. Gentleman will accept from me that I have sought very carefully to find out from the management what happened. I have its assurance—he may wish to believe it or not—that it sought to act in the way that is traditional and clearly part of its normal policy. I should like the hon. Gentleman to look carefully —it is not for me to comment·at how that aim of the management was destroyed. He may find that there are others who were to blame. In that case, I know that he will have the decency to blame them and not the management.
The hon. Gentleman rightly raised the question of rates. I take this position very strongly.
Mr. Wareing rose—
Mr. Gummer: I shall not give way because it is my job to try to answer the debate as raised by the hon. Member for Mossley Hill. The hon. Member for West Derby will have many years in which to raise Adjournment debates in this House and I shall be happy to reply to them. I shall be here for a very long time, and probably at this Dispatch Box, long after he has lost his seat in Liverpool, having shown that extremist positions are of no use.
The hon. Member for Mossley Hill rightly pointed to the fact that if we want new industry to come into Liverpool—there are some hopeful signs that a number of companies are coming—and if we want particularly the very important schemes of the port of Liverpool, in which I have been interested because of my responsibility for the dock labour scheme, the thought of a threatened addition of 50 per cent. to the rate bill will drive away the very jobs that we ought to be seeking to get.
I ask the hon. Gentleman to look again at his comments about the growth of schemes. I think we should accept that a number of the schemes in Liverpool are ones that he would want us to continue. The comments about acronyms and so on make good copy, but I am not sure that they are fair. I know that the schemes are not enough, but it is very

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important to have them, and the Government are right to have them. The hon. Gentleman would attack us very strongly if we did not have them. But in the end the question is how to bring real employment back to Liverpool. [HON. MEMBERS: "Resign."] The entire Liverpool city council ought to resign first. The extremists should be thrown out. Their noise today shows once again that they are not willing to listen to— [Interruption.] Anger does not stand in place of real answers. We have not heard a single real answer from the extremist hon. Members from Liverpool. I dare say that we shall have to put up with them for a long time. I doubt whether we shall have a single answer from them, but we shall put up with them on the Opposition Back Benches for a long time because that is where they will remain for a long time.
If we are to deal with the problems of Liverpool, we can do so only if Liverpool is an attractive place to which
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to bring jobs. That means creating an environment in which private enterprise, which creates real jobs, can flourish. It means having a rate burden which can be carried by private enterprise. It means spending the amount of money that can be raised reasonably, and not asking for a rate support grant so that even more money can be spent. There are many parts of the country, such as the one that I represent, which have to pay the rate support grant on wages that are considerably lower than the average. They have to pay towards that rate support grant and they can therefore reasonably ask that the Liverpool Members—
The Question having been proposed after Ten o'clock on Monday evening and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at fourteen minutes past Twelve 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 Portsmouth.
Several Lords—Took the Oath or Affirmed.

Television and School Children: Report
Lord Nugent of Guildford: My Lords, I beg leave to ask the question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action they propose to take in the light of the report on Popular Television and School Children.
The Earl of Swinton: My Lords, my right honourable friend the Secretary of State for Education and Science has already discussed the report's conclusions with the BBC and the IBA. We hope that there will now be continuing debate among broadcasters, parents and teachers about the issues raised in the report.
Lord Nugent of Guildford: My Lords, I thank my noble friend for that sympathetic answer and the good news that the Secretary of State has taken the initial step. Can my noble friend tell us, is the Secretary of State contemplating setting up machinery so that there can be continuing consultation between those responsible for broadcast programmes and teachers to ensure that the influence of television programmes on children should not be damaging? Is my noble friend aware that the burden of this report shows that the average viewing hours of children between 5 and 14 is no less than 23 hours a week, more hours than they actually spend in the classroom? Is he aware that this does show how enormously influential television is and the necessity for stronger safeguards? Can my noble friend give us some encouragement that we may expect some permanent machinery to be set up to get an improvement in this field?
The Earl of Swinton: My Lords, I am very grateful to my noble friend for drawing attention to this report. It certainly makes very interesting reading, and I hope a number of noble Lords will take the opportunity of reading it. The object of setting up this report was to try to get discussion going. I certainly hope that when perhaps some of the hullabaloo has died down there may indeed be discussion between broadcasters, teachers and others. I do not think my right honourable friend has any intention of, as it were, setting up formal machinery for this.
Lord Beswick: My Lords, the Secretary of State is to be congratulated on the initiative he has taken. In view of the facts set out in this report, does the noble Earl not agree that an element of urgency ought to be injected into these proposed discussions, and that we really cannot leave matters quite like this?
The Earl of Swinton: My Lords, I can only repeat that the whole object of the report was to provoke discussion, and that is seems to be doing extremely well. This report was produced by 15 teachers. I should like to take this opportunity of saying how grateful the Government are to the teachers, who gave up a lot of their time to produce the report. Its conclusions represent their considered views; it is not Government policy, although we do have a lot of sympathy with it. I hope it will take off in the natural course of events rather than rushing in and setting up some sort of official machinery.
The Earl of Lauderdale: My Lords, is my noble friend aware that his reaction that this makes interesting reading and that he hopes it will lead to debate will disappoint many who have read this report and been instructed by it? Can my noble friend really think that the words "interesting reading leading to debate" is an adequate response to the treatment of nuclear disaster as a proper topic for comedy, and the position of the disabled likewise?
The Earl of Swinton: My Lords, I am not going to get involved in any of the detailed criticism of any of the individual programmes. I think the report does make interesting reading; I do not think my noble friend could disagree with that. It may make worrying reading and upsetting reading. It was primarily a report by teachers for teachers, and I think that that is a great advantage it will have in informing the teaching profession what children think about and how much they are influenced by television programmes. I hope schools will take note of this and that there will be more discussion at schools between teachers and their pupils about what they have seen on television.
Baroness David: My Lords, may I ask the noble Earl the Minister if, when this report is being discussed, another report which has just appeared recently, by, I think the Dean of Oxford Polytechnic, could also be studied? I understand that in that report the evidence is that at least we can be thankful that there is no evidence of children copying any violent action. It seems to me that the most worrying thing in this report is:
"The mindless inattentiveness and passivity which can spill over into other areas of children's lives, making them less willing to think for themselves".
This seems to me to be one of the most worrying things and I would ask whether this report, and particularly that aspect of it, could be considered when the Secretary of State is setting up the inquiry.
The Earl of Swinton: My Lords, I am very grateful to the noble Baroness for drawing that other report to our attention. I shall certainly draw the attention of my right honourable friend to it.
Lord Somers: My Lords, having been a member of the teaching profession, may I ask whether the noble Earl would not agree with me that there are teachers and teachers?
The Earl of Swinton: Yes, my Lords, there are teachers and teachers. These particular 15 teachers who produced this report were chosen because of their

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very high reputation, and also because they came from a variety of schools, not only geographically but from large secondary schools, small primary schools, and across the board. I think these teachers were, if I may say so, very much teachers and not teachers.
Baroness Platt of Writtle: My Lords, will the Secretary of State be arranging an opportunity for a parental input into this matter? It is important that teachers should be discussing the matter: but most important of all is, as my noble friend Lord Nugent of Guildford suggested, that children are watching television for nearly as long as they are in school. That is in the hands of parents. Will the Secretary of State discuss this matter with parents?
The Earl of Swinton: My Lords, I am grateful to my noble friend for making that point. What the report says is that children spend more time watching television than they spend in the classroom. There is quite a lot of weight put into the report on the responsibilities of parents. Speaking not as a member of the Government but as a parent, I know how difficult it is to stop children watching television. One can tell them not to, but one finds the beastly set is switched on. As I said in my reply to the first supplementary question, I do not think that my right honourable friend is setting up any official machinery to study this, but I will certainly draw his attention to my noble friend's remarks about parents.
Lord Hunt: My Lords, the noble Lord used the words "when the hullabaloo has died down". Will he assure the House that this does not indicate that he considers that an unnecessary fuss has been made by the press, but arises from a deepseated and widespread concern on the part of the public?
The Earl of Swinton: Yes, my Lords. I apologise to noble Lords if I gave that impression. I was thinking of some of the rather unfortunate headlines that appeared in the more popular press. On the other hand, there were some very good and considered judgments in some of the other papers. I have tried to stress that there is absolutely no intention on the Government's part to hush this up. We welcome any publicity. Any publicity is good publicity on this matter. Discussion is a very good thing and that is why the whole report was produced.
Lord Glenkinglas: My Lords, will my noble friend cast his mind back a few years to when he was at school and agree with me that 23 hours a week spent in the classroom is remarkably little? We have benefited enormously by the fact that my noble friend spent a great deal longer than that in the classroom.
The Earl of Swinton: My Lords, I am grateful to my noble friend for that remark. I do not know quite how to take it. I cannot remember how long I spent in the classroom, but I think that when I was at school there was little television anyway.
Lord Mishcon: My Lords, has the Minister detected a note of anxiety in the House on all sides about the effect of television on children? Will he take the
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remark that he made about reporting back to his right honourable friend the Secretary of State a little further and say that it was the general expression of view in this House that this matter should not be limited to a mere debate and discussion but that a continuing council or advisory body should be set up to study the matter from week to week?
The Earl of Swinton: My Lords, I will most certainly do that. If I have given any impression that I was not one of your Lordships who were disturbed and worried by the report, I was putting my case very badly. I was as disturbed in reading the report as any noble Lord sitting in this Chamber. I am grateful to the noble Lord, Lord Mishcon, and will do that.
Lord Jenkins of Putney: My Lords, is the Minister aware that it is not the case that the idea of setting up a new body to supervise television is unanimously supported in this House?
The Earl of Swinton: Well, my Lords, that is a matter of opinion.

Whisky: Excise Duty
Lord Boothby Lord Boothby had given notice of his intention to ask the following Question:
To ask Her Majesty's Government whether they will consider reducing the excise duty on Scotch whisky.
Lord Shinwell: My Lords, in the absence of my noble friend Lord Boothby, may I be permitted to ask his Question?
Noble Lords: No.
Lord Shinwell: My Lords, I have not asked my noble friend because I have not had the opportunity, but I am sure that his absence is quite fortuitous.
The Lord President of the Council (Viscount Whitelaw): My Lords, I understand that the noble Lord is not allowed permission.
Lord Shinwell: That is a shame, my Lords.

International Exchanges of Prisoners: Thailand
2.48 p.m.
Lord Avebury: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will approach the Government of Thailand with a view to discussing a bilateral treaty for the exchange of prisoners.
The Parliamentary Under-Secretary of State, Home Office (Lord Elton): My Lords, we are currently considering whether the United Kingdom should participate in international agreements enabling

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prisoners to be transferred to serve their sentences in their home countries. Enabling legislation would be required to make this possible. It would not be appropriate to approach Thailand before we have announced our policy on the matter of prisoner repatriation generally. We hope to announce our conclusions within the next few weeks.
Lord Avebury: My Lords, if we decided to sign the Council of Europe Convention, to which the Minister refers, it would be some time after that before the Thai authorities could make up their minds whether they wished to adhere to the treaty, as they could do if they so wish. In the meantime, is the noble Lord aware that the Prime Minister has expressed concern on behalf of the Government about British citizens serving long sentences of imprisonment in Thailand? For example, a person is serving 35 years for simple possession of more than 10 grams of a scheduled drug. Does not the Minister think that if the Thai authorities are prepared to enter discussions about bilateral exchanges—as they have informally indicated they would be—it would be worthwhile setting in motion such arrangements in parallel with the multilateral ones?
Lord Elton: My Lords, we are, of course, concerned for the welfare of British citizens serving sentences in foreign countries where prison conditions are very different from those in this country by reason of the climate, culture, diet or custom. Our consular officers do all they can to help. But my point is that we shall shortly be coming to a conclusion on this matter and it would be precipitate to embark on these bilateral discussions ahead of the more general issue which will then be decided.
Lord Hale: My Lords, can the noble Lord, who I should like to thank for that encouraging answer, give any idea of how many British and associated prisoners are likely to be involved in this? If he does not have the figures, will he bring them the next time a Question is asked on this, which I apprehend will not be long?
Lord Elton: My Lords, I understand that there are at present nine British citizens serving sentences in Thai prisons, nine on remand and one on bail.
Lord Beaumont of Whitley: My Lords, even if the Government do not sign this convention, will they undertake to take steps to improve the welfare of British prisoners abroad? Is the Minister aware that the attitude of the Foreign Office in these matters is not always as helpful as it might be, when, as in Thailand, which has been drawn to our attention recently, overcrowding, diet and everything else is frequently of a very low standard? Will the Government really take this matter on board, even if they do not go ahead with the convention?
Lord Elton: My Lords, we certainly have this issue on board. The result of our cogitations about the convention will be available in the next few weeks. In the meantime, I am sorry to hear that the noble Lord thinks that there is anything lacking in the operation of the Foreign and Commonwealth Office. Of that I was not aware.
Viscount St. Davids: My Lords, is the noble Lord aware that the result is almost certain to be a very large increase in our prison population? It appears likely that if such an agreement is reached it will involve this country, the other country and the prisoner all agreeing to the transfer. No doubt very large numbers of our people would agree to being transferred here, but how many prisoners in this country belonging to other countries would wish to be transferred home?
Lord Elton: My Lords, the Question relates specifically to Thailand. The number resulting from that country would at the most, I understand, be 19, which in the present context of our prisons is not a large increase.
Lord Avebury: My Lords, irrespective of what we decide on multilateral exchanges, is the noble Lord saying that we will not enter into bilateral arrangements with any other country whatsoever? If there is an unwillingness on the part of the Thai authorities to accede to the Council of Europe Convention, but inquiries establish that they would be prepared to enter into bilateral arrangements, as they have done already with some nations belonging to the Council of Europe which may also sign the convention, does the noble Lord not think that this would be worth doing in parallel?
Lord Elton: My Lords, I had no intention of prejudicing anything that might be done bilaterally. I was merely saying that it should not in all reason be done ahead of anything that is done multilaterally.

