Sitting of 18 July 1983

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

    Serpell Report
    Mr. Colemanasked the Secretary of State for Wales, pursuant to his reply to the right hon. and learned Member for Aberavon, (Mr. Morris) Official Report, 27 June, c. 334, whether he has now completed his consideration of the Serpell report and its effects upon the railways in Wales; and if he will make a statement.
    The Secretary of State for Wales (Mr. Nicholas Edwards): The Serpell report is still under consideration by the Government. I intend, in due course, to issue a consultation document about arrangements for reaching decisions on local transport issues—including railways—in Wales.
    Mr. Coleman: Is the right hon. Gentleman aware of the concern in Wales over this important matter and of the representations that have been made to hon. Members by local authorities, trade unions, employers and women's institutes, to name but a few? When will he carry out his responsibilities to the people of Wales?
    Mr. Edwards: It is precisely because I recognise the concern expressed by a wide range of public bodies that I propose to issue a consultation document and to seek their views on this important matter.
    Mr. Hooson: My right hon. Friend has rightly said that the local authorities have an important role to play in the strategy for public transport. Therefore, would it not be appropriate for my right hon. Friend to identify those county councils that have a particular responsibility for guiding railway strategy?
    Mr. Edwards: I have already suggested that the county councils have a potentially important role to play. As they have existing responsibilities for other transport services, it might be sensible to consider bringing together all transport services, including railways, under one head. These are important issues and I propose to consult the county councils as well as other interested bodies.
    Mr. D. E. Thomas: Will the Secretary of State give an assurance that, in referring to local transport decisions, the Government are not proposing to abolish the Transport Users Consultative Committee, which has successfully resisted two attempts to close the Cambrian coast line?
    Mr. Edwards: I have no proposals, and none has been put to me from any source, to abolish the Transport Users Consultative Committee.
    Mr. Rowlands: Is the Secretary of State aware that many of the issues arising from the Serpell report affect not only the county councils? In the last Welsh Question Time the right hon. Gentleman dismissed extreme solutions. Will he assure us that one of the extreme solutions that was dismissed was the closure of the valleys railway lines?
    Mr. Edwards: These are not just local issues. That is why I have resisted pressures from some quarters to transfer them to the responsibility of the Welsh Office. We have to treat different aspects of the problem differently. It would be extraordinary if, at the end of full consultation and consideration of these issues, there were any proposal to abolish the valleys railway lines, which make an extremely important contribution to the economy and public services of the area.
    Mr. Denzil Davies: As responsibility for the railways in Wales lies not with the Secretary of State for Wales but

    3
    with the Secretary of State for Transport, what will the right hon. Gentleman consult about? Will he talk about railways or something else?
    Mr. Edwards: It may come as a surprise to the right hon. Gentleman, with his experience in Government, to know that we do not find it too difficult to work together as a Government. I keep in the closest contact with my right hon. Friend the Secretary of State for Transport on all these issues. When I put forward proposals and suggestions that affect Wales, I do so with the full knowledge of the Secretary of State for Transport. We, as a Government, will in due course put forward firm proposals as a Government.
    Sir Raymond Gower: The Government cannot be expected to give hasty decisions on matters of such great importance, but would it not be helpful to consider making an early statement dismissing at least two of the suggestions — first, that all railways west of Cardiff should cease to exist and, secondly, that there should be poorer maintenance and less expense on upkeep?
    Mr. Edwards: I have nothing to add to what my right hon. Friend the Secretary of State for Transport has said on numerous occasions, although I point out that no proposals were put forward by the Serpell committee. It merely pointed out the financial consequences of certain courses of action.

    House Renovation Grants
    Mr. Knoxasked the Secretary of State for Wales how many house renovation grants, including repair grants, were approved by local authorities in Wales in the last financial year; and whether he is satisfied with the rate of progress being achieved in this area.
    The Under-Secretary of State for Wales (Mr. Wyn Roberts): Provisional figures show that more than 28,700 house renovation grants, including 17,400 repair grants, were approved in 1982–83. This is about three times the total number of grants and about six times the number of repair grants approved in the previous financial year. This much-increased rate of grant activity should continue in the current year, and I hope that all local authorities will make every effort to meet the demand.
    Mr. Knox: I welcome the increased activity in improving housing conditions in Wales, but can my hon. Friend tell me whether the work has placed a heavy burden on local government finances?
    Mr. Roberts: I am glad that my hon. Friend welcomes the increased activity, which should be coupled with the 80 per cent. increase in private sector starts in the first quarter of this year, compared with the corresponding period last year. A great deal is going on.
    As regards local authority resources for 1982–83, increased expenditure on renovation grants was covered by additional capital allocations. In making allocations for this year, authorities' bids for expenditure on renovation grants were generally met in full, and where an authority's total expenditure on renovation grants for this year exceeds 50 per cent. of its housing capital allocation, the additional expenditure will be covered by a retrospective adjustment to the housing allocation.

    Labour Statistics
    Sir Anthony Meyerasked the Secretary of State for Wales what percentage of persons aged 18 to 21 years are in full-time employment in Wales.
    Mr. Nicholas Edwards: I regret that this imformation is not available; the employment statistics do not give an age analysis for this total group.
    Sir Anthony Meyer: Does my right hon. Friend accept that there is a serious problem of youth unemployment in Wales, as there is in the rest of the United Kingdom? There is general admiration for the efforts that he is making to bring in new jobs, which are desperately needed, but the insensitive comment by the Chancellor of the Exchequer about jobs being easily available does not help the situation in Wales one bit. Jobs may be available in Leicester, but they are certainly not available in many parts of Wales.
    Mr. Edwards: My hon. Friend is right to point out the seriousness of the situation for many individuals. The Government recognise the seriousness of the situtation and are undertaking massive schemes to try to help the young unemployed and devoting substantial resources to that task. As my hon. Friend knows, £1 billion will be spent on the youth training scheme this year.
    Mr. Denzil Davies: In view of the seriousness of the situation, and the fact that one in two school leavers this year will not be able to get a job, will the right hon. Gentleman give an undertaking that no cuts will be made by the Chancellor of the Exchequer in the money spent on the YTS?
    Mr. Edwards: We have already announced our plans for the youth training scheme in the current financial year, and those plans are going ahead.

    Cardiothoracic Services
    Mr. Andersonasked the Secretary of State for Wales if he will make a statement on the future of cardiothoracic services in the Principality.
    Mr. Wyn Roberts: The need for new facilities is being reassessed and I shall make an announcement as soon as possible after the recess.
    Mr. Anderson: The hon. Gentleman knows that Wales has one of the highest incidences of heart disease in the civilised world and one of the lowest levels of resources to meet the problem. He also knows about the fears that much-needed investment will be held back, because of the Government's public expenditure cuts, to make way for tax cuts for those on high incomes. Therefore, will the hon. Gentleman give the House an assurance that the much-needed facility in Wales will not be held back by the current public expenditure cuts?
    Mr. Roberts: I am aware of the general position of cardiothoracic services in Wales. I assure the hon. Gentleman that the position is exactly as I stated it. During our appraisal, further and more up-to-date material became available on the throughput of the present facilities and the general level of provision required. Following an interim report by the Welsh Office appraisal team, I asked that the matter be discussed further with representatives of the Welsh medical committee. The Chancellor's statement has no bearing on the problem.
    Sir Raymond Gower: In view of the disastrous consequences of the closure of the heart surgery facilities at Sully hospital some years ago, will my hon. Friend bear in mind, when assessing the current problem, the almost unrivalled facilities available at Sully hospital for cardiothoracic treatment?
    Mr. RobertsWe are looking at all possible options. Obviously, an option appraisal has to be carried out, and we shall pay considerable attention to the recommendations of the Welsh medical committee.
    Mr. D. E. Thomas: In view of the appallingly high incidence of heart disease in Wales, is not it time that the Welsh Office and the Health Education Council got together to launch a major campaign of public education about preventive aspects of heart disease? Will the hon. Gentleman tackle the problem urgently?
    Mr. RobertsThe hon. Gentleman is right. One recommendation of the working party report was that there should be a preventive campaign. The matter is under active consideration.

    Rhydlafar Hospital
    Mr. Terlezkiasked the Secretary of State for Wales why work on the heating system at Rhydlafar hospital will not commence before the winter.
    Mr. Wyn Roberts: The heating system must be fully planned and designed before tenders are invited. To avoid winter work, a start immediately after the winter months is advisable.
    Mr. Terlezki: I am grateful to my lion. Friend for that reply, but why cannot a start be made this summer?
    Mr. Roberts: My hon. Friend will realise that much work has to be done. It is necessary to plan the proposed new layout of the hospital, to work out the most economic heating system in terms of fuel and distribution and to plan and design the scheme in detail before going out to competitive tender. I regret that all that cannot be done before the winter begins. However, I am glad to assure my hon. Friend that all the work that can be done is proceeding, and the first matter to be attended to will be the upgrading of certain wards.
    Mr. Ron Davies: Will the hon. Gentleman confirm that adequate financing will be available to complete the upgrading programme at Rhydlafar hospital, despite the Chancellor of the Exchequer's decision to reduce expenditure on the National Health Service?
    Mr. Roberts: My right hon. Friend the Secretary of State has given a firm decision on the hospital, and it is our intention to carry out the necessary work there. We are considering how the cash limit adjustments described in the statement by my right hon. Friend the Chancellor of the Exchequer on 7 July will be implemented in Wales. It would be fruitless to speculate on possible detailed effects.
    Mr. Denzil Davies: I accept that we cannot be informed of the detailed effects of the Chancellor's statement, but will the Under-Secretary tell us how much cash will be taken away from the NHS in Wales?
    Mr. Roberts: The press reports that I have read of £8 million cuts in the NHS in Wales are considerable exaggerations of the likely reductions. We are not yet able to make a statement on the subject.
    Mr. Denzil Davies: Does that mean that the Welsh Office did not know about the cuts before they were announced? Why does the hon. Gentleman not know the figure?
    Mr. Roberts: Because we are working out the implications of the Chancellor's statement and we want any reductions that may have to take place to have the least possible effect on the NHS in Wales [Horn. MEMBERS: "How much?"] Health moneys in Wales are part of the block grant, which is divided by my right hon. Friend the Secretary of State to cover various services.

    Mid-Glamorgan and Gwent (Hospital Building Programme)
    Mr. Ron Daviesasked the Secretary of State for Wales what is to be the percentage difference between 1983–84 and 1984–85 in the centrally funded capital finance allocation for the hospital building programme for the Mid-Glamorgan and Gwent area health authorities.
    Mr. Wyn Roberts: As the capital allocations for the hospital building programme for the 1984–85 financial year have yet to be determined, no comparison can be made.
    Mr. Davies: Is the Minister aware that five out of the eight remaining programmes in the 1966 hospital building programme for Wales lie within the east Glamorgan and Gwent area? Will sufficient weighting be given to the Mid-Glamorgan and Gwent area health authorities to allow them to complete the hospital building prograrmne identified in the 1966 plan for Wales? When will finance be available for the construction of a new district general hospital to serve the area of east Glamorgan and Gwent?
    Mr. Roberts: I ask the hon. Gentleman to look again at and not necessarily accept the information that he has already received about the schemes that remain to be completed under the 1966 plan.
    With regard to the west Gwent hospital, it is for the health authority in the first instance to establish the need for such a hospital and its place in its priorities. Gwent health authority recently announced its intention to begin preliminary work on an appraisal of the need for that hospital. The proposed change in financial arrangements due to take place next year does not affect the moneys available for capital building. The new arrangements, with less involvement by the Government, are generally welcomed by the health authorities.
    Mr. Abse: Does that reply mean that provided the need is established, the rearrangement of capital for the Health Service in Wales will in no circumstances result in the intended hospital at Panteg in West Monmouthshire not coming into existence?
    Secondly, does that reply mean that there is no question of any interference whatsoever in the completion of the Royal Gwent hospital? As that has nothing to do with the establishment of need, but is going on now, should not completion be brought about as quickly as possible?
    Mr. Roberts: Treasury approval was given last week for the necessary spending on phase 6 of the Royal Gwent hospital.
    With regard to the hon. Gentleman's first point, it is necessary to establish the need for a hospital and for the authority to decide what priority it will give to whatever development is proposed. The change in the financial arrangements proposed for next year does not necessarily mean a decrease in the moneys available for capital spending in Wales.
    Mr. Rogers: As the Minister is looking at the preparatory work for appraising the need for a hospital in east Wales and considering the implications of the Chancellor of the Exchequer's cuts in the Health Service without knowing the figure on which he will start—at least, he is not prepared to divulge it—will he go a little further in his star gazing and give the House the basis of the formula on which he will assess the new grants to district health authorities in relation to the amounts that will be available to them for capital and revenue expenditure? How will that formula be arrived at? Will he abolish the old system—[Interruption.]
    Mr. Speaker: Order. The hon. Gentleman should ask only one question.
    Mr. Roberts: It may help if I explain the present position. Under the present arrangements the money available for capital development is top sliced by the Department to pay for major schemes and the residue is allocated to health authorities for their more minor schemes. From next April it is proposed that new major schemes will not be top sliced, but schemes already in the all-Wales programme's regional services will. As the all-Wales commitments run out, the proportion of funding going to the health authorities will increase. The Department's approval will still be required for schemes costing more than £2 million and Treasury approval will be needed for those costing more than £3 million. I hope that the hon. Gentleman finds that helpful.

    Housing Stock (Repair)
    Mr. Roy Hughesasked the Secretary of State for Wales if he will provide additional resources to local authorities in Wales to ensure that their housing stock is kept in a good state of repair.
    Mr. Wyn Roberts: During the past two years capital expenditure by local authorities on repair and improvement of their dwellings totalled about £70 million. However, during the same period Welsh authorities under-spent that total housing resources available to them by £35 million in 1981–82 and by about £45 million in 1982–83. There is therefore no lack of capital resources for local authority housing maintenance.
    Mr. Hughes: Does the Minister appreciate that the financial pressures that the Government are putting on local authorities are forcing them to cut back on essential repair and maintenance work? Some houses are now in such a bad state of repair that they are not worth selling to the sitting tenants or anybody else. Why does he not do something to help our local authorities and not perpetually harass them?
    Mr. Roberts: The hon. Gentleman is wrong, as he so frequently is. Welsh local authorities have consistently
    8
    spent more on their own housing stock than on private sector renovation grants—£128 million as against £100 million since 1978–79. That trend was maintained even last year when the higher rate of grants increased expenditure to about £41 million, while about £46 million was spent on the local authorities' own stock. I wish that the hon. Gentleman would get his facts right.

    Labour Statistics
    Mr. Raffanasked the Secretary of State for Wales what is the current unemployment rate for the Shotton travel-to-work area.
    Mr. Nicholas Edwards: The rate was 17·2 per cent. on 9 June 1983.
    Mr. Raffan: Does my right hon. Friend agree that that rate disguises actual unemployment in the borough of Delyn, which reflects problems distinctive to Delyn? Does he further agree that producing an unemployment rate on a travel-to-work basis, invariably crossing borough boundaries, is in this and many other instances bureaucratic nonsense, which can hinder an effective approach to reducing unemployment at local level?
    Mr. Edwards: I am afraid that I shall have to give my hon. Friend exactly the same answer as I have given to the hon. Member for Alyn and Deeside (Mr. Jones) on a number of occasions. The travel-to-work area is the best designation that we yet have been able to arrive at, although designation is not my responsibility. People often travel considerably further than the immediate towns and places in which they live. I am sure that my hon. Friend will agree that many of the important projects that have recently come and are coming to Deeside will benefit his constituents as well as those who live closer to those projects.
    Mr. Barry Jones: Does the right hon. Gentleman deny that the power station at Connah's Quay is to close shortly? Are not 230 jobs at risk? Where will the new jobs come from?
    Mr. Edwards: I have no precise information along those lines. As the hon. Gentleman knows, that is the responsibility of the board. All I can say about new jobs is that we are undertaking a massive amount of development work in the area and being extremely successful in attracting some important new projects to Deeside.

    Prince of Wales Hospital, Rhydlafar
    Mr. Gristasked the Secretary of State for Wales what proposals he has received from the South Glamorgan health authority regarding the Prince of Wales hospital, Rhydlafar.
    Mr. Wyn Roberts: The health authority has submitted outline proposals for repairs and improvements to staff accommodation, operating facilities, heating and roofs. The detailed plans are being worked up by a project team from the authority, Welsh Office and the Welsh health technical services organisation.
    Mr. Grist: Does my hon. Friend appreciate how far what he has just said and what the chairman of the South Glamorgan health authority has said about the hospital go to reassure the many people who have been deeply alarmed and concerned about the future of Rhydlafar?
    Mr. Roberts: I know the hospital personally, having visited it on a number of occasions both as a Minister and previously. I know how much the hospital and its services are valued generally in south Wales and how much the positive decision of my right hon. Friend was also appreciated by the community at large.
    Mr. Coleman: Will the hon. Gentleman go a little further and give a categoric assurance that the Prince of Wales hospital, which is renowned internationally as an orthopaedic hospital, will not be put in jeopardy as a result of the manoeuvres of the Chancellor of the Exchequer?
    Mr. Roberts: I have already given some reassurance about that. The plans are going ahead as required to implement the refurbishment of the hospital. It is still very much in the planning stage. There is to be another meeting of the project team on 27 July, when the plans will be developed yet again.

    Local Government Employees
    Mr. Hoosonasked the Secretary of State for Wales what are the latest figures available for the number of local government employees in Wales; what actual and percentage reduction this constitutes from May 1979; and what further target he has for reductions during the course of the new Parliament.
    Mr. Nicholas Edwards: In March 1983, the latest month for which figures are available, it is provisionally estimated that 128,000 persons, in full-time equivalent terms, were employed by local authorities in Wales. This figure is 4,400 or 3·4 per cent. lower than that for the corresponding month of 1979. Nevertheless, it is clear that the search for manpower economies must continue if local authority current expenditure and rates are to be held to levels the country can afford.
    Mr. Hooson: Are there not signs that the excellent reduction from 1979 to 1983 disguised a rise in employment in local authorities recently? Is it not timely for a special conference to be called with the association of local authorities in Wales to review this problem at the early stages?
    Mr. Edwards: There was an upturn in local authority employment in the last two quarters' figures, and I have drawn that fact to the attention of the local authorities and expressed my concern about it.

    Labour Statistics
    Mr. Ioan Evansasked the Secretary of State for Wales what is the number of people in full employment in Wales at the latest available date and in May 1979.
    Mr. Nicholas Edwards: Quarterly estimates indicate there were 865,000 employees in employment in June 1979 and 725,000 in December 1982.
    Mr. Evans: Although the Secretary of State talks about bringing jobs to Wales, is not this a massive reduction in the number of jobs available? To deal with the problem facing Wales at present, is it not necessary to make a major change in the Government's economic, industrial and financial policies?
    Mr. Edwards: There has been a substantial reduction in the number employed. The steel industry has suffered especially during this period. The figures that I have given
    10
    show that there are 24,000 more employees in employment than were given in estimates presented to the House a year ago. Those were estimates. I am now presenting figures on the basis of the 1981 census. The headline in a recent Welsh newspaper to the effect that there had been a 24,000 increase in unemployment is the reverse of the truth.
    Mr. Rogers: Does not the Secretary of State accept that in his blind, dogmatic search for cuts in employment in the public sector he is creating a situation in which local authorities cannot spend the money available to them for repairs? Will he take off his blinkers and give local authorities the chance of employing people so that they can use the capital moneys which the right hon. Gentleman says they are not spending?
    Mr. Edwards: The increase in numbers in the last two quarters came largely from the county councils and not the districts and cannot have arisen as a result of any problems concerned with repair grants.

    High Technology Industry
    Mr. Mark Robinsonasked the Secretary of State for Wales what recent efforts have been made by his Department to attract high technology industry to south Wales.
    Mr. Nicholas Edwards: The attraction of high technology industries to Wales is one of my foremost priorities. I have streamlined the arrangements for attracting investment from overseas to Wales and the new organisation—WlNvest—is fully in business.
    Mr. Robinson: Can my right hon. Friend say whether there are any signs of increased overseas investment in the region?
    Mr. Edwards: Yes. WlNvest handled no fewer than 47 visits by overseas companies between 1 April and 30 June, and I am pleased to tell the House today that another United States high technology company is establishing its headquarters in Wales. The Comdial corporation, which designs and manufactures telephone terminal equipment, is planning to build a 100,000 sq ft factory at St Mellons, between Cardiff and Newport. The 300 jobs to be created will benefit both communities, and my hon. Friend's constituents are among those who will benefit. The plant will be the most modern of its kind in Europe.
    Mr. Anderson: The right hon. Gentleman will recall expressing concern to me some months ago about the lack of high technology investment in south-west Wales. Given the Government's continued failure to attract such investment, from which future employment will come, is not the right hon. Gentleman sentencing that part of south Wales to very low employment levels in future.?
    Mr. Edwards: I do not believe that that is true. We are already seeing a marked extension of the high technology corridor along the M4, a further phase of which I have just announced. It is clear from the number of active inquiries and applications for SFA and other assistance before us at present that the level of activity is growing and spreading. As it spreads, I am sure that south-west Wales will benefit.

    South Cardiff (Redevelopment)
    Mr. Gwilym Jonesasked the Secretary of State for Wales what responses he has received, particularly

    11
    from the local authorities, in respect of the initiative he launched on 10 February for the redevelopment of south Cardiff.
    The Minister of State, Welsh Office (Mr. John Stradling Thomas): The response from all concerned has been most constructive, especially from the local authorities. The aim now is to encourage specific proposals for development. I shall give sympathetic consideration to proposals for urban development grant where this is necessary to enable a project to go forward.
    Mr. Jones: I am very grateful for that answer, especially in view of the significance of the date on which the Secretary of State announced his initiative. Is my hon. Friend aware that south Glamorgan county council appears to be pursuing a policy of total antagonism to the city council and that it is producing a very negative image in the effort to try to secure inward investment? Will my hon. Friend continue to use his moderating influence?
    Mr. Stradling Thomas: I am sorry to have to tell my hon. Friend that I deplore that comment. My right hon. Friend and I have had constant communication with both the south Glamorgan county council and the Cardiff city council. It is quite obvious that the ultimate in cooperation is required between local authorities, private developers and the various public agencies that can play a part. I have found nothing but good will in my consultations. Obviously the city council, as planning authority, has to produce a structure in which all can work together. We are doing all that we can to promote the maximum co-operation, because this is one of the most important matters in my sphere of responsibility.

    Welsh-Irish Ferries Ltd.
    Sir Raymond Gowerasked the Secretary of State for Wales if he will make a statement about the failure of the freight services of Welsh-Irish Ferries Ltd.
    Mr. Nicholas Edwards: I was naturally sorry to learn of the failure of a venture in which the Welsh Development Agency had made an investment and which my own Department had offered to support with grant-aid.
    Sir Raymond Gower: In view of the favourable feasibility study that preceded the launching of this undertaking and the study given to it by local authorities and others, is my right hon. Friend aware that there is a good deal of concern about this early failure, after only three months of operation? Has my right hon. Friend any idea of the reasons for the failure?
    Mr. Edwards: I must tell my hon. Friend, who pressed the case for this investment very hard, that I am sad that it has not succeeded. My hon. Friend is right. A detailed study was undertaken by Coopers and Lybrand, and the WDA looked into the case. But it was always clear that there were some risks, especially with the long sea haul involved. Anyone who has studied the matter will know that a long sea haul adds to the risk. If the WDA is to fulfil its role of supporting new projects, I am afraid that not all of them will succeed. The grant offered by my Department has not been paid, as the instalments come only 12 months after the creation of the first job.
    Mr. Anderson: How much of the £112,000 which was granted by the WDA will be salvaged? Is my right hon. Friend aware that south Wales is littered with redundant
    12
    ferry port facilities that have been provided out of public funds both at Swansea and Pembroke? Why was this investment allowed to go ahead in the first place and to collapse after a few months?
    Mr. Edwards: The usual criticism made of the WDA is that it is not sufficiently enterprising in backing such projects. I was strongly pressed by both Labour and Conservative Members that this project should be backed by my Department and the agency. The agency had a full feasibility study undertaken by an extremely well-known firm and it was on that basis that the investment was made. I am sure that the agency will want to investigate the circumstances of the collapse fairly fully and will be able to give the hon. Gentleman further information if he asks for it.

    Aerospace Industry
    Mr. Barry Jonesasked the Secretary of State for Wales how many jobs exist in the aerospace industry in the Principality.
    Mr. Nicholas Edwards: No precise up-to-date figure is available, but it is estimated that current employment is of the order of 6,000.
    Mr. Jones: What is the Secretary of State doing to help the plane makers of north-east Wales? Does he know of the deep concern at the likeihood of British Airways buying an American aircraft rather than the Airbus to replace the aging Trident? Why are the Government so slow to find money for the new Airbus, the A320?
    Mr. Edwards: I welcome the recent roll-out of the new 800 series of the HS125 and wish that well. However, I have little to add to the answer that the hon. Gentleman has already received from the Department of Trade and Industry. It cannot be for the Government to force British Airways to buy an aeroplane that might not be suitable for it in order to guarantee business for British Aerospace. The risks of doing that are obvious. We might damage the prospects of British Airways and that cannot be sensible.
    Mr. Adley: Without wishing to give my right hon. Friend help that he does not need, may I ask whether it is not a fact that, contrary to what the hon. Gentleman said, British Aerospace has not yet made a specific and detailed request for launching aid for the project that the hon. Gentleman mentioned? Therefore, is it not difficult for the Government to give assistance when they have not been formally asked to do so?
    Mr. Edwards: My hon. Friend is right. The Government would wish to be satisfied about the potential viability of the project before commiting themselves to any decision and clearly the orders that are received for the project will be an important consideration.

    Public Expenditure
    Mr. Ray Powellasked the Secretary of State for Wales if he will estimate the effects of the decision of the levels of public expenditure announced by the Chancellor of the Exchequer on 7 July on the Welsh economy.
    Mr. Nicholas Edwards: I am considering the way in which the cash limit adjustments described in my right hon. Friend's statement should be implemented in Wales, and I shall of course have regard to the need to minimise the effects on the economy.
    Mr. Powell: Did not the Secretary of State know before the election that there would be cuts? Why then did he try to deceive the electorate of Wales by not explaining in detail what he anticipated would be the Chancellor's action as soon as the Government were formed? Will he disclose to the House the detail and number of the jobs that will be lost as the result of that massive cut in public expenditure in Wales?
    Mr. Edwards: I did not have up-to-date information about the figures that led my right hon. Friend the Chancellor to announce his decision, many of which emerged after the election. My right hon. Friend is taking action to see that public spending does not rise significantly above the levels previously announced—levels that we pledged to maintain at the election. It cannot be in any way wrong—indeed, quite the reverse—for a Government to seek to stop overspending on their announced programmes. I can think of nothing more damaging for job prospects in Wales than spending policies that would lead to an increase in interest rates and in costs to industry.
    Later—
    Mr. Powell: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the reply by the Secretary of State to my question, I intend to raise—
    Mr. Speaker: Order. It is too late for that.

    Hospital Building Programme
    Mr. Abseasked the Secretary of State for Wales whether the new capital financing programme for Welsh hospitals will prejudice the completion of the Royal Gwent hospital at Newport and the new commencement of the building of the West Monmouthshire hospital at Panteg.
    Mr. Wyn Roberts: Under the new system, responsibility for planning and programming their capital expenditure will be devolved to the health authorities. Decisions about the timing of particular projects will, therefore, be for them to consider in the light of competing demands for resources.
    Mr. Abse: What is the point in talking about responsibility being devolved locally when decision-making will depend upon the capital available? Therefore, will the right hon. Gentleman answer the question that he avoided earlier this afternoon and tell us whether the hospital that has always been intended for west Monmouthshire will or will not be sabotaged as a result of the present capital expenditure arrangements? It is not a question of priorities; it is a question of money. Will the money be available for the hospital at Panteg?
    Mr. Roberts: I find it hard to take such an attack from a party which massively cut the Health Service budget in Wales. The new capital financing programme is coming into effect because we are following a policy of disengagement. We have done so since 1979–80 and it has been welcomed by the health authorities. The case for the west Gwent hospital must be made to the health authority and it is for the authority to accept that. The question of financing will then arise, and that will probably be a matter for the authority. As I explained earlier, any project costing more than £2 million will need to have approval from the Welsh Office and any project costing more than £3 million will require Treasury approval.
    Mr. Denzil Davies: The hon. Gentleman has still not answered the question. Will the cuts announced by the Chancellor last week, which specifically deal with the Health Service—because part of the reason for the cuts is that the family practitioner service is spending too much —affect the Health Service in Wales and will the west Gwent hospital be affected by the cuts?
    Mr. Roberts: That hospital has not as yet been justified before the Gwent health authority. That is the first step. The question posed by the hon. Member does not, therefore, arise.

  CHURCH COMMISSIONERS

    Buildings (Admission of Public)
    Mr. Greenwayasked the hon. Member for Wokingham, as representing the Church Commissioners, how many buildings in the ownership of the Church Commissioners are open to the public; and if he will make a statement.
    The Second Church Estates Commissioner, Representing Church Commissioners (Sir William van Straubenzee): The commissioners own a number of buildings of historical and architectural interest, principally former or present bishops' residences. In nine such cases, where security, access and the convenience of the occupants permit, appropriate arrangements are made for them to be open to the public.
    Mr. Greenway: May I raise the question of locked churches with my hon. Friend, although I know that he does not have any direct responsibility for that? Is he aware that about 80 per cent. of churches are locked to prevent vandalism and theft—
    Mr. Speaker: Order. The hon. Gentleman must make his question relevant.
    Mr. Greenway: Up to 80 per cent. of the churches that relate to the church buildings my hon. Friend mentioned in his reply—for which I thank him—are locked against theft and vandalism. Will my hon. Friend reconsider the suggestion that I made in the House in March, that teams of church watchers should be appointed to see that churches are kept open so that people may have access to them for their spiritual needs and simply to visit them?
    Sir William van Straubenzee: I am grateful to my hon. Friend for recognising that the Church Commissioners, for whom I answer, do not have direct responsibility for the kind of buildings to which he referred in his supplementary question. When he raised the matter last on 15 March 1982 it aroused considerable interest. I hold in my hand a report produced by the diocese of Bradford on that very point and I shall gladly send him a copy. It must be a matter for initiative at parish level.

  HOUSE OF COMMONS

    Trade Union Talks
    Mr. Canavanasked the hon. Member for Berwick-upon-Tweed, answering for the House of Commons Commission, what subjects he expects to be discussed at the next meeting between the Commission and trade union representatives of House employees.
    Mr. Beith: Negotiations and consultations have usually been carried on between representatives of management and trade unions, without the direct involvement of the Commission.
    Mr. Canavan: Now that the new Commission has been appointed, can we expect to see the abandonment of reactionary proposals such as the no-strike clause in employees' contracts? What are the prospects for better industrial relations in the House of Commons now that the previous chairman has gone to further his ambitions in the House of Lords?
    Mr. Beith: From the beginning, the Commission's objective has been to have good relationships with the staff of the House and to ensure that its business proceeds without impediment. The view that it should so proceed is widely shared by those who work here and by hon. Members. There is a world of difference between that and no-strike agreements. It is on that basis that negotiations have taken place and I understand that they are proceeding satisfactorily.
    Mr. Freud: Does my hon. Friend accept that it would harm industrial relations not one jot if all the loyal staff who worked in the Palace of Westminster were given two tickets per Session for the Public Gallery?
    Mr. Beith: My hon. Friend makes an interesting suggestion. It would normally fall to be considered by the Services Committee rather than by the Commission, but I shall endeavour to ensure that it is so considered.

  THE ARTS

    Sponsorship
    Mr. Murphyasked the Under-Secretary of State answering in respect of the arts what steps are planned to promote arts sponsorship by companies and individuals.
    The Under-Secretary of State for the Environment (Mr. William Waldegrave): My noble Friend, the Minister for the Arts, intends to take every suitable opportunity to promote the sponsorship campaign.
    Mr. Murphy: Is our noble Friend considering sponsorship as a means of funding the proposed Theatre museum?
    Mr. Waldegrave: My noble Friend will not rule out any such suggestion if it is made.
    Mr. St. John-Stevas: Does the Minister accept that any additional funding from private sources for the Theatre museum must be supplementary to the promises made by the Government? Is the Minister aware that the GLC is considering modifying the terms of its contract for the sale of the site at Covent Garden so that it will cost the Government a mere £250,000? In view of that, will the Minister undertake, on behalf of the Minister for the Arts, that the contract will be signed straight away, as we were promised at our delegation the other day?
    Mr. Waldegrave: I must make some matters clear. My noble Friend's position is that he has had to review his budget in view of the request for savings by my right hon. Friend the Chancellor of the Exchequer. There is no question, as things stand, of his committing money from this year's arts budget to a start on the Theatre museum.
    Mr. St. John-Stevas: Oh!
    Mr. Waldegrave: If the situation were to change in a number of respects — one can imagine a number of respects in which it might change — obviously the decision will be reviewed.
    Mr. Dalyell: On the question of companies, will the Minister examine the metal detecting business? Were he and his Department as concerned as some of us at the lead letter in The Times on Saturday about the Hambledon iron age harness which was sold at Sotheby's for about £59,000? Does that not raise serious questions for the export review body and raise the whole—
    Mr. Speaker: Order. The question is about plans to promote sponsorship of the arts.
    Mr. Dalyell: I thought that the question related to companies and their sponsorship. What are the Government going to do about Henry Cleere's complaints?
    Mr. Waldegrave: I welcome the opportunity to draw that important matter to the attention of my noble Friend the Minister for the Arts. I shall also draw the matter to the attention of other Ministers in my Department, because it is relevant to them.

    Arts Council
    Mr. Canavanasked the Under-Secretary of State answering in respect of the arts what subjects he expects to discuss at his next meeting with the chairman of the Arts Council.
    Mr. Waldegrave: They will discuss matters of mutual current concern.
    Mr. Canavan: Has the Minister seen the Arts Council leaflet that points out that local authorities' financial support for the arts is 70 per cent. more than the Government's and over 4,000 per cent. more than that which comes from business sponsorship? Will the Government take steps to improve their own performance and to encourage local authorities to maintain their support for the arts, because it is obvious from the figures that the level of business sponsorship is paltry and no substitute for the public funding of the arts?
    Mr. Waldegrave: The level of business sponsorship has risen, is rising and has reached about £12 million a year. That is not a large contribution, but it is extremely useful on the margin. Of course, local authorities and central Government have roles, but no one should undervalue the increasing efforts by the Association for Business Sponsorship of the Arts and by businesses direct.
    Mr. Blackburn: Does my hon. Friend agree that the future for financing the arts lies with sponsorship? Will he seriously consider the position of the Friends of the Manchester Galleries, which is pursuing sponsorship with effect, because that is the way forward?
    Mr. Waldegrave: That organisation, and others like it, does much good and deserves nothing but encouragement from the House. I am happy to pay tribute to it.

    Theatre Support
    Mr. Greenwayasked the Under-Secretary of State answering in respect of the arts, pursuant to the reply to

    17
    the hon. Member for Cambridgeshire, North-East (Mr. Freud), Official Report, 27 June, c. 343, if he will list the present policies of support for the theatre.
    Mr. Waldegrave: Government support is given through the Arts Council. A one-off grant has also been made to the theatre investment fund.
    Mr. Greenway: Does my hon. Friend accept that all who enjoy the theatre and make use of it are grateful to the Government for their help? Is he aware of the expense of theatre tickets and the burden of VAT on the theatre? Will my hon. Friend make a strong attempt to persuade the Chancellor to do something about that?
    Mr. Waldegrave: Over the years many people have argued for that objective. There is European pressure to take into account. Anyone going to my right hon. Friend the Chancellor to argue the case for a diminution in the tax base now will have a difficult task.
    Mr. Arnold: Why does my hon. Friend refer to a one-off grant in relation to the theatre investment fund? Is this not the second time that such a grant has been made, and is it not an admirable way to help the theatre?
    Mr. Waldegrave: I used the words "one-off" because no commitment was made to make regular payments. A case for an additional one-off payment could be made from time to time.

    Sponsorships
    Mr. Freudasked the Under-Secretary of State answering in respect of the arts if he will list the incentives being given by Her Majesty's Government to sponsors of the arts, both in respect of private individuals and companies; and if he will make a statement.
    Mr. Waldegrave: Considerable tax incentives are available to individuals and companies for donations to charities, including arts charities. These were improved by the last Government. There also exist various capital tax privileges for private owners of works of art of national importance. These were listed in a booklet published by the Office of Arts and Libraries last July. Since then my right hon. Friend the Chancellor of the Exchequer has announced a further concession on VAT in the case of acceptances in lieu of tax and private treaty sales.
    Mr. Freud: Does the hon. Gentleman accept that, though tax concessions to the arts exist, they are pretty miserly? Does he agree that if they were extended with a little more corporate generosity it would be a self-financing exercise for the arts?
    Mr. Waldegrave: I am not sure that I wholly agree. Businesses and individuals are often ignorant of the tax concessions that are now available through the convenant scheme. Pressure has been brought to bear to introduce the full American system. I am sure that my noble Friend will consider that in response to the Education, Science and Arts Committee report. One of the things that we should do first is to make it clear to people that considerable concessions exist, which, if used fully, could be of great benefit to the country and to the arts.
    Viscount Cranborne: Does my hon. Friend agree that the arts tend to flourish more under the idiosyncratic patronage of individuals than under the more cautious approach of committees sponsored by Government organisations?
    Mr. Waldegrave: My hon. Friend has, perhaps, some contributions that may be gratefully received by the arts organisations. The spirit of my hon. Friend's question is that pluralism is necessary and that the flow of funds should not be over-centralised. Pluralism should involve various sources of central Government and local authority funding as well as funding by individuals and private companies.

    Royal Opera House and Royal Shakespeare Company
    Mr. David Atkinsonasked the Under-Secretary of State answering in respect of the arts when he expects to complete his scrutiny into the finances of the Royal Opera House and the Royal Shakespeare Company.
    Mr. Waldegrave: My noble Friend expects to receive the report during August and to complete the scrutiny when he has received the comments of the Arts Council and the two companies.
    Mr. Atkinson: Can my hon. Friend assure the House that there has been every opportunity for all members of staff of both companies to be interviewed by the scrutiny team, to ensure that any waste, duplication or overmanning has come to light?
    Mr. Waldegrave: I shall bring that question to my noble Friend's attention, so that he may check with the scrutiny team and so that I can give my hon. Friend the assurance that he seeks.

    Arts Funding (Report)
    Mr. Fisherasked the Under-Secretary of State answering in respect of the arts when he intends to reply to the report from the Education, Science and Arts Committee on the public and private funding of the arts.
    Mr. Waldegrave: The hon. Member will have noticed that my brief runs only up to question 28 —[Interruption.]
    Mr. Canavan: Resign.
    Mr. Waldegrave: If Opposition hon. Members below the Gangway will be quiet they may hear, in reply to the supplementary question, an answer that will interest them.
    Mr. Speaker: Private notice question. Mr. David Harris.
    Mr. Fisher: On a point of order, Mr. Speaker—
    Mr. Speaker: Order. I will take points of order after the private notice question — I apologise to the hon. Member for Stoke-on-Trent, Central (Mr. Fisher). He has not asked his supplementary question.
    Mr. Fisher: I am sorry to hear that the Minister's knowledge of the arts runs out after question 28. How will he tackle the massive per capita imbalance in arts funding between London and the regions, which can vary by between 300 per cent. and 1,000 per cent.? What steps does the Minister propose to take to ensure a fairer distribution of arts funding?
    Mr. Waldegrave: That question brings in very complex issues. Some of the great, nationally funded institutions have a regional output in terms of touring and other arrangements. The figures show that over the past 20

    19
    years the balance has moved steadily in favour of the regions, but my noble Friend keeps the issue under close review and will continue to do so.
    Mr. Speaker: I again apologise to the hon. Member for Stoke-on-Trent, Central (Mr. Fisher). I hope that we have now disposed of the points of order.

Helicopter Accident (Isles of Scilly)
3.35 pm
Mr. David Harris(by Private Notice) asked the Secretary of State for Transport whether he will make a statement on the helicopter accident off the Isles of Scilly.
The Secretary of State for Transport (Mr. Tom King): At approximately 12·40 pm on Saturday, a British Airways S61 helicopter engaged on a passenger service between Penzance and the Isles of Scilly, carrying a crew of three and 23 passengers, crashed into the sea in poor visibility one and a half miles east of St. Mary's aerodrome. The two pilots and four passengers were subsequently rescued by the St. Mary's lifeboat, but 19 passengers and the cabin attendant are missing and must be presumed dead. No bodies have yet been recovered. The response from the rescue services was prompt and effective. In particular, the swift recovery of the six survivors from the water by the St. Mary's lifeboat is to be highly commended.
The air accidents investigation branch of my Department is conducting a formal inspector's investigation into the accident and will report to me. Arrangements were made immediately for an investigation team to go to the scene. With the help of the Royal Navy, the crash beacon has been located. Efforts are at this moment being made to recover the helicopter. Diving conditions are, however, not easy and the weather and difficult tidal currents in the area may bring problems.
I know that the whole House will wish to join me in expressing our deepest sympathy to the family and friends of those who have lost their lives in this tragic accident.
Mr. Harris: In thanking my right hon. Friend for his statement, I should like to express my personal sympathy to the relations of all those who lost their lives in this tragedy.
Is my right hon. Friend aware that the islanders, whom I visited yesterday, have in no way lost faith in the helicopter service, which is a valuable link for their community? They appreciate that, until this weekend, the service had an excellent safety record. It had carried 1·25 million passengers over 19 years without incident. I, too, would like to praise the rescue services, and in particular the coxswain, Matt Lethbridge, and crew of the St. Mary's lifeboat. I am sure that nothing more could have been done, in those circumstances, to save more lives.
Finally, I ask my right hon. Friend to make known the results of the investigation as soon as they are available.
Mr. King: I endorse my hon. Friend's point about the excellent safety record. This is the first fatal accident ever suffered by British Airways' helicopters, which have operated the link with the Scilly Isles for 19 years, carrying 1·25 million passengers, as my hon. Friend has said.
As soon as the report of the chief inspector of accidents is available to me, I envisage that it will be published. Clearly it is most important that we should learn any lessons that are to be learned from this tragic accident.
Mr. Robert Hughes: On behalf of the Opposition, I extend sympathy to the relatives and friends of those who died in this tragic accident.
I agree that it is too early to draw any conclusions about the accident, but will the Minister agree that there is cause for wider concern, especially as a similar aircraft made a forced landing last Wednesday at Longside near
22
Peterhead, having suffered engine failure? Is it the case, as has been reported, that the aircraft which crashed had been in use in the North sea services until only a couple of weeks ago?
I entirely agree that British Airways' helicopters have a marvellous safety record. However, will the Minister look carefully at an answer that he gave me last Thursday, which shows that there had been 409 notifiable occurrences relating to helicopter safety, and involving Sikorsky S61 helicopters? Will the Minister consider the possibility of a full inquiry into helicopter safety, intensity of usage, and maintenance and service requirements? Not all helicopter incidents concerned S61s, but their numbers must give us all great cause for concern. There are many questions to be answered.
Mr. King: I am grateful to the hon. Member for associating the Opposition with our expression of sympathy. I note his comments about the Sikorsky helicopter. It is true that an incident took place recently, but it is also true that this was the first Sikorsky fatality in the United Kingdom in 10 years. Considering that the Sikorsky helicopter is one of the main workhorses of the North sea, that is an outstanding record.
The helicopter in question came from Aberdeen on 24 June, and I understand that it received its annual airworthiness certificate of inspection on 22 June, two days before it moved down to Penzance.
My statement makes clear the importance that I attach to a full investigation by the chief inspector of accidents. It is the chief inspector's statutory responsibility. He has already been in touch with me a number of times since the accident took place and I am satisfied that his team is doing all it can to get to the truth of the matter as quickly as it can. I do not feel that, at this stage, a public inquiry would be appropriate.
Mr. David Mudd: As a Cornish Member of Parliament, I wish to be associated with the messages of sympathy to the bereaved.
Concern has been expressed that it took perhaps 40 hours effectively to pinpoint the wreckage of the aircraft. That being so, will my right hon. Friend, as a matter of urgency, review the standards and design of search and rescue homing radio and radar beacons carried by such aircraft?
Mr. King: I do not wish to anticipate any findings that may emerge from the report of the chief inspector, but I well understand why my hon. Friend has raised that point. The matter needs further examination.
Mr. David Penhaligon: I am sure that my hon. Friends on this Bench would like me to express our sympathy to those who lost their loved ones in the tragedy. The service had an excellent safety record until this desperate tragedy. Do precisely the same safety standards apply to helicopters in civil use as apply to those used —as this helicopter was—in commercial operations in the North sea? Do the same standards of safety and maintenance apply to both?
Mr. King: My understanding is that the standards are the same, saving only any different requirements for longer periods spent over open water, such as might apply to the North sea. However, they are all the responsibility of the Civil Aviation Authority and must satisfy its requirements.
Mr. Robert McCrindle: While awaiting the outcome of the departmental inquiry —and without in any way casting an aspersion on that service's safety record over the years—would it not help if the Secretary of State contacted the senior executives of British Airways to obtain an assurance that they have taken on board the many lessons to be learned from inquiries arising out of helicopter accidents—albeit that they have not involved British Airways? In that way, some reassurance may be given to the public—a particularly important factor at this time of year — that British Airways is taking every possible step to maintain safety standards.
Mr. King: It is a prime statutory duty of the CAA to ensure that any lessons that can be learned in that respect from the reports of the chief inspector of accidents are pursued. All airlines — not only British Airways — are required to take all such factors into account.
Mr. Michael McNair-Wilson: Can my right hon. Friend confirm that no black box flight recorders are carried in that type of helicopter? Will not the absence of such equipment make an investigation into the causes of the accident—and into the causes of all accidents involving helicopters—that much more difficult?
Mr. King: My hon. Friend is correct in saying that there are no black boxes on the helicopters in that service, and that may make the investigation more difficult. However, as both pilots have survived and as it may be possible to recover the aircraft, I hope that it will be possible to get to the truth of the matter.

Hadfields Steelworks
3.42 pm
Mr. A. E. P. Duffy: 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 formation by the British Steel Corporation, GKN and Lonrho of a joint company for the purpose of acquiring Hadfields, and the announcement by Hadfields that 'it may well be that the Hadfields plant will cease operation in consequence'."
I believe that the matter is specific, in that I received official notification on Friday last from Mr. Dan Bufton, managing director of Hadfields, and Mr. John Pennington, managing director of BSC Special Steels.
The matter is important, because the closure of Hadfields, which has played a major role in the Sheffield steel industry for more than a century, will cost 750 jobs. More than 1,000 jobs at BSC will also be at risk, in addition to the 1,700 redundancies announced by BSC Special Steels only last November, and the 1,900 redundancies at Hadfields in 1981—the early casualties of this same rationalisation scheme.
The matter is urgent because it arises from a Government strategy, code-named Phoenix 2. The bulk of the money involved will come from Government sources, either through BSC or directly. The next stage is expected to be a complex denationalisation of much of BSC Special Steels in south Yorkshire. Yet there has been no consultation with the trade unions, the workers or the Sheffield city council, which will have to pick up the pieces.
That brings me to the most disturbing aspect of the Government's handling of Phoenix 2. I have been asking parliamentary questions about Phoenix 2 talks since March 1981. The last occasion was as recently as 7 July. In all that time I have received only negative and distinctly unhelpful replies. They are all on the record. Yet the Minister of State, Department of Trade and Industry, in a written reply that can be found at the back of Friday's edition of the Official Report, conveyed the announcement to the hon. Member for Wolverhampton, South-West (Mr. Budgen). I am not aware of that hon. Gentleman having any steelworks in his residential constituency or any connections whatsoever with the parties to Phoenix 2.
To the workers at Hadfields, that grotesque form of communication will be gall to the wound. To hon. Members, such an evasive discharge of ministerial responsibility must come perilously close to a contempt of Parliament.
Mr. Speaker: The hon. Member for Sheffield, Attercliffe (Mr. Duffy) asks 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 consequences of the restructuring of the engineering steels industry."
I fully understand that that is a matter of great concern to the hon. Gentleman and other hon. Members, but, as the House knows, under Standing Order No. 10 I am directed to take account of the several factors set out in the order but to give no reason for my decision. I listened very carefully to what the hon. Gentleman said and have given careful consideration to his representations, but I have to

25
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 two questions relating to statutory instruments.
Ordered,
That the draft Pedal Bicycles (Safety) Regulations 1983 be referred to a Standing Committee on Statutory Instruments, &c.
That the Electrically Assisted Pedal Cycles Regulations 1983 be referred to a Standing Committee or Statutory Instruments, &c.—[Mr. Garel-Jones.]

EUROPEAN COMMUNITY DOCUMENTS
Ordered,
That European Community Documents Nos. 4579/83, 4094/83 and 5544/83 concerning Research and Development Programmes, be referred to a Standing Committee on European Community Documents.—[Mr. Garel-Jones.]

Orders of the Day

  Telecommunications Bill
  Order for Second Reading read.
  3.46 pm
  The Secretary of State for Trade and Industry (Mr. Cecil Parkinson): I beg to move, That the Bill he now read a Second time.
  As the House will be aware, the Government's Telecommunications Bill introduced in the previous Parliament had not completed its passage through Parliament when the general election intervened. I can see several hon. Members in the Chamber who still bear the scars of more than 200 hours of debate in Committee upstairs. A moment ago I was looking round for the hon. Member for Newcastle-under-Lyme (Mr. Golding), who inflicted a number of those scars in the course of his spectacular 11-hour speech to the Committee. Hon. Members may or may not be relieved to hear that the Bill that I have the pleasure to introduce today is substantially the same as the Bill that left the House for the other place in the previous Parliament.
  Dr. John Cunningham: It will get the same treatment this time.
  Mr. Parkinson: Somehow I do not think that it will receive the same treatment this time. I think that will get through its Committee stage and will go on to the Statute Book and that the shares will be sold.
  At any time in our history there are bound to be industries that have passed their peak of success, whose products are no longer in great demand—as in the past —or who find that lower cost producers can provide the products at lower prices. As those industries decline, it is our duty to ensure that the newer businesses that are growing to meet the new demands are not inhibited, and can come to play the leading roles in creating wealth in this country.
  It is difficult to exaggerate the importance of telecommunications to a developed economy such as Britain's. New systems can provide better services to society, enhance business efficiency and improve competitiveness. The industry is a huge potential source of skill, highly paid employment and very useful products. Until recently most of us probably thought that telecommunications was synonymous with telephone systems. It is, in fact, a term that embraces a whole range of present and future services that involve the transmission of information. Computer and telephone technology are converging, assisted by digital techniques and broad band cable. As a result, telephone systems will change almost beyond recognition, as will business techniques, office equipment and the information services available to the home.
  For a developed country such as Britain, it could be a major disadvantage to lag behind modern developments and the systems available to our competitors. Failure to seize the opportunities now opening up would deprive customers, whether private or commercial, of the benefits and lower costs that new technology brings. The world market for telecommunications products will be worth many billions of pounds each year for as far ahead as we

  27
  can see. There will be enormous market opportunities for British manufacturers. The competition will be intense. It is for all those reasons that the Government regard it as vital that our telecommunications industry be given the opportunity to develop as freely and as vigorously as possible.
  The Bill contributes towards that freedom. It sweeps away most of BT's special privileges and allows the company to take its place in the private sector. It takes it nearer to free competition and defines the obligations of telecommunications operators and the rights of their customers. Most important, it will give customers the choice between different suppliers of apparatus, different suppliers of services and, increasingly, different networks.
  The position we inherited in 1979 was a rigid state-owned network that was a monopoly supplier of most services and most apparatus. That system was quite inappropriate and while it survived Britain stood little or no chance of capitalising on the opportunities that I have described. There was little pressure on the old Post Office as the monopoly to provide its services at the lowest possible price to its customers. It had none of the incentive to get on with the development and provision of new services that competition provides. The suppliers of equipment to BT depended upon a monopoly purchaser and could not develop a range of products that could compete in world markets. The telephone equipment was overspecified and often quite unsuitable for export. Our prospects of selling the antique black telephone to the world have not been good for many years, and its successors were only marginally more marketable.
  To begin to tackle those problems, Parliament approved the British Telecommunications Act 1981. That broke BT away from the Post Office and created a separate corporation. But important problems arising from BT's status as a state-owned monopoly were not tackled by that Act, which was always intended to be merely a first step. In particular, there was a major difficulty with funding future investment. The demand for investment has been enormous. For a number of years it was impossible to accommodate such needs for finance within reasonable restraint on public spending. Charges had to be increased to fund investment. The effect was to heap burdens on both private and commercial customers and to inhibit the development of telecommunications.
  By removing BT from the public sector, as is proposed in the Bill, we shall be freeing the company to seek finance in the market. That will be of great importance when, in the years ahead, it faces the need for large tranches of investment finance. That investment will not be underwritten by the Government. but must be obtained on a commercial basis.
  There are other reasons for wishing to remove BT from state ownership. The change in its ownership will maintain and increase the pressure on it to adopt commercial and competitive practices. The need for company management to report to shareholders and bankers on the company's performance produces a spur to achievement that simply cannot be produced in the state sector. Privately owned telephone companies have been successful in other parts of the world, notably in the United States of America, where there has been a huge expansion in telephone
  28
  networks. Telecommunications is a major growth sector and BT and its employees will be well placed to take advantage of the opportunities offered.
  Mr. Laurie Pavitt: The Minister has made a strong case for commercial viability, in which the greatest criterion will be commercial profit. Can he reassure the House about the future of blind people working in the telephone exchanges? Although the Bill might be the best commercial bet, twice as high a proportion of blind people are unemployed as sighted people. Can he give some assurance that the Bill will not affect the employment of the blind?
  Mr. Parkinson: I shall be dealing at some length with that matter, which was mentioned during the general election. I shall be reassuring sections of the community who are vulnerable and who have no reason to be concerned. I hope that by the time I end my speech the hon. Gentleman will feel reassured.
  For the many employees who take advantage of the opportunity to buy shares in the company, an additional reward will be available. As in all the Government's previous plans for denationalisation, it is one of our central aims that employees should buy shares. In those companies that we have already removed from the state sector, in general more than 90 per cent. of employees have become shareholders. The effect on the motivation of employees has been as remarkable as the take-up. The Government believe strongly that when those who work for BT buy shares, the company will feel the benefit of a better motivated work force. For the employees, there will be a clear and direct link not only between their efforts and the company's performance but between that performance and their personal rewards.
  While I am speaking about BT's employees, I wish to digress to put an important matter on the record. Those who are opposed for political reasons to the Bill have put about an extraordinary series of scare stories. The most irresponsible has been to suggest that employees' pension rights will be in danger. That is nonsense. The Bill safeguards pensions, BT's obligations to its pension fund and also its obligations to its employees. Any hon. Members who doubt that should consult clause 56. The matter is made more explicit, for the avoidance of doubt. in paragraph 31 of schedule 5.
  Mr. Stanley Orme: Is the Minister saying that those who are re-employed or employed after privatisation will have the same pension rights as existing employees?
  Mr. Parkinson: The Bill makes it clear that the liability of BT—
  Mr. Dennis Skinner: Oh, yes.
  Mr. Parkinson: I hope that the hon. Gentleman will listen before he starts shouting. That will make a change. Why does he not set himself a precedent?
  The liabilities of BT on the day that it is transformed into a limited company, and on the day that that company's shares are transferred to the public, will be transferred in full. Any existing liabilities and any rights of employees of BT will be transferred. New employees will have to negotiate with the trustees of the pension fund and decide about their rights under the fund. There is nothing remotely improper about that.
  Mr. Harry Ewing: The Minister is discussing an important point. Is he giving a categorical assurance that any company buying shares in BT will have to give a written guarantee that BT's employees will have their pension rights continued, or will those employees have to renegotiate their contract of employment, which includes renegotiation of pension rights? If the latter is the position, the Minister's assurance to the House is not worth the paper it is written on.
  Mr. Parkinson: I do not wish to criticise the hon. Gentleman, but he has shown that he does not understand the workings of the joint stock company. If I buy shares in a company I take into account all its obligations. Anyone who buys shares in BT will have to understand that the new company has undertaken responsibility for the liabilities of the old company, including the rights of the employees in the pension fund. There will be no question of a person buying shares expecting that condition to be changed. The lady or gentleman concerned will know that that is a condition of buying the shares.
  Mr. Mark Fisher: Will employees involved in services currently undertaken by British Telecom have those pension Nights if parts of those services are sold to a separate company and they are transferred to it?
  Mr. Parkinson: The Government intend to sell the shares in a unitary company, and not to hive off parts of British Telecom. Therefore, British Telecom plc will take over the full business and liabilities of the existing British Telecom. Opposition Members seek to cause worry where there need be none, but I assure them that the pension rights of existing employees in British Telecom will be exactly the same the day after the new company is formed as they are today.
  Mr. Robert Hughes: That is a change of policy.
  Mr. Parkinson: We have not changed our policy. The hon. Gentleman did not understand the previous policy.
  The sale of British Telecom should proceed as rapidly as possible. It is one of the Government's aims, and it will give me great personal pleasure to see many of the millions of British Telecom subscribers participating fully in the purchase of shares. That will give them a stake in a major wealth-creating company and a greater interest in its performance. It will also have a stimulating effect on British Telecom management. The more customers who hold shares, the better.
  There are about 3 million share holders in American Telephones and Telegraph in the U sited States. In Japan over 40 million bonds have been sold to NTT customers. The Government wish to see a high proportion of customer-shareholders in the United Kingdom, together with a high proportion of employee-shareholders.
  I am convinced that the change in British Telecom ownership will bring about a major improvement in BT's accountability. Up to the present, British Telecom's chairman has been only loosely responsible to the Secretary of State for Industry. That has been the one inadequate source of pressure on the company to account for its actions. It is little wonder that every set of accounts published by British Telecom has had to be qualified by the auditors. The old arrangements for controlling British Telecom were, to borrow a word from The Times leader today, wholly "corporatist".
  30
  In future, British Telecom will be accountable to its shareholders—we hope that there will be millions of them—to its customers, to Oftel and to its bankers, and it will be subject to competition. For the first time a regulatory body, Oftel, will be able to question the service that BT provides and to restrict BT's freedom to increase prices. It will ensure that BT will not use its market position to block competition. For the first time, customers will have the right to sue BT in the courts for breach of contract. The Times argues that in the process of privatisation British Telecom will become more corporatist and less accountable. Those assertions are ludicrous, as even a cursory glance at the facts shows.
  We should proceed quickly to bring the new accountability to British Telecom by moving it into the private sector. That is one reason why I have decided against breaking up BT before offering it to the public. To do so would require a delay of many years in order to put British Telecom's accounts into a form that would make piecemeal disposals possible. The alleged advantages of that approach are greatly outweighed by the benefit of proceeding at once to improve BT's accountability.
  Enormous tactical problems must be faced. BT has developed as a single integrated network. To separate local services from trunk services, as has been proposed, would be immensely complex and costly. It would do more harm than good to the customer who, let us not forget, pays the bill in the end. I have also rejected the idea that British Telecom should be forbidden to sell apparatus and specialist services.
  Mr. Skinner: Does the Minister mean that nations all over the world could buy those shares. Would that include Argentina and Brazil, to whom we are now shovelling out large sums of British taxpayers' money? Will people in Argentina, Brazil and other countries, whose debts are being rescheduled, be able to pick up BT shares with British people's money, and will we send them more money when they run out so that they can buy more shares?
  Mr. Parkinson: If that is the hon. Gentleman's only problem, he is a very lucky man. He is talking nonsense and there is no point in answering nonsense.
  To separate the local services and the trunk services would do more harm than good to the customer who, in the end, would have to foot the bill.
  I have also rejected the idea that British Telecom should be forbidden to sell apparatus and specialist services. If customers had by law to obtain their line from one supplier and their telephone or equipment from another company, it would create a number of practical nonsenses. Business customers would be forced by law to make separate purchases, to pay two separate contractors, and so on. Some firms would undoubtedly think that it was simpler and easier to obtain the line and the equipment from British Telecom. Others might choose to get their apparatus separately. It would be absurd if we denied them the possibility of making that choice, but we are determined that British Telecom should not gain any unfair competitive advantage from its freedom to sell apparatus.
  The Bill gives us the power to require British Telecom to follow a liberal policy on interconnecting other systems to the British Telecom network. I intend to explore with BT whether its apparatus supply activities and the services now supplied by BT Enterprises should be in a separate

