Sitting of 11 July 1983

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS
  LLOYDS BOWMAKER BILL [Lords] (By Order)
  Read a Second time and committed.
  STANDARD CHARTERED MERCHANT BANK BILL (By Order)
  Read a Second time and referred to the Examiners of Petitions for Private Bills.
Oral Answers to Questions
  TRANSPORT

    Heavy Lorries (Rottingdean)
    Mr. Andrew Bowdenasked the Secretary of State for Transport if he will take action to prevent heavy lorries from using the section of the A259 at the Rottingdean village intersection on the road between Brighton and Newhaven.
    The Under-Secretary of State for Transport (Mrs. Lynda Chalker): The A259 at this point is a principal road for which East Sussex county council is the highway authority. It has extensive powers to keep lorries away from roads which are not suitable for them, but the county council must decide whether to use those powers.
    Mr. Bowden: I thank my hon. Friend for her reply. Is she aware that last month a lorry coming down the hill into Rottingdean crashed into nine cars in a public car park and that it was only a miracle that there was not human slaughter on a big scale? Will she urge the county council to take action rapidly?
    Mrs. Chalker: Yes, I am aware of the serious accident in June. I remind my hon. Friend that heavy goods vehicles, which sometimes come down that road far too fast, are signposted in Newhaven to take the A26 trunk road.

    Rear Seat Belts
    Mr. Jannerasked the Secretary of State for Transport whether he will introduce legislation requiring all new cars to have anchor points for rear seat belts.
    Mrs. Chalker: They have been required on new cars manufactured since 1 October 1981.
    Mr. Janner: In view of the massive saving of life that has resulted from the compulsory wearing of seat belts in
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    the front seats of vehicles, will the Minister undertake to introduce equivalent legislation to save the lives of people travelling in the rear seats?
    Mrs. Chalker: Although there has been a most welcome and notable saving of lives from the compulsory wearing of front seat belts, we should be careful not to predict too soon exactly how much effect that has had. Now that the anchorages for rear selt belts are provided and we already have powers to require the fitting of a lap or shoulder belt, it is a matter of concern that we get the question of fitments right. We are discussing that matter with other European countries. After that, there is the question whether rear seat belts should be worn compulsorily or voluntarily.
    Mr. Greenway: Has my hon. Friend heard of the man who was so concerned for his own safety that he stayed in bed until he died of starvation? Will she ensure that no compulsory rear seat belts are introduced in the interests of spurious safety unless it is completely proven that lives will be saved in that way, and cut out some of the silly nannying that is taking place?
    Mrs. Chalker: I do not think that I am qualified to speak on the first part of my hon. Friend's question. On the second part, the use of rear seat belts, which has been raised many times before in the House, is something on which we should proceed with all caution, but let us first get the fitting and the type of belts correct.
    Mr. Anderson: Is lot the argument "with all caution" precisely the one that was used year after year on the compulsory wearing of front seat belts? If, after a few years, even the Government are convinced that there is a direct correlation between deaths and the non-wearing of front seat belts, will they seriously consider making them compulsory for the rear seats?
    Mrs. Chalker: In no way do I wish to discourage the saving of lives. As the House knows, I am fully in favour of the wearing of seat belts whenever they are fitted in a vehicle. However, the House should be careful not to draw firm conclusions from just two months' figures, which are the only figures that we have to go on at present.
    Mr. Bermingham: Does the Minister agree that the fitting of rear seat belts would require certain design features to be considered? Will the Minister give consideration to the type of seat belts that should he fitted—for example, the type fitted in the front seats? Is he aware that people have been spun through the current design of belt when vehicles have been hit from the back?
    Mrs. Chalker: I understand the hon. Gentleman's concern, but the option between lap and shoulder belts in the rear requires us to consult further with our European neighbours and the motor industry before coming to a decision, as well as waiting until we have gathered a little more information on the results of the compulsory wearing of front seat belts.
    Mr. Janner: On a point of order, Mr. Speaker. In view of the sadly delaying and unsatisfactory nature of that reply, I give notice that I shall seek to raise this matter on the Adjournment of the House.

    British Airways
    Mr. Robert Atkinsasked the Secretary of State for Transport what consultations he has had or intends to have with British independent airlines in connection with the proposed privatisation of British Airways.
    Mr. Stan Thorneasked the Secretary of State for Transport whether he will meet management and trade unions within British Airways to discuss future ownership of the organisation.
    The Secretary of State for Transport (Mr. Tom King): The Government intend to privatise British Airways as soon as practicable. I have already discussed the future of British Airways with the airlines chairman and chief executive and I look forward to meeting other members of the board and staff of British Airways, as well as representatives of British independent airlines.
    Mr. Atkins: Is my right hon. Friend aware that many of the leaders of private airlines in this country—British Caledonian and Dan Air to name but two — would warmly welcome the denationalisation of British Airways, but would take it gravely amiss if it were to happen too soon? Is he further aware that they believe that at least two years are required for British Airways to return to profit and for a proper company to be put on the market, bearing in mind that they have had no subsidy during recent difficult years?
    Mr. King: I look forward to meeting representatives of British independent airlines. I recognise fully, as my hon. Friend fairly says, that they have views on the matter, and I shall listen to them carefully. While we are committed to the move, we must consider its impact on the independent airlines.
    Mr. Stan Thorne: As there is increasing support within Government circles for ballots, will the Minister assure the House that any privatisation procedure will include a ballot of all the members of British Airways?
    Mr. King: I am glad to say that we have just had the largest possible ballot — a national ballot — on this matter. I have in hand our manifesto, in which privatisation was carefully spelt out, and it received warm endorsement, as the hon. Gentleman will know.
    Mr. Robert Hughes: May I congratulate the Secretary of State on at least one point—on adopting that part of Labour party transport policy that includes the transfer of shipping and aviation to the Ministry of Transport? May I assure the right hon. Gentleman that if he follows the Labour party's integrated transport policy he will have every support from the Opposition?

    Will the right hon. Gentleman give an assurance, first, that British Airways will be kept intact as an airline and, secondly, that in the following two years he will not pour Government money into the airline to make it profitable in order to hand it over at cheap rates to his friends in the City?
    Mr. King: I am grateful to the hon. Gentleman for his opening comments. I did not organise the arrangements myself. That was done by my right hon. Friend the Prime Minister, so I shall pass his congratulations on to her.
    I note the hon. Gentleman's comments on the arrangements for privatisation. As my hon. Friend the Member for Ribble, South (Mr. Atkins) pointed out,
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    further stages are necessary. There has only recently been a return to profitability. We shall have to consider these matters, including some of the hon. Gentleman's points.

    East Coast Railway Electrification
    Mr. Snapeasked the Secretary of State for Transport when he will respond to British Rail's proposal for electrification of the east coast main line.
    The Under-Secretary of State for Transport (Mr. David Mitchell): We shall do so when British Rail has produced an acceptable plan showing how it will achieve fully commercial operation of its inter-city business.
    Mr. Snape: Is the Minister aware that it is now three years and as many Secretaries of State for Transport since the promise was first made to electrify the east coast main line? Is he further aware that, in those three years, the railway unions have co-operated in the loss of a further 25,000 jobs within the industry? Finally, is he aware that further deceit and delay by the Government will lead to an even further collapse in the relationship between management and the railway unions? Is it not time that the Government fulfilled at least one of their long-outstanding pledges?
    Mr. Mitchell: It may be three years since the first application was made, but we are expecting the plan from British Rail later this year which will enable us to take a decision.
    Sir Bernard Braine: Whenever my hon. Friend responds to British Rail's proposals for the electrification of the east coast route, will he ask a few searching questions about the lack of proper rolling stock and other shortcomings on the existing electrified commuter lines serving south Essex?
    Mr. Mitchell: I am meeting the chief executive of British Rail tomorrow and I shall bear my hon. Friend's comments in mind.
    Mr. Ron Lewis: As the Government have not come to a decision on the electrification on the east coast line, has the Minister received a proposal from British Rail to close the Carlisle-Settle line and, if so, will he resist it?
    Mr. Mitchell: I have received no such proposal.
    Dr. Mawhinney: Does my hon. Friend accept that the electrification of the main east coast line is a high priority for the railway industry? Is he willing to tell the chief executive of British Rail that the Government are becoming tired of the delay by the British Railways Board in producing a commercially viable paper which the Government can consider and to which, I hope, they can react favourably?
    Mr. Mitchell: I shall bear in mind my hon. Friend's point, but I expect to receive the paper before very long.
    Mr. Robert C. Brown: Is the Minister aware that it is many years since the colossal undertaking of raising all the bridges on the east coast line was put in hand in preparation for electrification? Is he further aware that, but for the intervention of the oil lobby in the House and outside, electrification would have been carried out many years ago? Will the Secretary of State stop procrastinating and give a decision now?
    Mr. Mitchell: I was not aware of the raising of the bridges and I am grateful to the hon. Gentleman for

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    drawing that to my attention. With regard to speed, we are waiting for British Rail. As soon as the paper arrives we shall be happy to deal with it.
    Mr. Adley: Will my hon. Friend bear in mind that the views expressed by the hon. Member for West Bromwich, East (Mr. Snape) are shared by many Conservative Members? Is he further aware that many new Members hope that the Government will show that they recognise the vital role that the railways have to play in the country's transport infrastructure? As a start, will my hon. Friend at least accept the point that the unions, however reluctantly, have in the past three years taken many of the steps that the Government have urged on them and that the Government should now respond to the report on electrification?
    Mr. Mitchell: I can assure my hon. Friend that I fully accept the vital role that British Rail plays in the transport policy of this country. We have received a request to meet a deputation from the NUR. We shall be glad to meet it and we look forward to doing so.
    Mr. Stott: In answer to the hon. Member for Peterborough (Dr. Mawhinney) is the Minister aware that one of the reasons for the continuous vacillation on the proposal for the electrification of the east coast line is the unacceptable conditions that the Government are placing on British Rail? Is the Minister now telling the House that he has not yet received on his desk a submission from British Rail for money to electrify the east coast main line? If he has not yet received that submission, the Minister will be aware that the rolling stock—the diesel locomotive rolling stock—that is currently used on the east coast main line may soon have to be renewed. That is a crucial decision that must be taken by British Rail. Does he agree that the sooner his Department gets off its knees and starts answering questions on this matter, the sooner British Rail will be in a better position to electrify the main line and ensure that further problems do not ensue?
    Mr. Mitchell: Perhaps the hon. Gentleman did not hear me say that where British Rail has produced an acceptable plan showing how it will achieve fully commercial operation of its inter-city business we shall be happy to go forward with the proposals on electrification.

    M11 (Loughton Access)
    Sir John Biggs-Davisonasked the Secretary of State for Transport what are the objections to providing access in Loughton to the Cambridge-bound carriageway of the M11.
    Mrs. Chalker: There is no clear traffic demand at present but we shall review the position after the M25 round the north-east of London is complete.
    Sir John Biggs-Davison: Is my hon. Friend aware that demand is frequently expressed to me? In due course, will she be prepared to discuss that access with those concerned?
    Mrs. Chalker: I am aware that there has been some demand for a full interchange at that point on the M11. That demand has been opposed in previous inquiries by the county council and the district council on the grounds that it would attract much more traffic into local unsuitable
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    roads and that we should await completion of the northeast quadrant of the M25 with an AI21 interchange before reaching a decision. Of course, I shall be prepared to meet interested parties at any time.

    Hastings-Tonbridge Railway Line
    Mr. Warrenasked the Secretary of State for Transport when he will announce a decision or, the form of improvements to the Hastings-Tonbridge railway line.
    Mr. David Mitchell: We hope to announce a decision shortly.
    Mr. Warren: I hope that "shortly" is in the near future. Although I am grateful to my hon. Friend for the personal interest that he has shown in the subject and the meetings that he has held with interested parties, will he confirm that he recognises that the improvement of that line is essential if the area is to build up its industry and employment? Is he aware that the area has been sadly neglected by successive Governments for the past 30 years?
    Mr. Mitchell: I fully recognise that the improvement of the line is wrapped up with the future of Hastings as a business growth area. I received a deputation that my hon. Friend brought to see me last week. It presented a formidable case for early investment in the line. I have taken that fully on board.
    Mr. Spearing: Does the Minister agree that one of the options for that line is to electrify between Tunbridge Wells and Hastings? in that event, how would le define a fully commercial return as a percentage of capital?
    Mr. Mitchell: There are many options for improving that line. Electrification is just one. We shall be looking for——
    Mr. Spearing: A miracle.
    Mr. Mitchell: If the hon. Gentleman wants a specific rate of return, perhaps, he would like to table a question.
    Sir Geoffrey Johnson Smith: Is my hon. Friend aware that the line is important not simply because of Hastings? It runs through many constituencies and is vital to a large part of the south-east region.
    Mr. Mitchell: My hon. Friend is right. Among the deputation that I received were representatives from various towns all the way from Hastings to Tunbridge Wells. I am fully aware of the line's importance to the area.
    Mr. Robert Hughes: Will the Minister assure us that the commercial criteria that will be applied to the Hastings line will be exactly the same as those that are applied to the east coast main line?
    Mr. Mitchell: No, because it is not an inter-city line.

    Grant-related Expenditure (Roads)
    Mr. Woodallasked the Secretary of State for Transport if he will consider reviewing the basis upon which the road element of grant-related expenditure is determined from per capita to the needs of the area or road concerned.
    Mrs. Chalker: A joint central-local government working group is currently looking at possible alternatives

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    to the present grant-related expenditure for road maintenance. For capital expenditure on roads, the grant-related expenditure is directly related to the transport needs of the areas. It is derived from the amount of each authority's bid for capital accepted for transport supplementary grant.
    Mr. Woodall: Is the Minister aware that many highways and roads are still suffering from the ravages of the severe winter of two and a half years ago? Is it not time that the Government gave road users a fairer deal in response to the massive amount of money that they give to the Government by way of licensing fees and taxation? May we have a better deal and better roads?
    Mrs. Chalker: The hon. Gentleman knows that we have not had hypothecated taxation in Britain since 1935. This year's spending on local road maintenance is 22 per cent. above what it was in 1981–82. Expenditure has increased in each of the past three years. West Yorkshire should look to the fact that it has emphasised revenue support for buses. It must decide whether it needs to increase revenue support for buses by 17 per cent. as it has — it has also increased capital expenditure by 18 per cent.—or to spend the money on road maintenance.
    Mr. Fry: Does my hon. Friend agree that, under existing policy, the quantity of new road building and improvement in Greater London has been pitiful? Will she note the report of the Select Committee on Transport, which commends a crash programme of construction and improvement if London is to be fit for visitors and to move around in, especially because of the increasing importance of road communications and the transport industry?
    Mrs. Chalker: My hon. Friend knows that we are well aware of the need for road building in Greater London. We are taking the Select Committee's recommendations fully into account.
    Mr. Robert C. Brown: Is the Minister aware that our principal roads are falling into disrepair at an alarming rate through lack of maintenance which is largely the result of the Government's cheese-paring? Does she agree that we need an emergency programme if we are not to lose all the advantages of saving lives by compelling the wearing of seat belts, because motorists will swerve to avoid the large potholes that are now to be found in all our major roads?
    Mrs. Chalker: One of the problems of spending on road maintenance is the high variability of its cost as between different local authorities. That is why we are trying to create a code of good practice for road maintenance to ensure that every county gets the best value for money. We are asking counties to concentrate their resources on the roads that are most in need. Many of the decisions about where money is spent are in the hands of the counties.
    Sir Peter Emery: When my hon. Friend examines grant-related expenditure, will she consider city, town and county authorities diverting heavy lorries out of the centres of towns? Will she encourage them to maintain roads properly and to use maintenance grants to find ways of keeping heavy lorries out of the centres of built-up areas?
    Mrs. Chalker: My hon. Friend knows that county councils have considerable powers to re-route heavy goods vehicles. They must take into account the state of the roads on which they re-route such vehicles. We have made
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    substantial increases in our bypass programme so that towns can be saved from the ravages of heavy goods vehicles. It is up to the counties to consider the suitability of alternative routes before taking powers to direct heavy goods vehicles on to them.
    Mr. Snape: Does the Minister believe that it is possible to drive from Birmingham to London on a summer Saturday in less than three and a half hours without being delayed by miles of motorway that is cordoned off for road maintenance? Does she agree that no maintenance seems to be done at weekends as those doing it appear to regard it as a quaint form of outdoor relief?
    Mrs. Chalker: The hon. Gentleman knows full well that maintenance on our oldest motorways is necessary to conserve our best assets. He also knows that maintenance must be done in better weather, otherwise the money is wasted. If he is so seriously delayed, I am surprised that he has not taken a train.

    New Road Construction
    Mr. Knoxasked the Secretary of State for Transport how much has been spent on new road construction in each of the past three years at constant prices.
    Mrs. Chalker: At average 1981–82 prices, expenditure on new construction of motorways and trunk roads in England was £404 million in 1980–81, £447 million in 1981–82 and £515 million in 1982–83. The corresponding expenditure figures for local roads are £465 million, £375 million and £365 million. Figures for 1982–83 are still provisional.
    Mr. Knox: As the Government aim to improve industrial efficiency, and as a better road system would contribute to that, does my hon. Friend agree that we should spend far more on new road construction than has recently been the case?
    Mrs. Chalker: My hon. Friend will be aware that we are now doing far better in new road construction and structural maintenance to keep our older roads and motorways in good condition. He will also be aware that we took an extra £45 million in the Supplementary Estimates last year to increase trunk road spending. We shall maintain that progress.
    Mr. Campbell-Savours: If in Cumbria substantial economies can be made if the county council rather than private consultants acts as road construction agents, will the hon. Lady favour the county authority?
    Mrs. Chalker: I am not sure whether I entirely follow the hon. Gentleman's drift, for the simple reason that the planning of roads by many counties is not more cost-effective or cheaper than putting the work out to consultants. However, in general the policy is that where a county council that has done the preparation work has a specific know-how, it will often continue the preparation work for that Department. Where there is no such expertise, the job, if it can be done as well, or better, will go to the consulting engineers.
    Mr. Higgins: As some new road construction has been held up in the past because of an insufficient pool of projects that had completed planning and other

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    procedures, will my hon. Friend give an assurance that in future there will always be a sufficient pool and allocate resources to achieve that objective?
    Mrs. Chalker: My right hon. Friend is well aware that in the last 18 months I have sought to add to the pool so that there are plenty of schemes. That is why last October we added 21 schemes to the pool, and in May this year I announced an additional 43 schemes so that these would be ready as soon as resources were available to build them. As my right hon. Friend is aware, we are now building more roads with fewer resources than we were two or three years ago.
    Mr. Moate: Are the Government prepared to look sympathetically at proposals for new road construction financed by the private sector?
    Mrs. Chalker: Indeed. We are at present looking at this with my right hon. Friend the Chancellor of the Exchequer.
    Mr. Parris: The figures given by my hon. Friend show a strange divergence between central Government spending, which is rising, and local spending, which is falling. What can she do to remedy that?
    Mrs. Chalker: My hon. Friend may be aware that we have been discussing the possibility of giving local government flexibility to spend its capital allocation on structural maintenance. We are about to consult the local authorities so that they may use their capital allocation for the maintenance of good existing roads, with a far better road surface, as an alternative to embarking necessarily on vast new roads. That proposal is just about to go out to consultation.
    Mr. Robert Hughes: How is the road building programme affected by the Chancellor of the Exchequer's cuts, and how soon will we know that information?
    Mrs. Chalker: I can give the hon. Gentleman the answer right away. I intend to absorb the 2 per cent. savings within the management of the trunk road construction and maintenance programme without affecting the impetus of the national motorway building programme.

    British Airports Authority
    Mr. Haselhurstasked the Secretary of State for Transport whether it is his intention to privatise the British Airports Authority.
    Mr. Tom King: We intend, in accordance with our manifesto commitments, to introduce private capital into the British Airports Authority. I shall be discussing this more fully with the chairman of the authority and considering how best this might be achieved.
    Mr. Haselhurst: Does my right hon. Friend accept that this policy, if confirmed by the public inquiry, could have a profound effect on the Government's other policy of providing extra capacity for airports in the south-east?
    Mr. King: As my hon. Friend knows probably better than any other hon. Member, that inquiry has just completed its hearings and it would not, therefore, be proper of me to comment in advance of the inspector's report. However, my hon. Friend and I stood on the same manifesto to encourage the introduction of private capital into Britain's airports, and that is what we shall seek to do.

    Seat Belts (Casualty Figures)
    Sir Dudley Smithasked the Secretary of State for Transport whether he is yet able to assess the effect of the compulsory wearing of seat belts on road casualty figures.
    Mr. Tom King: Deaths and serious injuries to front seat occupants of cars and light vans in the first two months of compulsory seat belt wearing were down by 25 per cent. on the same period a year ago. That is equivalent to a saving of 1,100 fatal and serious casualties. It is, of course, too early to assess the full effects, but it clearly looks most encouraging.
    Sir Dudley Smith: I thank my right hon. Friend for that interesting reply. Have his Department and the police had any problems in enforcing these regulations?
    Mr. King: We have no national figures, but there have been a limited number of prosecutions and a large number of warnings. It is most encouraging that, without great public complaint of aggressive interference by the police, the latest figures available to my Department show that the number of front seat passengers and drivers now using seat belts has increased from 40 to 95 per cent.
    Mr. Jessel: Is my right hon. Friend aware that those of us who over the years fought to introduce this change now feel totally, completely and utterly vindicated?
    Mr. King: It is too early to draw absolutely clear conclusions. However, I have said specifically that the figures are most encouraging. We shall watch them carefully, because the savings in life, hardship and distress that appear to have resulted from this change should be welcomed by everyone.

    Roads Expenditure
    Mr. Fryasked the Secretary of State for Transport if, in view of the underspending on road capital works by local authorities in 1982–83, he has made any recommendations to local authorities on the reclassification of spending on major structural maintenance as capital expenditure as now adopted for trunk roads.
    Mrs. Chalker: I shall shortly be consulting the local authority associations on extending this reclassification to local roads.
    Mr. Fry: I welcome my hon. Friend's statement. How far have discussions gone towards adopting the same system as is used in Wales, of restricting TSG to capital projects only to ensure that sufficient capital projects are completed?
    Mrs. Chalker: Discussions are at present going on in the grants working party, and as that has not yet reached any conclusions it would be premature of me to go further into this.

    Port of London Authority
    Mr. Gouldasked the Secretary of State for Transport what recent communications he has had with the director of the Port of London Authority.
    Mr. Tom King: I have had recent meetings with both the chairman and chief executive of the Port of London Authority.
    Mr. Gould: Is the Secretary of State aware that the chief executive recently wrote to all employees of the PLA

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    on 20 June warning them that some residual operations, even those that are currently making a profit, will have to close? Will he assure the House that that letter was not written in pursuance of any directive from him?
    Mr. King: It was written in pursuance of the chief executive's own letter of 17 May, in which he pointed out that
    "The PLA is in financial crisis. The eight week strike by PLA dockers has had a disastrous effect … The PLA can never be the same again."
    As the hon. Gentleman now represents Dagenham, he will know that when the chief executive wrote his letter of 20 June, after the dockers went back to work, the tallymen then came out on strike. I am extremely concerned about the situation at the PLA, because no undertaking in the land can survive that sort of industrial action and expect to remain in business.
    Mr. Robert Atkins: Has my right hon. Friend had any discussions with the PLA about the proposal to have a STOVL airport along the river? If so, what was the outcome?
    Mr. King: My hon. Friend is aware that that is at present the subject of a planning application, and the recent demonstration was in the presence of an inspector. It would, therefore, be quite wrong for me to comment further at this stage.
    Mr. Spearing: I agree with the Secretary of State that the effects of industrial action, whatever its cause, justification or lack of justification, are very much to be deplored. However, will he now answer the question of my hon. Friend the Member for Dagenham (Mr. Gould) about any directions that he may have given? Is it not extraordinary that operations that are currently profitable might have to be closed for fear of future loss?
    Mr. King: The hon. Gentleman cannot pick out an odd item and say that it is currently profitable, because as the chief executive told all PLA employees:
    "The PLA is in financial crisis."
    That is no understatement. That letter was written on 17 May, and the tragedy is that a third of the traffic that went to the Port of London and Tilbury has now gone elsewhere. The situation is extremely grave. We have given no fresh directions to the chief executive or the chairman. We are trying to see how this grave situation can be tackled sensibly.
    Mr. Hill: Disregarding the problems of the PLA, and taking in all ports, does my right hon. Friend agree that one of the major difficulties for employers and ancillary workers is the incredible national dock labour scheme? Will there not be a review of that during the lifetime of this Parliament? Will not my right hon. Friend take action against dockers who have jobs for life, whether or not they work?
    Mr. King: My hon. Friend will be aware that it is not just the dock labour scheme, but the interaction of the Jones-Aldington agreement on the dock labour scheme which introduces some of the problems of which employers have spoken. He will also know that the dock labour scheme is a matter for my right hon. Friend the Secretary of State for Employment, but I understand why he has raised this matter on this occasion.

    Coach Safety
    Mr. Campbell-Savoursasked the Secretary of State for Transport whether he will take steps to improve coach safety on motorways.
    Mrs. Chalker: Yes. The safety record has been very good, but, because of our grave concern over recent accidents, we are taking steps to improve standards of both driving and vehicle construction.
    Mr. Campbell-Savours: Is there not some evidence that some coach drivers are being pressurised by coach operators to keep to unrealistic timetables to enable them to compete with British Rail services as a result of the Transport Act 1980? Instead of equivocating on this matter, as she has done in a number of written replies to parliamentary questions, will the hon. Lady introduce a 60 mph limit on British motorways to prevent coaches travelling at as much as 80 mph and speeding past those other road users who keep within the law?
    Mrs. Chalker: There is no evidence for what the hon. Gentleman has said. Operators are responsible not only for the timetabling of their routes but for the fitness of their drivers. As the hon. Gentleman knows, there is already a 70 mph limit. Last week I met the officers of the traffic committee of the Association of Chief Police Officers to discuss this, and its enforcement, and this week I shall be meeting representatives of the Bus and Coach Council, the Transport and General Workers Union and the National Bus Company to discuss keeping within the law and making sure that safety standards on British coaches are maintained.

  ATTORNEY-GENERAL

    Defamation (Report)
    Mr. Rymanasked the Attorney-General if he will introduce legislation to implement the recommendations of the report of the committee on defamation chaired by Mr. Justice Faulks (Cmnd. 5909); and if he will make a statement.
    The Attorney-General (Sir Michael Havers): No such legislation is at present contemplated.
    Mr. Ryman: Does the Attorney-General agree with the committee's criteria as to the purpose of the law of defamation, which is to establish a proper balance between the right of the individual to his reputation and the preservation of the right of freedom of speech? As the committee reported as long ago as March 1975, does he agree that the existing law contains many anomalies, and will he undertake to introduce legislation to amend the law contained in the Defamation Act 1952, as recommended by the committee? Can he give any undertaking that legislation will be introduced in this Parliament?
    The Attorney-General: I can give no such undertaking. The report had about 10 main recommendations, not of the greatest importance. There has been little pressure from any quarter for the implementation of the report, which, on the whole, favours more libel proceedings. I do not see that there is sufficient priority for it to gain a place in the legislative programme.
    Mr. Archer: As Faulks on defamation, much of Younger on privacy, Franks on official secrets and half of

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    Phillimore on contempt are all accumulating a shroud of dust, and bearing in mind that there has been no obvious reaction by the press to the report of the Press Council last February on controls on cheque-book journalism, and remembering the recent debates on the right of reply and the behaviour of much of the press since the general election, is it not high time for a full public inquiry into the whole of the law relating to the press?
    The Attorney-General: That question covers a wide range of topics and, as the right hon. and learned Gentleman will remember, a Contempt of Court Act was enacted in the last Parliament. These matters are under discussion, but there was little reaction to the Faulks report.

    Legal Aid
    Ms. Harmanasked the Attorney-General if Her Majesty's Government will bring forward proposals to extend the legal aid scheme.
    The Solicitor-General (Sir Patrick Mayhew): Assistance by way of representation was extended last December to applicants to mental health review tribunals and on 1 May this year to parents involved in child care proceedings. Full legal aid will be extended to parents involved in child care proceedings next April. Any further extension will have to depend upon the availability of resources.
    Ms. Harman: Are not the Government ignoring the will of the House and breaking, if not the letter, certainly the spirit, of promises made to the House during the passage of what is now the Legal Aid Act 1982 by excluding from the draft regulations a right of recourse to those who have been refused legal aid in the magistrates' courts for cases to be heard in magistrates' courts? Is it not those cases in the magistrates' courts where the right of recourse is most important, bearing in mind the refusal rate in magistrates' courts and the past inconsistencies in the granting of legal aid in magistrates' courts?
    The Solicitor-General: The hon. Lady was less than just in the preface to her question. The right of recourse conferred by section 6 of the Act in the first instance, it seems likely, will have to apply to cases where there is to be trial either way in the more serious cases. This is a major step forward and we shall have to see how the matter proceeds. It is also a major improvement on the position before the previous Government took office, and we shall have to see how it goes.
    Mr. Fairbairn: Is my hon. and learned Friend aware that in Scotland the public prosecution system costs less than legal aid for defence and that if the scrutiny and economy in that system were applied to the English system the inequity of those with modest savings having to pay a contribution out of capital to legal aid could be alleviated?
    The Solicitor-General: Matters of prosecution and what changes may be desirable are for my right hon. and learned Friend the Home Secretary. I note my hon. and learned Friend's point, which is one about which he knows a great deal, as he frequently reminds us.
    Mr. Dobson: What do the Government intend to do about the refusal of some local legal aid committees to allow social security claimants to obtain legal advice on
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    the green form scheme? Is not advising them to seek advice from the DHSS as daft as telling the managers of an offshore fund to, seek tax advice from the Inland Revenue?
    The Solicitor-General: I have seen the reports in two newspapers today, to which I think the hon. Gentleman is referring. I know that my noble Friend the Lord Chancellor has not had the opportunity to look into these matters. However, I can give a general assurance that legal aid is available, subject to means requirements, in respect of any matter affecting the bearing of any point of English law upon the individual. It is not necessary at this stage for me to say more.
    Mr. Forman: Before considering any extension of the legal aid scheme, car my hon. and learned Friend tell the House how much is spent on legal aid, the latest figures, and by how much those figures have expanded recently?
    The Solicitor-General: The cost of the criminal legal aid scheme has gone up over the past two financial years by about 12 per cent. in each case. For the year 1981–82 the cost of the total legal aid scheme embracing criminal and civil legal aid and the green form scheme was £169 million.
    Mr. Archer: Will the Solicitor-General accept the congratulations of the Opposition on his first appearance at the Dispatch Box in his new office? As to his answer to my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson), will he go as far as to denounce the suggestion that the chicken should seek advice from the fox and invite his noble Friend the Lord Chancellor to write to legal aid committees suggesting that advice on the provisions of the many and complicated statutes relating to welfare benefit is at least as much a matter of English law as advice on corporation tax and income tax evasion?
    The Solicitor-General: I am grateful for the kind words used by the right hon. and learned General at the beginning of his remarks. I do not think that I should say more before my noble Friend the Lord Chancellor has had an opportunity to look into the matter. However, I can confirm that matters affecting entitlement to welfare benefit are matters of law to which the legal aid scheme is applicable and it would not follow, nor is there anything in the legislation so to suggest, that because advice for example, from a lay quarter may be available on a particular matter, legal aid would not be awarded in such a case.
    Mr. Berminghamasked the Attorney-General if he will introduce legislation to harmonise the granting of legal aid throughout England and Wales.
    The Solicitor-General: On the assumption that by harmonisation the hon. Gentleman means consistency in the refusal or grant of applications, it is not thought that this would be achieved by legislation. It is, however, intended shortly to introduce regulations under section 6 of the Legal Aid Act 1982 to provide recourse against refusal of criminal legal aid by magistrates' courts.
    Mr. Bermingham: While I welcome the answer in respect of criminal legal aid, does the Minister accept that the same problem is beginning to exist in certain areas over civil legal aid—the blue form scheme? Press reports today state that the same problems occur in the green form scheme, in that the different area committees take different

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    views of what is and is not covered. Does the Solicitor-General agree that there ought to be equality in the granting of legal aid throughout the country?
    The Solicitor-General: It is obviously desirable that there should be as much consistency as possible. The hon. Gentleman knows that where legal aid is refused, it must be refused by the general committee in an area and not by the secretary to the legal aid committee. If the hon. Gentleman or any other hon. Member has any information that suggests that there has been inconsistency or unreasonable refusal, the best way to proceed is for them to write to my noble Friend the Lord Chancellor.

  OVERSEAS DEVELOPMENT

    Falkland Islands
    Sir John Biggs-Davisonasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about assistance given by the Overseas Development Administration for the development of tourism in the Falkland Islands and dependencies.
    The Minister for Overseas Development (Mr. Timothy Raison): I understand that the Falkland Islands Government expect to make their new development corporation responsible for planning tourist development. The corporation is now being set up, and I have not, therefore, had specific proposals put to me. I can confirm that we expect the Falkland Islands Government to use some of the aid now available for this purpose.
    Sir John Biggs-Davison: I congratulate my right hon. Friend on assuming his new responsibilities and I wish him well. Will he be receptive to ideas from outside the normal channels for the promotion of tourism in the Falkland Islands and may I bring one of my constituents to meet him or one of his officials at an appropriate time?
    Mr. Raison: I am grateful to my hon. Friend for his congratulations. I took up my new post in January, but they are none the less welcome. I should be delighted to meet any of my hon. Friend's constituents at any time.
    Mr. Dalyell: How sensible is it to talk about tourism when the British taxpayer has to pay the Danish owners of the Herta Maersk a fat fee for bringing fresh water to the Falklands from New Zealand?
    Mr. Raison: The hon. Gentleman's fantasies about the Falklands grow ever more bizarre. There is scope for tourism in the Falklands, although it is not enormous, and the Government will try to help.

    Poorer Countries (Private Investment)
    Mr. Arnoldasked the Secretary of State for Foreign and Commonwealth Affairs what steps he is taking to encourage the flow of British private investment to the poorer countries.
    Mr. Raison: We have eliminated exchange controls. We provide investment insurance. Since 1979, 15 investment promotion and protection agreements have been signed with other Governments. As part of our aid programme, the Commonwealth Development Corporation has stepped up its collaboration with United Kingdom investors; we run a scheme for the support of pre-investment studies by private firms and we provide finance and technical co-operation for joint ventures.
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    I am looking at what more we might do in this area. Last month we held a conference with representatives of British private sector firms, including overseas investors, to consider the issues.
    Mr Arnold: Is there a team of officials in my right hon. Friend's Department that is specifically charged with furthering this policy? What instructions has he given to overseas posts and commercial departments to look out for suitable investment opportunities?
    Mr. Raison: I do not think that there is a team of officials designated in the way stated by my hon. Friend. On the other hand, I hope he agrees that what I have said shows our concern to promote the policies that he clearly favours. In my experience, overseas missions are conscious of their duties in this respect.
    Mr. Dubs: How much British private investment goes to the very poorest countries—those most in need—and how much goes to those that are not in such dire need?
    Mr. Raison: I cannot give the hon. Gentleman the figures offhand, but private investment helps both categories of countries.
    Mr. Rippon: Have the Government any plans to extend the insurance arrangements to which my right hon. Friend has referred? How extensive are they and do they cover the export of capital as well as goods on a large scale?
    Mr. Raison: I do not know whether the Government have any plans to extend the arrangements, but they give a comprehensive coverage to a wide variety of overseas investment.
    Mr. Meadowcroft: Private investment, by its nature, cannot cope with the problems of supplying raw materials and their exploitation. Should not there be a Government initiative to ensure that the poorer countries benefit from their raw materials, because that is what is most needed by those countries?
    Mr. Raison: Private investment overseas cannot do everything, but the private sector can do useful work on raw materials in developing countries.
    Mr. Bowen Wells: Does my right hon. Friend agree that there is much scope for the further encouragement of overseas private investment? I congratulate him on the measures outlined, but a need exists to combine private investment with investment in the public sector more effectively. Will the Minister pursue policies to that end?
    Mr. Raison: That is exactly the type of policy about which the Government should be thinking.

    India
    Mr. Jannerasked the Secretary of State for Foreign and Commonwealth Affairs whether he will increase the level of funds for the Republic of India in the forthcoming year.
    Mr. Raison: In the current financial year we expect to exceed last year's total of £110 million in our bilateral programme for India.
    Mr. Janner: I welcome that statement. However, is the Minister aware of the appalling floods that struck the state of Gujarat a few weeks ago, causing dreadful

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    devastation and the loss of more than 500 lives? Even if the Indian Government do not consider it proper to ask for specific assistance for the relief fund, will the British Government, bearing in mind the terrible tragedy, and the wishes of many former Gujerati citizens, who are now United Kingdom citizens, contribute to that fund without delay?
    Mr. Raison: I am aware of the appalling havoc caused by the floods. I still believe that it would be appropriate for the Indian Government to put a request to us if they require assistance, but we are providing relief through two voluntary agencies—Oxfam and the British Red Cross.

    Brandt Commission (Report)
    Mr. Barnettasked the Secretary of State for Foreign and Commonwealth Affairs when he intends to publish his response to the Brandt Commission's report entitled "Common Crisis".
    Mr. Raison: My right hon. Friend the Foreign and Commonwealth Secretary hopes to lay the White Paper before the House before Parliament rises later this month.
    Mr. Barnett: I am pleased to hear that a White Paper will be placed before Parliament shortly. Are the Government prepared to reply positively to the request in "Common Crisis" that over a five-year period we should raise our total official aid to 0·7 per cent. of GNP? Many hon. Members are concerned by the apparent drop in aid figures just prior to the general election, and which were announced in April. Secondly, many hon. Members are disturbed by the Government cuts and I seek confirmation that overseas development will not be affected by those cuts.
    Mr. Raison: I am unable to give a firm undertaking that the 0·7 per cent. target will definitely be achieved within five years. My right hon. Friend the Chancellor of the Exchequer announced a reduction in the overseas aid budget for the current year, but there will be an 8 per cent. increase in cash terms over last year's budget, and that will be ahead of the rate of inflation.
    Mr. Forman: As financial indebtedness is a major problem highlighted in "Common Crisis", do the Government intend to make clear in their response to the document that the idea of a country such as Brazil going into a salutory default would not be in the interests of the developing countries or the developed countries?
    Mr. Raison: I sympathise with my hon. Friend's comments, but he must await the publication of the White Paper.
    Mr. Loan Evans: In the light of the tremendous support by the public for the original Brandt report and the
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    Government's lack of reaction, will the Minister ensure that the Government will examine the major questions raised in the second report and put before the House proposals that will go some way towards dealing with the problem of world poverty?
    Mr. Raison: A full and constructive day's debate has taken place on the second Brandt report. The new Foreign Secretary took action at the International Monetary Fund interim committee earlier this year, which was of great value. The Government will set forth in the White Paper a detailed response to the proposals.
    Mr. Prentice: If further cuts in public spending are to take place in the autum will my right hon. Friend ensure that his senior colleagues are aware that many of my hon. Friends would be bitterly opposed to any further reductions in the overseas aid budget?
    Mr. Raison: I shall certainly stick up for my own programme and I shall ensure that suggestions by my right hon. Friend and others are considered carefully.

    Falkland Islands
    Mr. Spearingasked the Secretary of State for Foreign and Commonwealth Affairs what is the total sum now committed of the £31 million allocated for assistance to the Falkland Islands.
    Mr. Raison: The Falkland Islands Government have given priority to the £15 million civil rehabilitation programme. Final decisions on the use of the £31 million development money have not yet been made, although tentative allocations were in mind when my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym) announced that commitment on 8 December last. Important progress his been made in preparation for this development work, and the Falkland Islands Government are considering whether they wish to adjust their priorities to free resources for purposes not originally covered.
    Mr. Spearing: Is it not a fact that the Falkland Islands executive and legislative councils favour a degree of measured progress towards Falkland Islanders owning the land of those islands? Why are Her Majesty's Government not favouring the Falkland Islands Government purchasing private land now on offer to them with money that can be taken out of the £15 million that is still in balance?
    Mr. Raison: The Government have made available £450,000 to the Falkland Islands Government to purchase the Packe Brothers farm on West Falkland. I should have thought that that way a valuable start. Our view on the question of land distribution is that it is worth while, but that it should proceed gradually and carefully so that we know the real demand.

Queen Charlotte's Hospital
3.31 pm
Mr. Clive Soley: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the proposed closure of the post-operation recovery unit attached to Queen Charlotte's hospital, and the attempt by officials at the Department of Health and Social Security to prevent publication of this prior to the general election because it was considered to be a politically sensitive issue."
I submit that that is of great importance to the public, not just because it involves the closure of a hospital that affects people throughout the south of England—about 40 hospitals send patients to the unit—but because it demonstrates clearly that the Government had a secret manifesto prior to the general election. There can be no question or doubt about that.
The matter involves the democratic rights of the House and of the people. On 8 June The Guardian referred to a document dealing with the closure which stated that it
"was considered to be potentially a politically sensitive issue in the period immediately before the general election."
The real issue is that the hospital committee had already agreed to the closure. It decided not to publish that decision because of advice by the DHSS that it was a politically sensitive issue pending the outcome of the general election.
Sir Kenneth Stowe, the permanent secretary at the DHSS, apparently wrote to all health administrators shortly before the general election warning them against publishing such politically sensitive material.
Mr. Speaker: Order. I must stop the hon. Gentleman there and ask him to explain why he thinks this is an urgent matter.
Mr. Soley: It is an urgent matter precisely because the public and hon. Members have not had an opportunity to discover who told DHSS officers to issue such an instruction during a general election campaign. That cannot be a minor matter. It must be of serious concern to the House.
If this were a passing incident that would be one thing, but on 10 June another letter was sent by Mrs. Maggie Alexander, an executive officer in the DHSS, saying that the Department was now able to give a view on the closure and that it would be unwise to argue the case for closure on financial grounds. The letter suggested that the case should be argued in relation to medical practice and priority. The letter referred to a conversation with somebody else, whom I presume to be a DHSS officer —Joan Goldsworthy.
The rights of the public and hon. Members are involved. We must know who was giving instructions to
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senior officers in the DHSS to keep the matter quiet or to hush it up during the election campaign. That is of great importance.
Mr. Ivan Lawrence: On a point of order, Mr. Speaker. Is this not a clear abuse of the system and is it not plain that it cannot possibly be urgent?
Mr. Speaker: I think that the hon. Member for Hammersmith (Mr. Soley) had now finished his submission.
The hon. Gentleman seeks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
"the proposed closure of the post-operation recovery unit attached to Queen Charlotte's hospital, and the attempt by officials at the Department of Health and Social Security to prevent publication of this prior to the general election because it was considered to be a politically sensitive issue."
As the House knows, under Standing Order No. 10 I am directed to take into account the several factors set out in the order but to give no reasons for my decision. I have given the submission careful consideration and listened carefully to the hon. Gentleman's representations, but I have to rule that his submission does not fall within the provisions of the Standing Order and, therefore, I cannot submit his application to the House.

Statutory Instruments, &c.
Mr. Speaker: With the leave of the House I shall put together the five motions relating to statutory instruments —that is, items Nos. 1 to 4 and No. 6 on the Order Paper.
Ordered,
That the Agriculture and Horticulture Grant (Variation) (No. 2) Scheme 1983 (S.I., 1983, No. 923) be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Agricultural and Horticultural Co-operation (Variation) Scheme 1983 be referred to a Standing Committee on Statutory Instruments, &c.
That the Agriculture and Horticulture Development (Amendment) (No. 2) Regulations 1983 (S.I., 1983, No. 924) be referred to a Standing Committee on Statutory Instruments, &c.
That the Farm and Horticulture Development (Amendment) (No. 2) Regulations 1983 (S.I., 1983, No. 925) be referred to a Standing Committee on Statutory Instruments, &c.
That the draft International Carriage of Perishable Foodstuffs Act 1976 (Amendment) Order 1983 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. David Hunt.]

BUSINESS OF THE HOUSE
Ordered,
That if the International Monetary Arrangements Bill be committed to a Committee of the whole House, further proceedings on the Bill shall stand postponed and that as soon as the proceedings on any Resolution come to by the House on International Monetary Arrangements [Money] have been concluded, this House will immediately resolve itself into a Committee on the Bill.—[Mr. David Hunt.]

Orders of the Day

  International Monetary Arrangements Bill
  Order for Second Reading read.
  Mr. Speaker: I have selected the amendment in the name of the Leader of the Opposition.
  3.35 pm
  The Economic Secretary to the Treasury (Mr. John Moore): I beg to move, That the Bill be now read a Second time.
  The problem of sovereign debt, which underlies the Bill, is of great concern to all Members of the House. It has been the subject of a recent report by the Treasury and Civil Service Select Committee which I warmly commend. That report reflected what, I think it is fair to say, is a great deal of common ground between the parties. We are all agreed on the need to support the international financial institutions in their crucial role in maintaining the international financial system. We all agree that United Kingdom jobs and prosperity would suffer were that system to be seriously damaged. We are all committed to assisting developing countries by providing finance and in other ways. More generally, we are all committed to work through increased economic and financial links to improve not only the economic performance of developing countries, but indirecty their democratic and political institutions.
  In its report the Treasury and Civil Service Select Committee also endorsed recent international agreements to increase the resources of the International Monetary Fund. The Committee said in para 5.11 on pages 36 and 37:
  "We would support the speedy passage of the legislation laid before Parliament to give effect to these agreements".
  The Bill and the order which I hope to introduce later today embody that legislation.
  It will perhaps assist the House if I begin by setting out in broad terms how the debt problem originated. Throughout the 1970s, and particularly following the fundamental shift in the world economy after the 1973 oil crisis, the newly industrialised countries financed development by borrowing, and increasingly that borrowing was from the private sector. The authorities of the lending countries offered no discouragement to this process — indeed, rather the reverse — and it became fashionable to talk about recycling oil revenues.
  Of course, the truth was that oil revenues were not being recycled—whatever that might mean. They were being on-lent, and, as time went by, that lending was increasingly short term, or at floating rates of interest. Thus, the newly industrialising countries became more and more vulnerable. Just how vulnerable became clear when, following the second oil crisis in 1979, the world entered the recession. Few people were prescient enough during the 1970s and early 1980s to sound a warning about what was happening.
  The main sovereign borrowers now facing difficulties are, after all, countries with considerable underlying economic strengths. They are mostly countries endowed
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  with natural resources, like Mexico and Brazil; or with proven resources in terms of the skills, ingenuity and application of their industries, like some in the Far East.
  As the Treasury and Civil Service Select Committee pointed out in its report, just like the United States in the 19th century, it is entirely natural for such countries to finance the process of development by importing savings and capital from abroad, and for the private sector banks to play a part in that. The position that most of those countries are now faced with is not a permanent loss of credit-worthiness, but rather a temporary, if acute, problem of adjustment, exacerbated by world recession. They have been caught by a combination of overambitious borrowing, development programmes, higher than anticipated dollar interest rates and lower than anticipated commodity prices.
  By 1981 the nature of the problem had crystallised. A number of economies in Eastern Europe, Africa and Central America had recourse to the rescheduling of debt, both private and public, in conjunction with IMF adjustment programmes. However, the real jolt to confidence came when Mexico's liquidity difficulties came to a head in August 1982. That greatly changed perceptions of sovereign credit-worthiness.
  It is, of course, easily possible to overstate the dangers involved. As the Select Committee's excellent report points out in paragraph 4.4, only a small number of countries are sufficiently large borrowers to represent a major problem to the lending banks. Nevertheless, the debt position in total is sufficiently serious to merit very careful concerted remedial action.
  We can take a good deal of comfort from the speed and flexibility with which the international community responded to the problems that then arose. The measures taken to cope in the Mexican case provided an important precedent. Short-term bridging finance was quickly provided by the Bank for International Settlements and the Federal Reserve. The many creditor banks formed an advisory committee to simplify matters by representing their interest. The IMF was able to use the time gained by the bridging finance to negotiate the terms of standby finance with the Mexican Government, while making it clear to the banks that the facility also depended on their co-operation in easing the immediate liquidity problem and helping to finance the adjustment process.
  Other recent IMF-backed debt-rescheduling has invariably followed a similar pattern. Debtor countries have negotiated with the IMF economic measures which they believe will steadily improve their fundamental positions. To allow time for the necessary adjustments the IMF has been prepared to offer loans, but only on the basis that creditor banks agree to reschedule outstanding debt and contribute net new lending.
  The Treasury and Civil Service Select Committee, in paragraphs 4.10 and 4.11, rightly stressed that all three elements were necessary and that, without any of them, rescheduling packages were just not negotiable. The three essential ingredients, to quote the Committee's words are:

  "(a) the commercial banks agree to reschedule their outstanding debt, and to make a modest contribution of net new lending;

  (b) their lending is supplemented by a loan from the IMF;

  (c) the IMF's contribution is conditional on the borrower undertaking an austerity programme of the type that we have labelled `traditional IMF medicine."