Overseas Development Administration: Scientific Units
2.52 p.m.
Lord Oram: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will make a statement about their policy concerning scientific units of the Overseas Development Administration.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, the Foreign Affairs Committee in another place has recently reported on an inquiry into the Overseas Development Administration's scientific units. The report is being studied and the Government will reply in due course.
Lord Oram: My Lords, while thanking the noble Baroness for that reply I would ask her whether it is not the case that the report to which she refers makes it clear that these institutes are under a threat of a cut in their resources. Will she bear in mind that over many years these institutes have been a very valuable British instrument in the fight against world hunger? Will she, in the new position which she occupies, even at this late hour try to ensure that that does not happen? Will she try to do something before the debate in this House on Wednesday of next week (which is to be introduced by the noble Lord, Lord Seebohm) about world

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hunger, so that she is not on that occasion placed in the position of making the Government's usual sympathetic noises about world hunger against a background of unsympathetic action?
Baroness Young: My Lords, I should like to confirm to the noble Lord, Lord Oram, that of course the Government greatly value these institutes and the work that they do. I realise that it is disappointing to him, but I regret that I am unable to give him the kind of response which he would like today, because my right honourable friends the Secretary of State and the Minister for Overseas Development are still considering their reponse. But, as I have already indicated to him, we shall get a response to the report as soon as is practicable, and, of course, the sort of remarks which he has made will be taken into account.
Lord Cledwyn of Penrhos: My Lords, will the noble Baroness be good enough to emphasise to her right honourable friend during his consideration of this matter that the all party Foreign Affairs Committee in another place was scathing in its criticism of the report of the noble Lord, Lord Rayner, in this matter? Is she further aware that there is not a tittle of evidence that these units have been inefficient but that, on the contrary, they have made an enormous contribution to poorer countries, out of all proportion to the relatively small sum of money which Her Majesty's Government contribute towards their work?
Baroness Young: My Lords, I have of course read the report from another place. As I have already indicated, my right honourable friend will be making a considered response to it. On the question of costs and efficiency, again I could not comment on the details of this but, as someone who has had some responsibility for the scrutinies that have been conducted throughout the whole of government, I should like to confirm that, as part of the Government's policy for reducing the size of the Civil Service, every single department had to take some cuts, of which the scientific units were one. The scrutinies were designed to look carefully to see how these might most sensibly and properly be achieved.
Lord Cledwyn of Penrhos: My Lords, would the noble Baroness take care to ensure that ideology does not replace common sense in the Government's consideration?
Baroness Young: My Lords, I can assure the noble Lord that common sense is never apart from the Government's consideration of any matter at all, but on a lot of things it is very important to identify what the true costs are: not what people think the costs are but what they really are.
Lord Beaumont of Whitley: My Lords, will the Government bear in mind that this is possibly not a case for an ideological stand and that a great many Governments prefer to deal with the departments of our Government, knowing that they are extremely efficient and have no particular axe to grind? Will the Government bear that in mind when coming to their decision?
Baroness Young: My Lords, I recognise that these departments have made a very great contribution in this country and the world and that those who have worked for them have made their contribution, too. I should like to place on record my support for those who work for them and for the Civil Service in general. But that does not in any way invalidate what I have said in other comments. I hope that the noble Lord will wait until he hears the considered response on this matter.
Lord Hatch of Lusby: My Lords, is the noble Baroness aware that these units have played, and are playing, a crucial role in the attack on such diseases as bilhartzia, tsetse fly and malaria, which attack both people and animals? Is she further aware that the present budget for the units is only £6.7 million this year, which is much less than 1 per cent. of the total aid budget, much of which is also paid to British people and British firms? Could she not at least urge her colleagues that this is not a suitable institution to include in the Government's cuts.
Baroness Young: My Lords, I have already indicated the value that we place on these institutes. I am quite sure that my right honourable friend, when he comes to respond, will take into account the points that have been made in your Lordships' House.

Severn-Trent Water Authority Bill
2.59 p.m.
The Chairman of Committees (Lord Aberdare): My Lords, the Severn-Trent Water Authority Bill is a Bill which has been carried over from the last Parliament, and the Motion that I am now moving is in the same terms as that to which your Lordships agreed on 21st April last. I hope that your Lordships will agree once again. I beg to move.
Moved, That the Select Committee to whom the Bill is committed may hear evidence other than that tendered by the Promoters.— (Lord Aberdare.)
Lord Davies of Leek: My Lords, it is with some trepidation that I ask this supplementary question, having been absent through illness. I express an interest in this problem. Would I be in order in asking (if not, I shall immediately sit down) why it is necessary for evidence other than that tendered by the promoters to be heard—or am I trespassing on the time of the House?
Lord Aberdare: Not at all, my Lords. The fact of the matter is that in this case there were no petitions against the Bill, and so in the normal event it would not have gone to a Select Committee. But there was an Instruction moved by the noble Lord, Lord Beaumont of Whitley, and therefore it was felt that the Committee should have an opportunity of hearing evidence. That is the reason why I am moving this Motion.
Lord Davies of Leek: My Lords, I am grateful to the noble Lord.
On Question, Motion agreed to.

Leave of Absence and Lords' Expenses: Select Committee
Lord Aberdare: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That a Select Committee be appointed for the general supervision of arrangements relating to leave of absence and the reimbursement of Lords' expenses; and that, as proposed by the Committee of Selection, the Lords following, with the Chairman of Committees, be named of the Committee:—

Denham, L.

Hylton-Foster, B.

Kennet, L.

Ponsonby of Shulbrede, L.

Wigoder, L.

—(Lord Aberdare.)
Lord Hale: My Lords, may I ask whether this is a general alteration of the order of things, in that we have on the Committee one of each of the two known types of Liberal, and one representative only of each of the two main parties; or am I in error? I very frequently am.
Lord Aberdare: My Lords, these are the names recommended by the Committee of Selection. I should not like to go further than that.
Lord Hale: My Lords, perhaps this matter could be considered by the Committee of Selection at an appropriate time.
On Question, Motion agreed to.

Personal Bills: Select Committee
Lord Aberdare: My Lords, I beg to move the third Motion standing in my name on the Order Paper.
Moved, That a Select Committee on Personal Bills be appointed, to which all petitions for Personal Bills shall stand referred; and that as proposed by the Committee of Selection, the Lords following, with the Chairman of Committees, be named of the Committee:—

Banks, L.

Cross of Chelsea, L.

Dilhorne, V.

Nugent of Guildford, L.

Wilberforce, L.

Willis, L.

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

Consolidation Bills
3.2 p.m.
The Lord Chancellor (Lord Hailsham of Saint Marylebone)The Lord Chancellor (Lord Hailsham of Saint Marylebone) rose to move, That in the event of the

Medical Bill [H.L.]

Value Added Tax Bill [H.L.]

Car Tax Bill [H.L.]

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being read a second time, the Bills be not referred to the Joint Committee on Consolidation Bills, notwithstanding Standing Order 48.
The noble and learned Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. I ought to explain to your Lordships why this is being done. The three Bills which appear on the Order Paper for Second Reading were Consolidation Bills, all of which fell by the wayside on Dissolution, and they had all been examined in the ordinary way by the Joint Committee. Indeed, the Medical Bill had passed through all its stages in your Lordships' House. The Bills have been reintroduced in this Parliament in exactly the same form in which they stood at the time of Dissolution.
My noble and learned friend, Lord Brightman, who is the chairman of the Joint Committee, has agreed that no useful purpose would be served by these Bills again being referred to the Joint Committee, and I therefore seek your Lordships' approval to the Motion which would avoid that unnecessary step. I should also like to express my personal thanks to the noble and learned Lord, Lord Elwyn-Jones, and the noble Lord, Lord Wigoder, whom I consulted in this matter, and who are here to speak for themselves.
At the same time, I should take the opportunity to remind the House of the purpose of each of the Bills. The Medical Bill brings together the provisions of the Medical Acts of 1956, 1969, and 1978. It also takes into account the effects of a number of statutory instruments. Lastly, it incorporates a number of technical amendments which were recommended in a joint report of the two Law Commissions which was laid before your Lordships' House in March.
The Value Added Tax Bill is a strict consolidation. I should, however, tell your Lordships that on 31st May last the Treasury made an order entitled the Value Added Tax (Works of Art, etc.) Order 1983, which came into operation on that date and amended some of the provisions of the Acts consolidated in this Bill. The order was laid before Parliament in another place on 15th June, and the 40-day period for praying against it has not yet expired, so it would not be appropriate at this stage for the consolidation Bill to be amended. It is therefore proposed that an appropriate amendment should be made in another place after the expiry of the 40-day period, and the Bill will then be brought back to your Lordships' House for consideration of that amendment.
Lastly, the Car Tax Bill is a strict consolidation, and I am glad to say that in this case there are no complications. Therefore I beg to move the Motion standing in my name.

Moved, That, in the event of the

Medical Bill [H.L.]

Value Addded Tax Bill [H.L.]

Car Tax Bill [H.L.]

being read a second time, the Bills be not referred to the Joint Committee on Consolidation Bills, notwithstanding Standing Order 48.—(The Lord Chancellor.)
Lord Elwyn-Jones: My Lords, the proposal of the noble and learned Lord for the procedure to be adopted for these consolidation measures is unprece-

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dented, but this noble House is not unduly shackled by precedent where a change seems a sensible thing to bring about, and what is proposed here does indeed seem to be sensible. We are concerned with consolidation and the importance and the value of consolidation to Parliament, to the citizen, and generally, is considerable. Therefore steps which are proper within the limits of parliamentary supervision should be taken, and in this case there is also the advantage of supervision by a Joint Committee under the chairmanship of the noble and learned Lord, Lord Brightman, which has obviously gone thoroughly into these matters.
Accordingly, we on this side of the House consider that what is proposed is wholly sensible. I am not sure that I have totally followed what was said about the impact of certain changes in the Value Added Tax Bill in regard to proceedings which are to occur in another place, but it would seem to be a sensible course of action to follow, and accordingly we have no objection to what is proposed.
The Lord Chancellor: My Lords, I am very grateful to the noble and learned Lord for what he has said.
On Question, Motion agreed to.

Medical Bill [H.L.]
The Lord Chancellor: My Lords, I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read a second time.—(The Lord Chancellor.)
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Value Added Tax Bill [H.L.]
The Lord Chancellor: My Lords, I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read a second time.—(The Lord Chancellor.)
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Car Tax Bill [H.L.]
The Lord Chancellor: My Lords, I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read a second time.—(The Lord Chancellor.)
On Question, Bill read a second time, and committed to a Committee of the Whole House.

"Engineering Research and Development": Report of the Science and Technology Committee
3.7 p.m.
Lord Gregson Lord Gregson rose to move, That this House takes note of the Report of the Science and Technology
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Committee on Engineering Research and Development (2nd Report, 1982–83, H.L. 89). The noble Lord said: My Lords, I beg to move that this House takes note of the report of the Select Committee. When this subject was chosen for inquiry by Sub-Committee II of the Select Committee, I am quite sure that your Lordships' committee did not realise the wide interest that would be created. The committee received written evidence from over two hundred bodies and individuals, and heard oral evidence from 27 groups. To read and assimilate this great weight of evidence constituted a monumental effort, and I pay tribute to the hard work and perseverance of the committee Members. To the very many people who contributed, or who acted as hosts during the visits of the committee. I express the committee's thanks, and its appreciation of their efforts.
Manufacturing industry is fundamental to the economic well-being of the peoples of this nation, and engineering is the core technology which either participates in, or supports every part of, the manufacturing sector, and, in addition, it is an essential feature of the agriculture and extractive industries. It is, therefore, of crucial importance that we should have a technologically advanced and successful engineering activity.
There are some ill-informed individuals who suggest that we can sit back and let our manufacturing industries wither, and that we could provide for our present standard of living, or even an increase in that standard, by turning our efforts largely to the service sector. Your Lordships' committee finds that proposition quite untenable for a country that has to import about 40 per cent. of its foodstuffs and most of its raw material. The Minister of State for Industry put the whole question in context when giving evidence to your Lordships' committee. I can do no better than quote him. He said:
"Manufacturing industry provides about 25 per cent. of our GDP and 25 per cent. of jobs but it provides 75 per cent. of our visible trade exports. If we were to replace the contribution made by manufacturing industries to the balance of payments, we would need to increase our exports of services by £60 to £70 billion a year. To do that we would have to increase our share of world exports of services quite dramatically from under 10 per cent. to over 50 per cent. and that is really a wholly impossible task at the moment. So without manufacturing industry Britain could not survive."
This was further reinforced when the right honourable Lady the Prime Minister, in the debate on the Address last week, stressed the link between the prosperity of our people and the performance of our industry and commerce. Few would now question that British manufacturing industry and engineering activity have been in decline, compared with many other nations of the world, for many years—some would say for at least 100 years. During that time there have been many reports drawing attention to this sad state of affairs, which have long been ignored. In the first quarter of this year, for the first time in history, our import of manufactured goods exceeded our export of manufactured goods by the wide margin of well over half a billion pounds; and we are now only held away from a disastrous overseas trade balance by the temporary bonanza of North Sea oil. In these circumstances, it is no longer tenable to report that a major problem exists and then for those reports to lie gathering dust on the shelves of Whitehall. The time

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has come for action—and, your committee believes, action more vigorous and far reaching than any taken by Governments in the past.
As I stated earlier, engineering is the core technology to our manufacturing industries, construction and communications, and agriculture and extractive industries, including North Sea oil, the very thing that is at present holding us away from economic disaster. A successful economy therefore requires considerable engineering strength. To be strong, engineering has to be backed by vigorous research and continuous product development. As we have stated in the report, basic research in the United Kingdom is providing a relatively satisfactory level of achievement, although some of that research may be too remote from the market place to have any immediate value.
What causes intense concern is the state of applied research, particularly product and manufacturing development. With lack of profitability and a shrinking product base, much of the British engineering industry can no longer finance adequate product development. This is the problem to which we addressed ourselves in the report. We must derive considerable encouragement from the fact that the Prime Minister, in the debate on the Address, committed this Government to substantial support of new technology to launch new products and to bring about new research by the universities, the Government and industry in combination. I think that your committee's report points to the actions that are required to bring into being the advances suggested by the Prime Minister.
There are, in total, some 34 recommendations and comments. Your Lordships will be pleased to learn that I do not intend to refer to all of them. However, I should like to comment on the five principal groups of recommendations in the report. These are: firstly, better use of the nation's resources in accordance with strategic guidance from Government and some form of selectivity in those areas of industry and those products on which this country should concentrate; secondly, financial assistance for manufacturing industry by pump-priming from private and public sectors; thirdly, managerial commitment in manufacturing firms and a strengthening of their engineering workforce; fourthly, more use by industry of the resources of British universities; and, finally, organisation of support for innovation.
I deal first with better use of the nation's resources. If one theme dominated the large amount of evidence that your Lordships' committee considered, it was the need for industrial strategy backed by technological strategy. One has to indicate, in the first place, where the nation's industrial effort can be most profitably concentrated and where Government help can be most effectively applied. Your committee believe that the option of letting industry grow and contract in an international free market, without associated Government policy, is no longer viable. It is our belief that in such circumstances British industry would continue to contract because of the pressure of imports from competitors in economies that are structured by strategic guidance and assistance. In addition, the compass of modern industry is far too wide for a nation the size of ours to be able to do everything. Since the quantity of research and development is limited by resources
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and we must raise the quality of the work done, we must make a conscious selection of industries and products where we desire to succeed. We must therefore be selective.
It would be a mistake to suggest that strategic guidance and selectivity could be in the form of compulsion. Unless management and workforce are committed to the introduction of new products and processes, no amount of cajoling will produce results. Moreover, since accurate judgment of the market is vital to success, the primary responsibility for direction must come from industry and not from Government. Nevertheless, involvement of Government at most levels is now so great that they must be party to the exercise.
There are many organisations which could contribute to strategy. The committee consider that it would be unnecessary to suggest that a new body should be created for this purpose. It seemed to us that the National Economic Development Organisation had the right structure to promote a constructive dialogue in the ultimate; but it would, of course, require considerable consultation with bodies such as the Requirements Board, the Engineering Council and the Advisory Council for Applied Research and Development. But, of course, NEDO is not the only forum. What is important is that discussions should take place and a strategy should be defined.
The second group of recommendations concerns the problem of financial help in innovation. As I said earlier, lack of profitability and a shrinking product base create considerable problems for the ongoing financing of innovation, and your committee heard considerable evidence of the problems that exist and many suggestions for solutions, ranging from doing nothing to a complete planned economy. We were greatly encouraged to hear that consideration was being given within the City to new approaches for private sector funding to overcome some of these problems, since the flow of funds to industry for investment in R and D is absolutely crucial to break out of the Catch 22 situation of low profit, leading to low investment in R and D, leading to a shrinking engineering industry.
Your Lordships' committee have recommended that the Bank of England should take a lead in arranging discussions within the City to further these ideas. In connection with financial help for innovation, we also received a good deal of evidence regarding tax assistance. But it is really very difficult, without resorting to negative taxation, to see the further potential of beneficial tax treatment in this area. Almost all research and development expenditure already attracts full tax relief in the year in which it is incurred, and many of the companies most in need of development funds are not earning sufficient taxable profits and would therefore obtain little immediate benefit.
In parallel, there is another problem of using tax for this purpose. That is the total lack of selectivity of the tax treatment approach. There is, however, one area where tax assistance could be helpful, and that is in relation to the possible new City initiatives that I mentioned earlier. It relates particularly to the potential for tax incentives for additional financial