  31
  Companies Act company. Those arrangements and the Director General's power to scrutinise BT's detailed accounting arrangements can and will ensure that the competition is fair.
  I have explained as carefully as I can why the Government believe in establishing BT as a private sector company for the good of the economy, for the better performance of BT, for the benefit of its employees, and for the advantage of its customers. In a few moments I intend to give the House a detailed account of the Bill's provisions. I shall explain to the House some of the improvements made to the previous Bill and dispel some of the fears which have been generated by the Bill's opponents, but before I do that I will remind the House of the steps that we have already taken and of the results that we have already secured.
  The British Telecommunications Act 1981 prepared the way for competition, and BT's customers are already benefiting from the new opportunity to choose equipment from a variety of suppliers. Over 100 new products are now on the open market bearing the green approved label. Businesses know that they now have a wide choice when buying telexes or branch exchanges. The general public is only just waking up to the new range of goods that it can buy.
  My predecessor issued a licence for what are called the value added network services. For the first time, and with a minimum of regulation, VANS operators can provide a range of competitive service over the public telecommunications network, from electronic mail boxes to viewdata and automatic ticket reservations. It was the first licence of its kind in the world and gave Britain the most liberal VANS regime in the world. Already 46 service providers have taken advantage of the licence, and it is bound to become a major growth area in the coming years.
  The most important change is that we have licensed a private sector telephone company, Mercury, to set up a new all-digital network to compete with BT. It is licensed to provide a full range of telecommunications services and was the first competing network anywhere in the world to be allowed to provide international leased lines. Mercury will be small to start with, but we are confident that it will provide real competition for BT. People who work in BT now realise—
  Mr. Michael Marshall: My hon. Friend will appreciate that Mercury Communications Ltd. — in which I have an interest, which I declare—has a very important task in trying to carry out international work. He will recall that his hon. Friend undertook to introduce in February proposals to ease restrictions on those international activities. Can my hon. Friend say something about that today?
  Mr. Parkinson: Negotiations are almost complete. We expect to make an announcement very soon—certainly before the House rises — about the international interconnections of Mercury.
  Mercury will be small to start with, but we are determined that it will provide real competition for BT. People who work in BT now realise that their customers have a choice while those who work in Mercury will try much harder to beat British Telecom. The result will be better services and better telecommunications for all.
  Mr. Donald Stewart: Is the Secretary of State aware that the Mercury project itself is an example of what many of us fear will be the result of the Bill? So far, Mercury's objectives are aimed at the main cities, where it can expect to make profits. There is no sign that it would even go into Scotland until 1985. Mercury will be confining its operations to the areas that will return the fastest buck.
  Mr. Parkinson: I shall be dealing with rural services in a moment. The cost of providing those rural services will be spread between the various networks—in other words, Mercury will be making its contribution to providing the emergency and specialist services in the network.
  Dr. Cunningham: I distinctly heard the Secretary of State say that he believed that Mercury in competition with BT would bring better services to all. What is the right hon. Gentleman's estimate of the time it will take for Mercury to compete with BT nationwide, particularly in the rural and sparsely populated areas?
  Mr. Parkinson: By that remark I meant that for the first time we have a second network. We will be able to see how it performs. If it outperforms BT, if it has better equipment and if it gives a better service, people will realise that there are ways of doing things other than just the British Telecom way. For the first time we shall have a measuring stick against which to measure the performance of British Telecom.
  Dr. Cunningham: How long?
  Mr. Parkinson: I do not know how long it will take to develop, but £90 million has been invested and it is aimed to provide a better service for the customer. It is aimed at providing competition. I know that both those things are of no significance to Opposition Members, but they are of significance to the country at large. The country welcomes the fact that there is now a competitor to British Telecom.
  Mr. Barry Henderson: Does my right hon. Friend agree that the modest measures of liberalisation that have taken place have already greatly improved the quality of service offered by British Telecom? That is a benefit for everyone, particularly for those living in a rural constituency such as mine. Does he further agree that the possibility of alternative employment for people working in BT is a great advantage to them? BT will not be just a monopoly purchaser of labour.
  Mr. Parkinson: I believe that the injection of Mercury into the commercial scene has already improved the performance of BT and has made it realise that it has to behave like a business and much more commercially than it did in the past. I believe that that is for the benefit of all of us. I am grateful to my hon. Friend for explaining succinctly to the hon. Member for Copeland (Dr. Cunningham) just what benefits there are for the public, even though Mercury at the moment is only a small network.
  Dr. Cunningham rose—
  Mr. Richard Shepherd rose—
  Mr. Parkinson: I shall certainly give way to my hon. Friend in a moment. I accept that Mercury is still

  33
  something of an experiment. We are doing things that have not been attempted before. We want to give that experiment every chance to succeed, so while Mercury is establishing itself we decided not to licence any further competing networks. This restriction on competition is not, I accept, ideal, but it is more important to build up one effective competitor for British Telecom than to license several competitors to destroy each other and leave the field to the established monopolists.
  Mr. Richard Shepherd: I am concerned about the implications of duopoly on competition policy and the effect it has on our stance in the country at large. Surely the introduction of a duopoly into international services would have a consequential effect on those customers of British Telecom who have no alternative source of services. Will not a consequence of introducing duopoly to international services without extending competition generally be for prices for those captured customers such as myself and some small businesses to increase to make up the differential in lost monopoly profits?
  Mr. Parkinson: I know of my hon. Friend's keen interest in this matter and I have read a number of his contributions in Committee. While I accept the disadvantages of duopoly, I still think that, compared with a monopoly, it is a major step forward. We now have a measuring stick, or the beginnings of one, against which to compare the performance of British Telecom. British Telecom has shown already that, although there is only one competitor and it is small, it is taking that competitor seriously and it is being forced to improve its own performance.
  We shall also license two competing radio telephone networks. The effect of competition has acted like a shot of pure oxygen on BT. Under the guidance of Sir George Jefferson, BT has moved a long way from the traditional attitudes which it formed in the days when it was a Government Department. For example, Sir George Jefferson has undertaken a major reform of British Telecom's accounting and management systems. That was desperately needed. When Sir George arrived in that huge enterprise—I declare my interest here—there was only one qualified accountant among the whole of BT's 61 local areas. Its accounting and management systems were, by modern standards, almost non-existent. The very fact that the company was moving towards privatisation, that it would have to come to the market to account to its shareholders and to its customers has made it start behaving like a business—to the benefit of those who work in it, and above all to the benefit of its customers.
  A few years ago some subscribers felt that they could scarcely get a line connection for Love or money. Apart from the irritation that that caused, it was a major problem for new businesses or businesses moving office, as all Members will know from their constituency mail. In 1980–81 the waiting list for connections was 127,000. Last year it had fallen to 4,000. The number of new connections rose by 1·4 million during the period. A few years back, businesses which wanted private circuits to link offices in the same area had to wait three or four months for installation—by last year the waiting period was down to less than a month. There is still a steady flow of applications for new lines but BT can now deal with them much more speedily.
  The 1981 Act allowed liberalisation, but it did not take it all the way. The Bill is the next stage in producing
  34
  further liberalisation and it is, in our view, a practical Bill. We have not been dogmatic. We have been prepared to listen and to consider seriously all the many representations and suggestions that have been made to us since the first Bill was published last year. As a result, the Bill now contains stronger safeguards for the rural and the other socially necessary services about which the right hon. Member for Western Isles (Mr. Stewart) spoke earlier. It contains new provisions to help the blind and other disabled people and it draws on the suggestions of the Littlechild report on regulating the monoply that British Telecom is likely to enjoy in the provision of some services until competition develops fully.
  Under present legislation, BT enjoys a special position. It alone can run its systems without a licence, and it has powers to license other systems. British Telecom has access to Government funds and its borrowings are guaranteed by the Treasury. True competition cannot flourish in such conditions. It is as if one competitor had exclusive use of a motorway and all the others had to drive on the country lanes.
  The Bill repeals British Telecom's powers to license other operators and its special privileges, and replaces the Telegraph Acts by a new telecommunications code. The guiding principle in the code is that no person should unreasonably be denied access to the telecommunications system. In the past, it seems, we have never been concerned enough to regulate our monopolies. Customers have had little redress against BT, or the Post Office before that. It has been impossible to judge whether increases in telephone charges could be justified. After all, when people point to the profits, a monopoly can turn in large profits year after year, whether it is efficient or not.
  Mr. Richard Shepherd: My right hon. Friend has mentioned the regulation of monopoly, about which we are all concerned. Can he tell us a little about the Littlechild formula for price restraint? As I understand it, the formula is RPI minus x, but does that apply to the basket of all British Telecom's costs or to a narrow selected range? If it applies to all BT's costs, it means that one can cross-subsidise — by cutting costs to certain selective business users, one can pile additional charges on to the private customer who has no alternative service. Therefore, the RPI minus x solution, if applied to a full basket of charges, would give the customer no protection against extraordinary price increases.
  Mr. Parkinson: The Minister for Information Technology will answer that matter in detail later. We do not propose to have the limitation which causes my hon. Friend such concern, but I hope that he will feel happier when he hears the reply in full later.
  British Telecom's profits have, until recently, owed little to efficiency and everything to monopoly. The Labour party has never been willing to recognise that state-owned monopoly industries are just as likely as private ones to lapse into monopolistic practices to the detriment of their customers. Customers need protection whether the monopolies happen to be private or state-owned.
  Mr. Roger Stott: Ridiculous.
  Mr. Parkinson: It is all very well for the hon. Gentleman to sit there muttering, "Ridiculous", but lie has no way of knowing because until recently the accountancy systems of BT did not show where the money came from.

  35
  Every set of accounts that the organisation ever produced has been qualified by the auditor, who has said that in his view he cannot audit them; so the basis of the hon. Gentleman's assertion is very flimsy indeed.
  Mr. Stott: The basis of my assertion is almost 13 years of being employed by BT as a telecommunications engineer. I refute absolutely the Secretary of State's statement that the profit of the organisation did not come from the productivity of the people working in it.
  Mr. Parkinson: I suggest that the hon. Gentleman gets a presentation from BT of its accounting systems and what it knew about its business. Having done that, he may appreciate that he has no basis for making his assertion, except blind prejudice. The only long-term solution is to end the monopoly and establish free competition.
  In the interim, in the aftermath of decades of unchallenged monopoly in telephone services, it is only right that the customer should be given real protection. We recognise that BT will still be in an immensely powerful position after the passing of the Bill, so we need a regulatory system to deal with the problems that might arise.
  The licence issued to BT will have special provisions as to pricing. In a number of areas, including domestic rentals, installation costs and local calls, where it will for the time being be a monopoly supplier, the licence will require it to keep prices below the rate of inflation each year for at least the next five years. A draft of the BT licence will be made available to the House at the start of the Standing Committee's consideration of the Bill.
  The passing of the Bill will be a great advantage to the ordinary consumer. Clause 3 repeats the present statutory duty for BT to provide a nationwide service, but that duty has been extended from a duty to provide a telephone service to a duty to provide telecommunications services. This reflects our commitment to making modern telecommunications facilities and services available to all.
  What is more, we have put in new wording since the Bill was last seen by the House to make it clear that the requirements placed on the Secretary of State and the Director General of Telecommunications are statutory duties and nothing less. For the first time, clause 3 puts into statute what has previously been taken for granted but has never been written down. It lists all the vitally important social services which must be continued: the 999 emergency services, public call boxes, ship-to-shore services and services in rural areas.
  Let me make that quite clear: BT's licence will forbid it to discriminate between different categories of customer, so retail services will stay, as will rural kiosks, the 999 service and essential shipping services. It is all there in black and white for Opposition Members to read if they wish to do so.
  Mrs. Elaine Kellett-Bowman: Will my right hon. Friend accept that my area has a larger number of small revenue telephone kiosks than any other part of the country? A number of boxes are threatened with closure or removal, and while the actual revenue of those boxes may be small, it is no criterion of their use because many of them are used for reversed charge calls. Nor is it a measure of their social necessity, particularly in bad weather.
  Mr. Parkinson: That is precisely the sort of consideration which will be taken into account if there are applications, as there are now, to close or remove boxes. When my hon. Friend has had a chance to look at the arrangements, I am sure that she will come to the conclusion that it will be more, rather than less, difficult in future to remove or close rural telephone kiosks.
  Mr. Tim Eggar: Will my right hon. Friend confirm that there will be a defined subsidy paid to BT by the Government to operate uneconomic services? If not, there will be the danger of moving immediately into cross-subsidisation which, will impede competition in the future.
  Mr. Parkinson: I am pleased to tell my hon. Friend that there will be a system of excess fees which will create a pool, contributed to by all operators, from which the costs of maintaining these services will come. It will be not from a cross-subsidy but from that pool.
  Clause 3 also looks to the future and provides for the creation in the United Kingdom of a centre of telecommunications excellence, with both BT and a growing number of new market entrants providing competitive contributions in R and D as well as in new products and services.
  Mr. Pavitt rose—
  Mr. Parkinson: I would rather not give way further at this point.
  The Bill creates a new Office of Telecommunications, to be known as Oftel, which will monitor, enforce and amend licences. It will be independent of Government and will have considerable powers. Until now, customers have relied on the Post Office Users' National Council and the country councils. They have done well, but we need a much stronger body in future.
  Not only will Oftel follow up complaints, as the Post Office Users' National Council does now; it will be able to make orders requiring the licensee to comply with the licence conditions. The Bill also makes it clear that any person who suffers as a result of a licensee failing to comply with such an order will be able to take action in the court. The director will also be able to take court action to secure that the order is obeyed.
  Still on the subject of what redress is open to customers, the Bill makes another important change. It obliges BT to supply all services under contract. Until now BT, unlike any other telecommunications operator in the United Kingdom, has not had contracts with its customers. That means that customers have not had a legal means of redress under the normal law of contract.
  It will be open to consumers after the Bill is passed to take legal action, if they wish to take that route, although we intend to see that the existing non-statutory method of arbitration in cases of dispute also continues. The aggrieved customer will have the choice.
  Mr. Pavitt rose—
  Mr. Parkinson: I am coming to the point which I think troubles the hon. Member for Brent, South (Mr. Pavitt). The Bill makes important special provision for the disabled, including the blind and deaf. At present, there are a number of pieces of apparatus specially adapted for use by the disabled. We are determined that they should continue to be available; clause 3 spells out our duty to

  37
  ensure that. In other words, we have built into the statute a duty to ensure that the people about whom the hon. Member is concerned are taken care of.
  Since the House last saw the Bill we have inserted a new provision, clause 81, which will enable the Secretary of State to pay grants toward: the research and development of such apparatus. That will apply to telephone exchanges specially adapted for use by the blind. They provide a valuable source of employment for blind persons. We wish to see the number increased and we hope to make that possible by ensuring that the equipment is available. We also have in mind the needs of the deaf in using the telephone, and we shall ensure that their special needs continue to be met. I hope that the House welcomes those assurances.
  Mr. Pavitt: The right hon. Gentleman has said that under clause 3 there will be no discrimination between one type of subscriber and another. Is he aware that at present only deaf subscribers face extra charges? There is an extra charge for the installation of a transistorised handset and the rental is also more expensive. If someone in a rural area pays the same charge as someone in an urban area, surely the deaf person should not face an increased charge as compared with other users at present?
  Mr. Parkinson: As I have said, the Government will be making a contribution to research and development that we hope will lead to the production of suitable equipment. I was not aware of the problem to which the hon. Gentleman has referred but I shall take it up and write to him.
  Sir Kenneth Lewis: I am sure that both sides of the House will be pleased to know that the Government will be making a contribution to research and development that will lead, we hope, to the production of suitable equipment for the disabled. We know also that the Government will still have a large shareholding in the company when the Bill is enacted. If there are problems for constituents following the Bill's enactment, will we be able to question my right hon. Friend and his Department in the expectation of getting answers from them, or will we be told that they cannot answer our questions because these questions relate to the operations of an independent company?
  Mr. Parkinson: I have known many Ministers who have had an ambition to avoid answering questions of that sort but I have never known one succeed in doing so, especially when Members like my hon. Friend have pursued them. If hon. Members feel that the arrangements are not working, I have no doubt that they will be able to draw attention to the contribution that the Government are making to the costs of research because they have identified what they consider to be an area of social importance. On that foundation, they will be able to ask any question that they wish.
  I bring the attention of the House to part IV, which was not in the previous Bill and which concerns cable programme services. The Post Office Act 1969 needs some amendments to bring up to date the provisions which determine which services require a licence. These are technical provisions that draw a distinction between services that are like broadcasting and those that are like conventional two-way telephone services.
  I have taken some care this afternoon to set the record straight on a number of issues. There has been much
  38
  confusion about what the Bill does and does not do. There have been some genuine misunderstandings and others that have not been entirely genuine. It is with pride that I introduce the Bill. In doing so, I am very much aware of the great amount of work that was put into the previous Bill by my predecessor, by my ministerial colleagues and by the House, especially the members of the Standing Committee which considered the previous Bill.
  The Bill makes as great a contribution as any Government can make in legislation to stimulating enterprise and consumer choice in a difficult area where a monopoly has reigned for a long time. The House cannot create wealth for the nation, but it has often been guilty of impeding its creation. It is easy to grasp that great opportunities lie ahead—commercial opportunities and opportunities for improving our standards and way of living. The Bill opens doors on such possibilities. We shall establish a competitive environment that can generate highly competitive industries in Britain while being capable of sharing in the world's new sources of wealth. We shall do more than that, for we shall open up a range of new services to our people, both at work and at home. We offer the millions of BT customers a newly enshrined set of rights and the benefits of competition and new technology. We offer BT and its employees a brighter future as a world company in an area of high technology. Many benefits flow from ownership by the public and I commend them to the House.
  4.33 pm
  Mr. Stanley Orme: For the second time Parliament is faced with this major denationalisation proposal. I have no doubt that in Committee we shall examine the Bill with the same amount of detailed consideration that we gave to its predecessor. The proposals set out in the Bill will affect one of our major publicly owned industries which, for the past 70 years, has developed into an outstanding public, commercial and social service.
  British Telecom has 235,000 employees and its net assets are well in excess of £16 billion. It is a major purchaser of equipment manufactured in the United Kingdom. In the past 10 years individual telephone subscribers have increased from 9 million to about 18·5 million. All that being so, why are the Government submitting these proposals? For whose benefit have they been proposed and for what purpose?
  In Friday's edition of The Guardian Victor Keegan asked the same questions. The article's heading reads:
  "Victor Keegan looks at the case against privatisation of the money-making state giants like British Telecom and British Airways when the mere fact of privatisation will do nothing to break the monopoly but will simply help line private shareholders' pockets."
  The issue of private and public monopolies is central to the argument and the hon. Member for Aldridge-Brownhills (Mr. Shepherd) raised it forcefully in Committee. His argument, with which the Opposition did not agree, was that the mere transfer of a public monopoly to a private monoply would do nothing for the service and would lead to no basic improvement. That contention has been underlined by Lord Weinstock in the course of a Channel 4 interview a few days ago. Lord Weinstock, who is one of the Government's supporters, said:
  "I am not clear what point there is in privatising a company which is by its nature a monopoly. I don't see how you can have anything other than a monopoly running a national community service."

  39
  British Telecom has clipped one of its wings by allowing Mercury to develop. It will compete with British Telecom on its most profitable business lines. British Telecom will be asked to provide facilities for one of its main competitors and to do so at its own detriment. That is nonsensical.
  The argument was taken further by The Times editorial this morning. The Secretary of State referred to it selectively and I shall do likewise. The last paragraph states:
  "All that will occur, therefore, is that BT will gain greater access to private finance while losing what little public accountability it has had. That is not competition; it is corporatism."
  I maintain that British Telecom had a good deal of accountability and that it was being extended. The public were much aware of the development of BT. The right hon. Gentleman made great play about the lack of accountants within its organisation but no one is saying that it is perfect, that it does not need improvements and that it does not need to be modernised. However, over the past seven years BT has made a profit and has not received any public subsidy.
  Mr. Eggar: BT has been making a profit because it has a monopoly. That means that it can alter its prices at its own will. There is no pressure on it to increase its competitiveness and efficiency within the sector in which it operates.
  Mr. Orme: Perhaps we shall see the effect of a private monopoly on prices and then be able to compare that with the effects of price reins maintained on BT during the past seven years.
  The Government know that there are other ways of developing telecommunication services in the United Kingdom. However, they are hell-bent on privatising, not for the benefit of the community but for the benefit of private shareholders.
  Mr. Eggar rose—
  Mr. Orme: I have just given way. BT has made a profit during the past seven years. It is now faced with an explosion of technology and a need to expand services. It is obvious that investment is required. We are dealing not just with the telephone service but with information technology and with cable — a development that will expand at a tremendous rate during the next few years. That investment could be found by removing the dependence upon the public sector borrowing requirement and extending the external finance limits. The Government know—
  The Minister for Information Technology (Mr. Kenneth Baker)rose—
  Mr. Orme: I think that I can anticipate the question. Let me develop this point. I will give way to the Minister later. The Government know that BT needs the right to raise capital for investment, particularly in the new technology that has been developed so rapidly. At present two factors prevent this —the inclusion of BT in the PSBR and the fact that external finance limits act as a barrier. In the past, the Treasury has fought bitterly against taking the publicly owned industries out of the PSBR. This should be done now. There is no legal reason to maintain external finance limits. The Government have the
  40
  discretion to relax or abandon them. It is, therefore, easy to introduce more capital into BT without recourse to privatisation.
  Mr. Kenneth Baker rose—
  Mr. Orme: I shall give way after this sentence. The Government have chosen to restrict BT's capital in pursuit of their twin obsessions—the PSBR and the money supply.
  Mr. Baker: It cannot be said that during the past few years we have restricted the money given to British Telecom. We have always acceded to its investment programmes. On the right hon. Gentleman's main point, in a nutshell he was saying that we should have BT in the public sector but let it borrow in the market. All borrowing by a public sector authority must ultimately be guaranteed by the Government and the Treasury. It is, in effect, gilt-edged.
  The right hon. Gentleman is asking that public sector bodies should, with a Government guarantee, be transferred to the private sector. The Government do not hold the dogmatic view that this is unworkable. However, how do we choose? Do we include all nationalised industries and all Government Departments? The difficulty lies in choosing. If the right hon. Gentleman is in favour of this, why did previous Labour Governments not do it? They found that it was unworkable. If BT is to go to the market it has to be in the private sector.
  Mr. Orme: The Labour Government did not do it, although many Labour Members thought that they should have done. Four years on, faced with the proposed development of BT and the type of investment that is needed, that mixture is acceptable. The Government could put public money into an industry as important as BT, with its potential. The Government could allow it also to borrow from the market and, if necessary, guarantee that money. We believe that that rather than the way the Government are going is the way forward.
  The Government are proceeding with the resale of national assets from BT. The figure was not given by the Secretary of State, but I assume that £4 billion or £5 billion will be floated on the market when the shares are made available. What will the money be used for when it is raised? Where will it go? Will it go into specific areas or will the Treasury have control over it for its own purposes? From the expression on the Minister of State's face, I believe that he knows the answer. I shall not press him further.
  What is also worrying—and the Secretary of State did not deal with this point—is the profit level which is to be announced on 20 July. There was a forecast—if we are to believe forecasts—in The Economist on 9 July 1983 that suggested that the profit is likely to be less than the City of London has been expecting. Does that mean that local charges will be increased above the figure that BT was estimating, so that the resale price will be more attractive? That is a question that the House is entitled to ask. Does that mean that charges to domestic consumers will be increased to make the sale more satisfactory? We shall be faced with similar circumstances with British Airways. The Government are trying to get the accounts, as they see them, straight.
  It is worth remembering that BT has held the tariff at its present level for nearly two years. That is important.

  41
  If BT's profit is about £500 million—not as high as the City had forecast—it would be disgraceful if it were allowed to increase prices to make the resale more profitable. Perhaps we could have an answer on that point from the Government.
  I wish to deal with the provision of services for the consumer. Despite the Minister's assurances, we remain unconvinced that the level and range of services available will be continued. We maintain that market forces will demand that a privately owned BT cuts those services that incur a loss or make little profit. Rural services, emergency services, call boxes and provision for the blind and the disabled have an uncertain future.
  By their interventions this afternoon, some Conservative Members have shown that they and their constituents are also worried about these basic changes. The Bill contains the nice sounding phrases that the Minister of State used time and time again in Committee —"satisfying all reasonable demand" and "reasonably practicable". Those are words that slip easily off his tongue, but they do not give the guarantee for which consumers are asking for those services. The House should take note of that.
  The Bill will mean that we shall see an end to the principle of equality established and maintained for 70 years—universal pricing and services.
  The public telephone box could be threatened with extinction, not just in rural areas but on housing estates and in other parts of the country. Last year 120 boxes were removed. A few were supported with the help of local councils. The Bill could mean a flood of closures in the future. The call box service loses about £90 million a year. The hon. Member for Lancaster (Mrs. Kellett-Bowman) raised this point and asked bluntly for a subsidy and an assurance. What will shareholders do when faced with colossal losses as a result of the Government's proposals? The pressure will be on them to say that call boxes are no longer essential and can be removed. The vandalised box on the housing estate and the box at the end of the lane in rural areas will go. I know that all hon. Members would like to see every home with a phone of its own. That is a desirable target, but we know that in the present economic circumstances it is not possible. Many of my constituents in inner city areas depend on phone boxes for emergency and other essential calls.
  The Government have said that non-profitable services will be funded by an access charge, but we do not know the level of such a charge.
  Mr. Parkinson: The right hon. Gentleman is causing much unnecessary alarm and concern. Clause 3 says:
  "The Secretary of State … shall … have a duty to provide … such telecommunication services as satisfy all reasonable demands".
  That includes emergency services, and the rest. It is there, built into the legislation as a duty, while the right hon. Gentleman is talking about an organisation that has no contract with the person to whom it supplies a phone and the widest range of discretion that one can imagine. We have built in a duty upon the Secretary of State and the director to maintain certain emergency services in the public call boxes.
  There are 77,000 telephone kiosks, and last year 23 were closed, following an elaborate procedure approved by the Post Office Users National Council. There is no
  42
  reason why there should be any increase in that number. The sooner the right hon. Gentleman stops trying to mislead and scare people, the better.
  Mr. Orme: I am not trying to mislead or scare people. I used the phrases in the Bill "satisfy all reasonable demands" and "reasonably practicable", of which we do not know the interpretation. Many of the right hon. Gentleman's hon. Friends are concerned about this point, so let us be under no illusion.
  Mr. John Golding: Does my right hon. Friend realise that in the BT licence the phrase "all reasonable demands" was defined as that demand that was accompanied with the full cost so that any customer had to pay the full cost of providing services? That is what the phrase "all reasonable demands" means in the eyes of BT and the Department of Industry.
  Mr. Orme: I take my hon. Friend's point, which he has put firmly on the record. It will be the duty of the Government to clarify this matter in much greater detail and in much clearer language than has been used. When BT is privatised there will be shareholders' pressure, and if it is losing £90 million a year this will have a great influence.
  The Government have said that non-profitable services will be funded by an access charge, but we do not know the level of such a charge, how much money it will raise, how much money will be channelled to the non-profitable services or to what extent it will cover the cost of such services. Those questions need a firm answer.
  The Bill will lead to the loss of jobs, and nothing has been said about that by the Government this afternoon. Before discussing BT itself, I shall examine the effect of the Bill on equipment suppliers in the United Kingdom. About 70,000 jobs are linked in the manufacturing sector —a decreasing one—to BT equipment. The Secretary of State's speech this afternoon was an open door for imports and offered no protection for British industry. At the moment, BT purchases about 95 per cent. of all equipment from United Kingdom suppliers.
  Recently, Sir George Jefferson made a speech to the Telecommunications Equipment Manufacturers Association on the intention of a privatised BT—not BT as it is at the moment—to accelerate the trend towards purchasing foreign products. Where is the Government's "buy British" principle? We have a manufacturing sector that has new technology and the right ideas to develop and it needs the base of purchase from BT.
  Mr. Tony Marlow: The right hon. Gentleman and his party, during the election campaign that we have just been through, were putting around massive scare stories among BT staff saying that the result of the Bill, if it goes through, and it will, would be massive redundancies, and that many people within BT would lose their jobs. Can the right hon. Gentleman tell the House why people in BT will lose jobs? Is it because it is inefficient at the moment but will become efficient later, or is it because the amount of telecommunications activity will be less in the future than it now is? I should be very interested to know.
  Mr. Orme: I am coming to that point about jobs within BT, and I shall answer the questions that the hon. Gentleman has fairly raised.
  The proposed loss of jobs within BT is increasingly causing concern, and again we have this on record. Sir

  43
  George Jefferson has already made it clear that 15,000 jobs are to go, and, despite repeated requests, the Government have failed to deny the evidence of the Think Tank report that talked of 45,000 jobs lost after privatisation.
  The workers within the industry have every reason to be extremely worried about this. As I said, BT is to remain a monopoly for the domestic subscriber, but a creaming-off operation will take place with the establishment of Mercury, which will also lead to a loss of jobs within BT. Mercury is only interested in operating on the most profitable routes and is therefore taking BT's most profitable traffic, reducing its revenues and hitting its investment. To counteract this, BT has been forced to rebalance its tariffs, which will force up charges for local residential consumers.
  Mercury will not provide any services that BT is not already providing. On the whole, Mercury services will be no different, no better and no cheaper. It is a wasteful duplication of resources and the Government then have the nerve to demand that BT assists its main competitor. Is this the operation of market forces? Is there any other major company, for example in the motor industry, that has openly to assist its main competitor and be damaged by that competitor, at the behest of the Government, as BT will in this case?
  Mr. Gerrard Neale: Does the right hon. Gentleman nevertheless agree that a study of what happened in the United States, where similar arrangments have been permitted, much against the will of American Telephones and Telegraphs, showed that the revenue that AT and T has drawn from those companies that have been allowed to interconnect has been far greater than previously?
  Mr. Orme: The hon. Gentleman has anticipated my next remark. The experience of privatisation measures in other countries is far from reassuring. The Bell system in the United States has already started to lay off workers, even before the planned break-up of AT and T, to which the hon. Member for Cornwall, North (Mr. Neale) referred. The Japanese press speculated in February this year that moves to privatise NTT are to be accompanied by job cuts of about 90,000—almost one third of the work force. It is interesting to contrast those proposals with what is happening in Sweden and France, where the public sector is developing and expanding.
  I wish to put a series of questions to the Government. No doubt the Minister for Information Technology will be able to answer some when he replies to the debate and I hope that the others will be answered as soon as possible. As the Secretary of State said, the Bill incorporates minor changes arising out of the Committee stage and the major debates on the Bill in the previous Parliament—not least over the Littlechild report. Many of the questions that worried us then remain unanswered.
  The Secretary of State said that the licence is to be laid before the House. The Minister for Information Technology had great difficulty answering our debates on that subject in the previous Parliament. May I assume that the full, proper licence will be made available to all hon. Members and will be debated in Committee, so that amendments can be proposed to it?
  Mr. Parkinson indicated assent.
  Mr. Orme: I am grateful for that clarification.
  The Government have not answered the questions raised by the trade unions about the protection of pension rights. The Secretary of State did not answer my question about new employees. It seems to us that there could be two categories of employee within BT, and we shall need to pursue that matter. The fully-funded, index-linked pension scheme of BT, to which employees contribute, is a major factor in their employment and they are anxious about its future.
  The Secretary of State also failed to answer effectively the questions raised on the previous Bill about consumer protection. He said that the consumer protection body is to be abolished and replaced by Oftel. We still want to know whether there will be adequate safeguards and whether consumer protection will have an independent role. Oftel will have to take on many other activities and monitor many other areas.
  The Post Office Users National Council made three requests in its letter to hon. Members. The first was that the Government should
  "give a clear indication of how the price restraint formula is to be applied and a list of the services to be included within it—rentals, call charges etc".
  Secondly, the POUNC urged the Government to
  "confirm whether a broadly universal tariff will be retained or whether, with the splitting up of BT into 61 regional cost/profit centres, substantial local variations will be permitted".
  Thirdly, the council asked
  "how 'access charges' (proposed payments from BT and Mercury when connecting trunk calls into local BT networks) will be used to finance loss making but socially desirable services such as kiosks, 999 etc. The scale and method of payments of these charges should be clearly spelt out since these essential services must be preserved."
  Those are central questions and it is a pity that the POUNC is to be abolished and its work is to be handed over to a much smaller and less effective organisation.
  Considerable lobbying has taken place about the future of BT. The Secretary of State must be even more aware of that than I am. The right hon. Gentleman said that he would maintain the entity of BT after its conversion from a public monopoly to a private monopoly. Will that be written into legislation? Will it be possible for BT to decide to break up the monopoly, split it into units and sell them? That is an important matter and we are entitled to answers to those questions. After all, we are dealing with one of Britain's major industries. The Secretary of State said that he would not react to the pressure being applied by many of his hon. Friends and others, but what about the future and what about guarantees?
  Faced with a new era of information technology, with British achievements as good as, if not better than, most in the world, it is tragic that an organisation such as BT should be dealt such a devastating blow.
  The Opposition remain firmly opposed to the Bill. We shall fight it in Committee and if the Government are successful in getting it on the statute book we shall look forward to the day when we can recreate a publicly owned and democratically run telecommunications system in the United Kingdom.
  Mr. Marlow: Will the right hon. Gentleman give way?
  Mr. Orme: I ask my hon. Friends to oppose the Bill.
  5.7 pm
  Mr. Peter Temple-Morris: I am honoured to be called so early in the debate. This is not

  45
  the first time that I have spoken immediately after the right hon. Member for Salford, East (Mr. Orme)—I often did so in the Committee on the previous Bill—and I do not suppose that it will be the last. No doubt the right hon. Gentleman noted that a number of my hon. Friends were eager to interrupt him, and I am sure that my hon. Friend the Member for Northampton, North (Mr. Marlow) is itching to serve on the Committee that will consider this Bill. Doubtless there will be many volunteers from both sides of the House for that arduous task.
  I did not speak on Second Reading of the previous Bill, but I still found myself on the Committee. Perhaps that will serve as a warning to my new hon. Friends. If they speak on Second Reading and ensure that not everything that they say meets with the approval of the Government Front Bench, perhaps they will be less likely to have to sit through another 161·5 hours of Committee. I am pleased to see the hon. Member for Newcastle-under-Lyme (Mr. Golding) in his place. Perhaps as this is the start of a new Session he will reduce his speeches in Committee from 11 hours to six or seven hours. We shall have to wait and see.
  I do not intend to make a full-blown Second Reading speech, because we have been over the course before. However, I appreciate why Front Bench spokesmen have to go over the ground again to make their arguments for and against the Bill.
  I commend my right hon. Friend the Secretary of State, who was thrown in at the deep end on this Bill, because it is one of the more complex measures that will come before the House. He swam very well and I hope that he will continue to do so. Perhaps we may even see him in Committee. My hon. Friends the Under-Secretary of State and the Minister for Information Technology handled the previous Committee well, but perhaps extra moral support will be needed this time.
  I should like to make two main points to the new Committee, having served on the old one. First, my beloved rural areas. As the House knows, I represent a rural area. I did my best for such areas. I thank my right hon. and hon. Friends on the Front Bench for the way in which they answered the amendments that I tabled. I was also grateful at times for the support of Her Majesty's loyal Opposition, which concentrated the mind of the Committee. What emerged benefited the Bill.
  Clause 3 as it stands should be protected. However, it can be improved in certain respects. No doubt the Committee will set its mind to that. I dare say that will take up many hours of the Committee's time.
  My second point, which I deal with as someone who served on the Committee and is not a telecommunications or privatisation man, is about the philosophy of the Bill, partly because of other measures that might come before the House during this Parliament. I supported the Bill. On occasion in Committee I rebelled, but on all the main votes there and in the House I supported the Bill. I agree with what my right hon. and hon. Friends have said about the improved performance of BT and the fact that the competitive climate helped it. That is why I shall support the Bill today.
  However, we have to look at the nature of privatisation in the Bill, and in others like it, and consider when it is legitimate. For various reasons that I shall not go into now, I support privatisation measures for aerospace, airlines, airports, the National Freight Corporation, which is already an outstanding success, ports and so on. Either
  46
  internationally or nationally, these instances of privatisation add up to greater competition right across the board. However, there is an important dividing line.
  Having sat through hours of discussion, and occasionally as the nocturnal reality strikes one as one goes through the enormous detail of a Bill, one wonders whether much of it lives up to our high ideals of the legitimate aspects of privatisation. There is a questionable aspect of privatisation. I say that not in criticism of the Bill, but to put down a marker for the future. When a great national network is privatised, with a vast percentage of which there can be no competiton, such privatisation benefits the performance of the network—which is one of the reasons why I support the Bill—but only in a limited margin at the edges is there true competition, which Conservatives favour.
  That leads me to the central point, which has been the dilemma throughout the Bill. We have been engaged for hour after hour—and the new Parliament will be—in creating the most enormous private monopoly and monolith out of what is already a public monopoly. The matter has been dealt with by the Opposition. My hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) and I drew attention to it, either directly or in the form of various signals in Committee, as well as on Report and Third Reading. A basic conflict has to be resolved.
  Whatever we do, BT will remain a giant. Whatever we do, competition will be limited to the fringes for many years to come. The percentage, which varies, is frighteningly small. The position abroad is not necessarily any better. Increasingly BT will compete, as it does now, with huge state-run organisations. When one competes abroad in this day and age, one must not encourage a division when it comes to British component parts. BT will compete with large, state-backed organizations, whether it likes it or not.
  I shall deal now with rural areas and our beloved clause 3. The special need of the rural areas has been mentioned. Phone boxes and other services are more expensive than in urban areas. The general case for rural deprivation has been recognised. However, when we go beyond that we come to a central point of which much has not been made. I am slightly surprised that it has not, but I am sure that it will recur. I hope that my right hon. and hon. Friends will not mind me saying this, but it is important and was acknowledged before the Committee started. We are still playing "Hamlet" without the prince. The House does not have access to the vital licence between Her Majesty's Government and BT.
  So far we have "Ringing the Changes", which is immaculately set out. It was a genuine and sincere effort by the Minister of State to give us the best possible idea of what the agreement should contain. I understand that a new draft document is forthcoming, but I issue a wanting. I am not privy to any great secrets of Government, but if I had anything to do with BT I would play this out like mad. I would like hon. Members to scrutinise the agreement. It would be better if it were done by the House. I should like some confirmation, which I am sure will be forthcoming. I hope that the Minister of State will deal with this. Another document is forthcoming. I hope that my hon. Friend will take it as far as possible and that at the end of the day the House will have some control. The

  47
  influence that clause 3 can have on what emerges in the eventual licence document is considerable. The two could be in conflict.
  That brings me to clause 3 itself, in which there is an example of such a conflict. I am thankful for the amendment to clause 3. My right hon. Friend the Secretary of State mentioned the duty in it. The amendment was made in response to what I said on Report. It rationalises the way in which the Bill is laid out, and I am grateful for it. I say this in an in-House capacity to my hon. Friend the Minister of State. I am grateful for the words
  "impracticable or not reasonably practicable".
  They emerged at about 4 am and materialised in the legislation. That strengthened the Bill and was an acknowledgement of the Back Bench from the Front Bench.
  This is an important point for us to bear in mind. Clause 3(1)(a) concerns the duty to provide
  "emergency services, public call box services, ship-to-shore services and services in rural areas."
  The Committee should look at clause 3(1)(b) in detail. It states that the Secretary of State and the director have a duty to exercise the functions assigned to them
  "without prejudice to the generality of paragraph (a) above, to secure that any person by whom any such services fall to be provided is able to finance the provision of those services."
  Immediately, there is a qualification, if not a conflict. An action can be brought against the Secretary of State or the director of Oftel, but there is a potential let out in clause 3(1)(b). An enormous case could be made about the ability to finance the provision of those services, whether they are humble telephone boxes or whatever, bearing in mind all the ramifications of BT. That is in direct conflict with "Ringing the Changes". I shall not bore the House with Committee details, but it is intended that a series of obligations should be placed on BT so that the rural areas are protected. However, in the controlling Bill the provision creates an immediate argument against those obligations, whatever the terms of the licence. It means that there is still a need for a great deal of clarification.
  That takes me to clause 3(2), (a) to (h), all of which is an example of the mumbo-jumbo and statements of the obvious which result from any attempt to create a controlled private monopoly. We see a long list of obvious duties which any commercial undertaker would perform as a matter of course. The Secretary of State and the director are required to promote efficiency and economy, and so on. Once we get ourselves into the business of trying to create a controlled private monopoly we find ourselves inserting into the legislation all sorts of provisions that we could well do without.
  In clause 3(2) (h) we have a provision which, in my view, still deserves amendment. The Secretary of State and the director are required by paragraph (h)
  "to maintain and promote outside the United Kingdom competitive activity on the part of persons providing telecommunications services or producing telecommunication apparatus in the United Kingdom."
  It is still not clear from that whether all our producers of telecommunications equipment will immediately rush to France, for example, and compete with each other or whether they will get their house in order beforehand, Whoever drafted the Bill appears to have competition on the brain, to the extent that there could be international British competition as well as national competition at
  48
  home. Anyone who has had anything to do with international trade knows that that is not necessarily the best approach.
  For all its faults, I think that the Bill is about right. Whatever may be said about election misconceptions and the rumours which have been spread around — and I agree with my hon. Friend the Member for Northampton, North — there is a widespread public misconception about the Bill. Very few people see the need for it. That being so, there is a considerable burden on my right hon. and hon. Friends to convince people. They are dealing rapidly with the fears of British Telecom workers. Those fears exist, whipped up or not, and they have to be assuaged. A prime example is not only what Lord Weinstock has said, but that we have a leading article in The Times today on the subject. The fact that it has been written means that the Government, having indulged in this complex piece of legislation for one year, are still nowhere near winning the public case for it. We are about winning the public case, not only about voting in the House. I hope that the Government can do a good job in this respect.
  5.24 pm
  Mr. Donald Stewart: I am pleased to be called immediately after the hon. Member for Leominster (Mr. Temple-Morris) because he is due a good part of the credit for concentrating the Government's mind on the improvements required to what is now clause 3. He also stressed the need to win over the public's mind to the Bill. There has been no great public demand to bring legislation of this kind into being. In my view, it has been done in furtherance of this Government's doctrinaire policies.
  The Secretary of State spoke about the accounting systems of British Telecom, which he claimed were archaic or virtually non-existent. But that reflects on the Department responsible for overseeing British Telecom. This lack of supervision pinpoints my fear that once the Bill has passed to the statute book the Department will take as little interest in the day-to-day working of the system as it has in the past. My fear is that public accountability will go.
  The right hon. Gentleman drew our attention to what he claimed to be a degree of firming up in clause 3. It will be the duty of the Secretary of State to see that services, particularly emergency services, public call box services, ship-to-shore services and services in rural areas, are maintained. However, we read in subsection (1)(a):
  "save insofar as the provision thereof is impracticable or not reasonably practicable."
  There is a loophole that will exist for ever and a day.
  Whenever I write to a department about the problems of my constituents the usual response is that what I am pressing for is not "reasonably practicable". I forecast, without a crystal ball, that once the Bill is enacted, hon. Members representing rural areas will be told time and again that services to the rural areas will not be maintained because what is asked for is not reasonably practicable. I represent one of the most scattered constituencies of the United Kingdom. It is made up of separate islands. Many communities are miles from the nearest road. There are a number of isolated villages with long distances to go to a doctor, a vet, the local fire service, and so on. In my view,

  49
  the Government are departing from the civilised principle that the better off parts of the country should carry a share of the burden of the less well off.
  In many rural areas maintenance costs will be extremely high, especially where inclement weather occurs and snow, ice and storms bring down telephone lines. Who is to bear these costs? On 28 March the Minister said that the provider of telecommunications would continue to do so. However, with the passage of time I believe that the cost of these repairs will fall on the individuals or communities concerned.
  It is no comfort for the people whom I represent to be told that in the past the responsibility for providing services lay with British Telecom and that in future it will be the responsibility of the Secretary of State. I have had too long an experience of ministerial responsibilities being shelved to put any reliance on that assurance— and I mean no disrespect to the present incumbent of that office.
  The right hon. Gentleman said that there would be a choice between different networks. The idea of competitors fighting for a franchise in a rural area would be laughable if it were not tragic. It is a concept without reality. They will be in business for profits. Loss-makers will receive short shrift, despite all the apparent safeguards written into the Bill.
  I have already mentioned in an intervention the Mercury project. It is interesting that it is confined so far to the large conurbations, and that seems to be the trend. So far as I know, it has not even spread to rural areas south of the border, let alone to Benbecula in my constituency. The companies will also look forward to increasing their charges. Figures produced by British Telecom in 1982 showed that United Kingdom charges for residential users were fairly low by international standards. Taking the United Kingdom as the base line of 100, the United States was 108, France 148 and West Germany 160. How long will that position last after privatisation? A report in The Scotsman today by a researcher from the Institute of Economic Affairs advocated that people in rural areas should pay more for their postal services. He claimed that the village post office is no more a social service than the village pub or shop. The Government support that approach, but I am against it and that is why I am opposed to the Bill.
  5.30 pm
  Mr. Gerald Malone: It is with great pleasure that I rise to make my maiden speech. First, I thank you, Mr. Deputy Speaker, for allowing me to catch your eye. I am well aware that there is a long row of maidens—if I may put it that way—and it is a pleasure and a privilege to be called.
  It is a particular privilege because there was a stage when I thought that my passage to the House would become well nigh impossible. Many of my Scottish colleagues who have arrived in the House for the first time wonder at other English colleagues for whom this has been their first election. We are battle-scarred veterans in comparison to them. I have fought five elections, one of them a by-election. In two, I stood against party leaders. One was the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) in a by-election last year; he has now retired from his position. The other was the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel), who,
  50
  while not having retired from his position, I understand to be resting. I trust that my sudden arrival in the House has not upset those right hon. Gentlemen too much.
  I represent the constituency of Aberdeen, South. It was made up of parts of three other constituencies and, unlike the venerable curate's egg, I am pleased to report that my constituency is good in all its parts. The constituency took on two town boroughs of St. Nicholas and St. Clements which were previously represented by the hon. Member for Aberdeen, North (Mr. Hughes), whom I am pleased to see arrive in the Chamber. The old constituency ceded another area — Kincoath — to the constituency now represented by my right hon. Friend the Member for Kincardine and Deeside (Mr. Buchanan-Smith). Similarly, I took on parts of his former constituency— Cove Bay, Nigg and Altens. I am pleased to report to both that the parts of their constituencies that I inherited are in extremely good health, with satisfied constituents.
  The major part of my constituency was formerly represented by Mr. Iain Sproat, who did not secure reelection to Parliament. I am sure that he will be missed by hon. Members, particularly Conservative Members, because latterly his contribution in Government was effective and forceful. I for one look forward to the day when he can be welcomed back to these Benches.
  My constituency is diverse. It consists of the southern part of the city of Aberdeen, a city of striking contrasts, both in its industry and geography. I must be almost unique, along with the hon. Member for Aberdeen, North, in representing an urban constituency which has such a beautiful and lengthy beach. It is a well-known city because of its internationally renowned university; more recently, it became particularly famous because of its skill in football. The Aberdeen football club holds both the European and Scottish cups. What gave me greater pleasure than anything was the fact that its reputation in football extended beyond its skill in the field because its supporters, when they went to Europe, were renowned for their good behaviour, unlike so many football supporters who obtain a reputation for completely different conduct.
  Latterly, Aberdeen has become well known for its oil industry. The rapid expansion of that and related industries has been a great benefit, not only to the city but to surrounding areas. The area owes much of its prosperity and current low jobless total to the fact that oil has come to the north-east of Scotland. The city must be complimented on the way it met the challenge that oil presented. Its people responded with a flexibility that is not to be found in many other parts of the country. It was able to respond to the challenge and provide a suitable basis for the oil industry to flourish. I trust that it will be able to do so into the distant future.
  Fishing, while still a dominant element in the local economy, is not as dominant as it used to be. The history of Aberdeen must accept that. The deep sea fleet has gone, but I am greatly encouraged by the shift in the fishing industry from catching to processing. There is much that I hope to be able to do as the Member of Parliament for Aberdeen, South to foster that and to ensure that it is a growth area for industry.
  Aberdeen is famous for its granite. I was interested to learn that the Terrace of the House is supported by Aberdeen granite. I can only say, having been there during the past few weeks, that the weight that has been displayed upon the Terrace needs all the support of Aberdeen granite

  51
  that it can get. That export has reached all parts of the country and it has made the city not only famous, but beautiful.
  No city or its description is complete without a description of its inhabitants. I take this opportunity to set the record straight. The citizens of Aberdeen have the ill-deserved reputation among fellow Scots and others in the United Kingdom of being not the first to dip into their pockets when the occasion demands. As the Member for Aberdeen, South I want to issue a testimonial to the warmhearted and generous character of its people. I have been shown a welcome in the city that I shall not forget. I certainly shall not forget the welcome that was recorded in the votes that I received on polling day. They are a warm-hearted, generous, enterprising and hard-working people. That is why Aberdeen is the prosperous place that it is today.
  As a new Member I also want to say a few words about the officers of the House, particularly those who deal with security matters—the police officers. No new Member can help but be struck by the courtesy with which we have all been greeted. We have been guided without stint or complaint on many practical matters that would be baffling to anybody entering the House for the first time. It is a compliment to them that so many new Members have found their way around so quickly and can deal with the difficult procedures that we find when we first encounter Westminster. I thank them for that. It must be difficult for them, particularly for the police officers, to have to sit and look at photographs from old election addresses pinned to the backs of doors in their cubicles. I doubt whether any new Members have pinned photographs behind their wardrobe doors at home so that we can repay the compliment.
  I am pleased to have the opportunity to speak on the Bill, which is a vote of confidence in the future of an industry which is in its infancy. I sometimes wonder whether Labour Members fully appreciate the expansion that can take place in telecommunications in the foreseeable future. It is an expansion which, if properly handled, will provide jobs. If our telecommunications industry is tethered to the monopoly that we still enjoy, we shall not see that expansion in the services or in the production of telecommunications equipment which must go hand in hand with any expansion of the services.
  People are basically dissatisfied with the whole telecommunications service. They have two views. First, they recognise the failure to innovate when technological change presented that possibility. Secondly, they recognise the fall in the standard of service. I am certain that the Bill will cure that.
  The more serious is the failure to respond to technological change. Over the years our system has fallen far behind systems in other countries. It is necessary only to recognise the service and innovation in the United States to realise that we are almost in the dark ages in providing facilities to customers.
  British Telecom recently has had two answers to innovation—"can't" and "don't". It said it could not supply, and if a customer could supply it said, "No. We do not want to connect it." The Bill is designed to crack that attitude. The industry lacks flexibility. If any industry
  52
  needs to be flexible it is telecommunications, because it depends on an immediate response to technological innovation.
  When the Minister of State is charged with implementing the legislation I want him to take into account his powers under clause 21. Before the Bill's introduction, much dissatisfaction was expressed at the way in which standards of equipment were designated and the way in which equipment which had not been provided by British Telecom could be connected to the system. I hope that the Minister will exercise his powers to allow a rapid approval of apparatus, both in design and in eventual testing of specification.
  The old system, under which British Telecom was allowed to overrule and oversee the designing of apparatus and to test its basic acceptability, did not work quickly enough. It cost too much and companies were not designing or manufacturing equipment to be plugged into the network because they did not believe that British Telecom would be a fair judge of the equipment. I hope that a different approach will prevail so that companies are not required to pay too much to have equipment tested and that it can be tested quickly so that no further lengthy delays occur before new equipment is connected to the system. I am sure that a common sense approach will be adopted. I look forward with interest to that approach being outlined.
  I believe that the Bill is a landmark on the way to a new industrial revolution. Information technology is one way forward to create jobs. It is one way forward to keep our industries internationally competitive. Without the Bill, we shall be severely disadvantaged. When history is written, I am almost certain, but not quite convinced, that Opposition Members will realise how fundamental a landmark it was and regret their ill-inspired hostility to the Bill.
  5.44 pm
  Mr. John Golding: I congratulate the hon. Member for Aberdeen, South (Mr. Malone) on his maiden speech. He was as generous in his praise of Mr. Sproat as Mr. Sproat was in giving him a winnable seat. I congratulate the hon. Member on being brief and lucid. I am not saying that I always advise hon. Members to be brief and lucid.
  It would be against custom to take issue with the hon. Member's remarks about telecommunications, but the hon. Member for Leominster (Mr. Temple-Morris) proved beyond doubt by the way that he pointed to the inconsistencies and mumbo-jumbo of the Bill that he has a duty to serve on the Bill's Standing Committee. It would be a disgrace if the Committee of Selection packed the Committee with Lobby fodder and left out the hon. Member for Leominister.
  Mr. Marlow: Will the hon. Gentleman give way?
  Mr. Golding: It is vital that the hon. Member for Leominster sits on the Committee.
  Mr. Marlow: Give way.
  Mr. Golding: This Parliament will begin for me, as it ended, with the hon. Member for Northampton, North (Mr. Marlow) intervening every time I make a speech.
  Mr. Marlow: I am grateful to the hon. Member for giving way yet again in our relationship. My hon. Friend the Member for Leominster (Mr. Temple-Morris) may or

  53
  may not be interested in being on the Standing Committee, but I am sure that the hon. Gentleman would like a certain fact at his disposal before he puts any influence on the Committee of Selection: is the hon. Member for Newcastle-under-Lyme (Mr. Golding) likely to be on the Committee?
  Mr. Golding: I shall come to that later.
  The Bill underlines the tragedy of the Tory victory. It highlights the difference between the Tory and Labour parties. It illustrates the Tory view that industry is best run on the principles of greed, conflict, and of putting self and private interest first. We in the Labour party oppose that attitude strongly. We believe that industry should be run in the public interest; in Britain's interest. We believe that a dedication to public service, not private profit, should be our guiding principle.
  The Tory theory of the virtue of pure competition is as irrelevant as the Marxist — Trotskyist doctrines on the other side. Pure competition has not helped Britain or British industry. Ask those in the pottery, machine tool, general engineering, foundry, shoe and textile industries; ask anywhere in the west midlands.
  In Britain, we are not faced with a flourishing private sector on one hand and a weak publicly owned British telecommunications business on the other. The opposite is true. British Telecommunications under public ownership has had a far better productivity record than private industry; it has reduced real prices by 20 per cent. in the past 10 years; it has provided a national service for all, including the rural areas; it has been a model of industrial relations; it has ploughed back all profits in investment; it has bought British; it has supported the British telecommunications equipment manufacturing industry and provided the basis for national planning in telecommunications. The Bill puts all that in jeopardy.
  One question is never answered— how on earth can distributing profits to shareholders instead of ploughing them back into the business help telecommunications and its customers? The Bill has nothing to do with improving telecommunications or providing a better service for customers. The Bill is a method of selling valuable public assets to help the Government to pay for the unemployment that they have created. Like North sea oil, British Telecommunications is to be used to finance waste. Very few people will benefit from the Bill. They include a small number of large commercial users of telecommunications, the City brokers who are parasitic on such sales, foreign manufacturers and those who trade in their goods, and those who will be employed in the new quango, the Office of Telecommunications. Those who will suffer include the residential subscriber, British manufacturing industry and the staff of British Telecommunications. I declare my interest as an assistant secretary of the Post Office Engineering Union.
  During the Committee stage of the Bill it became clear that the residential subscriber would suffer so that big business might benefit. At present, the residential charges of British Telecommunications are among the cheapest in the world. A national service is provided. Profits made from customers in big business have been used to provide better and cheaper services for residential subscribers. Privatisation and liberalisation as embodied in the Bill will end that traditional cross-subsidisation, and the residential subscriber will pay more for a worse service.
  54
  For years, because of increased productivity, the increase in telephone charges has fallen far short of the increase in the cost of living. Now the Government have promised that the increases will be no greater than increases in the cost of living. That promise could, and will, cover much greater price increases than are necessary or would have occurred without liberalisation and privatisation. The Government's promise on telephone charges is like a promise that the price of tomatoes will not go up in August. The so-called safeguards for the residential subscriber and the rural user are bogus. However—here I take up the point made by the hon. Member for Northampton, North—I hope to deal with these points at greater length in Committee. I am told that Conservative Members are queuing up to be members of the Committee. I advise them to kiss their wives goodbye now. As they lie in their beds unloved during the autumn, the winter and the spring, those wives should direct their complaints to the Secretary of State for Trade and Industry and not to me or to my wife.
  The threat to the residential subscriber is very great. So, too, is the threat to British manufacturing industry. It matters to me whether BT contracts for wire are placed with Rists in my constituency or whether they go abroad. I care whether ICL gets the bulk of BT software and hardware orders rather than IBM. The Minister responsible for the west midlands is missing from the Front Bench now, as he was so often missing in Committee and as he is so often missing from the west midlands. He does not seem to care at all. Plessey and GEC, to name but two British companies, deserve our support. Jobs, profitability and investment in British companies are all being put at risk.
  Mr. Marlow: Has the hon. Gentleman been informed by Plessey that it is opposed to the Bill?
  Mr. Golding: I have not heard from Plessey that it is against the Bill. However, I have noted the remarks of leading industrialists and I shall refer to them in detail in Committee. Plessey, STC and GEC do not need to try to persuade me to oppose the Bill. Their efforts should be directed at the Government. What representations have been made to the Government about the method that they have chosen to destroy British Telecommunications?
  Jobs, profitability and investment in British industry are all being put at risk. When interrupted by the hon. Member for Northampton, North it is always my custom, Mr. Deputy Speaker, to repeat my last statement.
  At present, 95 per cent. of equipment is purchased by BT at home. The head of research at BT has predicted that, after privatisation, over half the orders will go abroad. We shall lose not only orders, but jobs, profit and investment. The Under-Secretary of State should be known as the Minister responsible for the far east, rather than as the Minister responsible for the west midlands. Government policy may make sense in Tokyo or Taiwan, or even in Dorking. However, it seems not only daft but suicidal in Northern Ireland, the north-east, Liverpool and the west midlands — indeed, anywhere in this country where telecommunications equipment is manufactured and where there is a high level of unemployment.
  Mr. Neale: As always, I am following the hon. Gentleman's arguments with interest. Does not the risk arise from the fact that the equipment that is likely to be imported has been produced and is ready to be imported,