  The Committee put a good deal of emphasis on the role of the private banks in all that, and perhaps I could touch

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  on that in a little more detail. There is, of course, nothing unusual in banks seeing corporate customers through temporary patches of difficulty, so long as they are taking steps to put their business in order. In the same way, it is quite natural for commercial lenders to be prepared to continue to lend money to their major country customers —provided they have the assurance that the borrower concerned is taking action, agreed with the IMF, to put its economy in better order, and that the other main lenders will not precipitate a short-term liquidity crisis by refusing to reschedule existing debts or join in a programme of additional lending.
  So, seen from a straightforward commercial point of view, what has been happening is not exceptional; it is a perfectly normal commercial process. It is, of course, also in our wider national interest that those countries should now succeed in making adjustments in an orderly way. A disorderly or disruptive process would be bound to do damage both to the economies of the borrowing countries themselves, and in some circumstances also to the international financial system as a whole. It could set back the process of world recovery that is now under way, with all that would mean for United Kingdom exports and jobs.
  Such packages will inevitably be subject to difficulties from time to time. Nevertheless, the debt problem is slowly responding to treatment. Over-borrowing is being tackled by the adjustment measures undertaken by the debtor countries. As confidence returns, the private sector, while obviously reassessing its exposure in relation to its capital base, is also able to face its full and continuing role in financing adjustment. Recent experiences have stimulated valuable reviews of supervisory practice, of the adequacy of information about banking exposure and of the analysis of country risk.
  The basic need, however, is for a sustainable recovery in world activity that will ease that part of the problem that derives from the recession. I did of course say sustainable recovery, not international reflation; and it was sustainable recovery that the Treasury and Civil Service Select Committee said in paragraph 5.2 was needed and must be achieved without a resurgence of underlying inflation, and that the solution to the problem of over-borrowing is most unlikely to lie with more of the same.
  Having looked briefly at the global issues involved, let me now say a little more about the role of two of the central institutions in all this, the IMF and the world's central banks operating through the Bank for International Settlements. First, I shall deal with the central banks and the BIS. Their role has been to act quickly to provide temporary bridging finance in cases where there was a general threat to banking confidence. It is right in such situations that immediate arrangements should be made by central banks, operating in conjunction with national political authorities, until longer-term adjustments can be negotiated by the IMF.
  Such BIS bridging loans are subject to adequate collateral, either from the borrower or from other central banks. Once an IMF adjustment programme has been agreed, the countries involved have been able to use part of their new credit to finance repayment of the BIS loan when due. In two cases—emergency credits afforded to Mexico in August 1982, and to Brazil in December 1982 —the Bank of England received indemnities from the
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  Treasury in respect of its share of those loans, and details of the arrangements were published in Cmnd. 8651 and Cmnd. 8779.
  Mr. J. Enoch Powell: The Minister referred to collateral that was available in connection with the loans. Could he give further particulars about the nature of the collateral?
  Mr. Moore: There are many forms of collateral. I should prefer to return to the matter at the conclusion of the debate. The right hon. Gentleman makes a legitimate point, and this is a legitimate debate, as it has always been, about the nature of collateral for loans.
  The president of the board of directors of the BIS has expressed his hope that there will be no further need for emergency credits of that kind, while recognising that the possibility cannot be ruled out. Nevertheless, the Government feel it right, as a matter of propriety, to seek specific statutory authority to cover any such future indemnities because of the contingent risk to public expenditure and the fact that potential liability can extend beyond a given financial year. That is the purpose of clause 2.
  I come now to the role of the IMF. The fund has resources of two kinds — those based on quotas subscribed by members, and those borrowed from member Governments. There is widespread agreement that the fund's resources need to be increased. At the recent IMF interim committee meeting in February, which was chaired by my right hon. and learned Friend the present Foreign Secretary, it was agreed that quotas should increase by 47·5 per cent. As the House knows, subscriptions are for each member country equal to its quota, and must therefore rise accordingly. The draft order before the House facilitates that increase for the United Kingdom.
  Finance Ministers and central bank governors of the Group of Ten countries have also agreed to increase the resources that the fund may borrow from member countries under the general arrangements to borrow. The original purpose of that facility, established in 1962, was to cope with prospective drawing of G 10 countries. For example, a significant element of the 1976 United Kingdom standby arrangement was financed with GAB resources. After the Mexican liquidity crisis, however, the GAB was also considered as a possible resource of conditional finance for other countries in extreme circumstances. Following G10 ministerial agreement in January 1983, the fund's executive board approved amendments to the GAB that would accommodate such a development.
  Under these amendments the total commitment under the GAB is increased from 6·4 billion SDRs to 17 billion SDRs. The United Kingdom's share remains at 10 per cent. The "second window" for finance for members outside the G10 can be opened only when a proposal from the fund's managing director to use the GAB to cope with impairment of the international monetary system is accepted by participants and then approved by the executive board. Loans by participants will attract interest at market rates.
  The new GAB will become effective when all the participants have notified the fund of their concurrence, and the deadline for notification is 31 December. Clause 1 embodies those proposals as they affect the United Kingdom.

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  Under the Bill, the limit on powers to lend to the IMF under its borrowing arrangements will be re-expressed in special drawing rights. It will also increase from its present level of approximately £350 million to 1,700 million SDRs, or about £1,200 million.
  Mr. Robert Sheldon: The Minister said that the debt problem was responding to treatment, yet the total debt continues to increase. Will he justify his statement that the debt problem is responding to treatment?
  Mr. Moore: I said that the debt problem for the specific crises that were occurring was slowly responding to treatment. The Bill seeks to extend additional resources to the fund to enable that process to continue. I do not doubt the difficulties that world banking and the developed world face over the problems of the nations of the underdeveloped world. I stressed, as carefully as I could the words "slowly responding".
  Mr. James Callaghan: Has the Minister seen newpaper reports that, because of the increase in the IMF quota, Third world countries may not now be expected to use the facilities under the general arrangements to borrow? Will he assure us that that is not the case and that the new proposals for including Third world countries will enable them to borrow through the GAB and use their extended quota?
  Mr. Moore: As the right hon. Gentleman knows from experience, more than I do, I shall not comment specifically on that. However, within the Bill and the money order arrangements relating to it, not only is there an increase of 47·5 per cent. in the quotas, but there is a sizeable increase in the resources to the GAB, which effectively will double the overall resources of the fund. To that extent the problems that he mentioned will be more easily solved. I shall return specifically to the point about giving a commitment.
  Dr. Jeremy Bray: Did the United Kingdom representatives at the G10 meeting last Friday support or oppose the proposal of the IMF's managing director to increase the borrowing facilities by the date of the IMF's annual general meeting in September? The reports are that Germany and the United States opposed the proposal. What did the United Kingdom do?
  Mr. Moore: The United Kingdom representatives have not yet shown their position on that matter. However, the United Kingdom will recognise the potential, additional needs that might be required and, therefore, we are not at this stage saying that such additional resources are not needed.
  Mr. Bowen Wells: Will my hon. Friend tell the House how he arrived at the increases in both the quotas and the SDRs? Many countries asked for double the amount that he has announced today.
  Mr. Moore: Hon. Members, and especially the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) may wish to be reminded of the increases to which we are referring specifically today. The meeting agreed to nearly a doubling of resources in usable currencies, which is more than twice the increase that was agreed last time. We start from a fund of 61 billion SDRs, of which 30 billion SDRs is in usable currencies, and that, as the right hon. Gentleman knows, is the key.
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  The meeting agreed a quota increase of 30 billion SDRs, or 15 billion SDRs in usable currencies. The GAB was increased by 10 5 billion SDRs, plus a sizeable, but so far undecided, additional contribution from Saudi Arabia. We believe that most of that sum will he usable, so we are talking about an increase of 25 billion SDRs of usable resources, which will compare favourably with previous increases.
  Several right hon. and hon. Members have tabled observations about the provision of assistance to Argentina. I well understand the anxieties on this matter. Argentina's invasion of the Falkland Islands was am, act of unprovoked aggression, and its ejection from the islands cost British lives and hostilities have yet to be formally ended. Yet we, through the IMF and through the United Kingdom banking sector, are involved in the international effort to facilitate the resolution of Argentina's debt problems.
  I cannot hide fro n the House my distaste, and the distaste of my right hon. and hon. Friends, that this should be necessary. But the House should not deceive itself. It is necessary, and it is very much in the interests of 13ritain and the world economy, that Argentina should be put back into a position from which it can repay its overseas debts. Default by Argentina would not be in our interests. It would be inimical to the whole financial system upon which we, as a major trading nation, depend more than most. It would damage our prosperity and destroy British jobs. I know that the Opposition will understand that.
  It is also in our interests that the IMF's adjustment programmes should be negotiated in a political way. Their purpose is to stabilise the international financial system to the greater good of all. An attempt to grade access to IMF support according to the political complexion of a member country would be wholly damaging, counter-productive and without precedent.
  That does not, however, mean that the performance targets do not bite, is was evident in 1976. The IMF programme agreed in January gives us the central elements of the international package. It is based on a thorough economic assessment. Disbursement is in five quarterly instalments subject to fulfilment of performance criteria covering balance of payments deficits, public sector domestic and external borrowing, domestic credit expansion, the elimination of external arrears and the removal of exchange restrictions. The United Kingdom is represented on the executive board of the fund, which is responsible for reviewing the progress of the programme and ensuring that the criteria are met before advances are made. We are playing our full part in that process.
  Perhaps I could remind right hon. and hon. Members of the historical sequence. At the beginning of the Falklands conflict the previous Government took action, with the full support of the House, to freeze all Argentine assets in the United Kingdom by means of directions made under the Emergency Laws (Re-enactments and Repeals) Act 1964. In an attempt to improve the long-term position and to facilitate an agreement between the fund and the Argentine authorities, the Government acted on 14 September last year to begin to remove those restrictions on a reciprocal basis We did that without in any way compromising our position on the Falklands. We have always said—both sides of the House accept this—that we wish stability to be restored to Argentina's economic and financial system.

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  Much progress has been made. The Argentines have removed many of the financial restrictions that they imposed last year on British companies. The fund programme built in a specific condition that any remaining Argentine discriminatory financial restrictions would be lifted. A time scale for the removal of exchange restrictions was not, as I have already made clear, the only condition of the fund programme. Nor would it have been appropriate for the United Kingdom to design or to dictate such general conditions, which would need to be consistent with the fund's normal practice and cover the whole spectrum of economic policy. The removal of discriminatory restrictions, although a matter of keen interest to us, is a matter between the fund as a whole and an assisted member, since discrimination is offensive to fund practice. Argentina has the right to apply for a waiver of any conditions imposed, but such matters, especially matters of principle, are taken seriously by the board. My expectation is that any such application would be refused.
  I should add that the commercial bank loans are contingent on satisfactory performance of the IMF programme. The first was limited in time. Drawings on the medium-term loan, still to be signed, would depend on provision of a certificate from the fund that the IMF programme was on track. That requirement is consistent with the normal pattern of relationships about which I spoke earlier.
  Mr. Tam Dalyell: Is it an unfair synopsis of what the Economic Secretary is saying that the overwhelming British national interest is that Argentina should be solvent, even if that means that it can buy hideous weapons, such as Telemine and Otomat missiles, which are far more formidable than Exocets, and that there is nothing we can do about it? In that case, to be fair to our service men, is not the logical conclusion to what he is saying that we must negotiate?
  Mr. Moore: That is not a specific synopsis of what I have been endeavouring to say. As for IMF conditionality and the details that I have described, it seems to most of us who look at international organisations such as the IMF that it is less likely that nations such as Argentina will purchase the kind of weaponry to which my hon. Friend was referring. I am not for one moment suggesting that it is not possible, but it would seem to be less likely. That is what I am seeking to suggest about the conditionality relating to the IMF.
  Mr. D. N. Campbell-Savours: Is it also correct that, within the arrangements that govern the advance of IMF funds to the Argentine, under paragraph 11, the chairman of the interim committee can request a review of the terms of conditionality in the event that the Argentines in any way defaults on the terms of the unpublished letter of intent? Do the Government intend to press ahead with that review in the event that there is the slighest variation?
  Mr. Moore: The hon. Gentleman is extremely well informed of the details. He is correct to inform every one that the Government's attitudes on the actual conditions are clear. As I said, my expectation is that if there were any such application for a waiver it would be refused.
  I have set out the position in some detail because I am not clear that it has been fully understood by Opposition
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  Members. It therefore seems useful to clarify the matter. I do not recall exception being taken by Opposition Members to the decision to move away from bilateral United Kingdom restrictions on the basis that I have described. I trust that they are not saying that it would be wrong for conditions to be laid down by the IMF; conditions incorporating understandings about the removal of restrictions and other matters. I cannot imagine that they would have preferred such questions to be decided between the United Kingdom and Argentina alone. I do not seriously believe that that could have been in their minds.
  In short, therefore, this is a conditional pattern of support. I accept of course that programmes have been known to break down. Our hope must be that Argentina satisfies all the performance criteria and so makes manifest a return to normality. To the extent that Argentina is forced to give priority—this is the point that the hon. Member for Workington (Mr. Campbell-Savours) correctly raised —to paying its debts, controlling its public expenditure and its further domestic and external borrowing, its ability to buy arms is restrained.
  It is to the credit of both sides of the House that they have made clear their concern for the developing world, the health of the international institutions and the maintenance and strengthening of capital flows to the Third world. It is to their credit also that they wish to see Argentina brought back, if that can properly be done, into normal economic and political circles and that they recognise, when the question is put in that way, that any other approach would have less positive implications for United Kingdom employment and the world financial system.
  I conclude on the main thrust of today's Bill and debate. The House is asked to give its assent to legislation that will allow the United Kingdom to continue to play its full part in international efforts to stabilise the sovereign debt problem. I pay tribute to the full part which, in particular, my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs has played in these matters. With wise counsel such as his and continued partnership and good will among all those affected, none of the problems that we face need defeat us. I commend the Bill to the House.
  4.4 pm
  Mr. Peter Shore: I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
  "this House declines to give a Second Reading to the International Monetary Arrangements Bill which fails to impose conditions on United Kingdom financial assistance to the Argentine while the present state of hostilities continues."
  I want, at the start, to make our position plain. The Opposition are strong advocates and supporters of international co-operative measures designed to help deal with the great menace that the massive indebtedness of so many non-oil developing countries poses, not just for their own peoples, but for the world economy. That is why we shall not oppose the International Monetary Fund (Increase in Subscription) Order 1983 when it comes before the House a little later. That order authorises a basic 25 per cent. increase in the United Kingdom quota to the IMF. Our criticism, if we have any, is not that it is too much, but, on the contrary, that it is too little. Nor do we oppose, I must make this clear, the general intention behind the two clauses of this short Bill.

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  The increase in the sums that the Treasury will be able to make available to the IMF under the general arrangements to borrow from the present £350 million to £1,200 million is welcome, as is the arrangement in clause 2 for the Treasury to indemnify the Bank of England in respect of its participation with other central banks and the Bank of International Settlement, in supporting rescue operations aimed at avoiding financial collapse.
  I must focus now upon our amendment. I congratulate the Economic Secretary on making his first speech from the Dispatch Box. Although he put forward a reasoned and plausible case, it is not one, I regret to say, that I found wholly convincing in two major respects. Like my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan), who intervened, I found the Economic Secretary altogether too optimistic in his general judgment that the debt problem was responding slowly to treatment.
  I looked, unusually, at page 2 of The Daily Telegraph today. There was a report by Sir Gordon Borrie from the Office of Fair Trading highlighting an example of indebtedness upon which I am sure many hon. Members will wish to comment. It contained a story about a married couple who, 25 years ago, borrowed £50 and entered into an arrangement to repay it. Unfortunately, they fell short of the terminal date of repayment and, therefore, were driven into a rescheduling arrangement. That rescheduling arrangement again fell short of the terminal date of repayment. So it continued: 25 years later, they are in debt to the extent of £2,500 from the original £50 that they borrowed.
  I have a horrible feeling that that is a minute example of what is happening on the world stage today as a result of the mammoth indebtedness that is afflicting so many countries.
  My second criticism is of the Economic Secretary's attempt to persuade us that the Government's approach to Argentina and the refinancing of its economy is somehow in our national interest. It is a matter with which I shall have to deal at some length.
  Our amendment appears to be well timed because today, if I am correctly informed, representatives of the leading commercial banks are meeting in New York to sign a five-year agreement with Argentina to provide that country with a medium-term loan of $1·5 billion of which approximately 10 per cent. — $150 million or £100 million—will be subscribed by British banks. Today's signing in New York marks the completion of a whole series of financial measures that began nearly a year ago designed to assist the Argentine economy.
  The truth is that Argentina has an overseas debt of about $38 billion—a vast sum which it lacks the capacity to repay or even to service. The package of international assistance comprises three main linked elements. The first is IMF standby credit of $2·2 billion, formally agreed on 24 January. Secondly, there are two bridging loans—$500 million from the Bank of International Settlements and $1·1 billion from the commercial banks. The third element is the medium-term loan for $1·5 billion, which I assume replaces the bridging money. That is to be signed in New York today.
  Mr. Moore: The BIS loan was never taken up.
  Mr. Shore: I thank the Economic Secretary for that information.
  Whether those funds will be sufficient to enable Argentina to cope with its present difficulties and, if so,
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  for how long are open questions. What the Opposition find extraordinary and unacceptable, in the light of the seizure of the Falkland Islands by the Argentines last year and their subsequent liberation by the British task force, is that the British Government and British commercial banks have contributed at every stage to the refinancing of the Argentine economy, while the Argentine Government have refused to terminate the state of hostilities between them and us.
  That is far from a formality. The continued threat to the Falklands by the Argentines has driven Britain into major and continuing expenditure on garrisoning, supplying and defending those islands. The latest development, announced only 10 days ago, is the decision to build an international runway at a cost of over £200 million to enable us rapidly to reinforce our garrison in the face of a resumed Argentine threat.
  That is not all. The Argentine Government have embarked on a major programme of rebuilding and extending their armed forces. Last November they purchased from France nine super Etendard strike aircraft equipped with Exocet missiles. In February they took delivery of the first of four frigates, with British Rolls-Royce engines, now being completed in the great shipyard of Blohm and Voss Two sophisticated submarines are under construction in other German shipyards. There are six MEKO type 1400 Corvettes, and in the Bazan shipyard of El Ferrol in Spain five 900-ton Halcon class fast patrol boats are being fitted out with sonar and radar equipment and with an Alouette helicopter, not to mention the even more deadly rocket weapons to which my hon. Friend the Member for Linlithgow (Mr. Dalyell) referred a few moments ago. Virtually all that equipment, costing about £2 billion, will be delivered in the next 12 months.
  The background is one of invasion and aggression, armed conflict at hem y cost in human life and equipment incurred in the liberation of the islands, the heavy further cost to Britain of ensuring that our arm's length defence remains a sufficient deterrent, and the Argentine purchase of an armada of new ships from European countries and of planes and missiles from France, Brazil and Israel.
  Why on earth, against such a background, are Her Majesty's Government and British banks lending money to Argentina today? The question became all the more pertinent last Thursday, when the Chancellor announced a cut of £1,000 million at home, including a reduction of £230 million in Britain's defence budget and £130 million in expenditure on the National Health Service.
  We are talking, not simply about the rollover of old British credits to the Argentine, but about the provision of new money. The Government have not, to my knowledge, clearly revealed how much money is involved. I did not ascertain that from the Economic Secretary's speech. If, however, we assume that Britain's share of the $·2billion IMF loan is the same as our quota of the IMF, Britain's contribution in that form will be roughly £100 million. If reports of today's meeting in New York are correct, British banks will be providing a further injection of £100 million.
  Right hon. and hon. Members on both sides of the House have asked how that expenditure can be justified and we have had a range of unconvincing and embarrassed answers from the Prime Minister, the Secretary of State for Defence, the Chancellor of the Exchequer and, with respect, from the Economic Secretary as well, although he has been able to address the matter more seriously in the course of a speech rather than in answer to questions.

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  In a written answer given on 20 December last year, the Prime Minister gave the excuse that lies at the heart of the Economic Secretary's defence today. She said:
  "These loans are not for arms purchase, but are to help Argentina to continue paying its debts, many of which are to residents of this country. We support the IMF in its efforts to maintain the stability of the international financial system."—[Official Report, 20 December 1982; Vol. 34, c. 352.]
  The Prime Minister's unease with that excuse surfaced during Prime Minister's Question Time on 27 January, when she was asked a direct question by the then hon. Member for Harlow. He asked whether she approved of the involvement of British banks in making loans to Argentina, and she replied:
  "Will the hon. Gentleman please understand that I understand why he is worried, and so am I?"
  On the same occasion the Leader of the Opposition asked the Prime Minister to halt loans from this country until hostilities had ceased. She began her reply by saying:
  "I share such feelings". — [Official Report, 27 January 1983; Vol. 35, c. 1060.]
  Echoing that view today, the Economic Secretary spoke of his distaste for the whole refinancing operation. Like the Prime Minister on the earlier occasion, he sought to justify the Government's failure to act by saying that it was not in the interests of the financial system of this country or of the West that there should be a default on either interest or capital, because the consequences would be very serious.
  The Government's case has been fairly put this afternoon. It gives rise to three questions. First, it may indeed not be in the interests of the financial system of this country to increase the risk of an Argentine default, but how is that risk to be weighed? That was at the heart of the question put by my hon. Friend the Member for Linlithgow. How is that risk to be weighed against the defence risk to this country—which also involves heavy financial cost—and against the interest of the Falkland Islanders in continuing their freedom from Argentine molestation and occupation, not to mention the cost in British lives of maintaining that freedom?
  Secondly, why did the Prime Minister not insist that any British financial assistance should be conditional upon either the acceptance of a formal end to hostilities or, better still, an agreement that the money should not be used for rearmament or warlike preparations?
  Thirdly, is it true that British non-participation would have led to an Argentine default on all its debts to the Western world?
  The first question— concerning the relative human and financial cost to Britain of a rearmed junta able to resume hostilities against the cost of non-payment to British banks—has received no answer at all from the Government. However, the scale of the expenditures is clear. Britain's capital and running costs for the defence of the Falklands were, last September, officially estimated at £1,600 million. That figure does not take account of the £200 million additional capital expenditure on the new Falklands airstrips, or the annual costs of maintaining, servicing and supplying our garrison. British banks have a total of £2,200 billion in various forms of credit to the Argentine. Simply as a financial equation, the cost of maintaining and defending the Falkland Islands, especially
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  if there were to be another assault upon them, is greater than the amount of British money involved in the Argentine.
  The second question concerns making money conditional upon a proper end to hostilities and the abandonment of the major rearmament programme. My hon. Friend the Member for Workington (Mr. Campbell-Savours) has been very assiduous in asking questions, both last year and this, and on 31 January the Prime Minister gave him the following reply:
  "The rules of the IMF do not allow such restrictions to be placed on its loans."—[Official Report, 31 January 1983; Vol. 35, c. 8.]
  The Prime Minister sought to bolster that by reference to the decisions adopted by the IMF in 1979, which are published on pages 20 to 22 of its document,
  "Selected Decisions of the Executive Board".
  I have inspected that document, and, hardly surprisingly, it has nothing to say about the almost unique situation of a country seeking IMF support while in a state of continuing armed hostility with another IMF member state, and whose whole economy is distorted precisely by the massive arms programme of its military leaders, who purport at any rate to be the lawful Government of the country. However, paragraph 4 states that
  "in helping members to devise adjustment programmes the Fund will pay due regard to the domestic social and political objectives, the economic priorities and the circumstances of members, including the causes of their balance of payments problems."
  That is, as I am sure it was designed to be, a catch-all clause. It certainly allows for the most searching examination of the social and political objectives of the Argentine, including the seizure and attempted colonisation of the Falklands, and the massive rearmament programme now being undertaken by the Argentine Government. Therefore, I do not understand why we should now suddenly say that conditionality—which lies at the very heart of the IMF operation—should not be applied rigorously to the Argentine.
  I well understand that to use conditionality to achieve specific political objectives opens up possibilities of action that may not be entirely welcome to many hon. Members, particularly Conservative Members. However, in my view, we must, in the period ahead, consider the politicisation of conditionality by the IMF and the open criteria that should be adopted. I have in mind not only the Argentine but the great controversy that followed the very easy extension of an IMF loan to South Africa, without any reference to its internal policies or its heavy commitment to defence programmes. That went unchallenged only a few months ago.
  Mr. Campbell-Savours: Will my right hon. Friend also note that he is supported by two senior counsellors to the IMF? Mr. Manuel Guitian and Mr. Joseph Gold have written several tracts on this issue and they both accept that there are greater powers and responsibilities available to the IMF, to the chairman of the committee and to the executive directors of the board.
  Mr. Shore: I am grateful to my hon. Friend for that point. I have long felt that the practices, rules and modus operandi of the IMF needed the most searching scrutiny and discussion in the House.
  However, today we want to know whether the IMF looked at the Argentine military budget and the more than £2,000 million purchase of foreign arms. What was the

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  attitude of the United Kingdom's representative on the executive board? The Economic Secretary did not answer those questions. When the Prime Minister was asked about them, she argued that the normal conditionality clauses of the IMF would exert pressure, to beneficial effect, on the Argentine Government's spending programmes. However, the last item of Government expenditure to be cut in a country that is run by a junta composed of army generals, navy admirals and air force marshals is the budget of the armed forces. Therefore, I am not impressed by that argument.
  The third question that I put, and which I now seek to answer, was whether British withdrawal from further financial aid, if collective action could not be agreed, would lead to an Argentine default. That is difficult to believe. Although our contribution is substantial, 93 per cent. of the IMF loan and 90 per cent. of the commercial bank loan come from non-British sources. Therefore, the argument that if Britain had taken a stand it would have brought down the whole Argentine house of cards cannot be sustained. If that is the overriding fear, it takes all the strength from what the Economic Secretary had to say about the invigilation of the Argentine economy, the quarterly examination of its performance and the strength of performance targets, because those performance targets would never be insisted on if the danger of default was always judged to be greater than the difficulties resulting from insisting on their adequate performance.
  Mr. J. Enoch Powell: As the right Gentleman is anxious that the United Kingdom should not participate in these arrangements, will he explain why he is not equally anxious the the "whole house of cards" should be pulled down? The right hon. Gentleman seems to dislike the whole arrangement. Why should he worry about the notion that our non-participation would prevent its taking place? Surely he wants it not to take place.
  Mr. Shore: I am certainly opposed to Britain making new moneys available to the Argentine while it remains in a state of hostility with us, maintains an active threat to the Falkland Islands and remains under a military junta. That seems a perfectly straightforward position, and I should be surprised if the right hon. Gentleman dissented from it. He is simply asking me whether I actively wish to see the collapse of the Argentine economy. My reply to that is no. I do not want to bring down the whole Argentine economy, because I think—this is where the Government's case must be taken seriously—that that would have repercussions throughout the world which would affect friends and allies, although not necessarily Britain to the extent mentioned by the Economic Secretary.
  Mr. Powell: So the right hon. Gentleman is perfectly happy for the Argentine economy to be sustained by international action, provided that we do not have a finger in the pie. Is that his case?
  Mr. Shore: The international community is not in a state of hostility with the Argentine. However, the burden of my case is that I would certainly wish to have the full co-operation of the IMF and other institutions in putting pressure and imposing proper conditionality on the Argentine. If that can be done collectively it will be far stronger and more effective. That is my answer to the right hon. Gentleman. However, if I could not achieve that, I
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  would not go ahead easily with the unconditional British advance of money to the Argentine at a time when we —unlike the rest of the international community—are in a state of hostility and contention with the Argentine. I hope that I have made my point clear.
  Prior to the debate I thought about the various arguments that might be put forward to justify British involvement in the refinancing of the Argentine. I have also listened to the additional arguments put forward by the Economic Secretary, but I have not been convinced and shall not be deflected from my course in recommending that my right hon. and hon. Friends should vote against the Bill'S Second Reading.
  The Government are not acting correctly, and are pursuing a double policy with double standards: one of strong military defence, but at an economic cost that is enormous; the other of financial and economic appeasement that can only increase our own burdens, assist our enemies to re-equip and embolden them for further adventures. Many of us find that hypocritical and disgraceful. It is an insult to our armed forces, to the Falkland Islanders, and to the people of Britain. It is the supreme triumph of the values of money and the interests of finance over the values of freedom and independence and the interests of our country.
  I want to say a few words about the larger questions of lending and borrowing and the threat to the world economic and financial system that now clearly exists. I mentioned earlier the enormous $38 billion debt that Argentina had accumulated. We know only too well that she is not alone in her predicament. The accumulation of debt by developing countries in the years since the OPEC cartel quadrupled the price of oil in 1974, and redoubled it in 1979, has been staggering. It has risen from some $100 billion to over $600 billion today, of which well over $200 billion is represented by the loans of commercial banks.
  Given the vast surpluses that the oil rich countries accumulated, recycling—if that is the right word; I am pondering it, after what the Economic Secretary said—was essential if world trade was not to be disrupted by balance of payments crises of the most serious kind. However, that recycling, was not carried out to any serious extent, either by the international institutions—the IMF and the World Bank—or under the discipline of national banks, supervising and regulating their own commercial banks. So recycling was undertaken, with astonishing recklessness, by the commercial banks of the West. While the oil surpluses continued, and while the rate of inflation exceeded the costs of servicing the loans, world trade continued, in spite of setbacks, to expand, and debtor countries were able to service their increased borrowings.
  Inevitably, as debts accumulated, and as the Western countries, led by the United States and the United Kingdom, pursued sharply deflationary policies after 1979, the bubble burst Recession in the West brought about a fall in both the volume and price of Third world exports. The servicing c f existing loans mounted steadily as a proportion of their external earnings. The Treasury and Civil Service Select Committee's report on international monetary arrangements, published on 15 March this year, documents the effects on individual countries. It is well worth perusal by any hon. Gentlemen who have not already done so.
  No less than 59 per cent. of Mexico's exports are absorbed in the servicing, of debt. It is no less than 67 per

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  cent. in the case of Brazil, and no less than 88 per cent. in the case of Argentina, with other countries across the world with far lower per capita incomes than those two countries having to pay between 20 per cent. and 50 per cent. of their export earnings in debt reservicing. This great problem will increase rather than diminish. The Arab oil surpluses are no longer available. The commercial banks are already over-lent, but the needs of the developing countries to borrow more, both for development purposes and to finance their current accounts, remain.
  The increase in IMF quotas, the increase in the resources available, under the general agreements to borrow, are almost trivial in relation to the magnitude of the debt problem. The packages arranged, of which Argentina is only one, are temporary and fragile. Only today we learn that the second tranche of the IMF loan to Brazil is unlikely to be paid, as that country, with strikes and riots spreading through its industrial areas, is unable to carry through the harsh conditionality that has been imposed.
  The truth is that irresponsible borrowing and lending have created a situation in which the orthodox remedies of the IMF are almost irrelevant, and the whole problem has been immensely compounded by the deflationary policies which the major countries of the West have pursued and which they again reaffirmed as recently as Williamsburg.
  Mr. Nicholas Baker: The right hon. Gentleman has said some severe things about the commercial banks. In so far as commercial banks went into lending to Third world countries under the umbrella of Western Governments, surely the Governments of Western countries have a great responsibility for the problems that now exist.
  Mr. Shore: Yes, they have that responsibility. I do not seek to put the whole responsibility on commercial banks. Frankly, the greatest responsibility has been the deliberate option at the highest level by the leading countries of the West for policies of international deflation.
  Unless the Western world is able, once again, to resume its own expansion, the whole problem will become insoluble. The corrective measures imposed on the debt-ridden developing countries can work only if they reduce their imports from the West and expand their exports to it. That can happen only if the economies of the West are themselves expanding. If the economies of the West continue to stagnate, the forces of protectionism will become irresistible.
  I conclude with the following three points. First, we should now be giving absolute priority to measures in the United Kingdom, and in co-operation with our Western partners, to expand our economies and world trade. Secondly, we should seek to work out new proposals to enable the IMF to perform its essential role and to deal with the massive problem of world indebtedness. Thirdly, we should join others in finding ways of lowering interest rates, which bear so cruelly on those who are already laden with debt.
  The Bill and the order that follows later today will need to be followed, in my judgment, by far more substantial
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  measures during the life of this Parliament. Meanwhile, we shall vote against this measure, for the reasons stated in our amendment.
  4.36 pm
  Mr. James Callaghan: I echo the latter words of my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore). I am sure that we shall come back to this subject many times. Dry as dust though it is, and difficult to comprehend, it is nevertheless one of the most important topics that the world and the country have to face, and it is for politicians to try to translate the problems into simple and understandable terms and explain why they vitally affect the ordinary citizen of this country and of so many other countries.
  My right hon. Friend introduced a most important element into the consideration of the role of the International Monetary Fund. I have watched it over 20 years, and although the central bankers—and, indeed, financial Ministers — believed that they were being politically neutral and were trying to exclude politics from their consideration, in fact politics has been growing more and more important in the work of the IMF. Indeed, I believe that it will grow more than it has done so far.
  My right hon. Friend moved the amendment about Argentina, which I well understand. However, I think we shall need to look at the problem because of the growing politicisation—if I may use that awful word—of the IMF in relation to much wider problems. There is the whole question of human rights and the terms on which loans are made. If it is thought right to impose austere rigid economic conditions on a country, which may, as my right hon. Friend said in his closing remarks, lead to riots, a coup, or loss of office by the existing Government, is that not a very political act? There is also the question that my right hon. Friend raised indirectly of the financing of arms programmes. We cannot act simply in relation to Argentina, but I think that countries will move more and more into greater political oversight of the work of the IMF. We shall have to be careful how that is done, but I believe that more thought should be given to the matter than has been given so far.
  For 10 years I have listened to reassuring, bland statements—if the Economic Secretary will forgive me for saying so—to the effect that the debt problem is serious, that it is well understood, that it is under control, and that it is slowly improving. This afternoon we heard another such statement. However, 10 years later, the problem is still here, and I am bound to say that it will be here, unless the fundamental restructuring to which my right hon. Friend referred takes place, in 10 years' time. We are tinkering with the problem. That is not to say that I despise this Bill or its proposals. They are a solarium for a dangerous disease, but they will not cure the disease and nor will the disease be cured by the free market system which we have lived through and in which the banks have been encouraged.
  I agree with the Economic Secretary that the banks were encouraged during the 1970s to take over the role of Governments. Governments were ready to step out of the arena and allow the commercial banks to step in and take over the responsibility that Governments were not willing to shoulder.
  We thought—no, many of us did not; Lord Lever did not think and he had an interesting article in The Economist on the matter this week. He has written more

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  persuasively and perhaps with more foresight about this than most people. Not everybody thought that it would be possible successfully to recycle those petro-dollars. It was claimed as a success when the petro-dollars flowed from the OPEC countries into Wall street and the City of London and were then sent to Third world countries which, momentarily, were able to finance their exports with ease. It was said to be a great success, but it was an illusion that was built up that it was possible to have a fivefold increase in world oil prices without a long-term economic cost.
  The Bill destroys that illusion and pretence. It says that it is not possible to continue along those lines. The banks have found themselves in great trouble and Governments have now had to step in, despite the prejudices and ideologies of some of the leaders of the Western world. President Reagan came to power on a programme of withdrawing support from the IMF, curtailing its arrangements and reducing the facilities that it might employ. Three years too late, he has learnt the facts of life and he and the United States Treasury have had to come round because there is no other way.
  I am looking forward to hearing the right hon. Member for Down. South (Mr. Powell) — he dissented audibly when the Economic Secretary was putting his conditions earlier—try to defend the case for commercial banks lending at high rates of interest under a free market system, piling the unpaid interest on top of the exisiting debt, finding themselves ensnared in their difficulties, and eventually having to step out and refuse to lend until forced to do so by the IMF. I always value the right hon. Gentleman's contributions on these matters.
  What would be the position of small countries? I do not mean Brazil. Brazil is big enough to look after itself and will get its money. I am told the Prime Minister is opposed to that—if I may say so by way of interpolation—but it would be short-sighted of her if she were, considering her priorities in the south Atlantic. But what will be said to those countries—there are several of them—who are unable to provide a supply of clean water, elementary housing and the very elements of health for their people? Will it be said that they must adopt a free market philosophy and that if they cannot borrow from the commercial banks on commercial terms there is no international institution to take their place? If that is the right hon. Gentleman's case, it may appeal to his head but thank God there are occasions when his heart will overrule his head. I hope that this will be one of them.
  The conditions that have been imposed upon some of the smaller countries have made it impossible for them to fulfil the conditions from either the banks or the IMF. I shall not name any country today because I do not want to make any invidious comparisons. However, I have spoken to our officials who serve in some of those countries and they tell me that the conditions that the IMF is attempting to impose are impossible to achieve. If that is the position, where will it put us?
  I want to return to the kind of proposals that were suggested by my right hon. Friend the Member for Bethnal Green and Stepney. We need many changes, not only the exposure of the banks. Mr. Tom Causen, the president of the World Bank—a hard-nosed banker if ever there was one—said recently in his report that some of the smaller Third world countries are having to abandon projects that are economically sound, that would aid economic growth and that, at the same time, would increase their export
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  potential and capacity, because of the failure of the United States, among other to fulfil its replenishment of the International Development Association funds, the projects of which have been guaranteed. They are now having to be put aside.
  A further effect is the regional impact. Many countries, because of their shortage of foreign exchange—some of them have no access to foreign exchange and no reserves other than what they obtain from the IMF—have had to embark on what is almost a bilateral barter arrangement with their neighbours in Africa, parts of Asia and South America. They are trying to arrange between each other that at the end of the year neither will owe the other anything but that everything will be balanced out. That is because they will not have any foreign exchange to pay each other, anyway. The IMF will not give them any and the commercial banks are unable to provide any more. That is silting up the channels of trade. It means that trade is being conducted an a lower level that it need or should be between these countries.
  The Bill will provide some help in such circumstances. I particularly welcome the fact that, under the general arrangements to borrow for the first time, what are called Third world countries — non-member countries of the Group of Ten—will be empowered to borrow through those arrangements. That is a sensible step forward. I hope, in view of some reports in the newspapers, that I understood the Economic Secretary rightly and that he will give me an assurance that the extension of this arrangement will not be curtailed because of the proposed increase in the IMF quotas. That would be to rob Peter to pay Paul. I hope that there is no such suggestion and that Britain will not support any arrangement under which access to the genera] arrangements to borrow would be denied to Third world countries.
  It is said—the Economic Secretary got close to it this afternoon — that the present economic recovery will make matters manageable. I do not believe it. First, we do not know how long the present world economic recovery will continue. I have a feeling that it will continue until President Reagan is re-elected. Unless the American economic recovery is more deeply seated than it is at present, based as it is on domestic consumption, construction and the rebuilding of inventories, until we see new capital investment, the American recovery, with all its implications for European recovery, is not likely to persist for longer than 18 months at the outside. Even if it does, on the best estimates that can be made, the rate of growth of the Third world countries will still be only half what it was five years ago.
  That being so, there is no way in which those countries can use their export earnings. Even if the price of primary commodities and metals goes up—metals are going up now, but primary products are not moving much—the additional export earnings will not be sufficient to do more than service a large part of the loan, with little left over for purchasing Western industrialised countries' exports. Therefore, there is little prospect of the debt problem going away.
  I have come to the conclusion that we now need a fundamental restructuring of world debt. Lord Lever said:
  "The West needs to teal with particular emergencies within a comprehensive and durable system."
  We do not have such a system at present. We have been living from hand to mouth ever since the crisis in oil prices. We have staggered from one crisis to another. The

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  crises have not affected us too much, although they have had an impact on this country, but they have affected dramatically and seriously the countries of the Third world.
  Mr. Nicholas Baker: What the right hon. Gentleman said about the responsibilities of Western Governments is interesting. Should commercial banks pay part of the price for the general irresponsibility? Will it be left to banks or Governments to do the restructuring?
  Mr. Callaghan: There are a number of ways in which the matter can be considered. It is not my task to give a solution. One solution, which has been hotly criticised, is for the World Bank, or the IMF, or a combination of the two, to take over some of the liabilities. That is regarded as bailing out the banks, but the position of the Third world is more important than not bailing out the banks. Another solution is that the commercial banks should be required to lend further sums, either with or without additional guarantees, at a penal rate of interest. Therefore, those banks would have to subsidise the rate of interest that they charged on new loans, having built up tremendous loan charges during the past. I shall not propose either of those solutions or any other.
  However, the matter has been partly taken out of the hands of the banks, which still have severe exposure. If Brazil were to default, there is no doubt that a large slice of the capital of one internationally known bank would go and several smaller banks would suffer. That would be injurious to the prospects of world expansion, however much there is. Therefore, I shall content myself with saying that I shall not attach myself to any solution. Solutions can easily be worked out by the expert technicians from whom I have had the most profound professional advice, but I am not necessarily so keen on their political judgment.
  We need to restructure the Third world debt, lengthen it, make maturities longer and make the interest rates less. My right hon. Friend the Member for Bethnal Green and Stepney referred to this. We need to reconsider the rates of interest that are being charged. What we need is an international interest rate disarmament conference. I might go further than START has done. I say that because I know of no rule under which it is necessary for real interest rates to be so much higher than the rate of inflation. They used not to be. Some 20 years ago, in the bad old days when I was Chancellor of the Exchequer and we had only 350,000 unemployed, a growth rate of 3 per cent. or 4 per cent. a year and all the rest of the evils from which we have now escaped, we had some international arrangements on interest rates. I put it strongly to the politicians and statesmen who lead us today that there is a case for them all to get together and to ask how far it is necessary to relate the real rate of interest to the level of inflation. Why was it possible for the world to have a lower rate of interest than today in the 1960s, which was not too bad in retrospect, however much Reggie Maudling and I have been criticised since? It is not enough to say that one has to finance the American debt and that it is forcing up the rates of interest. If there were general agreement, it would be possible to reduce interest rates.
  Means should be found to prevent a worsening of the terms of trade against the Third world. They have moved badly against those countries since the oil price crisis. I
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  have already referred to the need for a comprehensive and durable world payments system. It is the sort of thing that Lord Lever has argued for on many occasions. He and I often hunted together on that matter. I became convinced of its necessity many years ago. We must go on preaching it. I hope that it will be taken up by Governments.
  Finally, there should be more political oversight of the IMF. I have already referred to that matter and shall not go further into detail today. As I have said, the technicians at the IMF do a first-class job and try to do so internationally in a way that satisfies the needs of the statutes under which they operate. Those statutes are 40 years old. If one reads them carefully, one sees that they contain the material for extending the operations of the IMF. It is necessary to extend those operations. Just as we are becoming one world in so many ways, in our economic, financial and monetary policies we have to move nearer to that end. I am by no means an idealist. No one has ever called me that. However, I can see the practical necessity for us to co-ordinate our arrangements in all those affairs much more than we have done so far if we are to make the fullest use of the wealth of natural resources that the world possesses to meet the basic needs of men and women throughout the world.
  4.57 pm
  Mr. Geoffrey Rippon: I congratulate my hon. Friend the Economic Secretary on the assumption of his new and important responsibilities. I express my gratitude and, I am sure, that of the House for the way in which he introduced the Bill. I share some of the feelings expressed in the debate that it was an over-optimistic assessment of the situation. I apprehend, however, that the voice of Jacob and the hand of Esau are being represented on the Treasury Bench.
  I entirely agree with the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) that this is one of the most important, if not the most important, issues that face the House and the free world. It is extraordinary that we should pay so much attention to the Chancellor of the Exchequer's statement last week, yet regard this as an unimportant debate that might end conveniently at 7 o'clock. The Chancellor's statement pales into insignificance besides the international debt crisis. Everything that he proposed, except possibly the useful reform of one of the more stupid Treasury budgetary procedures, was entirely at the margin of events.
  It is rather strange that not one representative of the Social Democratic party or the Liberal party has been present at any stage of the debate. I suppose that they are busy in their constituencies, telling their supporters that they will clean the streets for them or get them a council house, and attending to their grass roots. Their proper place is here in a debate of this nature.
  The crisis that we face today might be likened to a series of time bombs, ticking away under our hopes of economic recovery. We do not know exactly where the time bombs will go off—it may be in Argentina or Brazil or, as the right hon. Member for Cardiff, South and Penarth said, the crisis might affect first some of the smaller countries whose problems are desperate. All we know is that the Governments who are responsible simply send out the fire engines each time and react to each explosion as it takes place. They are experts in crisis management and so must always have some crisis or other to manage.