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investment separate from the main balance sheet of a company; the so called "off balance sheet financing". Your Lordships' committee recommend that the Department of Trade and Industry and the Treasury should study the possibility of extending the legislation which, since our report, was proposed in the Budget earlier this year.
In the Stock Exchange we in this country have the oldest and most highly developed system for financing industry in the world; but there is one aspect of this system where we seem to lag behind most of our competitors, and that is on the disclosure of R and D spending by companies. Your Lordships' committee consider that it is important to encourage the early identification of those companies likely to respond to a high level of R and D expenditure. This would enhance their rating in the City as subjects for investment or loan financing and other support and, in this way, would encourage intelligent appraisal of such companies' long term prospects.
A company which is making such investment should be entitled to a better rating by the City than suffering disfavour because of the impact of such expenditure on profits without the cause being known. The Companies Act 1981 recommended voluntary disclosure, but this is simply not happening. Your committee recommend that the Secretary of State for Trade and Industry should use his powers and modify the disclosure requirements of the Companies Act by statutory instrument.
It will be apparent to everybody from the situation of the decline of British manufacturing industry, shrinking product base and the deteriorating trade figures, that time is not on our side; but time is of the essence. It is also clearly obvious that the vicious Catch-22 situation of low profits, leading to low R and D funding, cannot be rectified wholly by new schemes of finance from the private sector, nor would the time scale satisfy the urgent requirements. There is therefore a requirement for more Government pump priming to break the vicious circle.
Even without the debilitating effect of years of under-funding of industry, we are not assisting engineering R and D at anything like the rate of our principal competitors, and even without attempting a catching up exercise we need to increase assistance by at least three times. Let me add that that is only a tiny fraction of the amount we spend on assisting agriculture through the lunatic spending of the EEC.
A quick view of the statistics would indicate that we have comparable spending with our competitors until we realise that by far the great majority of our spending is within the Ministry of Defence for defence purposes and it is in the civil or commercial activity where we lose out in world trade. That is where our spending is so far below that of our competitors. Let me make it quite clear that I am not criticising the amount we spend on defence R and D since export of defence equipment is one of our most successful overseas trading activities. It is a good example of when sufficient is spent on R and D a good product is developed which can command an extensive world market, and I might add that the majority of this is financed by the Government. We should also
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understand that this R and D is for the purpose of the development of defence equipment, and the fact that the spin-off to civil application is comparatively small is totally irrelevant. If we had the same comparative level of expenditure for civil or commercial R and D, then we would not need the debate in the House this afternoon.
The Department of Industry's Support for Innovation, which is the source of funds mainly relevant to engineering, is a very small fraction of Government R and D expenditure. Of the gross Government R and D expenditure within industry in 1979–80, 81 per cent. went into defence, 12 per cent. into civil aerospace, 2 per cent. into energy and only 4 per cent. into other industry, trade and employment. The amount spent by Government in support of civil R and D is too small; the amount spent by Government within industry is pitifully low. Your committee have again gone into a great deal of detail suggesting ways that assistance in the civil sector could be improved and the various bodies involved that could be strengthened. Sufficient for me to say today that such money should be spent within an agreed strategy and agreed selectivity.
I now turn to the third group of the recommendations, and that concerns management in engineering. There can be no improvement in manufacturing industry, the quality of engineering, nor innovation without a dedicated management. The Finniston Report went into this in considerable detail and I opened a debate in your Lordships' House on the report in the last Parliament. Since that time, the Engineering Council recommended in the report has been set up and your committee wish it well in its future endeavours.
Ultimately, nothing in this or any other report will improve the performance of British engineering if the skills and enthusiasm of management are not provided. The United Kingdom has to regain the market superiority which it used to enjoy, and industrial success is conditional on the ability of British management to perform better than their competitors.
Your committee believe that the remedies lie mainly within industry itself—and with company shareholders—and they stress the importance of a well-conceived management development programme in any sizeable company, if its future is to be properly safeguarded. We hope this question will receive the early attention of the Engineering Council and we also believe that the Fellowship of Engineering should also keep the question constantly under review.
Fourthly, your committee also spent considerable time inquiring into the interface of industry and the university; and although, in general, we would suggest there is room for a good deal of improvement, your committee recognised that while the primary function of higher education is of course to educate, not to act as an industrial adjunct, there are enough sources of mutual benefit to the university or polytechnic and to industry to make collaboration between them worthwhile, notwithstanding the benefit to the country as a whole. In addition to their teaching role, basic research is the university's main contribution; but your committee dismiss any suggestion that the universities should be confined solely to this. They

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should be encouraged to make their basic research more market orientated and encouraged to carry out development work where this is appropriate, and to provide technical assistance particularly to the smaller companies.
Funds should be allocated through industry. There is a need for such funds to be directed through industry to allow these activities to take place relative to the market place. The American example of "industrial affiliate" programmes in universities is also worth consideration.
The most important recommendation that your committee make in this area is to highlight the need in this country for more centres of excellence of high technology on a graduate and post-graduate level. Your committee recommend that at least six universities should be earmarked to support research and development on this basis and that the Department of Industry, in consultation with the Department of Education and Science, should channel special funds into them or into associated research institutes. There are many research associations in this country; but very few of them are attached to universities. This is not the case with our major competitors and I think the industry/university interface here suffers because of this. Again, we recommend that this money should be channelled through industry in order that industrial commitment and market considerations are guaranteed.
During the course of our inquiry, the Prime Minister requested that a study be carried out by the Advisory Council for Applied Research in conjunction with the Advisory Board for Research Councils into the links between industry and higher education institutions in research and its applications. Because we considered this working party could study this important subject in much greater detail, and because of the important implications for the effectiveness of the university/industry interface, the committee have confined their recommendations on this topic to a few general conclusions in the hope that the ACARD report will put flesh on these bones and will identify practical means of bringing universities and industry closer together.
The report was published at the end of last week and I must say that, on a first reading, I was disappointed; it is not the engine of change that would help to bring the 18th century culture of some of our universities face to face with the realities of the fourth quarter of the 20th century. I think that it is academic biased and it fails to address itself to the most important and critical problem—that of the small and medium-sized companies, where there is an abysmal record of contact and co-operation with higher education. But of course such a report deserves further study, although I now wish that the committee had completed its inquiries into this question and had reported itself.
The final group which I want to mention this afternoon concerns organisational support for innovation. Several witnesses and organisations—notably the Engineering Professors' Conference—argued for engineering to be removed from the responsibility of the Science and Engineering Research Council, and for a separate engineering research and development council to be established.
On the other hand, the CBI and the Royal Society cautioned strongly against driving a wedge between scientific and engineering research and, although your committee sympathised with the engineering professors' concern at being the poor relations in the distribution of SERC grants, we decided that the view expressed by the CBI and the Royal Society should prevail; although your committee felt very strongly that SERC should increase considerably the miserable 24 per cent. that it now spends on engineering R and D.
The Royal Society went on in its evidence to recommend the concept of an engineering development council in parallel with the SERC in order to improve our poor record of carrying through research to commercial exploitation. This was also a feature of the Finniston Committee's report. Your committee accepts this concept, but rather than propose that yet another body should be created, the Research Requirements Boards of the Department of Trade and Industry should be considerably strengthened and adopt the role of an engineering development council.
The Finniston Committee also highlighted the poor record of inward licensing of technology into the United Kingdom compared with our major competitors. Inward licensing of technology was the basis of the so-called economic miracle of Japan. This question is now an urgent priority and should be considered on an urgent basis for the engineering development function of the requirements boards.
I have dealt with the major groups of your committee's recommendations. I have not attempted to deal with the report in detail and I am sure that that is not what your Lordships would have wanted. I have confined myself to the highlights and to addressing some of the important questions.
In conclusion, can I say that as a country we must spend more on research and development, and particularly development in support of our manufacturing industry. The Government must assist industry by pump priming in well chosen areas. The vicious circle of low profits and low R and D has to be broken. The committee does not see how engineering industries can improve their profitability enough in world markets where Government subvention is normal unless the British taxpayer helps to get R and D started. Without R and D there will be lower profits in future and lower tax returns. We must invest now in the country's future prosperity.
The recent depressed economic conditions, combined with neglect over many years, has had a very serious effect on our engineering industries. Some people counsel that we need do nothing but await a phoenix to rise from the ashes. I would only remind those people that it took 500 years for the phoenix to arise from the ashes. We do not even have five years if we are to redress the neglect of at least 100 years.
I look forward to the debate and I also look forward to the Government's reply, although I realise that they will not yet have had time to answer any of our comments in detail. This is an important subject involving considerable public interest, and I would request that when the Government reply they do so in a written paper which would be available for further

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discussion. I would also request that they produce that written paper quickly, as time is of the essence.
In opening the debate I thanked the people who came forward with a vast quantity of evidence and your committee for the inordinate amount of time that it spent on considering this mound of evidence and its wise counsel. I should like to conclude by thanking the four specialist advisers—Dr. Allen, Dr. Trier, Mr. Pavitt and Mr. Lawrence—for their expert assistance. Last—but certainly not least—our thanks go to our clerk and his staff, who bore the brunt of the tidal wave of paper and who assisted us to produce the report which I hope meets with the approval of your Lordships. I beg to move.
Moved, That this House takes note of the report of the Science and Technolology Committee on Engineering Research and Development.—(Lord Gregson.)
3.45 p.m.
The Earl of Bessborough: My Lords, I should like to say immediately that the noble Lord, Lord Gregson, was the most admirable chairman of our subcommittee and we had most interesting and, indeed, enjoyable discussions under his chairmanship. He has humour, and he was able to keep us going over this very long session. Some have said that this committee was more like a Royal Commission in the weight of the evidence which we received.
But before I make any of my own comments on the report, which of course I endorse, and before proceeding further, I should like to join with the whole House in congratulating my right honourable friend the Prime Minister on being elected a Fellow of the Royal Society. This was announced in The Times today. We all know what a great contribution she has made as a scientist and lawyer, as a Secretary of State for Education and Science, and also as Prime Minister. In my view, the fact that she has now been elected a Fellow of the Royal Society means that she is confirmed as the Minister for Science, which I understand in fact she is.
As so often happens in these debates, I feel that I have been here before; it is rather like one of J. B. Priestley's time plays. Exactly 20 years ago, as a junior Minister for Science, I made my maiden speech on the Robbins Report on higher education, and then we discussed the need for more what we called QSEs; that is to say, qualified scientists and engineers. The ACARD report on improving links between higher education and industry, which the noble Lord, Lord Gregson, has mentioned and which has just been published, reminds me very much of what was said 20 years ago. If I remember rightly, the Robbins Report was four volumes, whereas in the present case the material is contained in three, amounting to nearly 1,000 pages and covering well over 1,500 questions.
Then—and this is another time element—almost exactly 10 years ago in 1973, as chairman of the committee of inquiry into the research associations, I produced my own report, the main conclusions of which I am glad to say the noble Lord, Lord Gregson, agreed should be endorsed in the present report in which it is stated that these associations perform a role
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in the creation and application of industrial technology which is out of proportion to their size; and that their effect on science-based industries is of great importance.
I recognise of course that the Production Engineering Research Association, of which the noble Lord, Lord Gregson, was in fact chairman, considered that its current level of financial support was inadequate—I suppose both in so far as industrial as well as governmental support were concerned. While endorsing a very great deal of what the noble Lord, Lord Gregson, has said, I should like to make a few further personal comments on our proceedings.
I was particularly interested to hear what the admirable Dr. Duncan Davies, the former Chief Engineer and Scientist at the Department of Industry, said about the need for international co-operation, and the desirability of tie-ups such as between TRW and Fujitsu as well as between Siemens and Fujitsu. I agree with Dr. Davies that such collaboration seems inevitable in view of the increasing number of products now made in a totally international market.
Just something about France. Again Dr. Davies said that one thing that strikes you about the French—I did not say this but Dr. Davies did—was that they combine their resources better than we do, that they all come from the same school (the Ecole Polytechnique or the Ecole Nationale d'Administration) and that they are better at making selective decisions naturally and in concentrating resources.
Something else Dr. Davies said—and I am told that it is perfectly in order that I should quote witnesses before our committee—was that the French always told a good and consistent story, and were proud of it. Their programme for La Télématique was something all polytechniciens will tell you about. I agree with Dr. Davies that we have a lot to learn from the French—and I say this not merely because I am half French myself!
We had some discussion about French activity in the promotion of information technology. There seemed some confusion as to how much the French were in fact spending in the telecommunications sector and elsewhere. I think it was Mr. Edwards of the CBI who said that he very much doubted whether our funding could be compared in quantity with what was being done in France. He said that the commitment to electrotechnology and electronics by the French Government has been, in his own words, "pretty tremendous". All the same, he did not think that the CBI could complain that the British Government were not saying enough about it, but he thought that the funding should be greater.
On the other hand my honourable friend Mr. Kenneth Baker, the Minister of State for Information Technology, for whom I have the greatest possible respect, made it clear to us that it was very hard to find out exactly how much the French really were spending, and I think he hoped that we might tell him. Perhaps later on we shall.
Incidentally, our visit to the technological university at Compiegne in France was of great interest. I would draw your Lordships' attention to all that Sir Henry Chilver said in his evidence. He is of course now chairman of ACARD, the Advisory Council on