  55
  whereas in this country the equipment cannot be found? BT, which has dominated production in this country, has not permitted the design and manufacture of such equipment. Now that BT is facing competition, the equipment can only be found abroad.
  Mr. Golding: BT and the manufacturing companies have a duty to the British people. They have a duty to provide jobs and investment in this country. I have been as critical of BT's purchasing policy as I have been of the failure of private industry to deliver at the right price and on time, which has often been the reason why the waiting list has increased in length. However, my response to that is not to smash British industry but to try to improve its performance. I strongly object to the Government's attempt to smash British industry. For ideological reasons, they are impeding BT rather than helping it.
  The Bill also threatens BT's staff. It will lead to more and more industrial unrest. The threat to job security and pensions is turning a peaceful productive industry into a battleground. Ministers constantly tell us that after day one what happens to pensions will depend on negotiations within the private company. There is no lifetime guarantee on pensions. The Government will be sincere only if they give a copper-bottomed lifetime guarantee on the pensions of BT staff. However, when those involved are pushed, they say that they cannot and will not do that. Thus, insecurity remains because the Government refuse to give the guarantee that the staff demand. They could remove that uncertainty by writing a guarantee into the legislation, and we shall press that point hard in Committee.
  Ministers try to comfort us by pointing to the United States of America, but we hear warnings every day not only from the American unions but from representatives in Congress. The industry in the United States of America is threatened by rising prices, and job insecurity is growing because of similar structural changes. We are no longer reassured by people pointing to the United States of America. Indeed, we become more frightened.
  The Bill is an abomination. We on the Labour Benches must fight it, and fight it hard. If need be, we must fight it by night and by day. The Government say that they have a mandate to introduce it. Let me remind them that we have a duty to oppose it, and we shall do so with all our strength and determination. I hope that just as Ministers are determined to introduce this Bill, so those on our Front Bench will be determined to oppose it.
  6.1 pm
  Dr. Michael Clark: Thank you, Mr. Speaker, for calling me to make my maiden speech during the Second Reading of this important Bill.
  I am the new Member of Parliament for Rochford, Essex. It is a new constituency made up of the district of Rochford and the five villages of the borough of Chelmsford: Runwell, Ramsden Heath and Downham, South Hanningfield and Rettendon, Woodham Ferrers, and South Woodham Ferrers. The constituency is half rural and has many acres of agricultural land. There is also a lot of green belt that is zealously protected by those who live in the constituency. The other half is urban and includes the adventurous new town of South Woodham Ferrers. That new town is being planned and organised by Essex county council, but is being built with private capital.
  56
  The constituency stretches from the outskirts of Chelmsford in the west to Foulness in the east. Foulness in now in the hands of the Brent geese once again, having survived the attempts made some years ago to turn it into a major international airport. The northern boundary of the constituency is the river Crouch and to the south are the conurbations of Southend, Basildon and South Benfleet.
  Rochford is an ancient hundred, dating back many centuries. The last peer to carry that name, Anne Boleyn's brother, fell into disgrace with Henry VIII and lost his life. The land of Rochford reverted to the Crown and stayed with it for a few years until being given as a pension by the King to his fourth wife Anne of Cleves. So you will see, Mr. Speaker, that that pension was given at not much net cost to the monarch.
  As in the 16th century there were many changes in the ownership of the Rochford hundred, so in the 20th century there have been several Members of Parliament to look after the area's political affairs. Those of my hon. Friends who are new Members of Parliament have paid tribute to their predecessors. Generally, they have each had only one predecessor and for a variety of reasons that predecessor has usually left the House. My task is a little more onerous, because I have three predecessors, all of whom are still Members of Parliament.
  First, I pay tribute to my right hon. Friend the Member for Chelmsford (Mr. St. John-Stevas) who looked after the Chelmsford villagers so well from 1964 until the last election. His wit and personality are greatly missed. From 1974 until the election the Rochford area of the constituency—the largest part of my new constituency—was looked after by my right hon. Friend the Member for Colchester, South and Maldon (Mr. Wakeham). He looked after that area diligently and has had a distinguished career in Parliament. He has been very kind to me since my selection early this year, and I thank him very much for all that he has done. Indeed, I would have paid him that tribute even if he had not been appointed Chief Whip of our party.
  The person to whom I wish to pay particular tribute is my hon. Friend the Member for Castle Point (Sir B. Braine). He has represented many parts of Essex in his political career. From 1955 to 1974 he represented almost the whole of the constituency that I now represent and during that time, and until the last election, he represented the town of Rayleigh, which is the population centre of my constituency. Thus, for 28 years he represented Rayleigh and he is greatly loved—there is no other word—in that town. I know how much he is respected in the House and I believe that I can say that he has become the elder statesman of politics in eastern Essex. I also thank my hon. Friend the Member for Castle Point for all that he has done for me. He has shown great kindness and has helped me enormously both in the constituency and in the House.
  There is little industry in the Rochford constituency. Many of those in the area travel to Southend or London to work. However, some people work at Fords, at Dagenham and at Dunton. Many people also travel to Chelmsford to work for Marconi. They work in the electronics industry and are part of a giant organisation that has specific interests in telecommunications.
  There are three principal forms of communication with the Rochford constituency. First there are the roads. The principal road is the A127 from London to Southend. That road has been greatly improved in recent years but it is still congested and dangerous. During my time as Member of

  57
  Parliament for Rochford I shall do my best to see that more money is spent on it so that it can be turned into a safer, faster and better road for traffic travelling to and from the Rochford area and Southend.
  The second form of communications is the railway. It runs between Southend, Victoria, and Liverpool street and is subject to much criticism. There can be no doubt that those who use it have to suffer an inadequate service that is often disrupted by industrial action. Many people feel that the railway would provide a better service if it were privatised. The third form of communications is telecommunications. Everyone in the constituency uses that form of communication from time to time, and if the railway would be better privatised, so would the telecommunications service.
  I support the Bill. With private telecommunications we shall better be able to have innovation and improved technology within our telecommunications service. If politics is the art of the possible, technology is surely a science of change. Change is usually brought about in a competitive environment. Throughout history, scientists have responded to national emergency, commercial challenge and technological competition. A private telecommunications system will mean an improvement in BT's service. Much of its service has been indifferent. For example, those who try to make telephone calls on bank holidays, such as Christmas, are told that the service is run down and that we should not expect a good service at such times. Many people have wished for a choice of equipment, but have been told to take or leave the black standard "Henry Ford" type telephone. Choice has improved since liberalisation, and will improve a great deal more with privatisation. The charge to restore our telephones to working order outside normal working hours is excessive. A service, in the true sense of the word, has not been provided in that area. There will be an expansion of the telecommunications service when the industry is privatised. That will bring about more jobs in an age that is ever more technological. The more technological we become, the more jobs will be created.
  We must be careful that we do not move from a public monopoly to a private monopoly. Under the Bill, competition for BT is limited. It consists of the Mercury trunk lines and not much else—certainly nothing in the network. If we are to fight the excesses of public monopolies with a private company, we must ensure that the licence agreed between Oftel and the Secretary of State contains those things that are necessary to make certain that the public get a fair deal from something that is close to a private monopoly.
  BT must not be allowed to exercise commercial control over its competitors through licensing, or over its suppliers through monopoly purchasing powers. It must not be allowed to exploit its privileged position by charging exorbitant fees to the general public who use its services. It must not he allowed to neglect the needs and wishes of its customers and must be encouraged constantly to take into account the services provided by similar organisations in other countries. I agree with my hon. Friend the Member for Leominster (Mr. Temple-Morris) that it is important that BT continues to provide a service to rural areas—to those 77,000 kiosks from which the majority of 999 calls are made.
  Without details of the licence, we have to take the Bill a little on trust. We know that the draft licence will be available in October and that there will be negotiations
  58
  between BT and the Government. I am sure that we all know that constant changes to the licence will be needed once it has been laid before the House. Until competition for BT is well established, it will be necessary to review the licence from time to time. I was, therefore, delighted when my right hon. Friend the Secretary of State said that the licence would be laid before the House and that Parliament would have the opportunity to debate it.
  The Bill will be of great advantage to Britain, to industry and to technology. I hope that we protect the measure by ensuring that the licence comes regularly before the House for debate, thereby ensuring that the advantages of the Bill are permanently maintained.
  6.14 pm
  Mr. Ian Wrigglesworth: It is a great pleasure for two reasons to congratulate the hon. Member for Rochford (Dr. Clark) on his maiden speech. First, I have close personal connections with his constituency. I was married at Hadleigh, which is just outside his constituency. My wife's family come from his area and I know it well. He spoke eloquently about both the area and his predecessors. I am sure that we shall hear a great deal more from him, especially about the railway line from Southend, Victoria to Fenchurch street and Liverpool street. I am sure that that matter will exercise him to some considerable extent, as I know from personal experience that it exercises his constituents.
  Secondly, the hon. Gentleman showed a clear grasp of the subject before the House. He displayed an understanding of the distinction between the privatisation aspect of the legislation and the question of competition. As the hon. Member for Leominster (Mr. Temple-Morris) interestingly made clear, the two do not necessarily go hand in hand. We believe that they should not go hand in hand. We are in favour of the liberalisation that the Government have introduced, but can see no reason for the privatisation of BT. As the hon. Gentleman said, it does not live up to the high ideals of the Conservative party on privatisation. He represents a little bit of competition to the Bill on the fringes of the Government, in the same way as Mercury is a little bit of competition on the fringes of telecommunications.
  One of the fundamental issues is how much competition BT will face because of the Bill. The Secretary of State made it clear that the Government would not be prepared to give licences to other people to pursue effective competition to BT. He was pressed on that point by the hon. Member for Aldridge-Brownhills (Mr. Shepherd). Conservative Members wanting competition for BT should press Ministers on that point. There will not be the competition in telecommunications that some thought would result from liberalisation.
  My colleagues and I are in favour of liberalisation and I agree with the Secretary of State about its impact on BT. For example, I well know about the lack of accountants in BT. I worked for some time in another part of the Post Office, the banking sector in the City, not far away from BT headquarters. The whole ethos of BT was the old Civil Service ethos of the days when BT was part of the Post Office. From the customers' point of view there has been more change in BT in the year since liberalisation was introduced than took place in the previous 10 years, from the time when the Post Office ceased to be a Civil Service department and became a public corporation. Liberalisation has been an enormous stimulus and we

  59
  welcome that. There is little in the Bill and its proposals for denationalisation to further that process and improve the effectiveness of BT and its service to its customers.
  There are four reasons why I and my colleagues will oppose the Bill. First, as was reinforced by the statement of the Chancellor of the Exchequer a couple of weeks ago on the problems of public sector borrowing, I believe that one of the major reasons why the Government are selling assets is to raise funds to overcome their public sector borrowing requirement problems.
  In his recent statement the Chancellor of the Exchequer said:
  "immediate action must be taken to bring about savings that will bring total spending closer to the planned path … Accordingly, the cash limits for the current year will be reduced … In addition, the programme of asset sales during the current year will be increased by a further £500 million." — [Official Report, 7 July 1983; Vol. 45, c. 418.]
  That is a stark misuse of public capital. The Secretary of State should send some of his accountant friends to the Treasury to teach it the difference between revenue and capital spending. The Government seek to sell major public assets for a massive sum that they will put into the general pot of Government revenue to bail them out of their public sector borrowing problems. That is a gross misuse of public assets, and one reason why my colleagues and I shall vote against the Bill.
  Conservative Ministers argued against British Telecommunications investing further substantial sums in new capital spending, being provided with the opportunity to raise Buzby bonds, and increasing public sector investment, because that crowds out funds on the market. If the Government sell BT shares that will crowd out the market. If 50 per cent. of BT shares are to be sold, £2·5 billion of capital will be raised on the market for the Government's coffers. That is as much as financial institutions invest in equities in a whole year. It is four times as much as the largest ever equity sale on which the Government embarked—British Petroleum shares. That amounted to about £624 million, which is a minor sum by comparison. A sale of assets on the proposed scale will inevitably crowd out the market. If the argument for crowding out is valid—now is not the time to debate whether it is—it holds in this case, and the market, the Stock Exchange and City institutions are worried about that effect. Anxiety is expressed in the financial columns of newspapers about the impact of the sale and how it will affect the price of BT shares.
  Another reason why I am opposed to the Bill is that if the price of the shares is to be maintained, after the initial sale and fund raising, the market must buy desirable stock. Inevitably, people will suspect that it is in the Government's interests to ensure that BT will continue as a monopoly to sustain high profits and to get a good price when it sells the shares. Therefore, it is in the Government's, not the consumer's, interests that the restrictions on BT and the powers of the director of Oftel are limited, and that the pricing policy, to which the hon. Member for Aldridge-Brownhills referred, is maintained. BT's profits must remain substantial, at the consumer's expense, so that the price of the shares, when they are sold, is sustained at a high level.
  Mr. Richard Shepherd: I am delighted that the hon. Gentleman is following that line of argument. Is it a
  60
  reversal of the posture adopted by his party in the previous stages of the original Bill? Today he argues about the restriction of competition, or the Government's failure to limit or inhibit it. Yet in the previous Parliament his party moved few measures to increase or fortify the powers, duties and obligations of the Office of Telecommunications to ensure that competitive forces would act in a more benign way in the interests of the consumer.
  Mr. Wrigglesworth: When more hon. Members reflect on the votes cast in the ballot box and the representation in this House, we shall be able to take such action in Committee and in the Chamber. I deployed those arguments as SDP spokesman in the previous Parliament and I shall continue to deploy them in opposition to the measure. As I have said, we made it clear that we are in favour of liberalisation and want to see increased competition. I am worried that at this stage the Government will not be under the necessary pressure to ensure that that competition is as great as it could and should be in the interests of the consumer.
  The measure is an irrelevant switching of control from the Department of Trade and Industry to the new Office of Telecommunications. At present, the Department of Trade and Industry, through British Telecom, is able to control the operation of the industry to a considerable extent and to sustain the public interest, as it has done for some time on issues such as rural services and telephone kiosks, and, indeed, on the whole policy of BT.
  The Government have long been opposed to quangos, yet here they are establishing a new quango to carry out very much the same controls as have been and could be carried out by the Department of Trade and Industry. Public funds and resources will be deployed unnecessarily in that way. During the passage of the Bill, Ministers have said that they are removing BT from the hands of the Government, yet it is clear that BT will be just as restricted and hemmed in by the director general as it has been and could be under the Department of Trade and Industry.
  Mr. Marlow: Does the hon. Gentleman believe that it is better to have those organisations controlled by the Government, with all the political pressures that are placed on them from day to day, or by an independent third party, which can regulate itself?
  Mr. Wrigglesworth: The hon. Gentleman raises a substantial issue which concerns all the public sector corporations. I do not want to go into it in detail, but many of his hon. Friends have asked whether the Minister would still be able to answer questions in the House about BT. This afternoon the Secretary of State gave an assurance that he will still answer questions about BT. There will not be much freedom from restriction or control if the Secretary of State is still to be answering questions.
  Mr. Golding: Is not the hon. Gentleman being unfair to the Secretary of State? The Secretary of State said that he could be questioned on matters relating to grants given for the development of facilities for the disabled. There are many questions—I hope that the Minister of State will answer them tonight—about provision for the deaf and the blind. I suggest that the hon. Gentleman has not listened carefully to the debate.
  Mr. Wrigglesworth: I understood the Secretary of State to put the matter in rather broader terms than the hon.

  61
  Gentleman is suggesting. But, irrespective of that point, many Labour and Conservative Members, by the very nature of their questioning and the points that they have raised, have made it clear that they wish to raise issues of great public importance in this House — such as the provision of rural services—and to have an influence on how BT operates. If BT were not being denationalised, that control and influence could still be exercised. I see no reason why the change that the Government are proposing should take place.
  Mr. Kenneth Baker: May I clarify the position? Since 1969, when the Post Office ceased to be a Government Department, under successive Governments it has not been customary for Ministers to reply to questions in the House on the detailed day-to-day running of either British Telecom or the Post Office. That position will not be changed. In future, the Secretary of State will, of course, be answerable to the House in respect of the duties with which he is charged under the Bill, particularly under clause 3. To the extent that he fulfils those duties, or hon. Members feel that he is not fulfilling them, he will be answerable in the House.
  The hon. Gentleman was arguing earlier that when one introduces competition into the great state monopolies, the exercise of control is better done in a Government Department than in a regulatory agency. I beg him, on behalf of his party, on behalf of the research department of his party if it has one, to consider that again. My experience — I dare say that the same is true for Opposition Members who have held ministerial office—is that Government Departments are nut best suited for this regulation of competition. One needs a regulatory agency to do it properly. That is why we are setting up Oftel.
  Mr. Wrigglesworth: As the Minister knows, if that is the path that his party wishes to pursue, the Director General of Fair Trading, who is in charge of another quango set up by Government, could quite easily have taken upon himself these responsibilities. Why does one need an extra agency in the way that the Government propose in the Bill? What I find remarkable about the argument on the Post Office is that, despite the fact that it is now a public corporation and not a Government Department, hon. Members still ask questions about the closure of sub-post offices in their constituencies, as the Minister will be only too well aware. There are regular debates on issues affecting the Post Office. While there is not a regular Question Time, there is still accountability and pressure can be applied through Ministers on the corporation.
  We do not wish to see this privatisation come about because we believe that telecommunications, above all other industries, deserves and must have stability and some certainty over its future. It is a £10·5 billion industry, which will be investing billions of pounds in future. It is a highly complex organisation on which vast areas of industry and commerce rely. It is vital that there should be certainty about the future of the organisation, not only for the industry and other industries that depend directly on it, but for all the other industries that rely on its services. As I said on Second Reading of the previous Telecommunications Bill, nothing could be worse than getting into the same battle over BT as we got into over the British Steel Corporation. The BSC was a key industry, but it became a political shuttlecock. If we are
  62
  not careful, the same will happen with BT. It is far too fundamental a part of our industry and economy to allow that to happen. To hear the Opposition saying that they will renationalise BT is a clear sign that the same battle will take place again. Because we want to see more stability and because we do not want to see that uncertainty created, we are opposed to changing the ownership of BT.
  Mr. Baker: Once it changes it will not change back.
  Mr. Wrigglesworth: The Minister says that, but he had better put that point to the Labour Opposition. The Labour Opposition are making that threat. Those who make the investments and do the planning fear such a change. It is inevitable that if BT becomes a political shuttlecock, great damage will be caused to the industry. There is no doubt about our position. If BT is denationalised, it will stay denationalised. It will remain in the private sector so that there is certainty about its future. We do not believe that changing the ownership of such industries regularly over succeeding Parliaments is the way to succeed.
  Mr. Marlow rose—
  Mr. Wrigglesworth: For all those reasons, we wish to see the Bill defeated. We hope that the Government will think again on issues such as the role of the Director General of Telecommunications, on the way in which BT shares will be sold and their impact on the market. We hope, therefore, that the Government will ensure that if there is to be competition, it will be true competition that serves not only those involved in the industry, but those whom BT and the telecommunications industry are there to serve.
  Several Hon. Members rose—
  Mr. Speaker: Before I call the next hon. Member, it is right and fair that I should tell the House that there are still 12 hon. Members who have already told me that they wish to catch my eye. I ask hon. Members to bear that in mind.
  6.35 pm
  Mr. Gerrard Neale: I should like first to declare an interest in the telecommunications industry and secondly to say to the hon. Member for Stockport, South (Mr. Wrigglesworth) that, while I listened with great interest to his speech, I became a little confused when he appeared to extol the virtues of liberalisation and the fact that greater competition can improve the response of British Telecom to the customer but seemed to be against carrying it further through the various methods that the Government seek to employ. I might agree with him on some of the shortcomings of the Bill to which I shall come in a moment, but I should like first to congratulate my hon. Friend the Minister for Information Technology on reassuming his responsibility for this important subject. I also congratulate my hon. Friend the Under-Secretary of State.
  As one who has been fairly heavily involved in telecommunications, I am not unaware of the enormous amount of effort and enthusiasm that the Minister has put into the subject and his determination to ensure that the market is opened up. I hope that he will take my remarks as a sincere contribution to the debate and not as a personal criticism of him. I wish unashamedly to be a little critical of the direction in which the Bill will take us.

  63
  I believe that the next three or four months will be a crucial period in the industry in terms of how it affects the management and the men who work in it, particularly in the private sector. From all the discussions that I have had, I believe that it will bring to an end the transition period that began with the statement by my right hon. Friend the present Secretary of State for Education and Science back in July 1980. Along with my right hon. Friends the Secretary of State for Education and Science, my right hon. Friend the former Secretary of State for the Environment and the new Secretary of State for Trade and Industry, the Minister for Information Technology has done a great deal to encourage the private sector of British industry to see a real future in greater competition in telecommunications.
  However, all my investigations have produced evidence of disturbing fatalism among private sector companies, large and small, because they are now beginning to realise that there could be a great deal more in the old adage, "If you can't beat them, join them."
  Those companies do not see competition developing as they had hoped, as they felt sure the Government hoped, and still hope; and they are therefore worried that they could lose by seeking to fight for greater competition when the one and only customer of any real meat that will remain in the telecommunications market is British Telecom. They have found, particularly over the past two years, tremendous problems resulting from the 1981 Act which gave British Telecom the power to prohibit any connection of equipment to its system until it had BT's approval. They have suffered inordinate delays and I know that the Minister for Information Technology has received representations from various quarters on the subject. For example, for the small core routing systems the way in which dates have been put back time and again has been an absolute tragedy, resulting in a lack of effective competition from the private sector.
  With that in mind, I shall direct my remarks solely to competition, linking it to choice, which is the prime reason for Conservative Members feeling strongly about the subject. I ask the Minister to note carefully the various comments that have been made by my hon. Friends. As I pointed out in an intervention, the hon. Member for Newcastle-under-Lyme (Mr. Golding) and other Opposition spokesmen have consistently challenged the Government's privatisation policy, pointing out that one should not convert a state monopoly into a private monopoly. The hon. Member for Newcastle-under-Lyme, as usual, made a well-thought-out speech in which he dealt with competition. I agree that simply converting BT into a private sector company will do nothing to improve competition.
  Having thought through the issue carefully and discussed it with a range of people, I am left with the conclusion that, as long as BT has the right under its licence to supply terminal equipment or value added network services to the consumer in competition with others who need access to BT's network for their terminal equipment and value added network services, prevarication by BT will always be likely.
  With the timespan involved, I do not think we will get the investment decisions from the private sector to go for the full-blooded competition which the Government want. Instead, I fear that we shall find in the coming months
  64
  greater evidence of commitment by the private sector companies towards throwing in their hats and working with BT as the sole monopoly supplier.
  Hon. Members have quoted examples from the United States; we can argue in due course whether they are strictly appropriate to this country, but I cannot see how, within a few years, we shall not have exactly the same pressures on the Government as were evident in the United States over AT and T. We shall then face the problem of how to break up BT just as a similar problem was handled in the United States.
  Without seeming to be radical or revolutionary, but wishing to be totally constructive, I have a suggestion which I hope the Minister will examine carefully—and I am aware that only a few months remain before the passing of the Bill. We are doing more than setting a precedent; we must consider industries such as gas and electricity. We are today dealing with a multi-million pound organisation, so we must be extremely careful how we play it.
  I ask the Minister to examine whether it is possible, in the sale of BT, to restrict the assets of the organisation solely to the network—the entire British network but excluding all provision of sales, service and maintenance — of terminal equipment and value added network services. We should thus sell BT as the entire network with all the manning involved, but retaining, for the time being, BT Enterprises and the 61 area sales companies with all their appropriate procurement, sales and maintenance staff with a view to making early arrangements for the sale of those parts that form the remainder — the terminal equipment and the value added network services.
  I am convinced that in that way it would be easier for those advising the Government to arrive at the asset value of the BT network. It disturbs me that various Opposition Members have given widely differing figures for the asset value of BT. We have heard £16 billion and £12 billion suggested, and one hon. Gentleman talked about selling half the shares for £2·5 billion, which would be a remarkable discount on the share value of BT.
  If my suggestion were adopted, we should also have greater consumer choice, because all the suppliers of terminal equipment and value added network services would be in competition. The individual sales companies could be offered to the employees of the separate companies, as happened with the National Freight Corporation. The result would be that every supplier of terminal equipment and value added network services would find BT only too pleased to connect them to its system; BT would have a vested interest in making sure that each person approaching it was connected to its system.
  We could include in that arrangement all the safeguards for rural areas and emergency services. The private borrowing point could still be covered, but we should have the guarantee that other conflicting interests, such as cellular radio within BT Enterprises, could be floated as a separate company.
  I realise that it is late in the day to make such a suggestion, but I urge the Minister to consider it nevertheless. Otherwise, I feel strongly that we shall be creating more problems than we are curing— for the reasons given by hon. Members in all parts of the House —in view of the increasing hold that BT will have on the market.
  It is vital, if the Minister cannot accept my suggestion, that the licence—which, we are informed, will shortly

  65
  be in draft—contains terms which strictly control BT. In particular, I ask the Minister to clarify whether the licence will be in a form which can be amended. Will it, so to speak, form part of the Bill?
  In Committee on the previous Bill, the Minister produced a number of reports which attracted criticism, even derision, from Opposition Members. I must tell him that there remains in the private sector the feeling that there will be a strong lack of competition in what will be left. Therefore, will the Minister consider appointing a committee to consider competition in the private sector and to report back to him by 1 November? We could suggest people, if he will consider such a committee, who could consult those to whom the Minister is looking to create more competition and consumer choice, and thus fully to comply with the honourable intentions and policies which we have pursued in recent years, which we expounded in the election campaign and which the Minister has championed in every way possible.
  6.50 pm
  Mr. Stan Thorne: It is possible for some of us to be brief in this debate, because we have been down this road before. This morning, in common with many others, I received a copy of a document that was sent out by the corporate relations department of British Telecom. It is said to be a brief on the Bill. The third and fourth paragraphs of the introduction state:
  "A commitment to reintroduce the Bill was made in the Conservative manifesto and repeated during the election campaign by Ministers.
  In accordance with the decision of the electorate".
  That implies that during the election campaign the electorate had the opportunity to consider all the issues involved in privatising British Telecom. It is clear that the issue was referred to in the Conservative party's manifesto, but I am not aware that the issue was debated on television or on the radio at any great length so that the public could be aware of what was involved.
  The Government cannot claim to have a mandate because the Conservative party received about 15 million votes in the general election compared with nearly 19 million votes against it. The Government may claim that they represent the party with the largest number of seats, but they are talking about a party that was rejected by the greater part of the electorate. I think that the Conservative party can claim about 38 per cent. of the electorate, and that has been the position for the best part of this century. Only two Governments have had a majority of the votes cast, and only those two Governments were able to claim some sort of mandate.
  I have dealt with the beginning of the mis-statements in the so-called brief, which was sent to hon. Members by British Telecom, which cause me concern. However, there are omissions that worry me considerably. The Government have become aware of the virtue of democratic ballots. Trade unions are to be forced to hold ballots for their leaders and for other purposes. If the Government are so convinced of the value of democratic ballots, why has British Telecom not arranged for a ballot of all its employees on the issue of privatisation? What is wrong with that? In a democratic society—I accept that that is largely a myth in Britain now—it is surely right to ask employees to express a view on issues that will affect their future. That seems to be an elementary aspect of democracy. That is probably why it has not been done and why it is unlikely to be done in future.
  66
  In the so-called brief, reference is made to
  "consumer interests to be protected in a new competitive market."
  I recognise that Conservative Members have a fond belief in the market providing consumers with what they want. That is an absurd belief. The consumers of the services that British Telecom provides want an efficient telephone service that is available at any time and anywhere. The Minister of State—I am glad that he was finally adopted for a safe seat— said that the wording in one of the clauses has been changed since the Bill's predecessor fell and that "reasonably practicable" is a more credible phrase than that which went before.
  If the Minister is determined to give the Bill credibility, why does he not incorporate the pledges that were made by him and others in Committee when the previous Telecommunications Bill was being considered? Pledges were made that kiosks would be protected and that the needs of the aged would be safeguarded. Pledges were also made on behalf of the infirm, the poor, those in rural areas and others who rely on Br s services to provide them with a lifeline. Why are those pledges not spelt out specifically in the Bill so that everyone might be aware of the Government's intentions? Of course, that would mean a real commitment, and the Government are not highly respected for their adherence to commitments. The phrases "satisfy reasonable demand" and "reasonably practicable" represent for many no real undertaking by the Government that the services provided by BT will not suffer under private enterprise. It must be said that the Government can make very few criticisms of those services.
  Several hon. Members have said that the raison d'etre of privatisation is the seeking of profit. Most Conservative Members are supposed to be experts on making profits, but I sometimes wonder about that when they come here for £14,509 per annum. If they are really concerned about making profits, it seems that service to the consumer will not be the first priority in the drive for profits. That has been my experience over many years.
  Competition will be provided by Mercury. I do not know whether the hon. Member for Aldridge-Brownhills (Mr. Shepherd) hopes to serve on the Committee, but, if he does, I think that he will have a job to swallow some of the Government's ideas. Providing the means by which Mercury can compete with BT is not the sort of competition that the hon. Gentleman would like to see. I do not agree with the hon. Gentleman because, even 10 companies in competition with BT, would not lead to the provision of a better system for consumers. If the hon. Gentleman and I serve as members of the Committee, I have no doubt that we shall exchange some views on that issue.
  We are talking about an asset that has been publicly financed over many years. It is now a lucrative asset. We know that it is making good profits. The Government consider that now is the right time to sell it off to their friends in the City so that they can enjoy the profits that will accrue in future. As my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) said, the sale of this asset will probably enable the Government to plug a small hole in their financial policies. It will probably enable them to fulfil their commitments in the employment exchanges throughout the country, but in real terms it

  67
  would be far more sensible to use the profits of British Telecom to avoid what the Chancellor of the Exchequer is seeking to do—to cut other essential services.
  Some of those employed by BT would be glad to know that their profits were being ploughed into the National Health Service. They would be able to say, "We are making a real contribution to a much-needed service." The truth is that the service that they created is to be sold off to fill the pockets of a few financiers. When the next general election comes, no doubt they will then make even larger contributions to the funds of the Conservative party. I am sure that some people connected with this industry —I went through the list only a few days ago—made reasonable contributions. One contribution was £25,000; another was £30,000. I expect that if there is an election in 1987–88 there will be even bigger contributions to the Conservative party for the services that it has rendered to capitalist Britain. During the past four years, the Government have rendered no services to the British people, and they will make no contribution during the next five years.
  7 pm
  Mr. Simon Coombs: In addressing the House this evening for the first time, I must say that it is a great honour to represent the people of Swindon on behalf of the Conservative party. It will help hon. Members if they understand that, although the numbers behind the name have changed, the name has not—much to the satisfaction of all my constituents. There have been two additions to the constituency—parts of the constituencies of Chippenham and Devizes. I thank the hon. Members who represented those constituencies for their custodianship of the electors who were transferred to me. I welcome them to the new and enlarged constituency of Swindon. They are already becoming used to being a part of it.
  My principal task is to pay a warm tribute to the work of my main predecessor, Mr. David Stoddart, who is no longer a Member of the House. He was well respected. I was under no illusions about the task of trying to oust him. During his 13 years as a Member he became highly respected within his constituency. He was also well respected in the House, and will be much missed by the Opposition.
  Swindon is the largest part of the borough of Thamesdown. Swindonians still think of themselves as living and working in Swindon and find it difficult, even after nine years, to regard themselves as Thamesdownians. I doubt that they ever will. Swindon is reputed to be the fastest growing area in western Europe—I do not know whether that story is true, but it is widely circulated in Swindon. Every year new houses are built in staggering numbers, and new jobs are being created. However, some problems accompany the rapid growth of an area such as this.
  In the past, industrial and heavy engineering activity has predominated in the constituency. This has shrunk in importance but it remains a dominant feature. One thinks of British Leyland's factory and especially of the British Rail engineering works. Ever since Brunel on his journey west stopped in Swindon and saw it as an appropriate place, half way between London and south Wales, to build an engineering works, Swindon has been a railway town,
  68
  and it remains so to this day. This is clear from the atmosphere of the town, which breathes railways, and the museum, which records the fine traditions of the past. There is a railway village of cottages built in the middle of the last century for railway workers. As the representative of Swindon, I shall be keen to ensure that the town maintains its pride in the railway industry. I shall look for support from Members on both sides of the House to ensure that that remains the case.
  However, there is change in Swindon, as in so many parts of the country. There is a growth in the number of company head offices, new small businesses, warehousing and high technology industries all of which bring new employment to the town. Plessey has been in the town for a number of years and recently Intel—an important and, I am sure permanent, visitor — has arrived from America. One of the earliest of the local cable TV services has served the town for the past decade and Swindon Viewpoint is the oldest community access television service in the United Kingdom.
  Swindon is an exciting town to represent. The importance to Swindon of good communications must be plain to anyone, which is why the constituency shows great interest in the Second Reading of the Telecommunication Bill and why I have chosen to speak tonight. It is not, however, the only reason, because, although there have already been 200 hours of debate on the subject, there must be more to be said.
  I must declare an interest, because until recently I was employed by British Telecom. I should not like to suggest that the reason for the recent general election was to enable me to take my place on these Benches to contribute to the discussions on this legislation—I have no doubt that there were other reasons—but that happy coincidence has enabled me to contribute to the debate tonight and perhaps in the future.
  A number of briefs have been used by right hon. and hon. Members to support their arguments. Their views depend upon which brief is used. I have the briefs that some Opposition Members have used, from which it is clear that the end of the world is nigh. It is clear from the briefs held by some of my right hon. and hon. Friends that the Bill is an exciting new beginning. The truth will fall somewhere between the two extremes. While there will be support for the Bill's principles, hon. Members on both sides of the House have expressed anxiety about some of the Bill's detail, which has still to be discussed and decided.
  It is important to remind ourselves that the Bill is about telecommunications and the telecommunications industry and not solely about British Telecom. The mere mention of the words "competition" and "privatisation" have had a galvanising effect upon those who work in BT. I have watched the dedication and enthusiasm shown by the staff of the organisation over the past year or two to bring BT to the point where it can compete in the freer atmosphere that is to come. I have no doubt that that freer atmosphere will stimulate the entire industry to success. BT's success will depend largely upon the licence which we have still to see in its full draft form. The House should insist that there must be not just a fair opportunity for those new firms to be successful, but fairness for BT plc also. Those who have the duty of piloting this legislation through the House will want to be certain that that fairness extends to all who are concerned in the future.

  69
  The social services element in telecommunications is vital. I see no reason why an effective balance should not be achieved through the use of access charges, but we must wait to see what is in the mind of the Government. The right balance can be obtained between the interests of the consumer, the customer, the staff and the shareholders in the future of a privatised BT. One thing must be clear—if we are not successful in achieving that right and fair balance, the job of flotation of the new company will be severely imperilled. It is our duty to ensure that that message is got across.
  There is understandable anxiety, among both residential customers and the staff of BT, and their interests should be considered. The customers will want to know what pricing policy is to be pursued, what control is to be exercised and whether the changes in the Government's mind will lead to higher prices. There is no reason for their worst fears. As for the staff of BT, the expansion of the industry that should naturally follow this Bill must lead to more jobs in telecommunications and not fewer. The political scaremongering has fed upon itself and many people in the industry now genuinely fear for their jobs. As some of my hon. Friends have said, the Government's case must be put across firmly to ensure that that fear is unjustified.
  The structure for the regulation and approval of equipment must be staffed quickly and adequately to ensure that there is no wasteful or extensive delay in the approval of equipment and the setting up of the new organisation. Otherwise, an opportunity will be lost, and the flotation of the company will be damaged.
  With those few concerns, I have pleasure in supporting the principle of the Bill.
  7.12 pm
  Mr. Harry Ewing: It is a great pleasure to follow the hon. Member for Swindon (Mr. Coombs). I was glad to hear his tribute to his predecessor, Mr. David Stoddart, who, as he rightly said, was held in the highest regard in the House. One of the features of British politics is that we can disagree profoundly with each other while recognising the worth of an hon. Member to his constituency, even when he has been replaced by another Member. For that reason, I congratulate the hon. Member for Swindon on his maiden speech. However, without breaking the convention of the House, I take issue with him. I have a terrible feeling that the part of his speech devoted to the Bill reflected the fact that his five years leave of absence will not have expired before the date of the next election.
  As the Register of Members' Interests shows, I have to declare an interest in the Bill because I am a Member sponsored by the Union of Communication Workers. My union has, as one of its largest sections, a fair representation of the workpeople in BT. Despite what has been said by Conservative Members, there is a real fear about future employment prospects for the BT workers represented by my union. It is a fear that has been fed not by scaremongering, but by practical experience of seeing cutbacks and all the things that have happened in the industry through the years. I propose to deal with the real fear of job loss in the industry.
  I found the remarks of the hon. Member for Stockton, South (Mr. Wrigglesworth) astonishing. He made it clear that the SDP—I am not sure whether he was speaking for the Liberal party as well—is opposed to the Bill, but
  70
  that once BT has been privatised it will then ensure that it remains privatised. It must be a great comfort to the Government to know that all privatisation, measures carried out during this Parliament will remain for ever in the eyes of the SDP. I am sorry that the hon. Member for Stockton, South is not here to defend himself against my attack.
  There is a real fear that once BT is privatised it will take its business abroad, because there is nothing in the licence or in the conditions laid on BT plc to prevent it from doing so. Once a company begins to take its business abroad and to import its equipment, as night follows day, we shall lose jobs. The hon. Member for Northampton, North (Mr. Marlow) asked my right hon. Friend the Member for Salford, East (Mr. Orme) how he came to the conclusion that jobs would be lost. It is obvious that as the operator services are slaughtered—there is no doubt in my mind that they will be—or at least substantially cut back, many telephone operators will lose their jobs.
  As the hon. Member for Leominster (Mr. Temple-Morris) said, few people see any need for this legislation. Nevertheless, it is important legislation, and it does the House a great disservice to pretend that we can implement such legislation without it having a profound effect on job prospects in BT plc. There will be a profound effect, and it is the duty of the House to say so in clear terms.
  The decision to license Mercury is interesting. As the right hon. Member for Western Isles (Mr. Stewart) made clear, Mercury is not interested in going to the Western Isles or any other rural area. It is interested only in getting into the international network. It is already part of the national network with its inter-city lines. It is unfortunate that the Secretary of State for Trade and Industry said that he would make an announcement before the House rose for the summer recess whether the Government would authorise Mercury to enter the international network. I am sure that that decision is known now. It would have assisted the debate if the Secretary of State had made that announcement today.
  There seems to be an astonishing misconception, particularly on the Government Benches, that if one privatises an industry, and licenses other companies such as Mercury, somehow or other one will introduce competition. There is anything but competition in many private industries in which there is no public involvement and no Government stake. Have hon. Members not heard of the cartels that operate in some industries? What is to stop Mercury and BT plc getting together and raking decisions about charges and many other aspects of the telecommunications network that would seriously disadvantage consumers, whose interests Conservative Members are claiming to protect?
  It is an astonishing misconception to believe that if a service is privatised and one or two private companies are licensed, that will result in competition. I am sure that we shall live to see the day when that myth is blown sky high.
  If evidence for my belief is required, hon. Members need look no further than the manufacturing companies that have been supplying telecommunications equipment over the years. It is not long since they were operating a cartel. Indeed, one of the best known of those companies, whose chairman, a well-known peer, was highly placed in the Conservative party, had to repay the Post Office £3 million because it had overcharged for equipment between 1974 and 1979. Let no one say that, because the

  71
  Government are privatising telecommunications and licensing one or two other companies, they are introducing competition. Nothing could be further from the truth.
  Mr. Marlow: I intervene to help the hon. Gentleman. If he reads the Bill, he will discover that there is to be a regulatory authority, known as the Office of Telecommunications, which will be charged with the policies that he wishes to see introduced to ensure that competition works effectively.
  Mr. Ewing: We have seen regulatory authorities before. I agree with the many others who feel that it would have been better to retain the POUNC than to set up a new quango. We should have retained the independent POUNC and given it more teeth to deal with the problems to which I have referred.
  The so-called concessions on rural services, services for the blind and the social aspects of telecommunications are not worth the paper they are written on. They are so heavily qualified that civil servants will already have drafted the replies to hon. Members who will be sending in their complaints when the Bill becomes an Act. Anyone could draft such a reply based on clause 3.
  The hon. Member for Northampton, North may complain that a telephone kiosk in his constituency is to be withdrawn from service. He will be told that it is not reasonably practicable to keep the kiosk in service or that the demand that it should stay in service is unreasonable. The hon. Gentleman will be told that the decision was taken under the legislation for which he will vote tonight.
  Of course, the Minister for Information Technology will add some helpful advice before signing the letter "Yours ever". He will refer hon. Members to clause 82, which empowers local authorities to make contributions to rural services that they believe are necessary in their areas.
  I could save the civil servants time and draft their replies for them tonight. They can take them away and run them off in their thousands. The responsibility for maintaining telephone kiosks and many of the other services threatened by the Bill will pass from BT and the Government to the local authorities that the Secretaries of State for the Environment and for Scotland are clobbering. That is the dishonesty in the Bill.
  We can refer to examples of privatisation in other parts of the world. It is interesting that the Secretary for Trade and Industry should have introduced the Bill, because when I went to Chile in 1981, as part of an international mission from the Postal, Telegraph and Telecommunications International, I discovered that three weeks earlier a junior Minister from the Department of Trade—the present Secretary of State for Trade and Industry —had had been in that country. He was the first Minister to visit Chile after Pinochet came to power. The Labour Government closed our embassy in Santiago after Pinochet took control in Chile, but the Tory Government reopened it in 1980, although, as far as I know, the Secretary of State is still the only Minister to have visited that country.
  At that time, the Chilean regime was privatising the telecommunications industry, as a result of which 50 per cent. of the jobs in that industry were lost. Not only that, but, as a way of raising investment capital to develop the system, the private companies involved, many of which came from Japan, started charging subscribers for giving
  72
  them telephone numbers and that did not even guarantee a link with the system. Another charge was made for that. I sometimes wonder whether some of the ideas in the Bill were brought back from Chile by the Secretary of State.
  There is no doubt that the Bill is not wanted. As the hon. Member for Leominster said, very few people want it, and it is a bit much for Tory Members to attack the performance of our telecommunications industry. Of course, that is the classic approach to privatisation. If the Government want to privatise a service, they start by running down its performance and complaining about alleged inefficiency.
  The hon. Member for Stockton, South, who has returned to the Chamber, said that in the years since liberalisation there had been a tenfold increase in efficiency. The hon. Gentleman and some of his friends on the Tory Benches produce no evidence to substantiate such sweeping statements. They try to suggest that the industry was not efficient before liberalisation. However, through the co-operation of the Union of Communication Workers and the Post Office Engineering Union, it is one of the most efficient industries in the country. I am glad to see that the hon. Member for Swindon, who was on the sales side of the industry, is nodding his agreement. Efficiency came not just with liberalisation. The industry was always efficient. To listen to Conservative Members run the industry down to build a platform for themselves on which to privatise it is an insult to a great industry.
  Mr. Richard Shepherd: Not only Conservative Members and the public but BT have identified enormous inefficiencies or inadequacies in BT. In the business plan for 1980 to 1990, it identifies extraordinarily unsatisfactory arrangements and inefficiencies. That is why we are now seeing the present gains as BT gears itself up and responds to the challenges set out in Peter Benton's report.
  Mr. Ewing: There are inefficiencies in every industry. I am not suggesting that the industry was hyper-efficient. I am suggesting that, in fairness to the industry—surely hon. Members want to be fair to it—it is not on to make the sweeping criticisms of it that have been made in the debate, as if the industry had been inefficient through the years. In fact, the industry contributed more to the Chancellor of the Exchequer to reduce the PSBR than any other public sector industry. It was required by the then Chancellor of the Exchequer to help to reduce the PSBR. No inefficient industry could have contributed the sums that were contributed by both the posts and telecommunications sides of the business.
  Let no one say that we are dealing with an inefficient industry. We are dealing with a highly efficient industry that can be made more efficient. No one is arguing about that. The Bill will only damage the efficiency of the industry. It will do nothing for the consumer or for the country. Second Reading of the Bill should be opposed.
  7.32 pm
  Mr. Peter Thurnham: I thank you, Mr. Deputy Speaker, for calling me to make my maiden speech in this important debate on the fundamental reform of British Telecom.
  Bolton, North-East is one of the three new constituencies that make up the metropolitan borough of Bolton. I am proud to have become one of the 41 Members who have represented Bolton over the past 150 years. The

  73
  House is already familar with the speaking skills of my hon. Friend the new Member for Bolton, West (Mr. Sackville). No introduction is needed for the hon. Member for Bolton, South-East (Mr. Young), whose former constituency now forms a large part of Bolton, North-East, and to whom I am indebted for his conscientious work in the past.
  I pay tribute to Mrs. Ann Taylor, the well-known former hon. Member for Bolton, West, a small part of which the Boundary Commission put into my new constituency, so providing a slippery toehold from which the former Member sought to oppose me at the general election. I learned that she had the fighting qualities of a lioness, which she had previously displayed on the Opposition Front Bench and which she used to become a popular and conscientious Member for nine years.
  I pay the greatest tribute to Sir Charles Fletcher-Cooke, the former Member for Darwen, a large part of which also makes up my new constituency. Sir Charles Fletcher-Cooke had a long and distinguished career in the House, covering 32 years, during which time he became highly respected by hon. Members on both sides of the House and known for his dedicated attention to all north-west matters. He was a junior Minister at the Home Office for a period, was knighted in 1981 and in his capacity as a leading silk has acted as legal adviser to the Sultan of Brunei. Opposition Members may be interested to know that he first stood for Parliament as the Labour candidate for Dorset, East, narrowly failing to be elected in 1945. His conversion to the Conservative cause was followed by my hon. Friend the Member for Brent, North (Dr. Boyson), the Minister for Social Security, who knows the Eagley Bank area of my constituency well, having made a classic study of one of the most famous historic enterprises in Bolton, the Ashworth copper mills.
  Bolton, the original growth of which was founded on the genius of Samuel Crompton, now has a diversified industry built up by the skills of its people. I am confident that the Government's economic policies will provide the framework for the continued growth of new jobs. We were particularly pleased and grateful to see my right hon. Friend the Prime Minister during her recent visit to Warburton's bakery, a leading private employer and founder member of Bolton Business Ventures Ltd., the enterprise agency formed to foster the growth of small businesses.
  The revived spirit of free enterprise is exemplified by the Telecommunications Bill, which provides the opportunity for that public sector service to become a commercially oriented world leader. I hope that its work force of nearly 250,000 people, ably led by Sir George Jefferson, will seize this new opportunity with imagination and vigour.
  I press my right hon. Friend the Secretary of State for Industry to begin by controlling the new business with what I would call a light regulatory rein, both to maximise the price at which the shares can be sold and to avoid stifling the constructive initiatives that will be needed to transform a public body into a profitable growth business. Perhaps we can tighten the reins later when we see how the spur of competition develops. In saying that, I should not want the new Director General of Telecommunications in any way to overlook the interests of both residential users and small businesses. It is proposed that prices should be controlled through a local tariff index based on a basket of prices to rise by no more than RPI minus x.
  74
  What my constituents would like to know is that their phone bills will not rise. Indeed, they will look in the basket for an extremely small unleavened loaf marked "static standing charges".
  As a small business man, vitally dependent on the telephone, I should declare a personal interest because, in addition to the Bill before the House, I have my own annual bill with BT, which is now well into six figures. I am sure that I speak for all small businesses when I say that I look forward keenly to the time when I can shop around for the various items in the basket. I add a plea that, for many new businesses in their formative years—it is small businesses to which we must look for most of the new jobs for Bolton's 16,500 unemployed— it is not only price that matters but terms of payment, as I am sure Mr. Speaker himself is well aware. The Director General of Telecommunications should ensure that the basket contains a loaf marked "fair payment terms", even if BT cannot see its way to supplying long thin loaves marked "extended credit for new businesses".
  I welcome the new Bill. Trusting that an injection of Mercury can cure most communicable ills, I believe that the new competitive freedom for BT will be to the advantage of the whole community.
  7.40 pm
  Mr. Clifford Forsythe: I congratulate the hon. Member for Bolton, North-East (Mr. Thurnham) on his maiden speech. Having made my own only a short week ago, I am well aware of how he felt. However, he acquitted himself well, and I look forward to hearing him again.
  The hon. Gentleman said that he was a small business man. Speaking as a former small business man who was always in close contact with all the members of his staff, I am well aware that any firm will gain the best results only if it achieves the proper combination of workers and management.
  As a result of my experience I am also aware that some incentive—financial or in the form of good conditions or a combination of both—is necessary for the efficient running of any enterprise. But even bearing that in mind, I have considerable reservations about this Bill. I have a practical turn of mind and I am interested in the mechanics of running the proposed new system because, whereas part of the operation will be licensed to private enterprise, British Telecom will provide the network. I feel that this will give rise to certain practical difficulties for those using the system.
  If a telephone handset has been fitted by the private section and a fault develops in it, who is responsible for repairing it, bearing in mind that we as telephone users never really know whether the line, the handset or the connection at the exchange is defective? Will each section of the system have its own maintenance staff or shall we have a central organisation responsible for faults and repairs? Are we to be charged a call-out fee by the private section but not by the BT section? Can we expect as good an emergency service for faults and repairs as we have at present? If a fault is suspected to have been caused by the subscriber and a charge has to be made, who makes this decision?
  The present service given by BT can at least be said to be much simpler. I contend that the Bill, by its very nature,

  75
  creates a clash between BT providing a service to the public and the private side seeking some return on its investment.
  If in my plumbing and heating business I was asked to fit two service pipes to two different dwellings, one 10 m long and the other 50 m long, I should have had to charge more for the 50 m job than for the 10 m job, or I should soon have been out of business.
  I am puzzled to be told that proposals introducing the profit element are good for all subscribers. How can it be true? Eventually any business man will have to cut his losses and get rid of uneconomic parts of his business if he wishes to make a profit.
  It has been said that the BT side will handle emergency calls, call boxes and the rest, but if the private side of the system is making a profit, BT will come under great pressure from the Government to improve its financial position. If that part of the system is pressed too hard it may lead to a cut in services to outlying parts of the network.
  My worry is that the provision of call boxes or private dwelling lines at a reasonable cost in such areas as Devon, Cornwall, parts of Scotland and, of course, parts of Northern Ireland will be affected. The present BT policy of providing a universal service with uniform prices is of great benefit to all parts of the United Kingdom. If the cross-subsidy principle is changed, we may find that a fine public service is lost in the pursuit of profit.
  In this context, does dividing the system into regional areas mean that there will be local variations in price? Some will say that an efficient and profitable system is all that matters, but most reasonable Members and the general public will concede that in certain circumstances and for certain people the telephone is an essential service, regardless of cost effectiveness.
  In Northern Ireland, for instance, there are farmers living in remote and dangerous areas who remain there only because they have the telephone link with their friends and the security forces. At night they shutter their windows and bolt their doors, comforted by the thought that help is only as far away as the telephone. If financial considerations come into providing or repairing these services many of those brave people will be forced to leave their farms—which up to the present the terrorists have not managed to make them do.
  The public service ideal of BT must be preserved. Great care must be taken that profit is used only to increase efficiency and not to destroy the service. I make it clear that my party is not against privatisation. It is willing to look at each case on its merits, although the evidence on the side of privatisation in this instance seems to be very weak.
  The repair of telephone wires damaged by farm animals, storms or heavy snow is again a matter of great importance. Will the subscribers be responsible for the cost of repairing or replacing these lines? If they are, will they have to spend more money taking out insurance policies against this eventuality? The situation which could arise in Northern Ireland is illustrated by the tragic events of 13 July. Four UDR soldiers were brutally murdered when a land mine exploded beneath their land Rover. It left a crater 15 ft deep by 40 ft wide. Telephone cables were destroyed, putting 1,700 telephones out of order in that rural area.
  76
  The present BT service, like all other public services, started to restore the lines almost immediately to try to get matters back to normal. We in Northern Ireland are very thankful for the dedication to duty of BT workers, like all other public service workers. Shall the service be restored as swiftly under privatisation, or will the telephone service be treated as all other private business firms in Northern Ireland are treated when bomb damage occurs? That procedure is one of assessing the damage and lodging a claim for consideration by the Northern Ireland Office. Will the damage caused to an individual subscriber's installation in similar circumstances be looked after by the private sector, which fitted it, by the subscriber or by BT?
  Hon. Members should also be concerned about the fact that at present 95 per cent. of the equipment required by BT is made in the United Kingdom. Will there not be a temptation for the private section to import cheaper equipment, thus risking damage to home-based firms? We in Northern Ireland are proud of the excellent work produced by Standard Telephones and Cables and we shall strenuously oppose any trend which weakens the viability of such firms.
  I have looked at the Bill purely on its merits, having no ideological view for or against privatisation. I have enough business experience to be able to appreciate the attractions of running a business to obtain the best return for the money and effort expended. I am also aware that as a public representative I must take into account the view of many people who consider BT to be a public service which is necessary for the well-being of all our citizens. If, as seems possible, the cross-subsidy principle is altered, the lower standard of living and the higher prices charged in Northern Ireland could mean that the extra financial burden will be more keenly felt there than in other parts of the United Kingdom.
  I have listened to the debate with great interest so far but I have heard nothing to change my view that I should oppose the Bill. I shall recommend to my right hon. and hon. Friends that they vote against it.
  7.50 pm
  Mr. Richard Shepherd: This is the third time that we have looked at a printed version of the Telecommunications Bill. Each time there have been nuances of change and one has a feeling that the Government are firing at a moving target. Clause 3, which reappeared at the last Report stage as new clause 1, and has been slightly altered again, is also the third version. I do not quibble inasmuch as I am grateful that the Government have acceded to some of my hon. Friends' arguments and have moved to implement some of them.
  The essential issue in the Bill is the privatisation of what is recognised to be a monopoly and the extent to which one should devise methods and means through an Office of Telecommunications to control and regulate that private monopoly. There is a great difficulty here: clearly the more the private monopoly is regulated and controlled the more its prospective sale price is inhibited. That is a central issue.
  As the debate has moved from last November through to July this year, I have been conscious that the Government have resisted the opportunity of introducing strong regulatory measures which would enable an independent Office of Telecommunications to regulate and control the way in which the monopoly operates. I ask myself why, because it is a fundamental Conservative

  77
  principle that we should regulate privately owned monopolies. I can only wonder whether there is a battle going on between the Department of Trade and Industry and the Treasury. I had assumed that the Department was more vigorously converted to free enterprise and competition, yet there is an extraordinary hesitance in introducing adequate controls over BT's existing monopoly? Why? I should like some clarification on the extent to which the Minister sees this as a question of trade-off —the maximisation of the price that we can secure for BT in the market set against the extent of regulation and the protection of new competitors coming into the market and present users of services. That is an important issue. If we fudge the regulation of monopoly power we are effectively replacing a publicly owned monopoly with a privately owned monopoly. That is contrary to the assurances that we gave the electorate in our last election manifesto. I see in the Conservative party a hardening of views on this issue. The Government are losing the argument about the extent to which Oftel is a regulatory body.
  As a general philosophical stance, I subscribe to most of the benefits that Ministers see in privatisation, but I am conscious that those benefits are not achieved solely because of privatisation; they will be achieved largely through competition. That is the weakness in the Government's argument that was identified earlier. The Government have said that the creative thrust of telecommunications policy is dependent upon a light regulatory rein that will encourage market entry and will therefore create a viable, independent, responsive and competitive industry. I see no evidence to support that view. I would rather see a strongly regulated BT, until such time as effective competition has become a reality in the market. Privatisation alone does not achieve the critical objectives that were set out by my right hon. Friend the Secretary of State, nor does it provide any assurance that our residential constituents will enjoy an improved and more economic telephone service in their homes.
  BT's monopoly power must be controlled, whether BT is public or private. The essential underlying intellectual argument for that is that monopoly breeds inefficiency and arbitrary discrimination and leads to the misallocation of resources. The introduction of limited competition in selected sub-markets only increases the incentives to take advantage of those who have no adequate alternatives and that is the danger that faces small businesses and personal home subscribers. As BT reduces prices in certain markets to meet competition where it exists, it will seek to increase its revenues from markets such as the domestic consumer who has no alternative provider of the service. That is a very considerable fear. It applies not just to the domestic subscriber but to the small business man and, because the Government have not yet stated their position on cross-subsidisation, it can apply to discrimination between major business customers.
  Let me give an example. British Telecom has a subsidiary company called BT Enterprises, which now goes round and offers special deals. One special deal to one special customer can be to the grave disadvantage of the competitor of that special customer. I have always argued, and I ask my hon. Friends to accede, that such discrimination should be clearly outlawed in the Bill. I want to ensure that BT is more responsive to the needs of its users. I have tried to argue that that is the common interest of large corporate users, small business men and
  78
  residential subscribers. It is also of vital national interest as the new service industries of the information age, which the Government promote vigorously, will create new opportunities for investment and employment only if economically priced transmission is available.
  I have also argued in Committee, as have many of my hon. Friends, that we must balance particular vested interests against the national interest in a competitive market for telecommunications. We cannot promote the interests of particular unions associated with BT if that means creating special privileges that will destroy opportunities for the employees of potential competitors of users. Nor can we focus, as I have tried to say, on the proceeds of the flotation to the exclusion of our long-term objective in reforming the industry's structure.
  My conclusion on what I call the subscriber issue is that the common interest of large and small users and of the national economy can best be met by allowing more competition with BT and by providing stricter protection against anti-competitive practices while competition develops. I fear that this is a great gap in the Government's policy and strategy.
  I am mindful too of the gap in the Social Democratic party's industrial policy on BT. The hon. Member for Stockton, South (Mr. Wrigglesworth) spoke against the creation of Oftel. An interesting feature of the Committee stage of the previous Bill was my right hon. Friend's inability to honour pledges that he gave to the Committee to produce a licence. Fundamental to an evaluation of the Government's stance on BT is the need to see what they mean in practical terms. What is in the licence? I do not wish to embarass my right hon. Friend because we know that he is sincere but he gave us the assurance that he would produce for the Committee's inspection a licence that would set out the relationship between BT and the Government and how it would operate. He was unable to do that although, in fairness, a draft licence was introduced a few days after he had promised it. Notwithstanding his position as a 100 per cent. owner of BT, the earliest that we shall have sight of that vital document for the regulation of the telecommunications monopoly company will be October—10 months after the date on which the Minister who is solely responsible for, and who is 100 per cent. owner of, the business said that he would make it available to hon. Members. It shows the difficulty that the Government have in dealing with sponsored industries. I have always argued that we need an independent, above-board transparent organisation whose mandate can identify and protect the interests which it has been statutorily established to secure.
  Mr. Wrigglesworth: I take the hon. Gentleman's point, but surely it can be argued that if the Minister cannot produce the document, with all the authority and power that he has, a director general of an independent department will not be in any stronger a position.
  Mr. Shepherd: The director general's purpose is not to construct the licence. I want him to be responsible for implementing strict regulatory controls over the monopoly industry.
  I cited the incident of the licence because what it contains or omits will be the proof of the Government's competitive stance. The British Telecom licence is only one-half of the story. In that, we would see the Government's intention. It is not evident in clause 3,

  79
  which contains a series of general assertions through which most competent corporate lawyers would probably find a way when arguing why someone could not perform duties because they were not, for example, practicable or for some other reason.
  Why has the Mercury licence not been made available? I am curious about that document because we are talking about moving from monopoly, through duopoly, to a competitive environment, and the arrangement with a third party such as Mercury are of crucial importance in ascertaining where the Government stand. We are not talking about a commercially confidential document in the sense that it involves outside parties operating in a free and open market. We are discussing the Government as the sole issuer of licences. The private arrangements that they have entered into, covertly, with a private consortium is therefore important. We are not aware of the terms and conditions.
  For all that I know, the document might give rise to the gravest anxieties. Perhaps it gives such rights and powers and possibilities to a company that we would judge it to be against the spirit of competition. I say that because I am extremely concerned about the Minister's undertaking to the hon. Member for Newcastle-under-Lyme (Mr. Golding) that he does not intend to license any further companies in the foreseeable future. That is an anticompetitive stance.
  Whatever the Government say, the Minister responsible for competition in telecommunications has told the House that he does not propose to extend competition for the foreseeable future. We are left with the most dangerous of situations. There is to be virtually a private monopoly with a shadow duopoly company, the powers, duties and obligations of which are set out in the only licence in existence, which we have not seen.
  I want to examine the Government's competitive stance because they always allude to Mercury as if it were a real addition to competitiveness in telecommunications. Because it is the only competition allowed, it limits the Minister's argument. Mercury has no customers at present and therefore cannot provide effective competition for BT. For some fortunate large businesses in certain urban areas Mercury may provide a service, and hence a threat to BT, and so urge it to improve its service. For most of our constituents, however, Mercury is not an alternative.
  My consequential argument is that the Bill should be amended to include a clause under which a qualified applicant will receive a licence unless there is a valid reason why it should not. Of course, all entrants should bear a fair share of the burden of supporting loss-making services. We hear arguments about excessive competition and duplication of facilities. I argue, as a reasonable Conservative party stance, that we should let the market place decide how many facilities are necessary and how many competitors it should support. When we fail to do that we always invite trouble. When the Civil Aviation Authority regulates fares across the Atlantic, or the airlines that operate those routes, a mess of a policy is created. The best way to determine what will succeed, if one believes in competition—the Minister says that he does—is to let the market work itself out. The Bill should enable qualified applicants to enter the market.
  If we limit competition to a single alternative firm, which is able to service only a selected group of
  80
  customers, we shall deprive most of our constituents of the benefit of competition. Indeed, as BT lowers its prices to compete for the contested customers it will probably increase the charges to those who have no alternative. That is the flow of water in economic life. BT will make up for what it has lost elsewhere.
  I will be alarmed if the Government's conclusion is that they must allow Mercury alone to enter the profitable overseas field. All that that will do is divide what amounts to the high monopoly profits of British Telecom in the international market. They will be divided and there will be a consequential loss to British Telecom revenues elsewhere. That involves favouring one company at the expense of all consumers and possible entrants to the market. It is dangerous to try to prop up Mercury—if that is what the Government intend—by giving it access to international telecommunications. The consequences of such a duopolistic approach is that we shall suffer the worst of all worlds. British Telecom will experience loss of profit—that does not worry me particularly—but to make up its revenues elsewhere it will raise prices for those who have no alternative source of telephone services.
  The Bill should put an end to British Telecom's anticompetitive practice of refusing to serve customers who attempt to sell or share their excess capacity. That should be in the Bill, not the licence. That issue was not discussed much in Committee. I should like to hear the Government's view on resale. Why has the issue not formed a more central part of the Government's competitive policy and figured in their arguments about why competition is of benefit?
  Resellers who buy in bulk from BT and then sell to smaller users make available the benefits of competition to small business men and residential users. That is of benefit to us all. Resellers make discrimination against the small user impracticable. That is vital and it is why we should argue in favour of necessary resale. It also provides a market for the transmission facilities of BT and Mercury. They are retailers.
  I was a retailer in my previous profession. I was a small grocer. I liken the proposition here to Covent Garden insisting that every purchaser of fruit or vegetables deals directly with those who have the monopoly control over Covent Garden. That is clearly insane. I should like to hear the Government's view on resale, because American experience and my judgment lead me to believe that resellers make an important contribution to competition.
  It is important to secure stricter protection from anticompetitive practices. It is a substantial charge against the Government, because the Bill does not do that adequately. Selective competition will increase, not decrease, the incentives of the dominant carrier to raise charges paid by those consumers who have no alternatives. I tried to give an instance of that in letters to Ministers. British Telecom is unable to identify its area of profit or loss—or so I was advised by the Minister in Committee. Nevertheless, when competition was introduced on its long-line system it was able to reduce prices there, not knowing whether rural services were loss-making or profitable. It reduced charges to the long-line users at the expense, possibly, of the domestic or captured user.
  The statute must contain a firm mandate for the regulatory body, Oftel. That will promote competition. I have reread the Committee proceedings and the submission from the Department of Industry and I believe