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  I welcome the Bill in so far as it increases from £350 million to £1,200 million the Treasury's power to lend to the IMF. Some hon. Members would regard that as quite a lot of public money to be dispensed, so the Government should be concerned about it. I agree with those who suggest that, far from it being too much, it is, as the right hon. Member for Bethnal Green and Stepney (Mr. Shore) suggested, too little. It is only a temporary palliative and we can be sure that, in the course of this Parliament, other measures to deal with the international debt crisis will be brought forward. It is a part, and only a small part, of what is proving to be a slowly developing international operation.
  That international operation has become necessary in order to rescue hapless debtor nations from not only financial but economic disaster. In the process of rescuing them we are having to rescue ourselves. We have to rescue those who have lent so much and have lent it so unwisely and at such crippling interest rates. Lord Lever —although not so much when he was in Government—and many others have argued for a long time that one cannot sustain economic recovery or prosperity on the basis of high interest rates of the type that exist today.
  Before the right hon. Member for Down, South (Mr. Powell) leaves the Chamber, I should like to pay him a warm tribute, as I have done on other occasions, for the notable speech that he made to the junior chamber of commerce in Bangor in the late 1960s when he said that no country could prosper or perhaps even survive with interest rates at 10 per cent. In the speech that the right hon. Gentleman intends to make, I hope that he will agree that high interest rates fuel inflation until the point when they bring about economic depression and disaster.
  Like the right hon. Member for Bethnal Green and Stepney, I, too, read the newspapers. I read The Times rather than The Daily Telegraph this morning. I noticed the headline
  "Curbs sought on loan sharks".
  My first impression was that the headline related to our debate this afternoon. It can be profitable to be a loan shark, but it is essential to have enforcers. Anyone at the lowest level of the Mafia could tell us that. We cannot go out and break the leg of the President of Brazil. We cannot put outside the presidential palace a van labelled "debt collector" so that he would be shamed into paying. We must tackle that problem in a different way.
  I should like to ask the Government several questions. I will not attempt, as the right hon. Member for Bethnal Green and Stepney did, to ask questions and then to provide the answers. I want the Government to provide the answers. Will my hon. Friend make clear what similar action is now being taken by other Governments to increase their contributions to the IMF? Will he say a little more about how he envisages debtor nations such as Brazil ever being able to repay their IMF loans if they are still subject to existing interest rates? Perhaps he will clarify Brazil's position. The right hon. Member for Cardiff, South and Penarth said that Brazil must get its money—and I have no doubt that it will—but we have, in effect, to give Brazil the money to pay the interest on the debt and then to pay a tip so that Brazil will not embarrass us by defaulting altogether. What will Brazil receive? Will we be contributing and, if so, on what basis and to what extent? Do the Government feel that Brazil or any other country is likely to default, and, if so, what will we do in those circumstances?
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  My hon. Friend said that the basis of rescheduling was subject to conditions including austerity programmes. It makes more sense to have conditions such as compliance with human rights, which do not involve disastrous financial consequences. Countries that are on the floor and are using a high proportion of their national income to try to pay their debts—they are doing rather well and have done their best not to join the defaulters club — are being crippled by interest rates which mean that they can not buy from us. That leads to a downward spiral in international trade that must be halted.
  My hon. Friend said that the world debt problems are slowly responding to treatment. That is not merely nonsense but nonsense on stilts and, if I may say so, on shaky stilts. I did not sense from my hon. Friend's speech that the Government are fully aware that not only the debtor nations but the whole of the world banking system is continuing to roam around the rim of chaos. I felt that there was no sense of urgency about the problem.
  Clause 2 provides for the Treasury to indemnify the Bank of England in respect of its participation in international support operations—so far so good; I do not complain about that—but have the Government any further plans to extend such an indemnity to private banks and institutions? It has been said that the banks were pushed into lending, but some of them were willingly pushed and were a little greedy.
  Over the past few years the Western world has had a licence to make money provided it made nothing else. After the 1979 budget I said that if I charge a man these rates of interest I do so partly because I never expect him to pay or that I expect the whole of the principal to be repaid in interest during the first few years. They were unwise loans and, when the time came for recycling, the Arabs, like a good many other sensible people, lent their money to safe countries and safe institutions in order that they should pass it on to unsafe ones. The difficulties have been compounded. The commercial banks will not be tempted to do it again. In that case, what will the Government do to insure them against loss? In the United States, the Hanover Manufacturers Trust has made proposals for official loan guarantees. Reference has been made to Lord Lever's admirable article in The Economist of this week, which again puts the case for which many of us have argued for so long for collective action to support the overstrained international banking system. What is interesting is that Lord Lever puts forward suggestions not only for a new look IMF system but for the development of export credit agencies. What is the Government's attitude to the proposal that we should extend the power of the export credit gruarantee agencies to ensure some exports of capital as well as of goods?
  What action is being taken on the various pledges given at the Williamsburg summit at the end of May? I know that it is said that those are vague communiqués. I have always thought that if one took six communiqués and, with the aid of a word processor, shuffled the phrases around, one could produce another communiqué just about as useful. But we must not insult the intelligence and integrity of Heads of State and Government by believing that they are unable to read or do not understand what they have solemenly signed in our name.
  However, we all know what the United States has been doing about steel imports in contradiction to all the fine talk about resisting protection. Last week, the Prime Minister said that she deplored that action and she rightly

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  accords importance to the Williamsburg declaration. She will recall that at Williamsburg, the Heads of State and Governments invited
  "ministers of finance, in consultation with the managing director of the IMF to define the conditions for improving the international monetary system and to consider the part which might, in due course, be played in this process by a high level international monetary conference."
  That is a little lukewarm, but it is a recognition of the problem. What initiative are the Government taking in that regard? I am not suggesting calling a high-level conference without adequate preparation through official channels. Before there is a high-level conference there must be meetings of the relevant civil servants. I have always taken the view that, if it is expedient that one man should die for the people, it should be a civil servant, not a Minister. They are the people who must get down to the nitty gritty discussions. We hope that when they have prepared the ground sufficiently the Heads of State and Government will appear with golden pens, knowing for once what they will use them for.
  I fear that, in spite of the limited rescue operation that the Bill represents, there is likely to be a continuing wave of international financial crises, perhaps culminating in considerable debt repudiation, if we do not take urgent action to deal with the problem. In that process, the developed and the developing countries suffer equally. The rich will not be able to sell and the poor will not be able to buy. That is the classic recipe for economic depression and disaster. I do not underestimate the difficulties associated with reaching international agreement, but we would all like some assurance that the Government are willing to take a lead to secure an effective overhaul of our international monetary system before it is too late.
  5.12 pm
  Mr. J. Enoch Powell: It is one of the most difficult and disarming moments when a Minister introduces a Bill with the assertion that everybody agrees with and approves of the objects to which it is directed. One is embarrassed, amid the approving murmur that follows such declarations, to punctuate his speech with a series of negatives, as, taught by experience not to keep my month shut, I did not refrain from doing this afternoon.
  Judge, then, how grateful I am to the official Opposition for having tabled a reasoned amendment to the motion for Second Reading. It is not that they are serious about it. It became clear during the speech of the right hon. Member for Bethnal Green and Stepney (Mr. Shore) that, in general, they agree with the nonsense with which the Bill is concerned. The whole contraption is not merely familiar but congenial to them. Nevertheless, thanks to the form of the motion that they have tabled they will vote against the proposition that the Bill be read a Second time.
  Mr. Shore: We are extremely serious about our amendment and shall divide the House on it.
  Mr. Powell: The right hon. Gentleman misunderstands. Of course the Opposition are serious about their amendment, but they are not serious about the subject. Hence the contradictions in which the right hon. Gentleman involved himself. I am much relieved that the right hon. Gentleman has not disavowed his intention to
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  vote against the Question, That the Bill be now read a Second time. [Interruption.] There seems to be some disagreement in the ranks around me—not for the first time. I live in hope that, when the Question is put, there will be a sufficient cry from the Opposition Benches as will enable me to record my vote against the Bill being read a Second time. If that is so, I shall allow the order which the House will consider later—against which it will be impossible to find Tellers—duly to pass.
  As I listened to the Minister, I noticed him referring to what he called the "fashionable" notions that were in circulation when the problem to which the Bill directs itself was building up. I could not help thinking what a fashionable speech it was that the Minister read to the House, and how replete with sentiments and notions from which, at the moment, it is impossible in polite society or the economic journals to dissent.
  I should make it clear at the outset that I consider the international organisations with which the Bill is concerned to have two aims which are equally absurd and damaging, though the debate has principally directed itself only to the second. The first aim is to bring about stable, or as nearly as possible stable, exchange rates through the nations and central banks lending one another money to fudge the rates. The second is to lend money to those who are bankrupt, so that those who have lent to them shall, nevertheless, make their profits and get their interest. I consider both operations to be self-evidently absurd and arguably —I shall not argue it in too much length—damaging to both sides of the transactions.
  It is clearly absurd to attempt to stabilise exchange rates. They express economic circumstances which, by their nature, are changeable and unforeseeably changeable. The respective supply and demand of the various currencies, which is what is expressed by the ruling exchange rates, are the response to real economic changes of which it is profoundly important those concerned should remain aware as they are spelt out to them by the movements of that price system. It is, therefore, something foredoomed to failure and inherently undesirable that what by its nature is unstable, needs to change, and is bound to change, should be sought to be restrained and stabilised by borrowing or printing money which may be then lent across the exchanges.
  Although, however, that purpose is implicit in and served by the extensions which the Bill creates, it has not been the main topic of today's debate. The main topic of the debate has been the necessity to lend huge sums of money to those who, in private life, would already be bankrupt—in other words lend further huge sums of money to nations which are unable to repay and service the loans they have already contracted and which are determined that in no circumstances will they be found doing so.
  The underlying proposition is that, faced with those debtors, we ought to lend them more money. Two reasons for doing so are given. The first is that if we do not lend more money they will not be able to buy our goods—the argument is usually wrapped up a little, but that is what it amounts to. Now, it is one thing to be told to sell all one's goods and give to the poor. It is quite another to be told that we should buy our own goods and then give them away. That is the activity to which we are to be stimulated by this type of proposition.
  There is no possible benefit to be gained from buying our own exports and giving them away. The resources we

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  apply in that way would be more usefully, agreeably and advantageously applied inside this economy in all kinds of ways which hon. Members on both sides of the House on other occasions are ready enough to propose. I dismiss, then, as self-evidently vacuous the proposition that we ought to lend to the bankrupt so that they may continue to buy from us.
  The other argument, however, the central argument, is that if we lend them some more they will become good boys instead of bad boys; that a reformation will, or at any rate can, be achieved in their economies and even their moral behaviour. The key to that transformation is found in what the right hon. Member for Bethnal Green and Stepney — I am grateful to him for the expression—called the politicisation of conditionality. That was a splendid phrase: it goes to the heart of the matter and sheds illumination on the whole great scene.
  The "politicisation of conditionality" was what Chinese Customs was about. It was what we did to the Khedive Ismail, when we said, "A lot of our people have lent you a lot of money, and by Jove we shall get the principal and the interest on it out of the backs of your fellahin, O Khedive." That is exactly the proposition, not put in such brutal terms, that lies behind the plea to lend to the bankrupt—that we shall put them back into a condition in which they will be able to service the principal and interest on the existing debt as well as the new debt.
  However, one necessary piece of mechanism of the "politicisation of conditionality" was omitted by the right hon. Member for Bethnal Green and Stepney and by the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan). To make sure that our debtors behave, we must exercise some power of compulsion over them. We must be able to collect the Chinese Customs; we must occupy Egypt and see that, while the Khedive enjoys his operas, we run his country. The argument would be sound enough if we were saying, "Let us go and occupy these countries," — I hope not with an international body — "because we know how to run an economy." Such countries might raise their eyebrows at being told that. Still, we could say, "Let us show them how to do what we know so well. Let us march in and take control of the police and the administration. Then we can see that the loans are serviced and the principal repaid."
  Make no mistake, it is not through ignorance that the debtors have got into this mess. It is not because they are benighted, stupid people. It was in obedience to tremendous political forces, and therefore it is nonsense to talk about "politicising the conditionality" of these loans unless we strike down those political forces.
  I shall be interested to see the IMF setting about that task by the remote persuasion of an international body. There is indeed one threat that the IMF dare not utter. The right hon. Member for Bethnal Green and Stepney got very near to it, but he saw the gulf before his feet and stepped back just in time. The IMF cannot say, "Do this or we shall not lend you any more money" — [Interruption.] Someone says it can, but what have we been hearing about?
  Mr. Robert Hughes: Will the right hon. Gentleman give way?
  Mr. Powell: Not at the moment. We have been hearing that we must go on lending them money in order to sell them our exports and so that our own banking system may
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  not be disrupted. A fine threat the debtors will think it when, having used those arguments, the IMF itself attempts to threaten them with ceasing to supply loans.
  The word "bankrupt" applied to them is deeply fallacious. We are talking about the problem of sovereign debt, and that which is sovereign is not made bankrupt. What we are really saying is that we would like to undermine, deny or withdraw the sovereignty of debtors who, if they were not sovereign, would be bankrupt.
  An absentee from the debate who, without disrespect to the distinguished contributions of the right hon. Member for Cardiff, South and Penarth and the right hon. and learned Member for Hexham (Mr. Rippon), is its true hero is the hon. Member for Bolsover (Mr. Skinner). What a pity that activities elsewhere—it cannot surely be the eve of the Twelfth of July?—have prevented the hon. Gentleman from attending, for the hon. Gentleman has seen further and deeper into this matter than most, certainly than the Prime Minister, whose position was substantially undermined by her junior Minister this afternoon, when he withdrew her argument that after accepting another loan the Argentine would not be able to continue buying weapons—he only said that it was "less likely to be able to buy weapons", a substantial modification.
  It is a pity, I say, that the hon. Member for Bolsover is not here to behold his triumph and the validation of what he has said on this subject; for one puzzle was left unexplained in the speeches of the right hon. Members for Bethnal Green and Stepney and for Cardiff, South and Penarth. The right hon. Member for Bethnal Green and Stepney referred to the "astonishing recklessness" of the lenders who have brought things to the pass with which we are now confronted. The right hon. Gentleman said that this huge volume of debt—these billions of debt—had been piled up with "astonishing recklessness". In the motives that we impute to others, we often reveal something of our own character. Something of the sterling honesty and simplicity of the right hon. Gentleman is revealed by the fact that he thought it "reckless" to lend these sums of money to Brazil, the Argentine and other countries.
  The right hon. Gentleman said the bankers were taking a reckless risk. But what is the Bill about? It is a Bill to indemnify those who lend. We ought to ask why they were so certain that in due course this indemnity would be forthcoming, and why they were taking what they considered to be justifiable risks.
  I will explain something else to the right hon. Member for Cardiff, South and Penarth in the context in which he challenged me. He referred to the large loans that had been made to enable countries to purchase oil at enhanced prices. That was slightly corrected later by the right hon. and learned Member for Hexham, who said that the loans were made in the first place to countries that could purchase the oil so that they could then pass it on to countries that could not purchase it. Now, the loans are the counterpart of the oil exports—no loans, no oil exports—and had it not been possible to make these loans, it would not have been possible to hoist the price of oil. The problem of sovereign debt itself is the relic of the mechanism by which the price of oil was able to be pushed up. If those loans had not been forthcoming, the bottom would have tumbled out of the oil market faster than the sheikhs could put it back.
  Mr. Rippon: I was also saying that, when the price of oil had risen, the Arabs were wise enough to lend their money to British banks and institutions, which passed it on to unsafe countries.
  Mr. Powell: I appreciate that. I am only disagreeing with the right hon. and learned Gentleman about his tense—when the price of oil "had" risen. The rise in the price of oil was made possible by the simultaneous increase in the volume of debt, direct and indirect—the recycling as it was called. No recycling, no price hike—as the Americans, I gather, call it.
  When the right hon. Member for Cardiff, South and Penarth, appealing to my better nature as he sometimes does, asks me to contemplate the situation of a country where perfectly good commercial operations require to be financed, I do not shrink back in the least. First, it was these very loans, these very institutions, this very assumption of do-gooding on the part of some of the greediest and wickedest forces in the world, which were the initial cause of the misery and difficulties of the developing countries. Secondly, if there is a genuine commercial proposition anywhere in the world, be it in the poorest country, that proposition will be properly and commercially funded. The embarrassments of the developing countries are the fruit of what has been done by the international organisations.
  I conclude with an obeisance, which is only due, to the hon. Member for Bolsover. He is fundamentally right when he says that this is a bankers' ramp. The private bankers in the various nations extended these loans—unjustifiable commercially and politically, which financed among other things the weapons used against this country—in the confidence that they would be seen all right when there was trouble by talking about the world financial system and our economic and commercial interests. Why were they so sure that this would be done? They were sure because these organisations are themselves the creatures of the banks. This is the connection which the right hon. Member for Cardiff, South and Penarth apprehended well in his references to President Reagan. They are not erected—that is only the blurb—to enable people to do good to their fellow men. They are erected to see that the major commercial interests are sustained — more than that, can engage in uncommercial operations to make interest and profits upon operations which will yield those interests and profits only if they are sustained internationally.
  Even that word "internationally" is a fallacy, because in the end the burden comes back on to the backs of the people of each country concerned. There is a giveaway phrase in the explanatory memorandum on clauses with which we were provided. In paragraph 5 on clause 1 it says:
  "The GAB provisions have no direct expenditure implications."
  When we come to clause 2, however, it says:
  "In view of the contingent risk to public expenditure, the Treasury seeks"
  and so on. It is in part out of the taxpayers of this country and out of their work and production that this vast bankers' ramp, presented as if it were a worldwide benevolent enterprise, will be financed in the end. That is why, with great delight, I shall take the opportunity vouchsafed to me by Her Majesty's Opposition of voting tonight against the proposition that the Bill be read a Second time.
  5.35 pm
  Mr. Bowen Wells:I start by discharging two pleasant duties. First, I welcome you, Mr. Deputy Speaker, to your Chair. This is the first time that I have had the opportunity to speak under your chairmanship. Secondly, I welcome the new Economic Secretary to his post in the Government, upon which I congratulate him.
  It is always a great honour to speak after the right hon. Member for Down, South (Mr. Powell). His logic is, as always, impeccable, as his training, education and experience in the House always lead us to expect. I have always found with the right hon. Gentleman that he proceeds from an unsound assumption for his argument to an unsound conclusion. I shall point out where his unfounded and illogical assumption has been made.
  The right hon. Gentleman has stated that exchange rates are a reflection of the economic circumstances of a country and that the lessons learnt from the exchange rate need to be applied to the economy of that country. Is that a sound assumption from which to proceed? It is clearly not, because we can manipulate exchange rates. Exchange rates are manipulated, and are in the process of being manipulated now. They are manipulated at the moment by the use of interest charges in the domestic economies of the United States and this country. We saw it apply in the domestic economy of Great Britain in 1979, when the economic theorists' idea was that one controls money supply by putting up interest rates. However, exchange rates went up enormously as well, which resulted in the crisis of domestic manufacturers. It is not true to say that exchange rates are invariably and inevitably a reflection of economic activity in a certain country.
  One could take this back to the 19th century, when exchange rates were related to a certain value of gold. Again, they were the reflection not of economic activity but of the price at which gold was exchanged. It is common ground, although I should like to know the view of the right hon. Member for Down, South on this, that we were right to abandon gold as a standard against which to judge exchange rates. Had we not abandoned that, we would restrict our money supply, and therefore the growth of world trade, to the value of a commodity in the ground, which is unacceptable to the international community because much of that gold is in the ground of South Africa or Russia.
  We are looking—and the basis of the argument of the right hon. Member for Down, South is this, although he failed to make the point — at how we can apply economic and financial disciplines to international and domestic economies without having some more regulated manner of being able to value our money. If sound money, and the right hon. Gentleman is a great exponent of this, is the basis of growth of trade and investment in our domestic economy, so it must be, by logic, in world trade.
  Let us go back into the history of this crisis to see what has happened. There is a malfunctioning of the international monetary system. The present crisis had its seeds and origins in the fact that we were ripping off the oil-producing countries during the 1950s, the 1960s and the early 1970s. We were paying for the scarce commodity of oil with an ever-devaluing international currency because the United States Government began to finance the Vietnam war without taxing their citizens to pay for it. They then began to print money, thereby devaluing the

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  US dollar, which had been the foundation stone of exchange rate systems that had replaced gold. The fixed rate system that was introduced by the Bretton Woods conference was thereby undermined.

  The oil countries naturally said that the rip-off must stop. Eventually, they got together and formed OPEC and jacked up the price of oil. That action produced the surpluses in the oil-rich countries, which were fed into the world banking system. A bank is both a lender and a borrower. It cannot lend money that it does not take in. Where was the banking system to find the projects and investments on which to lend money in order to repay the Arabs—the oil-rich countries—in a proper, undevalued currency? The newly emergent and fast-developing countries—especially the oil-rich—were the means. At that time, the investments made by those banks were sound, given that the price of oil remained at its then value.
  However, oil prices are now falling, resulting in inability to repay loans. Those countries are then unable to repay the interest on those loans. The right hon. Member for Down, South is being absurd to suggest that a country can refuse to import oil, which is a basic source of energy. Many countries cannot refuse to buy it. Neither Britain nor a developing country can do that. They must continue to import oil to keep their countries going. The option of not importing oil was not open to developing countries. Therefore, they had to borrow.
  The non-oil, developing countries are in the most extreme poverty and will not be affected by the Bill. The House should be considering the problem, to which the Economic Secretary did not address himself— I have complained not only to him, but to every Treasury Minister in the past three years—of the difficulties in the international monetary system. The Government should have the political will, formed through proper discussion and preparation, to lead an international discussion to regulate and apply the discipline of money in the economy. We must ensure that countries do not print money or over-inflate their economies. We must seek to improve on that.
  Mr. Nicholas Baker: My hon. Friend is an expert on this subject. Does he agree that, contrary to the views of Opposition Members, there must be conditionality in the loans, and the conditions must be organised on an international basis?
  Mr. Wells: I am grateful to my hon. Friend for that intervention. We are trying to concentrate on the discipline and therefore on the conditionality of IMF loans—which is the only international mechanism left, as the automatic disciplines of the gold standard or the fixed-rate exchange system no longer apply—which ensure that the debtor countries adopt the economic policies that pull them out of their difficulties.
  Mr. Robert Hughes: Can the hon. Gentleman give an example of where conditions have been applied to a country that has not carried them out? What has the IMF done about that?
  Mr. Wells: Jamaica was recently unable to fulfil IMF conditions and the IMF agreement was renegotiated, thereby enabling the economy to expand somewhat.
  The Economic Secretary to the Treasury outlined the medicine that he said was standard IMF practice. I will read out a description of the usual IMF medicine
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  "As a condition for its assistance, the IMF almost invariably insists on measures that have the effect of contracting the economy, increasing unemployment and reducing consumption, in order to slow imports and shift resources to exports. The problem is that IMF conditions cannot work if applied at the same time in many countries, particularly in a period of global recession."
  That quotation is by Henry Kissinger writing in Newsweek at the beginning of the year, and not from any Keynesian Left-wing economist Dr. Kissinger approves the IMF as the only method open to apply the disciplines. However, he mentioned in his final sentence the great flaw. As my right hon. and learned Friend the Member for Hexham (Mr. Rippon) said, we cannot export to those who cannot buy. Therefore, a Marshall plan must be introduced, or a means by which those in need can buy. The IMF's mechanism and that of the World Bank is to lend money to state economies and to pay attention to the world trading system and the GATT. We must consider the totality of the international monetary system.
  The Bill is a welcome step in the right direction. I congratulate my right hon. and learned Friend the Foreign Secretary on his negotiations when he was chairman of the IMF interim committee, especially as the Americans were much opposed to him at the time.
  There is a note of hope. The problem of debt has brought together great minds and great speakers in the Chamber to consider the issues of international liquidity, international exchange rates and competing interest rates. If the experts can prepare themselves to deal with the situation on a more global basis, we shall lay the foundations for the expansion of world trade, which must be a precondition to domestic prosperity and the reduction of unemployment in this country. We live in a world in which electronics move vast quantities of money between exchanges. The poor are dependent on the rich and the rich are dependent on the poor. The world is inter-dependent, so there must be a proper rate of exchange and mechanisms for smoothing the problems of indebtedness and trade differences to assist the expansion of world trade. That will occur only if the Government have the political will to lead in the world. I beg that they do so.
  5.49 pm
  Dr. Jeremy Bray: I am glad that the hon. Member for Hertford and Stortford (Mr. Wells) exposed some of the fallacies expressed by the right hon. Member for Down, South (Mr. Powell). It is a bit pathetic to see new hon. Members troop in to listen to what they think they might believe if only they had the courage, but to hear a barrage of internal contradictions and fallacies which make them go away disappointed. They should reflect that if petrodollars had not been recycled not only would the bottom have dropped out of the oil market, but the bottom would have dropped out of many other markets and we should now be in an even deeper world slump.
  I am glad that the hon. Member for Hertford and Stortford talked about the problem of the international coordination of monetary policy. I hope that he will read the second special report from the Treasury and Civil Service Committee.
  I congratulate the Economic Secretary. I hope that he will not be deterred by his junior ministerial office from thinking independently about policies. The present Chancellor was not when he held junior office and I am

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  sure that the results in the hon. Gentleman's case will be more constructive than they were in that of his right hon. Friend.
  The Economic Secretary acknowledged what the Committee said about the banking crisis. I was a member of that Committee. I pay tribute to the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) specifically. At an early stage he insisted on the importance of the banking crisis as a major dimension in the general international monetary inquiry on which we had embarked.
  The problem of the Opposition's reasoned amendment is broader than the terms in which it is posed. It can be met more fundamentally in the specific case of Argentina by avoiding the Fortress Falklands policy and by attaching conditions, not to the short-term IMF loan which causes a forest of problems, but to the refinancing of those loans as bonds to which proper conditions can be attached on the lines that we recommend in our report. There are dangers in an over-politicisation of conditionality. I am not sure that in 1976 we would have enjoyed an even stronger dose of conditions. I do not rule out in future the proper resort by Britain to IMF resources, free of conditions which are too burdensome.
  The origins of the banking crisis were in the problems of recycling the OPEC surplus. The enthusiasm with which that recycling was undertaken is worth remembering. The debtor countries needed to borrow. The OPEC countries wanted a way of investing their money in an easily available and liquid form in the private sector. The banks in Britain and the United States were ready to undertake the necessary mediation. In the years 1974 to 1980 that seemed a responsible policy. People did not anticipate the depth of the recession.
  The problems affect all debtor countries, not just countries such as Mexico, Brazil and Argentina. If my hon. Friend the Member for Bolsover (Mr. Skinner) were here, he might care to remember that the debt crisis started with Poland. For the same reasons Poland, having embarked on an over-ambitious programme of industrialisation, was thwarted by the collapse of the markets which it anticipated meeting. The funds, whether from the private banks or international institutions, were exhausted and not available for the many credit-worthy industrial developing countries which were never a risky investment. But because the funds were not available and because their own markets had collapsed — an even bigger collapse than we had experienced in manufacturing demand — not only the rich and rapidly developing countries were at stake.
  The criticisms in our report refer particularly to the lack of risk assessment by the banks, even in the circumstances of the time. There seemed to have been extraordinary lapses by banks in checking credit worthiness and current indebtedness. Nowadays, when banking advisers go to a country they have to write to possible creditors to ask, "Do you have any debtors in this country?" That is a result of lax supervision in the past.
  But the biggest factor, which the Economic Secretary did not mention, was the failure of the developing countries and banks to anticipate the depth of the policy-induced recession. In paragraph 3.8, our report states:
  "Another respect in which the world economic environment has degenerated since the late 1970s … has been the adoption
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  of.monetary policies in the advanced industrial countries which have led to high and fluctuating interest rates and to very unstable exchange rates as between the major currencies."
  That was not anticipated, nor was it capable of anticipation.
  f those errors caused the banking crisis, its cure cannot be found without a resumption of growth and a reversal of those policies. The problems cannot be solved because, first, the borrowing is and will remain short term until there is a resumption of growth and credit worthiness. Secondly, the drying up of the oil surpluses means that funds are not readily available for overseas investment. Thirdly, the debt service, as my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) said, comes near to exceeding the value of exports so that there have already been huge reductions in imports for the most severely affected countries.
  The need is not just for refinancing, but for a restructuring of the debt. In paragraph 5.19 of the report, we suggest the lines that that should take. The report states:
  "the lending should be long term; the real burden of interest payments should not rise unexpectedly or independently of borrowers' ability to pay; and the volume of borrowing should be dependent on the country using the funds to supplement a high level of domestic saving to finance sound investments as well as on the country following prudent macroeconomic policies."
  There is a need for long-term bonds to which, properly, much more elaborate conditions can be attached than to short term bank loans. They could be launched by a consortium of developing countries and be partially guaranteed by, for example, the IMF's gold stock—the report makes that suggestion — and subject to the borrowers adapting the sound growth-oriented policy which makes good use of borrowed funds. That is a more healthy context in which to view, not so much the politicisation of IMF conditions as their economic relevance.
  The major change needed is the return to monetary policies in the advanced countries which are favourable to growth. Last Thursday, when the Chancellor of the Exchequer announced his mean and damaging cuts, we saw the latest chapter in the development of monetary policies that are inimical to growth. I said then that the measures were "trivial" in relation to the problems involved in maintaining the illusion that the Chancellor has induced in financial markets.
  The 5 per cent. reduction in the growth of sterling M3 and other money supply aggregates for which the Chancellor is looking represents about £5 billion off the PSBR. The Chancellor was announcing a £1 billion—or, more realistically, a £½ billion— reduction in the PSBR. It is no wonder that the markets reacted immediately and dismissed the Chancellor's measures as footling. To please Mr. Gordon Pepper in the doctrines in which he has encouraged him, the Chancellor should not only have avoided the cut in interest rates just after the election, but should have increased them and made much larger cuts in public expenditure. That is a consequence of leaving the medium-term financial strategy in place. It leads the market to expect further increases in interest rates. It encourages the investment strike upon which the market has embarked, and out of which it will be brought only by the increase in interest rates for which it is looking.
  My right hon. Friend the Member for Bethnal Green and Stepney put the point well on ITV's "News at Ten". He explored the argument underlying what the Chancellor

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  of the Exchequer had done in his medium-term financial strategy. But my right hon. Friend spelt out no alternative rules. One possible approach is beautifully illustrated by Mr. Fforde in the current Bank of England Quarterly Bulletin. He made a revealing remark about the setting of monetary targets. He distinguished between the political economy of money supply strategy, which is concerned with political presentation, and the practical macro-economics of a money supply policy, which is concerned with macro-economic relationships between money supply as an intermediate target and the ultimate objectives of policy regarding prices, output and employment.
  Mr. Fforde remarked on the contrast between the political economy and the reality, and said:
  "it would scarcely have been possible to mount and carry through, over several years and without resort to direct controls of all kinds, so determined a counter-inflationary strategy if it had not been for the initial 'political economy' of the firm monetary target."
  It was on that that the presentational confidence was built. He continued:
  "what matters is the refusal of the authorities to stimulate demand in 'Keynesian' fashion, or to 'reflate', as conditions develop that would in the past have justified and provoked such a response. The fact that the monetary targets have not concurrently been met, or that the meaning of particular developments in this or that aggregate has become very ambiguous, is of much less importance."
  Mr. Fforde may believe that, but the markets do not—as they are now showing.
  We must move on from the present stage of Government strategy and look for a viable alternative. This is not the occasion on which to embark upon a full-scale examination of our macro-strategy. However, one major aspect of it is of particular concern to the IMF, and we should not allow it to pass in a Bill that makes a major increase in the resources of the IMF.
  As the hon. Member for Hertford and Storford said, there is a clear need to take into account the exchange rates, nominal incomes and the final targets in the conduct of monetary policy. The mechanics of how to do so were explored by the Treasury Committee in its report on the exchange rate, and were spelt out both in the chairman's draft and, especially, in mine.
  The developments in the exchange rate policy of a single country are not without international repercussions. If one country adopts a managed exchange rate regime, it is a feasible course to follow. Even a bloc, such as the European monetary system, can do so. But if it is successful and other countries follow, the combination of countries can be highly destabilising. Destabilisation can occur quickly if the exchange rate targets aimed at are incompatible, as countries seek incompatible competitive devaluations or revaluations.
  The other international agencies, especially OECD, have examined the matter, and like major national agencies such as the Federal Reserve Board in the United States, and the Japanese Economic Planning Agency, have developed the apparatus of linked national economic models. But neither the Treasury nor the IMF has done so. Since we saw the IMF in January, it has taken some steps to examine the interaction of exchange rate regimes of a rather different sort than we have now, but those steps are still rudimentary and far from the policy level. They need to be put firmly at the top of the agenda if the IMF is to justify the increase in resources that we are giving it, and
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  certainly if it is to lead the negotiations needed to set up a more viable long-term solution to the problems of the banking crisis.
  If we are not to have a Committee stage, I hope that the Economic Secretary will explain why, in clause 2, we are giving the Treasury carte blanche to commit quite unlimited sums in support of quite unspecified actions by international agencies and central banks. I rather sympathise with the proposal. If we were to set a precedent of requiring legislative endorsements of particular support operations, it could have a most unfortunate effect in Washington if congressional approval were required. It would be better for the Economic Secretary to come clean and say that he is asking for a carte blanche for the Treasury in this extraordinary respect. Perhaps it is a measure, if not of the lap-dog character of the House, at any rate of its trust in an institution that I hope will do rather more to earn that trust than it has done in the recent past.
  6.6 pm
  Mr. Anthony Beaumont-Dark: I shall speak only briefly as I know that other hon. Members wish to take part in the debate. We are discussing one of the most important subjects that we shall ever discuss. The world is waking up late to the fact that there has been an international "Rake's Progress" taking place year after year, where greed has been paramount—especially since 1974 when the price of oil was hoicked up to vast levels and thousands of billions of dollars were swilling around the world. That great irresponsibility occurred because people did not learn the first-year exam lessons that I thought bankers had to learn, and which are certainly meant to be engraved on every bank manager's desk — one cannot lend short-term money for long-term projects.
  We are now at the stage where the long term has arrived—which proved to be so short term—and thousands of billions of dollars of loans from the Arab countries have turned out to be poisoned loans. They have been invested in long-term projects and the world has reached a stage where, as the right hon. Member for Down, South (Mr. Powell) said, there is a kind of madness. We have discussed the South American loans, and mentioned Brazil, Mexico and the African countries. They owe vast sums of money—some $600 billion. But nearer to home there are vast debtors on our doorstep. There was an interesting article in Investors Chronicle a fortnight ago under the heading "The debtors on our doorstep". The second XI in Europe encompass 144 million people. Those 11 countries have not had a trade balance since 1960. Apart from the $600 billion about which we all talk, there are $130 billion of loans much nearer home that must also be rephased.
  I shall give the House an example of absolute lunacy that shows the great disrespect we have of loans. Poland is one of the greatest debtor countries in Europe, yet it has just lent $134 million to Nigeria—another great debtor of the system. Those problems that lie ahead make the problems that we face today seem comparatively small. When we consider what has happened, how the problem has grown and the report to which the hon. Member for Motherwell, South (Dr. Bray) referred, and about which we have held discussions here and overseas, there must undoubtedly come a time of reckoning. A debtor's strike looms clearly on the horizon and will occur, not because

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  of evil men, but because the resources are not available in those countries, which may disappear because of civil war or poverty.
  I disagree with the inference made by the right hon. Member for Down, South that we can stop the roundabout by putting an iron bar in the spokes. Just as that iron bar would break the wheel, if we were to stop the roundabout for the countries such as Poland and Brazil, whether in Europe or South America, we would reduce the economy of the entire Western world and other countries to absolute chaos and cause genuine poverty such as we have not known since the dark ages. Therefore, we must be realistic and co-operate with the International Monetary Fund. As I said before Christmas in a debate on the Third world, we have the will and the means but we must have the courage to correct the position.
  The problem is that huge borrowings, whether by people or countries, are accepted as a macho principle and a way of life. We in the Western world are meant to be the great producers, yet we are not producing wealth. There is no real economic growth but only huge borrowings. Successive Governments in Britain and overseas have followed the philosophy that a good standard of living can be maintained, but need not be earned, or that if it need be earned, it need not be earned yet. With that philosophy the Western world will always have interest rates at the current usurous levels. Throughout the history of the world no genuine economic growth has taken place when real interest rates were above 3 per cent., and current real interest rates are nearer 10 per cent. Therefore, it is not surprising that borrowings are huge and that there is no real growth.
  If today's debate produces an awareness in the West of the need to change course to sustain the economic viability of the world, it will have been useful. But let no one think that when we approve the Second Reading today the problem passes with it. The sums involved are comparatively minute now compared with what they will be in the next few years. We must find an answer in the next few years, because we do not have 10 or 20 years. If we have the will, we have the means and can do something about it.
  6.14 pm
  Mr. Tam Dalyell: In his previous incarnation as Under-Secretary of State for Energy, the Economic Secretary to the Treasury was always willing at least to try to answer questions, in contradistinction to many of his colleagues. Therefore, to keep my speech brief, I shall put to him two complicated questions.
  The first deals with joint default. I was privileged to be the leader of the first Inter-Parliamentary Union delegation to Brazil in the mid-1970s, and I have maintained a deep interest in that country. Is it not a fact that it is dawning on the world's big debtors that their weakness is also their strength? They have realised that they need not take the IMF medicine and that there is no need to risk the riot and revolution that austerity may bring. Instead they can default, refuse to pay their debts, or impose a moratorium and delay paying back what they owe. It is no secret that Lloyds bank has loaned much of its capital to Mexico and Argentina. It is also well known that the relations between
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  the City banks, to which my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) referred, and Brazil are in the same category.
  Those loans have brought neither stability nor prosperity. In some cases they have brought weapons and revolt, not least to the smaller central American states to which my right hon. Friend referred. To the bankers, the Falklands dispute was not just a war but a crisis of credit—in Argentina, which owed more than $30 billion—and all over Latin America.
  Is it true, as has been reported in the press and as was reported in the BBC programme "Panorama" about four weeks ago, that the Mexican president Lopez-Portillo held two secret meetings with the Brazilians and the Argentines about joint default on or about 24 September 1982?
  On that occasion he could not persuade either the Brazilians or the Argentines to default, and Mexico could not go on her own. I understand that the position may change sooner rather than later. I do not wish to be personal in the House, but my brother-in-law is a Jesuit priest who has worked in Mexico City for many years, and he has told me that a monumental social crisis is round the corner if we are not careful. Those who saw the "Panorama" programme must have noted the extraordinary contrast on the border between Texas and Mexico where the First world and the Third world meet. The position cannot continue.
  What is the Government's reaction to that meeting and to the meeting in April 1983, which was not secret, between Jesus Silva Herzog of Mexico and Antonia Delfim Netto of Brazil, whom some of us have met? The "Panorama" programme contained the following statement by Mr. Herzog:
  "I think Mr. Keynes was the one who said many years ago that when you are the debtor of an important sum then you are the partner of the bank."
  If we do not help developing countries to solve their indebtedness problem they will not be our importers for many years. Will that not hurt recovery? It is in the interests of the developed countries to find a way to ease the indebtedness of under-developed nations.
  In a previous debate my hon. Friend the Member for Livingston (Mr. Cook) raised a matter about which he and I are deeply concerned. British Leyland has decided that its factory at Bathgate will be geared mostly to producing Third world exports. My hon. Friend in his speech asked a crucial question. It is in Hansard, and I hope that somehow it will be answered, because many trade unions, workers and management connected with Leyland want to know what we will do in our interests for the Third world.
  I listened carefully, as I always do, to the right hon. Member for Down, South (Mr. Powell). There is another side to this coin. If he were the hon. Member for Linlithgow or Livingston and had this urgent constituency problem on his hands, I wonder whether he would make the same categoric speech that he made this afternoon. The truth is that factories such as Leyland's at Bathgate, having become Third world dependent — there are many in many constituencies—face this urgent problem. What hope can the Treasury hold out—given the defaulting, not just in central and south America but possibly in Nigeria and other parts of Africa—to the huge work forces sent to Scotland, in this case, by the Macmillan Government? The work force wants some type of reply.
  If we cut off the development component, we shall create an intolerable situation in the developing countries.

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  We cannot have a policy that is designed solely to enable private banks to be repaid. There must be something for the people of the developing countries as well. They must be persuaded that they are not simply working for foreign banks.
  My collegues may have seen the by-lined article by Bernardo Kucinski in The Guardian today, which stated that Mr. Delfim Netto
  "will capitalise on the increasing social unrest by warning bankers against demanding more than Brazil can give."
  Later it stated:
  "Lula's strike could result in widespread food shortages and subsequent industrial disruption."
  One might add, "and how!" Problems of debt and recession spread from one country to another. Trade with other countries dwindles as each country has to import less. This debt trap in Latin America is—partially, at any rate— holding back economic recovery throughout the world. My first question is: Does the Minister accept that general analysis? In particular, what about our self-interest problem, which is epitomised at Bathgate?
  My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) explained fully and powerfully the horrendous arms problem. This is not the occasion to go into the whole Falklands issue, but I draw the attention of Ministers in general to a horrific development—the purchase from the Italian firm Oto-Melara and from Matra in France of the Otomat, which is different from the Exocet. It has a range six times that of the M38 Exocet. The more modern Exocet has a range of about 42 kilometres and the previous one had a range of about 20 miles. This means a range of about 125 miles. These weapons may be used — heaven help us —against our ships by aircraft which are halfway between the Falklands and the Argentine coast. The Ministry of Defence is wrong in saying that they can be land-based only; they can be married, as the Exocet was, to the wing of an aircraft.
  The British people cannot understand a set-up whereby Argentina is being given money which will be partly invested in Switzerland and partly spent on a remote-controlled mine, which the "International Defence Review", a highly reputable American publication, says the Argentines have specifically ordered. We are dealing here with mines that can be dormant for two years and are only five metres long. They are polyurethane-based, which means that they are very difficult to counter in any way. They have lithium or silver-zinc batteries which can last a long time. They can travel up to 100 km at 20 knots and can be set off by aircraft 500 km away at 30,000 ft. They have a TV camera which can identify their victims. That is just one example of the type of weapon that reliable sources tell us Argentina is ordering.
  The Minister's answer to my interjection and that of my right hon. Friend the Member for Cardiff, South and Penarth was that that was all very terrible, but we had to face the fact that the break-up of the Argentine economy would be even more terrible for the West. Given those two evils, we had to do more to prevent the second than the first. It is a judgment with which I might have more sympathy than many of my right hon. and hon. Friends. However, in reply to that I read the moving letter dated 26 May published in The Observer written shortly before he died by David Tinker on HMS Glamorgan to his friend Gareth. He said:
  "Your letter arrived today with the reinforcements: HMS Bristol, Andromeda and Co. Hi, life out here is no joke. We all
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  thought that being 'wogs' they would be bound to lose, but unfortunately Europe seems to have supplied them with super-modern invasion kit."
  Those are the eloquent words of a man who was shortly to give up his life.
  I agree with the Government that there is a considerable threat to the banking system if any of those three countries were to default. They are debtors on a huge scale. They have vast power. The conclusion that some of us must draw is that, from the Government's standpoint, the inexorable logic is that they had better negotiate with Argentina very soon. Negotiation is the only solution. It may be humiliating for the Prime Minister and difficult for many people, but the alternative is default and all the troubles that go with it.
  For that and many other reasons, I conclude—it may not be the conclusion of all my right hon. and hon. Friends, but I have to speak personally in this matter—that the sooner that there are negotiations on the future of the Falkland Islands, the better for us, the West and, not least, for the inhabitants of the Falkland Islands.
  6.27 pm
  Mr. Robin Cook: We have had a distinguished debate tonight, destinguished not merely by those who took part but by those who did not take part. The right hon. and learned Member for Hexham (Mr. Rippon) first drew attention at an early stage to the complete absence from our councils of any representative—even a humble, silent representative—on the alliance Benches. We have not had an intervention from those Benches since he spoke.
  At one point, I took the opportunity to nip out and consult the alliance manifesto. I found that it pledged support for
  "Additional finance for the developing world … through fresh issues of international money."
  Then, for the more technically minded SDP voter—I am most grateful that the hon. Member for Truro (Mr. Penhaligon) has finally graced us with his presence—international money is defined in brackets as "Special Drawing Rights." Later in the same document we find that the alliance committed itself to
  "support the principles of the Brandt Report, and in particular the proposals for increased credit through the international institutions."
  As we have seen tonight, whatever the alliance may have said to the electorate, it has no intention of using undue exertion to support those principles in our debate. One can only conclude that, despite the fine rhetoric of the manifesto, the alliance has concluded that there are no votes in resolving the debt crisis of the Third world. That is a pity, because many jobs in Britain undoubtedly hang on that debt crisis.
  The most obvious characteristic of the speech of the Economic Secretary was his possibly over-complacent confidence that the debt crisis is under management and will come under control. One is tempted to recall the precedent set by the new governor of the Bank of England who, in a statement at about the time of his appointment at the turn of this year, announced that the debt crisis was over. Only 24 hours later, he learnt that Brazil had been obliged to announce that it planned to defer any debt service payments for 1983. That unfortunate conjunction obliged a Treasury official to say, with great tact, that the governor-designate was a man two or three years ahead of his time.

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  The Economic Secretary's observation that the debt crisis is under control fails to measure up to the scale of the problem. The scale is horrendous. It does not matter whether we measure it by reference to the banks or by reference to the countries that are in debt. The New York banks alone have now committed themselves in loans to the three principal countries of Latin America to the equivalent of nine times their combined capital base, and a number of the countries that are in debt now owe sums equivalent in total to five years' entire export earnings of those countries. In the case of Brazil, debt servicing alone will soon cover the entire revenue obtained from export sales.
  As some of my hon. Friends have hinted, what we are contemplating is the consequence on a global scale of the monetarist fetishism whose similar consequences on our own domestic stage we have debated rather more frequently. Some harsh things have been said about the clearing and commercial banks who have indulged in a lending spree during the past seven years. The most imprudent action by the commercial banks in the 1970s was to assume that the major industrial powers would continue to act rationally. In 1979, some of the major Governments ceased to behave rationally. The figures show that the mounting debt total was perfectly manageable until 1979. Between 1975—the year of the first oil increase, which gave rise to the petro-dollars—and 1979, the total increase in the Third world debt, measured as the ratio of debt to export, increased from 37 per cent. to only 50 per cent. That was a tough increase, but a manageable one. Between 1979 and 1982, interest rates doubled and the ratio increased from 50 per cent. to 75 per cent., placing a totally unmanageable and crippling burden on the countries involved. That burden did not arise from fresh borrowing. It arose from borrowing to cope with the increase in interest rates which was the consequence of the monetarist experiment of the major industrial powers. We must recognise the very substantial contribution that the Western powers, and especially our own Government, have made towards creating the problem.
  Mr. Rippon: The problem did not start in 1979. It started when the Labour Government adopted the monetarist policy and raised interest rates to 16 per cent. That was the time when the right hon. Member for Down, South (Mr. Powell) made a significant speech to the junior chamber of commerce at Bangor.
  Mr. Cook: The right hon. and learned Gentleman tempts me to reopen a range of arguments in which I myself participated in 1976, but I shall not go into that area of history.
  The right hon. and learned Gentleman will find that the movement of world interest rates coincides with the introduction in 1979 in Britain and in 1980 in America of an additional degree of monetarism. It is from that point that one can date a spiralling of world interest rates and a spiralling in the debt of the Third world.
  One curious feature of the situation is mentioned in the Treasury and Civil Service Committee's fourth report on "International Monetary Arrangements", to which I shall refer. The most curious and unreal feature is that when the countries that have received loans are going bust— I shall not bandy words with the right hon. Member for
  642
  Down, South over whether the countries are technically bankrupt — and are undergoing major austerity programmes in order to meet their loans, the banks making the loans are behaving with every appearance of prosperity. In the current year, despite the attempts of the Bank of England to dissuade them, the British clearing banks have declared record dividends, increasing dividend payments by several times the rate of inflation. It is strange that at a time when half of Latin America is going bust, the banks participating in the loans that created that crisis are showing record increases in both shares and dividends. The Select Committee's report drew attention to what it regarded as
  "the highly dubious practice of seeking to make profits out of the rescheduling of what are effectively bad debts."
  According to the figures released today, it is estimated that the commercial banks have contrived to make a profit of £1·75 billion out of rescheduling the bad debts of the Third world.
  There is something grotesque about carrying out at a profit an activity turning on the rescheduling of what are effectively bad debts. Moreover, that profit of £1·75 billion can only make worse the crisis that the rescheduling is supposed to be easing.
  My right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) introduced a point that has run through the debate. There is a gathering consensus that the only permanent way out of the crisis is to expand out of the world slump. If the countries caught with these debts are obliged to respond by contracting their economies, the consequence must be that their ratio of debts to exports will worsen. There is therefore a critical part to be played by the industrialised nations which constitute the market for those exports.
  In a report that is given some coverage in this morning's newspapers, the Group of Thirty states that unless the industrialised world grows at a rate of 3 per cent. per annum, there is no prospect of the Third world increasing its exports at a rate that will enable it to catch up on the debts that it has already contracted. The Group of Thirty points out that Britain has a pivotal role to play. The chairman of the group suggests that the countries that should take the lead in stimulating the expansion of demand to provide a market for Third world exports are those that currently enjoy a balance of payments surplus and a low inflation rate. Although he does not name them, it is clear that he has in mind Germany, Japan and Britain. There is poignancy in that advice, in that the chairman who offers it is Dr. Johannes Witteveen, who descended upon us in 1976 to advocate deflation. If even Dr. Witteveen is now convinced that the time is right for Britain to carry out some degree of reflation, why have the Government, who are in charge of the economic levers of Britain, far from bringing forward a modest degree of reflation, actually during the past week introduced a degree of deflation into our economy?
  Mr. Beaumont-Dark rose——
  Mr. Cook: I hope that the hon. Gentleman will forgive me if I do not give way, but most hon. Members had more time in which to speak than I have. However, if the hon. Gentleman will forgive me, I promise to give way to him on a future occasion.
  My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) referred, as did several other hon. Members subsequently, to the case of Argentina. I

  643
  should like to take up a point made by the Economic Secretary, because it is not our argument that Argentina should be made to go to the wall or be forced into bankruptcy. We want a modest condition to be attached to any further facilities made available to Argentina. As hon. Member after hon. Member has said, conditionality is what the IMF is all about. Barely a facility is extended which does not have a condition attached to it by the IMF. Conventionally, the package involves austerity, deflation and a cut in living standards for the country receiving the facility. There is an irony there, in that article 1 of the IMFobliges it to promote growth, but in practice most of the packages arranged in the past two decades have sought to stifle it. Whatever the merits of those packages for industrialised nations such as Britain, they are plainly inappropriate for nations that are destitute, and for whom the consequences of deflation and austerity can be such a hard cut in living standards that it imperils families living on the bread line. Indeed, the Government of Brazil, who are dominated by the military, and are thus unlikely to be mealy-mouthed or soft and gentle, have now been obliged to tell the international community that they cannot accept the consequences of the austerity package, which is part of the conditions of the facilities made available to them.
  Whatever the packages may do to the countries that receive them, they are perverse from our perspective because they compound our problem. When we oblige such countries to accept austerity measures, we destroy our markets. It has been calculated that 150,000 men and women in America have lost their jobs because of the collapse of the Brazilian market for American goods. As my hon. Friend the Member for Linlithgow (Mr. Dalyell) has observed, our constituencies face a further 500 redundancies at the British Leyland Bathgate plant as a direct result of the Third world's debt crisis. Much of that collapse in the market results from the conditions attached to loans from the IMF. They are imposed as part of the price of the additional loans made available.
  There can be no doubt that the IMF and other similar operations impose conditions on those who take their loans. Therefore, we seek from the Government a condition on the loan to Argentina to prevent it from using that additional facility for additional arms purchases. That point is touched on in the Select Committee's report. In paragraph 5.27 it suggests that there may well be a case for placing restrictions on loans to countries which might be likely to use them for irresponsible acts, such as overextended purchases of arms.
  We believe that there is such a case in respect of Argentina. The Minister must answer two questions if he is to persuade the House that there is no such case. First, he must explain why it is prudent to make further loan facilities available to Argentina when they are dwarfed by that country's arms expenditure. My right hon. Friend the Member for Bethnal Green and Stepney referred to the loan of £1 billion or £1·5 billion that is being signed today in New York. However, that is less than the sum that Argentina is committing to the purchase of naval ships alone. It cannot be right to assist in the rescue of Argentina's economy while conniving at that Government's expenditure of very large sums on arms, which can make no contribution whatever to the development of its economy or to providing the finance with which to repay the loans that we are providing today.
  Secondly, and most profoundly, the Minister must persuade the House that there is any sense in Britain
  644
  offering Argentina an additional credit of £100 million so that it can purchase weapons at the same time as it insists on being in a state of hostilities with Britain, and refuses formally to cease them. The Government have a choice. They can decide to negotiate with the Argentine Government over the question of the Falkland Islands sovereignty, or they can insist, as they have hitherto done, on the resolute approach and can refuse to have any such negotiations. In that latter case they are obliged to withdraw from bolstering Argentina's economy with the credit with which it can purchase arms. If the Government attempt to adopt both of those courses, they will lay themselves open to the charge of hypocrisy. The Opposition will have no part in that hypocrisy and for that reason we shall vote for our reasoned amendment.
  6.45 pm
  Mr. Moore: It has not been at all difficult to sit through this enthralling debate. I enjoyed the debate in my new capacity as a Treasury Minister, although, clearly, I must put on a less pleasant and interested face in order to reduce that impression of optimism or blandness.
  My hon. Friend the Member for Hertford and Stortford (Mr. Wells) was right to say that the debate had ranged over the whole world's international trade and debt problems. Indeed, it is a compliment to the House that such a debate can take place in this Chamber, and it illustrates the Chamber's importance to the nation.
  I was fairly frequently taunted with the accusation that I was over-optimistic or bland. However, the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) was nice enough to say to me, on my first appearance as a Treasury Minister at the Dispatch Box, that such impressions had been given for 10 years, and I assume that that encompasses the period during which he led the country.
  I should like to remind Opposition Members of precisely what I said. I have looked at my notes again because the issue is important. I was talking about difficulties and I said that the debt problem nevertheless was slowly responding to treatment. I shall in future take much sterner advice from Treasury officials and use even more negative language, because I do not for a moment underestimate the seriousness or importance of the issues involved.
  I am in some difficulty in answering many of the legitimate and specific questions that were raised relating, for example, to clause 2. The hon. Member for Linlithgow (Mr. Dalyell) kindly said that I would always try to respond to the points made. As always, if I cannot cover some of the detailed points, I shall write to those hon. Members who raised them. However, I shall try to address my remarks to the major points made.
  Mr. Robert Hughes: It is not good enough for the Minister to appear at the Dispatch Box during a debate on a major Bill and state that as he cannot answer some points he will write later to those hon. Members involved. Consequently, I hope that there will not be any attempt to drive the whole Bill through the House on the nod.
  Mr. Moore: I am, of course, the servant of the House, and I am sure that the House will regard that intervention in the way that it should do. The debate was rightly wide-ranging, and hon. Members legitimately asked why so many of us were concerned with tinkering at the margin