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Applied Research and Development. He spoke to us about co-operation between the Cranfield Institute for Science and Technology—and I am glad to see that the noble Lord, Lord Kings-Norton, is taking part in this debate—and not only Compiegne but also Aachen University in West Germany, both of which we visited, and also what he told us about the discussions which Cranfield are having with MIT in the United States. Joint degrees are, in my view, important, as also is the joint innovation which is taking place in a number of directions, particularly in mechanical engineering but also in biotechnology on which there is a joint Cranfield-Compiegne unit.
I was also glad to hear Sir Henry Chilver—for whom we must all have the highest regard as one of my right honourable friend the Prime Minister's closest advisers—say that we were taking part actively in EEC collaborative research meetings within the framework of the EEC's CREST committee. I have for many years wanted to see more and more European technological co-operation but recognise that often it is preferable to conduct this on a bilateral, trilateral, or, shall I say, selective multilateral basis within the European Community, bringing in sometimes European countries outside the EEC such as Sweden, Switzerland, and Austria, as in the so-called COST projects.
One word about the requirement boards. I was a little disturbed to hear my old friend Sir Hugh Ford, now vice-president of the Fellowship of Engineering, admit that there was criticism of the boards. However, I was glad to hear him say that in his own experience if you went to the boards with a well prepared case the boards worked extraordinarily well; and he cited an outstandingly successful case which involved large sums of money for the development of a straining frame for plastic materials.
I also regretted to hear the evidence of Mr. Edwards, the deputy director-general of the CBI, when he said in answer to Question 854 that he did not feel the boards, now reduced in number, had been a resounding success. He also did not think it necessarily the fault of the boards themselves but felt the attitude of industry itself to some of the research proposals was one reason. The CBI also made the point that too many strings should not be attached to the provision of finance. Mr. Edwards did not, as I understood him, see the requirement boards as providing the major solution to our problems.
A short word about science parks. I was particularly interested, as I think the noble Lord, Lord Gregson, was, in the evidence given by Professor Crawford of Aston University about the way in which the Stanford Research Institute developed in California, which I have visited, and the way it became separate from the university but nonetheless continued to have a strong organic relationship with it. I hope very much that Professor Crawford is succeeding in setting up his own park in association with Aston University in Birmingham. I certainly look forward to visiting it too.
In the newer technologies such as microelectronics, robotics, computer-aided design and information technology generally, we were glad to hear from Dr. Roith, the present chief engineer and scientist of the Department of Industry, that the present Administration had taken major initiatives and that in those
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areas there had been a considerable increase in funding. There has. But he also said that in regard to optoelectronics and other areas of informatioin technology, such as the fifth generation computer, and problems arising from the Alvey Report, that he realised that much money would be needed, and that it was in those places where some of us would like to see new initiatives.
In regard to robotics, I hope that my noble friend Lord Cockfield, the Chancellor of the Duchy—and I congratulate him on his appointment—feels that the funding is sufficient. It was disturbing to read very recently—many of your Lordships may have read this—that the Japanese have 11 robots for every one of ours; the Americans have five; the West Germans three; and even Sweden, with a fraction of our population, has 1,500 robots to the United Kingdom's 1,152. We must clearly have fallen behind in this area.
I do not know whether this is because the unions consider that the use of robotics will increase the number of unemployed, and that they have influenced the Government in some way. If so, I think that the unions are wrong, because if you study an in-depth investigation into American industry you will find, my Lords. that in those industries and in those areas in the United States where robots are most in use, their—perhaps you may say paradoxically—unemployment is the lowest because these firms are doing well and expanding and increasing their manpower in various ways and in peripheral areas. I hope that the recent exhibition in Birmingham has made firms in this country more conscious of the advantages of installing robots. I hope my noble friend Lord Cockfield will assure us that he thinks that present Government spending is sufficient on robotics.
In so far as private funding for new technologies is concerned—to which the noble Lord, Lord Gregson, referred—I found our meeting with Sir Nicholas Goodison, chairman of the Stock Exchange, Sir Donald Barron, chairman of Midland Bank, and Michael Richardson, of Rothschilds, particularly interesting, and especially what Mr. Richardson said about the idea of creating a research and development trust fund with possible consequent tax benefits. Mr. Richardson brought a paper with him on the setting up of such a fund and told us that the inspiration came—Lord Gregson must be gratified by this—from the questions which we sent him. I hope that in connection with our conclusion No. 7 on page 69 the Government will carefully study this proposal.
In regard to spin off, we were all particularly interested in our meeting with my noble friend Lord Trenchard who was a Minister of State in both the Department of Industry and in the Ministry of Defence. The report of that meeting in December last year (which starts at about page 600 of volume II) is well worth reading. We can obviously learn a good deal from the United States in regard to spin off from defence into civil industry. It is wise of my right honourable friend the Prime Minister to move Ministers from industry to defence and vice versa. When I was Minister of State at the Ministry of Technology, which, curiously enough, still existed in 1970, I was responsible in certain areas for both civil and military R and D procurement. Although I thought the Ministry of Technology set up by the

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Labour Government was too large, nonetheless, I am sure that there are advantages in close links between the two departments.
In conclusion, I should like to pay a special tribute to my honourable friend Mr. Kenneth Baker, the Minister of State—who I know is staunchly supported by my right honourable friend the Prime Minister—for all he has done to persuade British industry to be more enterprising in taking up new research projects. It was Sir Henry Chilver who told me—no doubt the noble Lord, Lord Kings Norton, will confirm this—that at Cranfield, as soon as he let be known that certain research and development in a given area looked promising, first the Americans would ring up the same day and say that they were taking the next plane over and the Japanese would come a week later; whereas British firms might sometimes delay several weeks before coming to look at what was being done. This is distressing. However, I hope that my honourable friend the Minister of State in another place, and indeed Ministers in your Lordships' House. will renew their efforts vis-à-vis British industry, and that we may catch up, compete and also co-operate on more equal terms with our friends in other parts of the Western world.
3.54 p.m.
Lord Baker: My Lords, may I first thank the noble Lord, Lord Gregson, for introducing this debate and for so giving us the opportunity to discuss the report of his Committee on Engineering Research and Development. As the first Member of your Lordships' House who is not a member of the committee, may I congratulate the noble Lord, Lord Gregson, and his committee on the mammoth task that they have undertaken and completed so successfully.
The three volumes of this report, in which I have been immersed for the past two months—the report itself, the written and the oral evidence—form a fascinating document. It will provide the student of the history of industry with a rich statement of the position in this country in the last quarter of the 20th century, but nothing could be richer than the remark in Appendix 3, an historical interlude which states:
"The Cambridge Mathematics Tripos might have proved an excellent seed-bed for engineering talent had not the social and cultural background of its graduates directed them [elsewhere]".
If the Mathematics Tripos failed so signally, it makes me wonder about that lush garden in Cambridge which nourished me so delightfully for three years in my youth (it did the same thing some generations later for the noble Baroness, Lady Platt, and, of course, for the noble Viscount, Lord Montgomery of Alamein, who I remember so well as an undergraduate) and to which I returned many years later to cultivate for 25 years, and to increase it. If I may digress a moment longer, our historian might be interested to know that engineering has been taught in Cambridge for just 200 years without a break since Isaac Milner gave his first course of lectures in experimental philosophy in 1783.
The committee has produced a most excellent report. I agree with virtually all the recommendations. There is only one which I deplore, and to which I shall
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come later. I should like to mention two minor recommendations which pleased me very much. One is the suggestion that more engineers should appear on the boards of companies. This I support, and I hasten to remark that my feelings do not come from any experiences I have had with companies of which I am or have been a director but from years of effort trying to persuade directors to adopt new design methods that we have produced, or new projects or new products. We have had to do so in the face of such ignorance of engineering that the directors dare not even admit to their ignorance.
The other minor point I should like to mention is that it goes without saying that I support most warmly the recommendation that a greater proportion of funds for post-graduate work should be channelled into engineering. That would have a far-reaching effect. It would benefit the economy far beyond the immediate results of post-graduate work. It would involve more very able men in the solution of engineering problems and innovation. These men will never regret being introduced to such fascinating work in place of the pure research that they might have done if the additional funds had not been available. When university post-graduate work is over they will, I hope, leaven our manufacturing industry, which has been so grossly negligent of its staffing problems in the past.
As I have said, there is one section of the report that I deplore and on which I shall concentrate. The noble Lord, Lord Gregson, has already mentioned it. It comes in the section on "Organisational Support for Innovation", on page 61. It is the treatment of the proposals from the engineering professors, and it really is a surrender to the pure science lobby. The engineering professors, when all is said and done, are pretty close to the problem. They have asked that engineering be removed from the Science and Engineering Research Council and for a separate Engineering Research and Development Council to be established that can work to its own guidelines. The committee did not support this view, although they rather patronisingly said that they sympathised with the engineering professors in being poor relations in the distribution of the Science and Engineering Research Council grants.
It appears from paragraph 26.3 that the decision was taken on evidence given by the CBI and the Royal Society. I think that the CBI evidence can be dismissed. It seemed to me a rather questionable economic argument that it was better to save money even if by so doing one became less efficient. The Royal Society objected that any measure that would drive a wedge between science and engineering research was wrong. Since reading the report I have been trying to imagine the shape of a wedge, and where it could be driven, arising from the award of grants from different Government committees. Over the weekend I made inquiries from my old department and I found that, of the £1¼ million received in the last year in grants and research contracts, 44 per cent. only came from the research councils. Does the committee feel that the other 56 per cent. tended to drive a wedge between the engineering department and the Cavendish Laboratory? It seems to me a preposterous suggestion.

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There are other points arising out of paragraph 26.3—the interdependence of science and engineering—about which I have reservations and to which I will return later. The links between science and engineering seem to me good enough. The Royal Society embraces engineers as well as scientists—and I must declare that I am a Fellow of the Royal Society. Any engineer worth his salt will be watching carefully for any scientific advance which he can apply to his design work; and scientists are never slow to make use of the aids to their work such as scanning electron microscopes and computers produced by engineers. But, in any case, I cannot see their awareness being influenced by the source of the money which makes their work possible. I am at a loss to understand this argument, and I hope that the committee will be able to enlighten me.
Your Lordships will realise that scientists and engineers are entirely different animals. There is some confusion because their school education is much the same and they use the same tools; and there is recent confusion, for the layman at least, mainly of transatlantic origin, where every exciting engineering development is greeted as a triumph for science. The scientist is preoccupied, is engaged, with unravelling the mysteries of nature, and his whole world, his whole life, can be described as in research; while for the engineer (if he becomes involved in research, which he may not) the research is a mere incident in his real activity of innovation and the creation of new tools, structures and machines for the use and convenience of man.
I like to remember the remark of one of my most distinguished predecessors at Cambridge, Sir Alfred Ewing, in his presidential address to the British Association in 1932, when he was worried about the advance of mechanisation. I do not know what he would think of our three million unemployed today. He said:
"I cannot think that man is destined to atrophy and cease through cultivating what, after all, is one of his most God-like faculties, the creative ingenuity of the engineer".
It is now recognised that scientific research, in which we all agree this country excels, can do nothing of itself for the economy. It cannot cure our awful unemployment problem: it is only of help when it is transmuted, transformed, through engineering into useful ends. As the committee says in paragraph 1.7:
"A successful economy therefore requires engineering strength; and to be strong engineering has to be backed by vigorous research and continuous product development".
Here, I take it that the reference is to engineering research, but it does not matter from where the research comes.
In my own career, on two occasions—once for a period of two years and, 20 years later, for a period of three years—I and my team acted, worked, entirely as scientists carrying out scientific research, discovering the behaviour of a family of man-made structures; but we used exactly the same techniques which, in the first place, a zoologist would have used and which, in the second place, physiologists would have used. We were obtaining information on the behavour of structures under load or under stress; but this was relatively straightforward work compared with what we were leading up to, what we were obtaining the data
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for—and that was the synthesis, the development, of new design methods so that improved structures could be developed. It does not matter from where the research comes, or who does it, so long as it is there to be useful to the engineer.
This brings me to the written submission of the Royal Society. Perhaps it is not proper for me to examine critically evidence published in Volume III of the report—evidence by bodies kind enough to come here at our invitation to help the committee—but I think I must make this reference to complete my contribution to the debate. Perhaps I will be forgiven in this instance for I find that 25 per cent. of the Royal Society committee who drew up the evidence had been pupils of mine and, later, colleagues. I do not know whether to be proud of this or ashamed at my inefficiency at putting my ideas across to my pupils. Moreover, I was once a part of the scientific establishment. For 27 years (and does it not sound terrible?), for more than a quarter of a century, I presided over the council of the School of Physical Sciencies in the University of Cambridge. In those years, I came to know my scientific colleagues intimately. I came to admire their individual genius and their devotion to their calling, which was so intense that sometimes it frightened me; and also their skill at seeing that they received at least their fair share of any support that was available.
To move at last to the written evidence of the Royal Society, with a great deal of which I agree, what worries me there is the insistence on an integrated approach to science and engineering. There may have been a time some generations ago when this was possible at the undergraduate level, but since, fortunately, engineering departments are learning how to encourage real design and a real interest in development and innovation, that time has gone. But at the post-graduate level and beyond, no!— emphatically, no integrated approach.
When the engineering professors are given their own awarding council—they have put up such a sound and reasonable case that I hope our committee will reconsider their decision and will urge the authorities to see that it is done without further loss of time—and when they stand on their own feet, as it were, I suggest that they leave out the word "research" from their title and have a plain "development committee", or at most a "design and development committee". This suggestion may displease some of the engineering professors, but the opportunity should be taken to see that the engineer comes of age, as it were, and becomes quite independent. Engineering can claim an honourable place in the academic world or in any other world on the strength of its rigorous discipline and creativity. It needs no props from science. It needs full co-operation from science or anyone else working in related fields; but it stands on its own, and it is the bulwark which may save this country from its awful social problems.
The discipline in engineering comes from the fact that the engineer, within tight limits of cost, must produce something new and useful which will work. When it does not work it cannot quietly be buried in the pages of a scientific journal: the failure is there for

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all to see. When it does work, the satisfaction of standing back and looking at what one has helped to create is indescribable.
4.14 p.m.
Viscount Hanworth: My Lords, I should like to echo what the noble Lord, Lord Baker, has just been saying about engineering. As I develop my speech I think you will find that I feel exactly the same as he does. I believe that there is a tendency to put much too much emphasis on research and development instead of the product development, and it is at that stage that the engineer is absolutely vital. We are very, very good at inventing things, but very poor at developing them to the product stage. I think that if there is a criticism of this report it is that it fails to take that fully into account.
I should like to congratulate the Select Committee on their choice of subject. I always thought that the old Commons Committee spent too much of its time upon looking into subjects which had been discussed already almost ad nauseam. The Lords Committee has so far chosen those subjects where a detailed investigation was important and the subject had not so far received adequate attention.
Most of us realise that this country is dependent for its survival on its manufacturing and exporting ability. Unlike France or Turkey, we do not grow enough food and we have to earn money from abroad to buy it, and many other things as well. This of course makes the "fortress" policy, or something like it, proposed by some of the Left, a nonsense and really a non-starter.
This country's pre-eminence in the last century was to a great extent due to our engineering expertise. I even remember saying not so very long ago that firms still believe that Britain made the best engineering goods in the world and it was the customers' misfortune if they did not buy them. How wrong they were, unfortunately, sometimes on both counts.
I do not believe at this moment that it is profitable to analyse too far the causes of our failure to keep our dominance in this field. However, it is perhaps interesting to make an analogy with a company. The fight to get to the top is comparatively easy; it is much more difficult to remain there, and once on the downgrade it is even more difficult to arrest the slide. Marks and Spencer once told me that at one time they thought they were an efficient firm. Since then they have had improvements made in almost every area and they now realised that they were not efficient. No firm can be completely efficient so long as it is composed of fallible human beings. It can be said that in this rapidly changing world what was right yesterday can hardly be best today. We should always have an attitude of divine discontent.
I cannot help departing from this theme for a moment because there is a very important analogy in political terms where there is so urgent a need to improve our own parliamentary and democratic system. We still shelter behind being the Mother of Parliaments, the best judicial system in the world. We also support our unions for perhaps being the ideal—or some do, at any rate. The rats, or rather the inevitable process of decay, by exploitation have bitten
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into all of them; and that of course is the same in the engineering field.
It cannot be overstressed that we are still very good at producing new ideas. Our failure is in production development. The classic example, of course, is radar, which during the last war had to be sent to America to produce the usable equipment. Yes, I know that it was wartime, but much the same has applied ever since. One of the causes of this sitution has been the low status of engineers, which was, of course, the reason for the Finniston Report. For a long time engineers and designers have been almost second-class citizens. At one time or another scientists, accountants and marketing men have found their disciplines an easy road to the boardroom and further promotion; not so for engineers. It has been a "non-U" profession which has found it difficult to attract enough really able recruits. First-class design staff with a broad outlook which must take into account production needs can hardly be paid too much. Their training is also all-important.
Research associations are mentioned in this report. I consider they have a vital role to play, being so near to the grass roots. The amount of money invested in them by the Government is peanuts, and a few years ago it was decreed that they should beome more self-financing from contracts placed on them for R and D. On the face of it that was a right decision, but—and, yes, it is a very big "but"—the results of the contracts are likely to remain a commercial secret to those usually large firms who pay for them. Bearing in mind the importance of the small firm and those who need spoon feeding to change to modern techniques, I believe that we are now missing out in an area which is potentially vital to this nation's recovery.
High technology is most attractive, but I question whether the high technology that people think about will really produce the value of exports that we need, and I very much doubt whether it will make much of a dent in our unemployment. No, my Lords, I fear that it is much more the down to earth engineering that is required to make the impact that we need.
I have not had time to read the report in the detail it deserves, and not at all, I am afraid, the detailed evidence. Case studies, however, seem to me an important approach, as they are in all schools of business management. I think that the relative failure of our machine tool industry could provide some useful lessons. For years, we have tried to prop it up on a minor key. Why have these efforts produced no major progress in fighting back to our original pre-eminent position? This is something which, so far as I know, the report has not considered in any detail, and it might provide just the kind of lessons that we really need.
If I am right in thinking that the area which is most crucial is product development and not R and D as such, then it follows that universities, who are most important, must get down more than they would wish, or more than they have done in the past, to the "nitty-gritty" of commercial life and of detailed engineering design.
Some 15 years ago I attacked our universities for their ivory tower attitude, particularly in the arts. I then said that they seemed to believe that, whatever they taught, however badly they taught it and however