  81
  that it is important not to repeat the American mistake by enacting a vague statute that allows the incumbent carrier —British Telecom—to argue against new entry.
  The statute must also include firm prohibitions against discrimination. British Telecom should be forced to bear the burden of proving that any apparent discrepancies in the terms offered to different customers are justified by differentials in cost. There is no such provision in the Bill or in the licence, but it is essential. Already the threat of limited competition is driving British Telecom to anticompetitive discriminatory pricing. Last year, BT announced that rural long-distance services would be charged at a higher rate than the service between major cities, including most of the areas to be served by Mercury, and this despite the Minister advising us that British Telecom has presented no evidence that rural costs are higher.
  We also need to separate British Telecom's monopoly operations from its competitive operations, ensuring that they deal on an arm's length basis. Most important, we must not allow British Telecom to sell its circuits to a marketing affiliate on terms not available to the public. That would make a mockery of any claim to protection against discrimination.
  We should also allow users and competitors who suffer from unlawful anti-competitive practices to sue for relief in the courts. There was a somewhat acrimonious exchange on that subject on Report when the Minister would not yield on the question of allowing companies in competition with British Telecom to sue BT for injuries or losses suffered as a consequence of BT's offending against the terms of its licence. The argument has always been that Oftel can put matters right. However, in the two, three or four weeks that it may take Oftel to move—even accepting that British Telecom apologises for the discrimination or activity that has inhibited the commercial viability of the firm that wants to come in, and claims that it was unintentional—the damage could have been done at the earliest stages. It would give a great impetus towards competition if we were to allow the injured party to sue in the courts for damages consequential on the actions taken by British Telecom that had injured it.
  This House cannot stop the powerful economic forces that will inevitably reform what is, in my view, a sluggish telephone monopoly. The sluggishness of the monopoly has impeded the growth of new high technology. That has been evident in other countries too. Many years ago, when the then right hon. Member for Bristol, South-East, Mr. Benn, was attempting to defend the position of the GPO, he claimed that it was better than the Spanish industry. Those who had knowledge of Spain's telephone system in the 1960s would have considered that to be a poor level of comparison. We should be capable of being compared with the best.
  This country is moving faster than most, but we must not embark on a series of half steps that will leave us without either direct control by the Government or more efficient regulation by a true competitive market place. Partial steps, taken in the name of caution and gradualism, threaten to create a powerful private monopoly over which we will be unable effectively to regain control. We must look beyond the prospective revenues for BT and the proceeds of its sale and consider the potential for real growth throughout the telecommunications industry. That potential will be thwarted if we privatise a monopoly. The
  82
  system of having one overwhelmingly dominant carrier and one pace-keeping competitor has not worked. It would be even more wrong to extend the duopoly regime in the important international sector. We cannot stop the transition to a competitive market, but we can delay and impede it.
  We risk being overtaken by other strategically located countries such as Belgium and Ireland that would gladly establish themselves as centres for competitive communications but which, at the moment, lack the resources to do so. Our opportunity is to make the transition to a truly competitive market place as smooth and rapid as possible. That requires a policy of open entry, encouraging all forms of competition. We also need stronger safeguards against anti-competitive practices while competitive conditions develop.
  I want to press the Minister on the question of the price control mechanism as set out in Littlechild. Is it to be based on the basket of all the charges of BT, or a selected narrow range of charges? With a wide basket of charges, one could move the price mechanism within that basket and domestic prices could be doubled, trebled or quadrupled in order to enable British Telecom across the board to try to subsidise areas in which it needs to maintain competition but is unable to do so because of the limitations of its own competitive resources.
  Mr. Golding: Will the hon. Gentleman give way?
  Mr. Deputy Speaker (Mr. Paul Dean): Order. I do not believe that the hon. Gentleman wishes to give way.
  I again appeal for the co-operation of the House. The Front Bench spokesmen are expected to reply at about 9 o'clock. A number of hon. Members wish to speak, including some who have not yet made their maiden speeches.
  8.15 pm
  Mr. David Penhaligon: We have heard a number of maiden speeches today and they have been quite enjoyable. All the new Members appear to be able to speak well. No doubt they will speak again and express the views of their constituents.
  The hon. Member for Bolton, North-East (Mr. Thurnham) is clearly capable of looking after himself in the House. The hon. Member for Swindon (Mr. Coombs) endeared himself to me by mentioning Isambard Kingdom Brunel, even if his success in the election reduced—from the south, the south-west and the western counties to the edge of the GLC — the number of Opposition Members to five out of 120, despite the fact that the Opposition got 47 per cent. of the poll. That is why the Government are pressing the Bill through, even though they have no national mandate for it.
  Even those of us who did not serve on the Committee on the Bill feel that we have been here before. The one significant change in the Bill since it was first presented to the House is in clause 3. Those hon. Members who have worked hard to strengthen clause 3 have improved the Bill, although some of the words in the clause are vague and one wonders exactly what they mean. For example, the clause states that
  "all reasonable demands for them"—
  the services — must be maintained. It is difficult to understand what that means.
  It is true that, despite the desire of British Telecom to close telephone kiosks, public opinion and pressure from

  83
  Parliament and from the local councils have stopped it doing so. One suspects, however, that BT would still wish to close them. With regard to kiosks, what is reasonable? In urban areas, I suspect that to have a kiosk half a mile away would be considered extremely unreasonable and that people would press successfully to have a kiosk closer to their homes. However, in parts of my constituency, people live more than half a mile away from the nearest kiosk, and there is still pressure to close the kiosks. The hon. Member for Antrim, South (Mr. Forsythe) raised the same point in connection with his constituency.
  The Minister should tell us what he understands by "reasonable demands". Is he thinking of a kiosk 100 yards, half a mile, a mile or—in some of the more remote parts of Britain—five miles or more away? I would feel happier on that score if clause 82 did not exist. It seems reasonable that the Bill should contain a clause permitting local authorities to subsidise such a service if they so desire, but I am afraid that their legal right to do so may provide the new BT company with an excuse to suggest that that is the way in which such a service should be provided in future. That would be an appalling outcome, and I do not for one moment believe that the mood of the House would support it. I suppose that our one slight hope lies in the fact that those words are in the Bill, and presumably that means that we can return to the subject, even after the Bill has been enacted, and can raise it time and again. I can certainly give the Minister an assurance that some of us are determined to do that, should that situation arise.
  Several Conservative Members have told us why they want the Bill. It might have done the Minister some good if he had found some Conservative Members who really supported the Bill. Few Conservative Back Benchers have given it total support today. They have all mentioned that lovely word "competition". I believe in competition probably more than most Opposition Members, and I like to see the efficient companies survive and prosper. However, there is very little faith among Conservative Members that the Bill will achieve that. We have a nationalised company that is a monopoly. We are told that this great Bill, with its numerous pages, means that that company will continue to be a monopoly after it has been enacted, with the single exception of the Mercury project. The Minister may hope that the Mercury project will eventually break down BT's monopoly. But why could not that breakdown have been achieved by introducing a series of further small projects like Mercury?
  Conservative Members seem to be rather worried. Because the Bill involves privatisation, they know that they have to support it. It is like the reaction sometimes found among Labour Members who think they must support anything that is taken over by the state. However, the whole attitude of Conservative Members today seems to be based more on hope than substance. I have not heard one Conservative Back Bencher say with any confidence that the Bill, as it stands, will introduce competition into BT and will, as a result, provide the British people with a more efficient system.
  During the election there was a debate on television on this issue. The Minister involved is not here. I do not complain about that, because Ministers change their jobs. However, the hon. Member for Copeland (Dr. Cunningham) is here. The three of us were on the
  84
  programme. I am sure that the hon. Member for Copeland will admit that much of the debate was extremely predictable until we got towards the end. Suddenly, the Minister started waxing lyrical about the advantages of the Bill in terms of competition and of companies undercutting each other. Then, as a sort of coup de grace, because he knew he had us beaten, he said that what we needed most of all was the discipline of the bankruptcy court.
  "The bankruptcy court?", I asked him. Does the Minister expect to tell the House one fine day that he is very sorry, there is bad news, the company has gone bankrupt and there are no more telephones in Britain? Is that what the Minister was saying? I do not know whether that is what he meant, but that is what he implied, and it is a ludicrous argument. In reality, we know that if the company lost billions of pounds, come the crunch all of us would troop through the Lobby to bail it out. The idea of a civilised, industrial state without a telephone system is too ludicrous even to contemplate. Yet the hon. Member for Copeland can remember that that was the Minister's main argument.
  At this stage I suppose that it would save a little time if I were to play a record of the speech that I made on the previous Second Reading, because I wish to ask the same question again. It has also been asked by the hon. Member for Antrim, South and by other hon. Members who have applied their minds to the subject. What happens if a remote subscriber wakes up one morning, after the sort of storm with which I am familiar in my part of the country, and finds not merely that his telephone is out of order, but that three or four miles of poles and wires have been obliterated? The Bill is clear that there is a duty on BT to reconnect. However, the question that I asked on Second Reading, on Report, and on Third Reading, and which I ask again today, is: who will pay the bill? I assure the Minister that my dear farming friends in the south-west are interested in little else when it comes to the crunch.
  Mr. Golding: Will the hon. Gentleman also ask: who will fix the costs and who will decide how big the bill is to be? Night after night we asked Ministers that question, but we never got an answer. However, I wish the hon. Gentleman well.
  Mr. Penhaligon: I sincerely hope to avoid asking the Minister that question night after night, but I should like to know today who pays the bill. I have tried to find out the answer, and been told that it is to be found in the licence. That great document has not yet been presented to the House or to the Committee, but it is to be shown to us soon. We look forward to reading it. I have some fundamental questions to ask about it. Will it be debatable line by line in Committee? Will it be amendable in Committee? Once it becomes part of the Act, how will the licence be amended from that day onwards? I can think of many ideas that the new private enterprise BT and the Minister might support, but which I and my constituents in the far south-west would not be very enthusiastic about. My questions are quite straight forward. I repeat, will the licence be debatable and amendable line by line? If it becomes the law of the land, how will it be amended after that? If I or the hon. Member for Aldridge-Brownhills (Mr. Shepherd) do not like the idea of an amendment after that date, how can we prevent it from being enacted? I would appreciate an explanation from the Minister.
  Many hon. Members have said that the introduction of competition into BT may well work against rural areas.

  85
  Many of us who live a long way from London believe that BT already discriminates against us very severely. I cannot ring some of my constituents on a local charge call. Indeed, I cannot contact more than 20,000 or 30,000 homes on a local charge call. My area has to try to compete with urban areas such as London, Birmingham and Liverpool. People living in those urban centres can call millions of subscribers on local call charges. I know that some hon. Members are trying to be helpful, but the situation cannot get much worse for the remoter areas than it is at present.
  If the Government had continued on a path of liberalisation, instead of introducing this Bill, they might well have given the first real hope to some of the remoter areas of the country, which have to compete against those urban centres.
  I wish that my area had a telephone charge structure similar to that available in London so that it could contact businesses in the United Kingdom on the same basis as companies in other areas with which it is competing. I am sure that more companies would then come to my area. Office space is available, and it is cheaper than in many areas. There are many skilled people available. If my area could operate on the same basis as other areas with which it is competing, new opportunities would arise.
  I am disappointed with the Bill. I would have supported the Government on further liberalisation. I would have been, perhaps, one of the few hon. Members on the Opposition Benches to have done so, although I am sure that my colleagues in the Liberal party would have joined me. The Bill is a massive piece of legislation, probably the largest Bill of this Parliament. This act of privatisation must be one of the largest that the Western world has ever seen from a democratically elected Government. If any hon. Member knows of a larger act, it would be interesting to hear about it.
  The Minister can put forward no argument for the Bill, other than that it will increase competition. Yet Conservative Member after Conservative Member has said that the Bill will not introduce one iota of additional competition for BT. The House knows that that is right.
  8.30 pm
  Mr. Rob Hayward: I thank you, Mr. Deputy Speaker, for calling me to make my maiden speech in this debate. It is some five and three quarter hours since I entered the Chamber and, as hon. Members will realise, to double that time gives eleven and a half hours. That time is significant for the hon. Member for Newcastle-under-Lyme (Mr. Golding). I now have some practice in listening to other hon. Members, which I may need at a later stage of the Bill.
  I am the fifth Member to make a maiden speech in today's debate. I am tempted to relate some of my thoughts, but as they relate to my experience as a rugby referee they might be deleted from the record. I am the fifth Tory candidate for my constituency of Kingswood, which is situated half in and half out of Bristol. It is often assumed to be a Midlands constituency, but it actually lies alongside Bristol. All the five Tory candidates are now serving Members of Parliament.
  The constituency includes a substantial part of the old constituency of Bristol, South-East, whose previous representative, Mr. Benn, was defeated in one of the most commented-on upsets of the last election. I have no doubt
  86
  that we shall see him return to the Labour Benches in the near future. I hope that he will serve his new constituency as well as he served Bristol, South-East.
  Another part of my constituency is part of the firmer constituency of Bristol, North-East, which was ably represented for many years by Arthur Palmer. He was probably the best servant of the city of Bristol for very many years. Throughout his parliamentary career he sought not only to serve his constituency but to represent the city as a whole. Another hon. Member who gave me some of his territory is my hon. Friend the Member for Wansdyke (Mr. Aspinwall). While I will do many things for my constituency, I will not parachute from an aeroplane.
  My constituency has the rare distinction in the south and centre of England of not having a railway line. When the Serpell report is eventually debated I shall be able to take a neutral stance because my constituency does not have a railway line to be put at risk. However, it is situated close to the M4 and the M32. It is in the valley of high technology, and for that reason my constituents do not fear the Bill as do some in other parts of Britain.
  My constituency, together with others surrounding Bristol and on the other side of the river Severn, has shown that substantial investment in high technology can produce the benefit of investment from both within and without. An example of new business that has been attracted to an area just outside my constituency, but from which my constituency will benefit, is Hewlett Packard. My constituency also provides a large proportion of the work forces at British Aerospace and Rolls-Royce. It knows well what high technology is all about and how the nation can benefit from the development of the telecommunications industry.
  Although the constituency is based on the new high-technology industries, it is also a constituency of tradition and convention. It is made up of a series of small villages which have been merged. My constituents hold traditional values in relation to the family and the Church and I shall defend those values for as long as I represent my constituency, which I hope will be for a long time.
  The Boundary Commission formed my constituency from parts of three former constituencies. Some of my constituents never know which constituency they will be in next. Every Boundary Commission report since the last war has moved part of the constituency into another constituency. One area has not had the opportunity of returning the same Member of Parliament at two successive general elections since 1959.
  My constituents are not afraid of new developments in high technology and are positively willing to participate in them—for example, in British Aerospace and Hewlett Packard. It depresses me to hear discussions based on fear of the changes associated with the liberalisation and ultimately the denationalisation of British. Telecommunications in the Bill. Those changes provide opportunities in the telecommunications industry, and in the industries associated with supplying BT, for changing and updating.
  The three major suppliers of BT have operated for too long as part of the monopoly and have lagged further and further behind in the development of technology, which is why Opposition Members today say that they are afraid of foreign competition. Businesses have failed to invest in new technology. Some businesses have taken the opportunity to invest in and improve their products over

  87
  the last few years. It is sad that Opposition Members are worried about protecting jobs created by industry and are not seizing the opportunity that the development associated with the telecommunications industry might provide to export to other parts of the world. That is where opportunities lie. If we develop our industry through competition, we shall have the opportunity of exporting. Over the last five or 10 years our record in competing with Ericsons in Sweden, with Siemens and with the French and the Americans, has been lamentable. I hope that the development achieved through the Bill will generate opportunities to export to other parts of the world.
  I dislike the wording in clause 3, but shall not go into detail about it because it has been referred to at length on previous occasions, and I favour the strengthening of the wording in clause 17. My hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) commented at length on the dangers associated with cross-financing. Those dangers are not, as the hon. Member for Truro (Mr. Penhaligon) pointed out, associated only with services for rural areas, but also with undermining competition. Oftel must consider that carefully and ensure that cross-financing does not put at risk services in rural areas or endanger competition.
  I conclude on a personal note. I was very pleased when the Secretary of State for Trade and Industry spoke about the research and development financing intended to provide funds for the deaf and the blind. I have been blind and, therefore, take special interest in such research and development and the financing of it. I shall not allow the Minister, as I am sure other hon. Members will not, to reduce the level of financing and thereby denude the potential for research and development.
  8.40 pm
  Mr. Mark Fisher: This is a very large and important Bill, not just because of the huge sums involved—£15 billion of fixed public assets—but because, judging by the Conservative manifesto at the last election and by the Chancellor of the Exchequer's demands last week that the Government should sell off huge amounts of public assets in order to finance revenue expenditure, it is obviously to be the first of a series of Bills in this Parliament devoted to selling off public assets for that purpose. Therefore, it is perhaps worth scrutinising carefully how the Secretary of State set out and argued his case in his opening speech.
  The Secretary of State started somewhat unhappily, in order to prove the new circumstances which demanded and led to his Bill, by rewriting history and saying that British Telecom, before 1981, was an old-fashioned, fuddy-duddy, inefficient organisation, and that suddenly, post-1981 and post-liberalisation, it became full of flair, profitability and efficiency. That was gratuitously insulting to BT staff and to the innovative work in telecommunications and technology that took place in the industry throughout the 1960s and 1970s. It was a very sad and unhappy start to the right hon. Gentleman's speech.
  The Secretary of State went on to make a half-hearted case for increased accountability, saying that, by having shareholders, pension funds, British banks and foreign banks involved, BT would suddenly be made much more accountable. I do not believe that many hon. Members
  88
  would agree with him on that, because it will not be accountable to the public and certainly not to the employees in the industry.
  In making his case about share owning, the Secretary of State tried to say that, because some shares would be offered to small shareholders and employees, that was a move in the right direction. As he knows only too well, that is complete nonsense. We have only to recall the industries that the previous Conservative Government sold off to recognise that the number of individual small shareholders who hold shares in the companies is infinitesimal. In a corporation of this size, the number of BT employees would probably not reach even 1 per cent. of the share capital, so it is specious and misleading for the Secretary of State to say that it is an attractive proposition.
  The Secretary of State, unlike other hon. Members, did not explain how the flotation will take place. As the hon. Member for Truro (Mr. Penhaligon) said, it is probably the largest floating of public stock in our history. How is it to take place? Will it be on the London stock exchange? Will it happen all at once? Surely that is not possible. Will it happen over three or four years? Will it be sold off on the New York stock exchange or the Hong Kong stock exchange, so beloved of Conservative Members? How are the shares to be floated? We need to have the answers to those questions.
  The Secretary of State accused Labour Members of scaremongering. He said that we were misleading the public on the pension rights of BT employees, but he admitted that new employees will not have the same rights as existing employees. It is surely a recipe for a demoralised work force when there are two separate and coexisting pension schemes. I asked the Secretary of State to explain how he could give an undertaking for the first day after BT was sold, and what would happen after that. His answer was naive. He said, in effect, "Everything will be all right. We do not mind what happens after that." But it is a crucial matter, because many of the subsidiaries of BT will be sold off in the ensuing months, and there is no guarantee whatever as to the pension rights of those people, whatever the Secretary of State says. He must come clean and explain what will happen about pension rights, because his answers on those points in his first statement were extremely unsatisfactory.
  I suspect that it was a slip of the tongue when the Secretary of State said that Mercury would provide a service for all. When questioned, he quickly backpedalled and said that he meant to say that it would be a measuring stick and an experiment. Mercury will not be a national network. The Secretary of State knows that it will not and never will be. Is not the truth about the duopoly of Mercury and BT that the only people who will benefit will be shareholders in Mercury and some of the customers in metropolitan areas?
  The Secretary of State then did a quick gallop through some of the problem social areas — to which I shall return—and ended his peroration by saying that the Bill will give new rights to customers and a bright future for employees. I doubt both of those forecasts. The Bill, in seeking to privatise British Telecom, will give the worst of all possible worlds. It will not end the monopoly, because that was to some extent ended by the British Telecommunications Act 1981. It will not release British Telecom from the influence or control of the Secretary of State, but it will take away real public accountability and

  89
  responsibility from the Secretary of State and, most crucially, from the House. In short, after the Bill is enacted, British Telecom will not be a proper private company and it will no longer provide a proper public service. The loser in this vicious circle will be the consumer — once more sacrificed to the thoughtless dogma of Conservative Members.
  The Bill is not only wrong in denying and limiting public access to an accountable public telephone communications system but seriously less than competent in pursuing and enacting even its own very dubious ends. This incompetence, as hon. Members have said, stems from two omissions, only one of which has been mentioned during the debate—the lack of a licence—but most crucially the lack of a published memorandum and articles of association for the new company.
  I welcome the Secretary of State's assurance that the licence will be published before the Committee stage, but will the articles of association be published? Although I am new to the House, I understand that the Government did much the same on Second Reading last time and, indeed, said the same thing four times in Committee. Why is the licence not published today? Like the hon. Member for Truro, I assume that the licence will be amendable and debatable, but, even so, our debate today is rendered almost meaningless without it. Whenever hon. Members have sought to scrutinise the clause to determine its exact meaning, to probe for a likely effect of what it will mean, the Bill falls apart in their hands. They find nothing. It is strange, to say the least, that the one chance the House has to debate the Bill in principle has to be taken in such inadequate and unsatisfactory circumstances.
  In the absence of the licence, I join other hon. Members in asking the Secretary of State some crucial questions which I hope will be transferred to him when the Minister replies. How will the consumer's interest be protected by Oftel and the new Director General of Telecommunications under clauses 45 and 49? Why is the Post Office Users National Council being abolished rather than strengthened? How will the director general represent consumers and the company, police licences and advise the Minister? Clause 45 says that he will do this
  "so far as it appears to him practicable from time to time".
  With those split loyalties, I doubt whether it will be practicable for him very often. Where shall we find this paragon of virtue, this Solomon who will deal with these different, conflicting interests? Surely the Government do not intend Mr. MacGregor to take on this task as well.
  In clause 3, how will British Telecom ensure equality of service and equality of costs to rural areas? Many Members have asked this question but have not received a reasonable answer because clause 3 is so open to interpretation. Such services do cost more. Will rural subscribers have to pay more? To what extent will British Telecom cross-subsidise to protect minority rural interests? If not at all, it will be grossly unfair. If considerably, what is the purpose of privatisation? How will the director general regulate profits?
  The Secretary of State says that it is all in the Bill. I can find nothing in the Bill that adequately reflects the concern of the Littlechild report and its recommendation for the RPI minus x formula. Presumably, this will be covered by the licence, but we shall have to wait until October to see that.
  Apart from those questions, I should like briefly to consider two specific areas — telephone boxes and
  90
  trainee technician apprentices. There are 77,000 telephone boxes in the United Kingdom, which lose £75 million a year. Each one has to take £2,000 a year to break even. A privatised British Telecom seeking profit for shareholders will not want to lose money in that way, much less invest in telephone boxes that have been vandalised. How many will go, and which? Presumably not those in main-line stations and airports. Those on council estates and in deprived inner city areas, just the areas which need them most, will go. Will the Minister explain exactly what the policy on that will be?
  Will he also say what the effect of privatisation will be on trainee technician apprentices? Each TTA costs BT £20,000 to train. Since 1981 — since the threat of privatisation and a squeeze on staff — the number of TTAs has been run down and, when qualified, they have not been used properly. In my area of Stoke-on-Trent, TO work can be found for only two of the 24 TTAs who have qualified this year. Those trainees represent £480,000 of training investment, yet at present four of them are working in the stores, two are cleaning up and nine are unplaced. What a waste of investment and skill. Presumably that is a foretaste of what a privatised BT will be like. The conclusion will be drawn that technician apprentices need not be trained and the organisation need have no responsibility for the future skills of the industry.
  The Bill is wrong because BT is a basic public utility, an organisation which involves the freedom of speech and communication. It cannot just be sold off without constraint. That is the weakness at the heart of the Bill and its fundamental paradox. The Government know it, and many Conservative Members know it.
  Before proceeding, I must apologise to the hon. Member for Kingswood (Mr. Hayward). Being new to the House, I was not expecting so soon to have to congratulate another new hon. Member on making his maiden speech. I congratulate him on his lucid and interesting speech. In his concern for the disabled, bearing in mind his medical history, he recognises that there are problems of social responsibility in what we are debating. His speech did him great credit and showed that he will bring a genuine feeling of social concern to his future contributions, to which I look forward.
  The hon. Member for Kingswood illustrated the fundamental weakness and paradox at the heart of the Bill. The Government have been reluctant to publish the licence, which is crucial to our consideration of the measure, because without it we can only say what is likely to happen. It is likely that the public will pay larger telephone bills for a worse service, that rural areas will suffer, that the number of telephone boxes will decline, that directory inquiries will cost more, that jobs will go abroad, that BT employees' pensions will suffer, that investment in training and new technology will decline and that we will buy technical innovation from abroad because, for a privatised company, it is cheaper like that in the short run.
  In 1911, when a public nationalised telephone system was introduced in the House—almost 72 years to the day — on Second Reading, Herbert Samuel, the then Postmaster-General, said:
  "The Post Office telephone service is a public service for the use of the community … there are many conditions which apply to a public service which could not apply to a service worked by a company for private profit. I certainly should not be prepared to ask the House to depart by legislation … from

  91
  the policy which has been adopted … with the approval, I may add, of both sides of the House."—[Official Report, 14 July 1911; Vol. XXVIII, c. 643.]
  Where are those fine aspirations on the Conservative Benches today? Where is the concern that was shown for the people?
  The Opposition will oppose the Bill in every way possible in every clause. The Government may force the vote and impose the guillotine, but they will lose the argument. Indeed, it is clear from today's debate that they have already lost it. Certain aspects we can and will amend in Committee. Those arguments we will prosecute vigorously then, so that Ministers will have to be better prepared than they appear to be today.
  We will not be able to change the principle of the Bill. That principle is that, for short-term financial expediency, the Government are prepared to sell off the huge public assets of a public utility that is fundamental to free speech and communication. We in the Labour party do not believe that is right, and we shall expose both the folly and incompetence of that in every way open to us.
  8.55 pm
  Mr. Michael Forsyth: It has been obvious that for many hon. Members tonight's discussion is a rerun of an almost familiar classic, albiet with some of the leading cast in new roles. For me it is rather different. I was not in this place on 29 November 1982 for the Second Reading of the previous Telecommunications Bill and I was not here for the detailed debates which took place in Committee.
  My experience of the telecommunications industry, as a business man and a private individual, seems to be very different from that of many Opposition Members. It is from that experience that I derive my commitment to replace the monopoly that British Telecom has endured with competitive private enterprise. The hon. Member for Falkirk, East (Mr. Ewing) spoke about charges being made for telephone numbers to be supplied in Chile. That seems to be the reality of the black market experience of far too many of my business colleagues.
  The new constituency of Stirling, which I have the honour to represent, is not entirely unknown to the House. Its district council affairs have had to be debated in this place in the past, and I regret that they will have to be discussed once again on Thursday. It is a constituency of great contrasts — and I do not refer to the obvious contrast of a Conservative Member representing an area which has one of Scotland's most Left-wing and extravagant councils.
  The constituency stretches from the north at Collin and Tyndrum and Strathblane in the south, and from the tidal reaches of the Forth to the bonny banks of Loch Lomond, an area of about 800 square miles. It includes the university town and commercial centre of historic Stirling and the old boroughs of Callendar, Dunblane, and Bridge of Allan. From the great rural areas drawn from the former counties of Stirling and Perth, I have a constituency of outstanding natural beauty in which tourism, agriculture, commerce and new high technology-based industries are playing an increasing role. In short, it is a constituency which provides exactly that range of demands which the new private enterprise British Telecom will have to meet. It is a constituency in which industry and commerce
  92
  require effective speech and telex communications with Europe and the rest of the world and within the United Kingdom, as well as data handling and processing.
  A rural area needs effective communications to minimise its isolation, and services that are needed especially in emergencies. Despite the smears and innuendos of the Bill's opponents, I am sure that my right hon. Friend will ensure that in bringing private enterprise into the communications network he will make provision for meeting social costs within the licensing requirements and the fears that have been expressed about call boxes and the cost of connection in rural areas.
  It is because I believe that private enterprise will more effectively meet those demands in my constituency that I speak enthusiastically in favour of the Bill. The arguments do not need to be repeated and I suspect that if they were I should be called out of order. Private enterprise brings a force to bear on companies through competition that makes them more efficient and keeps prices down. Competition, not private enterprise, is at the heart of the debate. I hope that the many speeches which have been made will alert the Minister to the grave dangers of substituting a public monopoly with a private one.
  The Government's decision during the last Parliament to license Mercury showed their commitment to competition, as do the provisions of part II of the Bill for further licensing, provided those powers are used imaginatively to create the maximum possible innovative competition and not to restrict it, as has been so often the case. I hope that the Minister will reconsider the commitment not to issue licences that was made on Second Reading of the previous Telecommunications Bill during the last Parliament. I hope that more licences will be issued and that that commitment will be withdrawn.
  As part V of the Bill now stands, British Telecom will be transformed lock, stock and barrel into one company with a dominant position. If it had arisen in any other way, it would almost certainly have attracted the unfavourable attention of the Monopolies and Mergers Commission. I wonder whether, even if we proceed along the lines that have been suggested, it might not create a difficulty with our obligations under the treaty of Rome. The City editor of the Daily Mail asked on 23 June:
  "Would it be any less of a monopoly because half the shares had been sold? Do we have to keep British Telecom in its present shape and size?"
  He is not alone in asking such questions.
  Some people have suggested the organisation of local services into separate locally owned companies working within the national network. An example that is often quoted is the municipal service in Hull. Others have suggested hiving off the specialist services which make up British Telecom enterprises. I ask the Government —clearly this is not the place to discuss detailed provisions —to consider part V carefully before British Telecom is brought to the market. The experience in the United States, with the break-up of the AT and T empire and the reorganisation of the Bell telephone network, might provide useful evidence.
  So far we have considered only the benefits of competition as they affect the consumer, but British Telecom is also virtually a monopoly buyer of telecommunications equipment. In the past, this has led, to put it mildly, to unhappy relations with suppliers, or at least would-be suppliers. This could easily recur if the enterprise and innovation which is important to these

  93
  support services were stifled in favour of company-inspired regulation and conformity. Only with a wider range of purchasers for products will telecommunications manufacturers be encouraged to recapture their share of overseas markets.
  I add only a few words, lest it be thought that I have forgotten my traditional duty as a new Member to pay tribute to my predecessors. My constituency is carved out of three long-standing ones, all of which have disappeared. All the previous Members, such is their quality — the hon. Members for Falkirk, East (Mr. Ewing) and for Falkirk, West (Mr. Canavan) and my hon. and learned Friend the Member for Perth and Kinross (Mr. Fairbairn)— have returned to the House to play a full and prominent part. Therefore, it would be redundant of me to sing their praises.
  Mr. Denis Canavan: Why?
  Mr. Forsyth: Their performance is a testimony to that. I look forward to matching their records in dealing with constituency matters in the years to come.
  9.4 pm
  Dr. John Cunningham: We could all be forgiven if, during the debate, we thought that we were experiencing a problem suffered by the BBC and ITV at this time of the year—too many old movies. The debate has had many of the speakers on the previous Bill, both on the Opposition and Government side, but it has been leavened by a significant number of maiden speakers on the Conservative Benches. When I realised there were so many, I became worried because I thought that I would not have sufficient opportunity to attack and criticise what had been said by Conservative Members. I reflected upon the Secretary of State's speech and felt then that I was safe, for the duration of my comments at least.
  The hon. Members for Aberdeen, South (Mr. Malone), Rochford (Dr. Clark), Swindon (Mr. Coombs), Bolton, North-East (Mr. Thurnham), Kingswood (Mr. Hayward) and Stirling (Mr. Forsyth) addressed the House with fluency, strength and confidence. I am s ire that I did not reflect such qualities when I made my maiden speech in 1970. They all made an impressive first contribution to the proceedings of the House. I look forward to hearing them again throughout their parliamentary careers, although I cannot wish them long parliamentary careers.
  The hon. Member for Aberdeen, South comes from the granite city and showed a touch of internal granite, a certain strength, which can come only from fighting five constituencies. I compliment him on what he said.
  The points made by right hon. and hon. Gentlemen fit what the Opposition regard as the broad arguments about the privatisation of British Telecom. Those arguments have not been particularly well advanced or sustained by Conservative Members. The hon. Member for Truro (Mr. Penhaligon) said that almost everyone had entered some qualification or caveat to their welcome to the Bill. The hon. Member for Stirling is perhaps an exception to that, but I believe that he is the only one.
  Arguments have been advanced that, by definition, the private sector will be more effective, and more profitable; it will give consumers a better choice; it will prove more effective in introducing new technology; and by returning shares to individuals, the spread of ownership will be wide. Throughout all those arguments, the Government
  94
  did not put forward the vestige of an argument showing that there was a need for an industrial strategy for information technology and telecommunications. There have been no arguments about the massive opportunities presented to us as a nation, which we have the duty and responsibility to grasp, push forward, develop and benefit from in the national interest.
  On the contrary, it was argued that all these matters, important as they might be, are best left to the private sector to determine and in the end it will all come out right. In general, those arguments are simply the empty rhetoric that each age-old Tory has produced in his attack on the public sector. They have no relevance to BT, its record and the future of this important industry. The Thatcher Government have mounted a vicious attack on public sector industries and services throughout their time in office and intend, apparently, to continue to do so.
  I and my right hon. and hon. Friends say that the criticisms that we have heard from Government supporters this evening do not stand up to the test. Far from crowding out the private sector, the public sector has been one of its major customers. The public sector has bought about £13 billion worth of manufactured goods each year from the private sector and has made massive investments in the private sector manufacturing industry. The cuts in Government expenditure and changes in Government policy that have produced a fall in manufacturing output of 20 per cent. since the Government came into office have done far more damage to the private sector than anything that the nationalised industries have done.
  The nationalised industries are and have been subject to regular programmes of investigation and scrutiny by the Monopolies and Mergers Commission and every big nationalised industry has its consumer watchdog, which in the case of BT is the Post Office Users National Council. By definition, private companies are not accountable, and are not subject to checks and balances or to the scrutiny of Select Committees as our public sector industries have always been.
  The Secretary of State argued that privatisation would spread share ownership, and I believe that he quoted Amersham International. Some 50 million shares at £1·42 each were sold and, as the price of each share soared to £1·90, many shareholders immediately made a quick killing, selling their shares to the big institutions. Now, over 70 per cent. of those shares are owned by big institutions and individuals, and the story is the same in British Aerospace.
  Mr. James Hill rose—
  Dr. Cunningham: I shall not give way, especially as the hon. Gentleman has not been here for the debate.
  As my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher) pointed out, the argument that privatisation returns control of the industry to the public is not borne out by what has happened over the past few years.
  Mr. Parkinson: I did not mention Amersham International. Perhaps the hon. Gentleman would like to talk about the National Freight Corporation and what has happened in it, and how many people there have held on to their shares. I did not mention the company about which he spoke, so perhaps he could comment on the one that I talked about, where over 10,000 employees now have shares in the business.
  Dr. Cunningham: I do not deny that employees have bought and hold shares, and it is the same in British Aerospace. However, the Secretary of State's follow-up argument, that that gives these people control or say in these industries, is a fallacy. They own only a tiny percentage of the shares, and that is what is false about his argument. What is more, in almost all cases, they own a declining percentage of the shares.
  Mr. Hill rose—
  Dr. Cunningham: I shall not give way.
  Far from helping the key industries, privatisation has disrupted development plans in many key industrial sectors and now threatens the major development plans under way in BT.
  Mr. Hill rose—
  Dr. Cunningham: I am not giving way. The hon. Gentleman has been absent throughout the debate. He has not been here most of the time that I have been here.
  Mr. Hill: On a point of order, Mr. Speaker. I was here for the three opening speeches.
  Mr. Speaker: That is not a point of order.
  Dr. Cunningham: I regard the behaviour of the hon. Member for Southampton, Test (Mr. Hill) as an abuse of the House.
  Mr. Hill: The hon. Gentleman is rattled.
  Dr. Cunningham: On the contrary, whatever I may get rattled about, I can assure the hon. Gentleman that it is not about him.
  The Bill was hammered in a leader in The Times today, which said:
  "This bill gives a totally inadequate idea of how competition can be genuinely encouraged in the field of telecommunications and how such a vast company as the privatised British Telecom could be controlled."
  That sums up in a nutshell what the hon. Member for Aldridge —Brownhills (Mr. Shepherd) said today and throughout the deliberations on the previous Bill. A similar argument was made by the hon. Member for Leominster (Mr. Temple-Morris), and it is in an argument with which we agree.
  The effect of the Bill is to create a private monopoly out of a public monopoly. That may not be the Government's intention, but that is what will happen. We do not have to look far for other distinguished critics. Lord Weinstock said:
  "I am not clear what point there is in privatising a company which is by its nature a monopoly. I don't see how you can have anything other than a monopoly running a national communication service."
  The criticisms are not isolated. They have been made from both sides of the House and are widespread in the private sector.
  The comments of Conservative Members about the performance of public industry have hinged around their argument that, however good that performance, the private sector, by definition, is better. Such comments are usually based on invalid comparisons. The public sector has different goals, duties and responsibilities from the private sector.
  Let us take the example of productivity. Recently, it has been much higher in many public sector industries than in the private manufacturing sector. The Blue Book shows that output per worker was 20 to 50 per cent. higher in
  96
  public corporations than in private sector companies during the 1970s and was 30 per cent. higher in 1981. That is another argument that refutes some of the assertions of Conservative Members.
  I shall take up some of the questions that have been asked in the debate and I hope that the Minister for Information Technology will answer them. A number of hon. Members asked about provision for disabled people. In Committee on the previous Bill, the Minister for Information Technology assured us that consideration would be given to the provision of inductive coupling for the hard of hearing. We were told that meetings would be arranged. What is happening about that? What is the Government's present view and what decisions have been taken? The hon. Member for Kingswood and my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) mentioned that subject, which is of pressing importance to the disabled.
  The Secretary of State talked about Mercury offering choice for all. That was a fundamental error. He may have been displaying a misunderstanding of what is happening, but his claim was wrong. Mercury does not aim to provide a national network. It is an exercise in creaming off the traffic from the profitable routes and leaving the less profitable areas, the rural areas—the services that lose money—to the tender mercies of BT. The major quango that the Government are creating—Oftel—will have as one of its functions the responsibility to force companies to act commercially. To see that they act commercially, there will be unenviable pressure on the loss-making services, as many hon. Members said. The likelihood is that there will be threats to existing services and increasing costs to consumers who enjoy—if that is the right word —those services. There is likely to be a dual standard in the level and provision of services in different parts of the United Kingdom.
  My right hon. Friend the Member for Salford, East (Mr. Orme) said that it was a good target to have a telephone in every house. I have sometimes thought that it would be nice to have a house without a telephone. No doubt Conservative Members will share my view on that. The Government are about to make that more of a possibility, because people will not be able to afford telephones, as has already happened in a celebrated case in my constituency, which was discussed on the previous Bill. No doubt that example will be duplicated in rural areas, where, as my hon. Friend the Member for Newcastle-under-Lyme and the hon. Member for Truro said, not only for the cost of provision of telephones — my constituent was quoted £5,000 for the provision of a telephone—but for the maintenance and repair — the right hon. Member for Western Isles (Mr. Stewart) made the same point—we have no guarantees or assurances. There is nothing about who will pay for the repairs of damaged lines as a result of storms and bad weather. We do not know what will be the formula for calculating the cost of such bills regardless of who has to pay them.
  It has been argued widely on the Government Benches that BT as a corporation has a bad record. The reverse is the truth. BT has a good record. As a public corporation, it has not only improved services, operated profitably and increased available services, but it has done so with little increase in the number of people employed. The profitability record of BT compares favourably with that of any private sector organisation. As a publicly owned

  97
  corporation, it has been fully accountable to the community for its activities. The public have statutory rights to consumer watchdogs.
  I am not convinced that the Director General of Telecommunications and Oftel, which is almost certain to be based in London and is unlikely to have regional arms, as POUNC did, will be anything like an effective substitute. The reality is that Oftel and the director general will have to act as gamekeeper and poacher. The director general will have to oversee competition and the introduction of more competition. At the same time, he will have the remit to protect the interests of the consumer. Those two things are in direct and fundamental conflict.
  Mr. Parkinson: They are the same.
  Dr. Cunningham: I must tell the Secretary of State that many consumers and small business men will not see those two things as the same.
  One of the myths that things are better and different elsewhere is barely substantiated. In the Federal Republic of Germany, telecommunications are organised as a monopoly with no private element. Proposals for privatisation are not expected to be introduced there. The service will remain as a major monopoly covering the whole country. The same is true of France. Telecommunications is organised as a public corporation with a director general responsible to the Government and Parliament.
  France's telecommunications industry is a success. From being last among the developed nations seven years ago, it is now in the same league as the world's other major industrial economies. That is no accident, because successive Administrations in France have pursued a strategy for investment in the industry which has led directly to that success. Even now in Japan NTT is a public corporation monopoly. Although there are discussions about privatisation, the Government intend to maintain in 100 per cent. Government control the key core element of the telecommunications system in Japan.
  It is only in the United States of America, purely on the basis of anti-trust law operation against AT and T, that anything remotely like what is proposed here is taking place, and, far from it bringing benefits to rural consumers, the reverse is true.
  The reality is that BT's record compares at least as favourably as AT and T's. But the irony of the argument of Government supporters about private industry in America is that it is the biggest monopoly telecommunications operation in the world. It has succeeded on the basis of the policies being pursued by BT and it has succeeded as a total and absolute monopoly.
  People in the Congress concerned about the potential breakdown in the national telecommunications network and about the possibility of rising prices in rural areas are asking whether they are going along the right road. The 43rd report by the committee on Government operations in 1982 raises some of the difficulties resulting from the break-up of the monopoly of the telecommunications industry in the United States of America.
  As recently as last week, the New York Times was pointing out that arguments in the court were still going on and that a federal judge said that he would give final approval to the break-up proceedings only if there were guarantees that protected services to rural communities in the United States of America. It is taking the courts in
  98
  America to ensure that rural consumers are given the same level of service as elsewhere, and we are likely to see similar battles here if these proposals go ahead.
  Hon. Members who have participated in this debate have, with varying degrees of support for the Bill, addressed themselves to all these issues. I would have been most unhappy to be in the position of the Secretary of State for Trade and Industry or his hon. Friend the Minister for Information Technology, first announcing what was their most important and likely to be their major industrial measure in this Parliament—they made a similar claim in the last Parliament — and then hearing a long succession of my hon. Friends criticising in depth and at length major aspects of their proposals. That is what has been happening throughout the afternoon, and it is not surprising.
  I said just now that BT's record compared well with anyone's anywhere. Its prices have been falling in real terms over the past 10 years, and recent price increases have reflected this Government's pricing policy. We believe that the end of cross-subsidisation means that residential consumers will again be badly hit. By international standards BT's prices are also very reasonable. Privatisation will put up prices to the residential consumer and will probably end standard pricing throughout the United Kingdom. Local low users of telephones will be threatened. In America, and, to give a further international comparison, in Australia, resistance is growing rapidly to the ending of cross-subsidisation to help domestic consumers in particular.
  Of all the arguments that have been adduced in support of the Bill perhaps the one which shows the greatest hypocrisy is that in relation to the financing of BT. Labour Members have heard lectures ad nauseam from the Prime Minister about the evils of borrowing, about living within one's means and about running a business like a family budget. Now we are told that one of the most important arguments for privatising one of our key industrial corporations is to set it free so that it can borrow more. There can be no greater hypocrisy by the Government than to advance that argument in favour of the Bill.
  In an intervention, the Minister said that it was impossible to allow BT to borrow more simply by taking it out of the PSBR. He must have forgotten the previous Government's experience with the British National Oil Corporation and the Central Electricity Generating Board, both of which were able to borrow money on the open market. BNOC was given a triple-A rating on the New York money market. BT has assets three times as large as those of BNOC. There is no evidence to suggest that BT would be unable to borrow adequate finances for its development outside the PSBR.
  I said at the opening of my remarks that there was no vestige of a national strategy in anything that the Secretary of State had to say to the House today. Conservative Members have tried but failed to justify their dogma with bogus claims about the superiority of the private sector At best that is a self-deception and at worst it is a feeble attempt to justify the unjustifiable.
  On Second Reading in the previous Parliament on 29 November 1982 the Minister, who is now the Secretary of State for the Environment, questioned the strength of Labour feelings on, and the opposition to, the Bill. He and his hon. Friends lived to regret those remarks. My hon. Friend the Member for Newcastle-under-Lyme said that he

  99
  hoped that the Opposition Front Bench would show the same determination, ingenuity and energy in opposing the Bill as we did then. I assure him that we shall.
  Conservative Members who smile now about the prospect of the Bill going into Committee may live, like their right hon. Friend the Secretary of State for the Environment, to regret it. We shall apply every Opposition tactic in our power to prevent it reaching the statute book.
  9.33 pm
  The Minister for Information Technology (Mr. Kenneth Baker): There were several occasions during the debate when I had the feeling that I had been here before. On hearing the hon. Member for Copeland (Dr. Cunningham) I felt that we could have opened our speeches tonight with the words, "As I was saying before I was so rudely interrupted."
  The Bill's journey has been long and we are setting out on the journey again. On this occasion we heard many new voices. I congratulate all the hon. Members who spoke for the first time today. My hon. Friend the Member for Aberdeen, South (Mr. Malone) reminded us that he had fought five elections before getting here. During those elections, two opponents were leaders of other parties. One has resigned his leadership and the other is now in limbo. Some Opposition Members must therefore be pleased that my hon. Friend has found a safe berth.
  My hon. Friend the Member for Aberdeen, South, succeeds our old colleague Iain Sproat, who is much missed in the House. [Interruption.] He is missed more by some than by others, but the House is the poorer for the lack of his vivid and lively personality. I know that I speak for all my right hon. and hon. Friends when I say that I hope that he comes back to the House soon.
  My hon. Friend the Member for Swindon (Mr. Coombs), who paid a generous tribute to David Stoddart, told the House that he worked for British Telecom as a sales executive. I welcome his presence on our Benches. Several Opposition Members spent their working lives in telecommunications before coming to the House, and I welcome the appearance of one of BT's managers. The last time that Swindon was represented by a Conservative, we did not hold the seat for long. Having heard my hon. Friend's speech, I know that he will be with us for a long time.
  I pay tribute to my hon. Friend the Member for Rochford (Dr. Clark) who spoke about his constituency and of the previous Members who represented the new constituency. As one is our Chief Whip, to whom my hon. Friend paid generous tribute, I think that his political future is assured. My hon. Friend wanted further assurances about the emergency services, with which I shall deal later.
  My hon. Friend the Member for Bolton, North-East (Mr. Thurnham), who paid a generous tribute to Ann Taylor, spoke with practical experience of small business men. He was keen to ensure that, whatever arrangements are made for telecommunications, the services for the small business man are looked after. I suspect that his business is not too small since he said that his telephone bill was in six figures. None the less, my hon. Friend said strongly that choice was the key. He stressed the importance of choice in equipment and service which competition, liberalisation and privatisation will provide.
  100
  My hon. Friend the Member for Kingswood (Mr. Hayward) paid tribute to the two former Members who formerly represented his new constituency — Mr. Wedgwood Benn and Mr. Arthur Palmer. He said that his seat is in part of the United Kingdom's silicon valley, the electronics industry's belt, which stretches from the west of London along the M4, over the Bristol channel and into south Wales. He recognised the opportunity not only in telecommunications but in the whole area of information technology. Collectively it is the fastest growing area of economic activity in Britain. If those industries do not grow, the prospects are bleak. My hon. Friend the Member for Kingswood also said that he had been blind. I shall say something later about the assistance that the Bill will give to disabled people.
  I am particularly glad to welcome my hon. Friend the Member for Stirling (Mr. Forsyth) because he has been the councillor for the ward in Pimlico in which I live. He has brought great blessings to Pimlico and I am sure that he will bring great blessings to Stirling. He spoke as a business man. He said that he wanted an assurance that the social costs of telecommunications will be met, not sacrificed, by our proposals.
  Reference to the disabled was made by my hon. Friend the Member for Kingswood and by the hon. Member for Copeland. I believe that they were satisfied by my right hon. Friend's replies about the assistance for the blind given in clause 81. Grants will be provided—paid for by the Government—to modify the new equipment to enable blind operators to use it. This is necessary because the new digital and electronic equipment will not incorporate the gadgets that at present enable blind operators to use telephone equipment.
  The organisations representing the deaf want what are called acoustic couplers to be fitted compulsorily to the new telephones. Because of technical advances, modern telephones do not generate stray magnetism, and it would be cumbersome to fit special apparatus to generate such magnetism. There are alternatives to acoustic couplers, one of them being a lightweight attachment which a hearing-impaired person could carry in his pocket and which would clip on to the earpiece of any telephone.
  Frankly, we do not know the correct way forward, but we are determined to look after the interests of those who have a hearing impairment. Officials in my Department will shortly meet the Royal National Institute for the Deaf to explore the issues. My officials will suggest a research project to be funded by the Department to identify the options and the best way forward. We want the best expert advice on this question, including, of course, the advice of the RNID, just as we need the advice of the manufacturers. We want to find a satisfactory solution.
  The right hon. Member for Western Isles (Mr. Stewart), my hon. Friend the Member for Rochford and the hon. Member for Truro (Mr. Penhaligon) asked whether the rural and emergency services would be damaged or impaired when BT became private. For the first time in any statute we have placed an obligation on the Secretary of State and the director general of Oftel to take account of the needs of specific interests — the disabled, rural and remote areas, the provision of telephone kiosks and emergency services. That appears in clause 3. In existing legislation, how and where services were provided was for BT's judgment alone. We have now

  101
  placed obligations and duties upon the Secretary of State and the director general which they will be obliged to fulfil.
  We have also said that people who have a telephone service now will continue to have one — provided, of course, that they pay for it. We have extended that to cover a range of telecommunications services. We have given clear assurances that the network of telephone kiosks will be retained.
  The right hon. Member for Western Isles made the legitimate point that the existence of a telephone kiosk is important for many remote communities. If the House rises on the day that my right hon. Friend the Leader of the House has suggested, I hope to be on holiday with my family in the right hon. Gentleman's constituency in a fortnight's time. There are some very remote areas in that constituency, and the traveller — as well as the local community — is comforted to know that a telephone kiosk is there in case he breaks down or gets lost.—[Interruption.] I can think of no constituency in which I would prefer to get lost than the right hon. Gentleman's. I am not persuaded by the argument that in assessing whether a telephone kiosk should remain open, one should just consider its takings. Many people use the kiosks to make reverse charge calls therefore, I hope that I have reassured those hon. Members who expressed anxiety about that.
  I should remind the House that the Bill makes substantial improvements in the protection of consumer interests.
  Mr. Roland Boyes: This is very boring.
  Mr. Baker: Hang on.
  The hon. Member for Copeland had a constituent who wanted a telephone in a remote area, for which the charge was £5,000. At present that disgruntled consumer can only go to his Member of Parliament or to POUNC. In that particular case, neither the Member of Parliament nor POUNC could do anything. I think that the hon. Gentleman's constituent moved before the telephone was put in, but in future anyone who is so disgruntled will be able to appeal to the director general of Oftel who can consider the complaint and assess whether the charge is reasonable. He could take alternative quotes and if he found a cheaper quote he could instruct that the service should be provided at the lower cost.
  This Bill generally increases substantially the interests of the consumer—[Interruption.] The director general will have powers of direction, so when consumers complain he will be able to issue directions to either BT or one of the other telecommunications operators to put right the error. No other consumer body in the country has that power and authority.
  My hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) asked me a technical question that greatly concerned him during the previous Committee stage, concerning the enforceability of licences of prejudiced competitors by action in damages. The Bill, as reintroduced, now explicitly provides in clause 17(4) that a breach of a licence enforcement order is actionable by any person who may be affected by the contravention or by an action for breach of statutory duty.
  One question that has been raised several times tonight concerns the difference between liberalisation and
  102
  competition on the one hand and privatisation on the other. It has been asked why we should convert a public monopoly into a private monopoly. Over the past two years we have, of course, considered the matter carefully. My right hon. Friend the Secretary of State set out the reasons that led us to reject the arguments for a break-up. BT has been developed over 70 years as a single integrated telecommunications network, which cannot be divided up in any meaningful way. To insist on a break-up would certainly set back the Government's policy for the flotation. It may not necessarily affect the amount that we would expect for flotation, but it would certainly seriously affect the timetable.
  My hon. Friend the Member for Cornwall, North (Mr. Neale) suggested that it would be sensible to retain BT Enterprises — the apparatus company — in the public sector under state control, but to sell off the network. Others have suggested the reverse. They have suggested that we should float BT Enterprises, but keep the network under state monopoly.
  Mr. Neale: I meant that BT enterprises and the 61 regional companies should be kept until they too can be prepared for sale, not that they should he kept permanently.
  Mr. Baker: I appreciate that point. However, many suggestions have been made as to how BT could be carved up if it were to be carved up—[Interruption.] However, I have already said that it is the Government's policy not to do that. BT has been developed as an integrated operation for the past 70 years. The argument about dividing BT rests upon the extent of competition that it already faces. Those who argue for a splitting up of BT underestimate that competition.
  It is not only Mercury that is being given a licence. There has been some comment and criticsm about that company during the debate, yet it has already undertaken £50 million of investment—[Interruption.] Opposition Members may sneer, but it announced further orders today for £8 million of fibre optic cable. All the orders will go to British companies. GEC will have the order for 190 km from London to Bristol, which means jobs in Leyton and Coventry; BICC will have the order for 510 km from London to Birmingham, Leeds and Manchester, which means jobs on Deeside and Merseyside; and Plessey will have the opto-electronic equipment subcontract, which means jobs in Beeston in Nottinghamshire. Those jobs would not have been created without Mercury.
  I am glad to calm some of the anxieties of Opposition Members that the new liberalised-privatised era will mean jobs in America or Japan. That is not the case, and I have proved with solid evidence that jobs will be created in Britain.
  Mr. Dave Nellist rose—
  Mr. Baker: I shall not give way to an hon. Member who has not attended the debate.
  Many others beside Mercury have been given opportunities. We have given two licences for the radio cellular network and it is estimated that that will create 10,000 jobs by 1990. We shall be granting 12 cable licences later this year and many hundreds during the next two or three years. Those licences will be for alternative telecommunications networks. That is additional competition.

  103
  Several hon. Members have shown impatience at the speed at which competition is being generated. They are no more impatient that I am. Since 1980 we have been pushing for more and more competition in, for example, apparatus. Some 150 items of apparatus have been approved and are offered for sale. They can be made by individual manufacturers and sold direct to the public. Whole areas of activity have been taken out of monopoly supply—for example, telex printers. My hon. Friend the Member for Cornwall, North asked me about apparatus. He is involved with a company that will be a direct beneficiary of the programme. Since we have liberalised telex machines, prices have come down by 30 per cent. to 40 per cent., and there is a greater choice.
  The Bill will fulfil our main objective, which is the provision of up-to-date, efficient and cheap telecommunications. That can be achieved only in a competitive market — not one dominated by state monopoly. The Bill will help to create such a market. It will allow us to end the prime instrument monopoly of BT. It is in the long-term interest of BT, its employees, it customers and all who work in the telecommunications industry.
  There has been talk tonight to the effect that we are selling a public asset for private profit. [HON. MEMBERS: "Yes."] I have a good gallery tonight. Such a concept is absurd. BT will remain a national asset. It will not be any less a national asset because it is widely owned rather than being narrowly owned. Instead of one shareholder—the state—there will be tens of thousands of shareholder—members of the public. Its effective ownership will become broader, not narrower. Control is better exercised by people holding shares in BT than by politicians or bureaucrats.
  The Bill completes the revolution in telecommunications which was started in July 1980. The revolution aimed to liberalise the British telecommunications market and to free the monopoly control. Opposition Members who continue to argue for monopoly control argue for exclusive privilege, and they must justify that. If there has to be monopoly control and exclusive privilege — public control—why has the BT market done so badly over the past 25 years? Twenty five years ago, British companies provided 25 per cent. of the world's telecommunications equipment; now we provide about 5 per cent. One reason is that the arrangements between BT and its suppliers were too cosy, and the monopoly stifled competition and originality. The Government have decided to end that.
  I turn now to the unions that work in BT. It is unfair to exclude market entry from other workers, unions and enterprises, all of whom are capable of exploiting the new technology to serve the community better. Those who wish to retain BT's monopoly must persuade the House and the country that it is better to retain BT's exclusive privilege, and the exclusive privilege of the Post Office Engineering Union, and, to a lesser extent, the Union of Communication Workers, to be the only workers privileged to work in BT. The Government find that concept unacceptable. We want to create opportunities for more workers to work in BT and telecommunications generally. As several of my hon. Friends said, the job opportunities that will flow from our proposals will be greater than those under the present arrangement.
  104
  I have dealt with the benefits to domestic industry. Already British companies are coming forward with new equipment which would not have been designed, made or developed, were it not for the Bill.
  Although the spokesman for the Liberal-SDP alliance, the hon. Member for Stockton, South (Mr. Wrigglesworth), contributed to the debate, we are no clearer about his party's policy. Its manifesto had exactly 49 words about innovation and technology, and, search as I might, I could find nothing else about it. Forty-nine words do not add up to a policy. They form a mere whisper and today we have had only a repeat of that whisper.
  The spokesman for the Liberal party, the hon. Member for Truro, set out the party's policy, which, apart from defending the rural areas, was against the Bill. In the past, the Liberal party has been in favour of wider share ownership. Tonight, Liberal Members have an opportunity to vote for a Bill that will widen share ownership considerably. As is so often the case, the Liberal party is in favour of things in theory, but when it comes to reality it baulks, and tonight it appears that it will once again reject a great opportunity.
  The Labour party's view is clear. The BT monopoly must be retained, cable must be thrown in for good measure and Mercury must be nationalised. The one small snag about that policy is that the country dislikes it, does not want it and has rejected it. The Labour party has not noticed that. It has stumbled upon the truth and picked itself up as if nothing has happened. The Labour party is regrouping on the battlefield where it has just been decisively defeated. Its weapons are the same and the issues are the same. The banners under which it marches, state monopoly and nationalisation, will be the same and the defeat will be the same.
  The market and the opportunity are so great that we must seize them. The market can develop to the benefit of Britain as a whole only if it is driven forward by the forces of competition, and not dominated, destroyed and stultified by monopoly.
  Question put, That the Bill be now read a Second time:—
  The House divided: Ayes 356, Noes 219.

  Division No. 25]

  [10.00 pm

  AYES

  Adley, Robert

  Body, Richard

  Alexander, Richard

  Bonsor, Sir Nicholas

  Alison, Rt Hon Michael

  Bottomley, Peter

  Ancram, Michael

  Bowden, A. (Brighton K'to'n)

  Arnold, Tom

  Bowden, Gerald (Dulwich)

  Ashby, David

  Boyson, Dr Rhodes

  Aspinwall, Jack

  Braine, Sir Bernard

  Atkins, Rt Hon H. (S'thorne)

  Brandon-Bravo, Martin

  Atkins Robert (South Ribble)

  Bright, Graham

  Atkinson, David (B'm'th E)

  Brinton, Tim

  Baker, Kenneth (Mole Valley)

  Brittan, Rt Hon Leon

  Baker, Nicholas (N Dorset)

  Brooke, Hon Peter

  Baldry, Anthony

  Brown, M. (Brigg & Cl'thpes)

  Banks, Robert (Harrogate)

  Browne, John

  Batiste, Spencer

  Bruinvels, Peter

  Beaumont-Dark, Anthony

  Bryan, Sir Paul

  Bellingham, Henry

  Buchanan-Smith, Rt Hon A.