  645
  in the face of possibly structural problems in the whole area of world debt. My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) was right to say that at some stage we should consider to what extent we should concern ourselves with different and major initiatives.
  Before trying to answer some of the substantive points that were legitimately raised, I should point out that the Bill seeks substantially to increase not only the quotas but the facilities in terms of GAB borrowing.
  I accept and recognise the difficulties, but the Bill is at least a step in the right direction. With one exception, that has been accepted in all quarters of the House. The right hon. Member for Cardiff, South and Penarth asked a legitimate question. I confirm that, in addition to quota resources, the resources of the GAB will now be available to meet the needs not only of founder members but of any fund member undertaking an adjustment programme. When the fund is faced with payment imbalances which threaten the stability of the monetary system, this second window—I went into this subject in some detail in my speech — is activated when the managing director proposes use of the GAB and the G10 participants and the executive board agree. This is, of course, a matter of fund resources and does not of itself affect the amount of access of individual members to those resources. I think that what I have said will help the right hon. Gentleman, and it is a matter that I shall be happy to pursue, in view of its importance, if he wishes, at another time.
  The right hon. Member for Bethnal Green and Stepney (Mr. Shore) shared my distaste, but essentially I believe that he offered no alternative to trying, through the IMF, combined with international banking operations—if I have time I shall try to show the present position and how it relates to the matter— gradually to bring Argentina back to normalcy.
  The right hon. Member for Down, South (Mr. Powell), in a speech in which I was interested in an academic sense, although I could not agree with its total substance, asked whether, whatever Argentina's present internal political structure—and this is the question that I put to the right hon. Member for Bethnal Green and Stepney—the long-term resolution of our relationships with Argentina would be improved or hindered by trying to resolve them with the help of institutions such as the IMF, and the conditionality, however limited and however difficult it may be, that it is able effectively to attach to its loans.
  Perhaps I might go through three questions asked by the right hon. Member for Bethnal Green and Stepney. First, I do not see the choice that he poses between the risks and the costs attached to the defence of the Falklands, and the risks to the financial system. I do not believe that there is a choice. Argentina, which has a trade surplus, would be perfectly able to buy arms if she defaulted or if the international system collapsed. I remind the right hon. Gentleman that the Labour Government, of which he was a member, supported specific lending to South Africa in 1976 precisely on the basis that political criteria should not be permitted to determine IMF lending. I shall not go into the whole debate about the politicisation of IMF policies. Of course, the existence of an IMF programme puts a squeeze on all Argentine Government spending, including their spending on arms.
  646
  The answer to the right hon. Gentleman's third question, as the right hon. Member for Down, South said, is that it would be a curious position if we were simply to wash our hands of the matter—if that is what the right hon. Gentleman was suggesting. What could United Kingdom non-participation mean? We are a leading member of the IMF, and British banks are members of leading syndicates to Argentina. By participating in the IMF we are in a position, however limited, to insist that all the IMF conditions are met and continue to be met as each tranche of the fund money falls to be drawn.
  I do not in any way exaggerate our strength and our position. I am seeking to contrast the ways in which IMF conditionality — it is in no way different from the conditionality that was accepted by the right hon. Gentleman when he was in office—is a tool in the process of returning Argentina to normalcy.
  My right hon. and learned Friend the Member for Hexham (Mr. Rippon), in a major contribution to the debate, covered many questions that were raised by hon. Members on both sides about the nature of the structures of the IMF, its future, its resources and its liquidity. I think that it might help all right hon. and hon. Members if I go through my right hon. and learned Friend's question. He first asked about private banks. No formal guarantees are associated with this measure. The right assurance to private banks is that provided by fund conditionality through a programme to which banks also contribute.
  The second question, about the prospect of loans being repaid, is linked, first, with the success of the adjustment programme, and, next, with world recovery. Our belief and that of the fund is that debt problems respond to these changes, just as the problems began, because of over-borrowing and the recession. We believe that debt export ratios will improve. We must not forget that these economies have great underlying strength.
  The third question related to the ways in which IMF member countries were committed to getting these increased resources agreed by the end of this year. Some have already achieved that. In most cases, as in our case here today, legislative action is still in progress.
  My right hon. and learned Friend's fourth question related to Williamsburg. Williamsburg restated the basic economic strategy, that is, control of budgetary deficits and monetary aggregates so as to control inflation. It is a matter of continuing policy. Williamsburg spoke of making greater efforts to achieve convergence of economic performance so as to move towards greater exchange rate stability. It is a matter not of instant action, but of continuing policy. It is a subject in which my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) has played a prominent part. It involves continuing discussions among, in particular, the countries whose currencies make up the SDRs.
  Many questions have been asked about IMF resources. The fund recently agreed on a substantial increase in quotas and will also be able to draw on the recently enlarged general agreements to borrow that I mentioned, if international monetary conditions warrant it. Together, these measures should provide the fund with sufficient resources for intermediate needs. I expect new quotas to be ratified early next year, and the fund should have adequate resources to last until then. If there is any need to top up the fund's resources after the eighth quota review, I see no reason why arrangements could not again

  647
  be made to cover the requirements. Of course, the fund will be able to draw on the GAB if the conditions for activating are met.
  I believe that the IMF should rely primarily on resources from its members from quotas, but I am prepared to look at the matter. With other fund members, I am anxious to ensure that the fund has adequate resources to lend to countries in balance of payment need. Clearly, fund liquidity is kept constantly under review, but I am prepared to discuss any constructive proposals.
  The right hon. Member for Bethnal Green and Stepney asked what information was available about bank loans. It might help the House if I put the matter on record. As part of the overall financial support package for Argentina, five facilities were made available, by the IMF, commercial banks and the Bank of International Settlements. The first was a short-term bridging loan for $1·1 billion from international commercial banks. It was agreed in December last year. A number of drawings have been made, but it has not been totally drawn down yet. One final tranche remains. The following month, in January 1982, the two IMF facilities were agreed. A compensatory financing facility of SDR 520·1 million was agreed and made available immediately. At the same time, the IMF agreed a standby facility for SDR 1·5 billion, but this is being released in five quarterly instalments, subject to performance criteria being satisfied. The first two instalments have been paid, and the third is due next month.
  Also in January 1982, after the IMF programme had been agreed, the Bank for International Settlements approved a short-term facility. As I said, that facility of $500 million was never drawn and has now lapsed. Finally, there is the medium-term commercial bank loan of $1·5 billion which has been under discussion for several months. Negotiations by the banks are proceeding. I am not advised that the suggestion about a signature today is accurate.
  I have tried to cover some of the fundamental issues.
  Mr. Shore: What is the British component in these large loans?
  Mr. Moore: I shall have to come back to that matter, because I cannot be specific at this moment.
  I do not in any way underestimate the difficulties that we face. I believe that together the measures before the House strengthen the practical role that this country can play in co-operative international operations to deal with the current international financial difficulties. The way in which those difficulties are handled will influence the success or failure of particular operations for particular countries, and also the shape of the international financial system in future decades. I believe that it is right for us to support the existing international financial institutions and to join other nations in helping responsible countries facing severe difficulties. I urge the House to oppose the Opposition amendment and to support a Bill which seems to have almost universal and unanimous support in the House.
  Question put, That the amendment be made:—
  The House divided: Ayes 107, Noes 212.

  Division No. 13]

  [7 pm

  AYES

  Alton, David

  Archer, Rt Hon Peter

  Anderson, Donald

  Atkinson, N. (Tottenham)

  648

  Banks, Tony (Newham NW)

  Leighton, Ronald

  Barnett, Guy

  Lewis, Ron (Carlisle)

  Barron, Kevin

  Lloyd, Tony (Stretford)

  Beckett, Mrs Margaret

  McCartney, Hugh

  Bermingham, Gerald

  McKay, Allen (Penistone)

  Bidwell, Sydney

  McKelvey, William

  Boothroyd, Miss Betty

  Mackenzie, Rt Hon Gregor

  Bray, Dr Jeremy

  McTaggart, Robert

  Buchan, Norman

  Madden, Max

  Callaghan, Rt Hon J.

  Marek, Dr John

  Callaghan, Jim (Heyw'd & M)

  Marshall, David (Shettleston)

  Campbell-Savours, Dale

  Michie, William

  Clark, Dr David (S Shields)

  Mikardo, Ian

  Cohen, Harry

  Millan, Rt Hon Bruce

  Cook, Frank (Stockton North)

  Morris, Rt Hon A. (W'shawe)

  Cook, Robin F. (Livingston)

  Morris, Rt Hon J. (Aberavon)

  Corbett, Robin

  Park, George

  Corbyn, Jeremy

  Pendry, Tom

  Crowther, Stan

  Penhaligon, David

  Cunliffe, Lawrence

  Pike, Peter

  Dalyell, Tam

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

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

  Powell, Raymond (Ogmore)

  Deakins, Eric

  Radice, Giles

  Dixon, Donald

  Redmond, M.

  Dobson, Frank

  Rees, Rt Hon M. (Leeds S)

  Dormand, Jack

  Richardson, Ms Jo

  Douglas, Dick

  Rogers, Allan

  Dubs, Alfred

  Ross, Ernest (Dundee W)

  Dunwoody, Hon Mrs G.

  Sedgemore, Brian

  Eadie, Alex

  Sheldon, Rt Hon R

  Evans, loan (Cynon Valley)

  Shore, Rt Hon Peter

  Evans, John (St. Helens N)

  Short, Ms Clare (Ladywood)

  Ewing, Harry

  Silkin, Rt Hon J.

  Fatchett, Derek

  Skinner, Dennis

  Field, Frank (Birkenhead)

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

  Fisher, Mark

  Soley, Clive

  Foot, Rt Hon Michael

  Spearing, Nigel

  Foster, Derek

  Stewart, Rt Hon D. (W Isles)

  Freeson, Rt Hon Reginald

  Stott, Roger

  Garrett, W. E.

  Thomas, Dr R. (Carmarthen)

  George, Bruce

  Thompson, J. (Wansbeck)

  Godman, Dr Norman

  Thorne, Stan (Preston)

  Golding, John

  Tinn, James

  Gould, Bryan

  Wardell, Gareth (Gower)

  Gourlay, Harry

  Welsh, Michael

  Hamilton, James (M'well N)

  Wigley, Dafydd

  Hamilton, W. W. (Central Fife)

  Williams, Rt Hon A.

  Harrison, Rt Hon Walter

  Winnick, David

  Healey, Rt Hon Denis

  Woodall, Alec

  Holland, Stuart (Vauxhall)

  Hoyle, Douglas

  Tellers for the Ayes:

  Hughes, Robert (Aberdeen N)

  Mr. Frank Haynes and

  Kaufman, Rt Hon Gerald

  Mr. Harry Cowans.

  Lambie, David

  NOES

  Adley, Robert

  Braine, Sir Bernard

  Alexander, Richard

  Brandon-Bravo, Martin

  Amess, David

  Brinton, Tim

  Ancram, Michael

  Brown, M. (Brigg & Cl'thpes)

  Arnold, Tom

  Bruinvels, Peter

  Ashby, David

  Buchanan-Smith, Rt Hon A.

  Atkins, Rt Hon H. (S'thorne)

  Buck, Sir Antony

  Atkins Robert (South Ribble)

  Budgen, Nick

  Baker, Nicholas (N Dorset)

  Burt, Alistair

  Baldry, Anthony

  Butcher, John

  Batiste, Spencer

  Butterfill, John

  Beaumont-Dark, Anthony

  Carlisle, John (N Luton)

  Bellingham, Henry

  Carlisle, Kenneth (Lincoln)

  Bendall, Vivian

  Carttiss, Michael

  Benyon, William

  Cartwright, John

  Berry, Hon Anthony

  Chapman, Sydney

  Biffen, Rt Hon John

  Clark, Dr Michael (Rochford)

  Biggs-Davison, Sir John

  Clarke Kenneth (Rushcliffe)

  Blackburn, John

  Cockeram, Eric

  Bonsor, Sir Nicholas

  Conway, Derek

  Boscawen, Hon Robert

  Cope, John

  Bottomley, Peter

  Cormack, Patrick

  Bowden, Gerald (Dulwich)

  Couchman, James

  Boyson, Dr Rhodes

  Currie, Mrs Edwina

  649

  Dicks, T.

  Latham, Michael

  Douglas-Hamilton, Lord J.

  Lawler, Geoffrey

  Eggar, Tim

  Leigh, Edward (Gainsbor'gh)

  Fallon, Michael

  Lester, Jim

  Fletcher, Alexander

  Lewis, Sir Kenneth (Stamf'd)

  Fookes, Miss Janet

  Lilley, Peter

  Forman, Nigel

  Lord, Michael

  Forsyth, Michael (Stirling)

  Luce, Richard

  Forth, Eric

  Lyell, Nicholas

  Fox, Marcus

  McCurley, Mrs Anna

  Galley, Roy

  Macfarlane, Neil

  Gardner, Sir Edward (Fylde)

  MacKay, Andrew (Berkshire)

  Garel-Jones, Tristan

  MacKay, John (Argyll & Bute)

  Glyn, Dr Alan

  Macmillan, Rt Hon M.

  Goodlad, Alastair

  McNair-Wilson, M. (N'bury)

  Gow, Ian

  Major, John

  Gower, Sir Raymond

  Malone, Gerald

  Greenway, Harry

  Marland, Paul

  Hamilton, Neil (Tatton)

  Mates, Michael

  Hargreaves, Kenneth

  Mather, Carol

  Harvey, Robert

  Maude, Francis

  Hayward, Robert

  Mawhinney, Dr Brian

  Higgins, Rt Hon Terence L.

  Maxwell-Hyslop, Robin

  Hind, Kenneth

  Mayhew, Sir Patrick

  Hirst, Michael

  Meadowcroft, Michael

  Hogg, Hon Douglas (Gr'th'm)

  Mellor, David

  Holt, Richard

  Merchant, Piers

  Hooson, Tom

  Meyer, Sir Anthony

  Hordern, Peter

  Miller, Hal (B'grove)

  Howarth, Alan (Stratf'd-on-A)

  Mills, Ian (Meriden)

  Howarth, Gerald (Cannock)

  Mills, Sir Peter (West Devon)

  Howells, Geraint

  Mitchell, David (NW Hants)

  Hughes, Simon (Southwark)

  Moate, Roger

  Hunt, David (Wirral)

  Montgomery, Fergus

  Hunt, John (Ravensbourne)

  Moore, John

  Hunter, Andrew

  Morris, M. (N'hampton S)

  Jenkins, Rt Hon Roy (Hillh'd)

  Morrison, Hon P. (Chester)

  Jessel, Toby

  Moynihan, Hon C.

  Johnson-Smith, Sir Geoffrey

  Murphy, Christopher

  Johnston, Russell

  Needham, Richard

  Jones, Gwilym (Cardiff N)

  Nelson, Anthony

  Jones, Robert (W Herts)

  Neubert, Michael

  Kennedy, Charles

  Newton, Tony

  Kershaw, Sir Anthony

  Nicholls, Patrick

  Key, Robert

  Norris, Steven

  King, Roger (B'ham N'field)

  Onslow, Cranley

  Knowles, Michael

  Oppenheim, Philip

  Knox, David

  Osborn, Sir John

  Lamont, Norman

  Ottaway, Richard

  650

  Page, John (Harrow W)

  Stevens, Martin (Fulham)

  Page, Richard (Herts SW)

  Stradling Thomas, J.

  Pawsey, James

  Tapsell, Peter

  Peacock, Mrs Elizabeth

  Taylor, Teddy (S'end E)

  Percival, Rt Hon Sir Ian

  Tebbit, Rt Hon Norman

  Powell, William (Corby)

  Terlezki, Stefan

  Prentice, Rt Hon Reg

  Thomas, Rt Hon Peter

  Proctor, K. Harvey

  Thompson, Donald (Calder V)

  Rathbone, Tim

  Thompson, Patrick (N'ich N)

  Ridsdale, Sir Julian

  Thorne, Neil (Ilford S)

  Rippon, Rt Hon Geoffrey

  Thornton, Malcolm

  Robinson, Mark (N'port W)

  Thurnham, Peter

  Rowe, Andrew

  Townend, John (Bridlington)

  Ryder, Richard

  Tracey, Richard

  Sackville, Hon Thomas

  Trippier, David

  Sainsbury, Hon Timothy

  Viggers, Peter

  Sayeed, Jonathan

  Wakeham, Rt Hon John

  Shaw, Giles (Pudsey)

  Waldegrave, Hon William

  Shaw, Sir Michael (Scarb')

  Walden, George

  Shelton, William (Streatham)

  Wall, Sir Patrick

  Shepherd, Colin (Hereford)

  Waller, Gary

  Shersby, Michael

  Wardle, C. (Bexhill)

  Silvester, Fred

  Warren, Kenneth

  Sims, Roger

  Wells, Bowen (Hertford)

  Smith, Sir Dudley (Warwick)

  Wells, John (Maidstone)

  Smith, Tim (Beaconsfield)

  Wheeler, John

  Soames, Hon Nicholas

  Wilkinson, John

  Speller, Tony

  Wolfson, Mark

  Spencer, D.

  Wood, Timothy

  Spicer, Jim (W Dorset)

  Woodcock, Michael

  Spicer, Michael (S Worcs)

  Young, Sir George (Acton)

  Squire, Robin

  Stanley, John

  Tellers for the Noes:

  Stern, Michael

  Mr. Archie Hamilton and

  Stevens, Lewis (Nuneaton)

  Mr Ian Lang.

  Question accordingly negatived.
  Main Question put forthwith, pursuant to Standing Order No. 41 (amendment on second or third reading) and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Committee of the whole House. [Mr. David Hunt.]
  Further proceedings stood adjourned, pursuant to order this day.

Greater London Council (Money) Bill
Order for Second Reading read.
7.11 pm
Mr. Frank Dobson: I beg to move, That the Bill be now read a Second time.
I introduce this private Bill on behalf of the Greater London council. It is obliged each year to promote a money Bill to give authority for capital expenditure by the GLC, the Inner London education authority and London Transport and also for lending to other bodies in London, including the London boroughs. Other councils in other parts of the country seek and usually obtain that authority direct from Government Departments, but the law requires that the GLC comes to the House with this Bill.
Like other organisations with expensive and long-running contracts, the GLC, ILEA and London Transport let whole contracts when they can get the cheapest price, but the authority to spend the money in each year during the currency of any contract is subject to the House annually approving and giving authority to the expenditure so that, for example, if a year or two ago London Transport let a four-year contract for the renewal and improvement of a tube station this year, unless we give authority for this year's expenditure, that contract will have to be prematurely terminated.
The total expenditure covered by the Bill is £534 million, of which £452 million is for spending and £82 million for lending. Of that £82 million, £50 million provides for boroughs to share loans raised by the GLC. The provision is included in the Bill only as a technicality.
I have already referred to the way in which the GLC, ILEA and London Transport let long-term contracts. It is worth saying that no less than £380 million of the expenditure for which the authority is sought is to meet contractual obligations already entered into by the three organisations before the commencement of this financial year. That leaves around £100 million for new projects, but, in line with the practice of the authorities in the past, a considerable amount of even the new projects is already subject to contracts that have been let.
I hope that I shall convince the House that expenditure on this scale is needed. London has a predominantly Victorian infrastructure. Many of the roads and bridges are old, much of the sewerage system is old and many of the public services are provided from buildings which our Victorian ancestors decided should be provided by public spending in Victorian London. Many of those buildings, roads, sewers and bridges are in decay and need to be replaced.
Not only in the ILEA area but in stress areas in outer London the schools system is under great pressure. In an effort to relieve that pressure, authorities are trying to spend money to improve the physical conditions in schools to make it easier for our teachers to provide a decent education for our children.
Our capital city is seeing a catastrophic decline in employment in manufacturing industry. Therefore, we need considerable public investment, both in the traditional form of clearing sites, acquiring buildings and providing infrastructure that will allow private owners and entrepreneurs to develop industrial premises, and through the GLC's enterprise board and enterprise boards run by the councils of London boroughs to direct provision of industrial premises and industrial jobs.
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I do not want to go on about the other justifications for the expenditure, but I emphasise that the expenditure covered by the Bill is capital expenditure. It is expenditure which the Government say they want to see. They have constantly emphasised that they want to see the expansion of capital expenditure by local authorities and restraint on revenue spending. The Bill proposes a good level of capital expenditure on necessary facilities to improve living standards in London. I emphasise also that all that spending in every aspect has been discussed thoroughly with Government Departments. In some cases the level of spending has been reduced. I understand that the Under-Secretary of State will say whether these proposals have the Government's support.
A question that arises is: what is the money to be spent on? That is summarised briefly in paragraph 9 on page 2 of the Second Reading statement that was circulated to London Members. I hope that no one will think it necessary for me to read out extracts as it is both a tedious process for me to do it and insulting to hon. Members, who are as capable of reading the statement as I am. However, it might be worth while to expound briefly on some of the spending.
A great deal of the spending by ILEA is intended to improve school buildings and facilities. I emphasise that it is not an exercise in gold plating already excellent buildings. For instance, a substantial sum of money is being provided so that for the first time some of our Victorian schools can have inside toilets and proper means of escape in case of fire. I cannot imagine that any hon. Member would object to that expenditure. There is a great deal of expenditure on the provision of new nursery classrooms or the temporary provision of nursery classrooms. Over £1 million of that expenditure is intended to meet ILEA's extra obligations in trying to carry out its part of the Government's youth training scheme. Therefore, I hope that there will be no opposition to the proposed expenditure by ILEA.
A substantial amount of spending by the GLC is on improvements to metropolitan roads. There are improvements to parks. There are site works, the provision of new buildings for industrial premises and provision for improving employment. Some funds are included for the provision of GLC mortgages. This may appeal to Conservative Members. The law requires that if the GLC sells property under the right-to-buy provisions, it must provide the mortgage if the buyer wants it. The money for such expenditure is included in the Bill.
Similarly, substantial sums are included as, in a sense, a liability for the GLC, which will go to maintaining and improving large parts of the housing stock which it has passed over to the London boroughs but for which it maintains an obligation to bring that property up to date so that people can live in modern, decent conditions.
Considerable expenditure is proposed by London Transport, including general provision for track renewal, signal renewal, station modernisation, new rolling stock on the underground system and a substantial amount of money for further automation of the system. All those items should be welcome to Londoners, not only to those who live close to underground stations in inner London which are at present being improved, but to those Londoners who make use of the central underground system when they commute from outer London boroughs. The expenditure is for the benefit of all Londoners.

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All this work and a great deal more is vital to maintain and improve the living standards of Londoners. All the provision in the Bill is the product of a great deal of responsible budgeting by the GLC, with legal advice—no doubt expensive legal advice—and consultation with Government Departments at every stage of the process.
It is also worth emphasising that almost all this expenditure will provide work in the construction industry and in industries which supply the construction industry. The bulk of the money will go to the private sector, because only a limited amount of the work will be carried out by direct work departments. I have before me a list of more than 50 companies which at present have contracts with the GLC and whose contractual position would be jeopardised if the Bill were not enacted. Even some of the larger companies are not in a good seam at the moment and are dependent on the Bill being passed, not for the new projects that will start next year, but for the continuation of existing projects.
If the Greater London Council (Money) Act 1982 is not renewed it will cease to apply from September and the GLC will not then have the money to pay the contractors engaged in long-term contracts. Some of the companies mentioned in the list are household names. They include Balfour Beatty, Cubitts, Higgs and Hill, Laing, Mowlem, Costain, Tarmac and Wimpey. The list continues like a roll call of companies that make substantial donations to the funds of the Conservative party. I am sure that Conservative Members would not wish to do anything tonight that would jeopardise the financial position of some of the major suppliers of funds to the Conservative party.
I note that the hon. Members for Southwark and Bermondsey (Mr. Hughes) and for Woolwich (Mr. Cartwright) have blocked the passage of the Bill to date. I assume that their motive is to ensure that they have an opportunity to debate the Bill and to debate the doings and the non-doings of the GLC, the Inner London education authority and London Transport. I hope that they will not seek either to reject the Bill outright or further delay its passage. Besides doing damage to the contractors to whom I have referred and to the 40 or so other companies, that might damage the interests of their constituents.
I have checked, and the projects covered by the provisions of the Bill include, in Bermondsey, expenditure by the three authorities totalling more than £3·25 million. Projects range from the provision of indoor toilets for the Joseph Lancaster school, a nursery class for the Townsend school, improvements at Wellington youth club and expenditure to providing employment opportunities totalling about £2·4 million and, what I am sure will be welcomed in Bermondsey, £100,000 on making Kings Stairs gardens a decent local park and a great amenity for the people of Bermondsey.
No less than £13 million of expenditure is covered one way or another for the people of Woolwich. It ranges from the Galleon's Mount nursery class to whole schools at Thamesmead — we do not build many whole schools these days—£600,000 on job schemes, better sanitary facilities at a special school in Woolwich and other such developments, including a substantial improvement to the road system in Woolwich which, I understand, commands considerable public support.
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I am sure that neither the hon. Member for Southwark and Bermondsey nor the hon. Member for Woolwich would wish to jeopardise this excellent spending in their areas.
If Members have particular queries that they wish to raise I shall attempt to answer them this evening, but if I cannot do so I shall write to them or get the director-general of the GLC to answer. I hope that my explanation of the Bill will satisfy Members that it is a sound measure and that it should commend itself to the House. If my poor exposition has failed to convince the House, I hope that the eminently sensible and necessary provisions of the Bill will commend themselves to the House and that I shall not be required to offer any further explanation.
7.26 pm
Mr. Harry Greenway: It is not so very long since we heard the hon. Member for Holborn and St. Pancras (Mr. Dobson) putting similarly persuasive views before the House in relation to a GLC money Bill —persuasive views with an element of arm-twisting about them, which we heard then and again this evening. It is arm-twisting in the sense that Members whose names appear on the Order Paper in opposition to the Bill and who have work scheduled in their constituencies have pressure and threats put upon them in a way that is unacceptable to me. It is reminiscent of the pressure and threats, which amounted almost to blackmail, from the leader of the GLC not many months ago when he said that if he did not get the money Bill that he required he would see to it that the constituencies of individual Members of Parliament —Conservatives in every case, who voted against the money Bill or threatened it—would not get the works that they were due to have. In my constituency we were threatened by the GLC that we would not have pedestrian crossings and other such amenities that are fundamental to the safety of children and others. I believe that that tactic, that arm-twisting and blackmail, is a disgrace and must be brought to the attention of the House as such. [Interruption.] I am not moved by the hon. Member for Holborn and St. Pancras who, unattractively, as usual, mutters under his breath. That is not the way to operate in the House. One has to stand up to be counted and, although I did not like the hon. Gentleman's argument, he did stand up to be counted. But I am entitled to put my view and the views of my constituents to the House. That is what I am here to do.
It is impossible to separate what the GLC wants in the form of this money Bill from the way it is currently spending ratepayers' money in Greater London. My constituents take great exception to the way in which ratepayers' and taxpayers' money is being handled. It is impossible to explain to them that the two should be separated. I know that the hon. Member for Holborn and St. Pancras and the rest of the Labour party want us to make that separation clear. People in Greater London do not make that separation. They are cross that the GLC more than doubled rates in its first year and increased them substantially in its second. Moreover, although it will shortly no longer exist, it is taking on an extra 1,055 staff at a cost of £9·5 million. Those jobs are being created in defiance of circumstances in which the GLC should be reducing its functions. Moreover, it is handing out contracts that will run after the GLC has been disbanded, as I hope that it soon will be. I know that the GLC will be disbanded by 1986 but, as my hon. Friend the Minister

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is present and for the sake of emphasis, I should like to take this opportunity to say that I hope that the GLC will be disbanded much earlier—1985 would be much more acceptable. I hope that my hon. Friend will do his utmost to achieve that.
The hon. Member for Holborn and St. Pancras said that the school system is under great pressure in inner London. No one doubts that. It is also under great pressure in outer London. Having spent 23 years in schools and having run a school of 2,000 children in a deprived area for seven years, I am not sure that some of the so-called improvements which it is proposed should be made to the buildings are suitable items of expenditure. The GLC's architects' department should take a touch closer look at the way in which it works. It is wasteful. There is endless form filling. Moreover, it is a lengthy process to get work done and it is time consuming for many people, not least senior teachers and head teachers. The department is not happy and many of the so-called improvements will not improve anything.
The hon. Gentleman's mention of private contractors is welcome in a sense because it shows that the GLC has the wisdom to bring in outside contractors to do such work. They do it successfully. However, it should not be a point for blackmail and when the hon. Gentleman puts it that way he damages his case. That does not help the House to see the issues in the balanced way that we should.
The GLC and ILEA face complete reorganisation. Some of my constituents are deeply disturbed that ILEA, to which they contribute substantially as taxpayers——
Mr. Dobson: No, they do not.
Mr. Greenway: —is setting up a unit that costs £130,000. Perhaps I should say that ILEA would like my constituents to contribute. They resent the fact that ILEA has set up a unit to fight for its continued existence in its current form. A principal of an adult education unit has been put in charge of a unit at county hall that costs about £130,000 a year and has the sole aim of setting up a political battle to retain ILEA in its present form. Such abuse of ratepayers' money is serious and cannot be separated from a discussion of the way in which the GLC and the ILEA spend public money. I say that, although I served ILEA loyally, happily and faithfully for 23 years and was proud to be a member of the service. However, I do not support that kind of abuse of public money and I know no honest people who do.
The GLC's high rates continue to be driven up ferociously. They cost jobs throughout Greater London. Any amount of capital expenditure will not, in the end, replace the jobs that are being lost because of high rates. They have increased far ahead of inflation recently. That cannot be justified.
My constituents regard seriously the GLC's pressure for capital expenditure to build the proposed Hayes bypass and its proposed end at the White Hart roundabout at Northolt. Against all good sense and research the GLC continues to press for the bypass and money with which to build it. If it is successful—I shall fight to the end to ensure that it is not—it would damage the community of Northolt so much as to make it unrecognisable. For that reason alone I am extremely unhappy about the Bill and have to make my strong opposition to it known.
7.36 pm
Mr. John Cartwright: I thought that the hon. Member for Ealing, North (Mr. Greenway) was a little unfair to the hon. Member for Holborn and St. Pancras (Mr. Dobson) who gave us a lucid explanation of the Bill. He issued a warning to my hon. Friend the Member for Southwark and Bermondsey (Mr. Hughes) and me, but I thought that it was a much more graceful warning than we received from the GLC and the chairman of its finance committee. The warning from across the river was of the cosh-across-the-back-of-the-neck variety, whereas the hon. Gentleman's was much more the arm-around-the-shoulder encouragement not to be foolish and to "come along this way".
I do not apologise for having blocked the Bill. The tradition of seizing every opportunity to debate London issues has gone on for much longer than I have been a Member of Parliament. The Bill gives us another opportunity to debate London issues and should be grasped with both hands.
A Bill such as this, which involves about £1 billion of public spending, is something that we have a duty to examine to ensure that everything it contains is what we want. A substantial element of the Bill is directed towards housing. It will provide more than £112·5 million for 12 months and another £43 million for the following six months. I notice in the GLC capital estimates that £71 million of that is for improving existing housing stock. That is much needed. However, I hope that a good proportion of that £71 million will be spent on estates that have been transferred from the GLC to the London boroughs. In all parts of London, we are discovering—as if by magic — major headaches on estates after responsibility for them has been transferred from the GLC to the London boroughs.
I shall cite an example from my constituency. The Morris Walk estate was built during the heyday of industrialised building — the early 1960s. There were many difficulties long before the transfer from the GLC such as complaints about condensation and all the usual ones to which hon. Members representing London constituencies have become accustomed. In the years since the transfer there have been some major complaints by the tenants about dampness and condensation, rotting window frames, lifts that regularly break down and inefficient and expensive electric heating systems.
The tenants' association recently conducted a survey of a quarter of the tenants on the estate and found some revealing figures on the condition of the estate as the tenants saw it. For example, when asked:
"Do you suffer from dampness/condensation problems in your flat?"
90 per cent. of those interviewed said "Yes". When asked:
"Do you suffer from problems relating to the windows in your flat?"
86 per cent. said that they had major window problems. When asked:
"Do you think the installation of an entry-phone system is necessary to improve security?"
100 per cent. said they thought an entry-phone system was most important. When asked:
"Would you like to see the replacement of the storage heaters supplied in the high rise blocks?"
100 per cent. said that they would like to see such improvements.
The difficulty is that Greenwich council tells me that it is waiting for GLC approval for some of these schemes,

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such as window replacement, improvement of the heating system and action to deal with condensation. I am sure that other London Members will have had the same experience of the frustration that tenants have when they do not know to which authority to go to deal with these problems. They take problems to the borough council, which deals with some of them as routine maintenance, and says that others are the responsibility of the GLC as the original landlord and that the borough is having to negotiate with the GLC on how these problems can be tackled. I know that such problems are repeated on estates in many parts of London.
Looking at this item in the GLC capital estimates I see that it says:
"The Council's policy will be to meet its obligations under the various Transfer Orders to maintain and complete its rehabilitation and modernisation programme within the timescale specified provided that adequate financial allocations are made in the Housing Investment Programme."
That includes transferred stocks. It would be useful to have a clearer explanation of the time scale to put these problems right in the transferred estates, particularly against the background of the performance of the GLC in 1982–83 on renovation, when the programme is expected to be 16 per cent. underspent. We have the right to expect the programme to be rather better carried out in the future.
My second point concerns industry and employment. The hon. Member for Holborn and St. Pancras made a point about this, and the chairman of the finance committee in his budget speech said that he was
"introducing an industry and employment programme aimed at creating large numbers of new jobs."
As we know, the main instruments for creating those new jobs is the Greater London enterprise board. I have in the past been critical in the House about the salaries being paid to board members and the level of staffing, but I recognise that it is an institution which, properly handled, might tackle some of the problems of unemployment in London. We have a plethora of agencies, boards and action groups aimed at tackling employment problems. It would be useful to see what their performance has been in achieving jobs at ground level.
It is clear from the GLC capital estimates that that board will have a major financial provision. Some £18 million is to be provided for expenditure and a further £15 million for loans, which is a lot of money to get through in one financial year. It would be helpful for the House to know how many jobs are expected to flow from that money in this financial year and what progress has so far been made by the enterprise board in the tasks that it has been set by the GLC.
The hon. Member for Ealing, North referred to grants, and many of the GLC grants that have been controversial have been revenue grants. I have in mind a capital grant of £26,400 under the general heading of employment, because it was recommended by the director of industry and employment for the West London Trade Union Social Club Ltd., a trade union club established in April 1982 by trade unions in London. Its aims are described as social, educational, recreational and organisational. The club has a 21-year lease on an old co-op hall in Acton and is attempting to negotiate a loan from a brewery to install a small bar which would
"allow an expansion of activities in future years."
I am sure that it would. It wants money from the GLC to
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"carry out fairly extensive modernisation and renovation works, including the installation of fire escapes, proper WC facilities and opening up of the basement to provide office facilities."
The report that went before the GLC shows that the efforts of the club to raise money in other directions had not been fruitful. On 9 May 1983 the club had about £250 in hand. The GLC, however, has now made a grant of £26,000 for works to be done, plus further money for the equipment of the club. The justification for the spending of GLC capital moneys on a social and recreational club is that
"The de-industrialisation of London, involving massive job losses, has weakened the Trade Union movement and the infrastructure of the working class communities. By assisting in the establishment of the WLTUC, the Council will be helping the Trade Union movement in West London rebuild a sense of community through the planned activities, in a form where working people themselves plan their entertainment, education and culture rather than being the passive recipients of the inane pursuits promoted as 'popular entertainment' but motivated solely by profit."
That is an extraordinary justification for giving £26,000 of ratepayers' money away at a time when London needs investment in jobs. I have been involved in a number of trade union clubs in my time, and when we started a trade union club we did what this club should have done. We went to a brewer, got a loan and set the club up. We did not go to a local government source to get £26,000 of ratepayers' money.
I have one further example. In the arts and recreation sphere a grant of £25,000 has been made to an organisation called Women in Sync. This is not the kitchen sink as hon. Members might expect. The group was formed in 1979 with
"ten members who have had extensive experience in video"
The aim of the project is explained in the following terms: "We are setting up a video resource for women, so that women who haven't had the opportunity before can learn how to use video equipment."
There is a long list of capital requirements, which comes to £42,449·97, of which £25,316 is essential for priority items. There is a further list of the tools that would be needed, which include:
"Long Nose Pliers … … … … …£8
Ordinary Pliers … … … … … …£5
Ordinary Soldering Iron … … … …£6·07
Set of Jeweller's Screwdrivers … … …£4·38".
The GLC decided to have a whip round for the tools, including the long nose pliers, but it has made a capital contribution of £25,000 towards Women in Sync. When I think of the needs of the arts and recreation in London for capital money, including the Tramshed community theatre, in my constituency, I realise what an extraordinary waste of ratepayers' money that is.
The hon. Member for Holborn and St. Pancras referred to transport and to a major road scheme in my constituency. He did not name it, but I hope that he meant the A206 Plumstead road-Beresford street widening, as that scheme has been hanging around for a decade. It is important, because the road is a dual carriageway on both sides of the Woolwich town centre, and the town centre creates a major traffic bottleneck in the rush hour in the mornings and evenings. The road scheme would meet at least three of the GLC's criteria in that it would improve journey times for major bus routes, help commercial and industrial traffic and assist the prosperity of Woolwich town centre which desperately needs a bit of help in this economic climate. The GLC capital estimates simply say that a possible start will be made in 1983–84, so I hope that

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the hon. Member for Holborn and St. Pancras can confirm that this is one of the goodies that he will hold out to me if I do not do something wicked at the end of the consideration of the Bill.
My other point about transport arises on the GLC's draft estimates for the Bill—the provision of half the costs of a light rail system serving docklands. On behalf of south-east London, we should put it clearly on the record that we are not happy about the light rail system. It will serve not the docklands as a whole, but only the part on the northern side of the river. South-east London is once again to be the forgotten cornet of the city when dealing with public transport. The area has no tube provision. The roads that link us to central London are desperately congested and resemble Gruyere cheese for most of the time because of the number of holes that are being dug in them. We have what even British Rail accepts is a very poor quality commuter service.
All that is against the background of a loss of industry in south-east London and the creation, as a result, of many reluctant commuters who must travel to central London for work. Although I do not blame the GLC for the very limited docklands public transport system, on behalf of south-east London in general and Thamesmead in particular I say that it is no substitute for the original Jubilee line proposal which would have linked Thamesmead with central London.
I am grateful for having had the opportunity to raise some of these issues. I do not expect the hon. Member for Holborn and St. Pancras to deal with them all in winding-up the debate, but I should be grateful if he could get answers from the GLC to some of my questions.
7.52 pm
Mr. Toby Jessel: I listened with great interest to the hon. Member for Woolwich (Mr. Cartwright), and especially to what he said about the need for industry and employment in London. He said that the aim of the GLC was to create a large number of new jobs through the Greater London enterprise board. I am afraid that the policies of the GLC, although they may be intended to create jobs, actually reduce the number, because of the high rates. That view was expressed most vividly in a letter in The Times today from a former Labour Member of Parliament, Mr. Alan Lee Williams, who said:
"London rates have tended to increase more frequently than rents and dramatically faster than inflation and these are decisive factors in forcing companies to leave London.
I believe that the GLC grossly underestimates the harmful impact of rent and rate increases on the general level of economic activity in the capital."
Mr. Williams was right. I hope that some Opposition Members will comment on his letter. I should like to hear their explanation for the extraordinarily high GLC rate precept. The policy of the hon. Member for Woolwich and that of the alliance party would not give much relief in this respect, because in the general election campaign the alliance proposed to replace the GLC with a new regional provincial assembly for south-east England. That is an extraordinary idea. I believe that the alliance suggested regional or provincial assemblies for Scotland and Wales and wanted to carry that on throughout England, regardless of the wishes of the people. I cannot imagine that any sensible person would want a regional provincial assembly for south-east England, which would be one more vast and costly bureaucracy.
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The hon. Member for Holborn and St. Pancras (Mr. Dobson) asked for support for the Bill, but he will not get mine. We are asked to authorise massive expenditure. The Bill shows a gross total of no less than £957,994,678. That astronomical sum amounts to an average of about £170 or £180 per head — man, woman and child — in a population of 6 million to 6·5 million. It is about £500 per household.
The GLC rate precept in my constituency takes about a quarter of the rates. We are not in the Inner London education authority area, which is a big item for the 12 inner London boroughs. I represent an outer London borough. Twenty-five per cent. of the rates which go to the GLC provide some useful services, such as the fire brigade, which takes about 2p of that 25p.
The hon. Member for Woolwich referred to London Transport. There is much less tube provision in south London than in north London. That creates a great injustice between ratepayers in different parts of greater London. For historical and accidental reasons there is a wide network of British Rail southern region throughout south London, but only four tube lines extend to that area, and some of those are of no great length. British Rail southern region mainly serves London to the south of the river and to the west of London beyond Richmond. In the northern half of London, there is an extensive network of underground railways. That means that ratepayers in the north of London subsidise, through their rates, tubes which they can use easily whereas a much smaller proportion of people who live in south London make extensive use of the tubes. That is extremely unfair. That fact was partly behind Bromley borough council's case against the GLC.
Mr. Chris Smith: Would the hon. Member apply the same principle of separate taxation for separate services, which he appears to be enunciating, to the national education budget? People who do not have children must contribute rates and taxes for which they do not receive a service. That appears to be the argument that the hon. Member is making.
Mr. Jessel: No, I am not making that argument. There is no analogy in that. The hon. Member ought to know better than to argue on an analogy. Education is a basic need for children and we all willingly pay our taxes to provide for a system of education organised by local authorities. We all provide for that education system. That is entirely different from the difference between north and south London because of the fluke historic imbalance between an extensive provision of underground railways in north London and the relative lack of facilities in south London. The circumstances are not comparable at all.
Mr. Jeremy Corbyn: The hon. Gentleman's comment on the analogy is that education is a basic right, but the Government refuse to give any grant aid to the Inner London education authority, thereby ignoring the needs of inner London children who suffer greater deprivation than those in almost any other part of this country, and certainly far greater than anything in the hon. Gentleman's constituency.
Mr. Jessel: The Inner London education authority derives its revenue, in the main, from rates. That is a form of universal taxation applied to rich and poor households in inner London. The rich households pay more than the poor. This creates its own balance. The totality of the

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population in inner London provides a substantial base for the rates of the Inner London education authority. The position is not comparable with the fluke of the many underground railways in the north of London and the lack of them in the south. It is unjust that a householder in an outer London borough, such as Hendon or Barnet, which has an extensive tube system and whose householders come from the same group as many of those in my constituency, which does not have an underground railway, should receive a subsidy from my constituents who are unable to avail themselves to the same extent of the use of the underground railway.
Several Hon. Members rose——
Mr. Jessel: I have given way several times so I hope that I may be allowed to continue.
The Greater London council has been useful, but it has largely outlived its usefulness. That is not a party political matter. In its 19 years it has been ruled by a Conservative majority for 10 years and by a Labour majority for nine years. Changes of power are frequent. The council changes hands at almost every election. Rule by the present administration headed by Mr. Livingstone could be temporary. Long-term considerations are involved, regardless of the party in majority at county hall.
The case for the GLC's abolition springs, not from what might be thought of the present regime led by Mr. Livingstone and his friends, but from the dramatic erosion over the years of the GLC's functions, particularly in the middle and latter part of the 1970s. Its vast heritage of council housing, which accommodates a population about as large as the entire population of Birmingham—about 1¼ million—has nearly all been handed over to the 32 London boroughs. Ambulances have been handed over to the National Health Service. The sewerage system has been handed over to the Thames water authority. Most of the parks have been handed over to the London boroughs.
The Thames barrier, close to the constituency represented by the hon. Member for Woolwich, has been completed. Only one third of the expenditure on that flood protection was paid for by the GLC. The remaining two thirds came from the Government in the form of a grant from the Ministry of Agriculture.
Three ringway roads were planned in the late 1960s and early 1970s, but the plans have been dropped. The inner London motorway box was partly built, but the rest was dropped. The second ringway road consisted of the north circular road, which has been improved, and the south circular, which was never built. Ringway 3, the outer road, was replaced by the Ministry of Transport's M25, further out in the green belt, because of the "homes before roads" lobby that prevailed 10 years ago. That is now nearly completed. A reply from the Ministry of Transport that I received today shows that the M25 will be completed and in full use by 1986. The GLC is responsible for few, if any, major road schemes. That is another function that has disappeared.
The GLC has been involved in traffic management, but today the scope for yellow lines, one-way streets, no right turns, to achieve more capacity from the existing road system, is limited. Most of the work has been done and there is not much more scope. The police have requested the GLC and the 32 London boroughs not to introduce
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many more schemes that require too much police power to enforce. The GLC's functions have been reduced substantially.
What is left? First, the GLC is responsible for education in inner London, involving a population of 2½ million out of greater London's 6½ million. The Government intend to set up a joint board to run the Inner London education authority. Altering ILEA's internal structure is not proposed.
Several of the GLC's functions could be transferred to the 32 London boroughs. I refer to the remaining traffic management, handling of planning applications and licensing. It would be more democratic for such functions to be handled by the boroughs, which are closer to the people than county hall.
London Transport and the fire services cannot be handed over in that way because they must operate over the whole of London. A different proposal must be made for them. It is sometimes suggested that any change may make the transport and fire services less democratic. It is not obvious to me that transferring them from the Greater London council for the election of which only 35 per cent. or 40 per cent. of the population vote to Ministers answerable to this House for the election of which over 70 per cent. of the people vote would make responsibility for such functions less democratically controlled. I think that it would make them more so.
Mr. Dobson: Might there not be some merit in the democratic control of London's services being undertaken by people who are elected by Londoners rather than by the electors of Richmond, Yorkshire, who by allegedly democratic means chose the current police authority for the metropolis?
Mr. Jessel: No. The hon. Member is elected by Londoners, as I am. From time to time the hon. Gentleman will wish to ask questions about the Metropolitan police. I do not expect many hon. Members from Yorkshire to ask questions about the Metropolitan police and they do not. I cannot see much of an argument.
Functions such as transport and fire services are important. I am not saying that the GLC is not useful, but the exercise of such functions is not enough to justify retaining a vast, expensive bureaucracy.
I regard London as the arts capital of the world. It has a vast range of museums and art galleries, and live performances of theatre, concerts, opera and ballet. London's role in the arts and the arts' role in London are not assets for Londoners alone or for people who work in London and live 40 or 50 miles out. They are national assets. They help to bring foreign visitors to our shores. They are one of our greatest attractions, especially when put alongside the traditional British scene. They provide a substantial attraction to people who come here on holiday. That helps to generate employment. It is in the national interest as well as in the interests of people living in greater London that such activities are continued and fostered.
The Bill refers to support for the arts. An assurance of continuity is necessary. I was glad to receive a reply to a question a week ago saying that in the White Paper to be published in the autumn the support now given by the GLC to the arts will be included for consideration. I hope that the arts world in London and beyond will derive some reassurance from the reply to the last question.
8.10 pm
Mr. Harry Cohen: I intend to comment on a number of the points raised in the debate, but first on the charge by the hon. Member for Ealing, North (Mr. Greenway) of blackmail. That is nonsense. The truth is that either the Bill is passed and the capital works are carried out, or the Bill is not passed and the capital works are not carried out. That is a simple statement of law. It was nonsense to level such a charge.
One of the few humorous moments of the recent election campaign was when a London magazine alluded to the Secretary of State for Employment as Dracula. Presumably that was for his role of sucking jobs out of the economy. I recall that comparison between the right hon. Gentleman and the Gothic vampire because the latter showed no reflection in a mirror. The Secretary of State showed little reflection in his comments at an election meeting. The Standard reported him as saying
"The ambulance service could be organised under the area health authorities."
As the hon. Member for Twickenham (Mr. Jessel) said, it was organised under the area health authorities some 10 years ago.
The Secretary of State was also reported as saying
"The Inner London Education Authority could be run by the nominees of the 32 London boroughs."
Why should outer London boroughs have a say in inner London education? Perhaps the right hon. Gentleman is contemplating one education authority for the whole of London. If so, some of his Conservative colleagues in outer London would not like their powers and responsibilities taken away. Both his statements were made with little reflection—as, indeed, was the whole Conservative policy to abolish the GLC.
The two short paragraphs in the manifesto dealing with that issue traded on a destructive prejudice—rather like the "Bomb Russia" joke at the Nuremberg-type Tory rally. No one expects the Government to do that.
Mr. Jessel: I apologise for interrupting the hon. Gentleman, but did he say that a Conservative Member had said that all the 32 London boroughs should have a direct role in the administration of the Inner London education authority, which is an area covered by only 12 boroughs?
Mr. Cohen: That statement was made by the Secretary of State for Employment at an election meeting, and reported in The Standard.
The matter of how London should be governed, with all the facts and all the options, was not properly presented to the electorate in a studied manner either before or during the election campaign. The Government should think again before going ahead with their plan to abolish the GLC. They have no mandate for what they will put in its place. Londoners must be allowed their say about the Government's proposals at the GLC elections in two years.
The Government's alternative to the GLC is likely to be cuts, quangos or centralisation, or a combination of them. If it is cuts, the Government should have the decency to come clean and say so. Let us have no more of the nonsense about sensible savings when they really mean chronic cuts. It is incumbent on the Government to say where the cuts would occur. Will they be in London Transport, the GLC's measures to tackle or alleviate unemployment, grants to promote good race relations,
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mother and children projects or police monitoring? If they cut those services they must admit that they are taking a step further away from the Disraeli Conservative philosophy of one nation, which was so interestingly espoused last week by the previous Foreign Secretary, the right hon. Member for Cambridgeshire, South-East (Mr. Pym.
If various quangos or boards are to run London, it will mean the loss to Londoners of their fundamental right to choose people to run their city. London Transport is a prime example. There were two clear approaches to its running—the Conservative approach of commercialise and privatise, and the Labour approach of cheaper fares and more investment in our buses and trains. If London Transport is to be run by an unelected quango, the right to choose between the options, which has already been diminished by the courts, will be removed altogether. If a party stops old age pensioners' free travel concessions, it will face the consequences at the next general election, but that would not be the case with an unelected quango. How then can the Government assure the House that such a quango would not eventually stop those travel concessions?
Hon. Members committed to democracy want people to play a greater and continuous part in making decisions that affect them, not merely every five years when they vote. If the Government abolish the GLC the latter would result. Just as the Conservative Government chop the resources only of Labour-controlled councils, they care about democracy only when it suits them. Is the Conservative creed the diminution of democracy, or is it one of increasing centralisation? How long have Conservatives Members favoured that? Experience shows that local government is more responsive, accessible and accountable to local citizens, and that central Government are more remote. Local government provides services for local needs and interests, creates the opportunity for local innovation, is a counterweight to central Government, and, as such, checks national bureaucracy. Conservative Members pay lip service to that, and if the Government abolish the GLC they will move towards more central control.
It has never been made clear to the electorate that abolition will result in fewer services, more bureaucracy and less democracy. The Financial Times leader on 10 February 1983 stated:
"The GLC provides services which can neither be easily abolished or devolved to so small a unit"
as the boroughs, for example, fire and refuse disposal. It continues:
"The creation of a single tier of local government appears to enhance democracy, accountability and efficiency. The reality would quickly turn out to be the diminution of all three by the creation of a series of quangos, joint boards and ad hoc, multi-district committees."
We must quash the notion, on which the Government pin their hopes, that GLC services can be run more effectively by the nominees of London boroughs or by the London boroughs themselves. If the nominees of London boroughs ran the services, problems would be created. In my borough, for example, the nominee may be a councillor from a ward in Chingford which means that my constituents in Leyton and the people of Walthamstow may not be represented on that board. The nominee may not be directly elected for that job, which may only be part of his or her role as a councillor. The boards and quangos would make heavy demands on a councillor's time, and