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irrelevant it might be to the needs of the community, it was self-justifying because it was taught at a university—an intolerable point of view, discounted now, but I think a shadow of it yet remains. If we are to use the universities, with their enormous potential, this shadow must be rooted out completely. In this connection, I would say that, having taken the mechanical science tripos at Cambridge, the best education I received and the best training of the mind was undoubtedly at the Army Staff College. I am sure that the findings of this report should be taken very seriously. Many of its recommendations must be implemented, but in the final analysis it is people's approach to the problems which is just as important. You can take a horse to the water, but he still may not drink.
4.24 p.m.
Viscount Montgomery of Alamein: My Lords, like other noble Lords, I welcome this report on engineering research and development. This afternoon, the noble Lord, Lord Gregson, gave us a splendid summary of his recommendations and made some interesting proposals. I am glad to say that I agreed with everything he said. I also agreed very much with the remarks made by the noble Viscount, Lord Hanworth, and my short intervention will very much echo his observations.
I should like to mention one specific point and one general point. The specific point concerns demonstrator or pilot projects, to which reference is made in paragraph 16.11 at the bottom of page 53. In doing so, I think that I should declare an interest, in that I am a director of a large group of industrial manufacturing companies in the electrical and mechanical engineering field. All engineering plant requires full-scale demonstration to prove reliability in service. This is particularly so for overseas sales, where references must be established in any international tendering procedure. Existing systems may be all right for projects or developments of modest size, and indeed many products have been developed and will continue to be introduced by British enterprise. But in the energy field, particularly power generation, where the investment required is very substantial, the existing mechanism is probably not adequate. A good example is the nuclear reactor, where no one doubts the need for public funding.
During a time of investment by the energy industry, technical advance takes place since equipment is ordered for the home market. But at the present time, with economic restraint limiting investment, the development of new processes with consequent pilot plant opportunities tends to decline. This lack of continuity will deprive our nation of the seed corn for the future.
Other developed countries in Western Europe are funding demonstrators and the United Kingdom would appear to be lagging behind. The USA has been particularly successful in this field, and in this context it is worth mentioning the Electrical Power Research Institute, which comprises the US utility companies and other bodies. Their 1980 annual report shows that 1.6 billion dollars was spent on demonstrators, of which 500 million dollars came from the EPRI and the rest from other sources, particularly the US
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Department of Energy. If we do not take action to increase development, British industry will lose its technological edge in the future.
I put it to noble Lords that Government research establishments are at some disadvantage here, as they are remote from the market place. As a result, they have difficulty in setting up the discipline of commercial and product relevance, such as occurs naturally in manufacturing groups. The problem facing the Government, therefore, is to bring public money to bear in an effective and co-ordinated manner, and I hope that Her Majesty's Government will give this aspect of the report further consideration.
My general point concerns education, about which other noble Lords have already made some remarks. Do we really have a large enough percentage of national resources devoted to technical education? Are boys and girls, when selecting A-level courses, encouraged to make careers in manufacturing industry and, therefore, to follow maths and science courses with a view to studying engineering? It always seems to me that the liberal arts continue to attract the highest proportion of students. This point was indeed made by the noble Viscount, Lord Hanworth.
I was privileged, as he has already said, to be an undergraduate under the noble Lord, Lord Baker, when he was in charge of the engineering faculty at Cambridge. I am very glad to be speaking after, not before him, so that he does not have, once more, the chance to correct the inadequacies of my work. The noble Lord, Lord Baker, has said on a number of occasions—I paraphrase his remarks—that engineering is about producing useful solutions that work. However brilliant our technological innovation, Britain will always need a flow of engineers, particularly production engineers, who tend to be in the shortest supply, to turn ideas into reality.
British industry has to supply equipment that will have continuing sales at home and overseas, where we face increasingly strong competition. Engineers can be turned into management, but not vice versa. We shall always need more engineers than are available. This requires initiation at high school age—no later.
4.31 p.m.
Lord Kings Norton: My Lords, I had the pleasure, as a member of the committee whose report is before your Lordships this afternoon, of seeing the noble Lord, Lord Gregson, conduct the inquiry upon which the report is based. I should like to follow the noble Earl, Lord Bessborough, in paying a tribute not only to the great knowledge of the research and development field which the noble Lord, Lord Gregson, displayed but to his skill in conducting this inquiry and eliciting the knowledge which was vouchsafed to us by our witnesses. The result is a comprehensive document of great value. I hope that both Government and industry will implement the report's recommendations, even if there is some slight adjustment of them as a result of the limited criticism which we have so far heard.
I have described the report as comprehensive, and indeed it is. But since its publication I have come to the conclusion that in one area of research and development perhaps we should have probed more deeply. I want to deal with that area and with no other,

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despite the temptation to follow some of my predecessors this afternoon down a number of fascinating avenues.
On page 66 of the report there are two paragraphs, under the heading "British Standards", which indicate the importance of standards in guaranteeing the quality of our goods. The specification of British standards is the business of the British Standards Institution, and in my judgment the BSI does its work very well. But it is no use specifying quantities, whatever they be—lengths, volumes, pressures, volts, amperes—unless they can be measured. The whole fabric of specification, which gets more and more complex in its variety and level of accuracy, depends utterly on our ability to measure—depends utterly, that is, on the science of metrology.
The developing demand, with advancing technology, for the measurement of new quantities and for greater accuracy in the measurement of old ones, means that research and development in measurement itself must be sustained at a very high level in this country if British industrial products are to be specified and measured with the high accuracy demanded by international competition. I have found, in discussing this area of research and development with others, some difficulty in getting their appreciation of its basic importance in sustaining the quality of our manufactured goods, so perhaps your Lordships will allow me to give a couple of examples.
My first example is the calibration of altimeters for aircraft. In today's busy air lanes, aircraft are typically separated by only 1,000 feet. If this safety margin is to be confidently preserved, altimeters must be extremely accurate, particularly at heights such as 30,000 or 40,000 feet where the air density is low. The level of calibration accuracy in the manufacturers' laboratories must therefore be high, and the manufacturers' own calibration apparatus must consequently be measured against a central standard apparatus of unimpeachable integrity. This unimpeachable standard is at the National Physical Laboratory at Teddington. It is, as a result of steady research and development, the most accurate barometric apparatus in the world, and at the same time highly automated and computerised for speedy operation.
My second example is the control of radiation in the treatment of cancer. I understand that radiation directed at a malignant tumour must be within 5 per cent. of a specified dosage. If it is more than 5 per cent. too high it can burn healthy tissue, and if it is more than 5 per cent. too low it can be less than completely effective and so permit recurrence of the growth. Here the performance of hospital apparatus needs to be calibrated against a basic standard, and again the basic standard apparatus is the result of work at the National Physical Laboratory, where it is located and where it is continuously used.
Realising—I regret, belatedly—the importance of this basic structure of metrological research and development to British standards and British industry, I paid a visit recently to the National Physical Laboratory, and the director arranged for me to see something of the laboratory's work. I did indeed see the barometric department upon which altimeter accuracy depends, and much else beside. I saw the
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laboratory concerned with pressure measurement where pressures from one billionth of a unit pressure up to one billion times that unit pressure—a range which scientists call 18 orders of magnitude—can be measured. I learned about the extraordinary measurement of colour which can ensure that one manufacturer's plastic bath will match in colour another manufacturer's ceramic basin. Indeed, I learned enough to reinforce ten times my previous view that basic metrological research and development is of major national importance.
But when I questioned the staff on the speed at which they can supply their service to industry and on the new work which they need to do, I was worried. I was forced to conclude that despite valiant and successful efforts to computerise, automate and mechanise, the National Physical Laboratory is short of staff. I do most sincerely hope that when the noble Lord, Lord Cockfield, replies he will be able to give us some hope for a significant increase in the National Physical Laboratory's staff and apparatus.
It is not an expensive place. When one thinks, for example, of the expenditure on research and development for defence equipment, to which the noble Lord, Lord Gregson, referred, the cost of reinforcement of the National Physical Laboratory facility, which stands behind defence equipment specification, seems very small indeed. I should like to see something like a 25 per cent. increase in NPL professional staff to speed up the service, because some manufacturers feel that they have to wait much too long for the essential calibrations they require. I should like to see a 25 per cent. increase in staff, not only to speed up the service but to man the new work which is absolutely necessary if British standards are to compete with the best abroad.
I have not been able to pay a visit to the National Engineering Laboratory near Glasgow, where, on a smaller scale, work on some engineering standards of the same sort is done; but I believe the situation existing there is a similar kind of situation as the one at the National Physical Laboratory.
In the two paragraphs on page 66 of the Engineering Research and Development Report, to which I referred at the outset, two documents are referred to: a report from the influential Advisory Committee on Applied Research and Development, called Facing International Competition, and the Government's White Paper in response to it, called, Standards, Quality and International Competitiveness. Both of these documents emphasise, rightly, the vital importance of British Standards to British industry. Incredibly, neither refers to the absolutely vital necessity of sustaining the research and development at the NPL and the NEL without which the standards could not be maintained. In fact the reference in the ACARD report to the laboratories is superficial, and in the White Paper, which announces,
"the Government's determination to enhance the status of standards".
the laboratories on which the whole structure of standards depends are not mentioned at all.
The most effective contribution the Government can make to the enhancement of the status of British Standards is significantly to expand their support for

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the research and development programmes of the NPL and the NEL, and I recommend emphatically that they do so.
4.42 p.m.
Baroness Platt of Writtle: My Lords, first of all may I say what a great privilege it has been to be invited to sit on the Select Committee for Science and Technology and to take part in the fascinating technical questioning and study leading up to the publication of the report on Engineering Research and Development which is placed before your Lordships' House this afternoon. I also pay tribute to the chairmanship of Lord Gregson, which was excellent, and I would endorse the points he made this afternoon. Being of a hardworking nature himself, he made sure that we worked hard too in eliciting the vital evidence from many stimulating and well-qualified people, and then led us with great stamina to hammer out our agreed report, which I hope your Lordships will agree too is of value to the nation in a field crucial to its industrial future.
Most people are anxious about our industrial decline, and I quote from the first page of our report:
"The product base of the United Kingdom is shrinking at an alarming rate in terms of home manufacturing and of overseas trade. Too little has been done to encourage the exploitation of science and technology in engineering industry. The prominence of the United Kingdom in the field of original research and in the development of prototypes is not matched by its follow-up development so that, too often, other countries manage to develop this country's research and to reap the financial benefits."
My Lords, many of you may have seen in one of the colour magazines yesterday that this is no idle threat, as it mentioned that the number of engineering firms in the top hundred 15 years ago has halved by this year. Many people go on to say, "Never mind, we shall have to concentrate on our service industries in the future", and feel they can relax, particularly perhaps in the warmth of an English summer afternoon when the low pound is attracting more tourists to Britain than usual. Paragraph 1.6 should destroy that complacency, and, as Lord Gregson has already quoted, paragraphs 1.6 and 1.7 underline the urgency of our report.
We then addressed ourselves to the problem outlined in paragraph 1.8. In our hearing of evidence we heard of many efforts made by Government departments and Government-financed research laboratories to make sure that the results of the millions of pounds spent on national research were available to private industry for commercial use. Industry itself carried out research amounting to£3¼ billion spent in 1978 on research and development, of which nearly 80 per cent. was performed by large firms.
When I worked in industry, research and design departments tended to operate in a somewhat isolated and academic situation and to present their completed design to the production department, who struggled to produce it, and then on completion it had to be marketed. Today, I am thankful to say that design teams are far more closely integrated, so that senior production and marketing men are involved in the design team and research and product design and development are far more market-orientated, resulting in considerable economy in production, so
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that the right product is more likely to arrive in the market at the right place and at the right time for selling.
It is the satisfaction of the customer that must be the key driving force in research and development for production if we are to regain our position in the markets of the world and if firms are to regain their profitability and be able to employ more people again. It is vital that young engineers should be always conscious of the pressures of the international market place throughout their education—in that I agree with my noble friend Lord Montgomery of Alamein—and that the research and design team should see the selling of the product and its subsequent serviceability and economy in use as their target too.
One of the problems that was highlighted during our hearings was that of communication of the results of expensive and successful research, perhaps pure research, or research conducted primarily for defence needs, to small firms who might be able to apply it most valuably in their products and sell them internationally. My right honourable friend Mr. Kenneth Baker placed considerable emphasis on the work done in this field by the Department of Industry through its Small Firms Technical Enquiry Service, and this is excellent. It has now been in action for a year, and I hope up-to-date statistics would show that its work has expanded considerably as part of the Government's emphasis on assistance to small firms—my noble friend Lord Cockfield may be able to show us that in his reply—where the potential lies for industrial expansion and future employment.
This is a field where information technology and swift electronic data retrieval should be developed to the full and broúght to the notice of small firms. That is never easy, because they are often short on technological expertise and are not aware of the information available and how to get at it. Above all, they are so busy keeping their heads above water in financial terms and actually selling and servicing their products that the excellent information services often pass them by.
I remember, in taking evidence, asking about the development of special army uniforms to combat thermal stress in hot climates. My recollection was that the research was carried out to reduce the sweating experienced by tank crews. I asked whether it was available, for instance, to firms developing sports-wear, and it was not. This is a small example of how possible commercial spin-off is not being considered. It seems to me that pressure has to be continually applied in all quarters, whether at Ministerial level or through senior engineers and scientists in Government and research departments, so that that chasm—and it is a chasm—is effectively bridged between the brilliant technologist deeply involved in his or her research and the commercial entrepreneur struggling to keep ahead internationally in the markets of the world. I am glad that the enthusiasm of my right honourable friend Mr. Kenneth Baker continues to be active in the seat of power at the Department of Industry: he needs as many allies as possible.
Another line of communication that is vital is a financial one. The afternoon when my noble friend Lord Caldecot gave evidence was an optimistic one, as he, himself a distinguished engineer and President of