  Bendall, Vivian

  Buck, Sir Antony

  Benyon, William

  Budgen, Nick

  Berry, Hon Anthony

  Bulmer, Esmond

  Best, Keith

  Burt, Alistair

  Bevan, David Gilroy

  Butcher, John

  Biffen, Rt Hon John

  Butterfill, John

  Biggs-Davison, Sir John

  Carlisle, John (N Luton)

  Blackburn, John

  Carlisle, Kenneth (Lincoln)

  Blaker, Rt Hon Peter

  Carttiss, Michael

  105

  Chalker, Mrs Lynda

  Haselhurst, Alan

  Channon, Rt Hon Paul

  Havers, Rt Hon Sir Michael

  Chapman, Sydney

  Hawkins, Sir Paul (SW N'folk)

  Chope, Christopher

  Hawksley, Warren

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

  Hayes, J.

  Clark, Dr Michael (Rochford)

  Hayhoe, Barney

  Clark, Sir W. (Croydon S)

  Hayward, Robert

  Clarke Kenneth (Rushcliffe)

  Heath, Rt Hon Edward

  Clegg, Sir Walter

  Heathcoat-Amory, David

  Cockeram, Eric

  Heddle, John

  Colvin, Michael

  Henderson, Barry

  Conway, Derek

  Heseltine, Ht Hon Michael

  Coombs, Simon

  Hickmet, Richard

  Cope, John

  Hicks, Robert

  Cormack, Patrick

  Higgins, Rt Hon Terence L.

  Corrie, John

  Hill, James

  Couchman, James

  Hirst, Michael

  Cranborne, Viscount

  Hogg, Hon Douglas (Gr'th'm)

  Critchley, Julian

  Holland, Sir Philip (Gedling)

  Crouch, David

  Holt, Richard

  Currie, Mrs Edwina

  Hooson, Tom

  Dickens, Geoffrey

  Hordern, Peter

  Dicks, T.

  Howard, Michael

  Dorrell, Stephen

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

  Douglas-Hamilton, Lord J.

  Howarth, Gerald (Cannock)

  Dover, Denshore

  Howell, Rt Hon D. (G'ldford)

  du Cann, Rt Hon Edward

  Howell, Ralph (N Norfolk)

  Dunn, Robert

  Hubbard-Miles, Peter

  Durant, Tony

  Hunt, David (Wirral)

  Dykes, Hugh

  Hunt, John (Ravensbourne)

  Edwards, Rt Hon N. (P'broke)

  Hunter, Andrew

  Eggar, Tim

  Hurd, Rt Hon Douglas

  Emery, Sir Peter

  Irving, Charles

  Evennett, David

  Jackson, Robert

  Eyre, Reginald

  Jenkin, Rt Hon Patrick

  Fairbairn, Nicholas

  Jessel, Toby

  Fallon, Michael

  Johnson-Smith, Sir Geoffrey

  Farr, John

  Jones, Gwilym (Cardiff N)

  Favell, Anthony

  Jones, Robert (W Herts)

  Fenner, Mrs Peggy

  Joseph, Rt Hon Sir Keith

  Finsberg, Geoffrey

  Kellett-Bowman, Mrs Elaine

  Fletcher, Alexander

  Kershaw, Sir Anthony

  Fookes, Miss Janet

  Key, Robert

  Forman, Nigel

  King, Roger (B'ham N'field)

  Forsyth, Michael (Stirling)

  King, Rt Hon Tom

  Forth, Eric

  Knight, Gregory (Derby N)

  Fowler, Rt Hon Norman

  Knight, Mrs Jill (Edgbaston)

  Fox, Marcus

  Knowles, Michael

  Franks, Cecil

  Knox, David

  Fraser, Rt Hon Sir Hugh

  Lang, Ian

  Freeman, Roger

  Latham, Michael

  Fry, Peter

  Lawler, Geoffrey

  Gale, Roger

  Lawrence, Ivan

  Galley, Roy

  Lawson, Rt Hon Nigel

  Gardiner, George (Reigate)

  Lee, John (pendle)

  Gardner, Sir Edward (Fylde)

  Leigh, Edward (Gainsbor'gh)

  Garel-Jones, Tristan

  Lennox-Boyd, Hon Mark

  Gilmour, Rt Hon Sir Ian

  Lester, Jim

  Glyn, Dr Alan

  Lewis, Sir Kenneth (Stamf'd)

  Goodhart, Sir Philip

  Lightbown, David

  Gorst, John

  Lilley, Peter

  Gow, Ian

  Lloyd, Ian (Havant)

  Gower, Sir Raymond

  Lloyd, Peter, (Fareham)

  Grant, Sir Anthony

  Lord, Michael

  Greenway, Harry

  Luce, Richard

  Gregory, Conal

  Lyell, Nicholas

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

  McCrindle, Robert

  Griffiths, Peter (Portsm'th N)

  McCurley, Mrs Anna

  Grist, Ian

  Macfarlane, Neil

  Ground, Patrick

  MacKay, Andrew (Berkshire)

  Grylls, Michael

  MacKay, John (Argyll & Bute)

  Gummer, John Selwyn

  Macmillan, Rt Hon M.

  Hamilton, Hon A. (Epsom)

  McNair-Wilson, M. (N'bury)

  Hamilton, Neil (Tatton)

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

  Hampson, Dr Keith

  McQuarrie, Albert

  Hanley, Jeremy

  Major, John

  Hannam, John

  Malins, Humfrey

  Hargreaves, Kenneth

  Malone, Gerald

  Harris, David

  Maples, John

  Harvey, Robert

  Marland, Paul

  106

  Marlow, Antony

  Shersby, Michael

  Marshall, Michael (Arundel)

  Silvester, Fred

  Mates, Michael

  Sims, Roger

  Maude, Francis

  Skeet, T. H. H.

  Mawhinney, Dr Brian

  Smith, Sir Dudley (Warwick)

  Maxwell-Hyslop, Robin

  Smith, Tim (Beaconsfield)

  Mayhew, Sir Patrick

  Soames, Hon Nicholas

  Mellor, David

  Speed, Keith

  Merchant, Piers

  Speller, Tony

  Meyer, Sir Anthony

  Spence, John

  Miller, Hal (B'grove)

  Spencer, D.

  Mills, Iain (Meriden)

  Spicer, Jim (W Dorset)

  Mills, Sir Peter (West Devon)

  Spicer, Michael (S Worcs)

  Miscampbell, Norman

  Squire, Robin

  Mitchell, David (NW Hants)

  Stanbrook, Ivor

  Moate, Roger

  Stanley, John

  Monro, Sir Hector

  Steen, Anthony

  Montgomery, Fergus

  Stern, Michael

  Moore, John

  Stevens, Lewis (Nuneaton)

  Morris, M. (N'hampton, S)

  Stevens, Martin (Fulham)

  Morrison, Hon C. (Devizes)

  Stewart, Allan (Eastwood)

  Morrison, Hon P. (Chester)

  Stewart, Ian (N Hertf'dshire)

  Moynihan, Hon C.

  Stokes, John

  Mudd, David

  Sumberg, David

  Murphy, Christopher

  Tapsell, Peter

  Neale, Gerrard

  Taylor, John (Solihull)

  Needham, Richard

  Taylor, Teddy (S'end E)

  Nelson, Anthony

  Temple-Morris, Peter

  Neubert, Michael

  Terlezki, Stefan

  Nicholls, Patrick

  Thomas, Rt Hon Peter

  Norris, Steven

  Thompson, Donald (Calder V)

  Onslow, Cranley

  Thompson, Patrick (N'ich N)A

  Oppenheim, Rt Hon Mrs S.

  Thorne, Neil (llford S)

  Osborn, Sir John

  Thornton, Malcolm

  Ottaway, Richard

  Thurnham, Peter

  Page, John (Harrow W)

  Townend, John (Bridlington)

  Page, Richard (Herts SW)

  Townsend, Cyril D. (B'heath)

  Parkinson, Rt Hon Cecil

  Tracey, Richard

  Parris, Matthew

  Trippier, David

  Patten, John (Oxford)

  Trotter, Neville

  Pattie, Geoffrey

  Twinn, Dr Ian

  Pawsey, James

  van Straubenzee, Sir W.

  Peacock, Mrs Elizabeth

  Vaughan, Dr Gerard

  Percival, Rt Hon Sir Ian

  Viggers, Peter

  Pink, R. Bonner

  Waddington, David

  Pollock, Alexander

  Wakeham, Rt Hon John

  Porter, Barry

  Waldegrave, Hon William

  Powell, William (Corby)

  Walden, George

  Powley, John

  Walker, Bill (T'side N)

  Prentice, Rt Hon Reg

  Wall, Sir Patrick

  Price, Sir David

  Waller, Gary

  Proctor, K. Harvey

  Walters, Dennis

  Raffan, Keith

  Ward, John

  Rathbone, Tim

  Wardle, C. (Bexhill)

  Rees, Rt Hon Peter (Dover)

  Warren, Kenneth

  Renton, Tim

  Watts, John

  Rhys Williams, Sir Brandon

  Wells, Bowen (Hertford)

  Ridsdale, Sir Julian

  Wells, John (Maidstone)

  Rippon, Rt Hon Geoffrey

  Wheeler, John

  Roberts, Wyn (Conwy)

  Whitfield, John

  Robinson, Mark (N'port W)

  Whitney, Raymond

  Roe, Mrs Marion

  Wiggin, Jerry

  Rossi, Hugh

  Winterton, Mrs Ann

  Rost, Peter

  Winterton, Nicholas

  Rowe, Andrew

  Wolfson, Mark

  Rumbold, Mrs Angela

  Wood, Timothy

  Ryder, Richard

  Woodcock, Michael

  Sackville, Hon Thomas

  Yeo, Tim

  Sainsbury, Hon Timothy

  Young, Sir George (Acton)

  Sayeed, Jonathan

  Younger, Rt Hon George

  Shaw, Giles (Pudsey)

  Shaw, Sir Michael (Scarb')

  Tellers for the Ayes:

  Shelton, William (Streatham)

  Mr. Robert Boscawen and

  Shepherd, Colin (Hereford)

  Mr. Alistair Goodlad.

  NOES

  Abse, Leo

  Ashdown, Paddy

  Adams, Allen (Paisley N)

  Ashley, Rt Hon Jack

  Anderson, Donald

  Ashton, Joe

  Archer, Rt Hon Peter

  Atkinson, N. (Tottenham)

  107

  Bagier, Gordon A. T.

  Godman, Dr Norman

  Banks, Tony (Newham NW)

  Golding, John

  Barnett, Guy

  Gould, Bryan

  Barron, Kevin

  Gourlay, Harry

  Beckett, Mrs Margaret

  Hamilton, James (M'well N)

  Beggs, Roy

  Hamilton, W. W. (Central Fife)

  Beith, A. J.

  Hardy, Peter

  Bell, Stuart

  Harman, Ms Harriet

  Bennett, A. (Dent'n & Red'sh)

  Harrison, Rt Hon Walter

  Bermingham, Gerald

  Hart, Rt Hon Dame Judith

  Bidwell, Sydney

  Heffer, Eric S.

  Blair, Anthony

  Holland, Stuart (Vauxhall)

  Boothroyd, Miss Betty

  Home Robertson, John

  Boyes, Roland

  Hoyle, Douglas

  Bray, Dr Jeremy

  Hughes, Mark (Durham)

  Brown, Gordon (D'f'mline E)

  Hughes, Robert (Aberdeen N)

  Brown, Hugh D. (Provan)

  Hughes, Roy (Newport East)

  Brown, N. (N'c'tle-u-Tyne E)

  Hughes, Sean (Knowsley S)

  Brown, R. (N'c'tle-u-Tyne N)

  Hughes, Simon (Southwark)

  Brown, Ron (E'burgh, Leith)

  Hume, John

  Bruce, Malcolm

  Janner, Hon Greville

  Buchan, Norman

  Jenkins, Rt Hon Roy (Hillh'd)

  Callaghan, Jim (Heyw'd & M)

  John, Brynmor

  Campbell, Ian

  Johnston, Russell

  Campbell-Savours, Dale

  Jones, Barry (Alyn & Deeside)

  Canavan, Dennis

  Kaufman, Rt Hon Gerald

  Carlile, Alexander (Montg'y)

  Kennedy, Charles

  Carter-Jones, Lewis

  Kilfedder, James A.

  Cartwright, John

  Kilroy-Silk, Robert

  Clark, Dr David (S Shields)

  Lambie, David

  Clarke, Thomas

  Lamond, James

  Clay, Robert

  Leadbitter, Ted

  Cocks, Rt Hon M. (Bristol S)

  Lewis, Ron (Carlisle)

  Cohen, Harry

  Lewis, Terence (Worsley)

  Coleman, Donald

  Litherland, Robert

  Concannon, Rt Hon J. D.

  Lloyd, Tony (Stretford)

  Conlan, Bernard

  Lofthouse, Geoffrey

  Cook, Frank (Stockton North)

  Loyden, Edward

  Cook, Robin F. (Livingston)

  McCartney, Hugh

  Corbett, Robin

  McCusker, Harold

  Corbyn, Jeremy

  McDonald, Dr Oonagh

  Cowans, Harry

  McGuire, Michael

  Cox, Thomas (Tooting)

  McKelvey, William

  Craigen, J. M.

  Mackenzie, Rt Hon Gregor

  Crowther, Stan

  Maclennan, Robert

  Cunliffe, Lawrence

  McNamara, Kevin

  Cunningham, Dr John

  McTaggart, Robert

  Dalyell, Tam

  McWilliam, John

  Davies, Rt Hon Denzil (L'lli)

  Madden, Max

  Davies, Ronald (Caerphilly)

  Maginnis, Ken

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

  Marek, Dr John

  Deakins, Eric

  Marshall, David (Shettleston)

  Dewar, Donald

  Martin, Michael

  Dixon, Donald

  Mason, Rt Hon Roy

  Dobson, Frank

  Maxton, John

  Dormand, Jack

  Maynard, Miss Joan

  Dubs, Alfred

  Meacher, Michael

  Duffy, A. E. P.

  Meadowcroft, Michael

  Dunwoody, Hon Mrs G.

  Michie, William

  Eadie, Alex

  Mikardo, Ian

  Eastham, Ken

  Millan, Rt Hon Bruce

  Edwards, R. (W'hampt'n SE)

  Miller, Dr M. S. (E Kilbride)

  Evans, loan (Cynon Valley)

  Mitchell, Austin (G't Grimsby)

  Evans, John (St. Helens N)

  Molyneaux, James

  Ewing, Harry

  Morris, Rt Hon A. (W'shawe)

  Fatchett, Derek

  Morris, Rt Hon J. (Aberavon)

  Field, Frank (Birkenhead)

  Nellist, David

  Fisher, Mark

  Nicholson, J.

  Flannery, Martin

  Oakes, Rt Hon Gordon

  Foot, Rt Hon Michael

  O'Brien, William

  Forrester, John

  O'Neill, Martin

  Forsythe, Clifford (S Antrim)

  Orme, Rt Hon Stanley

  Foster, Derek

  Owen, Rt Hon Dr David

  Foulkes, George

  Park, George

  Fraser, J. (Norwood)

  Parry Robert

  Freeson, Rt Hon Reginald

  Patchett, Terry

  Freud, Clement

  Pavitt, Laurie

  Garrett, W. E.

  Pendry, Tom

  George, Bruce

  Penhaligon, David

  Gilbert, Rt Hon Dr John

  Pike, Peter

  108

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

  Soley, Clive

  Powell, Raymond (Ogmore)

  Spearing, Nigel

  Prescott, John

  Stewart, Rt Hon D. (W Isles)

  Radice, Giles

  Stott, Roger

  Randall, Stuart

  Strang, Gavin

  Redmond, M.

  Straw, Jack

  Rees, Rt Hon M. (Leeds S)

  Thomas, Dafydd (Merioneth)

  Richardson, Ms Jo

  Thompson, J. (Wansbeck)

  Roberts, Allan (Bootle)

  Thorne, Stan (Preston)

  Roberts, Ernest (Hackney N)

  Tinn, James

  Robertson, George

  Varley, Rt Hon Eric G.

  Rogers, Allan

  Walker, Cecil (Belfast N)

  Rooker, J. W.

  Wardell, Gareth (Gower)

  Ross, Ernest (Dundee W)

  Wareing, Robert

  Ross, Wm. (Londonderry)

  Weetch, Ken

  Rowlands, Ted

  Welsh, Michael

  Sedgemore, Brian

  Wigley, Dafydd

  Sheerman, Barry

  Williams, Rt Hon A.

  Sheldon, Rt Hon R.

  Wilson, Gordon

  Shore, Rt Hon Peter

  Winnick, David

  Short, Ms Clare (Ladywood)

  Woodall, Alec

  Short, Mrs R.(W'hampt'n NE)

  Wrigglesworth, Ian

  Silkin, Rt Hon J.

  Young, David (Bolton SE)

  Skinner, Dennis

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

  Tellers for the Noes:

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

  Mr. Norman Hogg and

  Smyth, Rev W. M. (Belfast S)

  Mr. Frank Haynes.

  Snape, Peter

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

BUSINESS OF THE HOUSE
Ordered,
That, at this day's sitting, the Motion relating to Ways and Means may be proceeded with, though opposed, until any hour. —[Mr. Lang.]

TELECOMMUNICATIONS [MONEY]
Queen's Recommendation having been signified—
Resolved,
That, for the purposes of any Act of the present Session to provide for the appointment and functions of a Director General of Telecommunications, to abolish British Telecommunications' exclusive privilege with respect to telecommunications and to make new provision with respect to the provision of telecommunication services ("the Act"), it is expedient to authorize—

(1) the extinguishment by order of all or any liabilities of the successor company to the Secretary of State in respect of the principal of transferred loans;

(2) the payment out of money provided by Parliament of—

(a) the remuneration of, and any travelling or other allowances payable under the Act to, the Director General of Telecommunications and any staff of the Director, any sums payavle under the Act to or in respect of the Director and any expenses duly incurred by the Director or by any of his staff in consequence of the provisions of the Act;

(b) any sums required by the Secretary of State for making grants or other payments under the Act or for discharging any liability imposed on him by the Act;

(c) any expenses incurred by the Secretary of State in acquiring securities of the successor company or of any subsidiary of the successor company or rights to subscribe for any such securities;

(d) any administrative expenses incurred by the Secretary of State in consequence of the provisions of the Act;

(e) any increase attributable to the Act in the sums payable out of money so provided under any other Act;

109

(3) the payment out of the National Loans Fund of any sums required by the Secretary of State for making loans under the Act;

and for the purposes of this Resolution "successor company" has the meaning given by the Act and "transferred loan" means any money borrowed or treated as borrowed by British Telecommunications the liability to repay which vests in the successor company by virtue of the Act.—[Mr. Lang.]

WAYS AND MEANS

  TELECOMMUNICATIONS
  Resolved,
  That any Act of the present Session to provide for the appointment and functions of a Director General of Telecommunications, to abolish British Telecommunications' exclusive privilege with respect to telecommunications and to make new provision with respect to the provision of telecommunication services ("the Act") may—

  (1) authorise the inclusion in licences for the running of telecommunication systems of conditions requiring the rendering of payments to the Secretary of State;

  (2) require persons to whom licences for the provision of cable programme services are granted to pay to the Secretary of State such sums as may be prescribed by or determined under regulations;

  and that, for the purposes of the Act, it is expedient to authorise the payment into the Consolidated Fund or the National Loans Fund of any sums falling to be paid into that Fund by virtue of the Act.—[Mr. Lang.]

Local Government (Direct Labour)
10.16 pm
Dr. David Clark: I beg to move, That an humble Address be presented to Her Majesty, praying that the Local Government (Direct Labour Organisations) (Competition) Regulations 1983 (S.I., 1983, No. 685), dated 5th May 1983, a copy of which was laid before this House on 9th May, in the last Session of Parliament, be annulled.
We are asking the House to annul Statutory Instrument No. 685. It is a mean little instrument which does the Government no good and is not worthy of the House. It was introduced ostensibly in the name of efficiency and competition, but it has little to do with either. It has all to do with rewarding the Government's friends.
The Government have many unpleasant aspects to their general approach but many of us find most reprehensible their approach towards public servants, whether they are in national Government, local government or the National Health Service. The men and women who work in these services have been denigrated by the Conservative party to an unthinkable degree. The instrument is one further attack on those who work in the public service and who provide us with essential services.
As I have said, the order has little to do with efficiency or good management. It has been introduced as a reward for the Government's financial friends, who have supported the Government loyally, well and generously over the past few years. It is a reward for financial donations to the Tory party. It is the return to such companies as Tarmac, which made a £13,500 donation to the Conservative party, to Taylor Woodrow, which gave £29,060, and to Wimpy, which could chip in only £25,000. Those firms and others are now getting their reward.
I realise that this is a contentious area and I accept that I must substantiate my claims. The instrument is an unashamed attack on the direct labour organisation in local government and I am prepared to make an equally unashamed defence of the direct labour organisation.
The instrument stems from the Local Government, Planning and Land Act (No. 2) 1980 and is the third tranche of measures to restrict the work of direct labour organisations. Each tranche has been more severe than its predecessor. The two previous measures have proved costly in terms of finance and manpower and I submit that the instrument has been introduced with insufficient evidence and background information.
Ostensibly the instrument tackles three areas. First, it provides that 60 per cent. of all new building works below £50,000 should go out to tender. The Opposition cannot understand why it is necessary to introduce such a measure. We know that 90 per cent. of that type of work, which is mainly council house building and at a low level of activity, is already carried out by the private sector. There is no need for the private sector to receive any further help.
This scheme is extremely costly. We can calculate from the direct labour organisations' reports for 1981–82 that the previous two sets of regulations have added about 7 per cent. to the overall cost of building. These costs are borne not by the private contractors but by the ordinary ratepayers. It is an overhead that goes on to the rates. The new regulations will mean an additional cost of about 10

111
per cent. It is preposterous that, when the Government are talking about cutting public expenditure, they are adding to public expenditure for no reason.
The regulations also deal with maintenance jobs below £10,000. About 60 per cent. of that work must be put to open tender.
Mr. Alfred Morris: Is my hon. Friend aware of the extent and excellence of the Manchester direct works department's achievement in housing maintenance? Is he aware that it has saved Manchester ratepayers large sums of money by the work that it has undertaken? What does my hon. Friend feel about how the regulations dealing with house maintenance will affect one of the finest works departments in the country?
Dr. Clark: I am aware of the history of the direct works department in Manchester, its excellent overall management service and the service that it has provided to Manchester in general. I am happy to pay tribute, not just to this department, but to many other direct works departments that provide an equal service in Sheffield, Tyneside and other places.
When we talk about housing maintenance we talk mainly about repairs. These are sensitive issues that need to be handled with a great deal of care and, often, speed. The regulations will make it more difficult to undertake this difficult task. We believe that it runs directly counter to the suggestions of the Department of the Environment for estate-based offices with a combined repair and rating function. We feel that this will undermine seriously a good approach to this problem.
Housing maintenance is affected, not just by delays but by the quality of work. Evidence from local authorities suggests that where maintenance work has been won in competition many contractors have been unable to meet the levels of services or the standard or quality of work required. A considerable proportion of the lowest tenderers are prevented from submitting tenders because of the poor quality of their work. I know from experience that there has been a great deal of poor workmanship by private contractors. Probably many hon. Members know of firms that are debarred from tendering for local authority work because of their cowboy attitudes.
The regulations deal not just with housing and construction but with the highways. It is amazing that the Department has brought this subject forward tonight because all the evidence at its disposal shows how foolhardy this proposal is. A survey carried out by the Department of Transport shows that this proposal does not make sense. The previous highways regulations alone have created an additional 202 administrative jobs. The Department's figures show that the new proposals require an extra 219 staff. Overall there will be an extra 421 jobs. Not a single inch of extra road will have been built or an extra manhole filled — this is purely an administrative and organisational matter.
Instead of putting men in at the sharp end, the Government will make them redundant and increase administration. We believe that that does not lead to efficient road building or repairing and is retrogressive. We do not oppose the regulations for those reasons only. We argue that the contract prices of private contractors do not have a good record, as the Government's survey
112
shows. My information is that private contractors' contracts have an outturn cost of 4·4 per cent. over the tender prices. Direct labour organisations' costs are not 4 per cent. or 1 per cent. over, they are 0·2 per cent. under the tender prices. Direct labour organisations stick to their contract prices more vigorously and fairly than private contractors.
Although I realise that winter maintenance, repairs and emergency repairs to the highways are not covered by this statutory instrument, running down the direct labour areas of highways departments will denude many highway authorities of staff so that they will not have adequate staff for winter emergency maintenance.
The Government are putting the lives of a great many people at risk by insisting that this statutory instrument goes ahead. I hope that I have shown briefly but conclusively that these regulations are inefficient and costly to the public purse. Direct labour organisations have been put deliberately at a disadvantage. I am not surprised by that because the Conservative party has shown no liking for them.
I find the Conservative party's attitude shocking. I have a letter written by the Tories at county hall during the 1977 election campaign. Sir Kenneth McAlpine wrote to the GLC Tory party on behalf of Wates, McAlpines, Taylor Woodrow, Marshall-Andrew and many others. The Tory party replied:
"direct labour will be awarded construction contracts only where there is no choice—for example, when a contractor is forced to withdraw and no commercial alternative is available. We will also seek to develop commercial interest in maintenance work."
The statutory instrument we have before us honours the reprehensible political pledge made in 1977. The Government are acting most reprehensibly tonight. They are waging a political vendetta against the public service. They have lowered the quality of public life. They are opposed by the local government organisations — the AMA and the Conservative-controlled Association of County Councils. I hope that the House will see the logic of my argument and treat these regulations with the contempt that they deserve.
10.28 pm
The Under-Secretary of State for the Environment (Sir George Young): Today's prayer has the same inevitability as the next performance of "The Mousetrap". Every year Ministers lay regulations before Parliament which will make direct labour organisations compete more and so help make them more efficient which, as a result, benefits the hard-pressed ratepayer. Every year a prayer appears on the Order Paper signed by Socialist theologians and apologists for the Association of Metropolitan Authorities. Tonight, the 1982 speech has been dusted off and trotted out again.The outburst by the hon. Member for South Shields (Dr. Clark) is largely irrelevant because he is attacking not the amended competition regulations before the House but regulations that appear only in his fevered imagination. He has accused the Government of attempting to destroy not only council DLOs, but public service itself. He has had to pretend that our modest regulations are meant to achieve far more than they set out to do.
As my hon. Friends will recognise, we have heard an emotional attack on a sensible and realistic package of proposals. These were produced only after we had considered the evidence of local council 1981–82 DLO

113
reports — these reports, incidentally, being part of the new accountability required of DLOs by our legislation — and after consultations with the local authority associations and other interested organisations. My hon. Friend the Under-Secretary of State for Transport also carried out a special investigation into the effect of the reduced £50,000 threshold for 100 per cent. competition for highways works, introduced last October, on highway costs and on winter maintenance operations.
Labour Members see—or rather pretend to see—our regulations as an attack on DLOs. In this they are briefed by the Association of Direct Labour Organisations, which claims to represent some authorities with large DLOs. The then convenor of the association made its objectives quite clear when, according to the Municipal Journal, he said:
"We mean to obstruct the new laws every inch of the way —that's what we are all about".
The regulations are not an attack on DLOs. Good and effective DLOs have nothing to fear from competition or openness. In 1975, the then Under-Secretary in my Department said that the efficiency of the direct labour departments would be tested in competition with private contractors. That is what these regulations do.
Labour Members do not know whether to claim that DLOs are so wonderfully efficient that they do not need to compete, or are so shaky that the slightest breath of fair competition will produce their immediate collapse.
It might be helpful if I remind the House of the origin of the legislation. Much of its content was originally recommended in a 1975 report by the Chartered Institute of Public Finance and Accountancy, an estimable organisation representing public sector professionals. The basic themes of efficiency, accountability and competition were repeated, if with some different emphasis, in the 1978 report of the working party on DLOs, which was set up by the right hon. Member for Brent, East (Mr. Freeson). That, too, emphasised the importance of competition.
Many DLOs have already benefited from competition and accountancy regimes which we introduced in April 1981, and which we are now further strengthening in the 1983 regulations.
Since we introduced the new regime, there has been a 10 per cent. reduction in the DLO work force, from 152,000 to 134,000 in about 18 months. Over three quarters of DLOs in England are achieving the prescribed rate of return on capital in 1981–82. There has been higher productivity, the selling off of surplus assets, less top-heavy bureaucracy, and real cost consciousness. For example, the London borough of Camden has halved its DLO work force from just over 1,200 to just over 600.
In view of what the hon. Member for South Shields has just said, I shall quote what some people who run the DLOs have said in the reports that we have just received. South Tyneside, in the hon. Member's constituency, said:
"One measure of efficiency is to win contracts in competition."
A Norwich city councillor said:
"It is only proper that a DLO should give and be seen to give value for money to the local authority."
Another district's new bonus system for painters boosted productivity by 30 to 40 per cent. Another county council is disposing of six depots as part of its rationalisation programme.
114
DLO managers say that our legislation has enabled them, for the first time, to manage, instead of being at the mercy of spendthrift councillors and militant unions. For example, the Municipal Journal for January 1983 said:
"Let us learn from the experiences of the last 18 months and seek to ensure that never again will we allow the services for which we are responsible to become in poor heart or inefficient for whatever reason."
At a seminar this month on highway construction and maintenance it was said that
"a more commercial attitude is now being taken. The tighter management controls which have been established are beginning to show signs of financial benefit."
The 1981–82 north Devon DLO report announced that
"the Works Manager is showing alarming signs of enjoying the challenge of his new position."
The 1983 regulations will do three things from 1 October. They will require about 60 per cent., instead of about one third, of local authority maintenance and new building work, below the continuing £10,000 and £50,000 thresholds for 100 per cent. competition, to go out to tender; they will require about 30 per cent. of highway works below the continuing £50,000 threshold to go out to tender, as against none at present; and they will make clear how a council should assess whether a particular job should go out to competition. That is all that we propose, yet that led to the emotional outburst of the hon. Member for South Shields.
The thresholds above which all work must go out to tender remain unchanged. We are simply increasing the percentage of work below the threshold that has to go out to tender.
Our proposals for more competition for new building and maintenance work went out to consultation last December and we published our conclusions last March. So the 1983 regulations should not have come as a surprise.
The reasons for the increased competition for building works are straightforward. We believe that DLOs, their parent authorities and ratepayers benefit from increased competition. We also believe that that competition will not be achieved unless it is required by law. The 1981–82 DLO reports show that many authorities required their DLOs to compete for lottle or none of their maintenance work below the £10,000 threshold.
The city of Manchester has been mentioned. The city's DLO was awarded 98 per cent. of the council's maintenance and highway works for 1981–82 without any competition. It is defensive of Manchester Members to be so worried about the regulations. It is worth noting that Manchester's DLO work force has been reduced from 4,300 to just over 3,000 since our legislation came into operation.
Mr. Alfred Morris: The hon. Gentleman sneers at Manchester's direct works department, but will he at least acknowledge that, in employing apprentices at a time of mass youth unemployment and in trying to find jobs for disabled people, the department has given a humane lead to the rest of the building industry?
Sir George Young: The private sector faces the same obligations in the training of apprentices and employing disabled people.
I assure hon. Members that the alternative competition-free allowance of £300,000 in a full year for works of maintenance will remain. That is of particular value to authorities with small DLOs.

115
Hon. Members should be aware that the amount of highway work that many highway authorities gave to their DLOs after competition in 1981–82 was derisory. A report prepared by the Federation of Civil Engineering Contractors which analysed councils' DLO reports in 1981–82 concluded that only 2·5 per cent. of authorities' highway works went to DLOs after competition. some counties in England did not require their DLOs to compete at all. that evidence came from their own DLO reports.
There have been arguments about DLOs' need to create sufficient work to keep their winter maintenance work forces employed during the rest of the year — winter maintenance work itself being, of course, still exempt from compulsory competition. But many authorities already manage to do their winter maintenance and to put a high proportion of work out to contractors—often over half.
An authority that already awards about 30 per cent. of its highway work to contractors will not be compelled to go out to competition by the new regulations, though I hope that it would do so in the interests of its ratepayers and electors. There is a limit to which we can let the winter maintenance tail wag the highways work dog.
We are producing an explanatory circular, which we aim to issue before the end of this month. It will provide authorities with guidance on the regulations. They are to some extent complex, because they must have legal certitude. However, the Opposition should not pretend to be unaware that a major reason for the complexity of the regulations is that a minority of authorities search for every legal loophole and crack in the legislation to featherbed their DLOs and keep them away from competition, by, for example, giving the DLO a chance to retender in the knowledge of contractors' bids, and by imposing unnecessary and irrelevant requirements on contractors.
The regulations provide explicitly that a job should not be regarded as exempt from competition because the value of each of the descriptions of work within it — for instance, highways and sewerage—does not individually exceed the relevant tendering threshold.
Mr. Martin Flannery: Will the Minister make his point more clearly? When he is making such accusations, can we have chapter and verse of where the problems have occurred? For instance, did they occur in Sheffield or in Manchester? Will he give us some of the evidence?
Sir George Young: There have been problems in one town in Wiltshire, where work was awarded to the DLO after there had been competition. After the private sector prices were known, the DLO had an opportunity to retender. That is one of the loopholes that the legislation seeks to close.
Complexity springs not from any wish of the Government but from the behaviour of a few authorities. The regulations are confined to the competition requirements. We have not changed any other part of the DLO regime; not the rate of return on capital, nor the annual report directions requiring various information to be included in the reports in the interests of greater accountability. We have not laid down the law on methods of estimating, nor the shape and content of the DLO accounts. We are leaving authorities as free as possible to
116
implement the DLO legislation in the way that suits them best. Competition is where many councils have fallen short. That is where we have to concentrate our efforts.
I make no apology for the new competition regulations. Competition is particularly effective as a direct means of checking efficiency, which is why some Opposition Members dislike it so intensely. Nor can I accept the allegations that more competition links with extra costs. Any additional costs should be more than offset by the keener prices that can be obtained, from both DLOs and contractors, by putting work out to tender. If DLOs are cheaper and more efficient, they will win in competition. Some do already. If they are not, local authorities—not the bureaucracy, but the electors and ratepayers who pick up the £2 billion tab for DLO work — will get the job done more cheaply.
It is not surprising that Opposition Members should object to the competition regulations. They always do. Their definition of equality is evidently the Orwellian one. Some are more equal than others, and DLOs should be more equal than contractors.
The regulations are necessary. Without them there will not be the increased competition for some of the great mass of minor maintenance and highways work that we wish to see. The benefits from competition are self-evident. For instance, the limited information that is available about the savings from accepting the lower tenders put in by the private sector for highways work suggests that the saving was about 10 per cent.
Our approach to DLOs is, therefore, unchanged. It is that they should be, and be seen by their electors and ratepayers to be, efficient. One of the most direct and efficient means of testing DLOs' efficiency is through open competition with the private sector over a broadening range of their work.
The 1983 competition regulations will help to achieve that objective. I commend them accordingly and invite the House to reject the prayer against them.
10.43 pm
Mr. Stuart Holland: The Minister addressed the House as if he were informing it. In fact, he has not argued the case at all.
On costs, for example, it is not enough for the hon. Gentleman to say that there will be a 10 per cent. advantage assumed from competition. Will he answer both the points put by my hon. Friend the Member for South Shields (Dr. Clark) in terms of the outturn costs where the private sector overruns and direct labour departments have consistently underrun estimates? How does he answer the fact that the estimated costs for the new requirement of 30 per cent. tendering will be £5·4 million—£4·7 million for England and £0·7 for Wales, resulting in the employment of 398 extra administrative staff—345 in England and 53 in Wales?
That not only amounts to an increase of that very type of white collar staff that Conservatives choose, and are even pleased, to call bureaucracy, but represents about 25 per cent. of the value of work estimated to be transferred to the private sector. What is the point? Where is the 10 per cent.? We are talking about increasing administrative costs by 25 per cent. I am perfectly happy to see some people put back to work, but I would prefer to see them put back either into productive work or into the social sector rather than simply in the scrutiny of work going out

117
in this case to the private sector on terms welcome to the Government Front Bench as the Tory party pays off its friends.
The tragedy is that it is worse than that. Behind the advantage to the property lobby from having access to a larger share of the contracts there is a certain economic philosophy — if here we must give credit to the Government. It is the philosophy of privatisation —precisely what we discussed earlier today in respect of telecommunications. It is the importer conviction of this Government — from Austria through Freidrich von Hayek—that state is bad and private is good. There is a positive crusade to roll back the frontiers of the state and unleash the forces of the private sector. There is no analysis of the internal efficiency of direct labour organisations. No economic audit of them has been undertaken. It may be that at some time in the future we shall be given it, but we have not had it today. It simply implies that the public sector is wasteful and that the private sector is profitable, without recognising the circularity of income generated through public expenditure and passing through direct labour departments.
The Minister was snide about the analysis by the Association of Metropolitan Authorities and the Association of County Councils, but as yet he has not answered their argument. The questionnaire which they put out on these proposals, as they say,
"makes it difficult to understand the purpose of the regulations at all. Fifty per cent. of all highways work is already carried out by the private sector. Obviously, direct labour organisations have a greater relevance to the smaller jobs, but even there 25 per cent. of all jobs under £50,000 are carried out by the private sector. When one takes into account that very nearly half the value of work carried out by the DLO actually finds its way into the private sector through the purchase of materials … and plant hire,"
the actual scope of the private sector is further increased. It is called the multiplier effect. It is a simple fact that public spending generates income and revenue in the rest of the economy.
The Minister may find this puzzling. But I am not sure. I think that he is embarrassed to have to stand at the Dispatch Box and read out all this garbage without believing it. The hon. Gentleman is really quite intelligent. Unlike some of his right hon. and hon. Friends, he understands Keynesian economics and public expenditure rather than simply assuming that it is a load of nonsense.
Unfortunately, the Chancellor of the Exchequer does not appear to have the same understanding. I put a parliamentary question to the right hon. Gentleman last week asking what estimates had been made of the income-generating effect in the private sector of public spending. I got the bland reply, which I had half expected, that the Government did not undertake such estimates. Of course they do not undertake them. If they did, they would knock a hole through the philosophy of privatisation. If they had to start estimating the generation of income in the private sector from public spending through public enterprise agencies and municipal agencies such as direct labour departments, they would undermine the basis on which they are seeking to roll back the frontiers of the state, Ronald Reagan-style.
There is a case in point in council housing, and the pressure to give the private sector elbow room and take the burden of the state off the private sector. The facts are that direct labour departments in Scotland in recent years have
118
been responsible for only 3 per cent. of council house construction, direct labour departments in England and Wales for only 7 per cent. and direct labour departments in the Greater London area for only 13 per cent. Does that mean that they are dominating the market? Is it really the burden of municipal public enterprise which is responsible for the crisis in the housing sector? It is not. It is the monetarist policies pursued by the Government, the cuts in the housing investment programme and the way in which they have pulled the rug from under the feet of private sector constructors which are responsible for the housing crisis.
Those very Rotarians and little business men were told during the election, as they were in the last, "We will cut your tax burden." They cheered the Prime Minister, forgetting that before the tax burden is reduced the first cuts come in the council house construction sector—the cuts in public spending which by themselves are unemploying those same small business men. It is the small builders, the Rotarians and local Conservative association subscribers, quite apart from the Wimpeys and the Laings, who have been undercut by the Government. They have had high interest rates wrapped around their necks and they have just been given the drop — the equivalent, despite the vote which, in the view of many hon. Members, went the right way last week, of capital punishment.
They have been given the drop by the Government's economic policies. They have been bankrupted by them. That is why they are bringing pressure to bear on the Government. That is why they come along and say that the housing sector is in crisis; they are not making money any more and there is no upturn or light at the end of the tunnel. They ask why the Government do not do something about DLOs; why they cannot have a little of what the DLOs are making in a shrinking market; why the Government do not look after them—their people.
That is the argument behind what the Minister is saying. That is what is behind all his pomp and fantasy about philosophy. The reality is that the Government are serving their bigger friends in highway construction and their smaller friends in the council house building sector by this attack on DLOs.
Mr. Keith Speed: I have listened to the hon. Gentleman's great flow with considerable interest. Does he believe that DLOs should be as efficient as possible? If so, by what yardstick should their efficiency be judged?
Mr. Holland: I am glad that the hon. Gentleman asked me that, because it brings me to the next point that I want to make. However, before I come to that—No, I shall come to it directly. The point in question is efficiency. Efficieny by what standard?
Mr. Michael Morris: Financial.
Mr. Holland: Cost-plus and cost-minus. In many cases in the private sector firms that tender for contracts find that they cannot maintain their cash flow adequately, fail to meet specifications, do a shoddy job and then vanish. They go bankrupt. I can give the hon. Member for Ashford (Mr. Speed) one clear example. In a previous debate I mentioned the case of the Ethelred housing estate in my constituency, but, for some reason, the Minister forgot to deal with it in his reply. The estate was undertaken by the

119
then Conservative Greater London council. The private contractors faced financial difficulties on the contract and skimped on the specification for the floors in several blocks of flats. As a result, the floors turned from concrete into sand. Many of my constituents, no doubt like many of us, would like to spend their retiring years on a beach, but not in their front rooms. When those floors turned to sand they became infested; the furniture sank into them; they created a health hazard for children and it was incredibly costly to tackle the problem, which was the fault of private contractors.
The hon. Gentleman asks what is the efficiency standard. When one turns round on the cost-plus basis to look for the private contractor to bring him to court to make him pay for the social costs of his failure, the hardship which faces so many people, and the misallocation of public resources, he has gone. He is bankrupt. He is not there to be sued any more. If Conservative Members imagine that we have such a flourishing construction industry under the Government's policies and that firms are not going bankrupt, they should open their eyes and their ears. We have never had such a rate of bankruptcies in the private construction sector as under the Government, which is another reason for the regulations.
If the Government only try to reallocate a larger share of a shrinking market to their friends they will fail both their friends and the people whom they should really serve. We are now putting down on roads chip tar which melts, becomes unusuable and causes traffic jams. As a result of public expenditure cuts, asphalt is not being used. The Government are trying to roll back the direct labour departments in order to make more room for the private sector and their private sector friends.
There is only one solution for the construction industry — to get construction going again. The cuts are a bottomless pit — the deeper one digs, the deeper one goes. If Ministers will not wake up to that, I hope that Government Back Benchers will and that they will listen hard to their side —the employers in the construction industry who realise that the Government's policy is a disaster which is no good to the industry and no good to the people whom it serves. The pathetic, sordid document that we are discussing is only a symptom of the Government's failure to address themselves to the real issues and to bring real proposals to the House.
10.55 pm
Mr. Robert B. Jones: I was glad that the Minister traced the roots of the regulations back to the legislation mooted by the Labour Government and to the document produced by the Chartered Institute of Public Finance and Accountancy, which began it all. What caused it to come out with its report was a long string of scandals in direct labour organisations throughout the country, the most prominent of which was the loss of 1 million bricks by the Lambeth direct labour organisation.
I was glad that, when the Conservative Government began their first period of office, they produced a document suggesting how direct labour organisations should be controlled. That set out to achieve two objectives—to test direct labour organisations in fair and in frequent competition.
120
The evidence from the first direct labour organisation reports shows that neither of those objectives had been achieved. My hon. Friends are, therefore right to advance further legislation. Frequency of competition may be judged by the fact that over £400 million worth of highway work was awarded to direct labour organisations and only 21/2 per cent. of that was won in competition. That is not satisfactory and I am not surprised that the Government have had to propose amendments.
As for fairness, a string of direct labour organisations have tried to nobble the private sector to support their friends. Some have been more notorious than others. I remember when Lothian regional council made it compulsory for those coming on to its tender list to disclose political contributions. That was withdrawn when it found that the largest political contribution was from the Co-op. Other extraordinary events include the performance by the London borough of Southwark, which struck Tarmac off its tender list because it was a contractor at Greenham common. I noted that it did not strike off British Telecom, which, among others, was also a contractor there, but arbitrariness is true of Socialism at least as much as inefficiency.
Many activities have been dealt with in legislation including the Employment Act, but many injustices remain. I hope that the Minister will emphasise what remains to be done to ensure that Socialist authorities do not continue unfair discrimination. The one thing that this legislation is not about is where the frontier is or about allocating work. It is about how to determine where the frontier is. That can be done only by open and fair competition.
10.59 pm
Mr. Robert Litherland: My hon. Friend the Member for South Shields (Dr. Clark) was accused of being emotional. I think that he was being factual. It is clear that the Secretary of State is extending Government policy on privatization, using the same ploy as other Ministers, and arguing that it is in everyone's interests. This proposal is said to be in the interests of the victims—the direct labour organisations. To make them more competitive and accountable seems good, but the real intention is to destroy direct labour. The emphasis this time is on competition. The Government are laying down the rules and regulations that will eventually run down the activities of the direct labour organisations. The Government are crying crocodile tears about fair competition, but they know that DLOs cannot compete with the private sector. The reason is that we are not comparing like with like. The DLOs are confined by law to tendering for work within the boundaries of their local authorities. They cannot tender throughout the length and breadth of the country. The private sector now wants to take over even the small percentage of work that is done by the DLOs.
Mr. Robert B. Jones: The DLOs have a guarantee of being on every tender list, and a guaranteed monopoly of that portion of the work that is not subject to compulsory competition.
Mr. Litherland: It is not correct to say that the DLOs have the right to appear on every tender list. In Manchester, the abominations that resulted from contracts

121
negotiated by the private sector have now been demolished. That persuaded us of the worth of direct labour.
DLOs work under principles and disciplines that are entirely different from those of the private sector. They are obliged to work under local authority rules and committee procedure. DLOs canno hire and fire at will. They have to work to the best safety, health and welfare regulations.
Apprenticeship training, which is vital to the industry, is now so neglected that before long, we shall have no craftsmen at all. In the past, such training was provided by direct labour. In Manchester 500 apprentices would be taken on at any one time in 27 different trades. In 1979 there was an intake of 150 to 180 apprentices. Last year the intake was 30. That demonstrates the demise of direct labour. DLOs have to employ their quota of disabled people too. All those costs have tc be borne by the departments. One is not, therefore, comparing like with like.
DLOs provide service cover 365 days of the year. They provide emergency services, and work anti-social hours in anti-social conditions. In every debate that we have had on direct labour, the service element has been overlooked.
Under the guise of assisting the DLOs, the regulations will put more nails in their coffin. These amendments to the maintenance and minor works activities are being made at a time when DLOs are still trying to absorb and to restaff to cope with the changes previously imposed by the Government. The regulations can only lead to loss of work, because of competition, and a farther loss of jobs. In 1979 there were more than 5,000 operatives in Manchester. Today, there are fewer than 3,000.
The process of running down the DLOs began in 1979. The irony is that extra staff will be required for administration and supervision, and the Government know that it will be impossible to obtain personnel with suitable technical qualifications in such a short time. Staff will be required to evaluate the cost and administration of the new regulations, and there will be an additional cost to a local authority in carrying out the supervision and inspection. That is what the AMA and the Association of Direct Labour Organisations are trying to impress on the Government.
Since they took power in 1979, there has been a concerted effort by the Government and the private sector to eradicate the direct labour organisations. Capital works were the first in the line of attack when the Government forced direct labour organisations to tender for all major contracts. Then came minor works. Soon the threshold of £50,000—wnich is a joke—will become irrelevant, and all work in the minor works section will have to be gained in competition.
Mr. John Heddle: The hon. Gentleman has just said that the £50,000 threshold is a joke. Does he agree that direct labour organisations are making a joke of it? Are they not breaking up contracts into smaller components? For example, where they cannot enjoy a monopoly over £10,000, they are breaking up £100,000 contracts into 10 or 11 smaller contracts of £9,999. Does the hon. Gentleman agree that DLOs themselves are making a joke of such thresholds?
Mr. Litherland: If direct labour organisations are doing that, it just shows that they are fighting for survival.
Mr. Heddle rose—
Mr. Litherland: I shall not give way. I shall come to that point later.
The maintenance that has always been the prerogative of DLOs and local authorities will go out to tender. The first maintenance jobs to go out to tender will be the cream. They will include the reroofing and rewiring of estates, and programme repairs, painting and joinery. All the lucarative sections will be hived off to the private sector. The residue is already being attacked in the Housing and Building Control Bill. Indeed, the hon. Gentleman knows that, because he and I served on that Committee. All the repairs will be hived off to cowboys at the expense of local authorities and council tenants.
The regulations tighten the thumbscrews on DLOs. Why are the Government sticking to £50,000 for new construction, £50,000 for general highway work, and £10,000 for maintenance works? Those figures were relevant in the late 1970s. They have never been index-linked to the higher cost of materials, labour or inflation. The Government's idea is to keep the thresholds low so that more work has to go out. That is the answer to the hon. Gentleman's question.
The regulations are a further restriction on the functions of direct labour organisations, so that the Government's friends in the private sector will eventually have no competition and will be given an open cheque. Lump labour will be reintroduced on a very large scale. Trade union pay norms can be undermined — all to the advantage of the private builder and private profit. The Tory doctrine is that there is no room for municipal enterprise, especially if it is successful and affects profits.
The Local Government, Planning and Land Act also gives the Secretary of State supreme power to close a section, or the whole of a department if he deems that it lacks the appropriate efficiency and productivity, and if it does not make a return of 5 per cent. on capital. It should be for the local authority to say whether it wants a direct labour organisation. It is for the electorate to vote it out of office if it is not satisfied. It is not for the Secretary of State to use undemocratic tactics to ensure that DLOs cannot exist. That is the Tory interpretation of democracy. That is why the Secretary of State refuses to meet representatives of the Association of Direct Labour Organisations and to listen to the problems. That is why there has been no real in-depth discussions with the local authorities. If the Government annihilate direct labour organisations, the ratepayers will suffer. We had experience of this sort of thing in Manchester when the Tories took control. After a two-year inquiry, the Tories came to the conclusion that the DLO was giving value for money. The Government want DLOs out of the tendering procedure, so that the private sector can be given a free hand, bringing with it the price rings and cartels.
We do not have a hope tonight of convincing the Government that there is such a thing as a viable municipal enterprise. Their sole intention is to smash direct labour organisations, because they have become a thorn in the side of the private builders who contribute so much to the Tory coffers.
Several Hon. Members rose—
Mr. Deputy Speaker (Mr. Paul Dean): Order. I remind the House that the debate must end at 11.30 pm. and a number of hon. Members are hoping to catch my eye.
11.11 pm
Mr. Richard Alexander: This has been an interesting debate, and has shown the great divide between Conservative and Labour Members about the way the country should be run and how local government should operate. I start from the basis that I believe unashamedly in the value of private enterprise — not only to the entrepreneur but to the unemployed. We shall never reduce the huge unemployment figure unless we encourage private enterprise. However, that is not the subject of the debate tonight.
The Government want to encourage the private entrepreneur, and not because they want to reward the Government's political friends, as was suggested by the hon. Member for South Shields (Dr. Clark). The only friends whom the regulations will reward are the ratepayers, and the Conservative party is the only party that is a friend to them. The hon. Member for Manchester, Central (Mr. Litherland) spoke of Manchester, and said that it is competitive and fair. I agree that some local authority DLOs are fair, and they do not have anything to fear from competition. But in 1982, £2,000 million of public work was undertaken by local government. Surely it is right that it should be covered by regulation. Public accountability must be introduced for that amount of public money. I welcome the regulations and the new limits proposed.
Direct labour departments have nothing to fear from the regulations if they are efficient; it is the inefficient that have something to fear. The ratepayer has so much to gain. My hon. Friend the Member for Mid-Staffordshire (Mr. Heddle), in an intervention, rightly said that many DLOs are not playing by the rules. Some Opposition Members asked for evidence. That has been supplied by the National Federation of Building Trades Employers, and has no doubt been supplied to disbelieving Opposition Members. There are abuses. It is surely unfair to count in the cost of work the cost of having to lay off those in the direct labour department if it does not win the tender. It should not be possible to split up the tender into such small pieces that they are not within the limits. It should not be possible to make smaller contracts into one enormous contract, which is so large that few private entrepreneurs can tender for it. That is the abuse indulged in by direct labour departments. That is why I welcomed the 1980 legislation and the further tightening of that with the present regulations.
We believe that sometimes, although not necessarily always, direct labour departments are inefficient and give less value for money than would be gained from private tender. The Labour party does not agree with that, which is why it opposes the regulations. It cares little for private enterprise and private business freedom. That is its affair, but we should not allow the Labour party, with its dogma, to permit Socialist authorities to make loopholes in the law in the manner that has been mentioned.
Rates are already high enough in Labour-controlled authorities, and it is the job of this House to make sure that they are curbed. Where we have the opportunity—as we have under the 1980 legislation—to curb those abuses we should be taking it. In the interests of the law and of the ratepayers, I hope that the Minister will, in the course of his tenure of office, clamp down on those authorities that are responsible for abuses.
11.15 pm
Mr. Simon Hughes: Three hours ago I was discussing with some tenants in my constituency the order that we are now debating. I put to them the issues that would come before the House. I asked them whether they were in favour of the retention of the direct labour organisation or whether they were in favour of building— whether major repairs or renovation on their estate or work on the roads outside it—being done by private contractors. Their answer was simple. They said, "We want the job done by the best people available."
In the debate it seems to have been almost forgotten that the reason and justification for the existence of direct labour organisations or local authorities is to serve the ratepayer and the tenant. There is no other justification. The debate has shown that direct labour has become a political football to be kicked around between the two traditional sparring parties as a proof of their masculinity in defending or attacking the principle of direct labour. That is wrong. The protagonists are either workers employed by the local authority or workers employed by small or big businesses. They are people who want a job and an income, and people who would hope to do a good job for the money that they are paid.
The direct labour organisation exists, as some hon. Members have said, to give service all the year round in ways that other competing organisations would not do, and to be available in times of bad weather, at weekends and in antisocial hours, to deal with the problems that arise, as well as taking on major jobs that it can do best in the local authority in question.
We have no dogmatic belief on the Liberal Benches that direct labour organisations have a justification for existence of themselves, just as we have no belief that a small business will necessarily do a better job. I have seen small and big businesses do bad jobs on the estates in my constituency, just as I have seen my local authority direct labour organisation do good and bad jobs in my constituency. That is the honest experience of all those who have looked at the issue.
We have to examine the evidence and decide what is in the best interests of the recipients of the services. It is possible that, with bad administration, we shall have an increase in white collar jobs and an increase in bureaucracy. With increased technology, that need not be the case. With increased technology it is possible to weed out the competing tenders efficiently and quickly, and for the matter to be dealt with properly by the local authority without any undue delay or any additional employment. The tragedy is that the Government, in a period of cuts, can now tell the House that, having cut away the majority of local authorities' income, they can justify further interference in those ways.
We should like the Government to change their policy of interference in local government because their policy of interfering with and cutting to the bone many of the funds that local government needs is not in the interests of the people who depend on those local authorities. But knowing that there is very little money around and that the Government will be mean to local authorities, particularly to those local authorities which have most council tenants and therefore, in most cases, have the most need of direct labour organisations, it is important that the tenant and the ratepayer are served best.

125
So on the limited evidence available, and by no means saying that next year we will be doing the same thing if the evidence is pointing in a different direction, we will tonight support the Government in the interests of the ratepayer and of the tenant in the hope that they will get a better service. If, after two years experience, the evidence does not show a better service, we will make that clear. It is the ratepayers and the tenants and not the vested interests whom this House should be primarily concerned to serve.
11.22 pm
Mr. Michael Morris: I welcome with particular interest the amended regulations before the House. I do so against the background that in 1977 and 1978 I looked in great depth at the direct labour organisations. I listened with some astonishment to the speech from the Opposition Front Bench, which suggested that all was wonderful in the direct labour departments. Indeed, in an intervention by the hon. Member for Manchester, Central (Mr. Litherland), we heard about the wonders of Manchester's direct labour organisation, as if it were a shining light for everyone else to follow. I remind the hon. Gentleman that the first re port of the district auditor in 1976 drew attention to certain irregularities in the Manchester direct labour organisation concerning the control of repairs and maintenance work. It instanced bonus payments for work not done, overstatements of amounts of stores and little control over maintenance budgets. As if that were not enough, what happened in this wonderful city of Manchester in 1978? In 1978, the organisation was so bad on housing repair and renovation —
Mr. Litherland rose—
Mr. Morris: I shall not give way. We have heard about Manchester. What did Manchester do in 1978? It pulled in the private sector to get it out of the hole—
Mr. Litherland: It was completely vindicated.
Mr. Morris: Manchester is up to its old tricks. In the National Builder of February, there is a comment about the major airport contract at Manchester. It says:
"A large slice of a £160,000 refurbishment scheme for Manchester Airport is to go to Manchester City Council Direct Works Department without first going out to tender."
The article explains that Manchester city council has cobbled things together to ensure that every contract was just under that £50,000 limit although they were all part of the same contract. That is the wonderful Manchester direct labour department—this guiding light for all to follow.
Conservative Back Benchers have warned the Minister about the number of loopholes in the 1980 Act. I am pleased to say that my hon. Friend has responded on some of them, but some still exist. I should like to know that there will be vetting in the months ahead to ensure that some of these obvious loopholes are closed.
I shall mention five of the loopholes that I have found — there are probably a good many more. First, authorities fail to accept the lowest tender from private contractors, often citing mitigating circumstances, such as the cost of redundancies. That is wholly unacceptable to the ratepayer. If a contract goes out to tender on a fair basis, the lowest tender should be accepted. There should not be jiggery-pokery, a suspension of standing orders or
126
some other bogus reason for allowing the direct labour organisation, if it is not the lowest tenderer, to get the work.
As my hon. Friend the Member for Newark (Mr. Alexander) mentioned, there are authorities which, presumably in party groups, chop big contracts into small amounts so that they come just below the statutory level. Or there is the situation, also spoken of by my hon. Friend the Member for Newark, where an authority lumps together a series of contracts into about the most complicated contract one could find, so producing a situation in which the only body able, ostensibly, to compete for the work is the DLO.
These things are happening in the world in which we live and the Minister must be aware of them because they are unfair and are working against the interests of the ratepayer. Then there are authorities that lay down unjustifiable conditions, such as union-only contracts, or political conditions. Reference was made to a certain DLO the shop steward of which was allowed to see the tenders before the tender award was announced. The result, of course, was that the DLO tender was the lowest.
Then there is the political dimension, for example warnings which go out to union members. One is reminded of the quotations cited by the Minister for Housing and Construction in a debate on DLOs last March. He quoted from an article in NUPE News which said:
"Members of NUPE working for local authorities need to be vigilant. When they hear of any moves — Me merest suggestion — that private contractors are contemplated they should raise the matter with their Branch and full-time officer … Above all, NUPE members must be ready to challenge each and every attempt by private contractors to burrow into local authority services".—[Official Report, 30 March 1983, Vol. 21, c. 232.]
Such political action cannot be in the interests of the ratepayers. The hon. Member for Vauxhall (Mr. Holland) suggested the Keynesian economics would have supported direct labour organisations. Does he or any Labour Member really support the sort of political action have described? I cannot believe so—
Mr. Stuart Holland rose—
Mr. Morris: —but if the hon. Member for Vauxhall does, I willingly give way to him.
Mr. Holland: I did not say the Keynesian economics would support DLOs; I said that they could support the construction industry as a whole. Many private contractors do not know how to evaluate overheads, or conveniently do not include them. That is clear from the figures, which show the consistent over-run of estimates by private contractors. It is only right, if Conservative Members believe in the "invisible hand", that they should want to open the books. Or do they have something to hide? Let us have the books open for both DLOs and private contractors.
Mr. Morris: I regret giving way to the hon. Gentleman; he was not even prepared to support NUPE tonight, but instead went off at a tangent on to another subject.
The Minister must also take careful note of the nature of the reports we are receiving on DLOs. My hon. Friend's Department has outlined what the reports should include but I have not found one authority that has met the model requirements. My hon. Friend must act urgently when authorities fail to produce the right sort of reports. Local

127
authorities can pretend to follow the requirements of the Act and the statutory instruments but when they submit their annual reports—
It being half-past Eleven o'clock, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 4 (Statutory Instruments, &c. (Procedure)).
The House divided: Ayes 124, Noes 231.