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with his other council commitments one of the jobs would suffer as a result. The board may then become officer-dominated and there would be less control of bureaucracy than there is now.
It is unlikely that those boards would reach a metropolitan view because each councillor would promote the policy of his or her borough. With no mandate for a metropolitan programme of action, chaos would ensue. Politics is the language of priorities, but the different boards would not determine priorities, nor would they be properly inter-related. Nominee government will be less efficient than the GLC.
It should be made clear that many London boroughs do not wish to take over the services currently provided by the GLC because they are under tight expenditure constraints and could not cope wth the extra work. As the Financial Times stated, services such as strategic planning, fire, flood and waste disposal are already cross-borough services. Another crucial point is that if services are provided by the boroughs they will cost more. The people will have to pay higher rates for poorer services. Whenever there has been a reorganisation of local government the cost of services has always increased, and the Government would find it hard to give an example where that has not been so. The wealth of the City of London and Westminster has always been used to contribute towards London's services. At present, those boroughs contribute 22 per cent. of the GLC's income. If that, or even a substantial part of it, is removed, the burden of rates will shift dramatically from the owners of office blocks to the domestic or business ratepayers in the rest of London. The case for alternatives to the GLC is very weak.
If abolition is proposed because the GLC is too expensive, I can refute that by telling the House that between 1978–79 and 1983–84 GLC revenue expenditure increased by 88 per cent., but central Government current expenditure on goods and services increased by 101 per cent. Some may argue that the GLC is remote from the people whom it serves, but central Government is much more remote. However, only an anarchist would say that we should abolish central Government because of that. The Standard may not be my favourite newspaper, but on 28 June it recorded the results of an independent survey conducted by the Harris research centre. The majority of a representative sample of more than 1,500 Londoners believed that the GLC was doing a good job. The survey asked specific questions, such as whether the GLC was doing a good job in fixing fares, in helping to tackle unemployment, in promoting good race relations and in giving grants to community organisations. In answer to all those questions, the majority said yes.
Abolition is completely irrelevant in the face of the results of that survey, and especially in the face of London's real problems, one of which is unemployment. One in eight people in London is out of work, and in some areas the figure is more than 20 per cent. Even before the announcement of the latest cuts in the Health Service, 53 hospitals faced closure. There is extensive housing decline, chronic public transport and traffic problems and rising crime. There is a case for proper regional government in London — for an enhanced GLC with powers for active intervention to tackle the problems of unemployment and urban renewal, to become the accountable health authority for London and the capital's
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police authority. It is a scandal that last year Londoners paid £323 million to the police but had no say in how they were run. That is a reason for improving, not abolishing, the GLC.
Finally, I shall say something about the alliance's feeble attempt to jump on the bandwagon and to snipe at the GLC by attempting to block the Bill. Alliance Members should stop wandering round like lost sheep, taking a leaf out of the Tory book on each issue. Why does not the Prime Minister put them out of their misery and take them into the fold? The hon. Member for Woolwich (Mr. Cartwright) talked about the housing capital that is proposed in the Bill. We need more, not less, capital expenditure on housing. The fact that there is probably inadequate provision in the Bill is no excuse for stopping the planned expenditure.
The hon. Member for Woolwich (Mr. Cartwright) talked also about industry and employment in the Greater London enterprise board. That board has saved over 500 jobs, which would otherwise not exist. An example of that is Austinsuite in my constituency where the GLC helped to put together a package to save those jobs. We have had the familiar sniping at a few individual grants. I do not know the details of the isolated grants to which the hon. Gentleman referred, but it seemed to me that his first example of the trade union club sounded similar to the unemployment centre that exists in my borough and in many other boroughs. Those centres are very much needed around London. They promote worthwhile projects.
The hon. Gentleman referred to women's video. Has the hon. Gentleman not realised that video and films are a part of the arts? Women have a place in the arts. The centre also has an adult education function. The vast majority of GLC grants by, for example, the women's committee go through unopposed by the Tories and the Social Democrats. Mothers and children, who would otherwise get no support, benefit through nurseries, latchkey projects, playgroups, holiday schemes, toy libraries and the like. Of course, there are some controversial grants to minority groups, but they have rights, too. The SDP should grow up and recognise that instead of exhibiting unjustified moral outrage and obstructing this formal GLC money Bill. The message to the SDP and the Tories— it will get through to them sooner or later — is that London's democratic government is not for burning.
8.27 pm
Mr. Michael Shersby: This is the first occasion on which the House has considered a GLC money Bill since the Government received an overwhelming mandate at the general election to abolish that authority in its present form. It is our duty to consider the expenditure that is envisaged in the Bill in the light of that fact.
Labour Members are prone to lecture the Conservative party on the importance of the mandate, particularly when their party is in office. It is fair for me to ask what is the response of the GLC and the Labour party to the overwhelming mandate that the Government received to abolish the GLC in its present form and to crack down on some of the unwise expenditure in which many people believe that authority is engaged. These matters have an unwelcome habit of working both ways.
Mr. Corbyn rose——
Mr. Shersby: I will not give way to the hon. Gentleman. If he wishes to catch Mr. Speaker's eye no doubt he will do so later in the evening. I am sure that he will find that the best way to conduct business in the Chamber is to try to make our points and to intervene only infrequently.
In looking at the way in which the GLC has responded to the mandate that the Government have received, I note that it has decided to recruit about 1,055 staff at an estimated cost of £12·5 million in a full year, according to the comptroller of financial services. It was interesting to note a report by John Grigsby, the local government correspondent of The Daily Telegraph on Saturday when he said:
"The GLC's job increase follows five years during which the number of staff at County Hall fell by 14 per cent. to 21,000, largely because of the savings made by Sir Horace Cutler's Tory administration."
Mr. Dobson rose——
Mr. Shersby: I said that I would not give way. Other colleagues wish to speak.
This is a serious matter. We have a large local authority which is deliberately and wilfully setting out to recruit a large number of people at substantial cost to the ratepayer in greater London when the Government it have announced their intention to abolish that authority. What will they be doing? Doubtless some of them will be working on some of the strange activities that the GLC believes are important to London. Perhaps they will be working on the nuclear policy unit, which is to recruit three extra full-time staff members. The women's support unit is recruiting nine extra members of staff and the police committee support unit is recruiting five extra members of staff. The GLC has no role in relation to the police and its monitoring groups, appointed at random around the metropolis, and its police committee support unit are not relevant to the policing of the metropolis, which is the Home Secretary's responsibility.
I remind the hon. Member for Leyton (Mr. Cohen), who queried the ability of members of the GLC to question expenditure on police, that every London Member of Parliament has ready access to the Home Secretary and to the Commissioner of Police of the Metropolis. We are consulted frequently about the policing of London and we do our job in that way. I am of the firm opinion that the policing of the metropolis should be the Home Secretary's responsibility because it is different from the policing of other towns.
Mr. Dobson: Yes, it is done worse.
Mr. Shersby: The GLC acts questionably, to say the least. I cannot see why a local authority has to have a nuclear policy unit. It is not clear from anything contained in the Bill. It is interesting to speculate as to what would happen if a Conservative local authority were to take on members of staff to research into the advantages of nuclear deterrence. I am sure that there would be an uproar from the Labour members of the GLC and my constituents, and rightly so.
We must study closely the Bill which we are being asked to sanction and lay down one or two markers for the Private Bill Committee, which will consider it in detail. Hon. Members will be aware that under that procedure no London Member is permitted to participate because we all have an interest. The Committee will comprise our
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colleagues from other parts of the country who will no doubt wish to study the Second Reading debate carefully when they approach this substantial expenditure.
Some parts of the Bill deserve that special attention. I hope that the members of the Committee will take careful account of what I am going to say. I hope that the Committee will consider taking out or reducing certain items in part I paragraph 4 of the schedule, (e) and (f) in particular, which appear on page six. My research reveals that much of (e) relates to the Greater London enterprise board which is Mr. Livingstone's reproduction of the national enterprise board for London.
When the Minister replies I hope that he will say a few words about that operation and what the Government's view is about such expenditure, bearing in mind their policy towards local authority expenditure in general, penalties and grants and so on. I hope that the Private Bill Committee will pay close attention to that because it seems to me that there is, at least, some unnecessary and undesirable duplication. For example, in part I of the schedule, (e), dealing with planning and industry, envisages expenditure in the year ending 31 March 1984 of £24·899 million and during the immediately following six months £17·900 million.
Sub-paragraph (f) dealing with
"purposes not included in sub-paragraphs (a) to (e)"—
a rather nebulous description—accounts for £8,605,000 in the year ended 31 March 1984 and another £3 million in the immediately following six months. Those are substantial sums of money. I hope that when the Committee considers the Bill in detail it will probe into the reason for that expenditure and consider whether it is justifiable that the ratepayers of London should have to finance it.
Under the present administration of county hall, the GLC's gross expenditure has reached unprecedented levels. In 1981–82, the GLC spent £1,174,000. In 1982, the figure was £1,351,000. The budget for 1984 is £1,479,000. In 1981–82, the GLC precept, after attributable block grant, represented only 18p out of an average rate bill of 140p in the pound, or 12·9 per cent. in 1983–84, the GLC precept of 39·9p compares with an average rate payable by Londoners of 174·8p in the pound, or 22·8 per cent.
My constituency of Uxbridge has the misfortune to be situated within the boundaries of the Greater London council. My constituents are therefore faced with dramatic rate increases which have hit them very hard. Many businesses in my constituency, especially the smaller ones, are also finding the going hard. The increased expenditure is being promoted at the expense of London ratepayers and the jobs of Londoners. On 2 December 1981 the London chamber of commerce and industry published evidence that massive rate increases in London had created severe problems for businesses, causing substantial unemployment. The survey was based on a total of 505 commercial and industrial respondents in greater London. It revealed that 38 per cent. of companies had already reduced their staff as a result of the level of rates while almost 17 per cent. of companies had already moved elsewhere and 16 per cent. had decided to run clown or close their London businesses. In addition, 37 per cent. stated that they would reduce staff if rates rose by more than 25 per cent. within the next two years, with 33 per cent. deciding to move activities elsewhere and nearly 30

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per cent. claiming that they would be forced in such circumstances to run down or close down their London operations.
While the unemployment position is shown to be depressingly bleak throughout greater London, it is inner London that is suffering the greatest damage, with 54 per cent. of companies having made staff reductions in the past five years because of rate increases. In addition, 45 per cent. of inner London firms stated that they would cut back staff within the next two years if rates increased still further.
Mr. Dobson: What about rent increases?
Mr. Shersby: The London chamber of commerce and industry has provided us with some important facts. No London Member who has recently fought a general election campaign can be unaware of the effect of rate increases on industry and commerce in greater London. None of us wants to see jobs moving out of London. Hon. Members who represent inner London, constituencies doubtless wish to see jobs retained in inner London, whereas those of us representing outer London constituencies do not wish to see jobs disappearing over the border into Buckinghamshire, Berkshire or the other home counties. We want to keep those firms here, so that our youngsters have the chance of a decent job. However, those companies are being driven out. If they want to, they can escape that form of taxation simply by deciding to move their geographical locations. That is happening, and that is why it is incumbent on the GLC—no matter which party controls it—to have regard to the effect of rate increases on jobs.
The GLC will have exceeded its spending target this year by about £300 million or 53 per cent. The metropolitan counties will have overspent by £72 million, or 6·5 per cent. Abolition of the GLC would remove that overspending and might eventually save a further £120 million per year—[Laughter.] It is all very well for the hon. Member for Holborn and St. Pancras to laugh. He may think it is very funny in his constituency, and no doubt the electors of Camden have great confidence in his gift of humour. However, the electors of Uxbridge do not share his constituents' taste for his brand of humour. My constituents take very seriously the GLC's failure to control its expenditure. Moreover, they are extremely angry that, due to the GLC's failure to restrain its expenditure and thus to obtain rate support grant, London ratepayers and taxpayers are having to pick up the bill. London's ratepayers are being robbed by such overspending and it is incumbent upon us to make it clear that restraint should be exercised, that expenditure should be confined to those things that it is necessary to do and for which the GLC has a proper responsibility, and that the GLC should not engage in duplication, waste, extravagance and the recruitment of new staff whose working lives with that authority are likely to be limited to a maximum of two or three years. Of course, London's ratepayers will doubtless have to pick up the bill for the redundancies, and if the GLC goes on recruiting at this rate the bill will be even larger.
Therefore, I sound that note of caution. I hope very much that our colleagues, who will consider this Bill with the care and attention that they always bring to private Bills, will have sympathy with the poor old London
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ratepayer and will consider the jobs of young people in my constituency and elsewhere in greater London, which are being swept away by such massive and unrestrained rate increases and by expenditure at the level contained in the Bill.
8.42 pm
Mr. Tony Banks: It would seem that discussing the GLC in the House has become something of a habit of late. As hon. Members may know, I am still a member of the GLC and proud of it. At one stage I thought that I might come over here to listen to other things, but I am afraid I still hear an awful lot about the GLC, and in the usual bigoted, prejudiced and ill-informed manner that I associate with the articles I read in the newspapers every day.
We are discussing the money Bill for 1983. Although one or two hon. Members have drawn a clear distinction between what is in the Bill—which essentially concerns capital spending—and the various, as they would see it, controversial revenue expenditures of the GLC, that distinction has not been clearly drawn by others.
Perhaps hon. Members are still not clear about the Bill. Part I concerns spending. In it there is £452 million of spending. However, it is, of course, capital spending. In many cases it is for projects that have already been started and that have been going on for some time. However, the GLC is required to ask the Government for permission for continued spending. Part II relates to the lending provisions. Indeed, £50 million of that lending is a technical inclusion to provide for sharing with London boroughs, and is raised by the GLC. The GLC raises loans on their behalf. If that sum is left aside, the overall total is about £484 million. About £380 million of that is for continuing commitments existing at the start of this financial year — and, in some cases, they have been going on for many years. So we are left with about £100 million for new projects, some of which have already started in the current financial year.
In past years there has been relatively little controversy. If they look carefully at the proposed capital projects, Conservative Members will see, when the cloud of prejudice that seems to sit around them when the GLC is mentioned has cleared, how non-controversial the great majority is and how worthy it is of London as a whole.
I listened carefully to what Conservative Members said about the GLC. It is clear that they still have not worked out the difference between capital and revenue expenditure in the Bill. In many respects we have parted company with the Bill and have gone on to a general discussion about the GLC, its future existence—or whether it will have an existence—and the case for its abolition. No doubt we shall come back to the theme this evening, so I am sure that it is impossible for me to avoid it.
The legislation that the Government promise for the abolition of the GLC will no doubt involve many debates about the GLC in the coming months. Whether Conservative Members like the GLC or not, or whether Londoners like the GLC or not, under the present arrangements they will have an opportunity in 1985 to say what they think about its future at the ballot box. I am sure that all sides of the House want to preserve that. It is all very well for the Government to talk in two short paragraphs about the abolition of the GLC. The real issue is abolition of another section of our democracy, and the House should be wary about that. It is possible that at some

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stage the Prime Minister will decide she has had enough of all of us on both sides and decide to run the whole operation from a submarine parked somewhere off the Falkland Islands. When we discuss the White Paper in greater detail, I do not think that quite so many people will be jumping up and saying, "What a good idea the abolition of the GLC will be."
The hon. Member for Twickenham (Mr. Jessel), who, regrettably, has left the Chamber, served on the GLC. Indeed, I remember looking at his face across the benches many years ago. Today he talked about GLC and ILEA rates. It is important to point out that ILEA is the only entirely rate-borne education authority in the country. It gets nothing from central Government. That is something about which London ratepayers, who are also taxpayers, have grounds for complaint, because they pay taxes which should go towards the provision of education in inner London. However, the Government give ILEA nothing.
The hon. Member for Twickenham went on to talk about the high GLC rates, as did other Conservative Members. One reason why GLC rates have gone up so much is the penalties that have been imposed by central Government. Grants have been taken away from the GLC. It is all very well for the Government to say, "You should not spend this money", but the essence of democracy is that people locally can decide how the money is to be spent. Despite what successive Governments have said about wanting to take Whitehall off the back of local government, there has been a gradual erosion of local government powers in recent years. That is bad for democracy, bad for accountability, and bad for the country as a whole.
I continue with the remarks of the hon. Member for Twickenham, because he made a most interesting speech. He complained about the non-provision of a London Transport underground in his part of the world. He also mentioned Bromley. Of course, the underground is not as extensive as we might like it to be. I should like to see a much more extensive service, although it is already the most extensive network in the world. He asked why his constituents should have to pay rates to sustain London Tranport's fare levels. Equally, in the area in which I live and which I represent, the ratepayers could ask why on earth they should be paying for all the subsidies for British Rail from which commuters from Bromley benefit. They could ask "Why can't we go to Bromley and say that we don't want to pay our taxes to British Rail because we don't benefit from its suburban services?". Such an argument cannot be used with any credibility.
I think that it was the hon. Member for Uxbridge (Mr. Shersby) who talked about the enormous size of the GLC's bureaucracy and said that it was taking on a large number of additional staff. I have looked carefully at that. The cost of all directly employed staff at the GLC represents only 16· per cent. of total revenue costs and over half of the staff are employed as fire fighters or on public health and safety duties. Administrative and managerial staff account for only 7·5 per cent. of all employees—less than 2 per. cent. of the GLC's total bill. That does not seem to me to be a vast overwhelming bureaucracy. Most of the new staff that the GLC wishes to take on are manual workers who have been recruited for work in the parks, where there has been such a deterioration in maintenance standards over recent years, and fire fighting, where we need to maintain and increase the cover that the fire brigade provides for London. If we were to move along the absurd path of
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abolishing the GLC merely because the Prime Minister does not like Ken Livingstone, we should be moving towards a democratic nonsense, and it would be economically absurd.
Another major financial responsibility of the GLC which could not be transferred to individual boroughs is the financing of London's debt, currently running at £2,036 million. The GLC is paying for all the capital projects that have been invested in in the past. That is an important function of the GLC. That huge debt and the debt servicing of something over £300 million cannot be transferred to the boroughs. Will the Government be prepared to fund the servicing of those debts if they succeed in abolishing the GLC? Some of my hon. Friends might say "Stuff all the debts and let the moneylenders go to hell". However, I suspect that that philosophy will not have permeated very far on the Conservative Benches.
For all its faults, the GLC exists to serve London. If one looks in detail at the various proposals in the Bill one can see exactly what is being proposed. I could speak for some time about the various worthy capital projects that are being spelt out, but hon. Members should by now have acquired the ability to read and it is up to them to look at the Bill for themselves and then to ask questions if they require some elucidation on the points raised.
Part of the £100 million in the Bill for new developments in the current year will go towards the arts. It will go to regional functions of the GLC's arts policy such as the provision of lake cleaning at Battersea park, new facilities at Hounslow heath, the development of Mile End park — another regional park that the GLC is developing—tree planting at Wormwood Scrubs, safety services in our playgrounds, and a new running track at Victoria park. Those are all projects that only the GLC can undertake on behalf of London because the boroughs in which those facilities are located, or through which they go, will not be in a position to provide the necessary money to sustain such regional developments.
I still have the privilege to be the chairman of the GLC arts and recreation committee and so I can speak with some feeling about those projects. We are talking of the £100 million within the Bill for new development. We come now to the improvements to museums and the compulsory purchase of Kelmscott house, which the GLC intends to turn into the William Morris museum. We intend to embody within that museum the principles of the work that Morris pioneered.
Also, within the £100 million, the GLC will be looking at the south bank, particularly at the Royal Festival hall. We want to improve the acoustic facilities for those who are hard of hearing— indeed, for those who are not. There will be deaf aid systems running through the whole Royal Festival hall.
Such are the projects that are spelt out. Surely no one in the House will say that it is all a load of tommy-rot and that we should not spend that sort of money. Frankly, I believe that we should spend considerably more on the arts. There are other provisions in London for the river Thames including the Richmond towpaths, the canal parks and the pier improvements. Next Friday the GLC is to open a new pier, the first on the river for 30 years, outside the Royal Festival hall. I hope that a few hon. Members will find time to come to see the good things that the GLC is doing, but about which one hears very little in the Chamber and reads nothing in Fascist comics such as the Daily Mail, The Sun and the Daily Express.

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The hon. Member for Twickenham spoke with feeling and some compassion and, I am even prepared to accept, with sincerity. He said that he was concerned about the impact on the arts were the GLC to be abolished. Yes, there would be a major impact on the arts if it were abolished. At the moment the GLC arts and recreation committee spends abut £15·5 million net a year on the arts in London. We help to sustain the National theatre, the English National Opera and the London Festival Ballet. We fund theatres such as Sadler's Wells, the Riverside, the Half Moon, the Theatre Royal, the Hampstead and the Lyric. We give about £1·8 million a year to community and ethnic arts. The GLC runs the south bank arts complex, including the Royal Festival hall, the Queen Elizabeth hall and the Purcell rooms. That costs another £4·5 million net.
The GLC funds museums such as the London museum, the Geffrye museum and the Horniman museum. It runs historic houses such as Rangers house, Kenwood, Marble hill and, if the Secretary of State allows the compulsory purchase order to go through, Kelmscott house as well.
If the GLC were to be abolished, who would look after all those arts provisions in London? The hon. Member for Twickenham said with great compassion and feeling and, no doubt, with some belief in the Minister responsible for the arts — regrettably there is no Minister directly responsible—said that the Government would take that into account. That does not amount to much. They are the same Government who took into account the provision of funds for the Theatre museum in Covent Garden. Arrangements had been made for an exchange of leases between the GLC and the Government. The Government chopped it last Friday. Is that the action of a caring considerate Government interested in the arts? They cannot even spend £4 million on organising a theatre museum for London. We are one of the few major countries that boasts a theatre and arts infrastructure, yet we have nothing approaching a theatre museum. Such basic dishonesty by the Government makes me feel that the arts cannot be left safely in the hands of such philistines, particularly when they are operating under the constraints of monetarism. The Prime Minister does not appear to believe that the arts are the sort of thing that macho people should spend money on. No doubt we shall have a few more guns and bombers, but there shall be no theatre museum in London. That is an appalling indictment.
At the debate last Friday, the Under-Secretary of State for the Environment—of whom I did not expect this—made some snide comments about GLC grants to certain groups. We are back on the revenue side. That has nothing to do with the Bill. At least I am honest enough to say so. However, I shall carry on talking about it if you will allow me, Mr. Deputy Speaker.
The Under-Secretary of State made comments about Babies against the Bomb, the English Collective of Prostitutes and the London Gay Teenage Group. We hear such comments all the time—it is like an old record. One would think that, in two years, the GLC had given grants only to those three organisations. Those are the ones about which one always reads. When Conservative Members have nothing better to say, they get up and berate the GLC about giving money to gay or lesbian groups. They should study the Benches carefully because I do not
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suppose that the House is made up entirely of heterosexuals. Conservative Members must investigate their own consciences when they attack the GLC for some of the grants it gives to minority interests in London.
Although one hears a great deal about those three grants, one hears nothing about the other 600 grants that the GLC has made in the past two years. In London, 600 groups received grants from the GLC. However, one does not read a thing about them in the capitalist press. Every constituency in London receives money from the GLC for a group that functions within its border. I become sick and tired of receiving letters from Conservative Members and from Conservative GLC councillors which say
"Dear Tony" —
it is always "Dear Tony" when they want something—
"I do hope that you will be supporting such and such a group in my constituency."
I shall start publishing those names and I shall start calling in some of those obligations. If they want the GLC abolished, why on earth do they come crawling to me to ask for extra money for groups in their areas?
In every constituency the GLC gives money to community centres, counselling groups, credit unions, disabled groups, elderly groups, family advice groups, holiday schemes for the elderly and handicapped, legal advice centres, youth organisations and church organisations, but we do not hear a word about that work.
I have spoken with feeling because I have had to suffer for two years the scurrilous attacks of Fascist newspapers such as The Sun, the Daily Mail and the Daily Express and the attentions of the Fascist goons who work for them. I am sick and tired of it. It is about time that hon. Members recognised the work that the GLC does. The abolition of the GLC will mean not merely getting rid of Ken Livingstone and a few Lefties over the water but the end of local democracy in London.
Several Hon. Members rose——
Mr. Deputy Speaker (Mr. Harold Walker): Order. I remind the House that the debate must conclude not later than 10 o'clock. There are 58 minutes left and six hon. Members seeking to catch my eye. The arithmetic will be obvious.
9.2 pm
The Under-Secretary of State for the Environment (Sir George Young): Much of the debate has been not about the Bill but about broader proposals concerning the GLC. I shall not deal with those. The parts of the debate that have been about the Bill fall to be dealt with not by me, but by the hon. Member for Holborn and St. Pancras (Mr. Dobson), who made one of his less provocative speeches when he presented the Bill. The hon. Gentleman emphasised the role of the private sector and showed a touching concern for the health of the privately owned construction industry in London. I hope that this will be a theme of all his speeches, because we have not always heard that concern.
As the hon. Gentleman said, the council is unique in that it and its predecessors have for many years presented an annual money Bill for the approval of Parliament for the capital expenditure and the lending that it can undertake during the current financial year and the six months following. This long-established arrangement has been modified, but not superseded, by the Local Government, Planning and Land Act 1980.

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The Government will not oppose the Bill. That may occasion some surprise, because there is of course a great deal about the GLC that the Government do not support. We do not support the behaviour of the existing administration at county hall. We do not support a body which has become increasingly unnecessary as it has lost a number of its functions, most notably its housing management responsibilities, which are progressively passing to the boroughs, but yet remains the largest overspending local authority in the country.
We do not support some of the expenditure decisions to which the hon. Member for Newham, North-West (Mr. Banks) has drawn attention. He has become rather sensitive about those grants. If he wants to avoid criticism of the GLC he should stop making such grants and the criticism will smartly cease. As he knows, we are firmly committed to abolishing the GLC and giving as much of its functions as possible to the boroughs to improve the economy and effectiveness of London's local government. But that is not a reason for blocking the Bill. Between now and the date of abolition, the government of Greater London must continue and the council must have the resources for necessary expenditure.
I emphasise the word "necessary". Last week the Government announced their decisions on the extent to which rate support grant will be held back from overspending authorities. There has been adverse comment from the Opposition in the press and elsewhere, suggesting that such holdback is unreasonable.
I see that the matter came up again in an article in yesterday's The Sunday Times, which referred to an authority which is almost laughing off the holdback. The Labour chairman of the council's finance committee is quoted as saying that he had no real problem:
"The government gave us all the figures and we knew in February that it would be about £23 million, so we put it into the April budget."
Local authority expenditure accounts for 25 per cent. of all public expenditure. Getting the economy right means getting public spending down, and local government must play its part. The GLC is budgeting to spend more than half as much again as the target that we have set in the light of what we see as London's needs. With ILEA, it will account for more than half of the overspending on revenue by all authorities in England. That is ludicrous and we have had to act. That is the only capital punishment that I shall be supporting this week.
If the capital budget in the Bill were on the same ridiculous scale, I could not ask the House to support it, but it is not. Initially, I thought that it would be. Last October the council sought an extra £75 million other services allocation, on top of the normal allocation for that block of about £10 million.
Such a massive increase would have gone partly towards developments involving, for example, the Greater London enterprise board which my hon. Friend the Member for Uxbridge (Mr. Shersby) mentioned. We rejected that. The leader of the GLC responded by threatening that those London MPs who did not support the GLC's programme when faced with an inflated money Bill in Parliament would find that no money would be spent on capital projects in their constituencies, beyond the barest essentials. What would have happened to constituencies with a Conservative Member of Parliament but a Labour
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GLC member was never made clear to me. Hon. Members will recall the swift action that the authorities of the House took against that threat.
I am pleased to say that the council subsequently saw reason. The usual discussions with the Government took place, after all, before the Bill was deposited. The provisions of the Bill have been scrutinised and agreed by the various interested Departments. Its proposals now reflect the level of capital investment which the Government think it reasonable for the council to be undertaking. The flights of fancy have been removed, and I can therefore commend the Bill to the House.
The hon. Member for Woolwich (Mr. Cartwright) rightly drew attention to the importance of the GLC's substantial programme for the renovation and improvement of the transferred stock to which it is committed by the transfer orders. The GLC's housing investment programme is related essentially to those commitments. Indeed, it has received an increase in its allocation for the current year to fulfil those obligations.
The hon. Gentleman also mentioned a matter of constituency interest—the proposal to establish a west London trade union club in Acton. I am normally keen when public money is invested in my constituency. However, I must tell the hon. Member for Newham, North-West that we can do without that type of investment. It is a social and recreational club the membership of which is open only to trade union members. The trade unions have put in a total of about £250 and the rest has come from the ratepayers of London. That proposal has not found enormous public support in Acton. It is an example of the type of project which the GLC could well cut back on if it wished to keep its budget within more reasonable limits.
I ask hon. Members to note that the council relies on the Bill as its only authority for capital expenditure and lending. It is important that the Bill be allowed to proceed. I hope that the House will give it a Second Reading and send it to Committee for detailed consideration.
9.9 pm
Mr. Simon Hughes: Some hon. Members who have already spoken have misunderstood why my hon. Friend the Member for Woolwich (Mr. Cartwright) and I have ensured that we debate this Bill on the Floor of the House. We have already achieved two things. We have heard a spirited de fence of some of the GLC's spending by the hon. Member for Newham, North-West (Mr. Banks). That may stand the GLC in better stead when it fights seriously for its life in the years ahead. The debate has even seen the Minister put his head on the block both with regard to his own party and, no doubt, some of his constituents later in the week.
The reason the debate was initiated was that, unless figures have changed recently, the GLC budget is greater than 18 sovereign states. It is highly appropriate that it should be considered by this place. It is also appropriate, although the hon. Member for Leyton (Mr. Cohen) did not acknowledge it, that hon. Members who, like me, represent nearly 500,000 Londoners under the system that sends us here — somewhat more than my Labour and Tory party colleagues who represent between 30,000 and 40,000 each—can bring before the House issues that concern those people.
The issue that primarily concerns them is that the GLC should spend its money on things on which Londoners

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think that money should be spent. It should spend its money and time properly on issues that concern Londoners—transport, housing, jobs and recreation.
There have already been allusions to some of the matters on which the GLC spends some of its capital budget. I give notice to the GLC that if it wishes to enhance its prospects of survival it must respond to the clear, current view of Londoners. On many issues, such as the time spent on discussing Northern Ireland, peace, nuclear deterrence and interest groups that do not deserve money compared with others that deserve it far more, the GLC is earning a potential rebuke that will mean its dissolution all too soon. That will be of the GLC's doing, and I hope that in time it will see the folly of its present ways.
The crisis facing London's services is not often realised. I allude to the catalogue of the crisis now facing us. In the three years to October last year, unemployment in the United Kingdom went up by 141 per cent. whereas in London it went up by 181 per cent. Unemployment in inner London is now 160,000—with a higher density than any other metropolitan county — and it is still increasing. Male unemployment in inner London is 17 per cent. and in places it is 25 per cent. A total of 44 per cent. of British new Commonwealth residents live in London, and two thirds of the West Indian and African unemployed live in inner London. At least a fifth of all young people in parts of inner London have been unemployed for more than a year. Between 1980 and 1982 there was an increase of 103 per cent. in unemployment among manual workers and nearly 150 per cent. among non-manual workers. Although London has gained £30 million through various inter-city programmes, it has lost £700 million in Government penalties. Job loss has been phenomenal; and job vacancies in the same period have declined from 20,000 to 9,000.
Those are simply the employment statistics. When one considers the housing statistics and the increased demand of the rate burden, inner London is a disaster area. If we compare inner London with any other metropolitan area, there is a clear and totally consistent picture.
In the last 10 years, the population loss of inner London has been greater than any other metropolitan county — 18 per cent. The number of people aged 75 and over—those who make demands on the services — is the highest of any metropolitan county, nearly 10 per cent. The school population has declined more than anywhere else, including the primary school population. The number of children of one-parent families is greater than anywhere else. The number of children in care is greater than anywhere else. The number of people in households with heads born in the Commonwealth or Pakistan is greater than anywhere else, as is the number of overcrowded houses.
The crisis facing inner London is such that, were inner London regularly identified as an area on its own, it would be receiving enormous grants, and the GLC, as the responsible body, would be given the money to deal with the enormous and growing problems from which people and business in inner London are suffering. I speak as someone who represents the borough of Southwark, which is second only to Manchester as the authority with the highest number of indicators of deprivation. That is one side of the picture.
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The GLC needs to spend its money on meeting some of those crisis needs. I shall point out some areas to which it might turn its attention so that it can, when considering its budget in future, consider the matters aright. In the office that I have in this building, I look out on to GLC county hall. I urge hon. Members such as the hon. Member for Newham, North-West and others who govern there to deal with the problems, some of which have been alluded to, and to bring to south-east London and inner south-east London a decent transport system.
We should have had not only a docklands-type light railway built for north of the river but, as has been pointed out, some form of transport, whether above or below ground, south of the river. It could be the Jubilee line revised. It is ludicrous how long it takes to get from places such as London bridge to places such as Surrey docks and New Cross and beyond. We are the white hole on the London Transport map.
The GLC has the responsibility of dealing with the large number of properties upon which, when they have been handed over to the local authorities, enormous tasks need to be done, such as double glazing for people who live on the edge of main roads, heating for pensioners in tower blocks and general maintenance. There are blocks in every inner London constituency on which the GLC has an obligation to spend the maximum possible amount of money.
Burgess park was started by the GLC in 1944. It will not be finished until 2020 from what I gather from the latest estimates. The GLC should address its mind and attention to trying to deal with the many empty houses, the blight occasioned by the growing park, although we welcome the park, and the problem of many old people who do not know their future because their community is being broken up. The GLC should turn its attention to dealing with problems of deployment of teachers out of some of the ILEA schools, which means that some of the courses and curricula that some of those schools have offered to youngsters will no longer be available in years to come.
I ask the GLC, as it prepares its budget for the future, to spend the enormous amount of money needed, not on the matters that give it a bad press and do nothing for Londoners, but on trying to assist businesses and people in the City to make London the thriving capital it should be. I hope that by the time this matter comes to be debated next year the GLC will have learnt its lesson. I hope too that the Government will have responded by giving all inner London designated urban area status and that the EC will have given London the grants to supplement the money it needs from the GLC. The GLC has rightly brought this Bill to the House and, rightly, it has been debated.
9.19 pm
Mr. Ron Leighton: I wish to earn a reputation for brevity, and I hope that I shall do so tonight. I have no objection to the exercise by the hon. Member for Woolwich (Mr. Cartwright) in blocking, at least temporarily, the passage of the Bill. That is a legitimate or at least a time-honoured device in the House to enable London issues to be discussed. The effect has been to allow some excellent speeches to be made by some of my hon. Friends.
The hon. Member for Ealing, North (Mr. Greenway), who is not in the Chamber, urged the Minister to abolish

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the GLC even quicker than the Government wish. I wonder whether that is the unanimous view of his colleagues at the GLC. Many leaks took place during the general election campaign. I do not know whether the document that I have constitutes a leak, but it is addressed to all members of the Greater London council Conservative group. It is from Mr. Bernard Brook-Partridge who is a Tory member of the GLC, and written in red on the front are the words
"Can I have this back?"
I do not know where the document came from, but it came into my hands. It says:
"it is also clear that there are a number of us who will fight tooth and nail to prevent the present Government, or any other Government, replacing the democratically elected GLC with a quango or any other organisation which is not directly elected for the stated purpose."
Perhaps not everybody agrees with that opinion. The hon. Member for Twickenham (Mr. Jessel), who is also not in the Chamber, spoke of joint boards which were precisely what the Royal Commission, which was set up in the early 1960s by the Conservative Government, rejected, because it said that they would take away local democracy. The hon. Gentleman wishes to deny Londoners the right to sack or not to sack Ken Livingstone in 1985.
The hon. Member for Uxbridge (Mr. Shersby), who also appears to have left the Chamber, spoke much about mandates. The GLC had a mandate for "Fares Fair". However, the Law Lords took a different view and said that mandates were not necessarily binding and, therefore, the Government need have no qualms on that score should they have better thoughts in the future.
The hon. Member for Uxbridge and the Minister spoke about overspending. That concept is meaningless, as it is not based on any objective criteria. There should be objective criteria for rate support grant or grant-related expenditure, but what locally elected councillors wish to spend on local needs should be a matter between them and their electors. The Government are taking selective powers — both arbitrary and dictatorial — against a handful of authorities, such as the GLC, whose electorates had the impertinence to vote Labour and where those Labour majorities have had the temerity to implement the policies endorsed by the electorate.
The hon. Member for Southwark and Bermondsey (Mr. Hughes), who spoke so eloquently about the deprivation in the inner city areas, should bear in mind that that is why resources should be directed into the capital, as they were under the Labour Government. In the past three years the Conservative Government have taken away £1 billion from London. The hon. Member for Southwark and Bermondsey nods in agreement. His attack should be against the Government.
The Minister spoke about grants. In an excellent speech my hon. Friend the Member for Newham, North-West (Mr. Banks) referred to controversial grants. The truth is that some services are effectively provided by voluntary organisations rather than by statutory bodies. Grants work at the grass roots. It is an effective use of funding which stimulates a series of community initiatives. The constant reference to expenditure on gay and lesbian groups is absurd. In 1982–83 less than 1 per cent. of grants money was spent on those groups. That section of the population could complain that it has been under-represented.
Even the hon. Member for Southwark and Bermondsey could not resist making snide remarks. He spoke about the
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GLC and Northern Ireland. As far as I am aware, the GLC has made no statement or adopted any view on Northern Ireland. Individual members may have done so, but that is their right. I agree with the Minister and hope that the House gives the Bill a speedy passage.
9.25 pm
Mr. Jeremy Corbyn: I think back to what the hon. Member for Southwark and Bermondsey (Mr. Hughes) was saying in his protestations of support for the GLC. His remarks reminded me of the way that a rope supports a hanging man. His purpose was to start the insidious attack that will be waged on the GLC and ILEA in the coming months. It is part of a continuing newspaper build-up against them. I commend his extensive use of briefing notes, which bore a remarkable similarity to the briefing notes published by the GLC in its defence. The statistics that he read out were a wonder to behold and bore a striking similarity to the GLC's publications.
The arguments used against the GLC and ILEA are dishonest in many ways. Government Back Benchers, of whom only one remains in the Chamber, have on many occasions berated London's Labour authorities for their alleged profligacy, waste of public money and high level of rates, whether that involves the GLC precept, the ILEA precept or the borough councils' rate levy. They know that the reason why rates have gone up for the majority of people in inner London is entirely central Government's fault for taking rate support grant away. That has happened nowhere more than in inner London and in my constituency in particular.
The ILEA is the only education authority in the country that receives no public money from central Government for its schools programme. The only central Government funding is a paltry £32 million for higher education. I say "paltry" because we are talking of a budget of £800 million. When hon. Members criticise the ILEA's programme, activities and attempts to provide a decent service, they should remember that they forced the precept up to its present level and have said to inner London "We do not care about you." They have ignored the language difficulty experienced by many inner London kids. They have ignored the old school buildings and the disgraceful housing conditions in which many inner London kids live.
Government Members who represent comfortable outer London suburban constituencies should remember that their constituents receive subsidies on London Transport and British Rail commuter services. They receive Government subsidies on mortgages, and yet continually condemn inner London and the borough councils for their attempts to provide decent services.
The GLC is a valuable authority in many ways. If hon. Members are serious in their opposition to the Bill and to the GLC's existence, they must remember the debate that we held recently about the future of London. If they have their way and remove the GLC and therefore a unitary authority for the whole of London, London will be the only capital city in the world with no overall planning or administrative authority. We shall return to the free enterprise chaos that created the original London county council towards the end of the 19th century. Government Members are trying to take us back down that road.
Mention has been made of returning to Victorian values. I assume that that means a return to Victorian values for public services. Those values were emphatically

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rejected in the late 19th century when the London county council and the London school board—the forerunners of the GLC and ILEA—were formed.
The criticism mounted against the Bill and the GLC's capital programme seems to be couched in strange ways. Some hon. Members claim to be speaking out and voting against the GLC's Bill, but what they are doing is reciting a litany of criticism, most of which is ill-informed, half-baked and picked up out of The Sun and the Daily Mail about a small number of grants that the GLC has made in the past two years.
As my hon. Friend the Member for Newham, North-West (Mr. Banks) said, the GLC has given more than 600 grants to different organisations. I defend its right to do so. I would have thought that other hon. Members would also defend that right. The GLC is recognising that, in London, there are many people who do a great deal of valuable voluntary social work and voluntary community work, trying to bring communities together in the poorest parts of London. They try to bring together the oppressed and those institutionally discriminated against.
In the past, when local government handed out convenient long leases to private golf clubs, bowling clubs or Territorial Army clubs, not a squeak was heard against that. But when the GLC chooses to give grants to ethnic minority groups, women's groups and minority interest groups, a howl of protest is raised. During the next few months Conservative Members will find that as they try to stoke up a public campaign against the GLC there will be a massive public rejection of their values, methods and style of doing things. Many people in London have reason to be pleased with the GLC for its capital building programme, pleased with ILEA for its school building programme and, above all, pleased with the GLC for caring about the minority groups about which nobody could give a damn a few years ago. That is what will be at stake in the debate about London.
If the Bill is not passed, an important school building and school improvement programme will be seriously at risk. Schools in virtually every inner London constituency will be affected by the Bill. The papers provided by ILEA show that a number of schools in my constituency will be affected, including the George Orwell school in Tollington park. I visited it on Saturday afternoon when it held its annual summer fair. It was attended by hundreds of people, who had a good time. People told me with some glee about the building programme. They felt some trepidation about possible disruption at the school because of the programme, but pleasure at and recognition of, the amount of money that would be spent on the school. If I had told them that their school building programme was at risk because of the antics of a couple of SDP Members this evening, they would have been amazed. They would have been surprised to learn that we live in a country that elects a local authority to decide its capital building programme, publish it, prepare to put the work out to contract, and then finds that the work is subject to debate in the national Parliament.
If the GLC is opposed and the Bill rejected, not only will the House be trying to cock a snook at the electorate who elected the GLC in the first place; they will be turning back the clock on the democratic process in London. The London county council and the London school board were formed in the 19th century because the poor of London
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needed services, schools, sewerage systems, roads and, above all, some form of planning authority and overall local government control. Unfortunately, that democratic process has not extended far enough. We do not have proper democracy in the Health Service in London—something for which the GLC has consistently campaigned. We do not have proper democracy in the Metropolitan police. As has already been said, the only democratically elected person who controls the Metropolitan police represents Richmond — not Richmond, London, but Richmond, Yorkshire. That is the degree of control that Londoners have over their police force.
It is for the House to support the extension and improvement of democratic processes in London such as the Health Service and the police and, above all, to end that monstrous anachronism of local government in the City of London. The City of London should be the subject of debate in the House. We must end the nonsense of that individual city, that super-rich city with the poverty existing all round it, so that its wealth can be shared out to its surrounding boroughs that so desperately need it.
The hon. Member for Southwark and Bermondsey made a remark about enterprise zones. I can think of nothing more insulting to the people of London, and especially to the nearly 500,000 Londoners without a job, than the idea of creating free enterprise zones to bring in a Hong Kong-style economy that allows people to grab all the money they can, make as much profit as they can, disregard the planning controls for which many of us have fought throughout the years, throw the workers on the scrap heap and then disappear to some other tax haven in some other part of the world. That is the reality of enterprise zones. If the hon. Member for Southwark and Bermondsey supports them, perhaps he will tell the people of his constituency that he opposes planning controls and any form of normal democratic control over the ravages of private enterprise.
The hon. Member for Southwark and Bermondsey said that the GLC and ILEA are bigger than 18 sovereign states that are members of the United Nations, and that the GLC and ILEA should keep out of debates on peace, nuclear deterrence and all the matters that affect Londoners. Is he saying that democratically elected councillors in London have no right to speak about matters that affect Londoners, such as the dangers of building a Sizewell-type nuclear power station, the effects of a nuclear attack on London or the nonsense and hypocrisy that is preached on the Government Benches about our civil defence in a nuclear war? Is he saying that because the Government do not like the policies of those who have been elected to county hall, because they speak up for the poorest people in London, they will wish it away? It is just like the Queen of Hearts saying, "I do not agree with what is going on so I shall destroy it."
If that is to be the form of debate during the next few months about the future of the GLC and ILEA, I look forward to going round London, speaking at public meetings and organising opposition to the Government's attempts to destroy London's democratic processes, to destroy its local government and, above all, to impose quangos where there was democracy. I shall oppose the extension of the old boy network that already exists in the Health Service and in the police authority. I welcome those terms of debate because I know that, at the end of