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the Fellowship of Engineering, outlined how Finance for Industry, of which he is chairman, tried to pick promising technological research, often of a high risk nature, and back it on a long-term basis. That is what is required. The field is a very difficult one, where people of long experience and expertise in the financial field need also to be capable of distinguishing the potential Frank Whittle from the crank or the smooth operator, and of envisaging the possible future commercial spin-off from a project in its very early stages.
On another occasion we were pleased, too, to hear from the chairman of the Stock Exchange that there are more technologists available to advise on the financial viability of engineering research and development. But there is still a long way to go. We make a particular point of this in paragraph 20.2 and in our conclusions on the contribution of management.
Government, too, are putting considerable money and encouragement into this field and ACARD—the Advisory Council for Applied Research and Development—has produced an excellent report on R and D for public purchasing. We very much supported its guidelines for the methods of support of research. When a programme of work supported by the public sector is capable of leading within five years to equipment or expertise which can be marketed outside the United Kingdom public sector there should be private sector participation in the planning, direction and funding of the work. Such participation should normally extend to control and a substantial degree of funding if export sales and sales to other United Kingdom purchasers are likely to exceed the requirements of the public purchaser concerned. Civil Servants are of their nature cautious and less likely to be commercially orientated. The influence of industry and the market place must be allowed full play.
My final point is the importance of industrial influence on university research. The shortage of money in industry and universities might bring about at least a shotgun marriage, although I hope the relationship would be more co-operative and mutually understanding than that and will lead to applied research being more market orientated and, as a further spin-off, students being more aware of the importance of the market place.
In other countries academics in universities and businessmen are on far more cordial terms and spend periods of exchange far more easily and naturally than we in this country. We make a particular point of this in Recommendation 22 and, indeed, want to see changes in the superannuation rules to facilitate this valuable mobility. On the same theme, we were particularly impressed with the contract research and independence from public finance of the Cranfield Institute. As the noble Lord, Lord Kings Norton is present, I welcome that and congratulate him and Sir Henry Chilver on the work that they do. We should like to see other universities following suit, in Recommendation 20. We welcome too the setting up of science parks which bring university research and commercial activity closer together, to their mutual benefit.
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The three books of this report are a bargain at the price if they do what we hope in helping engineering research and development to press forward Britain's profitability in the international market place. In the report we welcome the setting up of the Engineering Council as a result of the Finniston Committee report last year. The aims of the council are very similar to those of the Select Committee. I say that with some feeling as a member of the Engineering Council. I was present this morning at one of its sub-committees where the kind of recommendations in this report are really being put into action.
I should like to make a plea that your Lordships also join the club. I hope that you will read the report and with your Lordships' enormous collective influence see that its recommendations permeate into the corridors of power, whether in Government departments, research establishments, universities or industry and commerce. I hope too that the Government will take this matter very seriously and translate it into action. Its theme cannot be emphasised too strongly or too often. If its aims are achieved it could have the effect we so much desire of putting Britain back on the map in the market places of the world, increasing her industries' profitability and putting men and women back into jobs.
4.55 p.m.
Lord Hunter of Newington: My Lords, I beg leave to be absent from the latter part of this debate. There are family reasons why I have to he elsewhere this evening.
I feel very privileged, as someone from an entirely different background, to have been concerned with this penetrating inquiry into engineering under Lord Gregson's chairmanship. One has learned at lot, not least of which is that when one digs deep the basic problems have a remarkable similarity to other fields. The one aspect to which I should like to refer briefly is education and research—in particular the role of the universities—and wander with perhaps a little trepidation into different kinds of research.
Since the founding of the University Grants Committee in 1919 the universities have been funded under two principles: the quinquennial system and the block grant principle. There have been great discussions about the first; but we have been told only recently by the Government that the intention is to have a triennial system in the future. There has been little discussion about the second but it concerns us most. The idea behind the block grant principle is that universities submit to the UGC, and the UGC submit to the Government, the case for funds, which is itemised. But when the grant is given by Government or by the UGC it is on one lot, giving the UGC, and in their turn the universities, freedom within their programme over a period of years to spend in the way that seems best. This was done to preserve and promote academic freedom and initiative. Since the beginning it has been consistently the view of the universities that this freedom is necessary to healthy developments. It seems to clash with some of our proposals.
Until 1963, when the noble and learned Lord the Lord Chancellor was Minister of Science and Technology, the UGC was a committee of the Treasury. When the UGC was transferred to the

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Department of Education and Science attempts were made to continue as much financial freedom as possible, but the UGC funds were then subject to Government audit. What happened was that the sums of money became so large that the old somewhat informal arrangements could not be continued.
The second main source of funds was the Science Research Council, recently renamed the Science and Engineering Research Council. Those funds were competed for. Over the years the Science Research Council steadfastly maintained that the sums of money given to the Engineering Council were more than adequate for the research programmes of merit which came before them. In many universities there have been faculties of science and engineering and some would maintain that over the years science has had the prior claim. The post-Robbins development, with great increases in undergraduate student numbers, affected the situation because undergraduates' education received priority for funds. However, the UGC has always maintained that the basic equipping of engineering departments has always been adequate.
Looking back on this story one can see that after the second world war the universities had certain kinds of developments. It is true that engineering departments, almost without exception, had industrial contacts, but very few working relationships. The view was widespread that the two prime functions of universities were to teach undergraduates and to carry out research, which was of course the vital necessity for academic promotion. As your Lordships will see from the report, the consequence was that the ratio of engineers to scientists in Britain was 2:3; in contrast to that in Germany of 3:1 engineers to scientists. In the United Kingdom, science has had a higher academic and social status and been strongly supported by the research councils. In the United Kingdom, in contrast to the United States and elsewhere, a great deal of research and development was done in Government research establishments, with varying degrees of contact with industry and often only modest contacts with the universities.
Perhaps I could briefly contrast the engineering situation with the medical one over the same period. The first major medical development commenced in 1943 with the earmarking of £1 million by Sir John Anderson for medical development in universities. Much of this was used to develop full-time clinical departments, and there was agreement that the staff of the departments had health service contracts which were honorary but they continued to have responsibilities for patients; in fact a symbiosis was created. The consequence was that, in contrast to engineering, the developments in clinical medicine —practical medicine—were totally interlocked between the health service and the medical schools. The situation did not arise where staff, without clinical responsibilities, could hold senior posts, as has occurred, I believe, in engineering, where staff, sometimes with little practical industrial experience, did hold senior posts.
Unfortunately, the medical situation is not of easy application to the engineering scene. What does one do? The report makes important recommendations about the future. In fact it says that the block grant
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principle cannot or should not apply. It says that day-to-day co-operation and living together with industry is necessary to develop engineering and to train the staff. It says that the funds for this purpose should be available from industrial sources. It says that the Department of Industry, in consultation with the Department of Education and Science, should channel special funds into the universities or into associated research institutions. Of these solutions I much prefer the second, so that the fund is distinct from UGC funding. This procedure is very well established in the case of Science Research Council units and Medical Research Council units.
In engineering, dynamic flexibility is necessary. If the unit is no good, it should go. The terms of appointment and contracts of staff which are needed have been well worked out in management schools and post-experience centres within the universities. To attempt to do this through the UGC is not satisfactory. First, the UGC does not have the expertise to do it. Secondly, I believe that there would be an immediate conflict with the triennial and block grant systems and with the appointment system, which are still of course of the greatest importance in other parts of the universities—in the arts and social science schools, for example. I believe that the movement of staff from institutions, universities, research establishments and Government institutions should be easy, so that, as I have said, the traditional university terms of appointment could not be used.
Under these circumstances, if this opportunity is given and resources are made available, I think that five or six universities might well choose themselves, as they are the best. Perhaps they should not be chosen by the UGC but they should get UGC basic support in accommodation and equipment when they have proved their ability in this field.
5.3 p.m.
Lord Ironside: My Lords, I think that this debate is significant because it is the first one to follow the debate on the Address, and I think it concentrates our attention very much on one of the important subjects—that of the Government's resolve to,
"promote growth in output and opportunities for employment by encouraging industry to be adaptable and efficient, and to compete successfully".
The right reverend Prelate the Bishop of Norwich picked out part of this phrase to illustrate the points he was making on the youth opportunities plan when he spoke in the debate on the Address on 29th June, but I wished he had gone further. Yes, "growth in output" and "opportunities for employment" do go together, as he said, but I think only through encouraging industry "to compete successfully". These are the key words. If there is any single factor which affects the ability to do this it is engineering endeavour and the commitment to engage continuously in engineering research and development activities, which allows industry to bring the right products and designs to the market at the right time.
However, first, I should like to thank the noble Lord, Lord Gregson, for permitting me to attend the committee meetings and to take part in the inquiry, and to visit Aachen and Compiègne. He knows of my involvement in the contract research and development

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industry, and I am very grateful indeed to him for allowing me to join him in his deliberations. May I say that if this report on engineering research and development is as well received as his previous report on electric vehicles, I think he will have done another good service to industry. The interest which I have to declare is that I am employed by a company whose laboratories are in the north-east, and that my experience concerns the public sector markets.
In seconding the Motion for the humble Address, the noble Baroness, Lady Airey, paid, I think, a nice tribute to the inventiveness and genius found in the north-east. Names from there like Armstrong, Swann and Parsons have served the nation very well indeed. I think that people from the north-east will continue to do so for very many reasons.
In the contract R and D business one is always treading new ground in search of tomorrow's product, unlike the manufacturer, whose skill is in factory repeatability to time, cost and performance targets, which is the key to his success. But the biggest dilemma facing the manufacturer now, I think, is the choice of product. Some of them may have the ideas and resources to innovate successfully; but, equally, others may not; and the committee's main concern, quite rightly, has been over discovering the patient's condition, what is affecting his health and what tonic should be administered to bring him back to the pink of condition again.
I think that the evidence exposes very well what is affecting the patient's health, and I think that what has come to light is that the consumer is in a very much stronger position now than ever before, and we see consumer protection growing. Product liability, for example, is hovering over the manufacturer's head, and we shall hear more about that.
I think we have to realise that manufacturing processes and products have now been made so sophisticated through the use of robotics and automation that only excellence in engineering R and D will allow industry to compete. We should not be surprised, therefore, at the appearance of new patent law, the advance of copyright into the engineering field, tighter engineering standards, greater access to information and data and the concern for the engineering profession and the status of the engineer. As Lord Gregson has an interest in phoenixes, I should just like to say that we shall place quite a lot of reliance on the Science Reference Library for information and data in the future. I am sure that he will be glad to know that the Science Reference Library is now rising from the ashes which lie between Euston Road and Phoenix Road.
It all adds up to one thing for this country: that the highest accolade will be awarded to industry only if it is able to write "Designed and made in Britain" on the product. Just to be made in Britain has become a glory of the past, and I would hope that the Government might be able to look at ways of allowing British manufacturers to shout the odds for "design", which now counts for a lot in the eyes of the customer. Under the 1981 trade descriptions legislation dealing with origin markings on miscellaneous goods, for the manufacturer in clothing, domestic electrical, footwear, and cutlery businesses to indicate origin,
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which depends on the "last substantial process of manufacture". Perhaps there should be here a place for design origins, to establish a mark of quality at what I might call the front end.
The committee has examined the role of Government, universities, and other organisations, and it has taken evidence from a representative of the European Commission's Research Directorate in Brussels. I should just like to touch on this aspect, since it is clear that we do not suffer alone in the field of engineering R and D. In fact the Commission has just published—at the end of May—its proposal for a research, development and demonstration strategic framework programme, which I think can best be described as an enabling instrument to intervene more effectively with research action programmes, the first one of which, in the non-nuclear energy R and D field, was published just a few days ago, though I understand that it has not yet been deposited here. I expect that the Select Committee on European legislation, and Sub-Committee F, under the noble Lord, Lord Kings Norton, will very shortly be looking at this programme.
The framework programme is a fairly lengthy document—I have it here—but one phrase, in characteristic EEC English, spells out the purpose behind it:
"To allow industry in Europe to adapt quickly enough and become more competitive rather than being outdone by more efficient competitors and, forced onto the defensive, being obliged to protect itself by adapting when it is too late".
That, I believe, supports the committee's feelings completely. The programme is also an attempt to streamline and perfect the intervention machinery of the Community, but the lesson here for us is, I think, that strategic guidelines are definitely needed for engineering R and D. A plan would be too rigid.
If there is one factor that stands out in regard to the framework programme, it is that, next to energy, the money will be spent—or it is proposed that it should be spent—on promoting industrial competitiveness. Energy will consume 63 per cent. of the 600 million European units of account—which is the total of the programme—and industrial promotion will consume 18 per cent. The other point is that the framework programme is essentially a comprehensive programme, which includes demonstration as well as research and development; and the importance of demonstrators has already been drawn to our attention by the noble Viscount, Lord Montgomery. This means that the customer can then see the new product working.
As I say, a plan would be too rigid. In fact, the international field of which Brussels is just a part, is well supported by the Government, and this is something which is not really brought out in Table 7.1, on page 30 of the report. However, it is another way of investing in engineering R and D, because some of the money comes back into British companies. What is not really shown in Table 7.1, on page 30, is what this investment is, and what is spent in the United Kingdom.
Looking at the 1980 United Kingdom subscription to the European Space Agency, to CERN, and to EMBO, one sees that it totalled £71 million—and only the European Space Agency contribution is included

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in the figures under the heading of "Space" in Table 7.1. In addition to this, the investment in the EEC R and D sector can probably be equated to 25 per cent. of the 1981 spend of £124 million, which is around £31 million; so the total international spend comes to about £102 million. What comes back into the United Kingdom must be less than this, but I do not think it is much less. Some people say that it is about 50 per cent. less; but, whatever the figure, it is not enough, and I believe that we must strive to have the figures increased if we possibly can.
However, we are of course dependent upon the type of treaty that we have. The CERN Treaty has no mandate to encourage industry; only the mandate to encourage knowledge. On the other hand, the European Space Agency has a mandate to encourage industry. The international agencies have sophisticated procurement machinery, and British companies have to work hard for the business, but it shows, I think, the advantages of public purchasing power in setting standards of technical excellence.
I have not said anything about the universities, but I believe that their role is very important. The pursuit of knowledge is recognised, but I think that many of us in industry wish that they caught their prey earlier, and that it was not chosen in such a random fashion. Industry and university can get closer together through better communication, but in my mind there is no doubt that the science park has helped each of them to satisfy their aspirations: industry to get at the founts of knowledge, and universities to be more entrepreneurial.
But what alarms me slightly is to see that in the Cambridge science park, started by Trinity College, and now occupied by some 24 firms—all of which are listed in the brochure which the science park has published and circulated around the place—over 50 per cent. of the firms are foreign owned. Surely the intention is to see that British firms are making use of science parks, and I wonder whether there is a need for the vice-chancellors to look a little more carefully at the rules that they lay down for their tenants. Perhaps Dr. Sloman, who is chairman of the vice-chancellor's committee, will read in Hansard what I have said this evening about this matter, and I am sure that he will look at the question very carefully indeed.
The role of Government is more critical, because the intervention is more direct, but I believe that the machinery needs to be streamlined and perfected along the lines that have been proposed by the committee in its recommendations. The question about selectivity is important, and I think that the arguments put forward by the committee are very sound.
What I think must be remembered is that the ideas for technical advance are born in fertile minds, and that the contract research organisation often finds itself in a lead position on a technology, but because it has no source of manufacturing profits, it is without a partner to put up the balance of the money needed on top of the available Government support. I believe that this stregthens the case for the near-100 per cent. grant for important proposals. Furthermore, the normal assumption is that the approach would be coming from a company seeking "support for innovation" through the requirements boards, but I
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very much support the recommendation that they should take a more positive approach to promoting projects in key areas and should not just wait for proposals to come forward from industry.
I hope that this debate will set the scene for some years ahead, and I am grateful to the noble Lord, Lord Gregson, for introducing the Motion. What I think is clear is that a framework strategy for engineering R and D, including demonstration, which is designed to strengthen British industry, and which helps to generate saleable products for the markets at the right time, is a must. I hope that the Government's response will be encouraging, and that their resolve to make British industry adaptable, efficient and able to compete successfully is realised.
5.20 p.m.
Lord Spens: My Lords, I rise with some trepidation today to address you because I am not an engineer, nor a scientist. I feel very much the amateur among the professionals who have spoken. I find myself the mouthpiece of a Consortium on Planning Research that was formed only in the autumn of 1981. We decided fairly quickly to submit a paper to the Select Committee. It came rather late, and I am most grateful to the noble Lord, Lord Gregson, for accepting it. It appears in volume III on page 72.
The consortium consists of 18 members who are corporate planning directors or senior planning managers in public companies and nationalised industries. But they do not at present represent necessarily their companies' views. It is still all very experimental. The consortium is the brainchild of a university professor and two of these corporate planning directors. I was involved having originally consulted the university professor as to the possible effects of the development of micro-electronics on employment, since when we have kept in touch. He consulted me about the creating of the consortium.
I have written my own brief today although I was given two or three briefs by members of' the consortium. It is the only way that I can understand what I am about to say. I have been asked to stress the importance of, among other things, expert systems, testralogic and heuristics. I have delibertely used those words to illustrate what I think is a major problem that is arising. I refer to the problem of communication between the experts and laymen like you and me.
I give another example. According to the minutes of our meeting only a few days ago, we agreed to prepare a paper on structural framework for a national planning approach including such factors as the hierarchy of concepts, the need for adequate definition, the problems of objectives, and techniques for achieving flexibility. The consortium, as I say, came together only in the autumn of 1981 and was therefore not known to the Alvey Committee, set up in March 1982. Yet I do not think that I am boasting if I claim that the consortium represents, however unofficially, a forum for discussions of what Alvey refers to as IKBS, or intelligent knowledge based systems. I quote from chapter 4 paragraph 4.1 of Alvey on page 32:
"An intelligent knowledge based system is a system which uses inference to apply knowledge to perform a task. Such systems can be envisaged handling knowledge in many areas of human thought and