Division No. 26]

[11.30 pm

AYES

Adams, Allen (Paisley N)

Home Robertson, John

Ashley, Rt Hon Jack

Hoyle, Douglas

Atkinson, N. (Tottenham)

Hughes, Mark (Durham)

Banks, Tony (Newham NW)

Hughes, Sean (Knowsley S)

Barron, Kevin

Hume, John

Beckett, Mrs Margaret

Jones, Barry (Alyn & Deeside)

Bell, Stuart

Kaufman, Rt Hon Gerald

Bennett, A. (Dent'n & Red'sh)

Lewis, Terence (Worsley)

Bermingham, Gerald

Litherland, Robert

Boyes, Roland

Lloyd, Tony (Stretford)

Brown, Gordon (D'f'mline E)

Lofthouse, Geoffrey

Brown, Hugh D. (Provan)

Loyden, Edward

Brown, N. (N'c'tle-u-Tyne E)

McDonald, Dr Oonagh

Brown, R. (N'c'tle-u-Tyne N)

McKelvey, William

Brown, Ron (E'burgh, Leith)

McNamara, Kevin

Buchan, Norman

McTaggart, Robert

Callaghan, Jim (Heyw'd & M)

McWilliam, John

Campbell-Savours, Dale

Madden, Max

Canavan, Dennis

Marek, Dr John

Clark, Dr David (S Shields)

Martin, Michael

Clay, Robert

Michie, William

Cocks, Rt Hon M. (Bristol S.)

Millan, Rt Hon Bruce

Cohen, Harry

Miller, Dr M. S. (E Kilbride)

Conlan, Bernard

Morris, Rt Hon A. (W'shawe)

Cook, Frank (Stockton North)

Nellist, David

Cook, Robin F. (Livingston)

Oakes, Rt Hon Gordon

Corbett, Robin

O'Neill, Martin

Corbyn, Jeremy

Orme, Rt Hon Stanley

Cowans, Harry

Parry Robert

Craigen, J. M.

Pavitt, Laurie

Crowther, Stan

Pendry, Tom

Cunningham, Dr John

Pike, Peter

Dalyell, Tam

Powell, Raymond (Ogmore)

Davies, Ronald (Caerphilly)

Prescott, John

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

Randall, Stuart

Deakins, Eric

Redmond, M.

Dewar, Donald

Rees, Rt Hon M. (Leeds S)

Dixon, Donald

Richardson, Ms Jo

Dormand, Jack

Robertson, George

Dubs, Alfred

Rogers, Allan

Duffy, A. E. P.

Rooker, J. W.

Eadie, Alex

Ross, Ernest (Dundee W)

Eastham, Ken

Rowlands, Ted

Evans, John (St. Helens N)

Sedgemore, Brian

Ewing, Harry

Sheerman, Barry

Fatchett, Derek

Skinner, Dennis

Field, Frank (Birkenhead)

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

Fisher, Mark

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

Flannery, Martin

Snape, Peter

Forrester, John

Soley, Clive

Foster, Derek

Spearing, Nigel

Foulkes, George

Stott, Roger

Freeson, Rt Hon Reginald

Strang, Gavin

George, Bruce

Thompson, J. (Wansbeck)

Godman, Dr Norman

Tinn, James

Gould, Bryan

Wardell, Gareth (Gower)

Hamilton, James (M'well N)

Wareing, Robert

Hamilton, W. W. (Central Fife)

Welsh, Michael

Harman, Ms Harriet

Winnick, David

Harrison, Rt Hon Walter

Woodall, Alec

Haynes, Frank

Heffer, Eric S.

Tellers for the Ayes:

Hogg, N. (C'nauld & Kilsyth)

Mr. Lawrence Cunliffe and

Holland, Stuart (Vauxhall)

Mr. Hugh McCartney.

128

NOES

Alexander, Richard

Galley, Roy

Ancram, Michael

Gardiner, George (Reigate)

Arnold, Tom

Garel-Jones, Tristan

Ashby, David

Goodlad, Alastair

Ashdown, Paddy

Gorst, John

Aspinwall, Jack

Gow, Ian

Atkins, Rt Hon H. (S'thorne)

Gregory, Conal

Atkins Robert (South Ribble)

Griffiths, Peter (Portsm'th N)

Atkinson, David (B'm'th E)

Ground, Patrick

Baker, Nicholas (N Dorset)

Gummer, John Selwyn

Baldry, Anthony

Hamilton, Hon A. (Epsom)

Batiste, Spencer

Hamilton, Neil (Tatton)

Beaumont-Dark, Anthony

Hampson, Dr Keith

Beith, A. J.

Hanley, Jeremy

Bellingham, Henry

Hargreaves, Kenneth

Berry, Hon Anthony

Harris, David

Biggs-Davison, Sir John

Harvey, Robert

Blackburn, John

Hawkins, Sir Paul (SW N'folk)

Blaker, Rt Hon Peter

Hawksley, Warren

Body, Richard

Hayes, J.

Boscawen, Hon Robert

Hayward, Robert

Bottomley, Peter

Heath, Rt Hon Edward

Bowden, Gerald (Dulwich)

Heathcoat-Amory, David

Boyson, Dr Rhodes

Heddle, John

Brandon-Bravo, Martin

Henderson, Barry

Bright, Graham

Hickmet, Richard

Brinton, Tim

Hirst, Michael

Brooke, Hon Peter

Holland, Sir Philip (Gedling)

Brown, M. (Brigg & Cl'thpes)

Howarth, Gerald (Cannock)

Bryan, Sir Paul

Howell, Ralph (N Norfolk)

Buck, Sir Antony

Hughes, Simon (Southwark)

Budgen, Nick

Hunt, David (Wirral)

Bulmer, Esmond

Hunter, Andrew

Burt, Alistair

Jackson, Robert

Butcher, John

Johnston, Russell

Butterfill, John

Jones, Robert (W Herts)

Carlile, Alexander (Montg'y)

Kennedy, Charles

Carlisle, John (N Luton)

Knight, Gregory (Derby N)

Carlisle, Kenneth (Lincoln)

Lang, Ian

Carttiss, Michael

Leigh, Edward (Gainsbor'gh)

Chalker, Mrs Lynda

Lilley, Peter

Chapman, Sydney

Lloyd, Peter, (Fareham)

Chope, Christopher

McCurley, Mrs Anna

Clark, Dr Michael (Rochford)

Malone, Gerald

Clarke Kenneth (Rushcliffe)

Mates, Michael

Cockeram, Eric

Mayhew, Sir Patrick

Colvin, Michael

Meadowcroft, Michael

Conway, Derek

Mellor, David

Coombs, Simon

Merchant, Piers

Cope, John

Meyer, Sir Anthony

Couchman, James

Miller, Hal (B'grove)

Cranborne, Viscount

Mills, Iain (Meriden)

Crouch, David

Miscampbell, Norman

Currie, Mrs Edwina

Moate, Roger

Dickens, Geoffrey

Montgomery, Fergus

Dicks, T.

Moore, John

Dorrell, Stephen

Morris, M. (N'hampton, S)

Douglas-Hamilton, Lord J.

Morrison, Hon P. (Chester)

Dover, Denshore

Moynihan, Hon C.

Dunn, Robert

Murphy, Christopher

Dykes, Hugh

Neale, Gerrard

Edwards, Rt Hon N. (P'broke)

Needham, Richard

Eggar, Tim

Nelson, Anthony

Evennett, David

Neubert, Michael

Eyre, Reginald

Nicholls, Patrick

Fairbairn, Nicholas

Norris, Steven

Farr, John

Onslow, Cranley

Favell, Anthony

Osborn, Sir John

Fenner, Mrs Peggy

Ottaway, Richard

Finsberg, Geoffrey

Page, Richard (Herts SW)

Fletcher, Alexander

Parkinson, Rt Hon Cecil

Forman, Nigel

Parris, Matthew

Forsyth, Michael (Stirling)

Peacock, Mrs Elizabeth

Forth, Eric

Penhaligon, David

Fowler, Rt Hon Norman

Pink, R. Bonner

Fox, Marcus

Pollock, Alexander

Franks, Cecil

Porter, Barry

Freeman, Roger

Powell, William (Corby)

Gale, Roger

Powley, John

129

Prentice, Rt Hon Reg

Temple-Morris, Peter

Proctor, K. Harvey

Thomas, Rt Hon Peter

Raffan, Keith

Thompson, Donald (Calder V)

Renton, Tim

Thompson, Patrick (N'ich N)

Rhys Williams, Sir Brandon

Thorne, Neil (llford S)

Ridsdale, Sir Julian

Thornton, Malcolm

Roberts, Wyn (Conwy)

Thurnham, Peter

Robinson, Mark (N'port W)

Townend, John (Bridlington)

Roe, Mrs Marion

Tracey, Richard

Rowe, Andrew

Trippier, David

Rumbold, Mrs Angela

Trotter, Neville

Ryder, Richard

Twinn, Dr Ian

Sackville, Hon Thomas

van Straubenzee, Sir W.

Sainsbury, Hon Timothy

Viggers, Peter

Sayeed, Jonathan

Waddington, David

Shaw, Sir Michael (Scarb')

Wakeham, Rt Hon John

Shelton, William (Streatham)

Waldegrave, Hon William

Shepherd, Colin (Hereford)

Walden, George

Shepherd, Richard (Aldridge)

Walker, Bill (T'side N)

Shersby, Michael

Wall, Sir Patrick

Sims, Roger

Waller, Gary

Skeet, T. H. H.

Wardle, C (Bexhill)

Smith, Tim (Beaconsfield)

Warren, Kenneth

Soames, Hon Nicholas

Watts, John

Speed, Keith

Wheeler, John

Speller, Tony

Whitfield, John

Spencer, D.

Wiggin, Jerry

Spicer, Jim (W Dorset)

Winterton, Mrs Ann

Spicer, Michael (S Worcs)

Winterton, Nicholas

Stanbrook, Ivor

Wolfson, Mark

Stanley, John

Wood, Timothy

Steen, Anthony

Woodcock, Michael

Stern, Michael

Yeo, Tim

Stevens, Lewis (Nuneaton)

Young, Sir George (Acton)

Stevens, Martin (Fulham)

Stewart, Allan (Eastwood)

Tellers for the Noes:

Sumberg, David

Mr. Douglas Hogg and

Taylor, John (Solihull)

Mr. John Major.

Taylor, Teddy (S'end E)

Question accordingly negatived.

British Shipbuilders
11.43 pm
The Minister of State, Department of Trade and Industry (Mr. Norman Lamont): I beg to move,
That the draft British Shipbuilders Borrowing Powers (Increase of Limit) Order 1983, which was laid before this House on 22nd June, be approved.
Under section 11 of the Aircraft and Shipbuilding Industries Act 1977, as amended by subsequent legislation, the borrowing limit of British Shipbuilders is set at £700 million. The cumulative amount of BS's borrowing that counts against this limit stands at £613 million. There is provision to increase the borrowing limit by order, subject to the approval of the House. I propose that the borrowing limit should now be increased to £800 million. This increase in the borrowing limit reflects BS's current and planned borrowing needs. The timing of this proposed increase is in line with the view we took of BS's borrowing needs when we last raised the borrowing limit. If the House approves this proposal, the provision in current legislation for BS's borrowing limits to be increased will be exhausted. The Government will be bringing forward legislation next Session to increase the borrowing limit further.
As hon. Members will be aware, the borrowing limit of BS was raised several times by the previous Government. The original level written into the [977 Act was £200 million. The increases in the borrowing of BS reflect the Government's continuing financial support for the industry.
I have seen suggestions in the press, particularly the shipbuilding press, that the Government adopt a laissez-faire approach. One might say, "If only that were true " The charge could hardly be wider of the mark. The Government have been massively involved in the provision of support and in the attempts of BS to secure orders. We have also provided considerable support for the corporation's overall strategy.
Since 1979, BS has received nearly £750 million in support. Some of that assistance, for example the intervention fund — a form of support which is not matched in all the countries that compete with BS —does not count towards the BS borrowing limit. In recent years, support for jobs in the merchant shipbuilding division alone has amounted to about £7,000 per job. That level of support has enabled the industry to start to restructure and to re-equip. Capital investment in 1981–82 was double that of earlier years, and it increased again in 1982–83. Investment per man in BS is running at levels comparable with those in the Japanese shipbuilding industry.
All that adds up to massive support. Regrettably, it also reflects the poor results that the corporation has turned in over the years, although in fairness I should say that until the past year, the losses were on an improving trend.
The results for 1982–83 have not yet been published, but I must tell the House that they will not make good reading. There will be a substantial deterioration from last year's trading loss of £20 million. It is important that the House should understand that the deterioration is caused not so much by lack of orders as by losses incurred on orders already obtained.
Within the total loss, some parts of the corporation have not performed badly, but the scale of losses in other parts

131
is disturbing. I emphasise to the Opposition that I am not saying that it is necessarily the fault of the labour force or the trade unions; it is not my job to ascribe blame for poor performance.
I do not underestimate the problems facing BS. Many are fairly intractable. Putting new technology into practice and moving into offshore business have presented considerable problems for BS, but we have to ask whether we can afford to go on giving support to the industry on the present scale indefinitely.
In addition to the problem of losses on orders already obtained, there is a problem for the future. The market situation has deteriorated and BS faces depressed markets in nearly all its areas of business. On the merchant side, BS is, for the second time in its short life, facing a severe market recession. World new orders in 1982 fell by 20 per cent. and the corporation took the lowest level of new orders that it has ever recorded.
The outlook is very grim. It is aggravated by the huge surplus of ships that are laid up, and that are overhanging the market. At the end of 1982, around 80 million dead weight tonnes, equivalent to nearly 1,500 ships, was laid up. The position has worsened since.
British Shipbuilders' performance is dominated by its difficulties on the merchant side — which, understandably, is the focus of concern both publicly and in the House, but its difficulties on offshore work are almost as great. The offshore market has been fiat for several years.
The Government have taken measures to try to stimulate the market. Changes in the petroleum revenue tax regime were introduced in this year's Finance Act. Proposals on royalty relief are currently being discussed in a Committee of the House. These measures should at least do something to boost the market, but the full effect will take time to come through and, again, one cannot avoid the fact that there is a surplus of rig capacity overhanging the market.
Ship repair markets have also been much depressed this year. Post-Falklands refit work has helped some yards, both publicly and privately owned, but the market remains extremely tight.
Dr. David Clark: Will the Minister take this opportunity to state the Government's intention for the ship repairing capacity of British Shipbuilders? Does the Minister stand by his statement the other week in response to my question, when he said that it was doubtful whether British Shipbuilders should retain a ship repairing capacity?
Mr. Lamont: It is the view of the Government and of the corporation that the company should not remain in ship repairing in the long term. There is no doubt that there is too much capacity in ship repairing. There has to be reduction in it. I am afraid that there is no way of avoiding that.
I thought that the hon. Gentleman was going to refer to Readheads, our intention in that respect and whether there was a possibility of the workers' co-operative buying the yard. As I have said to the hon. Gentleman in answer to previous questions, the Government would look favourably on any proposition to buy from private interests, but there is the problem of the overhang of ship repair capacity. I understand that the general manager of the consortium, Mr. Richardson, and the board member
132
of British Shipbuilders, Mr. Hares, who deals with ship repair, met last Friday. They discussed the propositions and agreed to meet again as soon as possible. I very much hope that those discussions will lead to a resolution of the issue that will be satisfactory to all.
The problems are well known to hon. Members, many of whom take a close interest in the fortunes of the shipbuilding industry. They are painfully obvious to British Shipbuilders as it fights to get orders.
Mr. Roy Beggs: I recognise the need for increasing the limit of borrowing powers for British Shipbuilders, but will the Minister assure me that the order will not further disadvantage Harland and Wolff at Belfast, which should have been included in British Shipbuilders? Will the Minister assure me that all possible assistance is given to help finalise the Blue Star order for Harland and Wolff?
Mr. Lamont: It is not my purpose to talk about Harland and Wolff; as the hon. Gentleman knows, that is a matter for Ministers in the Northern Ireland Office. The order is not connected with Harland and Wolff. It is confined to British Shipbuilders. I shall draw what the hon. Gentleman said about the Blue Star order to the attention of my hon. Friend the Minister of State, Northern Ireland Office. Those matters are not within my control.
I have already referred to the recession in the world market. All west European shipbuilders are facing the same difficulties. There has been a spate of reports recently of closures and liquidations in west European shipyards. Competition from the far east is particularly fierce. The European shipbuilding industry must reorganise and restructure to meet the challenge of fierce competition from the far east and from newly industrialising countries. We have to find a European solution to the problems of shipbuilding—although, as I told the House on 19 April, the difficulties of getting an agreed EC line are very considerable.
All this adds up to a position of extreme seriousness for British Shipbuilders and, as hon. Members know, BS has asked the Government for special emergency help to get orders in the recession.
It is quite clear that the corporation's present difficulties are not a passing phase. The fiercely competitive markets that the corporation faces are not a temporary phenomenon. They are here to stay. Long-term problems need long-term solutions. We are not in the business of buying a short-term breathing space for BS. We must now consider the long-term future of the business.
BS has submitted a corporate plan, setting out its own views, and I have had a number of discussions with the chairman, Sir Robert Atkinson. The chairman-designate, Mr. Graham Day, who started as deputy chairman on 1 July, is also contributing to the development of a coherent, well-considered plan for the future development of BS.
It is important that our response should be in the context of an over-view of the business. Far too often in the past, we have rushed into short-term measures. We need to take a strategic look at the situation. We have a responsibility to the people inside and outside BS whose jobs depend on BS and to the taxpayer who has already put so much into this industry. We have to consider the corporation's future not in the short-term but in the long-term.
While plans for the future of the business are being formulated, I have told Sir Robert Atkinson that we are

133
prepared to give careful consideration to specific requests for help on a case-by-case basis, within the framework of our international obligations.
The Government have applied to the European Commission for approval to an interim extension of the intervention fund support until 31 October. The present intervention fund arrangements expire in mid-July.
I have discussed the workload with Sir Robert, and I am satisfied that the interim arrangements which I have described will provide adequate support for BS over the next few months, while we look at the business.
Mr. Robert C. Brown: The Minister has been talking of the ling-term future of British Shipbuilders. Is it still the Government's intention to privatise warship building? If that is the case, will not the hon. Gentleman agree that there is no future for merchant shipbuilding at all?
Mr. Lamont: We have never made any secret of our view that BS's warship building is a prime candidate for privatisation, but I do not accept that that will mean the end of merchant shipbuilding or do enormous damage to merchant shipbuilding. Merchant shipbuilding has to be competitive on its own and to stand on its own feet. If merchant shipbuilding can only survive on the back of warship building, there is very little future for it.
The measures that I have announced do not mean that BS will suddenly take a spate of orders — order prospects, with without Government support, are thin—but I believe that these arrangements provide a framework within which BS can continue to compete for what orders there are.
Although BS's two most recent orders have come from Mexico and Ethiopia respectively, the United Kingdom fleet continues to be merchant shibuilding's best customer. In 1982, 56 per cent. of the additions to the United Kingdom fleet were built in the United Kingdom. That looks small compared to the 80 per cent. and 90 per cent. figures recorded for some other countries, as has been pointed out in the House many times, but the United Kingdom fleet is by far the largest of an EC country which also has a developed shipbuilding industry. At 32 million tonnes, the United Kingdom fleet is second in size only to that of Greece. It is three times as large as the German fleet, and twice the size of the French and Italian fleets. In straight tonnage terms, United Kingdom shipowners have been placing a considerable volume of orders in the United Kingdom.
The year ahead will, I regret, be one of unprecedented difficulty for BS. Sir Robert Atkinson has said that BS is fighting for its life and that the industry's survival is now in question. BS must improve its performance by improving its competitiveness. It cannot keep looking to the Government to buy it out of trouble. BS is living in a fiercely competitive world and it cannot be insulated from it. It must be fiercely competitive and if it cannot or will not respond to that challenge, it cannot continue to demand financial support at the cost of other industries.
I hope that at every level BS will make the commitment necessary to turn its fortunes round. In the meantime it will continue to need financial support. The Government have made it clear that, particularly on the merchant shipbuilding side, they will continue to support the industry because that is necessary. However, there are limits to the extent to which we can go. I ask the House to approve the order.
12.1 am
Dr. John Cunningham: I thank the Minister for the way in which he introduced the order, which we shall support. It is a measure to bring extra financial support to BS, and, as I understand it, it will increase the borrowing powers to the absolute limit under the Act. As a result of this one stage, early in this new Parliament, if further financial assistance is required for BS it seems that new legislation will be likely.
However, we have several questions to ask about the need for the money and the purposes for which it will be used. The Minister has made a sombre speech about the current position and the future prospects of the industry. First, what will the money be used for? Will it go into investment or will it be used to run down the industry in some way? To what purpose will BS put the £100 million?
It is, as the Minister said, three months since the chairman of BS, Sir Robert Atkinson, asked the Government for emergency action to save the industry. It is about time that the Government came to a conclusion on the chairman's proposals. It is also incumbent upon the Government to announce those decisons while the House is sitting, given their importance to the United Kingdom generally and to Scotland, the north of England, Merseyside and Southampton in particular, and to shipbuilding as an employer.
The unions in BS largely support proposals for assistance made by the management of the corporation, but let us be in no doubt that the unions are equally firm in their rejection of enforced redundancies, further reduction in capacity in the industry, and the wage freeze that the management has urged them to accept. Those matters need early resolution if conflict in the industry is to be avoided. Those matters also hinge on the Government reaching a decision about the proposals put to them by the chairman.
The Minister mentioned the results for 1982–83, which sadly reverse the trend of an improving performance by the corporation. I hope that, as with the steel industry, no long-term decision about the future will be taken by the Government about the industry's capacity or its future on the basis of what may well be a short-term deterioration in its position. There has been a major slump in shipbuilding orders world-wide, but that has not stopped the Japanese or Koreans from filling their shipyards with orders, although the Japanese have accepted some reduction in capacity.
I press the Minister to make early decisions and remind him of the amendment that he moved to the motion that the Opposition tabled when we debated the industry's problems earlier in the year— That this House
"recognises the serious problems facing the United Kingdom shipbuilding and ship repair industries; welcomes Her Majesty's Government's measures to sustain those industries and to encourage them to compete effectively in international markets" —[Official Report, 19 April 1983; Vol. 41, c. 218.]
The Government's policies do not appear to be sustaining the industry at all. That is part of the problem. It is a question not just of financial support, but of support for obtaining orders in the United Kingdom and of Government policies to try to maximise the placing of orders by British firms in British shipyards. It is also a question of ensuring that public sector orders, paid for by the British taxpayer, come to British yards, unlike the

135
CEGB order which went to a Korean shipyard a few months ago. I urge those crucial policies on the Government.
The Minister of State said that a long-term solution to the industry's problems must be found. At this rate, there will be no industry. The industry is going down rapidly. If it does not survive, it will have died of Government neglect. The Secretary of State shakes his head, but the Government have been responsible for British Shipbuilders for over four years. We are not talking about a new Administration not having had time to grasp the problems. Throwing money at problems is not enough. How often has that been said by Tory Members? The industry needs much more than that.
In response to my hon. Friend the Member for Newcastle upon Tyne, North (Mr. Brown), the Minister refused to rule out privatisation. To talk about selling off profitable parts of an industry in the middle of a deep, world-wide crisis is like playing monopoly with the nation's industrial assets. It is like saying, "We are in trouble. Let's sell a little bit here and flog an asset or two there to pay the bills and get us out of the difficulties." Neither the Opposition nor the trade unions will support such a policy. Indeed, the Government can expect violent opposition to any proposals to dismember the corporation. That applies particularly to the ship repair sector which seems to be moving into a better phase in performance.
What do the Government intend to do about the Sir Tristram, which is anchored in the Tyne where its damaged superstructure is being cut away? Is that vessel to be repaired on Tyneside? May we have assurances about that specific case, because it is important to the people of South Shields which already has massive and mounting unemployment?
In the last debate the Minister talked about the need for action against Korea and Japan. What action has been taken by the EC in respect of those countries and what are the results? We hear talk about tackling the Japanese and the industrial operators of the far east. We have heard such talk before, and little, if anything, changes. As the United Kingdom accounts for only 3 per cent. of the world's shipbuilding capacity, it will make not an iota of difference to over capacity in the world if there are further closures in this country. It will, however, make a great difference to our long-term capability as a shipbuilding nation. As a maritime nation, we are pre-eminent in that respect among the nations of the EC and western Europe. Is not that the best argument of all for ensuring that our shipbuilding capability is sustained over a very long period?
I shall be brief, because many of my hon. Friends want to participate in the debate. Communities such as the Clyde, Tyne and Wear and Merseyside, where many thousands of families depend for their livelihood on the shipbuilding and ship repairing and associated engineering industries, will be at risk if no urgent decisions are reached by the Government. In Tyne and Wear, yet another 1,500 redundancies—
Mr. Don Dixon: It is 1,800.
Dr. Cunningham: My hon. Friend corrects me. A further 1,800 redundancies are being sought by August. That region has the highest unemployment level in the United Kingdom, with the exception of Northern Ireland.
136
In the Strathlyde region 21,000 people are employed in shipbuilding and marine engineering, and many more in associated servicing industries. West central Scotland is another area of massive unemployment.
My right hon. Friend the Member for Glasgow, Govan (Mr. Millan) is here to represent Scottish interests. What name can be more synonymous with shipbuilding than Govan? Neither we nor the trade unions can accept further massive unemployment in those areas. There is also Cammell Laird on Merseyside — another area of unacceptably high unemployment.
The Minister of State mentioned Britain's shipping fleet. He had nothing to say about the exchange of correspondence between the Prime Minister and Jim Slater of the National Union of Seamen about the future of Britain's fleet. The Prime Minister gave that industry no guarantees, and little comfort, about the Government's attitude to its survival. There is a massive and continuing decline in our merchant fleet, which is crucial to us in times not only of peace but of war, as we saw in the Falklands war. Britain's historic strength has been mirrored by our maritime capability, both merchant and military, and that is a lesson that Conservative Governments should not forget.
The shipbuilding industry is being forced to contract by the Government's attitude and lack of policy initiatives for its survival. It is no wonder that men are volunteering to leave the industry. They are disillusioned and fed up with the uncertainty. They believe that the industry is dying from neglect and indifference.
The Conservative Government, during their period of office, have provided money to support the shipbuilding industry, but they have taken no major policy initiative to correct the situation, apart from legislating to privatise the industry. The Government's rejection of an industrial strategy for shipbuilding has immeasurably worsened the plight of British shipbuilding in the worst international recession since the 1930s.
We believe that a plan for the industry's survival is now urgent. It should not be necessary to demonstrate the logic and commercial importance of a home shipbuilding industry and of a vigorous shipping policy for an island nation that is dependent for 90 per cent. of its trade on ships, and for its very existence in time of war on naval and merchant shipping. Shrill cries about free competition and vigorous market forces do not come anywhere near meeting the essence of the issue. All our competitors, including the United States of America, engage in policies of subsidy of shipping as well as of shipbuilding. Without comparable and determined policies, the British merchant shipbuilding industry will disappear within this decade.
Surely, the appointment of a new chairman and chief executive at the enormous salary that Mr. Day is receiving must herald the agreement by the Government of a new policy, wich will bring British orders to British shipyards and work to those highly skilled and dedicated shipyard communities throughout Britain. If that does not happen, the Government will be to blame.
12.15 am
Mr. Neville Trotter: A very grave situation certainly faces the whole shipbuilding industry not only in Britain but throughout the western world. One significant feature is that it does not seem to matter whether they are old yards that have had limited capital spending, or brand new yards in other countries, that have

137
been built in green field sites, because they face exactly the same problems as a result of the dramatic collapse of demand for every type of ship. We have seen nothing like it in the past 50 years. There is a lack of orders for every type of ship. In addition, there is competition from the very low-cost yards in the far east. It is no wonder that every hon. Member will express concern about the future of the industry.
I pay tribute to the way in which the Government have accepted the challenge. In the past four years they have put £750 million into the industry. They were right to do so and I congratulate them on that. However, we must look to the future, and there is a need now for some long-term plan for the industry. It will not be easy. Indeed it will be extremely difficult to arrive at such a plan, but it must be attempted. With the arrival of Mr. Graham Day in the very near future as the new chairman of BS, I should have thought that the time was ripe to face up to that task.
There is much uncertainty in the industry. There could not be anything else in the present world conditions. There is uncertainty in every shipyard in the world. I see no reason why merchant ship building cannot continue separately from warship building, but there is uncertainty about that and those who work in the yards need clarification in the near future. I do not see how we can continue to build merchant ships in any of the western countries without continued and very substantial Government financial support. All the western Governments must face that. I accept—as I believe do my hon. Friends on the Front Bench—that this country must clearly continue to have a merchant ship building capacity. I think that that is accepted on both sides of the House. It must also be recognised that it will be at a cost to public funds for a long time ahead until the fundamental imbalance in world shipbuilding changes.
The size of the British industry will depend, as it has in the past, not only on public money but on the productivity of those engaged at all levels of the industry. I was concerned to read some comments by the present chairman of BS, Sir Robert Atkinson, about the need for dramatic changes in productivity. He referred to the productivity gap being overwhelmingly large. That is an unfortunate factor in the equation.
There is some good news—although not much—about shipbuilding in Britain. Under Sir Robert Atkinson's leadership, there has been a dramatic move towards the greater use of computers. BS is now leading the world, I believe, in that direction. He is to be congratulated on the way in which he took the lead in bringing that about. The new designs, if only we could find orders for them, are world beaters. The new ships with their lower manning and fuel efficient engines will have a market when the world economy picks up. It is important that all those in the industry understand the need to increase productivity, although I understand the difficulty of doing that at a time of world depression.
We cannot match the Koreans and other far eastern yards, but we can match the other western European yards. There is no reason why we should not set that as our target. We cannot hope to match the low-cost yards in Korea, or, in future, China. After I first visited Korea in 1976 I warned the House that it would become a formidable competitor, but at that time all attention was focused on Japan. Now everyone is aware of what is happening in
138
Korea, where costs are a fraction of those in the west. In another 10 years, the same will happen with China. It will move into the shipbuilding industry in a big way.
Mr. Frank Field: The hon. Gentleman said earlier that there was a need for a long-term plan for the industry. Will he comment further on that?
Mr. Trotter: I said that with a new chairman it was time for the industry to produce its long-term plan. When it is produced, no doubt the Government will consider it and present their findings to the House. We can then debate the plan. I hope that that will be in the near future.
Mr. Field: The House would benefit by hearing what the hon. Gentleman believes should be in the tong-term plan. He brings particular expertise to these debates. It would be useful if we all tried to direct our attention to that need.
Mr. Trotter: There are three factors. The first is the need for increased productivity, the second the need for the right designs and the third the need for continuing public support. I see no alternative to those. Then we can argue about how large the industry should be. I do not know what the new chairman's views will be, but I expect that he might put a series of alternatives to the Government. That is what I would do. It will then be for the Government and the House to decide upon the action to be taken.
We must not write off the industry. I do not think that any hon. Member does so. The British people and all hon. Members believe that there is a need for merchant ship building to continue. That is one of the messages that must come out of this debate.
Mr. Robert C. Brown: Many of the hon. Gentleman's constituents work at Swan. Hunter. Does he support the Government's intention to privatise naval shipbuilding? If so, does not he agree that Swan, Hunter cannot survive without naval orders?
Mr. Trotter: I do not accept the logic of the hon. Gentleman's remark. Swan, Hunter is not a pure warship builder— it is half warship builder and half merchant builder. That presents a category of its own. I do not think that another major yard comes into that category. There should be no problem. I want Swan, Hunter to be able to compete in building complex ships. Without going over too many old arguments, I was disappointed that the Tyne did not build the liner for P and 0. It was an ideal ship to be built on the Tyne. Its predecessor for the Norwegian line was built there successfully. Swan, Hunter's great expertise in warship building should equip it well to build the difficult merchant ships, not the simple ships that the Koreans can build with their cheap labour. That is the future for Swan, Hunter. I do not think that privatisation will affect that. If the hon. Gentleman asks whether people will buy yards that need the continuing support of public money, my view is that they will not.
The message tonight must be that there is a future for merchant shipbuilding in this country. The problems are great, but the size of the industry in part depends on its efficiency and the efforts of those in it, as well as upon continued support from the Government.
12.25 am
Mr. Nicholas BrownThank you, Mr. Deputy Speaker, for enabling me to make

139
my maiden speech in this shipbuilding debate. My constituency is a shipbuilding community. It used to be a thriving shipbuilding community. I understand that it is a tradition of the House that maiden speeches should not be controversial but it is very difficult truly to represent a shipbuilding constituency and not be controversial.
In parts of Newcastle upon Tyne, East, male unemployment is over 40 per cent. In parts of the constituency, young people have lost hope of any real future, and it is sometimes reflected in their attitude to the rest of the community.
The average age of my constituents has been increasing for some time, and elderly people in my shipbuilding community are worried. They worry about paying the electricity bill, about rising urban crime, about continued social service and health service provision, and about the loss of bus services. Tyne and Wear seems to be singled out for special cuts beyond those inflicted on other transport authorities. Elderly people worry about vandalism and would like to see a real commitment to a community police service. They worry about the houses they live in and they worry about the long waiting lists for sheltered housing.
Overshadowing my constituency is the threat of yet further job losses in the shipbuilding industry. Those who work in shipbuilding harbour three main fears. They fear that the Government seek to return to the era of casualisation for the work force. They fear a return to the days, which some of the older workers in the shipyards can remember, of standing on the gates to see whether there was work. It is totally unacceptable to them that there should be a return to those days. Already too many of my constituents have endured short-term contract work or nothing at all. At present it is "nothing at all" for most of the men who would like permanent work and are prepared to accept short-term contract work but cannot find anything.
Secondly, and worse, my constituents fear that merchant shipbuilding and ship repair may be lost to our community — indeed, to our nation— altogether. The decent hard-working people who look to the shipbuilding industry for their livelihood expect something better from the Government than the instruction to compete with South Korea. We do not want to compete with a police state, slave wages and rotten working conditions. We cannot and we shall not, and we expect the British Government to protect and preserve a merchant shipbuilding capacity for Britain. At the very least, the Government could show the same determination as other European states. What a wicked thing it was to invest our wealth and our knowledge in such a way that it added to the world overcapacity in shipbuilding and ship repair, distorted the South Korean economy and ensured the industrial enslavement of South Korean workers.
The third fear that my constituents have is that the construction of warships will be held back until parts of British Shipbuilders have been privatised, and that then the orders will be committed to the new private yards. I hope that that fear will not be substantiated, and that the Ministry of Defence will dispel our fears by committing now the two minesweepers allocated to Clelands, and not hold back until 1985. I endorse the appeal that Tyne and Wear county council has made today to that effect and hope that we shall get a positive response.
140
It is sometimes argued that new jobs will come to communities such as mine to replace the old. My constituents are asking, "If that is so, where are the new jobs?" They will not be found at Parsons, the large engineering works that, together with British Shipbuilders, dominates the employment profile of my constituency. They certainly will not be found at Dunlop, Walker, or the tar works, or Berger paints division in Newcastle upon Tyne, because they have all closed.
The only large employer that is preserving jobs in my constituency is the local authority, and all credit to the city council for that, but increasingly the cost is falling on the already overburdened local ratepayer as central Government withdraws from their commitments to the local community.
I understand that it is traditional to praise the beauty of one's constituency. Parts of my constituency are very attractive, but other parts of it are downright ugly. We cleared away many of the old slums and now we have to clear some of the new slums. Central Government must not be allowed to run away from their share of the responsibility for what happened in the recent past. Central Government have an obligation to help local authorities rebuild their housing stock to a decent standard.
As a city council, Newcastle prides itself on its education service, and it certainly spends its money on that service. When things go wrong, the local educational establishment is protective rather than energetic. A local inspector's report has severely criticised teaching standards in the Walker secondary school. I wish to make it clear that I will not have that issue hushed up.
I understand that it is traditional in a maiden speech to refer to one's predecessor. I cannot claim to have broken the mould of British politics, but I have scraped some of it off. I should like to pay tribute to my former Member of Parliament — I live in the constituency — whom I remember for his consistency, and for his loyalty to his party and to the supporters in his party. I remember him for his charming and kindly personal demeanour and for his willingness to accept—I too hold this view—that it is possible to hold different political views and still be a person of integrity. Although he was always a political opponent, I should like to pay this tribute to Sir William Elliott, the retiring Member for Newcastle upon Tyne, North and the retiring Member for the Sandyford ward of what is now Newcastle upon Tyne, East.
12.31 am
Mr. Don Dixon: I should like first to congratulate my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) on his maiden speech. My hon. Friend spoke of the problems in his constituency and of his relations with the former hon. Member for Newcastle upon Tyne, North, Sir William Elliott. My hon. Friend referred to the people standing around waiting for jobs. I stood in the Naval yard, which is in his constituency and I have experienced those problems. I know the sufferings of those men who stood in all types of weather, waiting for the foreman to come out on the platform and say which men he required for a particular day. I agree wholeheartedly with my hon. Friend that we will not go back to those days in the shipbuiding industry. The sooner the Minister gets that through his head the better, and the sooner Robert Atkinson and the rest of British Shipbuilders' board get that through their heads the better. Enough is enough.

141
We shall not vote against the order because, as I have said many times, nobody wants to shoot a one-legged Father Christmas. The men who work in the shipbuilding industry want to hear something positive from the Minister and the Government about their future. The Minister talks about investment in the industry but he starts from the wrong position. When the industry was in private hands, investment was deplorable. I worked in the industry when it was in private hands. A survey was carried out in 1970 on investment and assets per worker in the shipbuilding industry. In the British shipbuilding industry, assets per worker were £825; in West Germany the figure was more than £1,000; in Sweden, it was more than £1,200; in Italy, it was more than £1,800; in Japan, it was more than £2,800. Those are the conditions that prevail in private industry. When the Government are talking about investment they should start from there, and not from nationalisation.
The Minister posed a question. He asked whether we could carry on supporting the industry in the present way. The question that he should be asking is whether we can afford not to support the industry in that way. The answer is no. Everyone knows that we cannot afford to allow the British shipbuilding industry to go down.
We live on an island. My hon. Friend the Member for Copeland (Dr. Cunningham) pointed out that 90 per cent. of our trade by weight is carried by sea. Seven eighths of the world is covered by water. We require not the sort of nonsense we hear repeatedly from the Minister but a maritime policy. The Select Committee on Industry and Trade interviewed members of the British Shipbuilders' board, trade unionists and indeed the Minister himself. The committee recommended that Britain should have a maritime policy. It is imperative that we should have a maritime policy. The fact that the Minister is called the Secretary of State for Trade and Industry perhaps indicates that the Government intend to pursue such a policy. One hopes that is the case because such a policy is vital for our shipbuilding industry.
It is about time that British shipowners started building in British yards. When a question was asked in the European Parliament by the Member for South Tyne and Wear, Miss Joyce Quin, she was given the information that Belgian shipowners ordered 94·4 per cent. of ships in their own yards; that French owners ordered 91·8 per cent. in their yards; Italian owners, 99·4 per cent.; and United Kingdom owners, 47 per cent. It is time that our shipowners realised that we expect more from them when it comes to placing orders at home. Indeed, our owners have the worst record in Europe.
Let us consider the orders that have gone abroad since the Falklands dispute. The Atlantic Conveyor would not have been replaced in this country had it not been for public opinion and the patriotism of Lord Matthews; he must have read some of the articles in the Daily Express during the Falklands crisis. There should be an inquiry into why the Cunard Countess order went to Malta. If British Shipbuilders could not compete with Malta on that, we should know why because, frankly, I do not understand how that order came to leave this country.
The hon. Member for Tynemouth (Mr. Trotter) referred to the P and O liner, the order for which went to Finland. My right hon. Friend the Member for Salford, East (Mr. Orme) wrote to the Prime Minister asking why the order for that cruise liner—at £90 million, the largest order placed by P and O — went to Finland. The Prime
142
Minister replied that Swan, Hunter or Harland and Wolff did not get the order because they did not have the necessary finishing trades.
It was nonsense to suggest that the finishing trades were not available in the Tyne and Wear area or at Harland and Wolff when national newspapers announced that the chances of a steel worker getting a job in the Tyne and Wear area were 71 to one; a painter, plumber, electrician or joiner, 45 to one; and an unskilled worker, 371 to one. For the Prime Minister to suggest that there were not sufficient finishing tradesmen in the area to complete that order was criminal.
We have said time and again that since the Conservatives came to power, British Shipbuilders have not had a proper deal. Indeed, the Prime Minister has the shipbuilding board terrified to put in for some orders in case the board is accused of overspending. The cash limits imposed by the Government are holding British Shipbuilders back, but I must not go into that in detail because my hon. Friend the Member for Sunderland, North (Mr. Clay) and others wish to speak. Many Members who are involved in the shipbuilding industry know Mr. Ken Douglas, who runs Austin and Pickersgill Ltd. He is a well known and much respected figure in the industry. He is a good manager and is not a political animal. We hear constantly about competition, productivity and the open market but in an article that appeared in The Guardian Mr. Douglas wrote:
"We are not competing against the Japanese shipbuilder or the Japanese shipyard worker, or the German or the Belgian or the Dutch or anything else. We are competing as a Government with Government terms offered elsewhere and it is a purely political thing. If Japan is giving a 50 per cent. subsidy, half the price of the ship, what kind of productivity levels would we have to reach to compete with that? If our men built the ship for nothing, we still can't win."
Every country is subsidising its shipbuilding industry, including our colleagues in the EC. Sir Robert Atkinson asked recently how long Britain would continue to fight to the Marquess of Queensberry rules when everyone else was indulging in all-in wrestling.
The sooner that the Government support the industry during the world recession and at this time of unfair competition the sooner there will be a future for the industry. Morale in the industry is low and the workers have no confidence in the Government. If the Government want the industry, they should recognise its present state for what it is. It is about time that they realised what has happened and acted accordingly. If we ever have another Falklands dispute, there will be no shipbuilding industry and no one will be available to get the task force ready. The Prime Minister will not be able to ride again on the popularity bandwagon that she has been on since last year. The Government must act positively and provide long-term assistance that will lift the morale of the industry and give our people some sort of future.
12.42 am
Mr. Bob Clay: Thank you, Mr. Deputy Speaker, for allowing me this opportunity to address the House on the appalling problems that my constituency faces because of the Government's attitude to shipbuilding and other industries. It is an opportunity for me to talk about the reality that lies behind the regurgitation of statistics and the chatter and jocularity that

143
I have witnessed on the Government Benches over the past few weeks whenever we have discussed mass unemployment and the collapse of our traditional industries.
Before dealing with those matters, I wish to pay tribute to the previous Member for Sunderland, North, Fred Willey. I know that Fred would not wish me to use too many words in honouring tradition when the pressing task is to speak for the shipyard workers, miners, other workers, and the workless, of Sunderland, the people for whom he spoke for so long and so persistently. Fred came into the House at the time of the great 1945 Labour landslide. It is sad that he should have left at a time when the Government clearly intend to continue apace the destruction of so much of what the 1945 Government achieved, which was built upon by subsequent Labour Governments.
The most frequent comment made about Fred by so many friends and colleagues is that he was a man of the greatest courtesy and patience. It is idle to speculate on the degree to which his exceptional qualities would have been strained by what is now being perpetrated on the town which he represented for so long. I hope that he will understand if I fail from time to time to control my bitterness and anger to the same degree as he did at what is being done to my constituents.
I make no apology for referring to bitterness and anger. I can only hope that I shall find the means to communicate succinctly to the House the irrelevance to my constituency of the talk of economic recovery and, more importantly, the real threat to democracy that begins to emerge in areas that have been all but abandoned. As my hon. Friend the Member for Copeland (Dr. Cunningham) has already said, the order is hardly relevant or helpful to the problems facing British Shipbuilders. An increase in borrowing power does not assist in winning new orders in the face of ruthless and unfair competition from the Korean yards. An increase in the borrowing limits does not alter the pitifully small intervention fund and the inadequate proportion of it that is available to win orders. It does not present British Shipbuilders with any opportunity for substantial investment in the industry; it merely reflects the increased debt due to the absurd level of interest charges that our shipbuilders face compared with those in other European countries and Japan.
How I wish that we had been debating not a £100 million increase in borrowing limits but a £200 million emergency package of direct assistance to British Shipbuilders for the next year to help it to improve substantially the pay and conditions of a highly productive, hard-working underpaid work force, to enable BS to compete more effectively with its more heavily subsidised overseas counterparts. I wish, even more, that the Minister had made an announcement of immediate Government orders for our merchant yards—a scrap and build programme and proposals for tough and immediate action to force British shipowners to build in British yards as the Americans do with their industry.
I question seriously the likelihood of the Government taking any action against the shipowners who talk so loudly of patriotism in other quarters while they have their ships built and repaired anywhere but in Great Britain. They pay their political levy to the Tory party and appear to be getting good value for their money. The Government
144
remain inactive and allow them to wreck a major British industry in pursuit of nothing but profit in the cheap labour markets of the far east.
It is interesting to dwell for a moment on that political levy. British and Commonwealth Shipping Co. Ltd. paid £95,810 to the Conservative party in the 12 months up to August 1982. The entire political levy paid to the Labour party by trade unionists employed by British Shipbuilders is calculated to be about £37,800. It is less than the £40,000 donated by Trafalgar House, the owners of Cunard, to the Tory party in that year.
In the light of what is being done to shipbuilding, it is scandalous that the Secretary of State for Employment shold have come to the House last week with proposals intended to restrict the political levy paid to the Labour party while at the same time refusing blatantly to interfere with the political levy paid by companies to the Tory party.
Nor is it true, as the Secretary of State for Employment claimed last week, that shareholders do not complain about such payments. Tyne and Wear county council, distressed by the Government's cavalier attitude towards industry, has written, as administrator of a local government pension fund with investments in excess of £130 million, to every major company with whom it has money invested, asking why they have donated money to the Conservative party. Councillor Michael Campbell, the leader of Tyne and Wear county council, attended the annual general meeting of Trafalgar House to voice anxiety about Cunard's disgraceful attitude towards British Shipbuilders. I hope that hon. Members will pay close attention to such factors when considering the trade unions' political levy.
The meagre and utterly inadequate nature of tonight's order reflects the criminal philosophy followed by the Government. In my view — tonight's statement reinforces it — the Government's attitude, as other Opposition Members have suggested, is to let shipbuilding go under and to write it off. We are told continually by the Government that we cannot hang on to dying industries and that we must look towards small businesses, new technology and so forth. I shall show what utter and tragic nonsense that is in my constituency.
The borough of Sunderland already has 25,885 people unemployed. That is over 20 per cent. of the work force. In many areas of the borough, it is over 50 per cent. This month another 4,500 shool leavers will join the search for work. They will join the other 26,000 in competing for 52 vacancies. About 1,100 of the 1,800 redundancies referred to by my hon. Friend the Member for Copeland will take place on the river Wear. British Shipbuilders will then employ less than 6,000 on the Wear.
Two of the pits which, according to the report of the Monopolies and Mergers Commission, should be closed are within the Sunderland district and others nearby employ thousands of Sunderland's workers. The collapse of British Shipbuilders on the Wear, and the closure of the pits threatened by the hit list, which has been for so long denied but which is now so clearly confirmed, would lead to over 9,000 direct redundancies in those two companies in the borough of Sunderland. Allowing for the most sober estimates of the effect on companies and services directly and exclusively dependent on British Shipbuilders and the National Coal Board, we should face unemployment of 58,000–45 per cent. of the work force. That is before we take into account all the spin-off effects of such a collapse of work. How many fish and chip shops or

145
microchip shops, video pirates, second hand car dealers, information technology agencies and disinformation opinion pollsters will it take to replace even the tiniest fraction of those jobs in pits and shipyards?
On the river Wear, where once we built half the world's tonnage of shipping, the two British Shipbuilders subsidiaries, Sunderland Shipbuilders and Austin Pickersgill, have taken on the grand total of 10 apprentices each this year. What possible hope can we have for the future of all the skills and traditions for which Sunderland is known throughout the world, when, out of 4,500 school leavers, the town's biggest employer takes on only 10 apprentices?
The Prime Minister should remember the Austin Pickersgill yard—she has been there twice to perform the ceremony of launching a ship. On the second occasion, the entire work force chose to clock off and go home before the launch to demonstrate their contempt for her policies. On both occasions she praised the efficiency and speed of production methods in the yard and called it an example of the achievements of British enterprise. I wonder whether she would dare come back now and face that work force, which is facing 700 redundancies out of the 1,100 already mentioned, when her policies have led to such despair and demoralisation and when this example of successful enterprise takes 10 apprentices this year and faces 700 redundancies.
Last year, 522 young people applied for apprenticeships at Austin Pickersgill. This year, the applications have dropped by nearly half, to under 300. That is a measure of how the youth of our town is increasingly giving up. More and more see no point in the search for work, see no hope for the future and have sunk to the utmost apathy and general hostility to our society.
Among all the froth and petty point-proving analysis of the fate of all parties at the general election, the most important fact is the increase in those, particularly young people, who have no wish to vote. In areas in my constituency, they will not even answer the door to any party. They are drifting away from any interest in the democratic process. As their numbers increase, and their despair intensifies, their passivity will not continue. Increasingly, they will retaliate with nihilistic fury against the society that has imposed this misery upon them, and our speculations about the relative fortunes of one parliamentary party or another will be placed in a different perspective by their activity. Measures of the kind that we are considering will be exposed as not merely inadequate, but irrelevant.
12.50 am
Dr. David Clark: I pay tribute to the speech of my hon. Friend the Member for Sunderland, North (Mr. Clay). We listened with great interest to his predecessor speaking in shipbuilding debates, and we listened today to my hon. Friend with great interest as well. There was much sincerity in his speech, and I enjoyed the powerful way in which he marshalled and used his facts to good effect. He will make himself a great reputation in the House if he continues to put forward arguments in the way that he did, and he is to be congratulated on the meaningful way that he did so. I also pay tribute to my hon. Friend the Member for Newcastle upon Tyne. East (Mr. Brown), who made a deep impression on the House.
146
I do not want to detain the House for more than a few minutes. We are discussing an order that increases the financial aid to British Shipbuilders, and I wish to speak about its ship repairing facilities.
The Minister's intervention and remarks on this aspect of British Shipbuilders earlier caused me some concern.
I understood the Minister to say that there was probably too much ship repairing capacity in the United Kingdom and that he doubted whether there was a long-term future for BS in that business. I take it that he means that the ship repairing capacity of BS should be made redundant. The hon. Gentleman should tell us whether he believes that the Middle docks in my constituency, which were saved after a great fight only a short time ago, should be closed. That is a matter of great importance on the Tyne. If the Minister is saying that the docks should be closed, it would cause great sadness and bitterness in the area. It may be unpalatable, but we should like a frank answer from the hon. Gentleman.
The Minister mentioned Readhead shipyard. I understand that we are talking no longer about a workers' co-operative, but about a limited liability company in which most of the shareholders will be former workers in the yard. My comments are in line with what I said about the Middle docks. It would be lunacy to reopen a private yard to employ 70 people if that put at risk a state yard employing several hundred workers and the private Smith's ship repair yard across the river, which also has several hundred employees.
I speak with some trepidation, but I must be frank with the House and my constituents. It would be silly to sacrifice up to 600 jobs on the altar of 70 jobs Will the Minister make it clear that it is not the Government's policy to have the only repairing facilities on the Tyne catering only for small vessels and that the Middle docks and Smith's yard should be closed?
Ship repairing is an integral part of BS. It would be nonsense to close that facility.
Mr. Trotter: I am sure that Smith's will face any fair competition. The firm's main complaint in recent years is that more than £13 million of taxpayers' money has been used to keep open the state yards on the Tyne. I do not believe that Smith's feels that it would be put at risk if there were a change on the other side of the river.
Dr. Clark: I do not want to get involved in a long argument. I understand what the hon. Gentleman says, but fair competition means equal labour conditions. Smith's and the nationalised yard have minimum standards of labour conditions. As long as those are adhered to, there will be fair competition.
12.58 am
Dr. Norman A. Godman: I shall move north-westerly from the Tyne to the lower Clyde. I am pleased to have heard in the debate two maiden speeches of such high quality.
In my constituency, shipbuilding and marine engineering together still form the economic backbone of the community. We are pressed for time, so I shall merely ask the Minister three questions, two of which are of direct concern to those on the lower Clyde.
First, is it not possible to allow one of our shipbuilding yards engaged in offshore operations to build a semi-submersible rig on spec and to sell it while it is under construction?

147
Secondly, is it not possible to reduce to three months the lead in time from the commencement of the building of the first type 2400 conventional submarine and the subsequent order?
My third question, in the light of what has been said about Britain's shipowners placing many orders in foreign shipyards, is a direct quotation from the July edition of Shipping World and Shipbuilder:
"is it not time that British shipowners were somehow forced to assist the plight of the shipbuilders by placing a larger percentage of their orders with UK yards? After all, this system is what apparently makes the leading shipbuilding nations become leading shipbuilding nations."
1.1 am
Dr. Cunningham: With the leave of the House. I would not want to let this occasion pass, without, on behalf of my right hon. Friends the Members for Glasgow, Govan (Mr. Millan) and Salford, East (Mr. Orme), congratulating our hon. Friends the Members for Newcastle upon Tyne, East (Mr. Brown) and Sunderland, North (Mr. Clay) on their maiden speeches. They both, in their differing styles, brought a force and clarity to their arguments on behalf of their constituents. I congratulate them both warmly. I know that we shall hear a lot more from both of them and that they will make a positive impact on discussions in the House, not restricted, as this one is, largely to the areas that they represent, but across the breadth of industrial and social policy. By coincidence, I am also proud, with them, to be a member of the General, Municipal Boilermakers and Allied Workers Trade Union, which represents the largest number of workers in the shipbuilding industry.
1.2 am
Mr. Norman Lamont: I should like to join in the congratulations to the two hon. Members who made notable maiden speeches. The hon. Member for Newcastle upon Tyne, East (Mr. Brown), spoke movingly and with deep concern about high unemployment in his constituency and made it clear that he intended to be an effective and forceful representative. As the Minister responsible for shipbuilding, whatever disagreements we may have about shipbuilding policy, I am under no illusion about the deep problems of high unemployment in constituencies that for so long have been heavily dependent upon shipbuilding. What the hon. Gentleman said struck an echo with me. It was an extremely effective and persuasive speech.
The only point on which I have a slight quarrel with the hon. Gentleman was when he referred to Korea and said that we do not want to compete with a police state. We may or may not like the internal regime of South Korea, but we have no option but to compete with it. Korea is in the world market. We have to compete with it. It is among our fiercest competitors.
The hon. Member for Sunderland, North (Mr. Clay) also made a forceful speech. He paid a tribute to the previous Member, Fred Willey, who always attended these debates. He was very knowledgeable about the shipbuilding industry. His experience went back to the pre-war era. I remember that on the Shipbuilding Bill, in a scrap-and-build clause debate, Fred Willey dissented from other Opposition Members—he was a bit sceptical about scrap-and-build because his memory went right back
148
to scrap-and-build policy of the inter-war era. He spoke with great conviction and enormous knowledge that went back a long time. He is very much missed in shipbuilding debates by hon. Members on both sides of the House.
The hon. Member for Sunderland, North made an effective and forceful speech. He said that he hoped right hon. and hon. Members would forgive him if his bitterness occasionally spilled over. But he was a bit wrong in one of his continents. He said that the order did not make much difference because it was concerned only with commercial borrowing and was not giving assistance to BS. It merely let the corporation borrow money at usurious rates of interest.
Perhaps it is unfair to expect the hon. Gentleman to realise that, for statutory powers, public dividend capital counts as borrowing. The order allows more public dividend capital to be advanced to BS—unremunerated, unpaid back and with no interest. I am afraid that the hon. Gentleman is wide of the mark if he thinks that the order merely allows the corporation to borrow money from the commercial banking system. It allows the Government to advance more money to BS. That is what the order is about, and that is why I said it was an earnest of the Government's support for the industry and for BS. That may be why the hon. Member for Copeland (Dr. Cunningham) was a little muted in his criticism.
The hon. Member for Copeland struck a new note. Normally he says that the Government are not doing enough to support BS. Tonight we heard more of a republican tune, because he pointed out that we could not solve problems by chucking money at them. I agree, and, by putting it that way, the hon. Gentleman appears to recognise that the Government have provided a lot of support for BS. He asked what the money would be used for. It will be used partly for working capital and partly for capital investment. But it is substantial support for BS.
The hon. Member for South Shields (Dr. Clark) asked about Middle docks. There is no Government view about Middle docks. That is a matter for BS. The Government regard BS involvement in ship repairing as an activity that is eminently suitable for privatisation. There is considerable overcapacity in ship repair, and one of the most worrying features is the competition between the public and private sectors. So many private sector ship repair yards feel that they are up against unfair competition from BS.
The hon. Member for South Shields showed a slightly schizophrenic attitude. He became very indignant when I said that there was overcapacity in ship repair, yet he was rather against the Readhead's buy-out getting off the ground, because he felt that that would damage the existing state yards. He seems to recognise that there is overcapacity. He felt that if Readheads workers were able to buy the yard, that might add to the overcapacity or put back capacity that had already been taken out.
There is one great difference about the Readheads' buyout. Those people would be going into the market place and competing with their own money, without subsidy and without support from the taxpayer. That is why the idea of a co-operative taking over the Readhead's works is a good one and one which I hope the BS management will look at sympathetically. I have urged the corporation to do that. If those workers want to chance their arm and compete with their own money, they should be given every encouragement to do so. I hope that there will be a positive outcome to the discussions about Readhead's.

149
My hon. Friend the Member for Tynemouth (Mr. Trotter) talked about how we should approach the corporate plan and the long-term problems of BS. He was asked what would be his priorities for BS. He said that he would draw up the plan by putting the emphasis first on productivity and secondly on design. My hon. Friend was right. We have given tremendous support to BS. Of course there is not a free market in shipbuilding; nobody says there is. The Government have been involved in and supported BS but at the end of the day it is productivity and design that will make the difference between Britain and other countries and whether we really can meet the competition from the low cost countries.
Mr. Field: The Minister struck a sombre note in his speech earlier and said that the Government were waiting for BS to put forward its corporate plan. Can we take it from that that when the Government receive that plan they will bring one of its alternatives to the House, or will they put forward their own proposals for the long-term future of the industry, not those put forward by BS?
Mr. Lamont: We have already received the corporate plan from BS and we are discussing not one but several options. I shall obviously keep the House informed about that.
Competition from the far east has been mentioned, and one hon. Member mentioned the Cunard Countess. Although that was a controversial order, it seems to have been forgotten that although many said that the Maltese would not be able to do it, that they were being unrealistic and had somehow cheated and got the order under false pretences, the work was completed in the stipulated time of 42 days. There seems no doubt that they did a good job.
That has been the history of so many orders about which the House has become indignant, feeling that the orders should go to BS. We have simply not been able to compete on either delivery date or price. We heard much talk about how the Cunard Countess would never be completed on time by the Maltese, how BS was being realistic while the Maltese were not. The sad truth was that we could not be competitive on that order.
The hon. Member for Greenock and Port Glasgow (Dr. Godman) asked me whether—
It being one and a half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted Business).
Question agreed to.
Resolved,
150
That the draft British Shipbuilders Borrowing Powers (Increase of Limit) Order 1983, which was laid before this House on 22nd June, be approved.

CAR TAX BILL [LORDS]
Ordered,
That in respect of the Car Tax Bill [Lords], notices of Amendments, new Clauses and new Schedules to be moved in Committee may be accepted by the Clerks at the Table before the Bill has been read a second time.—[Mr. Garel-Jones.]

MEDICAL BILL [LORDS]
Ordered,
That in respect of the Medical Bill [Lords], notices of Amendments, new Clauses and new Schedules to be moved in Committee may be accepted by the Clerks at the Table before the Bill has been read a second time.—[Mr. Garel-Jones.]

VALUE ADDED TAX BILL [LORDS]
Ordered,
That in respect of the Value Added Tax Bill [Lords), notices of Amendments, new Clauses and new Schedules to be moved in Committee may be accepted by the Clerks at the Table before the Bill has been read a second time.—[Mr. Garel-Jones.]

Statutory Instruments, &c.
Mr. Deputy Speaker Mr. Ernest Armstrong): To save the time of the House, I shall put the Question on the remaining four motions together.
Motion made, and Question put forthwith, pursuant to Standing Order No. 79(5) (Standing Committee on Statutory Instruments &c.

Statutory Instruments, &c.
  SEX DISCRIMINATION
  That the draft Sex Discrimination Act 1975 (Amendment of Section 20) Order 1983, which was laid before this House on 22nd June, be approved.