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the day, the people of London will stand up for their right to have their own local government, which this Government are trying to take away from them.
9.37 pm
Mr. Chris Smith: I am tempted to say that I was unhappy that the numbers on the Conservative Benches swelled by 700 per cent. during the past 15 minutes, because when the Under-Secretary of State was the only Conservative representative present I was going to remark that his party had made up in quality what it lacked in quantity, and that if all Conservative Members were as wet as he is Britain would have far less to fear from the Government.
This should he a standard Bill agreed by the Government and by the GLC for capital expenditure. The fact that it is not is due to a manoeuvre by the SDP and the Liberal party, which wished to take a swipe at the GLC. They have revealed themselves in their true colours by joining the chorus of opposition to the GLC from the Tory Benches. The hon. Member for Southwark and Bermondsey (Mr. Hughes) mentioned the crisis in housing. The way to deal with the crisis in London is to demand the resources that London needs to deal with it, which the Government have denied it, and not to join the chorus of opposition to the GLC.
The hon. Member for Woolwich (Mr. Cartwright) discussed housing in some detail. He, as is often the case with SDP Members, has rushed in to claim credit for realising something that everyone else realised a long time ago. He said that he hoped that a good proportion of the £71 million mentioned in the Bill for the improvement of existing council estates would go to estates transferred to the boroughs. I could take him by the hand round Barnsbury estate, Bemerton estate, Caledonian road estate, Cumming estate, Percival street estate and St. Luke's estate in my constituency and show him leaking roofs, dampness, condensation and graffiti. I could show the legacy of neglect from the 1977–81 period of Tory control of the GLC when there was no management or maintenance of those estates. I could show him the estates' desperate need for capital expenditure to provide the necessary repairs and improvements.
The hon. Member for Woolwich ought to be saying not that he hopes that a good proportion of this £71 million will be spent on the transferred estates but that that figure is nowhere near enough to deal with the problems faced by those estates. We are dealing with a housing authority—it still is one because it has responsibility for the expenditure of that money—which met its target under last year's housing investment programme allocation and performed well in spending capital wisely to upgrade its estates. What is its reward for that? It had to cut back on its programme for the current year because the Government would not allow it a sufficient allocation under their housing investment programme to carry out the work that was needed and which all the boroughs—Tory and Labour controlled alike—were demanding for the estates in their areas.
We ought to be sending a strong message to central Government to improve the allocations under the housing investment programme to the Greater London council. It is not enough that £112 million is allocated in the Bill. The Government ought not to be arguing that the GLC is doing things of which they do not approve. They are taking a swipe at the GLC. I remind them, as many of my hon.
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Friends have done, that the GLC is a democratically-elected authority. London electors have every right to remove the GLC at the next Greater London council election. That is the prerogative of the electorate. If the GLC is removed and if it is changed into joint boards with representatives of the boroughs meeting together on an ad hoc basis, the right of Londoners as a whole to decide the balance of rates and services for London will have been removed.
The closest equivalent body to the GLC is the Thames water authority which is not accountable to the people of London. Try telling the residents of St. Peter's ward in my constituency, whose basements were flooded out last Thursday in the great thunderstorm because of inadequate sewers, that the Thames water authority is accountable to them, must pay compensation and must speed the necessary programme of sewerage replacement. They have no access to the Thames water authority except, perhaps, through me or through the much-maligned borough council. The Thames water authority is not directly accountable to the electors of that area. I, for one, would hate to see the remainder of London government handled in the same way. That is the way that we are heading with the Government's proposal for the control of London, its services and rates. In demanding the debate the SDP and the Liberal party have moved to back up the Government's attack on London, not to alleviate, as they should, the desperate needs of our capital city.
Mr. Dobson rose——
Mr. Deputy Speaker: Order. I remind the hon. Member that he should seek leave of the House to address the House again.
9.44 pm
Mr. Dobson: With the leave of the House, I shall attempt to reply to the detailed points made during the debate.
Having introduced the Bill, which I have been privileged to sponsor, I sat eagerly awaiting the sensible points to which I might have to reply from the hon. Member for Ealing, North (Mr. Greenway), who was the first hon. Member from the Conservative Benches to speak. I was poised in vain, because he said nothing at great length. I need to say no more about his contribution.
The hon. Member for Woolwich (Mr. Cartwright) used the debate in the way that all of us have used London debates from time to time — to raise a number of specific points directly affecting his constituents. He mentioned particularly the problems arising in his constituency and elsewhere where living in flats which formerly belonged to the GLC, and which have nom, been transferred to the boroughs, are in need of repair and attention and the fact that the benighted inhabitants of many of those flats are at a loss to know who is responsible for their repairs and maintenance.
At the risk of sounding like a latter-day Harold Wilson, may I say that if someone cares to check back to when we debated the order transferring the GLC estates compulsorily to the London boroughs, he will find that I made the point that one of the biggest problems that would arise would be that people living in the estates would not know who was or was not responsible for failing to carry out necessary repairs. It was inevitable that that problem would arise, and I regret that it has arisen on the Morris

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Walk estate to which the hon. Gentleman referred. I shall take pains to ensure that it is drawn to the attention of the GLC and the London borough of Greenwich, in an effort to thrash out a solution.
The hon. Gentleman asked how many jobs had been created and saved by the GLEB. When it was established, the target set by the GLC was that it would create 10,000 jobs per annum by the fourth year that it was in operation. There is no reason to believe that it will not reach that target. It is in the nature of capital expenditure that returns in terms of jobs created are limited initially and grow over a period. I undertake to ensure that the hon. Gentleman receives a written answer to his specific inquiry.
I shall not refer to the two specific grants that he mentioned, because they are matters of opinion. He does not like them. We believe that they are OK. There is nothing more to say about them.
The hon. Gentleman raised the issue of the A206 Beresford street road scheme in Woolwich. The GLC has just approved the work necessary to start that road scheme going out to tender. He wishes it to go ahead as quickly as possible and that should be good news for him. It is expected that £700,000 will be spent on the work this year and that it should be completed in 1985–86.
The only problem is that there are 2.7 acres of royal arsenal Ministry of Defence property which need to be purchased for the scheme. It is not subject to compulsory purchase, but it is hoped that the Ministry of Defence will get itself sorted out and allow this land to be used for the road scheme, which is welcomed by everyone in the area.
The hon. Member for Twickenham (Mr. Jessel) went on, as Tory Members are wont to do, about rate levels in London and the problems that arise. I shall not list all the Tory Members who go on about them, but there are one or two points which they never seem to mention. One is that the level of commercial rents in London has risen at about the same scale and pace as domestic rates in Greater London for that period. Owners of property have to pay rents, but it should be remembered by those who bleat about the problem of businesses in London that unless the businesses have bad accountants they pay only half the amount, because they set off the rest against other forms of tax liability.
The other point that must be made is that under this Government London has suffered a substantial reduction in the amount of rate support grant. If one studies the plainest figure possible one sees that in 1979–80 local authorities in London received £695 million in rate support grant, whereas this year, in real terms, they will receive only £407 million, a reduction of 40 per cent. Such reductions have applied throughout the whole period of this Government, and that is one of the main reasons why rates have risen.
My hon. Friend the Member for Leyton (Mr. Cohen) prayed in aid Benjamin Disraeli, the most distinguished politician to have been born in my constituency. I remind my hon. Friend that one of the most famous things Disraeli said was that the Tory party was "an organised hypocrisy".
The hon. Member for Uxbridge (Mr. Shersby) went on at great length about rate levels in London and the burden that they imposed upon London ratepayers and businesses. He asserted that the abolition of the GLC would save enormous sums of money. I have found out that the present Secretary of State for Education and Science, when
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introducing the Bill that brought about the establishment of the GLC and the Inner London education authority, asserted that they would save money. When he was reorganising the Health Service, he asserted that that would save money. He will no doubt assert now that changing the arrangements for the Inner London education authority will save money.
In the same way, a number of Conservative Members have asserted that the privatisation policy of Birmingham city council has already saved money, despite the fact that what the council has done has been to make arrangements for forthcoming years. Conservatives are very strong on assertion about privatisation and the reorganisation of local government structures but not so strong on delivery, as people will gradually find out.
A number of my hon. Friends have referred at considerable length to the problems confronting London, faced with a Government who are determined to transform London's local government. I do not care a jot about forms of government. I and my hon. Friends are concerned about the services provided by those forms. We are concerned about the services provided by local government in London for those who are worst off. We are concerned about those services which make London a place in which people can work, enjoy themselves, have decent housing and be sure that their children will have good education opportunities. We are not wedded for ever and a day to any form of local government. We are, however, wedded to the concept that most services are best provided by locally elected bodies consisting of directly elected local representatives.
The hon. Member for Gillingham (Mr. Couchman) appears to be disagreeing with me. I do not know whether he represents a greater London constituency. If he does not he should remember that under the present Government the bulk of services in those areas will always be controlled by directly elected representatives. If he represents a greater London constituency, let him consider whether there is anything wrong with the people of inner London. Are they incapable of coming to a sane decision in directly electing the people who will form their education authority? Do they lack the capacity that the people of Hampshire, Dorset or Richmond possess? Are they incapable of judging whether the present authority and the present arrangements are good enough for their children? I think that they are capable of making that judgment.
On one occasion they made the wrong decision, when they voted out the Labour-controlled Inner London education authority—[Interruption.] It was a regrettable decision, but, being a democratic party, we happily accepted it and did not suggest that simply because, for once, we had lost control of that authority we would set aside the whole democratic procedure and install either appointed boards, or indirectly elected bodies, as the Government propose.
One of our citizens' biggest problems is to find out who is responsible for providing, or failing to provide, the services on which they, their families and neighbours depend. The best way of resolving that problem is to give them the opportunity directly to elect such people. If they do not like them, they can directly elect someone else.
If the proposed changes are made, Conservative Members should consider the problems that will arise for those who are not particularly well informed about the structures of government and for those in inner London who think that there is something wrong with their

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children's schooling. They will not know who to go to. There will no longer be directly elected members of the Inner London education authority to turn to. If the Government's proposals are accepted, nominations will be made by the borough council out of 60 or 70 members. Most of their names will remain quite unknown to local people. They will be nominated to that body by the local council. There is no merit in such indirect appointments.They will only confuse the issue for ordinary people.
It is ironic that a unitary education authority for what is now inner London was one of the first public bodies for which most people had the right to vote. Indeed, women also had a right to sit on it. Since 1870 the ordinary people and parents of inner London have had the right to elect and subsequently "dis-elect" their education authority. They have directly exercised that right while bearing in mind the interests—as they perceived them—of their children. They may not always have reached wise decisions, but at least they had the opportunity to make them.
The Government propose to do away with that right. That will not benefit anyone. In the short term it may benefit the Conservative party, but in the long term the links of responsibility between the ordinary people, their representatives and those in authority will be weakened and damaged, together with the service that the education authority provides. I hope that hon. Members will think about that and that those who represent constituencies outside London will consider whether they would like it if the members of their education authorities were no longer directly elected by them, their friends and neighbours. I believe that they would thank that wrong.
The people of inner London think that this is wrong, and the Labour party thinks that that is wrong, and we hope to convince the people of London so well that we shall be able to resist that threat to ILEA. Despite all its shortcomings—and God knows it has a lot of them—and all the things that need to be done to improve the standard of the education service in London, the people of London treasure ILEA, just as they previously treasured the London county council and the London board of education—[Interruption.] Conservative Members may laugh, but they will eventually laugh on the other side of their faces.
Question put and agreed to.
Bill accordingly read a Second time and committed.

BUSINESS OF THE HOUSE
Ordered,
That, at this day's sitting, the International Monetary Arrangements Bill and the Companies (Beneficial Interests) Bill may be proceeded with, though opposed, until any hour.—[Mr. Major.]/

INTERNATIONAL MONETARY ARRANGEMENTS [MONEY]
Queen's Recommendation having been signified—
Resolved,
That, for the purposes of any Act of the present Session to substitute a new limit for the limit on lending to the International Monetary Fund imposed by section 2(1) of the International Monetary Fund Act 1979 and to provide for the Bank of England to be indemnified in respect of certain financial assistance, it is expedient to authorise any increase attributable to the Act of the present Session in the sums charged on the Consolidated Fund or payable into or out of that Fund or the National Loans Fund. —[Mr. Major.]

International Monetary Arrangements Bill
Considered in Committee.
[Mr. PAUL DEAN in the Chair]

International Monetary Arrangements Bill
  Clause 1

    LOANS TO IMF
    Question proposed, That the clause stand part of the Bill.
    10.1 pm
    Mr. Robert Hughes: On a point of order, Mr. Dean. Before I address the House on clause 1, may I point out that I submitted a manuscript amendment today. I wonder whether you received it and what consideration you have given it.
    The Second Deputy Chairman of Ways and Means (Mr. Paul Dean): I am grateful to the hon. Gentleman for giving me notice of that, and I have to inform him that the Chair has not selected his manuscript amendment. Does the hon. Gentleman wish to speak to clause stand part?
    Mr. Hughes: Yes.
    The Bill increases by some considerable amount the moneys that are to be available to the IMF. There is no doubt that, in increasing that money, we are increasing the trust of this House and the country in the IMF and in the way that the Government discharge that trust on our behalf. The manner in which that trust is discharged is a matter of legitimate concern and one on which we are entitled to ask the Government how they intend to deal with different applications that come before the IMF.
    In particular, I want to refer to the decision taken by the IMF on 3 November 1982 to lend to the Government of the Republic of South Africa an amount equivalent to $1·1 billion. That is a considerable amount of money. The way in which that money was granted reflects badly, in my opinion, on the IMF, and in a sense brings into sharp relief the dilemma that Governments often face in trying to match the responsibilities under different arms of government and the different ways in which they operate as Governments.
    When the Commonwealth Prime Ministers last met, the British Government of the day—they were, in fact, a Conservative Government — committed themselves to the solemn duty of
    "vigorously combatting the evil of apartheid by the adoption of effective measures against it and to assist those struggling to rid themselves of it."
    That responsibility cannot simply be picked up and cast aside as the Government think fit. It is not something to which the Government can give a solemn commitment which they can then disregard as and when it suits them. This is especially so, as the United Nations General Assembly, during the 1982–83 annual session, voted to condemn the IMF loan to South Africa, and urged the IMF directors
    "to reverse the decision and to refrain from providing any support to the South African government as long as it maintains its apartheid policies."
    Those are two important issues to which I believe the British Government should address themselves, because

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    there is no doubt that the British representatives on the IMF ply a vigorous role in its workings and their policy decisions are ones that carry grave importance.
    During the last Parliament, I was engaged in correspondence with the former Chancellor of the Exchequer about this matter. It is fair to say that the former Chancellor and the IMF board of executive directors sought to justify the loans to South Africa on the grounds that the South African Government had met the conditionality requirements on which such loans are normally granted, and that, being an IMF member, South Africa was legally justified in securing financial support to deal with its balance of payments problems. I do not accept that the IMF should operate in such a simple mechanistic way as is suggested by IMF dealings on that loan.
    It has been put to me—these are matters that must be answered—that the IMF team went to investigate the South African economy secretly, that the majority of IMF executive directors were not advised of the visit or told straight away of the South African application for a loan, and that the initial negotiations were confined to the major western countries, of which Britain is one. In other words, it is alleged that a clandestine deal was arranged with the South African Government and certain members of the IMF executive board in an attempt to rush through the decision before the application and its size became known.
    It is alleged that the IMF executive team did not conduct an independent investigation into the South African economy but simply accepted the South African Government's policies as being adequate for IMF purposes. In that respect the IMF team did not seek to inform itself properly whether the alleged economic problems of South Africa arose from either the disproportionate share of military spending by the Government or the structural obstacles of South Africa's economic development which flow from the country's apartheid policies. Nor did it seek to inform itself whether the South African Government were pursuing a policy which would deprive the African majority of the right to acquire skills and enter into skilled occupations.
    Contrary to what the former Chancellor of the Exchequer said in his letter to me, I do not believe that the normal procedures were followed. It is the normal procedure that if an executive director of the IMF calls for a postponement of the discussion of an application for a loan, it is postponed. In this case the request that the application should be postponed for further discussion was refused, despite the fact that nine of the directors—a majority, although certainly not a majority in terms of votes — wanted such a postponement. It is clear that exceptional treatment was given to South Africa because the loan arrangement was heavily biased in South Africa's favour in that it obtained 80 per cent. of the $1·1 billion before having to fulfil any conditions whatever.
    The application for postponement having been refused, several directors objected and some voted against the granting of the loan. The Governments of western Europe, Canada and the United States backed the loan and refused to permit a postponement. Despite the attempts to obtain a quick vote which were successful, some of the western representatives expressed misgivings about the loan to South Africa. For example, the Italian representative expressed strong reservations about the lack of
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    conditionality and about South Africa's structural rigidity which prevented an efficient functioning of the labour market.
    I have also expressed strong reservations. On Second Reading I asked the hon. Member for Hertford and Stortford (Mr. Wells) to give some examples of countries which had received a loan from the IMF and which had failed to meet the conditions imposed upon them, upon which action had been taken by the IMF. The hon. Gentleman said that the Government of Jamaica was one such example. It is interesting that despite an earlier loan from the IMF with certain conditions attached to it, South Africa has taken no account of the views of the IMF expressed in 1976. Indeed, it appears to be moving in the opposite direction. I shall quote from a draft document, EBM/82140, which is the draft minutes of the executive board members, dated 3 November 1982. On page 47, Mr. Jayawardena said that the staff had concluded that
    "the labour market constraints had been a serious bottleneck especially during the recent growth phase of the economy."
    That is the South African economy. He went on to say:
    "The same serious problem had been highlighted by the staff in its report in 1976 and considerable concern about the issue had been expressed by several Executive Directors during the discussions of the report. Now, six years later, the same issue had surfaced again. Despite the assurances by the authorities that remedial measures would be taken, there had clearly been no progress in dealing with the labour market constraints."
    Those labour market constraints were the failure of the South African Government to make sure that their non-white population had the opportunity to improve its skills——
    Mrs. Elaine Kellett-Bowman: The hon. Gentleman mentioned Jamaica. Is he suggesting that there should be no help to Jamaica? It is facing considerable problems, which it has tried hard to overcome. Is he suggesting that there should be no loans to Jamaica?
    Mr. Hughes: I regret that the hon. Lady was not in the House when we had that interesting discussion on Second Reading. The issue is not whether Jamaica should be helped. We are not discussing Jamaica. We are discussing loans to South Africa.
    Mrs. Kellett-Bowman: The hon. Gentleman mentioned Jamaica.
    Mr. Hughes: I mentioned Jamaica. I shall make my point again as the hon. Lady has clearly not followed the argument. Jamaica was one of the examples that was given of the way in which the IMF operated in imposing conditions and acting vigorously if it felt that the conditions that applied to a loan had not been fulfilled. The IMF had not been satisfied with the way in which the Jamaican Government were responding and put severe pressure on that Government to change their policies and carry out the conditions of the IMF loan.
    Mrs. Kellett-Bowman: There has been a change of Government in Jamaica since then.
    Mr. Hughes: I am making a contrast. Jamaica is a poor country in the Caribbean and it gets one sort of treatment. However, a comparatively rich country, South Africa, is allowed to do anything that it likes and the IMF rushes things through and gives it exceptional treatment.
    The Economic Secretary to the Treasury (Mr. John Moore): I think that the hon. Gentleman would like all those who were not present on Second Reading to be

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    reminded of the specific point about Jamaica because it is important. For Jamaica there was none of the political conditionality for South Africa, which was mentioned in our debate. The specifics, whichever Governments were involved, related to technical matters concerning the economic conditions and the technical financial relationships to the loan. They were not political matters, to which the hon. Gentleman is obviously referring.
    Mr. Hughes: I am coming to almost exactly that point. I am not discussing a political objective. I was in the middle of reading a quotation when the hon. Lady intervened. That was a response to the South African Government in 1976. The IMF said to that Government in 1976 that one of the problems facing the South African economy was the constraints on the labour market and on the availability of skills and, eventually, on the growth of the economy through expanding incomes and so on. That economic argument was being put forward in 1976. One of the things that was identified by the IMF in 1976 was the technical point about the economy. The contrast that I was trying to draw between Jamaica and South Africa was that the conditions were applied to Jamaica, but because of political considerations they were not applied to South Africa.
    10.15 pm
    In draft document EBM/82141 on structural problems the IMF director said that, in 1977, the South African Government had sought to respond to the IMF's discussions by appointing two commissions to investigate various aspects of the labour market. He said:
    "The heart of the matter however had beer addressed by the second commission which had dealt with the questions of geographical mobility of labour and the desired location of new employment opportunities. In that connection a number of recommendations had been considered. For instance, it had been suggested that the 72-hour limit on the presence of black workers without prior permission in urban areas be eliminated. The recommendation had been accepted in principle but had apparently not been implemented."
    Certain directors of the IMF have pushed this loan through quickly with apparently exceptional conditions and have resisted the attempts of executive board members to discuss the issue with their Governments and so forth. This was driven through despite the fact that there was clear evidence that South Africa had no intention of taking notice of IMF conditions.
    Nor should we accept that the .South African Government take any account of IMF conditions. The South African Government are determined, whatever anyone else may do or say, not to be influenced from outside. They are determined to continue with their apartheid policies although they may from time to time genuflect in the direction of western public opinion by saying that they will do something about: the apartheid system. But that is purely for external consumption because they have no intention to make real changes. Indeed, it is suggested that, far from moving towards a more liberal system of dealing with their African population, they will go even further with present policies. There is about to be enacted, if it has not already been enacted, an Orderly Movement and Settlement of Black Persons Bill which would further limit the residential and employment rights of the black population, impose strict curfews and other restrictions on the movement of black labour.
    We have a responsibility in this matter. The Government cannot deal with issues by saying solemnly
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    that they will take action against the apartheid regime and then do the opposite by bolstering it up, by giving it loans and grants when it is clear that it will not change its policies. We know that many thousands of Africans have been forcibly moved around the country simply because they do not apparently live in the right part of the country according to the language they speak. The shocking system of apartheid must be seen to be believed. We should fight it with all the force at our command.
    My next point illustrates the difference between our system of government and the American system of government. Several members of the United States House of Representatives are trying to propose an amendment to the Federal Government's Bill to increase the quota and to do something about the way in which the American Government will deal with South Africa in the IMF. The United States house banking committee has proposed as an amendment, that:
    "The Secretary of the Treasury shall instruct the United States executive director of the IMF to oppose actively and to vote against any credit drawings by any country which practices apartheid."
    I do not know what the fate of that amendment will be. I have strong hopes that it will be endorsed by the House of Representatives and the Senate. We cannot impose such restrictions or amendments on the way in which our Chancellor operates so we must try to get assurances from him about the way in which he will deal with the business.
    On Second Reading, we had an interesting discussion of whether the conditionalities of the IMF should he politicised. I do not want to use the cumbersome phrase "politicising conditionalities". The issue is clear. Does the IMF operate on political or on purely economic grounds? The two cannot be separated. There are many issues on which there is no such thing as straightforward economics which can be divorced from political principles. The two are intertwined—[Interruption.] I do not know why the hon. Member for Hertford and Stortford finds that so funny, as the Prime Minister does not divorce economics from politics, nor does she try to.
    Mr. Bowen Wells: It is my experience that no economics are straightforward. The issues that the hon. Gentleman was dealing with on purely economic grounds must be related to political circumstances. There is no doubt about that. I hope that he agrees that these issues must be seen against an economic, financial, political and social background. Perhaps he would like to confirm the great difficulty of defining when IMF loans should and should not be given when they are related to an array of problems such as human rights, of which apartheid is one. How do we do that while keeping the world economic system going and expanding?
    Mr. Hughes: The hon. Gentleman and I form a curious alliance as we agree that it is not possible to have simple economics that are divorced from politics. The Government are trying to make such a separation. In correspondence with me, the former Chancellor said that:
    "to treat South Africa's request on a basis other than its technical merits would undermine the principle of the Fund that all members are treated in a uniform way and would damage the confidence that members could put in the Fund at a time when more than ever the international monetary system requires impartial expertise and objectivity."
    I simply do not believe that it is possible to separate such decisions so that they are based purely on economics. It does not work like that. Giving loans to South Africa is

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    a political decision. Whatever the United States Administration, the United Nations or the British Government might say, only one thing matters — commercial profit. Nothing else matters, otherwise this IMF loan would not have been given without any real effort to apply conditions. It is not true to say that conditions are not applied. We all know that they are. We all know that severe conditions were attached to a loan sought by Tanzania and that they were applied when my right hon. Friends went to the IMF in 1976. No one has yet explained fully why such favourable treatment is given to South Africa, especially when everyone is apparently against the apartheid system.
    That is not the end of the story, because the South African Government, even under the terms of its 1982 application, will have to come back in future years to the IMF to seek further loans to bail them out of their economic difficulties. It is becoming clear to me and to almost everyone else that the South African economy cannot sustain itself on the basis of a purely apartheid system, nor can it sustain itself unless it gets help and assistance from outside. If we are to take seriously our responsibilities to all the peole of South Africa, we must begin to take some action instead of paying lip service in opposition to apartheid.
    Before and since I came to the House in 1970, I argued that the Government should take strong action against the unilateral declaration of independence of Ian Smith. I said that if they did so, they would save many lives and bring to Zimbabwe a happier and more confident future than might otherwise be the case. Over the years successive Governments have failed to act with sufficient vigour. I know that lip service was paid to economic sanctions, and we know how many lives were lost as a result.
    If the Government argue that they want to avoid loss of life in South Africa, if they argue that they want to have an influence on the development of South Africa and if, they argue that the best way of achieving a non-racial democratic South Africa is by peaceful means and evolution, I would agree. But the only way to achieve that is for western Governments to do something about it and to act as a catalyst to assist in the process.
    So long as we have double standards and say, "Yes, we are against apartheid but we shall do nothing about it. The only thing that matters more to us is the commercial profit that our companies and banks can make, whether through the IMF or anywhere else", we hasten the day——
    Sir Nicholas Bonsor indicated dissent——
    Mr. Hughes: It is all very well the hon. Gentleman shaking his head, but I have seen heads shaken before and I have been proved right.
    Sir Nicholas Bonsor: In this instance, I would be interested to see how the hon. Gentleman has been proved right. In what other African, black-controlled country that he can name are minority tribes represented in a democratic house of representatives?
    10.30 pm
    Mr. Hughes: I am not interested in a tribal society. The interesting thing is that by that short intervention the hon. Gentleman has shown the fallacy on which policy towards
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    South Africa and Africa has been based for generations—an excessive belief in tribalism as an instrument of policy. From that stems the difficulties faced throughout Africa, not only in South Africa. The only minority tribe that governs and controls a country is the white tribe of the English and the Afrikaners. We want to avoid tribalism.
    We warned of the problems that would arise. We warned of the carnage and bloodshed in Rhodesia, and tonight we warn the Government of the consequences, unless they are prepared to take action. They cannot, as the Tory party did in the case of Ian Smith, put themselves on the side of those who prefer bloodshed to peaceful change and co-existence. Unless they put themselves on the latter side, the Government will be condemned out of hand. I ask the Minister to give us an assurance that when he is dealing with the IMF a more vigorous policy will be pursued through the IMF to try to see that South Africa meets its responsibilities, instead of allowing it to get away with what it has done for so many years.
    Mr. Dennis Skinner: I was not able to come to the Chamber for the Second Reading of the Bill, much as I wanted to, because I was playing my part in the national executive committee making policy in Committee Room 17. I had to stay until 7 o'clock because somebody wanted to reschedule Labour party policy. I can say with some authority that we have managed to ensure that those reschedulers have been kept at bay, including many of the leadership contenders.
    Mr. Tim Smith: Which ones?
    Mr. Skinner: I am not going into that — I am a careful fellow on these matters.
    I can tell my hon. Friend the Member for Aberdeen, North (Mr. Hughes) that the policy on South Africa has been re-affirmed in no uncertain terms, and there was no attempt to reschedule that policy.
    Clause 1 is the kernel of the Bill. The Labour party would not want to give the impression that we are against sums of money of this magnitude being sent to various rescheduling countries, in particular the developing countries. We are not arguing against sending money to areas such as Ethiopia, where on television, night after night, we have seen those little hungry kids running around on matchstick legs. We are talking about the massive increase in the amount of money going to developed countries, as distinct from those in the Third world. It is because of that that some of us have been anxious to have a debate on this for a long time, and it was that which prompted me to speak on the matter in July 1982, when it became apparent that the banking system was getting out of hand because of the amount of money going abroad.
    I see that the Liberals and the SDP have gone. I do not know what contribution has been made by them to this great issue, which is one of the big issues of our time—nobody could deny that, whichever view they take on this matter. Reams and reams of material has poured out of the Brandt report. If hon. Members scratch a Liberal or a Social Democrat, they will find a copy of the Brandt report underneath. Where are the Liberal and Social Democrat Members? They are missing because the decision is hard to make. When it comes to the crunch, they cannot find the answer. People who float about in the middle of politics do not have an answer. The bankers have an answer to the problem. I have no doubt that some

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    Conservative Members have an answer. I do not deny them the facts, the analyses and the reasoning behind their answer.
    However, the Liberals and the Social Democrats—the much-vaunted alliance — have gone running. I looked at them when the House was voting at 7 o'clock. I wondered what those people would do. They back every horse in the race. They are like a rocking horse—all motion and no progress. What will they do as they rock gently? I heard one Alliance Member whisper to another, "That's what you get for having a parliamentary party like our lot." I do not know whether the Member was a supporter of the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel), sympathetic to a man having two-and-a-half months off. What did they do? Some went into the Aye Lobby and voted for the amendment, some went into the No Lobby and voted against the amendment and some sat in the Chamber wondering where they had landed and then walked out. They were split three ways on an issue of such dimensions.
    Many or all Opposition Members would not hesitate to hand British taxpayers' money to those who are starving in the vast swathes of Africa and parts of the Caribbean.
    The present problem is even bigger. For the past 12 or 18 months, financial experts have been visiting South America, parts of Africa, Philippines, Taiwan, South Korea—some of the great consumer-oriented countries that have been producing goods, thereby putting British workers on the dole. We were told that they were the acme of capitalist production. What happened? Three of those countries are in the top 10 or 12 who are rescheduling their debts because they cannot cope with the current crisis that they face.
    The financial experts, including Witteveen, who was dragged out to Brazil from retirement or whatever he was doing, have been employed to solve the They are running around pushing their fingers into the financial dykes trying to prevent the clams from overflowing. Whatever the Minister may say about the Bill, it will not resolve the crisis because the position gets more difficult as each day passes.
    When I spoke about this subject in July 1982, I was told that Britain was OK. When the House was preparing for the summer recess, I was told by some of the pundits on the Conservative Benches that the problem was solved. They said that there had been a crisis but we should leave it to Lord Richardson, Larosière and others with foreign-sounding names as they would be able to resolve it. Hon. Members had not left the House for five minutes when the banks wrote to the Chancellor saying, "For God's sake, stop the freeze on the Argentine assets because we are up to our neck in trouble, and if the freeze is not lifted, we will be unable to get out of the mess." The Prime Minister was faced with the problem, which I acknowledge, between August and December. With the so-called "conviction politician" aura around her, she could not afford to say in the House that she would allow Argentina, with British connivance to get money from Britain by way of bridging, medium-term and IMF loans, while, at the same time, Argentina refused to cease hostilities. On 20 December 1982 the Prime Minister had to give in and bite the bullet. What is happening? They are using that money without any conditions—that was one of the reasons why the Opposition voted against the Second Reading—to buy Exocets, German frigates and all the rest.
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    What a catastrophe it is. Lads fought for their lives at Bluff cove and some died on the beaches. Yet the Government are handing over hundreds of millions of pounds to Argentina so that it can buy more weapons. We are spending £600 million or so on a new airport, but that will be bombed by the new-fangled missiles and I suppose that we shall have to rebuild it.
    I do not believe that the Tories can justify their policy. Some of us took a different view of the Falklands war, but I do not see how any decent Tory can espouse the idea of Fortress Falklands while shovelling out hundreds of millions of pounds to the Argentines so that they can bomb the islands and the airport again.
    Sir Nicholas Bonsor: No one suggests giving Argentina money so that it can bomb the islands again. The hon. Gentleman knows that, and he also knows that the Government are determined to fortify the islands so that that cannot happen.
    After the second world war, the western allies had to spend a great deal of money to ensure that Germany did not bring down the rest of Europe because of its economic weakness. Does not the hon. Gentleman agree that it is important for South America and Europe that Argentina does not present a similar risk?
    Mr. Skinner: But there is a significant difference. I was only a bit of a kid at the end of the war, but I get the impression that when we made reparations in Germany and Japan those countries were not refusing to say that they had ceased hostilities. The Argentines are saying forthrightly, "When we get hold of your money, we will use it to bomb your people in the Falklands." I do not believe that the Prime Minister or any other Tory can justify such double standards. That is why we feel so strongly about the matter.
    What worked me up was the fact that in January this year I picked up The Guardian—I believe that The Times and The Daily Telegraph carried similar pieces—and read that the banks would be allowed tax relief on all the bad debts with Argentina. Brazil and the rest. The top four clearing banks, which made £6,000 million in the four years of the previous Conservative Government, and the hundreds of minor banks that have lent money to Argentina and Brazil through the Bank for International Settlements will not have to foot the bill for the bad debts. They will get the money back from the ordinary taxpayer.
    The rich taxpayers will not have to pay. We know that, because we had a debate last week in which it was made clear that £400 million is to be handed over to the richest 3 per cent. of the population. The bill for the bad debts in the 25 rescheduling countries will be met by the widows who pay tax on their £45 a week—the people who the Tories always talk about at election time.
    I have all the figures and I have a letter from the Inland Revenue. I was careful not to believe The Guardian on spec. I thought that I ought to follow it up by asking the Government what they thought about the proposal, so I asked some parliamentary questions. Not content with that, because the Government used some sleight of hand in their answers, I wrote to the Inland Revenue, who sent me the documents and told me that tax relief would be allowed on all the rescheduling. There were two or three pages of details.
    I received an answer from the Economic Secretary to the Treasury last week. He did not say that there would be no tax relief. He said:

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    "It is not possible to make an estimate of tax relief in relation to the second part of the question."—[Official Report, 7 July 1983; Vol. 45, c. 172.]
    The Economic Secretary used to be in charge of running down the Coal Board. Today he is bailing out the banks.
    10.45 pm
    It is a travesty. A total of £6,000 million in profits has been made in four years and all the bills for the bad debts will be paid for by the ordinary taxpayer. Every time that we ask about the international banking crisis we are told, "It is improving you know." Bankers are bound to say that because they live on confidence. They do not have much money of their own, apart from massive profits. The real money is borrowed and sent via a posting box to someone else. Bankers cannot afford to have confidence in them smashed.
    During the secondary banking crisis in 1972–73 I remember a fellow who used to sit near where I am—he is not even in Parliament now because he got mixed up with someone else, Somerset way. His bank, London and Counties, went down because confidence went. Once that went, many banks in the secondary banking system went down like dominoes, including the one that the Chairman of the 1922 Committee used to look at carefully —Keyser Ullman. I do not know whether that was an issue when he was run close for the chairmanship, but I have no doubt that one or two people remember that.
    The point that I am trying to illustrate is that confidence cannot be held once it starts to fall. When we recall that fellow who was found hanging under Blackfriars bridge, we do not have to go far away from Signor Calvi and some of the things that have been discussed in this debate because the crisis in the system is becoming worse all the time.
    I have figures from the beginning of January, not for today. The position is worse today than it was then. They show that $728 billion is owed by countries up to their necks in debt in one form or another. Let us compare that with the reserves of the major western industrial countries. They have only 5580 billion between them in reserves. The 500 top banks in the world have only another $250 billion. About $728 billion is floating about and it compares almost exactly with the amount owing.
    We are not talking abut the corner shopkeeper with a few bad debtors. He will manage if only three out of 500 are bad payers. He will get by. We are considering organisations with more bad payers than good customers. That is what is happening in the real world. That is why we should be worried about what is happening in the international banking scene.
    When my hon. Friends met Dr. Witteveen and the rest in 1976 and said, "Let's tear up the rest of the Labour party manifesto"—roughly what they did—they did not have a mandate from the people. In Brazil that is not happening any more. Brazil is in the process of forming a debtors' club. Mexico and Brazil—the two top debtors—met not so long ago. Now they are forming a cartel. Several Latin American countries are getting together and saying "We'll pay back our debts, or not at all, on the basis of what we say. We will put our terms to the IMF. We owe that much money that we can call the tune." They are bound to call the tune since Brazil has a 120 per cent. inflation rate, riots in the streets. There is also the possibility—I put it no higher — of Governments being elected in Latin
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    American countries such as Brazil, Venezuela, Chile or Argentina with a mandate not to pay. Nearly all the parties there which go to the starving people experiencing massive inflation will get a mandate not to pay.
    It reminds me of the tally man coming round the streets where I used to live—I suppose that he still does—when we would knock on the doors to tell the neighbours that the man was coming to collect their debts for a few paltry clothes and a bit of furniture, and to tip them off not to pay. Little did I realise, when I told the man that my man and dad were not in and could not pay this week, that in a small way I was saying that they were rescheduling their debts for a week. The morality of the working class was that they wanted to pay the following week, or at the end of the year, but in the casino economy where bankers thrive, the morality is different. They do not say, "My man and dad cannot pay this week". Now we have reached the point where Brazil and several other countries are telling the bankers in no uncertain terms, "We are playing your game. We will pay you back when it suits us".
    Set against that background, there is no doubt that the crisis is upon us, and it cannot be solved by being tinkered with. The casino economy proliferates in Britain as well as abroad, because it is still easier to lend money at 12 per cent. interest. One need only look at the City columns in the Sunday Telegraph or other newspapers to find massive advertisements telling British people to invest their money in America, Japan or elsewhere. Just before the general election, Aitken Hume was asking British people to invest £500 or £1,000 in an American technology fund, saying that there was a crisis in Britain and that one would get a better return on money invested in America. That is called waving the British flag.
    We shall be told later tonight, when my hon. Friends speak in the debate on the Coal Industry (Borrowing Powers) Order, that the real crisis in Britain is due to the miners trying to get a substantial wage increase. We shall be told that the economy is in a mess because we have too many pits, and that some of them should be shut. But the real crisis is not in the pits, on the railways or in the areas of the industrial economy that have been savaged by the Government and run down to a great extent. The real crisis is in the international and domestic banking scene. It will continue for as long as it is possible to make money out of money, investing at high interest rates, and not having the capacity to invest in industry at rates of 3 per cent. or 4 per cent.
    Set against that, the American dollar can no longer do what it did in the 1950s and 1960s. Anyone who believes that the United States can bail us out of trouble should forget it. In the 1950s and 1960s it was possible for America, with its mighty dollar, to go round and cover up and pass a few million dollars here and there to keep the natives quiet. But we have gone well beyond that. Now the problem is so large that even the dollar cannot compete. The Latin American countries alone owe $300 billion, and there is the spectre of riots as a result of the people in those countries going hungry and being out of work.
    This is not a crisis of our making. It has nothing to do with Socialism, and no Opposition Member need feel guilty about what has happened. The problem is that the enterpreneurs have been making money, but now they cannot pay their bills. So they call upon the taxpayer and anyone else they can find to bail them out. The system of

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    market forces and monetarism, as exemplified by the appeal in the House to get this Bill through, show only too well that they have now burnt themselves out. That is why I was happy that my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) agreed to put down an amendment based on the conditions — not because we are against sending money to the parts of the world that need it, but because we are beginning to see that the system that the Government support and operate cannot deliver the goods at the end of the road.
    Mr. D. N. Campbell-Savours: My hon. Friend the Member for Bolsover (Mr. Skinner) addressed a silenced and hushed House. It is significant that, apart from one occasion, Conservative Members did not intervene. They know that, in great measure, what he says is true. Increasingly, as the months and years go by, more and more journalists, economic commentators, people in the media, hon. Friends, Conservative Members and others in the country will recognise that the international economy moves steadily and relentlessly into crisis. What was once a small minority of people will surface as time passes to address themselves to the real problems and solutions that are necessary.
    We all recall my hon. Friend the Member for Bolsover intervening during the speech of my right hon. Friend the shadow Foreign Secretary a week and a half ago to ask the important question whether it was true that the taxpayer would be funding the losses of any United Kingdom banks. My right hon. Friend replied in the affirmative. It was an important contribution to our debates, because my right hon. Friend was clearly accepting, as does my hon. Friend, the measure of the crisis.
    Clause 1, which quadruples the limit from £350 million to 1,700 million SDRs in the Treasury's power to lend to the IMF, gives us the opportunity to debate these matters again as we did on Second Reading. The public seek assurances about the use of these moneys. Therefore, the debate on conditionality must be central to our deliberations. There is public anxiety about the irresponsible use of quota funds and those funds that have been and are to be contributed by member Governments because, as my hon. Friend the Member for Bolsover said, in its crudest and simplest terms it may be the pensioner who picks up the bill at the end of the day, because we are talking about priority in the allocation of Treasury resources.
    Too often we have, as quota contributors—I can only quote the words of Lord Lever—
    "lending that has financed wars, the purchase of ludicrous levels of armaments and economic megalomania of all kinds."
    If the debate today has done one thing, it has enabled many of us to concentrate our attention on the use of these funds.
    My hon. Friend the Member for Aberdeen, North (Mr. Hughes) addressed his comments to a problem in South Africa. Worst of all, we have underpinned Fascist regimes to which we are opposed. There seems to be a strict correlation between some of the largest borrowers and anti-democratic Governments. In further contributions tonight and further debates we should address ourselves to why the anti-democratic Governments are the largest borrowers. May it not be perceived as a reflection of the kind of political and economic systems that they manage?
    Commenting on the allocation of moneys to the antidemocratic borrowers identifies the double standards that exist. We do complain about sending food to the Soviet
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    Union or ships to Poland and the funding of those two commodities, but we do not complain about the supply of weapons to Latin America. However, in the minds of those who seek to be objective in these matters, they are equally squalid anti-democratic societies. When the media and Members of Parliament set out to criticise eastern Europe, they should also criticise the anti-democratic regimes which exist in other parts of the world and which are too often propped up by the resources of the central banks and the IMF.
    I submit that the IMF has the power to impose conditions but, for political reasons, lacks the will to do so. The clearest and nearest example to the hearts of the British people has been the notable case of Argentina and its attempts to use precious resources, which have been made available through the banking system, to fund its additional purchases of arms supplies. We all know that inevitably they will be used to shoot at our people in the south Atlantic.
    There has been a dearth of information about the real terms of the loans and IMF advances. On 9 February 1983 I asked the Prime Minister, in a written question, to publish the Argentine letter of intent. The following day the right hon. Lady replied that that letter of intent was confidential. However, there are some sources of information. One of them is an article written by a Mr. Jimmy Burns, which appeared, I believe, in The Times.
    Our man in Buenos Aires—if that is the right phrase—said that the letter of intent that he had been able to identify
    "lays out the broad outline of the military Government's economic programme for a 15-month period beginning in January 1983.
    It includes a forecast of 5 per cent. growth in gross domestic product in 1983 after slight contraction in the current year.…
    The letter is understood to have accepted the need for fiscal and monetary discipline while forecasting an inflation rate for the next year of 150 per cent. This compares with consumer price inflation of 175 per cent. in the 12 months to September this year …
    Yesterday's agreement in principle followed four weeks of complex negotiations which on a number of occasions had come close to collapse. Last-minute objections to the negotiations from sectors of the armed forces were thought to have delayed the departure of the IMF team's chief.
    Sr Jorge Welbe the Economy Minister, is presenting the deal as a compromise, with the IMF stepping back from tough conditions which might have been politically and socially unacceptable. But the economists view the growth and inflation targets as too optimistic if not incompatible in the present uncertain political atmosphere."
    That was a journalist's comment on the letter of intent which the Prime Minister refused to publish, despite the fact that Britain, and the Chancellor of the Exchequer as chairman of the IMF, were clearly involved.
    I asked the Prime Minister what conditions were imposed by the International Monetary Fund on its loans to Argentina in respect of public sector and external borrowing by that country. I received an answer that was simply based on undertakings given by the Argentine Government about growth rates. There was a promise to eliminate external payments arrears by June 1983. It is now July and perhaps the Economic Secretary will tell us whether that element of conditionality was complied with by the Argentine Government.
    The question for the House to ask is whether the IMF went far enough in the correcting measures that it was required to demand of the Argentine junta. I believe that it did not. The origins of conditionality which are at the heart of the debate and which have already been referred to put immeasurable powers in the hands of IMF negotiators in discussions with the Argentine Government.