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activity from medical diagnosis to complex engineering design, from oil technology to agriculture, from military strategy to citizen's advice.".
I wish to emphasise the next sentence of this quote:
"The development of such knowledge based systems is widely regarded as the best means of expanding the application of information technology to activities which today's computing technologies cannot approach.".
Your Lordships' Select Committee supports the recommendations of the Alvey Committee which include IKBS in its programme. It was encouraging to hear the statement by the noble Lord, Lord Trefgarne, on 28th April when he said that the Government had accepted the Alvey Committee Report and were going to contribute to its financing. The consortium believes that it can contribute a bit to your Select Committee's conclusions and recommendations, in particular, the first mentioned by the noble Lord, Lord Gregson, relating to better use of resources.
I wish to emphasise speed and to give a personal example. The noble Lord, Lord Miles, in a maiden speech here on 19th June 1979, produced a microchip, for the first time, I think in this Chamber. The next day, in a debate on unemployment, I argued that the chip was going to create a lot of unemployment very quickly. That was only four years ago. I take another quote from Alvey on page 14:
"The rate of technological advance is so rapid that it is recokoned that around half the products which are on the market today did not exist three years ago".
The speed is absolutely fundamental at the moment. It is overtaking us, and we have to be able to cope with it. We are failing to realise some of the benefits that these modern tools are creating. Individual R and D operations are throwing up not only new advances in the particular industry concerned but also methods of obtaining those advances that could and should be shared by all of us. This needs co-ordination which can come through a consortium like ours provided that the companies concerned are prepared to allow the exchange of experiences of its members.
I am now going to stick my neck out and try to define those technical words that I used earlier. Expert systems are computer programmes designed to solve problems. They have built into them the necessary insight, logic and learning through memory to enable diagnosis, formulation of plans and taking of decisions. They may have been around for some time in individual offices without being recognised as something special. Their speciality is that they perform specialist tasks just like a human specialist, but they are at all times explicit and easily communicated to anyone else. For example, where a human expert has, say, "green fingers" he may not be able to explain to others the reasons why he does things. The expert system will do that. At any stage a system can produce probabilities as well as other possibilities.
I remember, at one of our early meetings, the representative from ICI talking about a new expert system that he was developing, and saying that he was testing it on the identification of birds and that it was working very well. You put into the system various observations about the shape, colour, or whatever, of a bird and eventually the probability that it was one bird rather than another came out from the system.
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The expert system may use testralogic to sift the available information, which can also be achieved sometimes by other means, first to discard that which is not pertinent and to bring forward only that which is still pertinent to the particular diagnosis. A "slimmed down" field of information will then be presented, as a result of which a decision can be taken.
For example, after the computer has been loaded with information, it may be asked questions to which each answer, however dressed up, will be either, yes or, no—the only thing the computer can do is to say, yes or, no. If three questions are asked in succession, there will be eight possible answers, but by using testralogic we can probably slim these down to not more than four, because the other four will not be pertinent to the series of questions.
Finally, heuristics will bring the human element into the operation, if used, because heuristics are the ad hoc rules of thumb or hypotheses that we use to make an intelligent guess at the solution, not necessarily always, but when the decision maker thinks he can afford so to do. I hope that I have got those definitions right.
The point of all this is that an expert system does not give away trade secrets if the relevant information has not been put into it. But the shape of that system might well, with very little modification, be adaptable to something entirely different. And this is where exchanges of experience in a consortium could produce better systems or systems which could be used for entirely different purposes.
I apologise if I have been giving a lecture on this matter but, as I have said, I have been trying to understand what I am trying to say! What I am leading to is a new concept of planning. Planning is nowadays a bit of a dirty word, specially for those who believe in leaving it to the market forces. But expert systems have made planning as we used to know it quite out of date. I should like to quote from our own consortium's paper which appears on page 74 of volume III. At paragraph 3.2 it says:
"we believe that one aspect of planning which may be inadequately conducted is the way in which both government and industry still appear, largely, to plan on a single line forecast basis, with perhaps certain contingency funds and provisions to cope with change. It could be of advantage if government were able or prepared to promote the technique of considering alternative futures, so that both they and companies could test the robustness of their strategies to change".
Modern planning techniques no longer have to use the rigidity of single line forecasting, but can introduce the ideas of alternative scenarios, with apparently incompatible views within the same policy framework, leaving the eventual decision to be taken only after one or more courses of action has proven to be dominating.
Thus, looking at the very top, the Chancellor of the Exchequer could have the views of the CBI, the TUC, the Institute of Directors and the National Federation of the Self-Employed and Small Businesses and anyone else you can think of, plus the various departmental views, all put into the computer and the computer would sift those views out according to the particular policies which he wants to use. Moreover, if that is done there should never be a case for the Government having to make a U-turn because it will have been indicated in the computer much earlier on.

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As a postscript to all that—and I hope that I am not being insulting to any one—I want to repeat a remark made to me very recently by a member of our consortium who found himself involved with the latelamented—although I do not know whether it is latelamented—Central Policy Review Staff. He said to me that the trouble with the CPRS was that it only used the tools of the kindergarten.
Other subjects at which our consortium has looked or is looking, include the availability of information. Is it produced in the most helpful way? Certainly a very recent circular from Her Majesty's Stationery Office on Business Data Packages is causing us some concern, and we are taking the matter up with HMSO. Another matter is the importance of adequate communications systems and their structuring, especially between Government and industry, and the use of strategic audits as a means of assessing the validity of various strategies.
A glance at the composition of the Alvey Committee and the many firms, universities and other bodies which it consulted, shows that there is an absence of industrial users with the exception of ICI. For example, none of the following members of our consortium was consulted: British Aerospace, British Shipbuilders, BNOC, BOC, Sperry Univac and Reed International. We have also liaised with the British Technology Group. They are all users of the new technology but they were not consulted by Alvey. We believe that a body such as our consortium has a place in this. I should like to suggest that our consortium provides a nucleus from which a body of consumers of the new advanced information technologies could be formed. It has already met some four or five times and has a programme of work to be developed; all it needs is some form of official recognition. I hope that the noble Lord the Chancellor of the Duchy of Lancaster will be able to say that he will recommend us to the Department of Industry where I think there is to be a new directorate set up to deal with this matter.
5.37 p.m.
Lord Bruce of Donington: My Lords, the House will be most grateful to my noble friend Lord Gregson for having so adequately summarised the principal portion of the report that has been produced by the Select Committee. The contents of the Select Committee's report are of very considerable importance to the nation as a whole at this time. This is perhaps underlined by the fact that there has been almost complete unanimity among those of your Lordships who have addressed the House this afternoon, because all noble Lords have been absolutely convinced of the importance and the extent of the work that has been accomplished by the committee.
The difficulty about reports of this kind is that they are so good and so comprehensive that the general public at large are very rarely informed of their contents. This report is in many ways sensational in that it underlines something of which perhaps the general public are not yet fully aware: first, the very serious state into which our manufacturing industry has fallen; secondly, how vital it is that our manufacturing industry be increased in its scope and activity; and, thirdly, the disastrous consequences that would follow if that were not to take place.
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One has no need to go into the figures again as regards the disastrous decline in manufacturing production in this country, particularly over the last four years, the decline of investment and the parlous state into which the nation has been placed as a result of this. Sometimes we tend to think (and in many ways quite properly so) of defence purely in terms of military, naval or, perhaps more recently, nuclear might, and we tend to give overriding priority to all expenditure of resources—both monetary and human, scientific and technical—in the defence sphere as being part of the natural order of things which strike at the very vitals of the nation's security. What we sometimes forget is that industry itself is a vital part of the country's defensive capability because, speaking in terms of conventional warfare, since nuclear warfare is unthinkable, one thing that the second world war proved is that a manufacturing base, a highly industrialised base, was indeed vital, and may have been decisive, in our ultimately achieving the victory that was gained with our allies. Therefore, the report emphasises the vital nature of the expansion of British industry, and indeed of the expansion of investment in British industry, of which of course research and development itself is an integral part.
The second vital point brought out by the report—one which tends to be obscured in a wealth of statistics that have been provided in the appendices but which nevertheless has been referred to in the report itself—is where we stand in the international league in devoting certain proportions of our resources to research and development. Perhaps I may remind those of your Lordships who were not on the Select Committee itself of the figures that were produced, which are reproduced at page 291 of Volume II of the committee's report. In regard to research and development our position in the league can readily be assimilated by looking at Appendix 2 on page 291 where the gross expenditure on R and D in terms of dollars per head of population is shown. That is one yardstick that is used. The figures are as follows: 114 dollars per head in the United Kingdom; 208 in the United States, 128 in France, 180 in Germany, 126 in Japan, 154 in Holland, 182 in Sweden, and 219 in Switzerland.
When it comes to personnel engaged in R and D, per 1,000 of the labour force, we find that the figure for the United Kingdom is 6.5; in the United States there is a provisional figure of 5.8 which covers research in science and engineering only so it is not strictly comparable; in France it is 9.8, in Germany 12.2, in Japan 10.4, in Holland 10.8, in Sweden 8.7 and in Switzerland 14.5.
I am not for one moment suggesting that either one or both of those criteria are the only criteria by which research and development should be judged. But I say, and I invite your Lordships to agree, that nevertheless they are an indication of the rather poor extent to which this country has devoted its resources to R and D as compared with our competitors. As my noble friend Lord Gregson pointed out in his opening remarks—and, indeed, other noble Lords referred to this—of the research and development that we do in fact incur, 81 per cent. is in respect of defence, with only a very minor amount—some 4 per cent., as is revealed in the report—devoted to industry outside aerospace and energy.

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This is a position of the utmost gravity and noble Lords should please be assured that I seek to focus on this not to gain any party advantage; I seek to draw attention to it because it is a problem which the Government must face, because they are likely to be the Government for the next four or perhaps five years; it is in the country's interests, in the interests of those of us on this side of the House and on that side and in the interests of the population at large that they tackle this problem, and tackle it thoroughly. It is also in everyone's interest that the Government understand the real nature of the problem and do not merely take the observations that are offered from all sides of the House as something to which a party political response has to be made.
My noble friend Lord Gregson made what I thought was a very constructive suggestion. He suggested that the Government ought to make a written response to this report and its annexed documents in order that their attitude may be made public and unequivocal. I reinforce that suggestion, not because I wish in any way to diminish the significance and the importance of the reply that will be given to this debate by the noble Lord, Lord Cockfield—we shall await his observations on the report and on the debate with the very greatest interest—but, without wishing to downgrade his reply in any way, because he may have prepared a good deal of it in advance, I still think that it was a very wise suggestion, and I hope the noble Lord will convey to his colleagues that the subject is of sufficient national importance for a considered reply to be given in detail by the Government to what is one of the most important and comprehensive reports that has been presented to your Lordships' House for some considerable time.
The Government find themselves in some difficulty. I am not trying to pick a party argument with the noble Lord. Essentially, the Government believe in the policy of free enterprise and have stated so publicly, and I take it that it is permissible to refer to it without offence. Fundamentally, they believe that if industry is sufficiently freed from all the shackles of Government and all the other restrictions, this is a problem which it ought to be solving itself and that Government ought not to be helping it at all. We know that, under the impact of the realities of the world as they exist, this ideological approach becomes blunted at the edges because the position becomes untenable.
Your Lordships will remember—and the noble Lord, Lord Cockfield, will remember it very well since he was the adviser to the then Chancellor of the Exchequer, Lord Barber—the taxation incentives, which have been referred to in this debate as being an aid to investment, being granted in the form of 100 per cent. capital allowances on capital expenditure incurred on plant and machinery, in which that part of capital expenditure spent on research and development was also included. For the first time, 100 per cent. capital allowances for tax purposes were given in respect of qualifying research and development, together with capital expenditure on plant of all kinds at that time.
Noble Lords will remember that the response from industry—not all industry, but industry by and large—was so abysmal that Mr. Edward Heath, the
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Prime Minister as he then was, addressed the Institute of Directors in August 1972 in bitter terms, and railed at them, saying, "We have given you all the incentives that we can and still you will not invest". The Government have, I think, assimilated the fact that, in spite of the forces which are supposed to be generated by enterprise, initiative, and thrift in industry and the inventive genius of our people, in practice that theory does not work and Government intervention becomes necessary.
However, it is not purely Government intervention in the sense of providing financial support that is required. I have no doubt that the noble Lord can produce, and possibly will—and the House will listen to him, as always, with interest and respect when he recites this—the amount of money that is being spent by Government in support of research and development. He may even be in a position to give the House particulars of future financial support which the Government are going to bring forward.
However, the real thing required from Government is not merely financial support. It first of all has to be financial support in respect of priorities, not merely acting as a stopgap in certain areas as and when difficulties appear. What is really lacking, as indeed the Select Committee points out, is a central strategy by the Government in furthering research and development in the United Kingdom. When I say "central strategy", I have in mind something to which I think the noble Earl, Lord Bessborough, referred obliquely when speaking about the experience of France. I am not referring particularly to the French Commissariat du Plan, but to its successor, and the whole ethos in the French Government which is directed to co-ordinating a drive in certain directions—not forcing industry, but supplying that necessary punch in policy which, after all, if I may put it to the noble Lord, is the prime function of Government.
In exactly the same way, if I may draw another example of which I am sure the noble Earl, Lord Bessborough, is aware, there is in Japan the Ministry of International Trade and Industry—MITI, as it is called—whose functions in co-ordinating the activities within Japan's mixed economy and in assisting dynamically to formulate a strategy for the whole of the nation in conjunction with its industrialists have been conspicuous in their success.
What I am venturing to put before your Lordships—and I am trying not to be dogmatic, but I feel it deeply—is that from this Government in their term of office, on the assumption that they are going to be here for their term of four to five years, what the nation requires, in the light of the parlous state into which very mistaken policies have pushed it, is now more than an amende honorable; it needs a real strategy. At the moment what we have is a strategy of cuts, cuts in all types of public expenditure—except of course on armaments; except of course on the armed forces; except of course on the police force; except of course on the Common Agricultural Policy, and one or two other favourite planned projects of the Government. A series of cuts. The noble Baroness, Lady Platt of Writtle, whose activities and expertise in the educational field are so well known, referred to the education aspects of the matter. What happened when