  WEIGHTS AND MEASURES
  That the draft Weights and Measures Act 1963 (Wine and Grape Must) Order 1983, which was laid before this House on 28th April, in the last Session of Parliament, he approved.
  That the draft Weights and Measures Act 1963 (Amendment of Schedule 3) Order 1983, which was laid before this House on 28th April, in the last Session of Parliament, be approved.

  INTERNATIONAL IMMUNITIES AND PRIVILEGES
  That the draft International Jute Organisation (Immunities and Privileges) Order 1983, which was laid before this House on 29th June, be approved.—[Mr. Garel-Jones.]
  Question agreed to.

INMOS
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Garel-Jones
1.12 am
Mr. Jack Dormand: I raise the question of the future of INMOS tonight for several reasons, all of which are related to the uncertainty of that future. I am proud of the fact that INMOS was established under a Labour Government. It was a far-sighted decision, taken at a time when it was thought that there was some doubt about the manner in which the microchip industry would develop.
INMOS was formed in 1978 with the aim of ensuring that the United Kingdom had its own source of mass market microchips. Since then, £65 million of public money has been invested in the project, with another £35 million in loans and guarantees. The company made a loss of £20·4 million last year, although sales had risen from £2·1 million to £13·7 million—a significant increase by any standards. However, there is widespread agreement that there will be a profit next year.
INMOS's first product, the 16K Static RAM, has taken more than 70 per cent. of that specialised world market, selling to about 100 of the biggest computer and electronics companies. That market is still growing, but properly and wisely INMOS has begun to produce its version of the 64K RAM by which it hopes to be taken into profit more quickly. I hope that the Minister will confirm the basic facts that I have described, because they are relevant to my argument.
We read in newspapers and journals that INMOS is finding it difficult to raise the capital that is vital to the company's continuing success. I appreciate the vagaries of the money market, but I am puzzled that there should be this difficulty for at least three reasons. First, we are constantly told by the Government that the country's economy is well and truly on the upturn. Secondly, we are told that INMOS's record must give cause for confidence. Thirdly, we are told that it is an industry, the products of which are almost certain to stay in demand for a considerable time.
My view is supported by a report in The Guardian of 2 July in which it is said that Britain's problems in finding high risk investment are becoming a thing of the past. Mr. Gordon Edge, chief executive of the PA consultancy firm which is much involved in this industry, is reported as saying that this country's financial institutions have changed their attitude dramatically and that there is now no shortage of high-risk finance, not just for quick return ventures such as home computers, but for the long-term underlying technologies, such as microelectronics.
Why are the Government so hesitant about injecting more capital into INMOS? When a further £15 million was put into the company in February last year, it was suggested that that would be the last public money to go into INMOS. In view of the company's potential, we must assume, as we have had to assume with so many of this Government's actions, that it was a doctrinaire decision based on the free market and laissez-faire dogmatism that pervades everything that the Government do, regardless of the merits of the case.
The Government should think again and take heed of the view of Sir Ieuan Maddock, the former chief scientist at the Department of Industry, who, in an article two
152
months ago, argued that microelectronics, because of its nature, including the exceptional amount of its turnover which needs to be spent on research and development cannot be left to the influence of the market. His conclusion was unequivocal and forthright. He said:
"If the United Kingdom is to survive in this competition it will have to commit large resources and much national determination to the task."
For the word "determination" we could substitute "will" in relation to this Government, because they are blind to the value and place of public enterprise in our society.
Recently I have heard reports that INMOS is to be sold off to private enterprise. In view of the Government's record, no-one would be surprised if they were thinking along those lines, but most reasonable people will agree that there is less reason to privatise this company than other industries which have been vandalised by the Government's denationalisation policy.
The Minister will agree that INMOS has built up a splendid reputation. I doubt whether any similar company could claim to have greater expertise or more dedicated management. In spite of its difficulties, it has become known for its innovation and design. Its factories at Colorado Springs and Newport in Wales are recognised to be among the finest in the business.
There is a danger of a doctrinaire destruction of public enterprise, simply because it is public enterprise. I hope that even this Government will not indulge in such folly, particularly at this stage of INMOS's development. INMOS claims that its Newport factory has the lowest operating costs of any semiconductor plant in the world. I do not know whether that claim can be fully justified. If it can, the Government would be hard pushed to justify a sell-out.
I am aware of the substantial changes that have taken place in the industry since 1978, when INMOS was established. There has been increased competition from Japan, but it would be foolish in the extreme to rely on that country, particularly when our own company is doing so well. If we had continued to rely on oil from the middle east instead of developing our own resources, we would have faced immense difficulties. It could be argued that there is a parallel with the microchip industry.
Inevitably, the multinationals have entered the field. INMOS remains Europe's only independent company in the world business of making microchips, and I have given an idea of its success.
On 25 June The Economist reported that some powerful business men whose firms use chips were lobbying the Government about keeping INMOS going under British control. It would be interesting and useful if, when he replies, the Minister could tell us whether there is any truth in that statement. After all, the Government claim to listen to business men. The Minister should be able, without hesitation, to confirm or deny the reports which we read on this aspect of the matter.
It would also be valuable if the Minister could say how far, if at all, talks between INMOS and the American firm Commodore have gone. They have been reported in at least two newspapers, but the Government seem determined to maintain secrecy about what could be a most important development. Has any other firm shown the same interest? Are the Government encouraging such discussions?

153
Rumours abound about the further financing of INMOS. On 2 July The Guardian stated:
"An American share flotation for Britain's state-owned microchip company Inmos is now firmly on the cards".
According to The Guardian, a three-man team of merchant bankers, acting as the company's advisers, had returned after talks at the American headquarters in Colorado Springs. The Guardian reporters are usually accurate and knowledgeable on these matters. They say that, following the American discussions, a three-stage method would begin with the placing of a stake with a range of British financial institutions. The second stage would be an offer of shares to the general public in this country, and the third stage would be an offer on the American stock market.
One has to ask what would happen if those three options failed. Do the Government wish to keep majority British ownership? Are they prepared to see a slow, or perhaps even a quick, death? Are they prepared to stop—even at this late stage — the taking over of most of the production from Colorado Springs? We read that all that production is to come to Newport.
We are entitled to hear the answers to those questions. We are also justified in asking why the Government are so dogmatic in refusing to provide further public funds for such a successful enterprise, when the market is being so weak-kneed about it.
Would the Government permit a quick, cheap sale to someone in another country? Such a deal would be obnoxious to me and to my hon. Friends.
I should like some clarification on the question of a second United Kingdom production plant. I realise that such an expansion would depend on demand for the product, but, from the beginning, it was expected that there would be a second unit. That was confirmed in July 1980 by the then Secretary of State for Industry, the right hon. Member for Leeds, North-East (Sir K. Joseph). As far as I am aware, production targets have not been lowered, and the expected profit next year suggests that progress is being maintained. If one adds to that the forecast of an end to the world recession, it is reasonable to assume that the second factory will be built.
I therefore reiterate the strongest possible request that full consideration be given to the northern region for the location of the second unit. When the first factory went to Wales and the headquarters went to Bristol, considerable surprise was expressed by many people who had automatically assumed that they would go to a special development area. I believe that the next factory must go to a special development area, and the claims of the northern region must rate very highly. We have the highest unemployment in the United Kingdom, with the exception of Northern Ireland; a work force that is amenable to training; a virtually strike-free record; some of the finest educational institutions in the country, including two universities and three polytechnics; three new towns; and something that seems to be of particular importance these days—a high standard of executive housing.
Perhaps I should say that about three years ago, on behalf of the northern group of Labour Members of Parliament, I corresponded with the British director of the company, Mr. Ian Barron, on this matter when, I think through something of a misunderstanding, we crossed swords about the north being a suitable location for an INMOS factory. I do not think, however, that anyone would deny the strong claim that the region has for such a production unit.
154
In one letter that I received from Mr. Barron, he said:
"Hopefully, when we have established a viable operation in the United Kingdom and have an effective management learn, it will be possible for us to be more adventurous in our decision on the location of future facilities."
That was written in 1980, and the progress made by INMOS speaks for itself, so there should be no particular difficulty in putting the northern region in the front rank of contenders for the next factory. With so much public money invested in the company, no doubt the Minister will confirm that the Government will have an effective voice when the location of the unit is considered.
There is a further reason why the northern region should be considered. Our problems are largely, although not entirely, caused by the run-down of the old traditional industries such as coal mining, steel making and shipbuilding. The amount of unemployment in those industries has been exacerbated by the murderous policies of the present Government, and they, therefore, owe a special debt to the north to help in building up a more balanced economy for the region, so that it is not for ever plagued by this endemic problem of depending on the older industries.
I conclude by telling the Minister that any attempt to sell off INMOS or to reduce the public stake in the company will meet with the utmost resistance from the Opposition. It would not only be further proof of this Government's extremism but could well be the end of one of the country's most valuable assets. I look forward to some clear and unequivocal answers this evening, and an assurance that for once, at least, dogmatism will not prevail.
1.28 am
The Minister for Information Technology (Mr. Kenneth Baker): I congratulate the hon. Member for Easington (Mr. Dormand) on securing this debate and choosing this subject. I know that since the INMOS company was set up, he has shown a keen interest in its progress and well being. I am sure that he will not mind me saying that, as he made clear in his concluding remarks, one of his reasons for being so interested in the company is that it might provide employment in the northeast. He sees a successful INMOS as a possible contributor towards jobs in the future. I share the hon. Gentleman's concern to try to stimulate more eletronic and technological development in that part of the country.
I am also glad to welcome to the debate the right hon. Member for Wakefield (Mr. Harrison), who is one of the renowned nightbirds of the House. I am glad that his eagle eye is on the debate. I also welcome my hon. Friend the Member for Newport, West (Mr. Robinson). He is one of the new Conservative Members and represents an area in which the main INMOS factory is sited.
It might be helpful if I review the history of the INMOS company since it was set up in 1978. The National Enterprise Board, supported by the then Labour Government, agreed to provide backing for INMOS. The NEB agreed to take a majority stake of some 72·5 per cent. in the new venture and to put up some £50 million in equity in two tranches of £25 million each. INMOS was forecast to provide about 4,000 jobs by the mid-1980s, save £20 million a year in imports and to generate £100 million a year in exports.
At that time, when the first tranche of £25 million was provided, it was planned to begin design, development and

155
initial production in the United States and to transfer that technology to the United Kingdom where major production would eventually be undertaken.
This Government would never have let INMOS be set up in that way, important though the semi-conductor industry is for our future electronics and information technology business. We would have insisted on the involvement of majority private sector finance at the outset, whether in the form of industrial or institutional investors. Since coming to power in May 1979, the Government's policy towards first the NEB, and now the British Technology Group, has been that it should seek to bring private sector funds into its investments, especially a major subsidiary such as INMOS, at the earliest practicable opportunity. A company the size of INMOS needs the confidence and disciplines of the market place if it is to succeed as it should. I do not believe that that is being dogmatic or doctrinaire.
It was against that background that the new board of the NEB reviewed INMOS in 1980 before considering whether to support the request that the Government should provide the second tranche of £25 million, most of which would be spent on the construction of a United Kingdom manufacturing plant. It was clear that new investors could not be found at that stage in the company's development. At the same time, the review concluded that INMOS had the potential to play a leading role in the semiconductor industry. The NEB recommended therefore that the second £25 million be made available provided the United Kingdom manufacturing plant was located in south Wales and that plans for a second United Kingdom production plant involved location in an assisted area. That remains the case, although it is clear that the company is still some way from contemplating a further production facility.
When that decision had been taken in July 1980, INMOS then began a major build-up of its activities with the American plan at Colorado Springs designing, testing and manufacturing the first product — the 16K static RAM. Meanwhile construction of the United Kingdom factory at Newport in south Wales was begun.
By the end of 1982, substantial technical progress had been made but, partly because of the nature of the way in which the company had been set up, there was also a slippage in meeting commercial targets, even though sales were by then running at £2 million per month. It had always been envisaged that the company would need additional capital beyond the £50 million to support its expansion.
It was clear that private funds would not be available until the Newport facility was fully on stream and the company had reached break-even. The British Technology Group and its and the company's financial advisers were confident that INMOS was moving towards a position of overall profitability and that further support from public funds was necessary only for a limited period. Therefore, while we would have preferred to see all further funding coming from the private sector, my right hon. Friend the then Secretary of State agreed that the National Enterprise Board, as part of the British Technology Group, should provide a further £15 million of equity funding, bringing its equity contribution to a total of £65 million. At the same time, the BTG appointed a new chairman of INMOS, Sir Malcolm Wilcox, with the specific task of meeting the
156
company's further requirements for funding from private sources and thereby diluting the NEB's holding in the company.
So much for the history. Where does the company stand at present? That is what new investors will want to satisfy themselves about. I think that it has a good story to tell, with a first-rate design team, impressive state of the art facilities and a range of memory products on one side, and of some impressive new microprocessor products on the other.
By the end of 1982, INMOS' first product, the 16K static RAM, had captured more than 70 per cent. of the market for that fairly specialised type of chip. Its market success was such that one of the major United States semiconductors companies, Intel, dropped manufacture of its own product and chose to supply the INMOS chip instead. Also by the end of last year test samples of the new 64K RAM chip had been shipped to potential customers and had been well received. The company now has a healthy order book. Further memory products are planned for introduction in the future.
On the microprocessor side, the research and development facility of Bristol is working on the new transputer—that is the microprocessor on one chip—and has developed a new programming language for it called "occam". This is likely to be one of the significant areas of future development in the so-called "fifth generation" systems. Indeed, INMOS could have an important role in the research and development work in the Alvey programme which was recently set up in my Department. The unit at Bristol has also developed an integrated set of computer-based design aids for very large scale integrated circuits, which has been recognised as outstanding by independent consultants and has market opportunities outside the company.
With regard to trading performance, INMOS is still in a start-up position. That is why we have had to be patient in attracting new investors. The original 1978 figures for sales, profits and employment were wildly optimistic, and when those were looked at again in 1980 they were revised downwards to more realistic levels. While there have been substantial start-up losses, the amounts involved include the large investment in research and development that the company has incurred. But sales have eventually taken off, rising from £2 million in 1981 to £14 million last year, at a time when the world market for semiconductor products was depressed. The estimates for this year are higher. That situation is now showing signs of improvement.
Prices are beginning to harden, production is beginning to build up in the United Kingdom, and the balance of employment, which has been significantly towards the United States end in the early stages, is now swinging towards the United Kingdom. All this bodes well for the future of INMOS. Although 1983 will also show a trading loss, the company should be moving into profit by the final quarter of this year.
My hon. Friend the Member for Newport, West may be interested to know about the employment plans and prospects at the factory in his constituency. The 1982 INMOS corporate plan, although it showed a slippage of a year in employment targets, forecasts that, while about 370 people will be employed at the end of April 1983, this will rise to over 500 in August, with a target of 750 being reached towards the end of this year.

157
The prospects of INMOS taking advantage of the upturn in the integrated circuit market look good, and especially promising is the feasibility of our objective of moving INMOS from the public sector to its rightful place in the private sector.
I can assure the hon. Member for Easington that my right hon. and hon. Friends are concerned to see the technology, for which the taxpayer has paid, properly transferred to the country, and for the company to contribute to the regeneration of the country's industrial base. The taxpayer has taken a considerable risk and made a large investment in INMOS, and it is right, now that the company is moving in the right direction, that the taxpayer should begin to see the fruits of that investment.
I firmly believe that the time is now ripe for the private sector to become involved in INMOS. I know that potential investors on both sides of the Atlantic have shown an interest, although, perhaps not unnaturally, there has been more on the American side. What is important is that the manufacturing operation that has now started in Newport should continue, and I hope that British investors will show the same interest in the company as is now being reported in the Wall Street Journal. All this indicates a future for INMOS. At a time when the semiconductor market is firming up, and while good design and manufacturing facilities are in short supply, INMOS is in a fortunate position and is potentially a very attractive investment.
The semiconductor industry is, of course, highly capital-intensive. The entry price is higher now in real terms than when INMOS was set up in 1978. The production know-how required is almost as significant as the design skills themselves, and the manufacturing technology is moving at a pace to rival semiconductor development.
All the companies in the industry are discovering that to remain competitive they are constantly having to improve and update their manufacturing and testing processes. This equipment is extremely expensive; so expensive that most companies have moved into other activities to spread the risk. Several large manufacturers such as Motorola now produce other manufacturers' chips
158
as a "second source" supplier. Companies such as Texas Instruments and Fujitsu in Japan have vertically integrated businesses so that they produce computer equipment that uses the semiconductors. Perhaps the most significant move of all took place last year when IBM, the largest computer manufacturer in the world and a significant chip producer in its own right, took a significant interest in Intel, which is arguably the most important independent semiconductor manufacturer in the world.
This is the type of environment in which INMOS will have to live. It is one in which there is a large and continuing need for capital, and one in which the competitors are themselves very large, many with links with other companies with complementary interests. It is clear therefore that if INMOS is to become the significant force that we all hope it will be, it will have to get into this competitive environment and win through on its own merits.
It would be completely wrong to leave the company with a majority stake held by the public sector. We would then be faced by continuing and probably ever-increasing demands for further funds while at the same time seeing the company hampered in its efforts to enter into arrangements with potential partners. Such potential partners would regard the position of public ownership with some suspicion. No, I want to see INMOS develop, if not into one of the giants of the industry, then certainly into a significant force keeping this country in the forefront of chip technology. In order to do that it must apply its technical strengths in a way that keeps in step with the market. The closer the involvement of the private sector, the more powerful the commercial discipline on INMOS to succeed. I believe the time is right for this to begin to happen. With the commitment that the Government and the taxpayer have shown, the company has responded with well-designed products, increasing sales and exciting prospects. It is now for the private sector to rise to the challenge and to push INMOS through to the success it deserves.
Question put and agreed to.
Adjourned accordingly at nineteen minutes to Two o' clock.

ENERGY
  Opencast Sites
  Opencast Sites
THE ARTS
  Funding (Report)
  Funding (Report)
  British Library
  British Library
  Arts Council
  Arts Council
  Theatre Museum
  Theatre Museum
EDUCATION AND SCIENCE
  Inner London Education Authority
  Inner London Education Authority
  Under-fives
  Under-fives
  Michael Sobell Sinai School, Kenton
  Michael Sobell Sinai School, Kenton
OVERSEAS DEVELOPMENT
  United Nations Development Programme
  United Nations Development Programme
HOME DEPARTMENT
  Demonstrations (Metropolitan Police Costs)
  Demonstrations (Metropolitan Police Costs)
  Prisons (Damage Repairs)
  Prisons (Damage Repairs)
  Incest
  Incest
  Prison Department Tenants
  Prison Department Tenants
  Diplomatic Privilege (Parking Offences)
  Diplomatic Privilege (Parking Offences)
  Strangeways Prison
  Strangeways Prison
  Anti-terrorism
  Anti-terrorism
  Isle of Man (Capital Punishment)
  Isle of Man (Capital Punishment)
  Armed Robbery
  Armed Robbery
  Sri Lanka (Police)
  Sri Lanka (Police)
  Prisoner Repatriation
  Prisoner Repatriation
PRIME MINISTER
  Commonwealth Conference (Students)
  Commonwealth Conference (Students)
  Geoffrey Arthur Prime
  Geoffrey Arthur Prime
  Public Service Staff (Salaries)
  Public Service Staff (Salaries)
  Parliamentary Boundaries
  Parliamentary Boundaries
  Supplementary Benefit
  Supplementary Benefit
  War Widows
  War Widows
  Redundancies
  Redundancies
  Nicaragua
  Nicaragua
  Minimum Income
  Minimum Income
NORTHERN IRELAND
  European Assembly (Report)
  European Assembly (Report)
SCOTLAND
  Jobcentre, Dundee
  Jobcentre, Dundee
  Unemployment (Dundee)
  Unemployment (Dundee)
  National Health Service
  National Health Service
  Labour Statistics
  Labour Statistics
  Death Statistics
  Death Statistics
  Redundancies
  Redundancies
  Carolina House, Dundee
  Carolina House, Dundee
  Nursery School Provision
  Nursery School Provision
  Pupil-Teacher Ratio
  Pupil-Teacher Ratio
TRADE AND INDUSTRY
  European Community (Cars and Heavy Goods Vehicles)
  European Community (Cars and Heavy Goods Vehicles)
  146 Airbus
  146 Airbus
  Automotive Parts
  Automotive Parts
  Motor Car Engines
  Motor Car Engines
  Motor Components
  Motor Components
  Building Societies
  Building Societies
  Heavy Goods Vehicles
  Heavy Goods Vehicles
  Grants
  Grants
  New Businesses (Incentives)
  New Businesses (Incentives)
  Copyright Law
  Copyright Law
  Manufactures
  Manufactures
  Motor Components Industry
  Motor Components Industry
  Steel (Exports)
  Steel (Exports)
  Whisky
  Whisky
  Data Bases
  Data Bases
  West Midlands
  West Midlands
  Trade Missions
  Trade Missions
  Management Information System
  Management Information System
  Exporters (Government Assistance)
  Exporters (Government Assistance)
  Internal Security Technology
  Internal Security Technology
SOCIAL SERVICES
  Mental Health (Amendment) Act 1982
  Mental Health (Amendment) Act 1982
  Postal Votes
  Postal Votes
  NHS (Expenditure)
  NHS (Expenditure)
  Spectacles (Prices)
  Spectacles (Prices)
  Nutrition
  Nutrition
  Severely Psychotic Adolescents (Accommodation)
  Severely Psychotic Adolescents (Accommodation)
  Fluoridation Society
  Fluoridation Society
  Longevity Statistics
  Longevity Statistics
  Pharmacists
  Pharmacists
  Kidney Transplants
  Kidney Transplants
  Mobility Allowance
  Mobility Allowance
  Family Income Supplement
  Family Income Supplement
  Shoplifting
  Shoplifting
  Supplementary Benefit
  Supplementary Benefit
  Consultants (Merit Awards)
  Consultants (Merit Awards)
  Occupational Deafness
  Occupational Deafness
  Health Authority Administrators (Public Policy Statements)
  Health Authority Administrators (Public Policy Statements)
  International Population Conference
  International Population Conference
  Claimants (Accommodation)
  Claimants (Accommodation)
  Housing Benefit Scheme
  Housing Benefit Scheme
AGRICULTURE, FISHERIES AND FOOD
  Nuclear Waste Disposal
  Nuclear Waste Disposal
  New Zealand Venison (Imports)
  New Zealand Venison (Imports)
  Arterial Land Drainage Schemes (Assessment)
  Arterial Land Drainage Schemes (Assessment)
  Isle of Man (Fishing Limits)
  Isle of Man (Fishing Limits)
DEFENCE
  Land Sales
  Land Sales
  Central America (Aid)
  Central America (Aid)
  Sea Eagle Missile
  Sea Eagle Missile
  Ground to Air Missiles
  Ground to Air Missiles
  South Atlantic Fund
  South Atlantic Fund
  RFA Sir Tristram
  RFA Sir Tristram
  Advertising and Recruitment
  Advertising and Recruitment
  Fire Protection
  Fire Protection
WALES
  Welsh Water Authority
  Welsh Water Authority
  Public Expenditure
  Public Expenditure
  Swansea Enterprise Zone
  Swansea Enterprise Zone
  Taff Vale School, Cardiff
  Taff Vale School, Cardiff
  Labour Statistics
  Labour Statistics
  Nursery Education
  Nursery Education
  Enterprise Zones
  Enterprise Zones
  Youth Opportunities Programme
  Youth Opportunities Programme
FOREIGN AND COMMONWEALTH AFFAIRS
  Hong Kong
  Hong Kong
  Diplomatic Privilege (Parking Offences)
  Diplomatic Privilege (Parking Offences)
  Civil Nuclear Emergency
  Civil Nuclear Emergency
  E1 Salvador
  E1 Salvador
  Sri Lanka (Police)
  Sri Lanka (Police)
EMPLOYMENT
  Derbyshire
  Derbyshire
  Job-splitting Scheme
  Job-splitting Scheme
  Back Problems
  Back Problems
  Enterprise Allowance Scheme (Asian Languages)
  Enterprise Allowance Scheme (Asian Languages)
  Paternity Leave
  Paternity Leave
  Labour Statistics
  Labour Statistics
  St. Helens
  St. Helens
  "Democracy in Trade Unions"
  "Democracy in Trade Unions"
ENVIRONMENT
  Rents
  Rents
  Single Homeless Accommodation
  Single Homeless Accommodation
  Local Authorities (Housing)
  Local Authorities (Housing)
  Inner London (Building Regulations)
  Inner London (Building Regulations)
  Merseyside
  Merseyside
  Liverpool International Garden Festival
  Liverpool International Garden Festival
  Humberside County Council
  Humberside County Council
  Local Authorities (Capital Receipts)
  Local Authorities (Capital Receipts)
  Home Ownership
  Home Ownership
  Local Authorities (Expenditure)
  Local Authorities (Expenditure)
TRANSPORT
  Heavy Lorries
  Heavy Lorries
  Operators' Licences (Goods Vehicles)
  Operators' Licences (Goods Vehicles)
  Driving (Alcohol and Drugs)
  Driving (Alcohol and Drugs)
  North Devon Link Road (Inquiry)
  North Devon Link Road (Inquiry)
  Aircraft Seating Materials
  Aircraft Seating Materials
CIVIL SERVICE
  All-party Conferences
  All-party Conferences
NATIONAL FINANCE
  Workers (Output)
  Workers (Output)
  Sterling M3
  Sterling M3
  Government Expenditure
  Government Expenditure
  Industrial Productivity
  Industrial Productivity
  Exchange Rate
  Exchange Rate
  Unemployment
  Unemployment
  £1 Coin
  £1 Coin
  Manufacturing Industry
  Manufacturing Industry
  Wine and Beer
  Wine and Beer
  Herbicide 2, 4, 5-T
  Herbicide 2, 4, 5-T
  Tax Consultative Committee
  Tax Consultative Committee
  Public Sector Borrowing Requirement
  Public Sector Borrowing Requirement
  Commercial Bills
  Commercial Bills
  Long-dated Gilts
  Long-dated Gilts
  Benefits
  Benefits
  Public Expenditure
  Public Expenditure
  Employment Categories
  Employment Categories
  Gangmasters (Accounts)
  Gangmasters (Accounts)
  International Business (Taxation)
  International Business (Taxation)
  Financial Deposits
  Financial Deposits

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Southwark.
Several Lords—Took the Oath or Affirmed.

Shorthold Tenancies in London
Baroness Gardner of Parkes: My Lords, I beg leave to ask the first Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will take action to bring the regulations for shorthold tenancies in the London Area into line with those for shorthold tenancies outside London.
Lord Skelmersdale: My Lords, for shorthold tenancies in Greater London a fair rent must be registered by the rent officer within 28 days of the tenancy being granted. For shortholds outside Greater London which began after 1st December, 1981, this initial registration of a fair rent is not compulsory. Instead, the rent may be freely agreed between landlord and tenant, although either party may apply at any time to the rent officer for a fair rent to be fixed. We have no plans at present to change these arrangements.
Baroness Gardner of Parkes: My Lords, I should like to thank the Minister for his Answer. Would he inform me whether he is aware of the disastrous effect that this so-called registration of rent is having within the London area, in that it is keeping many properties vacant which would otherwise be available to needy tenants?
Lord Skelmersdale: My Lords, I agree that this subject is part of a whole range of opportunities which were freed by the Housing Act 1980, and indeed it has made a good start with some 5,000 registrations that we know about, but I feel that, with a little bit of political uncertainty since 1980 and the Labour Party's pledge to repeal this activity, it could hardly have been expected up to now to have had a mammoth impact on the private rented sector.
Baroness Gardner of Parkes: My Lords, would the Minister confirm that the Rent Act 1974 was the cause of a great many people—British people in particular—being unable to obtain accommodation in London today? If, as I believe, the noble Lord will confirm this, would he tell us whether there is any likelihood of some action being taken to change the situation whereby those few in tenancies have secure rights but any other young British person requiring a tenancy has no hope of getting one, and all the accommodation on offer today is on offer to foreigners?
Lord Skelmersdale: My Lords, I would agree with my noble friend that the Rent Acts generally from 1965 onwards have contributed to the structured decline of the private rented sector. But I do not think that that is the only reason for the decline, because, as we know, there is a confessed wish of a majority of people to live not in rented accommodation at all but in owner occupation.
Baroness Faithfull: My Lords, may I ask my noble friend the Minister whether he would agree that, despite what he has just said, an enormous number of young people are unable to find rented accommodation? In the meantime, what would he suggest that they do?
Lord Skelmersdale: My Lords, there are various sorts of tenancies available in what I might loosely describe—but not, I hasten to say, in any legal way—as controlled tenancies. There is also of course the open-ended private rented sector both in London and outside in the provinces.
I regret that I did not answer the second part of the second supplementary of my noble friend Lady Gardner of Parkes in which she asked about the possibility of a review. No such review is contemplated, but of course, as is normal when a new Minister takes over a portfolio, he is having wide thoughts and wide-ranging consultations as to what action he might pursue in the future.
Lord Cledwyn of Penrhos: My Lords, will the noble Lord deal with the question that his noble friend asked him—namely, that there are a large number of houses available for letting in London which are not let at the moment? This is the question to which the noble Lord has not addressed himself. He can disregard manifestos and policies in the past and deal with the facts as they now are, and the needs of young people in the London area. Will he be good enough to tell us what is the policy of Her Majesty's Government now in regard to that position?
Lord Skelmersdale: My Lords, I have recently been down to the docklands where the policy of Her Majesty's Government is being carried through to the letter. There, buildings are available to let at reasonable rents, and low cost home ownership schemes are being pursued with the utmost vigour. In other parts of London, properties would be rented, first, if landlords were assured that they would get fairness and, secondly, if prospective tenants could afford to pay the rent.
Lord Tordoff: My Lords, will the Minister assure us that in these wide-ranging thoughts that his right honourable colleague is having they do not include the possibility of reintroducing to the Housing Bill when it comes through the parliamentary process again any thoughts on the sale of charitable housing association dwellings?
Lord Skelmersdale: My Lords, that is a totally different question, but I make the general point that thoughts are thoughts and I should not like to put any limit on them.
Baroness Gardner of Parkes: My Lords, may I ask the Minister to take back to the department the suggestion that action be taken under the Housing Act 1980, Section 52 (4)? Is the Minister aware that that section was the section implemented to remove the control on shorthold tenancies as a requirement of the rent officer?
It says,
"The Secretary of State may by order direct that subsection (1) (b)above shall have effect, either generally or in relation to any registration area specified in the order, as if paragraph (c) were omitted".
Paragraph (c)deals with the necessity to agree a rent with a rent officer prior to offering a shorthold tenancy. Will the Minister take that back to the department to look at that again to see whether such a direction could be made for London?
Lord Skelmersdale: My Lords, this has never been implemented, but I shall certainly take up my noble friend's suggestion with my honourable friend the Minister for Housing and Construction.
Lord Wells-Pestell: My Lords, having regard to the need for housing that people can buy in the dockland area, may I ask whether the Minister considers it right and proper that properties being built there should be for sale at £160,000? Some special properties are for sale at over half a million pounds.
Lord Skelmersdale: My Lords, the need for housing, as in anything else, is for a mix both socially and businesswise and indeed in any other way. I think it is right and proper that both ends of the price spectrum should be present in a particular area of the country.
Lord Davies of Leek: My Lords, will the noble Lord say what limits there are on a person keeping a house empty without letting it? Is there a period of time in which he must pay rent or rates on an empty house?
Lord Skelmersdale: My Lords, if a person owned a house, rent would not come into it. I believe that after a certain period it is possible to receive rate relief on an empty property; but I shall have to write to the noble Lord with the details.

Leisure Centres: Efficient Use Of Facilities
2.45 p.m.
Lord Auckland: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what plans they have in mind, in conjunction with local authorities and private consortia, to advise and, where necessary, assist leisure centres to ensure their most efficient use in sporting, recreational and artistic activities.
Lord Skelmersdale: My Lords, the Government are anxious to ensure that all leisure centres are managed in the most efficient way, including the use of private sector expertise where appropriate. The Sports
978
Council is always willing to help and advise local authorities and private consortia on the best ways of achieving this aim, and is also able to give grants to help operators improve their facilities.
Lord Auckland: My Lords, I thank my noble friend the Minister for that helpful Answer. Is he aware—I am sure he is—of the continuing problems of leisure these days, and thus the need for properly managed leisure centres to encourage sport, the arts and everything else thus connected? Can we be assured that this is not a kind of "Yes, Minister" plea for large public funds? Will he elaborate a little on the amount of contact between the Sports Council and these leisure centres, bearing in mind the large grants which private funds are making into leisure centres sports and the arts generally? Finally, has he any news of the EEC Development Fund in this respect?
Lord Skelmersdale: My Lords, as far as the third part of my noble friend's supplementary question is concerned. I have no information on the EEC grant, but I shall write to him. I should like to make the general point that sport is important to the whole community and local authorities must continue to play a major part in the provision of local leisure facilities. However, having said that, I hope that all local authorities will look at their facilities carefully and will always ensure that they are managed efficiently. This may mean opening such centres for rather longer hours than they would normally wish to do; it may mean attracting grants for refurbishment, for example, from the Sports Council; or it may mean doing the same thing with a mix of private enterprise and other parts of the public sector—for example, longer use of sports facilities in schools.
Lord Sandford: My Lords, I wonder whether I may ask my noble friend two questions. First, does he agree that when the district audit has completed the study that it is doing in this general field of the provision and management of leisure centres we shall be in a better position to assess these matters? Secondly, would he provide us with a fairly comprehensive Written Answer to a Question, if I were to ask one after the Recess, on progress (which I believe to be all too slow) in the dual use of educational buildings for leisure and recreation?
Lord Skelmersdale: My Lords, I cannot comment on the district auditor's report—a document which is still not completed, let alone published. On my noble friend's second point, yes, certainly, if he would like to put down a Question for Written Answer I should be delighted to answer it as fully as possible.
Lord Taylor of Gryfe: My Lords, will the noble Lord give an assurance that in the disposal of Forestry Commission land with a substantial recreational facility, these will be preserved in the plans for disposal?
Lord Skelmersdale: My Lords, with respect, that is rather a different question because leisure centres entail buildings.

Wheel Clamps: Experimental Use
2.50 p.m.
Baroness Gardner of Parkes: My Lords, I beg leave to ask the second Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will comment on the effectiveness, to date, of the experimental use of wheel clamps in central London.
Lord Lucas of Chilworth: My Lords, the experimental use of wheel clamps began on 16th May. It is too early to make a reliable assessment of the effects on illegal parking and the flow of traffic. That assessment is the responsibility of the Transport and Road Research Laboratory, and will depend mainly on comparisons between "before" surveys in the autumn of last year and "after" surveys at a similar time, September or October, of this year.
Baroness Gardner of Parkes: My Lords, I thank the noble Lord for his reply. May I ask him whether he saw the article in the Daily Telegraph dated 14th July headed, "Protests as police end clamping of diplomats' cars"? Did he read in the report that in the first eight weeks of the experiment 4,358 vehicles were clamped in the Kensington, Chelsea and Westminster area, and of those, 101 vehicles belonged to diplomatic missions, and in particular the French Embassy had 11 vehicles affected, seven in one day? In view of those figures, will he consider the Written Reply given by my noble friend Lord Elton to my noble friend Lord Balfour of Inchrye, in which Lord Elton said that under diplomatic relations they could not clamp recognisable diplomatic vehicles? Will he also give thought under those circumstances to limiting the number of recognisable diplomatic vehicles, as has been done in other countries? For example, in Australia, you cannot have an unlimited number of diplomatic vehicles. It seems that seven vehicles clamped in one day is rather a lot. Will the Minister comment?
Lord Lucas of Chilworth: My Lords, my noble friend has asked a number of questions. She asked whether I had seen the article in the Daily Telegraph.Yes, I have seen it. Regarding the figures that she mentioned in relation to the response given to a Written Question by my noble friend Lord Elton to the noble Lord, Lord Balfour of Inchrye, my noble friend explained that the Commissioner of the Metropolitan Police has obtained legal advice which suggests that wheel clamping contravenes the provisions of the Geneva Convention on diplomatic relations. Wheel clamping of identifiable diplomatic vehicles has accordingly been discontinued. In response to my noble friend's rather more specific supplementary question on what are we going to do about it, I think that it will be more helpful to your Lordships if I say—and it is not very much to tell your Lordships —that that situation is being further examined and we are awaiting the results of that examination. As to what happens in Australia, the Australians have some odd customs which do not always accord with our sense of fair play.
Lord Underhill: My Lords, the noble Lord has said that the wheel clamping of diplomatic cars has been suspended. Does this mean also that it is not within the province of the Metropolitan Police to remove a diplomatic car when it is impeding the flow of traffic and is in a dangerous position? If so, I think that most people will regard that as being something that should be looked into very seriously. As one of those of us who supported the experimental period for wheel clamps, may I ask whether the noble Lord is satisfied that sufficient publicity is being continually given to the experiment in order that the experiment should act as a deterrent? Some of us regard the experiment as one which would be successful on the deterrent principle rather than in just getting convictions.
There is also a report that the cars of visitors to this country have also been the subject of wheel clamps. If that is so, is there anything that can be done to avoid that possibility? Will the Minister tell us whether or not there have been cases of persons deliberately removing the wheel clamps? If so, is he satisfied that the penalty of £200 is sufficient for that?
Lord Lucas of Chilworth: My Lords, in so far as the responsibility of the police is concerned. I am sure that your Lordships will accept that I am not able to answer for matters which fall, quite properly, within the purview of the Home Office. I notice that the noble Lord, Lord Underhill. has a Question relating to this matter on the Order Paper for 26th July. I think that if he likes to pursue that line of questioning on the 26th he may get a rather more satisfactory reply from that department.
To turn to publicity, there has not been a further round of material issued by the department, although I would have thought that both press and radio through most channels have given a considerable amount of publicity to this matter. In regard to visitors, it is largely up to a visitor to satisfy himself as to the rules and regulations of the country he is visiting. Most of our visitors to other countries will go to one of the motoring organisations and ask what kind of emergency equipment is required. I would expect, frankly, that the overseas organisation would give the advice. If my noble friend Lady Gardner is to believe this, there is no doubt that visitors who have embassies in London would find advice readily forthcoming from that.
In reply to the supplementary question, on the removal of clamps, there are four instances where clamps have been removed. It would be quite wrong for me to make any comment with regard to the penalty which the Act provides as a maximum—that of £200—since none of these cases has yet been brought to court. I am sure your Lordships accept that it would be wrong for me to comment on these four matters before they get to court.
Lord Mottistone: My Lords, will my noble friend give consideration to the matter of policemen standing in Park Lane with wheel clamps very ostentatiously displayed at midday on every day, particularly when Parliament is sitting, to discourage people from parking?
Lord Lucas of Chilworth: My Lords, I note what my noble friend had to say.
Lord Tordoff: My Lords, will the noble Lord agree that perhaps we should put our own house in order first? Will he contemplate an experiment of using wheel clamps in the Lords' car park outside Nos. 6 and 7 Old Palace Yard in order that those people who park in an unauthorised manner there, blocking parking bays for the staff, should be discouraged from so doing? Will he agree that it is not only difficult for the staff but it may pose a threat to the security of your Lordships' House?
Lord Lucas of Chilworth: My Lords, the experiment is in an attempt to ease the problem of a third of a million illegal parking offences in London each day, with the consequent hindrance of the public and free flow of traffic. I hardly think that the introduction of clamps to your Lordships' car park would aid either of those objectives.
Lord Boyd-Carpenter: My Lords, if the object of the exercise (as my noble friend has just said) is to prevent the obstruction of traffic by badly or illegally parked cars, will my noble friend explain why it is thought that this objective would be helped by making those cars immovable?
Lord Lucas of Chilworth: My Lords, your Lordships' House, as my noble friend Lord Boyd-Carpenter will recall, debated this matter at great length and felt that it would provide something of a deterrent in certain areas. There is not here a question that, in general terms, a clamp would be applied where a motor vehicle is parked dangerously when the other alternative provision of taking away the car could equally apply.
Lord Denham: My Lords, we have spent 22 minutes on three Questions. I wonder whether your Lordships might feel that we should go on to the next business.

Tobermory Pier: Isle of Mull
3 p.m.
Viscount Massereene and Ferrard: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will take steps to ensure that Tobermory Pier, Isle of Mull, is not permanently closed.
Lord Lyell: My Lords, Tobermory Pier remains available for use by smaller craft, including fishing boats. My right honourable friend the Secretary of State for Scotland has met a local delegation to discuss the future of the pier. It is owned by Caledonian MacBrayne and it is for them to make proposals. However, my right honourable friend has indicated that he is prepared to consider financial assistance towards the cost of reasonable works. It should therefore be possible at least to put the pier into a satisfactory condition commensurate with the use at present made of it.
Viscount Massereene and Ferrard: My Lords, while thanking my noble friend very much for that reply, may I also declare an interest? Is my noble friend aware that the Isle of Mull is twice the size of the Isle of Wight and has a tourist trade of very nearly a quarter of a million, together with tens and tens of thousands of livestock? Is he further aware that without Tobermory Pier, if it were not to be repaired, the Isle would only have one pier, which is exposed to the northerly gales, so that sometimes the mail boat cannot call? I should like to thank my noble friend again for his reply. Is he aware that I was going to go on for a long time but I will not do so because of my noble friend's heartwarming reply?
Lord Lyell: My Lords, I am grateful, as I am sure all your Lordships will be, to my noble friend for his support of the Isle of Mull. I personally have to declare a non-interest because I have not been there, but I am sure we are all fascinated to learn that the Isle can, among other things, boast of the presence of a noble Viscount: my noble friend. I would stress to him and to your Lordships that the vast bulk of goods, vehicles and passengers reach Mull by the modern roll-on, roll-off ferry which goes to Craignure. This is entirely unaffected by any recent development at Tobermory as regards the pier.

Foster Children (Scotland) Bill [H.L.]
The Lord Advocate (Lord Mackay of Clashfern): My Lords, I beg to introduce a Bill to consolidate certain enactments relating to foster children as they have effect in Scotland. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Mackay of Clashfern.)
On Question, Bill read a first time, and to be printed.

Finance Bill
Brought from the Commons endorsed with the certificate of the Speaker that the Bill is a Money Bill; read a first time, and to be printed.

Business: Standing Order 43
Lord Denham: My Lords, on behalf of my noble friend the Lord President of the Council, I beg to move the Motion standing in his name on the Order Paper.
Moved, That Standing Order 43 (No two stages of a Bill to be taken on one day) be dispensed with for the purpose of taking the Companies (Beneficial Interests) Bill through its remaining stages this day.—(Lord Denham.)
On Question, Motion agreed to.

Companies (Beneficial Interests) Bill
3.4 p.m.
Lord Mackay of Clashfern: My Lords, I beg to move that this Bill be now read a second time. This Bill has

983
been brought forward to deal with an acute legal difficulty that has come to light in the application of company law to certain shares held on trust. The problem is this: Section 27 of the 1948 Companies Act introduced the rule—an important company law rule—that a subsidiary may not be a member of its holding company. Allotments or transfers of shares in breach of the rule are void, a very severe penalty. The section already provides an exception to the general rule where shares are held by a subsidiary as trustee—provided that neither the company nor any subsidiary is beneficially interested under the trust.
Turning to practice, it is well known that in many groups a subsidiary acts as trustee of the group pension scheme. It is also very common for such schemes to hold at least some shares in the parent company. Whatever the wider arguments about so-called self-investment, with which this Bill is not concerned, it has clearly never been thought that there was any possibility that an acquisition of the parent company's shares by a subsidiary trustee in these circumstances might be void. No trustee of a pension scheme would risk that outcome, yet that is indeed the position without this Bill, given that the parent company or any other subsidiary has the interests or rights, which it typically will have, described in Clauses 2 to 4. The most typical of these is the right to receive any balance of the trust property when liabilities under the scheme have been satisfied or provided for. A similar problem arises under Section 37 of the 1980 Act and under the other provisions listed in Clause 1 of the Bill.
A failure to legislate would, now that this problem has come to light, cause severe and widespread practical and legal problems which it has never been the intention of the existing legislation to create. We are not talking here of unsuccessful attempts to avoid company law but we are dealing with the unsuspected application of company law in a practical situation which has existed for a considerable time without, so far as we know, any detriment to anybody.
The interests and rights to be disregarded, as described in Clauses 2 to 4, are either remote or minor, and most of them depend on the occurrence of events which will rarely occur. It is perhaps significant that, although for the most part they derive from standand terms of trusts and schemes, they have not previously been recognised as creating a beneficial interest in the trust assets. None of them can be considered to provide a company with the means to control itself through the acquisition of its shares by a subsidiary or some other person on its behalf, and that is essentially what the company law provisions seek to prevent. The Bill does, however, make appropriate provisions in Clause 2, together with the Schedule, for the situation where one of the interests to be disregarded—the residual interest—vests in possession and accordingly ceases to be remote.
To sum up, the Bill is very technical, but the difficulty which it seeks to resolve is very real and practical. Without this legislation, the title to very many shares held in trust now or in the past, particularly by pension and employees' share schemes, would be in doubt. Very many schemes, trustees and shareholders would be put in an extremely difficult situation. Once this situation is advertised by publica-
984
tion of a Bill, as it now has been, it cannot be allowed to remain unremedied for long. It also seems right in these exceptional circumstances that the difficulties should be removed retrospectively. I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read a second time.—(Lord Mackay of Clashfern.)
3.8 p.m.
Lord Bruce of Donington: My Lords, we on this side of the House would support the general purport of this Bill, which has been adequately explained by the noble and learned Lord. This House, in common with another place, rather frowns upon retrospective legislation, and very rightly so; but in the circumstances described by the noble and learned Lord it is quite proper that this House should give a Second Reading to this Bill and, indeed, should expedite its progress to the statute book.
There are a number of questions arising. One can quite understand, following the passing of the 1948 Act, that a particular clause of the 1948 Act, now interpreted, probably escaped notice for some time, because the development of these particular types of trusts proceeded only very slowly during those years but has accelerated more in recent years. Now there are a very large number indeed of trusts that are affected by the provisions of this Bill.
I should like to know, and I am sure the House would similarly like to know, just how this discovery took place. After all, the 1980 Act had a fairly detailed examination in this House, and we on this side then complained that the Government seemed most reluctant to accept any amendments to that Bill. Indeed, they wanted to rush it through. I should like to know why it was that the particular sections of the 1980 Act, which were subjected to very thorough examination by parliamentary counsel, to whom the noble and learned Lord has very often referred, escaped their attention then. That is the second point that I want to make.
Thirdly, does this Bill mean that the process of consolidation of the Companies Acts, the necessity for which has been repeatedly referred to on all sides of the House, is indefinitely postponed, or does it mean that counsel, having got to Clause 34, will presently arrive at Part V of the Act, Sections 68 and 69, which are notoriously ambiguous, and will then bring forward another Bill in connection with the interpretation of those sections, which attracted very considerable comment in this House, as the noble Lord knows? Are we to have a piecemeal development? Are we to have a whole series of little Bills as the provisions of the 1980 Act are subjected to the same critical examination? We should like to be reassured on this, because it is in the interests of industry and commerce generally, as well as of the professions, that consolidation takes place with the minimum of delay.
Finally, although I am quite sure that the noble and learned Lord will be able to give me an answer in the affirmative, is he quite sure that there are no taxation implications in any part of the Bill? The Inland Revenue have a tendency to examine these matters in very great detail, and I hope that the noble and learned Lord is able to give us a reassurance on that matter. Those are the only questions that I have to ask, and I

985
reiterate that we on this side of the House should like to ensure the speediest possible passage of the Bill on to the statute book.
3.13 p.m.
Lord Lloyd of Kilgerran: My Lords, I must first apologise to the House because my name does not appear on the list of speakers, which is entirely my fault due to a hitch in the usual channels. Nevertheless, I shall be very brief. I also welcome this Bill, and I should like to congratulate the Government on bringing it forward so quickly, having discovered the lacuna that exists dating right back to the Companies Act 1948. The noble and learned Lord the Lord Advocate has explained the necessity for this Bill. As the noble Lord, Lord Bruce of Donington, said, if a Bill with retrospective provisions were brought to this House we—certainly we on these Benches—would oppose it strongly. Nevertheless, as this is such an exceptional case I feel sure that the passage of this Bill will not he taken as a precedent for introducing Bills with retrospective effect.
As I said, this lacuna has existed since the Companies Act 1948, and since then we have had at least four or five Companies Acts. Even in the discussions in your Lordships' House on Sections 36 and 37 of the Companies Act 1980 this lacuna was not discovered. It means that this new Bill is adding another burden, particularly to small companies and small trust funds, as well as to certain firms that have introduced schemes for partnership and shareholding for their employees. I should like to have from the noble and learned Lord an assurance that the promises already made for the consolidation of company law in this country will be brought forward with greater urgency now that this Bill is to be added to the list of Companies Acts.
3.15 p.m.
Lord Mackay of Clashfern: My Lords, I am grateful for the general thrust of the remarks of both the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Lloyd of Kilgerran. May I say that I am also grateful to the noble Lord, Lord Lloyd, for intimating to me that he intended to speak, notwithstanding that his name was not on the list. Of course, I welcomed the knowledge that he was going to speak, knowing that he would add to the distinction of this very short debate.
As regards the questions put by the noble Lord, Lord Bruce, I think the answer to the first one will do a good deal to dispose of some of the later ones. I think the situation was that somebody looking at a pension scheme questioned whether it was in accordance with the provisions of the Act of 1948, and, as is usual in these matters when a difficult question arises, it ultimately landed up with learned counsel. Then, learned counsel, having compared the proposed scheme with the Act of 1948, concluded that the scheme fell foul of the provisions of the 1948 Act to which I have referred. Of course, those familiar with these matters then realised that this was not an isolated example but was, in fact, a very general situation, and, accordingly, that it was one which should be remedied.
That shows that the problem was highlighted by the discovery of the application of a long-established provision to trust deeds, which have also been in existence for some time—though, as the noble Lord,
986
Lord Bruce, has said, the number of these has increased quite considerably and properly in recent years. So it is not so much a defect in the legislation as that in applying the legislation to practical matters those with experience did not think that they fell foul of the legislation but on very close examination, and on a narrow reading of the legislation, it appeared that they did. Accordingly, it is right that what was the understood and perceived practice should now be made the effect of the legislation.
That also answers the question of the noble Lord, Lord Lloyd of Kilgerran, about an additional burden for small companies. On the contrary, this difficulty in their trust schemes having been discovered, there would have been a tremendous burden on them unless the legislature had stepped in to prevent that burden arising, and that is precisely what we seek to do now. So, again, I suggest that the fact that the 1980 Act or the 1981 Act did not specially provide for this problem arose from the fact that those dealing with these matters in practice did not see that the 1948 Act held this problem for them. Now that that has been appreciated, legislation immediately appears to be called for; and I think I have also answered the point that it is a fairly general problem that has arisen.
So far as consolidation is concerned, we are determined to press on with that as rapidly as possible. This Bill will not in any sense impede that process, which is very well advanced. I am hopeful that in the course of the present Session some, at least, of the results of these labours on consolidation will become apparent and will give your Lordships satisfaction.
So far as taxation is concerned, the situation is that this Bill, if enacted, will bring the position in law to what it has been understood to be in practice for some time. Therefore, there are no tax implications in the sense of changing what has hitherto been understood to be the tax position.
On Question, Bill read a second time: Committee negatived.
Then, Standing Order No. 43 having been dispensed with (pursuant to Resolution), Bill read a third time, and passed.