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    Paragraph 4 of the selected decisions of the executive board, the background document on conditionality, says:
    "In helping members to devise adjustment programs, the Fund will pay due regard to the domestic social and political objectives, the economic priorities, and the circumstances of members, including the causes of their balance of payments problems."
    Political objectives and economic priorities are clearly defined there as areas where the IMF negotiators have responsibilities and the right to intervene.
    Much has been written on the fund's responsibilities on conditionality, but there are a number of excellent sources on conditionality which I want to bring to the attention of the House and which I believe the House should bear in mind in considering the Bill and this clause.
    Joseph Gold, who is a senior consultant to the IMF, and formerly general counsellor and director of the legal department of the fund, said in an article on conditionality:
    The program set forth in a member's letter of intent normally spells out certain aims in connection with the balance of payments, growth, and inflation, and includes a range of policies and intentions covering many aspects of the economy. The program is not dictated by the Fund, but the Fund has the duty to determine whether or not support of a program with its resources would be consistent with the Articles and with the policies of the Fund."
    I understand that to mean that the IMF negotiators have the right to establish whether certain purchases which would affect the balance of payments should be taken into account in any allocation of moneys by the IMF.
    Mr. Gold continued, on the subject of conditionality:
    "Specific prices of commodities or services, specific taxes, or other detailed measures to increase revenues or to reduce expenditures would not be considered macroeconomic variables".
    He says that because he maintains that macroeconomic variables are the only matters that are to be included in consideration by IMF negotiators.
    Mr. Gold went on to say:
    "The Fund may wish to know, however, what a member's intentions are on matters of this kind in order to have a view on whether there is a reasonable prospect that the member will be able to meet performance criteria"
    Therefore, there is the possibility of a detailed analysis of the public purchasing programmes of Governments such as the Argentine Government. I believe that questions should have been asked about what the Argentine Government intended to do with moneys that were likely to be made available to them over the period following negotiations. Mr. Gold's comments speak of reduced expenditure as an area for consideration, and that implies consideration of arms purchases by the Argentine Government.
    Another senior adviser and counsellor to the IMF, Mr. Manuel Guitian, the senior adviser in the exchange and trade relations department of the fund, in an article in Finance and Development in June 1981–1 believe that that is an IMF publication, but I stand to be corrected—had much to say about conditionality. He said:
    "It is also common to have a number of important policy understandings in the formulation of an adjustment program, which provide the basis on which the feasibility of the domestic financial policies is predicated. These understandings are rarely made performance criteria in programs supported by the Fund, but they can be critical for the attainment of financial balance and sustainable growth rates. They normally include: public sector policies on prices, taxes, and subsidies, which can contribute to eliminate financial imbalances and to promote efficiency in public sector activities."
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    That shows the detail into which IMF negotiators can go in trying to establish what may be the criteria or, in his terms, understandings, before loans are made by the IMF.
    On this occasion, particularly with the provision of money to Argentina, according to published documents there was no consideration of those matters. If it is the Prime Minister's intention, as she suggested earlier this year, to ensure the closest possible scrutiny of the use to which money is put within the IMF criteria, the right hon. Lady should use the criteria and understandings identified by that senior adviser in his article to ensure that there is more positive restraint on the use of this money by the Argentine Government.
    A. W. Hook, another IMF commentator, in the pamphlet—[Interruption.] Hon. Gentlemen may laugh, but there are many people who believe that Parliament should have considered these matters at the same time as the IMF and when the Chancellor of the Exchequer, as chairman of the interim committee, was winging his way across the world to meetings to discuss the allocation of the money. Hon. Gentlemen would do well not to be scornful or to laugh. It is a matter of great concern to the British people.
    Mr. Tim Smith: The hon. Gentleman is providing us with all this tedious detail from IMF experts, but he should bear in mind that his hon. Friend the Member for Bolsover (Mr. Skinner) said that it does not matter what conditions were imposed because it was possible for these states to ignore them all, form a club and impose their own terms.
    Mr. Campbell-Savours: I am sure that my hon. Friend the Member for Bolsover will accept what I say. If the Argentines had been informed that the allocation of money precluded the purchase of weapons that could be used against British troops in the south Atlantic, they would have fulfilled and complied with the terms and conditions laid down. They are the conditions and arrangements under discussion. My hon. Friend was referring to repayments. We are now talking about conditionality on the principle of allocation in the first place.
    Mr. Hook, in the IMF pamphlet, stated:
    "Performance criteria also include limits on the contracting of new external and medium term debt."
    As I understand it, it is that debt which is being incurred to secure the purchases of the weapons that were referred to by my hon. Friend the Member for Linlithgow (Mr. Dalyell) and my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore).
    All the comments on conditionality imply substantial levels of intervention. Intervention could have taken place on weapon purchases. In an article in The Guardian on 23 March 1983 those weapons purchases were all clearly laid out for the record. The article, under the heading "Junta inspects new warship", said:
    "Navy chiefs inspected their newest ship yesterday, the 3,600-ton Almirante Brown … The ship, which cost £500 million, is fitted with Rolls-Royce engines … The Almirante Brown ߪ was fitted with sea-to-sea MM40 Exocet missiles, similar to those used against the Task Force last year … Argentina also awaits delivery of 3 other Meko-360 type ships built in West Germany. Defence sources say that Argentina has received up to 70 Mirage III or Dagger fighter-bombers since last summer. About 24 of these were delivered during the conflict, another seven arrived in January and up to 28 in early February."
    How many of those weapons are being paid for out of money that even now we are providing by increasing the money in clause 1?
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    Mr. Tam Dalyell: I should like to refer to this minor point in my hon. Friend's argument. The M 38 Exocets, which had a range of just under 20 miles, were used against the task force. The Exocets :to which my hon. Friend refers, the M 40 Exocets, are updated and more formidable, and have a range of over 40 miles, with better control and guidance systems.
    Mr. Campbell-Savours: My hon. Friend is a master of those matters, as we all know. Over the past few months he has drawn to our attention innumerable examples of arms purchases by the Argentine junta, all of which we know and believe will be used against our people in the south Atlantic over the coming years unless negotiations are undergone with the Argentine junta or, we hope, with a democratic Government later this year after the elections.
    The last batch of French-built Mirages was received on 1 February, according to the article in The Guardian. They were
    "transferred by night from the port of Buenos Aires to the metropolitan airport for assembly at the Aerolineas Argentinas sheds."
    That was all before our eyes. We are seeing that purchase taking place and seeing the money allocated, yet the British Government stand back and refuse to move on conditionality in the way in which many of us in the Opposition believe is possible under the present agreements. The article continues:
    "Argentina has also bought 12 Brazilian Xavantes light reconnaissance jets … The Argentinian Government arranged last September to buy 10 Lynx helicopters from Westland in a three-way deal through West Germany."
    That was reported on 23 March. I wonder how far those negotiations have got. The article states:
    "Argentina is looking for more French Mirage 2000 fighter-bombers and Israeli Dagger aircraft to replace its Skyhawk fighters … Up to $6,000 million"
    —this is of crucial importance to the House—
    "of Argentina's $6,000 million debt is thought to have been spent on defence."
    That is a warning for the future. The House would do well to take note. The question is whether we have the power to intervene on matters of restricting trade and by doing so prevent those purchases from taking place, I can only refer back to the comments of Mr. Joseph Gold——
    Mr. Nicholas Baker: On a point of order, Mr. Dean. This is fascinating, but how does it relate to clause 1?
    The Second Deputy Chairman: Order. I have heard nothing that is out of order so far.
    Mr. Campbell-Savours: The hon. Gentleman would do well to leave these matters to the Chair if he cannot be bothered to debate himself.
    I return to the comments of Joseph Gold. He says that we have the power to stop them from restricting trade, so I presume that we have the power further to restrict them in their trading practices. On foreign debt, presumably acquired through borrowing for imports, lie says that
    "New foreign debt of some kinds may place too great a burden on a member's reserves in the medium term and maturity of those kinds of debt may be the subject of a performance criterion."
    That statement invites intervention by the British Government through the criteria on arms purchases. Paragraph 10 of the background document on the use of the fund's general resources and standby arrangements
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    provides a review of the conditionality arrangements imposed on a recipient borrower. The Minister should give clear undertakings that when that matter is reviewed the British Government and Chancellor will ensure that conditionality includes far stricter rules on the ability of the Argentines to purchase weapons. If we fail——
    Mr. Patrick Nicholls: Will tie hon. Gentleman give way?
    Mr. Campbell-Savours: No, not at this stage. If we fail to do so we will have misled the British people by leading them to believe that what we were doing in the House tonight was right, because that is how the Division tonight will be interpreted by the British people.
    Mr. Robin Cook: We have had a useful debate. One clear lesson stands out from the debate of the past one and a half hours—it is to be regretted that the Government did not find time for a full day's debate on the Second Reading of this important Bill. It is perhaps unreasonable to hold it against the Economic Secretary on both counts, but it is a matter of regret for the House as a whole and a particular criticism of the Government that it is now a full year since the origins of the debt crisis with the Mexican threat to default. This is the first time that this House has paused to debate that debt crisis and its implications for the world monetary system. No hon. Member can be proud of the fact that we have managed to get through the past year without, at length and seriously, turning our minds to these affairs, which are profound.
    The House will be grateful to my hon. Friends the Members for Bolsover (Mr. Skinner) and for Workington (Mr. Campbell-Savours) for the way in which they have addressed their minds in their different manners to the profound issues that lie behind the Bill. My hon. Friend the Member for Workington has given a scholarly analysis of the meaning of conditionality as applied by the IMF. I was particularly interested in the manifest research that he put into his work. My hon. Friend has shown without any doubt that it would be perfectly possible for the IMF to attach a condition preventing Argentina using facilities it received for the purchase of weapons. Any hon. Member who listened carefully and attentively to the references produced by my hon. Friend could not doubt that it would be technically, politically and practically feasible to attach such a condition. It would be feasible even on the narrow grounds of what is relevant to the financial facility being offered. As those hon. Members who were present during the Second Reading debate earlier today will be aware, Argentina is now committed to spending £2 billion on the purchase of arms abroad. It is the largest single commitment of the Argentine foreign reserves apart from debt servicing. It cannot but be relevant to our consideration of whether Argentina should be given a loan facility as to whether Argentina will use that facility to fuel its military grandeur.
    My hon. Friend the Member for Bolsover approached the Bill in a different spirit, with passion, vigour and vehemence. My hon. Friend was absolutely right to say that the countries that are affected by the debt crisis are not the most destitute countries in the world. We are not dealing with the countries of the Indian sub-continent or of the sub-Saharan region. We are dealing primarily with0020the newly industrialised countries—Mexico, Brazil and Argentina.

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    Only three or four years ago, those countries were held to be the spear-head of the Third world's development. Indeed, three or four years ago, it was fashionable for articles to appear in the quality press warning of the dire future for the industrialised and developed world from the new industries springing up in those very countries which we now regard as the worst victims of the debt crisis. My hon. Friend was right to raise the issue. If the world's institutions cannot manage to find a way to handle the emergence of those countries on to the industrialised stage in a more successful manner than we have managed the emergence of these three Latin American countries, what hope is there for the destitute countries of the Indian subcontinent and of the sub-Saharan region? I am ever grateful to my hon. Friends for taking part in the debate and for adding in depth to our earlier debate on the Bill.
    My hon. Friend the Member for Aberdeen, North (Mr. Hughes) concentrated on the issue of South Africa and raised some new matters which we did not have an opportunity to explore in our earlier debate. I wish to refer in detail to a few of the points that he raised.
    I cannot resist noting that the House of Representatives, when considering a similar Bill which fulfils the American contribution under the agreement that was obtained by the previous Chancellor of the Exchequer at the IMF meeting in Washington, attached an amendment obliging the representatives of the United States in the IMF to vote against the use of the increased facilities for any country that practises apartheid. I cannot resist comparing and contrasting the more democratic procedures of the House of Representatives, which enabled it to reach that decision, with the more narrow procedure under which we operate whereby the similar amendment that my hon. Friend the Member for Aberdeen, North tabled is held not to be in order so the House cannot judge on that point of principle.
    My hon. Friend aired fully and in detail a matter that concerns him and should worry the whole House. There can be no doubt that he was right to raise the political issues that are involved in the loan to South Africa. I should like to pick up the exchange between him, the Economic Secretary to the Treasury and the hon. Member for Lancaster (Mrs. Kellett-Bowman) on the history of Jamaica.
    The Economic Secretary said that the facility to the Jamaican Government were suspended on technical grounds. That is perfectly correct. In 1977, the credit facilities to Michael Manley's Government in Jamaica were suspended on the precise technical ground that one of his monetary targets was 3 per cent. adrift of that which was set under the conditions that were attached to the facility. It is perhaps just as well for the Government that they are not the recipients of credit from the IMF on the condition that they hit their monetary targets because they have been far more than 3 per cent. adrift on their targets on the monetary aggregates.—[Interruption.] The hon. Member for Beaconsfield (Mr. Smith) intervenes from a sedentary position. If he follows the history of the period 1974–79 he will find that there were no monetary targets in the first two years and when monetary targets were introduced, for what it is worth—I do not think that it is worth much—the Chancellor hit the targets with much more precision and regularity than the succeeding Government, although they raised those same monetary targets to the level of a fetish.
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    It is true that there were technical grounds for the suspension of the credit facility to Jamaica. The question that has often been asked is whether there would be any other Government, such a technical breach of the conditionality by which would have resulted in the decision to withdraw the credit facility. It is not possible to draw a clear line between a technical judgment and a political judgment because the technical judgments employed by the IMF reflect the political values of the dominant groups in the IMF.
    That was shown in 1978 when Michael Manley's Government asked for and received another credit facility under extreme duress, but it was a credit facility that involved conditions that resulted in a 60 per cent. price increase in food and fuel and a cut in public spending, especially in welfare. Those may have been technical conditions but they were also political. They were certainly political in their outcome because, as the hon. Member for Lancaster said, as a result of those conditions, unemployment rose by 30 per cent. and there was a 45 per cent. drop in the living standards of the Jamaican people. The entirely predictable consequence, which could not have escaped the IMF, was that the Government were hounded from office and replaced by another. The hon. Lady said that the new Government was better. I shall not bother to maintain that technical discussion and perhaps I shall not condescend to such a subjective concept of what is better or worse but I agree with the hon. Lady that the new Government of Jamaica are far more akin in their political values to those of the Western bankers who dominate the IMF. As soon as that Government obtained office with a different set of political values, they then obtained the same credit facilities that Michael Manley had been seeking on much softer conditions than he had been able to obtain.
    11.30 pm
    Sir Nicholas Bonsor: Surely the reason for that increase in facility was not the political values of the new Government but their economic values, which made it much more likely that they would be able to repay the loan than Michael Manley's Government who followed pure Socialist dogma.
    Mr. Cook: The hon. Gentleman's intervention gives us an interesting insight into the current Conservative mind, which appears to hold that economic policies, performance and judgment have nothing to do with politics. That may go a long way to explain the unresolved mystery of how this Government were re-elected with an increased majority. If we leave aside economic performance and policies, we may indeed start to understand the result of the last general election, but to any normal punter and humble Back Bencher, it is impossible to separate economic policies from political judgment.
    It is, therefore, very clear from the recent history of Jamaica that the IMF has been willing to make a political judgment. I do not criticise it for that, but if it make a political judgment in relation to a Government in the Caribbean who happen to be Socialist, radical and black, we are entitled to expect it to exercise a similar political judgment in the context of a Government of South Africa who are Conservative, capitalist-minded and who happen to be white.
    That brings me to the basis on which that credit facility was made last year. Quite apart from the wider political

    707
    considerations, there are narrower technical matters that are intriguing. For instance, the financial policies pursued by the Government of South Africa last year, were not the kind that are normally pursued by a country that has just succeeded in raising a $1 billion credit facility from the IMF. The normal condition of an IMF facility is that the budget deficit should be reduced, but in the year in which it obtained this credit facility, South Africa's budget deficit expanded in cash terms and remained constant as a percentage of GDP. It is normally a condition that monetary targets are tightened, but South Africa's credit facility was obtained in the very year in which it relaxed its monetary targets. It is normally a condition that interest rates rise to curb monetary expansion, but interest rates in South Africa fell.
    In other words, the precise reverse of all the features of financial policy that we normally associate with IMF credit facilities obtained in South Africa last year. One is then driven to ask the question posed by my hon. Friend the Member for Aberdeen, North, why, in the case of South Africa alone, were an entirely different set of financial standards applied from the standards exercised in the case of Michael Manley's Government in Jamaica in 1977 and 1978?
    My hon. Friend is entitled to a detailed reply to the specific questions that he asked. First, was the majority of the directors of the IMF informed of the visit to South Africa before it took place? Secondly, why was the request by nine IMF directors for a postponement of a decision refused? Thirdly, why, again uniquely in the case of South Africa, and most unusually in the case of the IMF, was the credit facility front loaded so that 80 per cent. was triggered before South Africa could have been expected to fulfil any of the conditions attached to it?
    The answers to these questions will be telling, and I am well aware that the Minister attempts to answer all questions punctiliously and carefully. He may not be able to answer my hon. Friend's questions tonight. If he is unable to do so, I hope that he will set out the answers in writing for my hon. Friend. The questions go to the heart of the debate on conditionality, which has overhung the general debate throughout the afternoon and evening.
    My hon. Friend the Member for Bolsover (Mr. Skinner) understandably expressed surprise at the fact that not one alliance Member took part in the debate especially as it has centred on an issue on which alliance Members' compassion, so they constantly claim, is pinned to their sleeves. My hon. Friend spoke about their absence in Committee, but they were absent on Second Reading. Not one alliance Member intervened on Second Reading. However, we were favoured by a visit by one alliance Member for the Front Bench replies.
    During the debate on whether the clause should stand part of the Bill, one alliance Member managed to sustain an attendance for 20 minutes before, perplexed by the detailed exposition of my hon. Friend the Member for Workington, he retired from the Chamber. He was replaced by the hon. Member for Berwick-upon-Tweed (Mr. Beith).
    Mr. Skinner: The alliance has a rota.
    Mr. Cook: The hon. Member for Berwick-upon-Tweed may have arranged the rota. If he did so, he certainly arranged it to suit himself, for he stayed in the Chamber for only six minutes. That was the combined
    708
    contribution of those who sit on the alliance Benches. It exposes as a hollow sham the many rhetorical speeches throughout the country of alliance Members who are happy to address public meetings and tell the press about their concern for the Third world. It seems that they are not prepared to be in their places in the House when they could do something towards resolving the problems of the Third world.
    The Economic Secretary to the Treasury (Mr. John Moore): Until the speech of the hon. Member for Livingston (Mr. Cook), it was hard to believe that we were addressing ourselves to a clause that seeks massively to increase international aid from Britain to the IMF. I shall take up immediately the hon. Gentleman's last remarks because they were extremely germane. It is true that an alliance Member has not participated in our debates. Indeed, for most of the time no alliance Member has been present. This fact was touched upon by the hon. Member for Bolsover (Mr. Skinner). Much as I admire and love the coal industry and all my memories of it — I was involved ministerially with the industry in the previous Parliament — I thought that I would not be visited by Bolsover again. However, the hon. Gentleman made an engaging, lucid and outstanding speech, in which he drew our attention to the absence of the alliance. I think it right in its absence to draw attention to a passage in its manifesto. I am sure that the Committee will not wish to prevent the public knowing what it stated in that document. Among many other things, including an expression of the need to make available additional finance for the developing world, it ended a significant paragraph by stating:
    "support the principles of the Brandt report, and in particular the proposals for increased credit through the international institutions."
    It would have been to the benefit of all parties which seek on each side of the Chamber to represent those who voted for them at least to have heard an alliance Member explain why the issue was so critical during the election campaign and so irrelevant when it came to be debated in the House.
    Mr. Robert Hughes: We know that the Minister is punctilious in his accuracy. That being so, I hope that he will not adopt the slipshod fashion of speaking about the alliance. There is a Liberal party and an SDP party, and it seems that never the twain shall meet.
    Mr. Moore: The hon. Gentleman is right. My difficulty is to find any form of identity. That being so, I employed slipshod journalese. It is hard to describe something that does not exist and lives in some in-between world. I shall reconcile myself to the hon. Gentleman's specific approach, which I shall try to recall in future.
    I recognised the value of the comments of the hon. Member for Bolsover, who asked "How can the Government justify this policy?" It was somewhat difficult for him, as I appreciate that he was unavoidably detained in a meeting of the NEC, and was therefore unable to attend the critical debate on Second Reading, and hear the attempt that I made—perhaps not a very good attempt—to express and explain the Government's policy. I draw the hon. Gentleman's attention, as a pure matter of technicality, to the fact that he did not vote against the Second Reading of the Bill, but on an amendment. The Second Reading was approved without a vote.
    I wish to take up the specific point raised by the hon. Member for Bolsover, because it has resulted in an

    709
    important debate that has gone on for months. It concerns banks, bank interest and the nature and relationship of that to the tax liability of banks. I find it difficult to explain to some of the 350,000 people who work in the banking industry and have a pride in their occupation and their work, why they are the subject of constant attack. As a politician, I do not mind being under attack, and have become quite used to it. I should like to give the Committee, as I have an opportunity to do so, the facts on relief for taxpayers. The hon. Member for Bolsover is right —and has been assiduous in his pursuit of the matter—to say that it merits the House having the details.
    Provisions dealing with tax deductibility apply to all businesses, whether banks, companies generally or unincorporated businesses, and in respect of domestic as well as international banking debts. Secondly, this is not a new relief. The deductibility of specific bad debts is fundamental to the United Kingdom tax system, and of long standing. The Inland Revenue statement of practice, which the hon. Member for Bolsover is attempting to produce, was printed on 25 January 1983, and explained the general rules of tax deductibility and how these applied in the case of country-risks debts.
    This statement needed to be published and brought out, and was not a new revelation or discovery, because there had been considerable press speculation — I do not suggest that we encouraged it—that seemed to create difficulties and doubts in peoples' minds. The Inland Revenue thought it right that the position should be made clear. The position is no different, there are no changes, and it still applies to all businesses.
    The hon. Member for Bolsover asked a parliamentary question the other day, which I sought to answer, on how we could quantify these debts in terms of the potential for debts that could be offset against taxation. I was unfortunately unable to explain, and had to say that it was not possible to quantify. Let me try to explain why, because this is a legitimate point, and we should all know the background. First, the Inland Revenue is concerned, at the moment, largely with accounts for periods at the end of 1981 or early 1982, largely before the problem of international indebtedness arose. Secondly, this is only one item deducted in arriving at taxable profits, and separate statistics are not kept of such details. Thirdly, as to confidentiality in relation to any specific bank, anyone interested in pursuing the matter further can refer to banks' annual reports on this matter. I always try to answer detailed questions, but there is no essential difference.
    Mr. Skinner: Will the Minister acknowledge that on 21 January, a story was run in the financial columns of most of the newspapers, on the lines of:
    "Until now the Inland Revenue has not publicly accepted that these provisions are deductible."
    That statement came in an article by Peter Rogers in The Guardian, and if that and other articles in other newspapers are wrong, why has the position changed? We know, and the Government know, that by making it public, they were giving the nod and the wink to many of the banks that were reluctant to send money abroad to Argentina, Brazil and Mexico that, like others who get perks from the Inland Revenue, they could go ahead and be all right because at the end of the day they wuld not have to foot the bill. That is why the big four banks have
    710
    set aside £922 million for bad debts and why many other banks have added to that. The making of this fact public, as was shown in the article, and as the Inland Revenue has told me in its letter, made all the difference, and has resulted in much more tax relief being available to these banks.
    Mr. Moore: Being an assiduous reader of the press, I am surprised by the determination of the hon. Member for Bolsover to believe what he reads in it.
    I shall repeat the facts that I previously stated. Speculation in the press did not help, so at the request of the British Bankers' Association a statement of practice was issued on 25 January entitled "Country-risk Debts" which restated the tax treatment of those debts. The statement was issued as a means of making the position perfectly clear.
    11.45 pm
    The hon. Member for Aberdeen, North (Mr. Hughes) legitimately raised a subject on which I, in my limited time of nine or 10 years in the House, have heard him speak, argue and discuss with consistency. I do not, in any way, deny him the right to address the Committee on his arguments. However, I am asked to concern myself with the IMF conditions, which have always related to economic need. That subject has previously been discussed. An area for further debate involves the definitions. I shall pursue with great care the contribution by the hon. Member for Workington (Mr. Campbell-Savours). Opposition Members have a better understanding of the economic need facilities surrounding the IMF provisions from their experiences in 1976. The decisions, as I clearly said during the Second Reading debate, are essentially apolitical.
    I wish to speak about South Africa. I shall, as the hon. Member for Livingston suggested, return with specific details. I wish to remind the Committee — the hon. Member is most familiar with the subject — of the specific loan that he was talking about, which was referred to in a parliamentary answer in November 1982, which said:
    "There is no provision within IMF's articles for declaring a member ineligible to use the fund's resources unless it fails to fulfil any of its obligations under the articles. South Africa is not in this position. Accordingly the UK supported the application on its technical merits." — [Official Report, 11 November 1982: Vol. 31, c. 601.]
    I am sure the hon. Member remembers that. I remind the hon. Member for Aberdeen, North who has been consistent on this issue, that policies did not suddenly change in 1979. South Africa last used fund resources in 1976 and 1977. In 1976 the SDR figure was 160 million and 232 million in 1977. The then Labour Government were as consistent as the present Conservative Government in their attitude and application to the principles. Last year's loan contained a specific difference —I shall return with further details in correspondence, which will be made public,—in that access to the CFF —the compensating facilities which are quite different from general loans — is more mechanical. Temporary slumps in export earnings are compensated, provided certain tests are met. For example, the shortfall should be attributable to circumstances beyond the members' control, the member must demonstrate a balance of payments need. The hon. Member for Livingston is aware of the difference, as he is familiar with this topic.
    Mr. Robert Hughes: In 1976 and 1977 I was as vociferous against the then Labour Government's facilities through the IMF towards South Africa as I am now. The Minister referred to balance of payments difficulties. The loan was curious in that the South Africans maintained that one of the reasons why they needed these facilities was that the gold price would fall to 315 dollars an ounce, whereas it remained steady at 400 dollars an ounce. It is surprising that the views by the South African Government were taken at such face value without, apparently, the rigorous investigation that applies to other countries which base their application on the falling price of a commodity.
    Mr. Moore: We can debate the matter further on another occasion, but the hon. Gentleman's question related to the CFF facility, as opposed to normal IMF loans, and that facility provides finance to help recovery from temporary export shortfalls. The hon. Gentleman suggested that the South African request was dealt with on a basis other than its technical merits. But that would undermine the principle of the fund, which the hon. Gentleman quoted accurately, without necessarily agreeing with it, that
    "all members are treated in a uniform way".
    Such action might also have acted as a disincentive to other potential fund clients and would have damaged the confidence that members could repose in the fund. The hon. Gentleman quoted some of those words. I know that he does not agree with them, but they represent the policy of the previous Conservative and Labour Governments and the policy of the present Government.
    Mr. Robert Hughes: That quotation was contained in an answer that the Chancellor of the Exchequer gave to me. It comes directly from him.
    Mr. Moore: Absolutely. I would not do other than quote the original words to the original questioner.
    The hon. Gentleman asked about the Government's policy. We believe that economic need is the key criterion and that IMF decisions are apolitical. We do not agree with what has been said about the absence of conditionality. The Opposition believe that it is possible to introduce greater conditionality and that debate will continue. I re-emphasise that the apolitical nature of IMF funding must be maintained.
    We have taken a long time on a critical clause, but I think that there is general support for its extension of aid to all areas that seek loan borrowing via the GAB facility.
    Question put and agreed to.
    Clause I ordered to stand part of the Bill.

  Clause 2

    INDEMNITIES FOR INTERNATIONAL SUPPORT OPERATIONS
    Question proposed, That the clause stand part of the Bill.
    Dr. Jeremy Bray: The clause is worded in extraordinarily broad terms and it would be
    712
    helpful if the Economic Secretary would explain the justification for that. If he wishes to intervene now, perhaps I shall speak again later.
    Mr. John Moore: The hon. Member for Motherwell, South (Dr. Bray) asked a specific question on Second Reading and I have been able to obtain a specific answer. It may be convenient if I tell him now that the clause does not extend the present power to give guarantees. It merely codifies existing prerogative powers under which the Government can give indemnities when they consider it in the national interest to do so.
    The hon. Member was correct when he said that there is no monetary limit, but that is no change from the present position. The clause gives specific parliamentary authority for such operations and lays down specific rules for notifying the House whenever indemnities are given, as well as when they are called. I know that the hon. Gentleman agreed with that, but he wanted clarification. I hope that my comments have been helpful to him.
    Dr. Bray: If there were no specific authority, the House, by giving specific authority, is doing something that was not done before. I shall read carefully what the Economic Secretary has said. The proposal could create a situation that might be desirable, though not foreseen by the Government. A Government who did not enjoy a majority in the House could initiate sweeping action under the clause and not be called to account by the House.
    Without going so far as to think that the Government have secret plans for vast IMF schemes, or anything so imaginative as that, I can foresee a future Government proposing schemes that would not command the instant support of the House. Other legislatures required to endorse the proposals could be obstructive. The most difficult case could involve the behaviour of Congress. Do any comparable provisions exist in current or planned United States legislation?
    Mr. Moore: I should like to be able to answer that, but I cannot. I shall answer the question at some other time. I do not believe that the provision changes the nature of our authority. It seeks to give propriety to it. I shall examine the matter carefully.
    Question put and agreed to.
    Clause 2 ordered to stand part of the Bill.
    Clause 3 ordered to stand part of the Bill.
    Bill reported, without amendment
    Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 58 (Third Reading), and agreed to.
    Bill accordingly read the Third time, and passed.

Companies (Beneficial Interests) Bill
Order for Second Reading read.
11.57 pm
The Under-Secretary of State for Trade and Industry (Mr. Alexander Fletcher): I beg to move, That the Bill be now read a Second time.
I welcome the hon. Member for St. Helens, South (Mr. Bermingham) to the Opposition Front Bench. I am sure that his early elevation to that position is due entirely to his ability and not to the lateness of the hour. I look forward to hearing him on this important issue.
I am conscious of the fact that the House is owed an explanation for the short notice of the Bill and for our wish that the House should carry all stages of the Bill this evening.
The object of the Bill dictates the exceptional procedure, as I shall seek to explain. In essence, the Bill deals with a problem which, once publicly exposed, must be remedied without delay, and only legislation can provide that remedy.
The purpose of this short, technical Bill is therefore to enable people to continue doing what has been done without question for many years, and to avoid penalising well-intentioned common practices which until recently were thought to be in order.
As the title suggests, the Bill is about beneficial interests under company law, and concerns, as clause I shows, only a handful of company law provisions. The need for the Bill has arisen because the legal profession—initially learned counsel—has exposed the fact that many parent companies have had unsuspected, unidentified beneficial interests in their shares when held on trust — for example, for a pension or employees' share scheme. These interests, remote and minor in character though they are, take companies outside exceptions provided in the relevant provisions of the Acts for shares held on trust.
Under those provisions only exceptionally can a company's subsidiary be a member of the company and can shares in a public company be acquired on its behalf. Company law has since 1948 frowned on companies being able to control themselves. Section 27 of the Companies Act 1948 frowns so severely on such a practice that the penalty that it imposes for a breach of its rule that a company cannot be a member of itself is that transfers and acquisitions of shares in a company to a subsidiary of the company are void if the parent company is beneficially interested in the shares, even if they are held on trust.
Bearing that in mind, I refer to the common practice whereby companies establish subsidiaries to act as trustee of their pension schemes and to the common practice of pension schemes holding shares in the parent companies. I am well aware that there is a lively current debate in the context of pensions policy about so-called self-investment and about the legal framework for pension schemes. But it has never been suggested that the combination of a subsidiary trustee of a self-investing pension scheme is contrary to company law, or that it is contrary to the policy of company law. That is because no one has imagined that the parent company has a beneficial interest in the shares held by the scheme.
What has now happened, to precipitate the need for this Bill, is the identification of unsuspected beneficial interests of the parent company or other subsidiaries.
714
Those interests are described in clauses 2 to 4. All derive from standard terms of trust deeds, which no one would have provided or entered into if he had had the slightest suspicion that he risked investing the assets of the trust in void transactions. Those interests are remote and contingent or minor. I am unaware of any suggestion that they have given rise to malpractice. Accordingly, in the Government's view, it is right and proper not only to validate transactions in the past that would otherwise be void, but to enable past practices to continue in future.
I have concentrated on section 27 of the 1948 Act and used pension schemes as an illustration. In practice, the problem applies more widely, including to employees' share schemes and in respect of provisions introduced in the Companies Act 1980. The effect of the Bill is to require, for the application of the provisions specified in clause 1, a limited number of specified interests to be disregarded for the purposes of establishing whether a company has a beneficial interest in shares. The Bill also provides for the so-called residual interest described in clause 2 to cease to be disregarded when it ceases to be remote and contingent.
As the House will have recognised, the Bill, although short, is technical. I have sought to convey its necessity and its effect as simply as possible. The Bill reflects intense confidential discussions which my Department has had with several outside experts, to whom I am grateful.
12.4 am
Mr. Gerald Bermingham: I thank the Minister for his kind comment. It shows that speed, when necessary, can be achieved by the House. In several other cases the Opposition will use equal speed if the Government give us the chance to do so.
The Opposition do not disagree with the Bill, which is not concerned to revolutionise the law, but seeks to legitimise what we all believed to be the case. Although we would normally object to retrospective legislation on principle, there are cases where it is justified, and this is one of them. No one seeks to remove anything from anyone or to remove rights which we believed they had.
The Bill could be summed up by saying that it wishes to re-enact the legal position as everyone believed it to be. It is fair to say that when such a case arises speed is necessary, but one must ask why the matter was not spotted before. Had the mistake not been rectified, some people might have been dancing in the streets at the thought of all their ill-gotten gains. However, because the House has moved at such speed, those who could have danced have been deprived of their chance before the tune even began. The House can congratulate itself on the fact that the matter has been rectified so speedily. The Opposition support the Bill.
12.6 am
Mr. Nicholas Baker: I congratulate the hon. Member for St. Helens, South (Mr. Bermingham), whose speed in arriving at the Dispatch Box has matched that of the Government in introducing the Bill. We have had an explanation for the speed which worried many of us, especially on the Conservative Benches.
The only point that I wish to make is about consolidation. I would have expected and hoped that the Bill would be part of a consolidation of company legislation for which we have been waiting for many

715
months. I hope that the Minister, when he replies, will be able to say when we can expect some consolidation of the legislation on company law.
12.7 am
Mr. Anthony Nelson: I should like to add a short welcome to the Bill which has been so ably introduced by my hon. Friend the Minister and welcomed by the Opposition spokesman.
It is proper, however, that we should pause for a second when we have a Bill that undergoes such an expedited procedure—to put it at its most generous—and consider the background, as was done in the introductory speech.
I regard measures which introduce a degree of retrospection with some circumspection, but in this circumstance it is right, because we are simply implementing what for some time people understood to be the case.
I served on the Standing Committee on what is now the Companies Act 1980 and it is clear that the drafting of legislation is not always accurate and despite prolonged scrutiny by Standing Committees and others, mistakes slip by. Although the House is prepared, rightly, this evening to pass this legislation without too much contention, I sound a note of caution. We should not treat it as a precedent. We should be cautious about having such an expedited procedure for Bills of this kind.
My hon. Friend the Minister, in moving the Bill, said that there were a number of other tangential matters that were raised, including the accountability of pension funds. This is not the occasion to make a lengthy speech about that, but I should like to put a marker down, which I believe is shared by many colleagues on both sides of the House, about the lack of accountability of pension funds and the extent to which we are storing a major future problem—the number of pension funds which will be unable to mee app t their actuarial obligations. Although we have been fortunate in not having a major default so far, that possibility would be put off permanently, or at least for a long time, were we to implement some fairly inexpensive but sensible improvements in the degree of accountability of pension funds; in particular, appointments to pension funds' ++boards and the range of information that is made available to beneficiaries.
With those cautionary words, which I hope the Minister will not take as being in any way derogatory, I believe that the Bill is necessary, but I hope that we will not make a habit of introducing important and complex legislation and passing it on the same night.
12.9 am
Mr. Tim Smith: I do not question the merits of or the need for the Bill, but I question strongly the way in which it has been dealt with. The Bill was published on Friday morning and is now passing through all its Commons' stages late on Monday evening. I do not understand the need for such speed. We have heard no explanation from my hon. Friend the Minister as to why it is necessary.
The Bill remedies a defect which has been in the Companies Act 1948 for 35 years. Section 27 was deemed to be satisfactory until recently. Now we find a technical defect. It was raised with the Department of Trade in November last year. There have been discussions on and off since then. At one point it was suggested that it might
716
be remedied by the Finance Bill. If it had been, there would be no question of publishing the Bill on one day and putting it through the House in all its stages on the next.
The Government have treated the House with a certain degree of contempt. It is very unfortunate that it has not been possible to have adequate consultations with people outside the House, and that even those who are technically qualified to comment have not had time to digest the Bill's contents and be able to say whether it achieves its aims. Therefore, I still regard the way in which the Bill has been dealt with as very unsatisfactory.
The Bill also raises the question of the Department's legislative priorities. We were recently told that it was not possible for the Department of Trade and Industry to do anything about the Cork report, because the Department was reviewing its legislative priorities. I tabled a question for answer on Thursday, asking exactly what the Department's legislative priorities were. The only major Bill that it has on the stocks at present—of course it is very important—is the Telecommunications Bill. I am not aware of any other proposed legislation. The. Court report is a matter of considerable urgency. It is now a year since it was published, but we have not had any adequate response from the Government. Indeed, there seems to have been a step backwards. The previous Minister had at least set out some urgent issues that he regarded as having priority, but we now seem to have taken one step backwards instead of forwards.
I do not understand why the Government have introduced this Bill, when we could have been dealing with something much more significant. I support what my hon. Friend the Member for Dorset, North (Mr. Baker) said about consolidation. There were Companies Acts in 1948, 1967, 1980, and 1981, and this Bill will become another Companies Act. It merely heightens the urgent need for consolidation, and I very much support what my hon. Friend said.
12.14 am
Mr. Alexander Fletcher: I am grateful to the hon. Member for St. Helens, South (Mr. Bermingham) for his understanding of the need to expedite the Bill. I noted his comment, on coming fresh to the Opposition Dispatch Box, that there are other matters that the House might consider just as expeditiously.
My hon. Friends the Members for Dorset, North (Mr. Baker) and for Beaconsfield (Mr. Smith) mentioned consolidation, and the Bill will, of course, be included in the consolidation of the Companies Acts, which we are now working on. The progress being made is quite satisfactory, and I know that several of my hon. Friends have awaited that consolidation for a long time. Draft Bills were sent to various representative bodies in May 1983 for scrutiny and comment by those who will have to use the new legislation, and the Department looks forward to receiving their comments in the coming months.
My hon. Friend the Member for Chichester (Mr. Nelson) mentioned the Bill's introduction. We are dealing with an exceptional matter. I refer to an error in a very important piece of legislation in Companies Acts, which has been in existence for about 35 years. It was only because of the seriousness of the matter that the Government felt obliged to move.
Mr. Nelson: I do not wish to detain my hon. Friend, but I understand that the measure was brought forward

717
because of a legal opinion, or an opinion given by counsel, about the defects in the existing law. Did the Government hear about that legal opinion and then get their own legal advisers to certify that it was correct? It is a little odd that primary legislation should be introduced on the basis of a legal opinion that was given to a private firm.
Mr. Fletcher: I understand that the error was discovered by a practitioner, who sought legal advice from a leading firm of solicitors, who in turn took counsel's advice. The Department then took separate advice and confirmed the finding. It was the result of some practical work, presumably on a pension fund or something similar, and it is remarkable that it was not discovered before. However, it has now been discovered. Because of the importance of the pension schemes and the many millions of people who depend on them, the Government had to act in this way.
In answer to the other matter that my hon. Friend raised about accountability or regulation of pension funds, I note that he has put down his marker. No doubt we shall hear more about this subject.
My hon. Friend the Member for Beaconsfield asked why the matter was urgent. Without the Bill there would be widespread confusion about the title of shares, and the Government were worried about that. There could be considerable difficulty in tracing the true ownership of shares and uncertainty about the recovery of money paid for shares. Trustees would have to act on the basis that schemes did not have the assets that they were thought to have, shareholders generally would have to consider whether shares that they acquired had been passed to them with valid title, and, as I have already said, pension schemes could well suffer.
My hon. Friend rightly asked why this measure was not included in the Finance Bill. I understand that it is outside the scope of the Finance Bill because it is essentially a matter of company law that we are amending, and primary legislation of this kind is the only course open to us.
Mr. Tim Smith: I accept that, but why was it necessary to publish the Bill on Friday and take all its stages on the following Monday? I do not understand that.
Mr. Fletcher: It was because of what would happen as soon as the errors were publicly revealed with the publication of the Bill. There has been considerable consultation on the matter. There has been a healthy secretiveness about it, because of the dangers that could have ensued if the error in the legislation had become public knowledge. The Government therefore decided to publish the Bill and ask the House to go through all the stages of the Bill as quickly and expeditiously as possible.
I started with an apology to the House for the fact that the business had to be conducted in this manner. I repeat it now to my hon. Friend and to all hon. Members who are present. It is not a satisfactory way in which to do business, but the Government felt—to use a time-worn expression, but with the utmost sympathy—that it was in the public interest that the matter should be handled in this way.
The Government take the Cork report seriously, and following an election and the fact that we have new Ministers in the Department, a new Secretary of State and myself, we are looking at the total priorities of the Department, including how to deal with the Cork report. We could not wait for the decisions that are to be made in the coming months on the Cork report before dealing with this matter.
Question put and agreed to.
Bill accordingly read a Second time.
Bill committed to a Committee of the whole House. —[Mr. Lang.]
Bill immediately considered in Committee; reported, without amendment.
Motion made, and Question, That the Bill be now read the Third Time,put forthwith pursuant to Standing Order No. 58 (Third Reading), and agreed to.
Bill accordingly read the Third time, and passed.

Coal Industry
12.20 am
The Under-Secretary of State for. Energy (Mr. Giles Shaw): I beg to move,
That the draft Coal Industry (Borrowing Powers) Order 1983, which was laid before the House on 1st July, be approved.
The purpose of the order is to raise the limit on the National Coal Board's accumulated borrowings from £4,500 million to £5,000 million in accordance with section 1 of the Coal Industry Act 1982. The purpose of providing for such interim orders on borrowing powers is precisely to give the House from time to time an opportunity to debate the progress of the industry concerned. Therefore, I shall confine my remarks to a brief span in order that hon. Members may make their contributions.
I must begin by making it quite clear that the board, like any other nationalised industry, has exercised and will go on exercising its borrowing powers within the framework of external financing limits settled with the Government. This order does not change that position.
The National Coal Board's financial position and prospects are, as hon. Members know, serious. The board has been under great pressure in all its markets, both on volume and on price. The board's sales in 1982–83 amounted to just over 120 million tonnes, 2·25 million tonnes lower than the previous year. Even this figure was achieved only because power station stocks rose by 10 million tonnes. The prospects for this year are for a continuing reduction in sales. As a result, national coal stocks, both at the pithead and power stations are likely to reach around 60 million tonnes by the end of the year. That represents about six months' consumption at the current annual rate. This is a highly competitive market with little room for price increases if sales are not to be put at risk. Therefore, despite increasingly high levels of productivity and vigorous efforts by all parts of the board to contain costs, I understand that the board's accounts for the year will show a loss of £111 million after deficit grant of £374 million. As accumulated losses now exceed the board's reserves, my right hon. Friend the Secretary of State, has confirmed that he will continue to make advances to the board from the national loans fund.
The causes of that position are well known. Sir Norman Siddall and his colleagues have often explained them. He has made the point that 10 million tonnes of the board's capacity is responsible for a loss on revenue account of £400 million a year. The recent report by the Monopolies and Mergers Commission has only underlined what the board has often said. For example, the Commission estimates that if capacity were reduced by 10 per cent. and the reduction could be concentrated on those pits with the largest operating losses per tonne, the NCB's finances would be improved to the tune of £300 million a year. The root of the problem is simply that the industry is producing more coal than it can sell profitably and suffers a cash drain from its huge stocks of unsold coal. In addition, the continued operation of a relatively small proportion of heavily loss-making pits swallows up resources which could be used elsewhere. This is the stark economic reality that everyone in the industry must face.
In this context, I should like to take this opportunity to pay tribute to the realism and leadership of Sir Norman Siddall, whose term of office as chairman will come to an
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end on 31 August. His notable, though brief, tenure of the chairmanship is only the culmination of more than 40 years' service to the coal industry. I know that the whole House will wish to join me in regretting that his health made it impossible for him to consider reappointment and in wishing him a long and happy retirement.
The Government's objective for the coal industry has often been set out. We wish to see a strong and viable industry, which can give customers secure supplies of fuel at competitive prices and can give its work force secure and prosperous employment. Within that over-riding objective, we look, as my right hon. Friend the Chancellor of the Exchequer has often said, for the earliest feasible return to economic viability. Mr. MacGregor's objective will therefore be to continue the task so ably pursued by Sir Norman and to focus the board's efforts on the earliest practicable return to profitability, on competing successfully in the market place and developing new markets for British coal, and on securing the highest possible efficiency and control of costs. That is the only prerequisite for providing stable and well paid jobs in the industry.
While the industry is moving back towards viability, the Government are ready to support the board, as they have done in the past. Last year, grants to the board of all types, including deficit grant, amounted to almost £520 million, and they are likely to be higher this year. Those grants, like the substantial amounts that have been paid in previous years, represent action by the Government to protect the industry from short-term fluctuations in demand.
Despite that high level of grant support, we have also financed a continuing high level of capital investment. The board's capital investment approval for this year will be some £800 million. That is a substantial figure compared, for example, with British Rail's capital expenditure of £337 million and that of British Steel of £217 million. As Sir Norman Siddall has said, expenditure at that level hardly shows any intention to destroy the industry. As a result of the £4,500 million that has been invested since 1974–75 under the "Plan for Coal", over £3,000 million, or two thirds, has been invested in the four years since a Conservative Government were elected in 1979 compared with £1·5 billion in the preceding five years under a Labour Administration.
Support on that truly massive scale is based on the firm expectation that the industry will return to economic viability within a reasonable time. That is why we back the industry on the scale we do. That is why we support the board in its determination to grasp the nettle of its longstanding losses. That is why in May this year we greatly improved redundancy terms to ease the social pressures. That is why we have extended the coal conversion grant scheme to help the industry find new customers.
The present order should be seen in this context. It is necessary to secure continued access by the board to borrowings out of which it can finance capital investment and working capital. As I told the House earlier, the present limit of £4,500 million was set by the Coal Industry Act 1982. On 30 April this year the board's total borrowings stood at £3,856 million. Because of the pronounced seasonal peak in the board's business, borrowings are expected to rise to £4,287 million in July and to £4,850 million in September, which is in breach of the limit. The order is therefore necessary to enable the

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board to continue its normal operations. I am sure that the House will justify this confidence. I ask the House to approve the order.
12.28 am
Mr. Alexander Eadie: It is customary to congratulate Ministers on making their debut speech from the Front Bench. I hope that we will hear much from the Minister with his responsibility for the coal industry. I hope that he will make much more optimistic speeches than the one that he made tonight finishing at the late hour of 12.28 am.
The hon. Gentleman probably set the tone for the debate. In his introductory remarks, he said that this was the opportunity for the House of Commons to debate the progress of this great industry. I feel that I speak on behalf of my hon. Friends in protesting at our being given only one and half hours to debate the industry's progress. That is a scandal.
The Minister said that the order will increase the coal board's borrowing limit by £500 million. Neither I nor my hon. Friends will oppose the idea that there should be more investment in the coal industry.
Mr. Dennis Skinner: There is not enough.
Mr. Eadie: In the memorandum attached to the order the Government say that the order is needed because of
"lower proceeds resulting from reduced demand and lower prices of competitive fuels and overseas coal."
Will the Minister confirm that we have the cheapest deep-mined coal in the EC? Will he also confirm, however, that we cannot compete with overseas coal, which is primarily opencast coal, as it is sold below the cost of production and is subsidised to offset the impact of the recession in what could be broadly described as the Western world? I do not include the slave labour conditions of South Africa.
I hope that when the Minister introduces future orders dealing with the coal industry he will say that it is in the country's defence interests to have a strong, viable coal industry.
Stretching to the middle east and beyond are politically unstable regimes. Therefore, to reduce the industry, as the Minister's speech implied would happen, would be against the national interest. It is still a classic truth that a nation without access to energy, particularly indigenous sources, will wither from the industrial league of nations.
We have more than 300 years of coal with existing technology and perhaps 1,500 to 2,000 years of coal when technology improves, as it surely will, and coal is still cheaper than oil.
The Minister said that higher interest rates were a factor leading to a need for increased borrowings. It is strange that the order is needed because of lower demand. The Government have created that by their policies, which have also generated an army of unemployed people and the wholesale destruction of industry. Is it not strange also that the Government should refer in the memorandum to high interest rates?
The Government and Conservative Members generally describe all of the money that the NCB receives as a subsidy. Will the Minister spell out what the NCB has to pay in interest on its borrowings? Does he believe that the so-called subsidies are a good investment for the nation? The Minister mentioned £800 million. No doubt it, too, will be called a subsidy.
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According to the Conservative party's reasoning, every industry receives a subsidy. I am glad that the Minister recognises that the Government are introducing order because of interest rates. I hope that he will remember that the NCB, like other industries, has had to pay interest. That is an elementary point, but, to listen to some hon. Members, one would think that the NCB was different and that every penny it received was a subsidy. I have described that attitude as "Thatcher's Law". The Prime Minister always describes the money that the NCB gets as a subsidy. It is strange not to apply the same argument to other public and private industries.
When the Minister discussed the external financing of the NCB, was any advice given about the other markets that will be available so that the problem of rapidly increasing stocks can be dealt with? What has happened about liquefaction? Will the order provide money to get the Point of Ayr scheme off the ground? In the past four years, we have had nothing but excuses on the liquefaction of coal and the Point of Ayr scheme. What is happening with the conversion schemes that the Minister mentioned? We are told that money is or is not available for that, but not much is happening. I understand that industry wants to go ahead but, for some reason, it is not proceeding at the pace that we were led to expect. Therefore, did the Minister discuss with the NCB any offers of Government help on coal to oil conversion schemes, which would do something to alleviate the problem of existing coal stocks?
What about coal gasification? Some interesting material on the subject has appeared on my desk. As a former Minister. I know that the technology is available to make synthetic North sea gas. The Minister would be constructive if he told what progress had been made.
Before approving the order, Parliament is entitled to be assured of the progress of the coal industry. We must be assured that the NCB, in conjunction with the Government, is organising the industry efficiently. To some extent the unions are accusing the NCB of not doing so as efficiently as it should. I have just attended the miners' conference at Perth. I saw no Ministry representatives present, and that was a pity.
The unions are accusing the NCB of violating long-established procedures on pit closures, because it seems that it is closing pits before the normal conciliation procedure takes place. That is serious. I refer, of course, to Cardowan in Scotland, about which there has been much publicity. May we be assured that the general organisation of the industry is as it should be? The industry has a long and proud industrial relations record. At one time my hon. Friends and I talked about industrial relations in the industry being the envy of the rest of British industry, but, according to the unions, a change has taken place.
It is alleged that the NCB is locking men out of the Polmaise pit in Scotland. Does that mean a change of strategy in the board's general organisation? Apart from an extra £500 million, should not the order call for a new industrial relations strategy? I hope that the hon. Gentleman will comment on these points because they are important.
The hon. Gentleman also suggested that the Monopolies and Mergers Commission's report substantiated the case for the increased sum for which he now seeks approval. The report has not been as well received by the coal industry as the hon. Gentleman seems to think. Its terms of reference are wrong and it will fall off its