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the Government came to consider Aston and Salford, which play a vital part in the production of trained engineering personnel? They cut them.
Surely what we have to do in the national interest is not only to plan a strategy, but within that strategy to plan the priorities. So often one gets the impression—if the noble Lord will forgive me—of a series of packaged compromises being arrived at, usually dominated by the Treasury, in which all demands from the various departments for funds to sustain their own activities ultimately get into a Dutch auction without any really constructive thought being given to where planned public expenditure should take place. This is one area to which the Government should address themselves urgently.
One has a feeling that it was perhaps a mistake to abolish the Think Tank. Think Tanks can be awkward, in that they sometimes say "No" to Prime Ministers who do not like to be argued with. The Think Tank whose function is mainly to say "Yes" to what the Prime Minister proposes is not always the best thing. In this particular field, independent views would be welcome.
What we on this side of the House would ask for is a Government rethink of their own part in promoting research and development in this country. It should be a radical rethink which endeavours to look the facts in the face; which endeavours to draw the reasonable conclusions from them; which is prepared to take Parliament into the Government's confidence as to the decisions that they are going to reach, so that we can have a really constructive debate as to what ought to be done. With the expertise of individual Members of your Lordships' House, including those who have spoken this afternoon, so readily available, it may well be that the more specialised Members of your Lordships' House can be of considerable assistance to the Government in this.
This does not mean that management in private industry has no responsibilities, that it should not be required to make the effort that is so necessary and ought to be part of the overall Government strategy. Some noble Lords have referred to small and medium type businesses and to the handicaps under which they labour when it comes to questions of research and development. But they also have a responsibility, as anyone in the merchant banking or normal banking businesses well knows, although I am not in them myself. I am referring to lack of proper presentation to those who are prepared to provide finance for research and development; the lack of adequate forecast projections; the lack of any feedback from any market research that has been done, and the lack of any projected cash flows that are likely to ensue on the assumption that the forecasts are correct and that funds are provided.
Indeed, some of the larger firms also neglect a proper presentation of their case to Government departments and to sources of finance. They, too, have a responsibility. They also have this responsibility with which no Government can help them. As is generally known and as several of your Lordships have pointed out this afternoon, there is far too little use of production engineers in the research and development process, particularly at the stage which immediately follows after development into production. There is
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too little use of production engineers even at the invention design stage because there are several ways normally of designing, some of which result in a far cheaper product and some of which, without any improved performance, are complicated to manufacture and present service problems afterwards.
So there is the responsibility on private industry, the responsibility on management, but the responsibility on Government still remains. First, there is the responsibility to think out and then present the strategy, as they see it, to Parliament. Secondly, there is the responsibility to be quite sure that some of the decisions that are made in relation to economies in public expenditure do not, as in the case of education, strike once again at the very vitals which they are supposed to protect.
If the report presented by the Select Committee helps the Government to achieve that objective, as I sincerely hope it will, and if the Government respond positively not with slick answers, not in terms of propaganda, but with patient thought and equally patient presentation and comprehensive arguments, then the authors of this report will have done the nation a very great service indeed.
6.4 p.m.
The Chancellor of the Duchy of Lancaster (Lord Cockfield): My Lords, the Select Committee has produced a valuable and thoughtful report. I have listened with great interest to the speech of the noble Lord. Lord Gregson, who chaired the Committee and to the speeches of other noble Lords who have contributed to the debate this afternoon. The noble Lord, Lord Gregson, started by saying that he did not realise the wide interest which would be aroused by the Select Committee's inquiry. It is perhaps a tribute not only to the importance of the subject, but also to the Select Committee and to the noble Lord who chaired it, that the report should have aroused this wide interest.
Perhaps I might start by dealing with the speech of the noble Lord, Lord Bruce of Donington. The noble Lord seemed worried about the future prospects of this Government. Let me assure him that we shall be here not for the next four or five years but for many years beyond that, and I trust therefore that on that assurance he will sleep soundly in his bed tonight. The noble Lord referred to what he described as the disastrous decline of manufacturing industry in this country. This is not the right occasion on which to indulge in a general debate on the economic state of the country. We had that discussion during the debate on the humble Address, but when one is considering the position of manufacturing industry and its fortunes there are four relevant factors which we ought to keep in mind.
First, there is the impact of the recession from which all countries have suffered and from which, fortunately, we are gradually emerging. Secondly, there has been the excessive rise in costs in this country, particularly during the decade of the 1970s when our total gross national product went up by 350 per cent. while our output went up by only 17 per cent. In dealing with this matter also we are showing real signs of success. There has been a big increase in productivity in the last few years and the

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competitiveness of British industry has improved significantly.
Thirdly, there have been mistakes of Government policy in the years before 1979 and they are matters that we have also dealt with. Fourthly, in some areas there has been a lack of enterprise and a lack of quickness of adaptation to change on the part of industry itself. I do not wish to pursue these matters at greater length this evening. All I would say is that we live in a period of great changes. What we need is a determination to seize all the opportunities which present themselves in every field, to remove obstacles wherever we find them, to improve our productivity, to reduce our costs and to encourage and reward enterprise and initiative.
Perhaps with those introductory remarks I may turn specifically to the report of the Select Committee itself. We entirely accept that a healthy engineering industry, in common with other industries, must be backed by vigorous research and continuous product development if it is to remain competitive. We entirely support the Select Committee in its view that industrial research and development is best financed from the profits of industry, and industry needs a climate of confidence to encourage investment and innovation. Our policies are devoted to creating that climate, and we are succeeding.
While there is a broad agreement on objectives, the same cannot always be said of some of the specific proposals the Select Committee makes. Thus, the Select Committee has called for a national strategy for industry and technology and that approach has received some support from the debate this evening. The committee invites the Government to designate those sectors and technologies on which industry should concentrate. We cannot agree with this approach. Experience does not support the view that Government can successfully take decisions of this kind. Only industry has the intimate and detailed knowledge of the markets and of the opportunities. It is industry which will reap the rewards of success and pay the penalty of failure. Only industry can take the decisions needed.
However, there arc many areas where we share the Select Committee's approach. Government have a role to play and we have demonstrated our willingness to support the efforts of industry to adapt to new technology and develop new products and processes. This rÔle is particularly important where profitability is low and demand is reduced in the recession.
May I pick out a number of examples where Government have helped. First, this year the Department of Trade and Industry will spend over £300 million on industrial research and development. Over two-thirds of that money will go directly to industry. There is additional support under the provisions of the Industry Act for projects that will create or retain employment or encourage industry in the assisted areas. Much of this support benefits the engineering industry.
Second, the "Support for Innovation" programme. I was glad to see that the Select Committee has endorsed this. The programme has been strengthened and extended. The focus is on enabling technologies which can be applied across a wide range of industries
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and to a large number of products. The programmes can be deployed flexibly to support firms with worthwhile applications in any manufacturing sector. Last year the maximum rate of grant was increased from 25 per cent. to 33⅓ per cent. of eligible costs. The programme has now been extended to include grants for market assessments and help in setting up full-scale production.
Funding has been increased: a further £185 million has been added to the programme over the next three years. This includes £100 million allocated to the Small Engineering Firms Investment Scheme—a particularly successful scheme which the Government have reintroduced. We have also, as the committee would wish, greatly increased our support for industrial research and development. Help under the Science and Technology Act 1965 has quadrupled from £57 million in the last year of the Labour Government to £230 million in 1983/84. This is an increase of 135 per cent. in real terms.
A significant number of the Select Committee's recommendations are addressed to improving the interface between universities and industry. The Government agree with the Select Committee that the promotion of the science, engineering and technology departments in all kinds of higher education institutions is of fundamental importance. We pledged ourselves in our manifesto to,
"accelerate the transfer of technology from the university laboratory to the market place".
The Select Committee welcomed the study carried out by the Advisory Council for Applied Research and Development and the Advisory Board for the Research Councils. The report resulting from that study was published last week. The prime conclusion was that the initiative for forging new and productive links should lie mainly with the higher education institutions. The noble Lord, Lord Gregson, referred to the report and expressed some concern about it. The Government are considering carefully the recommendations made in that report, and conclusions will be published in due course.
The Select Committee has endorsed the findings of the Finniston Committee, which reported on the status and training of engineers. Following that report, Government facilitated the establishment of the Engineering Council; and other actions are in hand. In his Statement on the education and training of engineers in July 1981, the Secretary of State for Education and Science gave support to greater emphasis on engineering in schools. In certain cases, the Department of Education and Science can provide financial support for the development of links between schools and industry. The Department of Trade and Industry is actively promoting greater awareness of technology in schools—for example, through the "Micros for Schools" campaign.
The Government want to see engineering degree courses which are more in line with the needs of industry. The Secretary of State for Education and Science is encouraging the inclusion of practical experience so that future engineers are equipped to undertake engineering as it is practised in the real world of production.
Also, the Select Committee made several recommendations designed to stimulate the flow of

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private funds into research and development of new technology generally. The Government fully support this approach. The Committee pointed out that high interest rates were a disincentive to risk investment in research and development. They are of course a disincentive generally; and it has been a key objective of Government policy to bring interest rates down through prudent fiscal and monetary policies.
The Select Committee's suggestion that some development expenditure could be funded separately from the main balance sheet of a company is under active consideration by the financial institutions involved. As a matter of interest, the National Research Development Corporation, now part of the British Technology Group, has been connected for several years with off-balance-sheet funding of development expenditure.
Another Select Committee suggestion was that a development fund, offering tax incentives to investors, might be a desirable instrument for channelling private sector money into a range of high risk projects. The Business Expansion Scheme—the extension of the previous Business Start-up Scheme—could well provide many of the tax incentives for which the Select Committee is looking.
Perhaps, I may now refer to points which were made in a number of individual contributions. My noble friend Lord Bessborough made a very interesting and wide-ranging contribution. I fully support the points that he made about the need for international collaboration in technology. That collaboration must be fully guided by commercial considerations and the need for trade to follow the technological collaboration. The Government give a great deal of help in the setting up of the arrangements—for example, with Japan and with our Community partners—working closely with firms which are interested. We watch very carefully what governments in other countries are doing; and there are lessons that we can learn. But we must always be careful that we do not necessarily follow too blindly what other people are doing. The French, for example, are particularly skillful in presenting their programmes to best advantage without necessarily spending more money.
Collaboration within the European Community is of increasing importance. There are several interesting prospects now being discussed. My noble friend also asked whether I was satisfied with progress on, and funding in relation to, robotics. There is still a lot of ground to be made up in the United Kingdom; but there is now a growing awareness in British industry of the importance of this technology.
The Department of Trade and Industry has set up the Robots Advisory Service, and there is support for both the installation and the manufacture of robots. I hope that firms will make more use of the help that is on offer here. Increased use of robots is vital: they not only increase output but also raise quality. The countries with the largest populations of robots have the lowest levels of unemployment.
My noble friend drew attention to the Alvey programme. He will be pleased to hear that the programme has now been agreed and will be an important form of collaboration between the Department of Trade and Industry, the Ministry of Defence, the research councils and industry.
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The noble Lord, Lord Baker, commented on the Select Committee's recommendation not to support the proposal to set up a separate engineering research council but rather to look to the requirements boards to fulfil this role. The increasing emphasis given to engineering by the research council was marked last year by the change of name to the Science and Engineering Research Council. The Department of Trade and Industry now works increasingly closely with the Science and Engineering Research Council, and they are making many extremely successful joint programmes between the requirements boards and the councils.
My noble friend Lord Montgomery spoke of the funding of pilot models for feasibility demonstrations. This was recommended by the Select Committee as providing a means of ensuring the launching and continued updating of advanced technology projects. The Government agree with the committee on the value of demonstrations projects. In the field of energy, mentioned by my noble friend, they are already fulfilling a useful role. Demonstration projects have been widely used in industrial energy conservation through the energy conservation demonstration project schemes administered jointly by the Department of Trade and Industry and the Department of Energy.
The noble Lord, Lord Kings Norton, drew attention in a most interesting contribution to the importance of research and development into accurate measurement, and to the valuable work of the National Physical Laboratory. The standing of the NFL, both nationally and internationally, is very high indeed, and deservedly so. The laboratory has the largest share (some 35 per cent.) of the resources devoted to the laboratories of the Department of Trade and Industry, and the department takes advice from the strong team of industrialists and academics on its requirements board to make sure that the programmes are adequate and relevant to the needs of industry. But it is important that industry should itself be involved in the development of measurement technology and in calibration. Routine calibration is increasingly provided through the British calibratiion service, in which NPL accredits over 100 laboratories nationwide to undertake calibrations to a consistent and accurate standard. This method of operation reduces the resources needed in government so that government scientists can concentrate on the more difficult and demanding measurements.
My noble friend Lady Platt of Writtle asked about the small firms technical inquiry service. I am pleased to be able to tell her that this scheme has been an outstanding success, with over 2,500 firms having used the service. The Production Engineering Research Association has played an important part in that success—a matter in which the noble Lord, Lord Gregson, can take justifiable pride.
My noble friend and others drew attention to the importance of spin-off, not just from defence research but also from all areas of government research. I can assure your Lordships that the Government attach great importance to getting the best value from all research, and we are giving renewed attention to this particular topic. Careful study of what other countries

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do, notably the United States, suggests, however, that, pound for pound, they do no better than ourselves.
The noble Lord, Lord Hunter of Newington, spoke with concern of the funding of education and research, and the implications for engineering. Restraints on funding will of course lead to some pressure on research activity. However, the Government have shown themselves ready to inject additional funds where particular needs are identified. Examples of this are the extra resources made available to help universities attract new blood, particularly in the sciences and technology, and to enhance research and teaching on subjects related to information technology. This will strengthen research in the departments concerned.
My noble friend Lord Ironside drew particular attention to the importance of design. His remarks are particularly apposite, since this is Design for Profit Year; and I draw your Lordships' attention to the campaign now being run by the Department of Trade and Industry, with support available for small companies for design consultancy.
The noble Lord, Lord Spens, referred to a research and development consortium which had been formed in 1981 and which made a late written submission to the Select Committee. Those concerned with the implementation of the recommendations of the Alvey Report will be taking expert advice when and where it proves appropriate. When decisions on this are taken, I am sure that the experts in the fields of advanced information technology mentioned by the noble Lord, Lord Spens, will be considered.
I have not been able to answer every single point which has been raised in the debate but I assure your Lordships that everything that has been said will be most carefully considered and taken into account. The Government will be formally responding to the Select Committee's report. Preparation of the response is well advanced and should be available very shortly. In the meantime perhaps I may conclude by making this one brief comment. The success of a nation in material affairs, in its economy and its political institutions, is a reflection of its qualities of mind, its intellect, imagination and courage. Research and development, whether in the universities or industry, is one of the channels through which those qualities are harnessed to our material needs. The report of the Select Committee is an important contribution in that direction and is to be much welcomed, not least on that account.
6.30 p.m.
Lord Gregson: My Lords, may I first thank the noble Lord the Chancellor of the Duchy of Lancaster for that reply on behalf of the Government. May I say on behalf of the Select Committee that we look forward with some considerable interest to the detailed reply which will eventually be issued by the Government. I thank noble Lords who have taken part in the debate for their contributions on this subject. It is significant that a report of this nature, which I consider to be of considerable importance, could be debated at the level at which it has been debated this afternoon only within
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this building. In effect, that points to the value of this Chamber in discussing these subjects to that degree. I thank all noble Lords who have taken part.
On Question, Motion agreed to.
House adjourned at twenty-nine minutes before seven o'clock.

  NORTHERN IRELAND: JOB CREATION AND LOSSES
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  NORTHERN IRELAND: ACTION FOR COMMUNITY EMPLOYMENT SCHEME
  THE CIVIL SERVICE: SECONDMENTS
  THE CIVIL SERVICE: SECONDMENTS
  FURTHER EDUCATION
  FURTHER EDUCATION