723
pedestal. As the old saying goes, the wrong questions will produce the wrong answers. The unions even refused to give evidence to the commission because they recognised that the terms of reference were cockeyed.
It is right that we should mention anyone who gives great service to the coal industry, and the Minister was right to mention the imminent retirement of Sir Norman Siddall. It is only proper that we should mention someone who has given a lifetime's service to the industry and who is now ill. I do not want to criticise any of the Minister's generous comments. However, it is unfortunate that Norman Siddall will leave the industry against the background of a complete change in the Government's strategy. The previous Tory Government failed to sink a new pit and no new pit has been sunk in the short life of the present Tory Government.
The Minister knows that the appointment of Mr. MacGregor has not been welcomed in the industry.
Mr. Frank Haynes: It is a shocking appointment.
Mr. Eadie: A written question was tabled asking how Mr. MacGregor's £1·5 million transfer fee would be paid. It seems that the Department of Energy will have to pay it by making economies within the Department. This means that the energy industry generally will have to pay the fee. It is a most unfortunate appointment. It is equally unfortunate that the Minister, who is making his debut at the Dispatch Box in his new capacity, decided to suggest the policies and the roles that Mr. MacGregor should pursue. When are we to have a chairman who is as unacceptable to the coal industry and the unions as Mr. MacGregor, I fear not so much for him but for the future of the industry.
I hope that the Minister will see fit to reply to the serious issues that I have raised, for there are many of my hon. Friends who still have coal dust in their lungs. We love the industry and we believe that its expansion will mean prosperity for the nation. We shall fight like tigers to prevent anyone massacring what we regard as our industry and the nation's industry.
12.48 am
Mr. Barry Henderson: First, I must declare an interest as one who advises a small company in the private sector of the coal industry.
The House always listens with respect to the hon. Member for Midlothian (Mr. Eadie) when he talks about the coal industry, a subject about which he knows more than most of us. He has a great deal of practical experience. I cannot say that I agreed with all that he said, and some of what he did not say was of particular interest.
I was particularly interested in what the hon. Gentleman said about coal gasification, because if it had not been for the general election campaign, I would have gone to Westfield to see some of the advanced work being done by the Gas Corporation on coal gasification there. I also remember the hon. Gentleman speaking on a sad occasion on the Cardowan colliery, and his reference to it as a gassy pit. That is just one of the factors about Cardowan that should not be forgotten when there is an argument going on about whether it should remain open. Never mind the economics, which are bad enough, it is not a pit that most of us would like to see people working in in such danger.
Mr. Eadie: I am grateful for the generous comments that the hon. Gentleman has made, and I am not trying to score any debating points. I worked in the coal industry for 30 years, and all the pits in which I worked were gassy pits. Most of the pits in which miners work are gassy, so I hope that the hon. Gentleman will not hang his hat on the fact that the Cardowan pit is gassy.
Mr. Henderson: I shall not hang my hat on that fact alone. One of the troubles with some of the pits that are uneconomic is that they are often those that are the least attractive to ask a man to work in.
The order comes with a memorandum that says that the aggregate borrowings are increasing this year by £100 million a month between April and September, which is an enormous sum of money. It goes on top of the fact that in 1981–82 the Government granted aid to the Coal Board of £575 million, and the board borrowed a further £905 million. Those are enormous sums of money. The order comes at the same time as the Monopolies and Mergers Commission report on the National Coal Board, Cmnd. 8920, which is a devastating indictment of the ways in which the money provided by the Government over the years has been used in the national interest.
I think that it is in order for me to put on record what the commission has said, in careful, considered, judicious and judicial language, which has given all the more force to some of the points. For example, it says:
"The performance of the coal industry affects the whole of the United Kingdom economy".
That is a point that the hon. Member for Midlothian is emphasising. It adds:
"coal represents 45 per cent. of the Central Electricity Generating Board's costs."
On page 364, it says:
"On the information available to us, there is little possibility that the NCB will be able to operate without a deficit grant, let alone generate sufficient funds to finance any significant part of its own capital investment, before the end of this decade."
The part that is most serious and most relevant to the order comes at paragraph 19.9, on page 365, which says:
"The Plan for Coal of 1974 was intended to produce over 40 million tons of new and modernised capacity to meet the expected increase in demand and to offset the exhaustion of old capacity. There has in fact been no increase in demand and closures have taken place at a much lower rate than envisaged. Nevertheless, until very recently the NCB has persisted with its development plans. We are concerned that these appear to have taken precedence over the statutory obligation to adopt a policy directed to securing that revenues shall not be less than sufficient for meeting all the outgoings properly chargeable to revenue account on an average of good and bad years. We have drawn attention in paragraph 9.111 to the circumstances in which much investment has gone into collieries which are either unprofitable or of doubtful profitability."
That was not the purpose for which the funds looked for under "Plan for Coal" were to be used. Paragraph 19.11 states:
"even with the help of social cost grants, the financial aim set out in section 1(4) of the Coal Industry Nationalisation Act is unlikely to be achieved for many years…"
Paragraph 19.12 states:
"The NCB's present aim relating to output and demand seems to us to be undesirably vague."
Then follows a section about the problems of over-capacity and high-cost pits. The Minister said that the 10 per cent. least economic pits lose the National Coal Board more than £300 million a year. Surely, if 10 per cent. of production is losing money on that scale, that is a great danger to the future of the coal industry.
Mr. Martin J. O'Neill: The hon. Gentleman is taking the level of subsidy as a criterion for the closing down of an industry. Will he comment on the fishing industry in his constituency which receives a massive subsidy in comparison to the small amounts of money that the Government give to the coal mines?
Mr. Henderson: If I am allowed, I shall be happy to expand on the fishing industry. Suffice it to say that the aid given to the fishing industry at a critical time last year was, if I recollect correctly, £50 million.
Mr. Deputy Speaker (Mr. Harold Walker): Order. I hope that the hon. Gentleman will not widen the debate to cover the fishing industry as well as the coal mining industry.
Mr. Henderson: I am grateful, Mr. Deputy Speaker, for your protection. The National Coal Board was receiving £535 million each year for several years, quite apart from its borrowings which, as we see from the order, are rising to £5,000 million. That is a significant difference. I am sorry that the hon. Member for Clackmannan (Mr. O'Neill) raised such a trivial comparison.
Paragraph 19.17 states:
"The industry's case for investment in new capacity cannot be sustained if it is unable to close down older, uneconomic pits."
The NCB and the Government, with their responsibility to supervise it, have been remiss in their duty in using funds provided by the House when, under "Plan for Coal", certain action was to be taken by the Government on behalf of the nation and certain action was to be taken by the people working in the NCB. One side has fulfilled all of its obligations; the other has not. It is time that we did something about it.
Paragraph 19.19 states:
"the major reason for the over-production and the continued existence of so much high cost capacity, resulting in the present grave financial position of the NCB, has been the failure of the industry to achieve the elimination of 'a broad average of some 3–4 million tons capacity a year' that was accepted by the NCB, the unions and the Government, in the interim report of the Tripartite Coal Industry Examination in 1974."
The Monopolies and Mergers Commission states:
"The longer the problems are left the worse they will become."
It goes on to say:
"In the meantime, much taxpayers' money would have been committed and the price of coal might have been kept higher than it need have been, unnecessarily increasing the cost of electricity to industry and thereby reducing the country's competitiveness in the world market."
The NCB's failure to meet its obligation to improve its performance has done serious damage to our whole economy. The MMC, with its limited terms of reference, looked at only some of the board's operations. The one way to make improvements without substantial job losses would be to improve marketing at home and abroad. That aspect needs greater attention and we must look at introducing competition into the coal industry so that all sections of the community may benefit from a great industry which, I believe, has a substantial future.
I urge the Minister to look at the Telecommunications Bill as a possible model for obtaining improved organisation of the coal industry. I do not believe that the House should accept another order like the one before us unless there has been a substantial remedy of the fundamental failures that we have seen in the industry for too long.
1.1 am
Mr. Allan Rogers: It is with a great sense of honour and pride that I rise to make my maiden speech on behalf of the people of the Rhondda valley. I also do so with a great sense of sadness, because I am here as a result of the tragic death of my dear friend, the right hon. Alec Jones. I can say truthfully that I would much rather not be here.
Alec Jones served the people of the Rhondda valley in the House for 16 years. He gave his all for his friends and constituents. I am sure that a substantial part of my majority was an overflow from the reservoir of love and affection that Alec had created in our valleys. I only hope that I shall leave behind a similar residue.
Alec served his party and his country well, in the House and in Government as a Minister at the Department of Health and Social Security and at the Welsh Office. Recently, in Opposition, he was the shadow Secretary of State for Wales. During the election campaign in the Rhondda and since coming to the House I have heard nothing but praise for Alec's work and the warmth and regard of hon. Members, individually and collectively, have been an immense help to his wife and family in a very difficult period.
Following a long line of distinguished Rhondda Members, from Mabon to Alec Jones, I fully realise the heavy responsibility that I have inherited in representing an area which is still suffering, perhaps more than any other part of the United Kingdom, from the rundown of the coal industry. I have had some experience of representing the Rhondda, having served in the European Parliament for the past four years as the Member for South-East Wales. I hope to serve those people with the same diligence in this House as I have tried to exercise in Europe.
I have chosen this opportunity to make my maiden speech because of my interest in coal mining and general energy issues. To some people, the name Rhondda conjures up thoughts of derelict coal mines and the ravages wrought by the private companies. The hon. Member for Fife, North-East (Mr. Henderson) mentioned those companies. Perhaps he would like to return the coal industry to them. The Rhondda has improved substantially since it was left that legacy. Presently it will recover.
The Rhondda valley is probably the most spectacular of the valleys in south Wales. From the southern end of Porth to Blaencwm, Blaenrhondda and Maerdy the eye is constantly assailed by spectacular scenery.
The area was far more beautiful before coal mining started about 100 years ago. The beautiful oak forests were destroyed by the indiscriminate and thoughtless exploitation of the resource. The people of the Rhondda valley have to live with that. Whereas 40 collieries existed once, only two pits are now open and one of them is to close soon.
Many of the closures are due to geological problems and the exhaustion of reserves. That is accepted, but Opposition Members in particular know that many closures are the result of the lack of an effective energy policy for the United Kingdom. We hope that the Government will produce a rational plan for the development of energy resources. When better to plan such a policy than at a time of plenty, instead of it being an hysterical response to a crisis.

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In a document accompanying the order the Department of Energy states that the National Coal Board needs an increase in external finance because of reduced demand and low prices of competitive fuel and overseas coal. Higher interest charges have also been a factor leading to a need for increased borrowing.
It seems not to matter that our mines are the most efficient in the world. It does not seem to matter that the output per man shift has increased continually since "Plan for Coal". That was not taken into account in hon. Members' obtuse mathematics.
The miners are suffering from success. The penalty of success in the mining industry is closure. Because of the Government's inability to keep energy demand at a reasonable level, the miners who have worked so hard to make the industry efficient and effective have to suffer the penalty.
I was intrigued by some remarks by the hon. Member for Fife, North-East, who has a fishing as well as a coal interest. He spoke of introducing competition to the coal mining industry. It is obvious that he knows nothing about the industry, but he has an obvious need to read chapter after chapter from documents.
I have a copy of the Coal industry Commission Act 1919, which I commend to the House and an interim report by the commission, chaired by Mr. Justice Sankey, who later became Lord Chancellor. The first world war was almost lost because of the incompetence of private industry in providing the necessary back-up for our soldiers in France. It was decided to set up the Royal Commission and its recommendations were substantial. It was said that the coalmining industry was too vital to the country to be left to private greed.
In 1919 the commission stated categorically:
"Even upon the evidence already given, the present system of ownership and working in the coal industry stands condemned, and some other system must be substituted for it, either nationalisation or a method of unification by national purchase and/or by joint control."
It went on to state, illuminatingly:
"We are prepared, however, to report now that it is in the interests of the country that the colliery worker shall in the future have an effective voice in the direction of the mine."
Even in 1919 Mr. Justice Sankey suggested that our indigenous fuel resources were too precious to our economy to be left in the hands of private industry.
However, that has been the sad history of nationalisation in Britain. One after another of our industries has had to be nationalised because it has been driven to bankruptcy in private ownership. Once the state has restored an industry to profit, the Conservative party wants to sell it off to make money for its friends. They cannot do that with coal mining, because the miners will not stand for it.
When Conservative Members quote facts, they should at least get them right. British miners can compete against the miners of any other country, and certainly against their European colleagues.
I shall give the House some comparative figures issued by Commissioner Davignon to the European Parliament committee on energy and research. He sets out the financial measures taken by member states to support coal mining output. I am sorry that the figures are in ecus. I should much rather be out of the Common Market so that we could measure them in sterling, but as Conservative Members wish us to remain in the Community they can multiply the figures by 0.·58 to convert them to a decent
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coinage. The Federal Republic of Germany's support in ecus per tonne is 7·97. In Belgium it is 31·68, in. France it is 36·4 and in the United Kingdom it is 5·81 Does the Conservative party expect the British miners to compete under that handicap? Is that a free market? Are they unfettered going into the areas in which we wish them to compete?
If the Minister does not believe that these are valid figures, I am prepared to argue them more forcefully. the figures show indirect measures, such as special depreciation, facilities for expansion, rationalisation for coal mining underground, expenditure on season tickets and — this is a new concept for NUM-sponsored Members—reduced holiday travel warrants for miners. Perhaps there is some benefit in staying in the Community.
The direct measures include investment aid, concession for initial innovation, miner's bonuses, aid to attract qualified personnel, pit head stock aid, aid for contingency stocks, aid for power station coal, aid to cover pit operating losses, and a separate category of coking coal aid.
I am sorry, Mr. Deputy Speaker, if I have broken with tradition by making such a maiden speech, but I am passionate about coal mining. I am the youngest of 12 children, and my father, who was a coal miner, was crippled in 1926 and did not have an opportunity to work until the war brought some jobs to my area of south Wales, so perhaps the House can understand my passion. My opinion of miners—it is a reasoned judgment—is that they are the hardest workers that one could come across and that they are a proud people. I am proud to represent them, the Rhondda valley, and to have succeeded Mr. Alec Jones.
1.14 am
Mr. Martin J. O'Neill: I am pleased to have the opportunity of following my hon. Friend the Member for Rhondda (Mr. Rogers) who made a moving and apposite speech, not just in paying tribute to his distinguished predecessor but in showing, on the basis of that contribution, that he has a distinguished career ahead of him in the House. The mixture of compassion, reason and erudition made it plain that we can expect some valuable contributions from him.
I am speaking in a coal debate for the first time because a readjustment of the constituency boundaries has brought Polmaise, a coal mine which is at the development stage, into my constituency, although since 1979 I have had the pleasure of having Castle Bridge mine in my constituency. When I was a prospective candidate my hon. Friend the Member for Midlothian (Mr. Eadie) invited me there. It was the only shaft sunk since about November, 1978.
I want to talk briefly about the Minister's complacency when discussing the future of mining. I had the experience of visiting Polmaise pit in Stirlingshire this morning. The men are not preparing the mine for increased production. They are being locked out by a management whose approach to industrial relations brings back all the worst memories that resulted in the Sankey committee report. The way in which the management of the National Coal Board in Scotland is handling the cut-down and closure does not bode well for the industry's future in Scotland.
It is not for me to enter a debate now about the possible closure of Cardowan, because the colliery review procedure has about six and a half months to be worked through. However, it would appear from the reports that

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I received this morning from the delegate from that pit that the board seems to assume that the review procedure is unnecessary and that the men should be dispersed at the earliest possible opportunity. The indecent haste with which the Coal Board seems to be carrying it through has brought about some of the strangest happenings in recent memory. Men are being given an extra week's holiday to leave Cardowan and go to another pit. The disturbance money is being brought forward within days when normally such procedures take weeks if not months.
The problem arose in the Polmaise pit because there was an agreement between the National Coal Board and the unions which was confirmed in May this year during the general election campaign—although that has little significance—that there would be no transfer of men into Polmaise before any of the men from there had moved to the Longannet complex.
The NUM officials at Polmaise approached Mr. Wheeler of the Coal Board courteously last week to discuss the point that before any men came from an outside pit consideration should be given—I hasten to add that it was no more than consideration—to the agreement that had been entered into with respect to the men who had been transferred from Polmaise to the Longannet complex. Mr. Wheeler refused to speak to them. Following that, a certain situation was created—a lock-out. It has been said that there are allegations of a lock-out, but there are no allegations, only facts. The facts are quite clear. The men in that pit are prepared to go to work. They have been turning up, but have found the gates closed. That is intolerable because the men were expecting big pay packets before their holidays. It brings back distasteful memories of the board's tactics when it sought to close Kinneil colliery just before Christmas. It is now trying to do something equally distasteful just before the summer holidays in the Scottish coalfield.
I do not share the Minister's optimism and complacency, because I know that many of my constituents are very anxious about the future of the coal industry in Scotland, and are distressed at the tactics adopted by the board's management. We can only assume that it stems from national decisions taken in Hobart house. It has been suggested that many of the difficulties are attributable to the lack of demand for the product and to failures that can be directed towards the NCB. Unfortunately, the hon. Member for Fife, North-East (Mr. Henderson), in his copious quotations from the report of the Monopolies and Mergers Commission, forgot to look at page 374. Perhaps he did not get as far as that. Paragraphs 4·70 and 4·71 refer to demand forecasting and state:
"Comparison of the forecasts made in past medium-term development plans with outturn shows that the errors in the estimates of total disposals of NCB coal are somewhat greater than the NCB might have expected. A large part of the error can be attributed to over-estimation of demand for coking coal."
The report goes on to say that that stems from plans adopted as a result of the British Steel Corporation's proposals.
If we are to talk about the funding and future of the coal industry, we must make it clear that the problems confronting the industry are not the creation of the industry, but are the result of the Government's failure to manage the economy adequately. Some of the difficulties simply result from the fact that the NCB has compounded
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its problems, faced — as it is — with an increasingly depressed and depressing economic prospect for the United Kingdom as a whole. It thinks that it sees the writing on the wall for the industry, and is thus behaving in this way. Although we welcome any money that is put in the coal industry we regret the amount, the direction and the Government's lack of commitment to sinking new shafts and to taking advantage of the technological advances that my hon. Friend the Member for Midlothian supported when he was responsible for the coal industry.
Those of us who are in any way involved with the coal industry welcome the continuance of the NCB's borrowing powers. We recognise that the order is debated against a profoundly depressing background that does not bode well for the long-term future of those whom I and most of my hon. Friends represent.
1.23 am
Mr. Dennis Skinner: We should discuss the NCB's borrowing powers in the context of the sort of borrowing that takes place in other industries. I do not want to develop any of the arguments about fishing, but there are many other examples, and it should not be assumed that because the NCB is borrowing, nobody else is at it.
The other day I read that agriculture received £1,300 million of support. I am not making a special point about that, but I do not hear many Tory Members—including the hon. Member for Fife, North-East (Mr. Henderson), who was complaining, and the Minister—spending too much time whining about the 73x00A3;1,300 million of support for agriculture. The reason is that we want to cut imports of agricultural products. We want to make sure that we produce as much as we can in this country. There may be arguments about whether money is used well, or whether the common agricultural policy is a mess, as it obviously is, but the principal argument about providing the money to establish the support to cut down the import bill is accepted by almost every hon. Member. It is only the mechanics that we quarrel about.
The same is true about money that is spent —although not in the same way—in the Common Market. We do not all agree on money going there. We heard the figure from the Prime Minister the other day—£3,800 million in net contributions over the past 10 years. We should compare that with the amount of the money that the coal board gets. Let us forget about the borrowing powers. This measure is about saddling the industry with a lot of interest as a result of the borrowing that has to take place. Compare it with the amount of money that goes to the Falklands. My hon. Friend the Member for Linlithgow (Mr. Dalyell) said that that is £3 billion. I know for a fact that the Government are spending £600 million this year. Then they talk about uneconomic pits. There are uneconomic things all over Britain, and the British taxpayer finds money, via the Chancellor of the Exchequer, to prop them up. This place is a typical example, coupled with the other place. How much money is used to subsidise this place? No one quarrels with that, because we need a parliamentary forum to pass legislation, or to try to stop it, although some of us could devise a better system, whereby we were not here at 1.30 am, fighting for the miners, or others. We need to spend the money. The same is true of many industries, organisations and establishments. So let us not single out the National Coal Board and the miners for this treatment.

731
When we talk about uneconomic pits, I can tell the Minister, the Monopolies and Mergers Commission, and all those clever people, that there are those of us who have worked in uneconomic pits for a year, and some of us were there for two or three years. Suddenly the strata and the geology changed, the water went, the gas was less than before, and the overheads were massively cut. Suddenly that pit, which had a high sulphur content and goodness knows what else, became economic and finished at the top of the league. The 10 per cent. of uneconomic pits are changing all the time. If we ask the Monopolies and Mergers Commission or anyone who knows a bit about the industry to list the 10 per cent. of uneconomic pits in, say, three months' time, we can bet our bottom dollar that they will be different from today's list. A few of them may still be the same, but the fact remains that the others change.
There is a pit in Derbyshire—Westhorpe colliery in the constituency of my hon. Friend the Member for Derbyshire, North-East (Mr. Ellis) — which was scheduled for closure in 1966 during a wave of pit closures between 1964 to 1966. Then it was suddenly realised that coal was running short. The coal from the colliery had a high ash content, and we were told that it had to close. Norman Siddall was in charge of area No. 1 in north Derbyshire—the very man that some people want to congratulate. I reserve judgment. Suddenly the cry was that Westhorpe — and all the others — had to be kept open. That was when the picture changed. When the oil boom was over, when companies in the Middle East were nationalised, the picture suddenly changed. The miners were wanted again.
Now we are going through a similar phase. I say to those who view this measure purely from the point of view of pounds, shillings and pence, "Take a longer-term view". I point out to the Minister that a Bill went through the House the other week that had some sense in it. Its aim, in trying to get all the oil and gas out of the North sea that we possibly could and to ensure that not a drop was left down there, was to allow the marginal oilfields to be exploited. The Government said that they would allow those marginal fields to be operated on the basis that the taxpayer would be asked to put more money in so that the oil companies would develop them. Labour Members want to do the same in a different fashion. We believe that the state should do it. But the general principle of ensuring that the energy available in the North sea is maximised applies in the same way to the marginal 10 per cent. of pits that the Minister is talking about.
This is the Minister's first appearance at the Dispatch Box. I spoke to his predecessor who is now the Economic Secretary—he has some fancy name. He said that he would look into the subject of concessionary coal for those who had seen the pits closed in the 1960s before redundancy entitlements came through. The Minister should listen carefully. Those people worked in the pits for 40 years and more. They were between the ages of 50 and 60 and they could not get concessionary coal at that time. That was true not only in Derbyshire in my constituency and in the Blackwell and south Normanton area, but also in Durham and Lancashire. The hon. Gentleman promised to look into the matter. He told us that it would cost £1 million. The department will pay MacGregor £1½ million out of its funds to get him down to the National Coal Board, yet it cannot find concessionary coal for this dwindling band of 70 and 80-year-olds and their widows.
732
I hope that the Minister has a note of what I am saying. It will be in Hansard the day after tomorrow. We want that coal for those who have served the industry well.
If the Minister wants to get rid of some of those 60 million tonnes of stocks that he mentioned, why not allocate part of the domestic fuel stocks to the pensioners for the winter? They do not need 60 million tonnes. Let them have a few extra bags to stave off hypothermia.
I have another idea. If there is all that coal at the pithead, tell the Central Electricity Generating Board that the miners, the miners' parliamentary group and the Labour party will get rid of standing charges for electricity providing that the coal is sold a little more cheaply. How is that for an offer? Can the Minister refuse that in order to reduce some of the 60 million tonnes so that the pensioners and disabled will not starve this winter?
I have many more things to say. The money will be used for borrowing. Some of it will undoubtedly find its way into more wages this autumn. There is now talk—quite apart from the board over-reaching itself at Polmaise and elsewhere in Scotland — of this fancy Dan from America with a tax fiddle of £1½ million, saying that there will be no pay increase for miners. I hope that the Government and Mr. MacGregor will not combine and overreach themselves to the extent that they tell the miners that they have nowt to come in their pay packets on a national basis this autumn. They will find that they have picked a nail up. I warn the Minister and Conservative Members, who are clamouring to get at the miners' throat because they have voted in ballots in a way in which they have interpreted as a sliding towards defeat, that that is not the case. Go a little too far and they will find that the miners will rally as they did in 1972 and 1974. I was told then that the mining industry had had it and would never return to unity. Suddenly, there was a flashpoint in 1972 and 1974 and it will happen again. It may be that I shall relish that moment, but that is another argument, not for tonight. I warn the Minister and the Government—do not go too far.
1.34 am
Mr. A. J. Beith: There are many things that more time would have allowed us to explore tonight, such as challenging the Government on whether they recognise that the competitiveness of the industry depends on investment, and investment depends on borrowing. That is what the debate is all about. We should have had the opportunity to challenge the Government on the marketing of coal. If there is too much coal around, the first answer must be to make better use of the coal available, selling it at home and abroad.
In the little time that is left to me, however, I shall refer to those more immediate aspects of the future of the industry which affect my constituency. There is a background against which my constituents view Government energy policy. They are faced with the prospect of having on the doorstep of two collieries a nuclear power station. It is part of the Government's commitment to nuclear power, which shows a remarkable confidence in the dubious accounting of nuclear power, which has been fully shown up by the Select Committee on Energy, alongside an inadequate confidence in the coal industry, the record of which is more clearly proven and in which figures are much clearer and easier to predict.
That is remarkably obvious at Druridge bay in my constituency, where the nuclear power station is

733
threatened to be built. Alongside the proposed site is the productive Ellington colliery, and another two miles down the road is another colliery now under a closure proposal, Lynemouth. Within my constituency there is a third pit, Whittle. A fourth colliery, Shilbottle, was amalgamated with Whittle just a couple of years ago, under schemes for resettling miners, which Conservative Members questioned at the time.
The hon. Member for Tynemouth (Mr. Trotter) criticised the National Coal Board for paying miners disturbance money to move from the Shilbottle to the Whittle colliery. I wonder whether Conservative Members will do the same again as the NCB attempts to amalgamate the Lynemouth and Ellington collieries. There is not much prospect of that amalgamation going through if it is subject to such an attack from Conservative Benches as the previous amalgamation was.
The Ellington colliery is a remarkable success story, which proves what investment can do in the coal industry. Lynemouth colliery was intended to be the same. In its time it was a showplace pit, but it has had beyond its share of bad luck in its time, ranging from the fire that it experienced to some of the geological problems that it now has. It has not been a lucky pit, and has not had the level of investment that Ellington has.
The miners at Lynemouth, who now have to consider whether to accept the amalgamation proposal, view it against the background of a headlong, unrestrained Government commitment to nuclear power right on their doorsteps. They view it also against the background of the appointment of Ian MacGregor to the chairmanship of the board and the threat that that poses to some of the pits to which some of them are to be sent if the closure goes through.
One of the features of the proposals that caused most anxiety at the initial stage was that not all the men who would stay in work, as opposed to those who would get redundancy or early retirement, were to be offered jobs at Ellington. Some of them were to go to other pits, which may on the face of it have a decent future, but may not have much of a future when Mr. MacGregor takes over the National Coal Board and the pressure for closure increases. It is important that the NCB ensures that there is a future for all the Lynemouth men at Ellington if it wants the amalgamation to go ahead.
The matter is still under discussion. Neither I, the Minister nor hon. Members should make the task of either side of the discussion any more difficult, but it would be easier if there were a clear guarantee that all the men who want to will be able to go to Ellington. If the National Union of Mineworkers reverts to its historic practice of always operating by secret ballot, the discussion could proceed in the best possible way. It was an unusual lapse from that practice that a lodge meeting at Lynemouth just over a week ago had an open show of hands vote on a closure proposal. There is no union with a better record of operating secret ballots than the NUM, which in its existing practice goes beyond what the Government wants to enforce on other unions. It is by traditional NUM democratic procedures and the usual consultation process that this issue should be examined.
The Government, in seeking to encourage the board to undertake measures that involve closure proposals, cannot divest themselves of the image that their nuclear
734
enthusiasm has created. They are bound to find that closure and amalgamation proposals such as those at Lynemouth and Ellington are viewed against that background. It is a difficult decision for the men to take, faced with this apparently massive commitment to nuclear power and with the threat that they understandably see in the appointment of Mr. MacGregor. They want to see much more commitment to the coal industry than has been demonstrated in what the Minister said tonight or in recent Government statements and decisions.
1.40 am
Mr. Frank Haynes: I wish to take up one point that the Minister made about the mining industry. Why have the sales of coal fallen? We hear far too many explanations from the Government Dispatch Box for what has gone wrong in the mining industry. Since May 1979 the mining industry has taken a hell of a bashing from the Government by way of comments, which has not helped matters. The Government have attacked the NUM and the national president. That is all they do. At the same time they have attacked the trade union movement as a whole, which in turn affects the NUM.
I have been a member of the NUM for many years. I feel the things that are said by Ministers at the Dispatch Box and the comments made by Conservative Back Benchers. Why have the sales of coal fallen? Why is the electricity industry in its present position? What is wrong is that half of industry has been closed down by the Government's policies. Industry is not buying coal, but the miners are breaking output records at most pits. They do so regularly in my constituency at pits which, not long ago, the coal board said it would close.
A beautiful example is the Sherwood pit in the constituency of my right hon. Friend the Member for Mansfield (Mr. Concannon). I remember Sir Hubert Houldsworth, the then coal board chairman, deciding that Sherwood pit should close. I remember Lord Taylor of Mansfield, formerly the Member for Mansfield, appealing to Sir Hubert Houldsworth not to close the pit. The pit was unprofitable at that time. My hon. Friend the Member for Bolsover (Mr. Skinner) made the point that, in a short space of time, the circumstances at a pit can change. It may be uneconomic at one moment, but four months later the position may have changed. That was the case with Sherwood and it now makes a profit of about £6·5 million a year.
It is no good the Government saying that they have nothing to do with closing pits and that they leave that to the coal board. They have tied the coal board's hands behind its back. They are forcing the National Coal Board to take these decisions. Mr. MacGregor has his marching orders. We are not daft. We have worked in the mining industry for far too long. We know what is going on. Mr. MacGregor has his orders on pit closures.
I wish to tell the Minister, the Government and Conservative Members that there will be one hell of a fight from the NUM. It is no good saying that the NUM has had a ballot before. The mistake then was that closures were linked with wages. There will be a question on the ballot paper this time about pit closures. I wish to make it clear to the Government that things will be different this time. The lads at the pit realise what is going on. They will understand the issue of pit closures and they will realise that they are being put out of work by the way they are working—by the bonuses they earn, by the increased

735
productivity in the industry and by the stocks of coal that are costing the coal board a fortune because industry, as a result of Government policies, does not need it.
I could speak for a great deal longer—[Interruption.] —I nearly swore then. It is all very well for my hon. Friend the Member for Hemsworth (Mr. Woodall) to keep on at me, but I was squeezed out of one coal industry debate. I had been here all night and was not called, although my hon. Friend was.
Mr. Deputy Speaker: Mr. Giles Shaw.
Mr. Alec Woodall rose—
Mr. Giles Shaw: I give way to the hon. Member for Hemsworth (Mr. Woodall) for 60 seconds.
1.44 am
Mr. Woodall: I am grateful to the Minister. My hon. Friend the Member for Rhondda (Mr. Rogers) made an excellent maiden speech which should have been heard in a much more crowded Chamber. He put his finger on the pulse. The problems of the mining industry have been created by its success.
I put just one question to the Minister. When energy experts are saying that North sea oil and gas will be in decline by the late 1980s, why are the Government considering installing a natural gas pipeline from the mainland to Northern Ireland? Why, when all the experts say that it would be much cheaper, would help the country, Northern Ireland and the mining industry if a coal-fired gas plant were installed in Northern Ireland, are the Government laying a gas pipeline?
1.45 am
Mr. Giles Shaw: With regard to the last point of the hon. Member for Hemsworth (Mr. Woodall), when I was responsible for those matters in Northern Ireland I recall that we had a large coal capacity. We then built a large oil capacity. The problem of supplying energy that is generated in Northern Ireland at a reasonable price remains. I suspect that the gas pipeline to which the hon. Gentleman referred is that from Kinsale in the south.
I thank the hon. Member for Midlothian (Mr. Eadie) for kindly welcoming me to these debates. I shall be glad to learn as much as I possibly can in as short a time as possible. I suspect that it is from people such as the hon. Gentleman that I shall learn important facts about the industry.
The hon. Member for Rhondda (Mr. Rogers) made an exceptional speech on a subject that he knows well—the coal industry in Wales. He spoke in a manner which was up to the high traditions that his predecessor ably demonstrated to the House. Those who knew his predecessor respected him greatly. I am sure that we shall hear much more from the hon. Gentleman. I wish him well.
The issues that have been raised fall into two parts. The first concern individual constituency problems relating to the closure or threatened closure of pits. The hon. Member
736
for Clackmannan (Mr. O'Neill) raised the difficulties at Polmaise. I agree that circumstances there are extremely unsatisfactory. He will know that the problems associated with the transfer of men from Cardowan has resulted in disagreement whereas agreement had been reached with the NUM. I hope that better thoughts prevail in a day or two.
Likewise, the hon. Member for Berwick-upon-Tweed (Mr. Beith) mentioned the transfers to Ellington from Lynemouth. I fully understand his point. It is vital that a long-term future be guaranteed to any transferee who is asked to move to another pit. However, the hon. Gentleman knows as well as anybody that the judgment of the time is the best that can be made. That must remain the view.
The second group of issues concern the NCB's financing and future. The Government's commitment to continue financial support for investment and for running costs, as the order makes clear, is complete. It is crucial that we support and develop an effective coal mining industry, based on the obvious fact that the resources available are substantial, will last much longer than most other resources at our command and, if efficiently mined, must produce a world-beating resource. We are really discussing, once again, the short-term problem of financing and the long-term problem of development. The two are interconnected because the problems that we face in deficit financing are clearly due to the difficulties of trying to sell coal at the price at which it is mined.
The hon. Member for Bolsover (Mr. Skinner) is quite right to say that there will be changes. Today's economic pits can become tomorrow's uneconomic pits. I guarantee to examine the issue of concessionary coal which he raised again today quickly. As my hon. Friend the Economic Secretary to the Treasury is here, I can say that I know that he will keep himself up to the mark in that regard.
We must arrange the affairs of the coal industry in such a way that investment can continue and the sale and marketing of coal can be expedited. There can be no question but that we can produce coal that can be more competitively priced. As a result, larger volumes will be sold, there will be greater viability within the industry and greater job security.
The House will surely agree to pass the order to lift the borrowing to £45 billion, as permitted by the Act. I welcome the debate, and I trust that the House will pass the order.
Question put and agreed to.
Resolved,
That the draft Coal Industry (Borrowing Powers) Order 1983, which was laid before this House on 1st July, be approved.

INTERNATIONAL MONETARY FUND
Resolved,
That the draft International Monetary Fund (Increase in Subscription) Order 1983, which was laid before this House on 23rd June, be approved.—[Mr. Moore.]

Bournemouth (Hospital Services)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Major.]
1.50 am
Mr. David Atkinson: In many ways this is a follow-up to the Adjournment debate of last December initiated by our former colleague, Sir John Eden, in which he highlighted the ever longer waiting time faced by our constituents in the east Dorset health authority for urgent orthopaedic surgery.
Tonight presents me with an appropriate opportunity to pay my own tribute to Sir John for his long service to Bournemouth as well as his distinguished service in Government to the country, and to thank him for his many kindnesses and his friendship during my five-and-a-half years in the House. I wish him every happiness and health in his new activities and his retirement.
My hon. Friend the new Member for Bournemouth, West (Mr. Butterfill) has just joined me, and I understand that he hopes to catch your eye, Mr. Deputy Speaker, after I have sat down.
In Sir John's Adjournment debate last December, my hon. Friend the Member for Hampstead and Highgate (Mr. Finsberg), then Under-Secretary for Health and Social Security, referred to the hopes that the health authority would be able to commence the construction of a new two-phase, 670-bed district general hospital at Castle Lane in my constituency. A categoric assurance that the building of this hospital will commence as planned by the authority next January is the main purpose of this debate.
In this respect, the debate could not have been better timed, because three weeks ago a health authority spokesman said that the authority was expecting my hon. Friend's Department—I congratulate him on his new appointment — to announce this month that the first phase of the hospital, with 281 beds, four operating theatres, X-ray departments, diagnostic facilities and residential accommodation for nurses and staff, would go ahead as planned.
This would enable tenders to be invited this month for a start in the new year, with completion by January 1987. There was every reason to believe that that announcement would be made last Friday, but as my hon. Friend will know, it was not. I hope that he will explain why. Better still, I hope that he will use this opportunity to make that announcement.
I must tell my hon. Friend in no uncertain manner that if the Castle Lane hospital does not proceed in the new year, as planned by the health authority, the Government will incur the wrath not just of my constituents but those of my hon. Friends the Members for Bournemouth, West, Poole (Mr. Ward), Christchurch (Mr. Adley), Dorset, North (Mr. Baker), and Dorset, South (Viscount Cranborne) — the areas to be served by the hospital when it is completed — as well as that of the entire medical and nursing staff who strongly believe that this area had been scandalously denied the proper facilities and resources to match local needs.
Castle Lane hospital has been promised for well over 20 years. When I was first elected as the Member for Bournemouth, East in a by-election in November 1977, the start date for the hospital was then expected to be 1979–80. I suspect that if it had not been for the cuts in the hospital building programme that were made by the then
738
Labour Government, the first phase of the hospital would have now been opened. Changes in national hospital building policy and resource assumptions and objections by the authority and local medical staff to national standard design solutions have all contributed to delay in the submission of the present plans to the Department.
During the past seven years, the authority has understandably been reluctant to use capital resources to develop services in existing hospitals which would have become obsolete. This means that existing facilities are having to cope with demands for which they were never designed or built. The crisis will remain until the second phase of the new hospital is completed in 1990–91, according to existing health authority plans.
The authority and its acute services will be facing major problems over the next few years due to pressure on existing facilities and the ever-increasing demands of a rising and elderly population. There will not be enough hospital beds in Bournemouth and Poole to cope with the increased population that is anticipated and planned for the rest of the decade.
It was because of this crisis that last Friday the health authority discussed a number of complex options, including the reopening of a 15-bed ward at Christchurch hospital in four months' time. It is planned that the ward will be used mainly for orthopaedic patients who need physiotherapy. The options are designed to reduce the hospital waiting lists for operations, to which Sir John Eden referred and highlighted in an Adjournment debate in December 1982, and especially to provide short-term relief of the pressure on trauma beds in Poole hospital.
The situation is so acute at Poole that those who have been on the waiting lists have had to telephone the hospital on the morning of admission to check bed availability. It is not unusual for patients to face postponement on at least three or four occasions due to trauma overflow. Between January and April 188 operations had to be postponed at Poole hospital. Similarly, waiting lists for orthopaedic surgery at Christchurch hospital have often been postponed. Boscombe hospital has had to accept additional acute admissions despite its cramped space and old buildings.
The fiddling around with limited resources to produce stop-gap schemes is the cause of great frustration and concern to the medical and nursing staff, which understandably feels that the Department has failed to appreciate the problems that are facing the area. It is an area in which there are 93,000 people over the age of 65 years. That is nearly a quarter of the population and is one and a half times more than the average over-65 population. The area has more than twice the average level of people over the age of 75.
I should like to know whether these factors are given the special recognition that they deserve in the existing allocation of resources. I must tell my hon. Friend that we in Bournemouth do not think that they are. We regard the east Dorset district as one of the most underfunded districts in the Wessex region, which itself is an underfunded region in accordance with the RAWP formula.
I hope that my hon. Friend will be able to assure the east Dorset district that it will benefit in real terms from the increase of 1½ per cent. that my right hon. Friend the Secretary of State so recently announced would be available to the Wessex region. If it is so to benefit, the district will be better able to cope with the crisis that it will

739
have to meet for the rest of the decade. Such an assurance will be extremely useful for all Dorset Members when they meet the health authority chairman and officers on Friday.
I wish to emphasis that such extra resources may make all the difference in finding a solution to another inadequacy that has long been a source of contention and concern among my constituents—the establishment of a seven-day, 24-hour casualty service at Boscombe hospital. This was the subject of a report published last month by the east Dorset community health council, which has published reports on the inadequacy of the accident service in its district almost every year since 1977.
Until recently, emergency cover at Boscombe hospital has been restricted to between 9 am and 4 pm between Monday and Friday, so that every night, every weekend and every bank holiday there has been no local cover. Someone who has sustained an accident that is not regarded as a medical emergency has to endure a long and painful journey, through congested town centres, to the Poole casualty hospital.
This is not the first time that I have referred in the House to the traumatic experience that my wife had in 1978, shortly after we moved into the constituency. She was carrying our son, who was then 12 months old, and tripped and dropped him on a stone path. As he was stunned, she took him to Boscombe hospital, where because it was nearly 4 pm on Friday, it was closing time for the casualty, which, anyway, had no X-ray facilities. The hospital advised her to take him to Poole hospital, to which she drove in despair in rush hour traffic, taking more than half an hour. That is an experience that has been shared by too many of my constituents and visitors to Bournemouth for too long.
I know that since May of this year, the minor casualty unit hours at Boscombe hospital have been extended to 7 pm Monday to Friday until September, but that is not good enough for a major holiday area such as Bournemouth. I hope that we shall hear tonight that support resources will be made available for a full day and night service, seven days a week at the Boscombe hospital, as the community health council has been urging with the full public support of my constituents.
2.2 am
Mr. John Butterfill: I am grateful for the opportunity of supporting that which has already been said in the House by my predecessor, Sir John Eden, and that has again been brought to the attention of the House this evening by my hon. Friend the Member for Bournemouth, East (Mr. Atkinson).
The people of Bournemouth legitimately feel that they have been neglected for far too many years. As my hon. Friend told the House, the site for the hospital has been available for 20 years, and repeatedly, assurances have been given to the people of Bournemouth that the new hospital will be built "in the near future". However, this has not happened, despite the fact that new hospitals have been built in places such as Basingstoke and there has been a major hospital extension in Southampton. There is a justifiable feeling of grievance among the people of Bournemouth that they have been overlooked when their need is obviously so great.
Many consultants at the hospitals in Bournemouth, and particularly the Boscombe hospital, have made heartfelt complaints to me about the conditions under which they are being forced to work, and have told me of the danger
740
in which critically ill patients have been transferred by a long and difficult road journey to Poole hospital, sometimes at severe risk to their lives. This cannot be permitted to continue, and I urge the Minister to give us the assurance that my hon. Friend the Member for Bournemouth, East has requested this evening.
Only this week, I had a letter from one of my constituents who lives in Bournemouth. She is extremely disabled, and it is extremely difficult for her to travel, but she had to travel to Christchurch to obtain medical treatment. She was transported there by ambulance. Due to the traffic conditions at that time of year when Bournemouth has many welcome visitors, she could not complete her journey in time for her appointment. When she arrived, the surgery had finished and she was then forced to travel in considerable discomfort to her home, having spent an entire morning travelling to and fro without receiving any treatment. The position is quite intolerable and must be remedied with all possible speed.
2.10 am
The Under-Secretary of State for Health and Social Security (Mr. John Patten): I congratulate my hon. Friend the Member for Bournemouth, East (Mr. Atkinson) on securing this debate and on vigorously raising once again the issue of hospital services in his constituency. The critical question is whether the health authority can now invite tenders for the new district general hospital at Castle Lane, Bournemouth. My hon. Friend has been pressurising my Department, and my predecessors, for a considerable period. I thank him for his congratulations on my transfer from Stormont Castle to the Elephant and Castle. It sometimes takes considerably longer to get to the Elephant and Castle than it did to get to Stormont Castle.
I certainly appreciate my hon. Friend's long standing interest in health care and the well-deserved compliments that he paid to Sir John Eden, who served Bournemouth, West for so long and in such a distinguished manner. By becoming an hon. Member of the House at such a young age, he was able to retire with many years of honourable service behind him but with enough years ahead of him for one, two or three more careers. I was also extremely pleased that my hon Friend the Member for Bournemouth, West (Mr. Butterfill) was fortunate enough to catch your eye, Mr. Deputy Speaker, and to raise points about the needs and interests of his constituency. Having heard my hon. Friend briefly speak today, I am all the more sorry that I was not in the Chamber when he made his maiden speech on the Second Reading of the Housing and Building Control Bill.
The critical issue is the new district general hospital. My hon. Friend the Member for Bournemouth, East said that this hospital development has been waited upon for a long time. It has been given the highest priority in the district's plans and a high priority by the regional health authority. I understand that it is hoped to start work on the new hospital in January 1984. I stress the word "hoped". In view of the recent statement on 7 July by my right hon. Friend the Chancellor of the Exchequer about necessary adjustments in public expenditure in the current financial year, spending Departments, of which the DHSS is one, are having to reconsider their priorities. This means that we shall have to review our spending plans to assure ourselves that they are still feasible. Accordingly, regional health authorities have been asked to review their plans in the light of the new cash limits for 1983–84 and to start

741
planning ways in which they can bring their proposed expenditure for this year into line with these new cash limits that restore our cash balance. My right hon. Friend the Secretary of State has decided that the overall adjustment will be made on a pro rata basis among the 14 regional health authorities. I am glad to reassure my hon. Friend the Member for Bournemouth, East—although on precious few other points — that the original differential effect of this year's cash limit will be maintained. My hon. Friend can be reassured that the position of Wessex relative to other authorities will not be affected by the revised allocation.
Clearly, regions will need time to look at their overall programmes in the light of their revised allocations and of their own, perhaps revised, priorities and to decide how that will affect their districts in turn. So a decision on whether tenders can be invited on the Bournemouth hospital scheme will have to be deferred for a little time yet, but I can assure my hon. Friend that there will be no unnecessary delay. I thought it important to point out the context in which that unfortunate and difficult decision had to be taken.
I know that my hon. Friend has been concerned about delays on this development in the past. I believe that plans for a new hospital in Bournemouth were first mooted as long ago as at the end of the last war—even longer ago than my hon. Friend suggested. I understand that my hon. Friend is already well aware of the history and reasons for the delay. These were set out in a letter to him from the district administrator on 6 January 1983. I will not trouble the House by running through them all again now, but, while I understand the feelings of frustration that local people have obviously felt at times. I should like to mention a couple of points that have been important in the history.
First, I am sure that my hon. Friends and their constituents must feel pleased in retrospect that the original plan for a huge 900-bed development did not go ahead. Present policies for hospital building reflect the general view that relatively smaller central district general hospital units providing a range of specialty services, supplemented by "satellite" hospitals strategically placed elsewhere in the community, are better able to meet local needs.
Secondly, the Wessex regional health authority overall has had to cope with a poor stock of hospital buildings. That has long been recognised by my Department and the region has been receiving an above-average capital allocation to help improve matters. The Bournemouth scheme has had to compete with several other badly needed new hospitals in the region's capital programme, and, although I recognise that this will be no compensation for residents in Bournemouth and the surrounding areas, the region as a whole has achieved a great deal already in improving its hospital provision. I hope that that is recognised locally.
New hospitals include the prestigious Southampton district general hospital, which provides teaching facilities for the whole region and from which east Dorset, too, can benefit. There is also the existing district general hospital in Poole in the eastern sector of the east Dorset health authority. So the district is not doing badly, although I am the first to admit that Bournemouth has not done well.
742
I do not underrate the pressures on services in Bournemouth and in the district as a whole produced by the necessary provision for elderly people. The plans for the new district general hospital would increase the provision for geriatric patients in the district. They also include the provision of new accident and emergency facilities.
In answer to the direct question of my hon. Friend the Member for Bournemouth, East, we take into account in the planning needs of the region, if not the district—the region determines the districts' allocations — the numbers of those over 65 and, increasingly, the numbers over 75 and 85 in our increasingly ageing society, with all the pressures on the public purse that result from that.
My hon. Friend asked about what will happen until the hospital is built and about the problems of providing adequate emergency care in the area. I appreciate that the district and its acute services face significant problems over the next few years because of pressure on existing facilities and the ever increasing demands of the rising elderly population. No significant additional resources will be made available before the second—and final—phase of the Bournemouth district general hospital is operational. It would be foolish to hope for more than that. Capital and revenue will of course be in short supply in the district and so interim relief on hospital services will have to be achieved at minimum cost.
I know that the DHA presently is considering this matter and various options to rationalise its acute services. It is a matter for the DHA. It would not be sensible for Ministers to become involved in such issues, in detail, particularly as one of the objectives of the 1982 Health Service reorganisation was to establish locally based health authorities to respond to locally expressed needs and be in tune with the needs of the communities that they serve. My hon. Friend is keeping in touch with the local health authority and its plans. Accident and emergency provision in the area is quite understandably a very emotive topic since until 1975 full accident and emergency services were available in Bournemouth. My hon. Friend has personal experience of what the lack of such services one Friday afternoon meant for him, his wife and young child.
Accident and emergency facilities in Bournemouth obviously need to be looked at in the context of the district's overall provision. Presently the major accident and emergency provision for east Dorset health authority is provided at Poole district general hospital, which has the full back-up facilities necessary to support a major accident and emergency department. This major service is supported by minor accident and emergency and casualty departments at other hospitals within the district.
The criteria for the setting up of a proper and modern integrated accident and emergency department are complex. I do not have the time to outline them tonight, but I shall set them out in detail and send them to my hon. Friends because they are of interest.
The population of Bournemouth is currently served by a minor accident and emergency department at the Royal Victoria hospital, Boscombe. This service is planned to transfer to the new Bournemouth district general hospital once the first phase of the development is completed. Bearing in mind the national policy on accident and emergency services, the district health authority is in no position even to consider reinstating a major accident and emergency service in Bournemouth until the second phase

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of the new hospital has been completed. At that stage the appropriate orthopaedic and other supporting departments will be available to provide the necessary back-up facilities to a full major accident and emergency department.
I was pleased to note that from 16 May this year the services are opened for a longer period from, 9 am to 7 pm —an extra three hours a day. We recognise the local concern about the accident and emergency services and
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about the hospital itself. I hope that the Department will be in a position soon to respond to the pressure brought by my hon. Friend. I thank him for raising this important issue this evening.
Question put and agreed to.
Adjourned accordingly at nineteen minutes past Two o' clock.

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