International Monetary Arrangements Bill
3.20 p.m.
The Minister of State, Privy Council Office, and Minister for the Arts (The Earl of Gowrie): My Lords, I beg to move that this Bill be now read a second time. The Bill, together with the International Monetary Fund (Increases in Subscription) Order, implements the United Kingdom's share of international decisions to increase the resources available to the International Monetary Fund by the end of 1983. The United Kingdom subscription to the IMF was increased by order last week under the International Monetary Fund Act 1979. And Clause 1 of the Bill now amends Section 2 of that Act so that the limit of approximately £350 million on the power of the Treasury to lend to the IMF under the general arrangements to borrow is replaced by a limit of 1.7 billion special drawing rights—in money terms, approximately £1.2 billion.
The second clause of the Bill provides statutory authority for the Treasury to indemnify the Bank of

987
England in respect of its participation, together with other central banks or the Bank for International Settlements, in operations to provide bridging finance for countries. Such bridging finance can provide a breathing space for countries faced with a sudden deterioration in their external finances and allow time for an International Monetary Fund adjustment programme to be negotiated and implemented.
Before these international decisions to which I referred were taken, this House had an opportunity last December to discuss international deficit finance. It was a most stimulating and educational debate provoked by the noble Lord, Lord Lever of Manchester, with many notable contributions. The origins of the present difficulties were well covered and well understood in that debate. Throughout the 1970s and particularly following the fundamental shift in the world economy after the 1973 oil crisis, the newly industrialising countries financed development by borrowing. Increasingly, borrowing was from the private sector and from commercial banks in particular.
It is worth emphasising that the main borrowers were all economies with very considerable underlying strengths and development potential. That this borrowing came to be characterised as "the debt problem" reflected the interaction of broadly three factors. The first was a reduction in the level of global economic activity and the consequent fall in commodity prices, combined with a period of high interest rates which were the inevitable counterpart of high inflation, and the policies required to reduce it. The second factor was the extent of the borrowing by some developing countries that had to be serviced, as they sought to delay the inevitable adjustment of their own economies to new and changed international conditions. The third factor was a growing concern of commercial banks about the creditworthiness of these countries.
The noble Lord, Lord Benson, pointed out during the course of that notable debate last December:
"…when all is said and done there remains the burning question: should lending continue to those foreign borrowers whose credit is now in question? I believe that it is inevitable that it must, and that it should be aided by an enlarged IMF. There are, too, cases where it would be appropriate for the central banks and the commercial banks also to lend to sovereign borrowers in this state,"—[Official Report,15/12/82; cols. 686–7.]
Replying to that debate, at col. 705 my noble friend Lord Cockfield stressed:
"the need to fortify and improve the existing mechanisms… the central banks, commercial banks and their supervisors and, in particular, the IMF, which has a key role to play now, as it has had in the past".
Within two months, finance ministers and central bank governors agreed to increase the total amount of commitments under the IMF's general arrangements to borrow, broadly known as GAB, from SDR6.4 billion to SDR 17 billion—that is to say, approximately 18,000 million dollars, or £12,000 million. This was the first substantial increase in general arrangements to borrow since the year 1962, which helps to put it in some perspective. The IMF Interim Committee, meeting under the chairmanship of my right honourable friend the present Foreign Secretary, agreed that IMF quotas should be increased by 47.5
988
per cent. from around SDR 61 to SDR 90 billion, equivalent to 95 billion dollars. It was decided to implement these decisions by the end of 1983, a considerable acceleration of the previously envisaged timetable.
Since then events have moved on, but the analysis remains the same. The Treasury and Civil Service Select Committee endorsed these agreements and supported, in their words,
"the speedy passage of the legislation laid before Parliament to give effect to these agreements".
The committee's report rightly stressed that three elements are necessary in dealing with debtor countries. I refer to paragraph 4.10 of their report. The first element is that commercial banks agree to reschedule their outstanding debt and to make a modest contribution of net new lending. The second is that their lending is supplemented by a loan from the IMF. The third is that the IMF's contribution is conditional on the borrower undertaking an adjustment programme.
The role of the private banks is of course vital. As my honourable friend the Economic Secretary said when introducing this Bill in another place:
"there is … 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 that they have the assurance that the borrower concerned is taking action, agreed with the IMF, to put its economy in better order".—[Official Report, Commons;11/7/83; cols. 612–3.]
Of course the IMF and the world's central banks, operating through the Bank for International Settlements, have a key function to perform. The central banks and the BIS have acted quickly to provide bridging finance in cases where there was a general threat to banking confidence, until longer term adjustments can be agreed with the IMF. Dr. Leutwiler, the president of the board of directors of the Bank for International Settlements, has expressed his hope that there will be no further need for emergency credits of this kind, while recognising that the possibility cannot be ruled out. Nevertheless, the Government feel it right, as a matter of propriety, to seek specific authority to cover any future indemnities because of the contingent risk to public expenditure. That is the purpose of Clause 2 of the Bill.
But the central international financial institution is the IMF. The adjustment programmes agreed between borrowers and the IMF are absolutely central to the process now in train—the basis for setting the borrowers' economies in order and giving commercial banks the confidence to agree to reschedule existing loans and advance additional funds. There is widespread agreement that the fund's resources need to be increased.
I believe that the measures before the House today strengthen the practical role that this country can play in co-operative international operations to deal with the current debt problems. In debate after debate on general economic affairs in your Lordships' House it has been put to me that this form of international co-operation is desirable and essential. I believe it is right for us to support the existing international financial institutions and to join other nations in

989
helping responsible countries facing severe difficulties. I beg to move.
Moved, That the Bill be now read a second time.—(The Earl of Gowrie.)
3.29 p.m.
Lord Bruce of Donington: My Lords, we on this side of the House have little dispute with the Government about the broad thrust of the Bill. As the noble Earl said in the course of his opening remarks, it was quite proper for IMF funds to be made available, within the constraints placed upon the debtor countries by the IMF, provided that the debtor countries put their economies in order. Within that broad general context, many of us feel that the policies of the IMF are to some extent over-influenced by the present Government, and indeed by the Government of the United States, insisting on the more rigorous applications of monetary policy which are applicable in some cases.
Nobody would dispute that the lender has the right, if he is to make large sums available to people already in debt, to require that they should take some steps to remove the causes of the imbalances within their economy. Nevertheless, the noble Earl rather skated over (although I am not suggesting he did so in any way deliberately) some of the matters that were raised in the debate in your Lordships' House on 15th December, which pointed to the unwisdom of many banking institutions throughout the world in making loans to countries at high rates of interest without any kind of prudent regard as to their ability to repay, even in times of normal trading circumstances.
I believe that most of the noble Lords who were present during that debate came to the conclusion—and some articulated it from all sides of the House—that the banking institutions themselves were very largely to blame; that there had been a tendency, particularly in the countries of South America, to spend rather large sums on armaments, and following close upon the heels of those salesmen came the representatives of the banks, assuring them that credits could be made available to them for this purpose.
I repeat that so far as the general thrust of this Bill is concerned we are in support of it. I myself had rather hoped that my noble friend Lord Lever would participate in today's debate, to give us the very constructive ideas appearing on pages 18 and 20 of The Economist for 5th July about the formation of a centralised export credit agency. I will not touch upon that today, in the hope that other noble Lords may do so.
A point upon which I do wish to touch, and into which I shall go in some detail, is the position of ourselves and the Argentine. It is well known that the Argentine is still in a state of hostility at the present time so far as we are concerned. It is known today that the Argentine is still obtaining supplies of armaments from various countries in the world. The terms on which she is getting those armaments and the means she is using, or will ultimately use, to pay for them are unknown; but it is a fact that the Argentine is still continuing to re-arm.
This raises a question of considerable principle: the question as to whether it is proper, in these circum-
990
stances, for Britain and British banks to participate in a facility, some £100 million of which will be directed at the relief of Argentina's liquidity position. This is a straight question of principle. I do not propose to deal with this question in emotional terms, which would perhaps be inappropriate in your Lordships' House, but it is a matter to which we ought to direct attention since the people of our country generally are quite mystified as to how it is that this situation exists in respect of a country with which we are still technically in a state of hostility, with the Argentine representing, presumably, an ever-present threat against which we have to safeguard ourselves at considerable cost to the country and (if I may mention a term which I would mention with more emphasis were the noble Lord, Lord Cockfield, present this afternoon) to the taxpayer.
The Government themselves have been very uneasy about this from the commencement. Your Lordships will recall that on 14th February last this matter was raised by my noble friend Lord Molloy, who sought some assurances in the matter. The noble Lord, Lord Trefgarne, who was replying at the time, said this:
"The purpose of these facilities is to enable Argentina to meet her debts as they fall due, and the IMF support programme, of course, has a number of conditions atached to it. As the noble Lord will recall, it is not customary to reveal the details of those conditions. I can say, however, that the conditions are pretty stringent". [Official Report,14/2/1983; col. 2.]
The noble Lord added, in the course of his reply to a further supplementary question put by the noble Earl, Lord Lauderdale:
"Those restrictions are quite severe and will no doubt at least curtail Argentinian ambitions, if they have any".
This point was further reinforced the next day. The noble Lord, Lord Belstead, in reply to other questions on this matter and in referring to remarks made by his noble friend Lord Trefgarne in reply to questions, said:
"My noble friend said that he very much doubted whether the Argentinians will have much in the way of spare cash for the sort of military adventures which we may fear". [Official Report,15/2/1983; col. 99.]
The view which the Government were putting forward at that time, and which this House quite clearly understood, was: first, that the Argentinians had little spare cash of their own, anyway, to devote to armaments; secondly, that in so far as the loans made to them by the IMF were concerned, the restrictions imposed by the IMF were quite severe. But that broke, because it was found out that the IMF had imposed no such restrictions at all affecting Argentina's right, if they so wished, to use their financial resources in order to buy armaments.
The next argument that was put forward was put forward also by the noble Lord, Lord Trefgarne, on the 14th February, as follows:
"I might add that if support had not been provided for Argentinian debt repayment purposes in these circumstances, presumably they would have defaulted on their obligations—not only on their obligations to us but on their wider obligations to the world banking community in general; and that would have released substantially more funds for the purposes which the noble Lord and I both deplore".—[Official Report,14/2/1983; col. 3.]
In other words, if we did not, through the IMF, lend the Argentinians the money, then somehow that would make it easier for them to acquire armaments. The delicate reasoning that lay behind that argument

991
was never fully explained, but I have no doubt that the noble Earl, Lord Gowrie, when he replies, will probably elaborate on that point a little. But the converse of it would appear to be this: that the more money that is loaned to the Argentine the less money there will be to buy arms.
This really is a question of principle. We went to the rescue of the Falklands on a question of principle. Many of our men died for that principle and hundreds were wounded in the course of upholding that principle. Why should the practice, which I would have thought would be universally accepted, that you do not give financial aid to a person or to a country that is still in a self-avowed state of hostilities to this country, be exempt from the principle?
The Government themselves in another place expressed some distaste about this. The Economic Secretary to the Treasury, speaking in another place on 11th July, at col. 616, said:
"I cannot hide from the House my distaste, and the distaste of my right hon. and hon. Friends, that this should be necessary".
Then he pointed out that we, the United Kingdom, through the IMF and through the United Kingdom banking sector, are involved in the international effort to facilitate the resolution of Argentine's debt problem.
I invite the noble Earl, who I am quite sure is very sensitive concerning matters of this kind, to address himself to this problem: is it to be the case that the loyalty of the ordinary man and woman is to be to his or her country, but that the bankers' loyalty is to be to the international banking system? This question has to be asked, and I am hopeful that the noble Earl will be able to say that in all circumstances the loyalties of British banks should be to the British people, who very largely sustain them, and to their own nation, and that this should take precedence over any wider and very clubbable loyalty to the international banking community with whom they are in daily contact.
I say, I trust without any degree of wishing to give offence, that bankers, particularly international bankers, live rather different lives from ordinary mortals. I make no particular complaint about that. They meet on these numerous occasions, they are in continuous touch on a daily basis by telephone and telex. There is an international camaraderie, which I take it is quite proper, among them. Quite clearly, therefore, they together have a desire that the international banking system, from which they profit considerably, should be preserved intact with the least possible ripples of trouble. This is something, I think, which ought to be challenged; this is something which we ought to think a little more deeply about.
It is said, of course, that if these facilities were not granted the international banking system might be imperilled. It was referred to in the course of the debate last week in the other place—the so-called domino effect: if there were a default by any particular nation, or perhaps a group of nations, particularly again in South America, the whole system would be in peril. I do not know whether the noble Earl, Lord Gowrie, has had the opportunity to consult his noble friend Lord Cockfield on the subject, because Lord Cockfield referred to this aspect of the matter in the
992
debate on 15th December. Some fears were raised from all sides of the House that the whole workings of the banking system, largely due to the follies of the bankers themselves, were in some danger.
The noble Lord, Lord Cockfield, was most reassuring. He said on 15th December, in col. 701:
"Let us start by looking as calmly as we can at the actual facts. The total external debt of the third world countries now just exceeds 500 billion dollars. In real terms, that is somewhat less than 2½ times what it was 10 years ago. In relation to GNP, the growth is relatively modest but individual countries, particuarly in Latin America, have very heavy debts—Mexico, Brazil and the Argentine are prime examples. These are all countries with great economic potential. The problems arise not so much from the magnitude of the debts, as from the impact of the recession, which has stunted growth everywhere, and sometimes from economic mismanagement as well. But, having regard to the potential of these countries, and the improvements in management that are feasible, given proper control over the economy, it is quite wrong to suggest—as has been suggested by several noble Lords this evening—that this is massive bank lending which sooner or later will have to be written off".
Those were very reassuring words from the noble Lord, Lord Cockfield. True enough, he made those remarks on 15th December, but the noble Lord, Lord Cockfield, who likes to update his remarks from time to time, stated again that that was his view as recently as 21st March. The noble Lord then said, at col. 1146:
"As I said in December—and I adhere to this view—the present situation is a cause for concern but not for alarm. This is the difference. Steps were necessary: it was essential to take them. Those steps have been taken. The funds available to the IMF have been substantially increased—an increase of 47½ per cent. is a very large one indeed. The funds of the World Bank have been replenished".
So the argument that if we do not take this action, that if we in the United Kingdom suddenly decide to veto—which of course we are quite entitled to do—the lending of £100 million of our money to the Argentine, an international banking collapse would follow, is quite clearly wrong.
Therefore, the idea which was put forward in another place in the course of the debate last week, that somehow any hesitation in making funds available to the Argentine would lead to unemployment, is a lot of monstrous nonsense; it would do nothing of the kind.
Moreover, it has been suggested that if such a step were taken it would provoke some trade retaliation. The Argentine is in no position to retaliate trade-wise against the United Kingdom. The noble Lord will see from the records for 1981 and 1982 that our imports from the Argentine were £136·9 million and £58·7 million respectively, while our exports were much lower, at £161·2 million and £37·3 million respectively. So the Argentine would be in no position to embark on a trade war of that kind. Therefore, the excuses will not work.
I must go into this in very great detail, I am sorry to say, because I want an effective and informed answer to a question which the House is entitled to ask. The existing criteria have been laid down by the IMF and given by the Economic Secretary to the Treasury as follows. The countries concerned must take certain action in regard to,
"balance of payment deficits, public sector domestic and external borrowing, domestic credit expansion, the elimination of external arrears and the removal of exchange restrictions." [Official Report,Commons, 11/7/83; col. 616.]
Is there any reason why those cannot be extended by the IMF in approved cases? Is it entirely out of the

993
question that the British representatives on the IMF should insist upon an additional criterion—that the funds cannot be used for the purchase of armaments for possible use against the countries that are advancing the money? Is that an unreasonable proposal to put forward? I should not have thought that it was an unreasonable criterion.
As I have said before, bankers are very friendly and clubbable people, internationally, one with the other. It might be argued that for the United Kingdom to make such an argument would disturb the broad and general harmony within which international banking takes place. It cannot be forgotten, and I trust the noble Lord and the Government will not forget either, that one of the difficulties may well be that the individual bankers who take part in the consortium also have board representation on most of the world's leading armament companies. Therefore, there may not be the same incentive to restrict the sale of arms.
I have tried to put these arguments as temperately as I am able, even though it gives me and many of my noble friends, and, indeed, noble Lords in other parts of the House, some cause for considerable indignation. If no action of this kind can be taken and if no pressure can be exercised to this end, what does it really prove? It will prove something that we have long suspected—that the Prime Minister, the Chancellor of the Exchequer and the Foreign Secretary are lap dogs when it comes to the City of London and financial interests.
The Earl of Gowrie: My Lords—
Lord Bruce of Donington: My Lords, the noble Earl will have an opportunity to reply. It must be said that the Prime Minister herself has a very limited knowledge of these matters. The House will recall that when she was answering a question—
The Earl of Gowrie: My Lords, I must ask the noble Lord to give way. He has been astonishingly irrelevant and astonishingly offensive. There is every opportunity, as I shall shortly seek to show, to influence the way that the IMF programmes are budgeted.
Lord Bruce of Donington: My Lords, the noble Lord must not be so impatient. The function of the loyal Opposition in this House—
The Earl of Gowrie: For 36 minutes, my Lords?
Lord Bruce of Donington: Yes, my Lords, because it is a very important subject. The function of this House and of the Opposition is to oppose and to bring forward exactly these considerations. That is why I point out in illustration of my last remark that, when the Prime Minister was answering a question on 6th March 1980 in another place, she said that,
"the tendency is for bank profits to be high when times are bad for others and a good deal lower when times are good for others." [Official Report,Commons, 6/3/80; col. 656.]
She said that as though she were mystified by this phenomenon. The noble Earl may fulminate as much as he likes upon this, but he will have to satisfy himself in his own mind that he is correct, as distinct from
994
quite properly supporting his Government. I say on behalf of the Opposition, as I have a right to say and will go on saying, that the present Government have neither the intellect nor the will to stand up to the banking community. For that they should be indicted, and we on this side of the House have not the slightest hesitation in indicting them on those lines.
3.58 p.m.
Lord Taylor of Gryfe: My Lords, this debate has gone on rather longer than expected, but in view of the fact that when this matter was discussed in the other place there was very sharp criticism of the SDP-Liberal Alliance for failing to make its position clear, and because this is a very important subject, I propose to say a few words this afternoon. We on these Benches are agreed on the need to support the international financial institutions in maintaining stability in the international financial system. Questions which we may ask are: Is it enough? Is it in time? The possibility of collapse of the international financial system is something that I do not look forward to and would not like to encourage.
The Minister has rightly identified the main causes of the present crisis: the oil price increase, the world economic depression with the consequent collapse in the prices for primary products, and the continuing high interest rates. The Bill we are discussing will make a contribution towards relieving the situation, but until the world economic depression takes a positive turn for the better the crisis will continue. I can well understand the chairmen of the central banks making reassuring statements from time to time because they must maintain confidence in the system, but in the light of the facts of the moment I doubt if that reassurance is justified.
It is easy to criticise the international bankers. That is always an emotive thing to do. It is easy, in retrospect, to criticise indiscriminate lending. But your Lordships will recall that when the lending was taking place two facts existed. The first was the need to recycle petro-dollars, and the international banking system was hailed because it had these large deposits of petro-dollars which were on-lent for further development. They were being on-lent for countries, many of which had double-digit growth rates. To that extent it looked a reasonable possibility that these monies would be repaid. Today, because of the factors which I have mentioned, the situation has changed. The world banking system has taken some steps to tighten its controls and its monitoring of that lending. The exchange of information now at Washington (the Ditchley 2 organisation) will help in a sensible exchange of information on countries which are large borrowers.
But more important, and relative to this debate, is the positive role of the IMF in the rescheduling of debts. The IMF has not simply lent additional monies to make the system reasonably stable; it has also encouraged the clearing and central banks to lend as a condition of further IMF lending. As a further condition, it has insisted on the rescheduling of existing debts, thereby avoiding the crisis which we all fear. To that extent we support fully what the IMF is doing in this positive way. But do not let us

995
overestimate the size of the IMF contribution, nor our size in relation to the total IMF resources.
Lord Molloy: My Lords, I am following the noble Lord's extraordinarily interesting argument, but would he tell the House who forms the IMP? Who are the individuals who sit there and have this massive control? Who appoints them, and who checks on them?
Lord Taylor of Gryfe: My Lords, the British Government, like those of other countries, have representatives on the IMF. Once the 47 per cent. increase is carried through, the total British contribution to the IMF quotas will be only 7 per cent. I think the total at the moment is 10 per cent. So do not let us overestimate our power and influence to make the IMF decide in favour of our political prejudices or particular wishes.
The nature of the crisis is such that only last week Brazil was within 24 hours of defaulting on the short-term borrowing (the bridging finance) she had secured from the Bank for International Settlements. The chairman of the Bank for International Settlements, Dr. Leutwiler, said that there would be no further credits for Brazil from the BIS; and within 24 hours of the closure date agreement was reached between the IMF and Brazil. The Brazilian situation is that they owe $94 billion, of which $11·5 billion is to British banks. But to give your Lordships some idea of the nature of the crisis, the total export earnings of Brazil this year will be $22 million. In order to service her debt and repayment requirement, $17 million of that $22 million will be taken up. Even with the assistance which has been given, and the rescheduling of the debts, there is still a critical situation so far as Brazil is concerned. The league table is: Brazil, $94 billion; Mexico, $91 billion; the Argentine, $41 billion; and the third world total debt, around $600 billion. The crisis has not disappeared.
So far as the third world debt is concerned, primary products fell in price last year by 14 per cent., and between 1977 and last year debt servicing of the third world countries went up from 15 per cent. to 30 per cent. The third world countries are caught in this awful squeeze of debts increasing, because debt is related to the London inter-bank rate, and at the same time commodity prices are collapsing.
I want to say a word or two about conditionality—about the questions raised by the noble Lord, Lord Bruce of Donington, who speaks from the Labour Front Bench. This is a very difficult matter, and it arises repeatedly in United Nations deliberations. The test which the IMF places on borrowers is their ability to repay. The regime which they set for the countries to make reasonable repayment is to ensure that their economies can carry the debt that they are now incurring. Once you introduced into that system some preference for a particular political regime, it would make the IMF's general activities extremely difficult.
I can recall that at the end of the war, when I was engaged in the reconstruction of Europe as an official of the United Nations, we sometimes had to make decisions to assist countries with whom we had been at war. I remember that in all our discussions in the United Nations the Russians used to take exception to this. They used to say that assistance and aid should be
996
given only to countries which they described as countries that had resisted the Fascist hordes. We had, however, to get the European system working again. That required giving credits, support and aid to countries with whom we had recently been at war. There is something of a parallel in all this. We took the criterion of need, and not of our particular political affiliations. To some extent the test must be applied to the Argentine. Does its increased armament commitment affect its ability to service its debt? If it does, the IMF is entitled to take a very strict line, as it would with any other country. In many countries it has cut back public sector expenditure because it believed it was excessive. By the same token, the IMF is right in insisting on rigid financial discipline. and must take into account the fact that the Argentine is spending large sums on armaments.
Similarly, with apartheid. I noticed that in the discussion in the other place the view was expressed from the Labour Benches that we should not lend to South Africa because we disagree with apartheid. In so far as apartheid restricts a country's economic growth, stability and ability to repay a debt, apartheid should be condemned by the IMF in those terms. But if you are running the IMF you cannot do so on the basis of particular political prejudices or on the inevitable emotional feelings one way or the other. Therefore I suggest that our representatives of the IMF should critically examine the large expenditure on armaments in the case of the Argentine, and should also critically examine whether the policies of apartheid restrict or undermine the ability of South Africa to meet its credit commitments.
I want to say a few words in relation to the interesting idea put forward by the noble Lord, Lord Lever of Manchester, in which he suggested (and this would be undiscriminating, I suspect, if I may say so to the noble Lord, Lord Bruce of Donington) that there should be a general extension of the Export Credit Guarantee Department arrangements which presently finance sales to foreign countries, and that this should also include an export credit guarantee arrangement on capital which we might lend on to other countries. This is worth looking at. It is an idea that was aired during our previous discussions in December and last March.
In the Brandt 2 Report, Common Crisis,there is very good comment in relation to IMF policies. I commend the Government to take note of these three points. The first point is:
"That countries be encouraged by the enlarged availability of low-conditionality credits to come to the IMF at an early stage of anticipated difficulties".
Too many of them come at the last stage, the IMF gets a bad name because it has to impose rigid disciplines on these countries, and it then becomes classified as an agent of imperialism.
Secondly, the Brandt Report states:
"That the IMF use its expanded resources to give countries support for expansionary adjustment wherever possible".
In the application of IMF policies there has been a tendency to be totally contracting and restrictive. The report goes on to state:
"That greater attention be paid to supply relative to demand conditions, so that payments deficits are corrected by an appropriate mix of policies with less exclusive concentration on demand

997
constraints, devaluation and credit ceilings as the main instruments of adjustment".
I suggest that we should take a positive role in IMF discussions, and perhaps pay some heed to the proposals contained in the Brandt 2 Report, Common Crisis.
4.11 p.m.
Lord Beswick: My Lords, I find it quite astonishing that the Government Ministers complain that some of us should want time to discuss the issues involved in this Bill. The noble Earl referred to what he rightly called a notable debate at the end of last year, in which the dangers inherent in modern moneylending were discussed. But I think he will agree that that can scarcely be considered the end of the matter. The basic problems remain. We are as far away as ever from a genuine solution to the difficulties that we talked about in the debate last December. I would have hoped that we could have had a full day's debate on some of these matters, and I hope that after the Summer Recess we shall get such a debate; I might even help fulfil that possibility by myself putting down a Motion.
It is not that the Bill now before us is itself of such profound importance, though I must say that the potential liabilities opened up by Clause 2 cannot be considered as unimportant. However, against the background of the problem, the Bill really is a pitiful piece of legislation. Some may say that it is an ambulance measure, a first-aid operation. But when I learned something of first-aid I was told that when there was loss of blood, the immediate action must be to stop that loss. This Bill does not stop the flow; it is designed to provide more blood, so that the flow can continue—to the continued profit of the donor, and the weakening of the patient.
Much has been said about the large sums that have been borrowed, but it is possible to say that it is not so much the actual volume of lending and borrowing that has bedevilled our economic systems, but rather the quite stupid rates of interest that have prevailed. I do not believe that we have even begun to understand the distortion to our economic and social systems brought about by this debauch of moneylending. Of course, we can see what could happen if there were a default by a major borrower. Of course some banks could seriously burn their fingers and areas of trading could be brought completely to a halt. But the point that I want to make is that we need also to understand the deep-seated threat to modern societies if there is no default, but the devices in this Bill make it possible for moneylending to continue at anything like the current rate of interest.
In my submission there is a flaw, a design fault, in the world banking system, and this Bill simply props up the system. Much greater effort should be directed at identifying the fundamental design fault and appropriate modifications made. There are others far more learned about banking than I who can give solutions; but in my unlearned way I should like to point to some of the evidence that persuades me that there is this design fault.
I have no doubt that in this House there will be quite a number of us who hold Government stock yielding 15 per cent. interest. That 15 per cent. did not reflect
998
a prosperous economy in 1979 or 1980 with business and profits booming and growth at an all-time high. Precisely the opposite was the case—it was because business was so bad that the rewards went up. This morning I read in an American newspaper that in the United States between August and December 1980 prime interest rates rocketed from 11·12 per cent. to 20·35 per cent. Again this did not reflect real economic growth of that order. It was simply a panic reaction to signs of trouble.
If I may for a moment be allowed to look back I would say that many years ago I helped to start a little airline. I recall that it did quite well and one year my dear friend the chairman said proudly that he was going to propose a 10 per cent. dividend. He was rightly proud because everyone had worked hard, they had earned success and everyone was going to share in the rewards. But in the case of that 15 per cent. Treasury stock there had been no success. There was no question of that yield coming from economic growth. It seems to me basically wrong that there should be increased rewards as the result of failure. I shall not pursue that line of argument any further this afternoon but I would call attention to another piece of evidence in the case against moneylending as now practised.
Some of my friends in the other place, and the noble Lord, Lord Bruce, powerfully this afternoon, have emphasised the point that the effect of this Bill will make it possible for the Argentine to continue to borrow money—some of it our money—to enable it conceivably to buy weapons; and equally conceivably some of which weapons might be used against us. The Government agree that this is a bad thing. The noble Lord, Lord Taylor of Gryfe, said that it was a bad thing. But we are told that the institution itself is unable to stop it. The noble Lord, Lord Taylor of Gryfe, spelled out the difficulties confronting the IMF if it tried to impose conditions relating to military preparations.
But the extraordinary thing is that though its powers of persuasion or compulsion cannot cover military expenditure, the IMF powers can cover social and industrial expenditure. It can require austerity from everyone in a particular country. Now I am certainly not myself going to argue that in certain cases a bank manager should not say to his customer that he cannot borrow more money unless his personal extravagances are cut. But what the international bank manager is saying is that whoever may go without, whatever may have been the cause of the difficulty, the moneylender must be certain of his extravagant return. It was Mr. Henry Kissinger who described the position as clearly as anyone. He put it this way:
"As a condition for its assistance the IMF invariably insists on measures that have the effect of contracting the economy, increasing unemployment and reducing consumption".
Moreover, as I have tried to indicate on previous occasions, we have to bear in mind that those conditions are enforced because of many problems that have arisen, directly in part and indirectly in large part, by the high rate of interest charged on earlier loans. The lending of money can be a valuable part of our economy if it leads to increased production of real wealth and out of which interest and dividends can properly be paid. But surely there is something

999
basically wrong that rates are higher when growth is lower. If there is no growth, then, to maintain rewards to the moneylender, some innocent people invariably have to suffer in the way that Mr. Kissinger spelt out.
No doubt I can be reminded of the elementary principle that risk-taking in banking should be rewarded. But this Bill is designed to take out such risk as there was in lending to sovereign borrowers. The Bill will of course go through; but I repeat my hope that, in the near future, we shall have the opportunity of discussing the real issues involved. As certainly as anything is certain in this world, the problems involved behind this Bill will not go away as a result of simply finding some more money.
4.21 p.m.
Lord Molloy: My Lords, I apologise for not having my name down to participate in this short debate. However, there has been reference to me. I was responsible in the very heat of the Falklands crisis for submitting to your Lordships the idea that the day would come when we have to sit down, negotiate and start trading again with the Argentine Government, and that perhaps by that time there would be a sane and sensible Argentine Government. It would be a difficult situation in which we were faced with taking action in the hope that this would lead ultimately towards achieving that democratic Government. Equally, I was somewhat shattered when the IMF made its decision to lend money to the Argentine Government, not on the grounds that people were going to be killed, that they were going to be bombed or that any Welsh Guards would suffer terrible things, but that the international financial scene would otherwise be placed in difficulty. The dollar, the pound, the franc and the mark were all put well ahead of any soldier, sailor, airman or anyone else. I found this particularly repugnant.
I have to be honest in saying that I cannot go all the way with my noble friend Lord Beswick on the fundamental objectives of the Bill. Like my noble friend Lord Bruce of Donington I find that the measure can and will make a contribution. I agree with the remarks of the noble Earl, Lord Gowrie, in the early part of his speech, that it can help a great deal. I believe, however, that there must be great control. It is no use we in this Chamber getting up and saying, "The IMF do this" or "The IMF do that" because ordinary people are beginning to ask what the IMF is I have heard the IMF in this Chamber confused with the General Agreement on Tariffs and Trade, with which it has no connection. It is known that as a result of the Bretton Woods conference there was supposed to be strict control. I do not expect that many of us would be able to identify the representatives of the British people saying at the IMF how much we should contribute and where the money should go. Despite what I consider a dastardly act, I support immediate talks with Argentina once it has removed its hostility to my country. That has not happened.
I object strongly when this Government—supported, I am surprised to say, by some parties on this side of the House—are prepared to take the risk and to inform the Argentine Government that we are willing to contribute through the IMF so that they can
1000
have a few more millions but asking them only to use it for economic purposes and not to harm British subjects. Is it not possible that the Government could go further and argue that they have such confidence in the Argentine Government never acting again to harm the Falkland Islands that they wish to encourage more British families to go to the Falklands to develop farms and to make the land more productive?
That is the Government's stand, is it not? It cannot be anything else. I find it wounding that we should behave in this way, especially as one of those who says that the time has to come when we must trade with Argentina. I can imagine the justifiable anger that would have been displayed by the noble Earl, Lord Gowrie, if during his period as Minister with responsibility for Northern Ireland there had been some contribution to American financiers from the IMF to make sure that the IRA had better arms and more guns with which to attack the British Army. Would there have been the same cool attitude that has been seen this afternoon along the lines of, "It's too bad chaps, but that's the way it goes"? Anyone taking that view has no right to sit on any Front Bench. However, that is what would have happened.
There would have been total condemnation in this House in which I would have joined if financiers operating public money had said, "We are very sorry about the rough things we have said about the Soviet Union invading Afghanistan and if a few more billions are needed to maintain your arms there you shall have them." That is what is being said in other countries. It is what ordinary people are saying. It is wrong for us to believe that folk outside do not understand these things. They do understand. I support the noble Earl, Lord Gowrie, 100 per cent. in what he says about showing a co-operative attitude in international affairs. As the noble Earl rightly says one important step is through endeavours created under the Bretton Woods agreement; and, indeed, the International Monetary Fund.
There comes a time however when we have to say that although we are prepared to be co-operative, to be helpful and to start trading again, we will only start trade when those who have slaughtered our men and some women in a recent war say that they are no longer hostile to us. If they want to make an agreement with us to trade, we can say that we are prepared to trade. Until that is forthcoming, I am not prepared to listen to all the pleadings that have been made. I was disappointed to hear the contribution of the noble Lord, Lord Taylor of Gryfe. I do not want anyone to say that I am becoming emotional because a few hundred British soldiers, sailors and airmen gave their lives. I do not want anyone to say that I should forget that. I have no intention of forgetting it. I do not know what we can do.
I listened carefully to the speech of the noble Earl, Lord Gowrie, and his submission that under the Bill we are trying to be more generous and give more aid and help and increase international co-operation. I support that aim 100 per cent. But my shoulder is right behind my noble friend Lord Bruce of Donington. Like my noble friend, I feel that we should have been stronger. It is not enough to stand still for two minutes and give 21-gun salutes to the Welsh Guards, the Scots infantrymen and the men of the RAF. We do not

1001
dismiss them in 12 months simply because there is a new International Monetary Fund that has to be co-operated with. We have to take the same attitude that would have been adopted if the money had gone to the IRA or the Soviet Union to mount an invasion of some other country. That would be rightly condemned. These are the issues that we must consider seriously. By doing so, when we ultimately want international co-operation we shall achieve it on the most honourable basis that the human mind can devise. In that way, everyone will gain without bitterness or sadness. There will be a genuine feeling that we are moving along a saner and better road towards international behaviour in the dark, miserable and dangerous world in which we live.
When we can achieve a situation where, for example, there is an increase in the IMF funds to attack poverty, ignorance and disease, it will be a wonderful thing. Indeed, that is the part of the Bill with which I agree. However, I feel very strongly indeed that we move too hastily and too far as regards a people who felt a form of violence and hatred for us and who are still not prepared to say, "Very well, it was a black, dark, period of our relationship; it is now all over, let us try to give some sunshine and light to a new situation". We are prepared to say that, but they are not, and until they do so we ought to stand firm and have nothing to do with any organisation that is prepared to lend money to a régime which is only about 200 miles from the Falkland Islands.
Indeed, are we not now sending people from our land to try to develop the Falkland Islands? Can we do that with the absolute surety that the hostility still being professed by the Argentine Government is not much to worry about, so much so that we are prepared to go out on a limb and lend them money in the safe assurance that they are not going to attack the people who are, perhaps, not yet in the Falkland Islands? It is that aspect that the Government ought to take on board and consider very seriously indeed.
4.31 p.m.
The Earl of Gowrie: My Lords, I certainly agree with the noble Lord, Lord Beswick, that this is a subject of immense importance, so much so that only a few days ago, when wearing my hat as Minister for the Arts, I rather surprised an arts journalist by saying that some of the things one could or could not achieve in the world of the financing of artistic activities might be contingent on events in Latin America or central Europe in terms of international financial stability. Therefore, I certainly yield to nobody in thinking this subject important. I do not think that there is any single issue except perhaps the issue of world peace which is more important today than continuing international financial stability and the sort of terms for international stability with which this Bill seeks to deal.
The response to the Bill in your Lordships' House has fallen very squarely into two parts. There are those like the noble Lord, Lord Taylor of Gryfe, and the noble Lord, Lord Beswick, who are concerned with the economic consequences and the economic thinking behind these measures. There are those like the noble Lord, Lord Bruce of Donington, and the noble Lord,
1002
Lord Molloy, who express themselves in broad agreement with the economic purposes but have expressed, very trenchantly, anxieties about a system which might be lending money to a country still formally engaged in hostilities with us—a country which might use such money to proceed against us or to damage our interests.
Of course I agree with the motivation for such anxiety, but I think that the criticism misses a key point: that this issue of "conditionality"—and the noble Lord, Lord Taylor, gave us an admirable account of the problem of conditionality—can be imposed in ways other than those suggested by the noble Lord, Lord Bruce of Donington, or the noble Lord, Lord Molloy. If I am not misinterpreting them, they want loans to such countries as Argentina to be contingent upon a political response—in this case as regards foreign affairs—by that nation.
The noble Lord, Lord Taylor, showed us very clearly how very difficult it is for an international economic body like the IMF, as against the chancelleries of the soverign countries around the world that belong to the IMF, to engage itself in direct conditionality and to say, "We want you chaps to have this, that or the other political objectives or this, that or the other political system". But that is not to say that the IMF cannot be enormously influential on the ways in which people respond politically to the needs and demands of their creditors and of the rest of us—
Lord Paget of Northampton: My Lords, would the noble Earl—
The Earl of Gowrie: My Lords, let me just finish the point. Were the Argentines to divert money to buy more arms, or indeed anything else, the IMF programme being negotiated with the Argentines could be severely jeopardised. Let me just say to noble Lords before I give way that the IMF programme and any bank lendings contingent upon it do not give Argentina any surplus funds to spend on arms. Indeed, the programme puts very tight control on Argentina's finances, and, if the Argentines were to divert money to buy more arms, this could jeopardise the programme and Argentina's ability to negotiate further funding. Indeed, I can tell the House that the international commercial banks have not yet signed the 1·5 billion dollar loan which has been under negotiation for several months. In earlier reports, the 11th of this month was quoted as a possible signature date. My present advice is that this has slipped and the loan is unlikely to be signed just yet. It is, therefore, unlikely that any such loan would be effective unless and until Argentina has satisfied the performance criteria of the fund programme. So the funds the Argentines receive will be contingent upon how they behave.
Lord Paget of Northampton: My Lords, I am most grateful to the noble Earl for giving way. Why is it very complicated for the IMF, as a matter of policy, to say that they only accept clients who are at peace with their fellow members of the United Nations, that they will not lend money or recommend the lending of money to nations that are at war and that they must wait until they make peace?
The Earl of Gowrie: My Lords, if there were circumstances of global conflict, that would be a great deal easier. But there are, of course, conditions of partial war and peace, or of good relations or bad relations, that exist between member countries. If noble Lords look at the membership of the IMF, they will find that this suggestion really would be a little unrealistic. The membership of the IMF includes 146 countries. Six countries—the United States, the United Kingdom, France, Germany, Japan and Saudi Arabia—all of which are profoundly unlikely under any rational scenario to be in any state of formal hostilities with each other, appoint directors to the executive board. The remaining countries are grouped into 16 constituencies and they elect 16 executive directors to the board. The point I am trying to make is that the IMF is a particular type of body, and, as a financial body, it is highly influential and can influence its creditors in ways which are thoroughly conducive to peace. But, if it took the frontal approach suggested by the noble Lord and others, it would immensely diminish its chances of being able to influence countries in their pocket books—which is where, in fact, they are probably most easily and sensibly influenced for good.
I can assure the House that the 1.5 billion dollar commercial bank loan currently being negotiated with the Argentine is very closely linked to the IMF programme, and that drawings will only become available while the IMF conditions are being satisfactorily met. If I showed a little impatience during the perhaps rather contentious remarks—where personalities were concerned—of the noble Lord, Lord Bruce of Donington, it was not because I do not recognise this genuine anxiety about lending money to people who may be, or indeed are, engaged in hostile diplomatic relations with one; it is simply that I have often debated economic affairs with the noble Lord, Lord Bruce, over the last five years and have always been accused of turning my back on Lord Keynes. It seemed to me that the noble Lord was turning his back on what could he called the economic consequences of the peace. I should have thought that it was a principle dear to Keynesians and to neo-Keynesians, or even to modified Keynesians, that countries with which one can have interruptions of good relations, or poor relations, should not suffer economically for a reason which can only strengthen those elements which are seeking to promote violence or disorderly policies within the countries in question.
I also have to say that I am always rather impatient when I here the old socialist argument about the bankers' ramp as if the IMF were, so to speak, gnomes. That is not what the IMF are. The way they conduct their affairs is not simply designed to provide commercial profitability, and we value their work highly. Of course membership of the IMF board enables us to take part in periodic reviews of the IMF's progress and to ensure that the appropriate conditionalities are met. I think what I have said about the Argentine shows that we take that seriously.
Coming to the remarks made by the noble Lord, Lord Taylor of Gryfe, I can only really commend them to the House as an admirable tutorial on the situation we have got ourselves into in the international world. I do not think it is fruitful to apportion blame, and I do not think it is particularly fruitful to criticise commer-
1004
cial banks for lending to countries which enjoyed high and indeed enviable rates of growth until growth was pulled up by the international energy crisis, and perhaps even more by the international liquidity crisis, if I may put it that way, which followed 1973 and which has cast such a blight over all our lives since.
The task of the 1980s is now to get more stable growth. It is therefore essential—and perhaps I may say this to the noble Lord, Lord Beswick—that all countries engage in these rather grim and gloomy policies (admittedly jeopardising growth in the short term) which enable us to get to non-inflationary and sustainable growth in the longer term, admittedly at perhaps a lower level than we enjoyed in that astonishing post-war flowering.
The measures in the Bill before the House strengthen rather than weaken the role that this country can play in needed international efforts to deal with international difficulties, and they strengthen the existing international financial institutions in carrying out their vital role of promoting and facilitating adjustment. I hope I have dealt with the central fear expressed in relation to the Argentine. Otherwise I very much welcome the wide support that the measures have commanded throughout this House and another place, and I commend the Bill to your Lordships.
On Question, Bill read a second time; Committee negatived.

Local Authorities (Expenditure Powers) Bill
4.44 p.m.
The Minister of State, Department of the Environment (Lord Bellwin): My Lords. I beg to move that this Bill be now read a second time. It has a single objective even if the legal niceties involved are inevitably a little more complex. I will endeavour to explain that aim, and how the Bill seeks to achieve it. This Bill was first introduced into another place in the previous Parliament; but because of the early dissolution, it failed to complete all its stages there. It has now been reintroduced, and comes before this House largely unchanged.
The purpose of the Bill is to remove a doubt which local authorities have brought to our attention about their ability to make grants towards certain urban development projects. This doubt has come to light in the particular context of the Government's Urban Development Grant initiative. It applies more generally, however, to a potentially wider range of projects involving either the acquisition of land or any building works on land which local authorities may wish to grant-aid, using Section 137 of the Local Government Act 1972. I am sure that the House is by now fully acquainted with the Urban Development Grant Scheme. The essential characteristic is that by using relatively small amounts of public resources —local authority contributions, backed by a 75 per cent. Government grant—considerably greater sums are levered from the private sector in support of projects aimed at the regeneration of our inner cities.
When the Bill was read a second time in another place on 7th July, my honourable friend the Under-Secretary of State for the Environment was able to

1005
announce a further batch of 21 UDG projects, making 93 approvals in all to date. These projects represent a total investment of £216 million, of which £173 million comes from the private sector. It is because we wish to avoid any unnecessary delay to these schemes that the legal doubt about the authorities' own powers to assist in this way should be speedily resolved.
Let me now seek to explain the nature of that doubt and how it has arisen. Local authorities have long had powers to make loans for the acquisition of land, and the carrying out of works on land, including the erection of buildings. In England these powers are embodied in Section 3 of the Local Authorities (Land) Act 1963, and there is an equivalent Scottish provision. These powers are extensively used by local authorities in, for example, assisting local firms to provide themselves with new premises. Local authorities also have a much more general power to incur expenditure for the benefit or improvement of their area. This power is subject to an annual expenditure ceiling equal to the product of a 2p rate and is hence often referred to as the twopenny rate provision. It is contained in Section 137 of the Local Government Act 1972; and, again, there is an equivalent Scottish provision.
Last year, after a great deal of discussion, into which I need not go now, Parliament did two things in the Local Government (Miscellaneous Provisions) Act. First, it confirmed that Section 137 could be used inter alia to make grants for local industry and commerce. Secondly, it widened the scope of the 1963 Act so that local authorities could make loans not just in respect of land that they owned or had sold, but in respect of any land. I hasten to reassure your Lordships, that both these changes were made with the full support of the local authorities themselves, and indeed at their request.
But they have had an unfortunate if unintended result. The general power in Section 137—the twopenny rate provision—is however only available where there is no other specific power, whether or not subject to conditions or limitations, which authorises them to incur expenditure for the same purpose. As noble Lords will realise, it is not an easy matter to say what is or is not the same purpose. But one or two local authorities represented to us that if they had power under the 1963 Act to make loans, say, for the erection of buildings, they could not use Section 137 to make grants for the same purpose, which is exactly what they want to do in many UDG schemes. The Government's own legal advice agreed with this interpretation, which is why the Government decided to introduce this measure, as a matter of urgency, to make sure that they could use Section 137 to make such grants.
Let me now explain how the Bill achieves this purpose. It does so by providing that certain powers shall not be regarded as restricting—in the way I have described—the power in Section 137. The powers concerned are Section 3 of the Local Authorities (Land) Act 1963 for the reasons that I have already given, and also any enactment in a local Act for which the Bill provides powers for the Secretary of State to designate in an order.
Your Lordships may wonder why it is necessary to refer to local enactments in such general terms, or to
1006
have a designation procedure. The answer is straightforward: we simply do not know at this stage what provisions in the many local Acts which exist may inhibit the use of Section 137 to further urban redevelopment projects. We must rely on the local authorities themselves to tell us when they find an example, so that my right honourable friend can make an order to remove the inhibitory effect. But we have provided safeguards to ensure that the order-making power is exercised only when, and to the extent, it is needed. So that if, for example, one local authority to whom the local Act applied wanted the order but another did not, then the order could be made only to apply to the former. Similarly, the Bill provides that the local authorities concerned must be consulted beforehand. My honourable friend has already given an additional assurance, in another place, that the department will also keep the local authority associations in touch with any points of principle which arise in the use of this order-making provision.
The only other provision to which I need draw attention in introducing this Bill is the brief reference in it to retrospection. This provides that in relation to Section 3 of the Land Act the Bill will have effect as from 1st April of this year, and that any order designating a local Act may similarly have effect from 1st April of the year in which it is made. This provision was incorporated into the Bill when it was reintroduced into this Parliament to meet some concern which has been expressed about the position of local authorities which had made payments, under UDG schemes in particular, in this financial year—and hence after the Bill was first introduced—but before it could receive Royal Assent. I am sure your Lordships will regard this limited degree of retrospection as both practical and reasonable.
I have endeavoured to explain as clearly as I can the very simple purpose of this Bill. There is however one last point that I should perhaps make for the sake of completeness. This is to remind your Lordships of the undertaking that my honourable friend gave on 7th July in another place to look at how best extra publicity for Section 137 could be brought about. This was in response to concern over the way in which some local authorities may be misusing their discretionary power conferred by the section. He said,
"we had it in mind to include details of Section 137 expenditure in the summary of accounts that we propose local authorities should prepare in future. We shall be consulting the local authority associations shortly about our detailed proposals so that we can implement the change at the earliest possible moment".—[Official Report, Commons, 7/7/83; col. 436.]
My concern this evening is to commend this Bill to your Lordships as essentially a technical measure to fill an unintended but important gap in local government's armoury to tackle the regeneration of our inner areas. It is in that spirit that I commend this Bill to your Lordships.
Moved, That the Bill be now read a second time—(Lord Bellwin.)
4.54 p.m.
Baroness Birk: My Lords, on this occasion the Opposition are able to welcome the Bill put forward by

1007
the Minister and we are doing nothing to impede its progress. We are also pleased to see that the Bill has taken note of what was argued in Committee in another place on the first Bill, before the election, so that it makes it retrospective to 1st April 1983. This is essential and I am pleased to see it incorporated in the Bill.
The Bill, as the Minister so clearly explained, is attempting to clarify the law relating to Section 137 of the Local Government Act 1972. I think, but it is probably better if there were no doubt—there is a school of thought that there was no existing doubt—that this was clear and it could have gone ahead with, if necessary, the courts having to sort it out if anybody objected. On the other hand, I can see that it caused a certain amount of anxiety among many local authorities. Therefore, while one does not want to add to legislation, even in the smallest form as this is, it is still better that it should be completely clear.
However, there are several points relating to the use of Section 137 in the fields of industrial and economic development to which the Minister has not addressed himself. First, there is the general unsuitability felt by many individuals, local authorities and some of the local authority associations, certainly the AMA, of having to rely on Section 137 to legalise the valuable work undertaken by local authorities to rejuvenate and energise their local economies. It is a provision normally associated with providing bus shelters or projects of a much smaller kind.
During proceedings on the Local Government (Miscellaneous Provisions) Act 1982, I remember arguing to give local authorities far greater financial flexibility and higher spending on economic development in their areas. That is essential to revitalise the inner city areas. Although some progress was made in that Act, as the Minister pointed out, it did not go as far as many of us had wanted, as far as the product of a higher rate. When one is dealing with industrial and commercial measures and trying to improve them and put them into an area to improve both the quality of life and the employment situation in an area, that is different from some of the other more cosmetic although equally important but smaller services that we are discussing. There are already problems with the 2p limit itself. The limit is not on the rate that a local authority can levy, but on the expenditure it may incur. That means that the Government's urban development grants count against the limit.
In bringing forward this legislation. the Minister is attempting to help the urban development grants scheme which the Bill does, but he could help more by using the powers available under Section 44 of the Local Government (Miscellaneous Provisions) Act 1982 to exempt urban development grants from the calculation. The Minister could then tell local government that what counts against the limit is not the gross expenditure before deduction of the grants, but expenditure net of the grants. With the UDGs available at 75 per cent. the use of this power could make an enormous difference to the amount of economic development work a local authority could undertake. It would enable it to stretch its economic
1008
and industrial limbs in a way which it cannot when it is inhibited by the Section 137 provisions.
This is an example of the Government seeking discretionary powers from Parliament and then not using them. Clause 1(3) will give the Government more discretion, this time to discriminate between local Acts and local authorities using general Acts. Can the Minister tell me at this stage whether the Government will use this discretion? They have not so far used the discretion they have under Section 44. If they do not use it it will mean that many local authorities are at a disadvantage because they are unable to implement some of the local Acts.
Finally the Bill has to be seen in the context of the Government's overall policy towards local government. Today we are discussing the powers of local government to spend within the product of a 2p rate: a fairly small sum, we agree; but, even so, the Government have given the impression of trying to be helpful about this. How does this helpfulness square with what the Government are planning to impose on local authorities after the summer?
Since the Bill first appeared we have seen the Tory manifesto and the Queen's Speech, in both of which a Bill has been promised which is not concerned just with the marginal problems of the 2p rate but with the Government's plans to legislate to take away the local authority's freedom to levy any rate it chooses. I am sure the Minister will say that those powers are aimed at only a few overspending authorities, but many of those alleged overspenders—this is on the Government's own criteria and includes Conservative as well as Labour authorities—are authorities many of whom are doing most for industrial development in their areas and who stand to benefit most from this Bill.
Finally, the Bill clarifies the legal hurdles which always lay hidden in most legislation and, therefore, as I have said, we will give it an easy and speedy passage. It should take any doubts out of urban development and facilitate the excellent work that many local authorities are endeavouring to carry out in this area; but, without sufficient financial means and vigorous local government, these efforts may be legally blessed but in practice could be nugatory.
5 p.m.
Lord Beaumont of Whitley: My Lords, I should like to thank the noble Lord who introduced this Bill for his explanation of it. It is a Bill which I think will get widespread support in this House and certainly from these Benches—not that we think that necessarily it has been produced in the most satisfactory way or that we are entirely happy about everything in it. But basically it is a Bill to give more power to local authorities to do work which is necessary to be done. This is fairly unusual for this Government and we are delighted that they are taking these steps. The objective is admirable: the improvement of the inner city and the use of our resources in order to make that improvement. Unfortunately, in order to do it apparently we have to produce some slightly convoluted legislation dealing with where it is a matter of debate as to what controls need to be imposed on the local authorities in their use of the monies which they can raise.

1009
It is the philosophy of the party which I represent and that of our noble allies on the Back-Benches that we would like to see as much power as possible given to local authorities and that one way of enabling this to be done is to produce a better and more democratic way of electing the authorities so that the kind of extremist use of funds which has been referred to, and which is the target of some of the measures which have to be introduced, is no longer possible. I have already written to the Minister on this matter regarding an interchange that we had the other day. I do not know whether he intends to say something about it today, but I very much look forward to that. But, given that we are where we are and that we start with this unsatisfactory system, the Bill obviously needs support.
I think that one or two very minor points should be taken up. I understand that my noble ally, the noble Lord, Lord Kilmarnock, is intending to take up the point which Mr. Cunningham proposed in the other place when this Bill came up before the election, a point which had to do with how one controlled the use of monies which could be used under this Bill if there were extremist authorities which wished to use them in ways which obviously would not be fitting and, in particular, if they wanted to use them in an extreme political way. I hope that the noble Lord, Lord Kilmarnock, will not only deploy arguments about this but will actually manage to get from the Government some commitment about the same matter. That I think is the main point.
Another point is the retrospection which the noble Lord, Lord Bellwin, mentioned. In this particular case, I think it is a very mild retrospection although we on these Benches usually pride ourselves that this is something which we do not let pass easily. But it would be picking at nits to make objections on this particular matter. I congratulate the Government on their desire to see that local authorities can go ahead with the kind of work for which this Bill clears the way. I only regret that there is not a sounder basis of local government finance and local government elections on which we can build something much more radical and which would give much more power to local authorities.
I have little doubt that what is needed so much in so much of our politics is more and more decentralisation. The more that Government look at things and set up vast authorities and bodies to administer from the centre, the more we get lost in a maze of bureaucracy; whereas if you go down to the grass roots and allow the people there to see what needs to be done and to see the resources that they already have—and in these cases the resources so often are the resources of manpower, which in these days, unfortunately, are only too obviously idle and available—the more we are able to devolve that kind of power and the better I believe it will be for the welfare not only of the local authorities but of the country as a whole. I am quite certain that we should be moving in that direction. This, I suppose, is a tiny step in that direction and therefore deserves our support.
5.6 p.m.
Baroness Gardner of Parkes: My Lords, I have put down my name to speak on this topic simply because of the commencing phrase of the Title, which reads:
1010
"An Act to remove certain restrictions on the powers of local authorities under Section 137 of the Local Government Act";
and because I am aware from previous debates in this House of the great discrepancy in the amount of money which is represented by a 2p rate. We have had debates and comments at earlier stages in this House and I have listened with great interest to those from areas outside London who have said (as the noble Baroness, Lady Birk, has said) that to them a 2p rate was barely enough. Sums quoted were perhaps £20,000 or £30,000. I have every sympathy with those authorities. I think that they have every intention of spending the money raised by their 2p rate well and wisely and in doing a lot of local good.
However, I think that I must again draw attention to the very different situation which exists in London. A 2p rate in the Greater London area, raises £38·8 million. That is a subject of quite a different size from that which we would be considering in other areas. For that reason, I would ask the Minister to ensure that, particularly in terms of a vast expenditure like that which at the moment is so uncontrolled in its use, this should never be increased beyond the 2p. If there is ever an increase for some areas then, it should be done in such a way that a ceiling or a capping should exist upon this expenditure, because it really is not in the interests of the ratepayer to have sum as large as £38·8 million unwisely spent.
In the city of Westminster, a 2p rate for two of the major oil companies' offices represents £21,000 or £26,000. To the large store in Oxford Street, a 2p rate represents £22,000. That is as much as the whole of some authorities raise with their 2p rate under this section. The head office of a large chain store group which has a rateable value of £2 million finds that to them a 2p rate represents £47,000. Two of the largest hotels would have to find an extra £9,000 or an extra £11,000. The Westminster Chamber of Commerce have worked out that, for every business space occupied in London, roughly £1,000-worth of rates are payable for every staff member. Therefore every extra 2p, every extra £1,000 on your rates is putting more jobs at risk.
There are also unseen and perhaps unconsidered rates which have to be met by ratepayers in London. When you realise that the London Electricity Board pays a rate bill of £26.5 million a year, that is £17 for each domestic ratepayer in London, and more for each commercial ratepayer. People who pay their electricity bills and find those costs high do not realise that they are actually paying more because they are also paying for the rates that are paid by the London Electricity Board. Ninety per cent. of all the rates paid in Westminster are paid by the business community; and so, the Minister having mentioned that extra publicity was to be given concerning Section 137 expenditure, I should appreciate some comments on whether he meant that this was to be publicised as a good thing or a bad thing. I should like to know more about that because it is important for the ratepayers, who do not have the choice of refusing to pay their rates; that is a statutory obligation and it has to be met. I should also like to be assured that more ratepayers will not be forced out of London in 1984.
The Minister mentioned that this Bill would remove doubts and I think that it is very timely and necessary.

1011
As I see it, it is intended to regularise a situation that already exists, and, in that sense, the retrospection is no problem at all. But, referring to some of the points which were made by the noble Baroness, Lady Birk, such as variation and how local authorities felt inhibited by Section 137—sadly, some local authorities do not feel so inhibited. Even last week the Minister answered a Question and said that he relied on authorities which were to be abolished to act in a reasonable way between now and then. Only a day later 1,055 new staff were taken on. Who could say that was reasonable? I just feel that I should like to place these matters on record and to ask the Minister for an assurance that these points will not be overlooked—that is, the point of the vast difference between authorities and the difference in the amount of money that is produced by a 2p rate.
Baroness Birk: My Lords, before the noble Baroness sits down, since she commented on some of the points I made, I am sure she would agree that even the authorities who are getting in, as she quite rightly said, a much larger amount of rates have tremendous demands made on them, with larger populations. Their geographical position and also their needs for expansion and the possibilities for industrial and commercial expansion are very important, not only locally but nationally as well. I think the noble Baroness knows too much about it all to stand on what sounded at times rather like generalisations. I hope she did not mean to generalise about the whole of London or the whole of these big cities.
Baroness Gardner of Parkes: My Lords, I thank the noble Baroness for her intervention. Last time, when I gave chapter and verse and named the companies concerned, there was an objection from that side of the House that this should not be done; but I will of course be happy to supply chapter and verse on the facts that I have given—
Baroness Birk: My Lords, that is not the point I was making.
Baroness Gardner of Parkes: My Lords, on the point the noble Baroness was making, for example, about Greater London spending its money well—I presume that is the point she was making—perhaps I may tell the noble Baroness that the Greater London Enterprise Board has created only 44 jobs at a cost of £476,000. That I do not consider an economical use of London's money; nor do I consider a grant to the Black Lesbian Society as being a good use of Section 137 money. I could go through 50 similar grants for your Lordships. I believe that the ratepayers of London are not satisfied that their money is being wisely spent, and that is why there is a demand for the Government to take what I think is, unfortunately, a most necessary action to control the rate expenditure in London.
5.15 p.m.
Lord Kilmarnock: My Lords, this is a sensible Bill for sensible councils: the objective is admirable, as my noble friend and ally, Lord Beaumont of Whitley, has
1012
already said. We understand perfectly well that it is directed mainly at urban development grants. We know that local authority associations want it, although the metropolitan authorities appear to have some reservations, and we understand why, in that the urban development grants element of the total expenditure is met 75 per cent. by central Government and 25 per cent. by local government grant, but that advances made by a local authority under Section 137 of the Local Government Act 1972 for this purpose may, strictly speaking, be illegal. Local authorities are anxious to cover themselves against this, though I also understand that some expenditures have already been undertaken under this heading with the simple safeguard of a district auditor's certificate. The Bill would remove any impediment under this heading, but the trouble is that it opens a hole which a coach and horses could be driven through.
Some noble Lords will no doubt be familiar already with the case of the Islington Borough Council, which was advised that the passage of this Bill would enable it to produce a politically-motivated local newspaper that the law does not permit to be produced at present, and that this could be distributed free at ratepayers' expense. Of course we would not object in the least to other Section 137 expenditure under the general heading of employment and industry—I know, for example, of some very worthy schemes undertaken on the other side of the river in Dartford and Greenwich—but we do very strongly object to the type of misuse or abuse of public funds contemplated in Islington. It may be said that this is merely one maverick council and that is not sufficient grounds for subjecting all councils to some additional form of control. It may also be advanced—and indeed it was advanced in Standing Committee C in another place before the Bill fell at the Dissolution of the last Parliament—that the proper remedy for abuses lies in the hands of the electorate. That was a point made by the Association of Metropolitan Authorities. They said that, if the truth of the matter is that local authorities are abusing their freedom to spend up to the product of a 2p rate, it is up to the local electorate to decide what are and are not abuses.
We would accept both points if local authorities were truly representative of their electorates; that is to say, after the introduction of proportional representation for local elections in this country along the lines recently proposed in your Lordships' House by my noble friend Lord Harris of Greenwich and referred to by the noble Lord, Lord Beaumont of Whitley. Pending this, we feel that some safeguard must be written into the present Bill. The noble Lord, Lord Bellwin, said that there was one, but it did not appear to us to be adequate, or the right one. An attempt was made in Standing Committee C to introduce into the Bill an amendment making it unlawful for Section 137 expenditure to be made to any body,
"whose composition is restricted by constitution or by practice to representatives of one or more political parties, nor to assist organisations or activities calculated to promote a political cause".
This fell owing to the difficulty of defining political purposes. A further suggestion was made that the limitation contained in Section 137 should be lifted, but only in relation to development expenditure where both central Government and the local authority are

1013
involved. An attempt to give body to this idea was made in a further series of amendments and, at col. 110 of Hansard on 26th April, Sir George Young, speaking for the Government, said this:
"Against the background of that concern, I am prepared to take away and consider an amendment on the lines of Amendment No. 10.
That amendment read as follows:
"That the power conferred on a local authority by this section shall not apply to expenditure unless that expenditure has been approved by the local authority and by the Secretary of State."
Sir George went on to say this:
"we shall have to consider drafting carefully because we shall want to consult the local authority associations".
But what happened. my Lords? As I say, that was on 26th April. The general election followed shortly after, and almost immediately upon the resumption of the legislative process we have the same Bill as before, rushed through the House of Commons in one day, while in this House we are being asked to take it on a telescoped timetable.
The amendment moved in the Standing Committee, which the honourable gentleman appeared to favour, may not be the right one; it may give excessive power to the Secretary of State. But the point I want to make this afternoon is that this House would not be taking its duties seriously as a revising Chamber if it did not devote some considerable attention to a very important and potentially dangerous lacuna in the Bill. Civil servants may regard the Bill as a mere technicality, and the noble Lord, Lord Bellwin, used the same phrase. Ministers may have been misled by their civil servants. I put it as charitably as that. However that may be, I want to ask the noble Lord whether the Government, in consultation with other interested parties, are prepared to bring forward their own amendment along the lines which appeared to be conceded by Sir George Young before the general election. If not, I must tell the noble Lord that we on this Bench shall not be happy to let the Bill through as it stands "on the nod", and shall seek to improve it at the Committee stage.
5.20 p.m.
Lord Bellwin: My Lords, I am very grateful to the noble Baronesses and noble Lords who have spoken on the Bill. Indeed, I am gratified—not an experience that I always have—to have noted the generally satisfactory reception which this Bill seems to have received. I am certainly grateful for that. If your Lordships will bear with me, I should like to deal with the points slightly back to front. They will flow well enough if I respond, first, to the observations made by the noble Lord, Lord Kilmarnock, because his was the only note of major dissension as to any aspect of the Bill. Also, I think it is quite proper that I should comment upon the point that my honourable friend made in another place.
May I say at once that I am well aware of the great concern that many feel, both in your Lordships' House and elsewhere, not about Section 137 but about the misuse of it. I find it sad, as I find many things sad, because I see it as yet another example of how the flouting of generally accepted conventions by individual authorities leads to a call for action which affects
1014
all local authorities. Indeed, many of the problems facing local government today, not least its relationship with central Government, rest clearly and heavily on the backs of those relatively few authorities.
I shall not go into the history, as I should like to do, of the original 3d.—the provision which was added to the statute book in 1963. But it is fair to say that the wider power of Section 137, which we are now talking about, has in recent years worked very well. Hitherto, it did not attract anything like the criticisms that have been made of it comparatively recently, and it is what can only be described as the wilful abuses of discretion which have led us to the unhappy feeling that so many have about it today. But having said that, consideration of what I am entitled to call a largely technical Bill does not, in my view, represent the time or the place for action to be taken.
I say again—and I shall come in a minute to the precise observations of my honourable friend in another place—that it is proper to say that the Government are watching these provocative developments very closely. We are already taking steps to require authorities to include in their accounts details of the expenditure being made under Section 137, so that ratepayers can see and have highlighted the matters on which their money is being spent. This will be a useful step. But I say again that I am conscious of the anxieties which this situation is bringing about. When the previous Bill was being considered in another place, the then—
Baroness Birk: My Lords, has the Minister finished on that point?
Lord Bellwin: Almost, my Lords. I just want to respond specifically to the point about my noble friend. When the Bill was being considered in another place, the then honourable Member for Islington, South, put forward a proposal which would require ministerial approval to expenditure authorised by the Bill, in order to try to prevent the possible abuse of Section 137 by some councils, which I say again gave rise to so much justifiable concern. My honourable friend undertook to consider whether it would be possible to introduce such a requirement into this Bill. We considered this carefully as one possible way of dealing with the problem but we did not feel able to incorporate the change into the Bill now before your Lordships.
The question was discussed very thoroughly with the local authority associations. They had serious objections to it on the grounds that, first, it represented a new control over and a serious diminution of local authority discretionary powers. Secondly, they felt that it was not justified by—as they saw it—the relatively limited evidence of abuse which had been brought forward. Thirdly, it would not in fact preclude the vast majority of questionable payments which had been drawn to our attention. Again, I shall not go into further detail as to why we felt that the weight of the argument lay with them; at least so far as this Bill was concerned. All I can do to try to assuage the concerns of the noble Lord, Lord Kilmarnock, is to repeat again that we are not lightly turning away from this and trying to pretend that what is happening is not really

1015
happening. If I tried to do that, my noble friend Lady Gardner would certainly make sure that I did not get away with it—not that I want to. Did the noble Baroness want to intervene?
Baroness Birk: Yes, my Lords. The Minister has in his last remark covered the points that I wanted to draw to his attention: that there has been consultation with the local authority associations and that this will continue. But is he aware that we on these Benches will certainly be very unhappy to see this Bill, which is a small Bill for a particular purpose to legalise something about which there was some doubt, used as a vehicle to do something for which it was not meant to be used at all?
Also, would he agree that, while there are some local authorities which are spending money on certain things with which many of us would fundamentally disagree, they are a minority? It seems to us wrong to generalise and bring into unsuitable legislation something that should not be in this Bill, and on this occasion the Minister has the support of these Benches. I am so sorry to have taken up time, but I thought that I should state that view as this subject arose after I spoke.
Lord Bellwin: My Lords, I thank the noble Baroness for that. She gathers from what I have already said that it is not our intention to introduce anything of the kind into this Bill. But I hope that she agrees with me, and indeed with the other concern expressed. There is a problem here and we cannot turn our backs on it and pretend that it does not exist simply because it applies to a relatively small number of people. I am glad that it is only a small number but there is some evidence that it applies to a growing number of people. Perhaps we may leave it at that for today; but I am sure that none of us is turning our back on that aspect.
I should now like to come to the other side of the coin, which is the suggestion by the noble Baroness, Lady Birk, that we should extend the use of Section 137. As she said, there are people who feel that this should be done, and I have no doubt that there are people who would use it very well. My noble friend Lady Gardner illustrated in the sheer numbers that she mentioned why some authorities could make very good use of an extension. But I thought that her statistics were very relevant. When you talk of any authority which has available this 2p power, that is almost £40 million in a year—I admit that that is the largest—and that puts the whole thing into context. I found that interesting.
I assure her that the concerns which she has are the ones that we also have in mind. If there were to be any further increase in the headroom which is currently generally available to local authorities to use Section 137 to take account of urban programme expenditure, it could only be additional to the netting-off arrangements which were introduced in the Local Government (Miscellaneous Provisions) Act last year, which in themselves gave some extra flexibility. I should just assure the noble Baroness that Section 137 already permits local authorities to net-off the grant that they receive from the department. Section 137(4)(b) lists
1016
various disregards; that is, items that do not count against the 2p limit. These include payments corresponding to payments made by the department under the Local Government Grants (Social Need) Act 1969. That is the Act under which we pay urban development and urban programme grants. Only the authorities' 25 per cent. share of grant-aided expenditure in fact scores. If the noble Baroness would like to pursue this further with me, I should be very glad to expand on it in correspondence with her.
My only other comment relates to the point raised by the noble Lord, Lord Beaumont of Whitley, about proportional representation. The noble Lord sees it as a possible solution to the abuse issue. I listened carefully to what the noble Lord said but I am not convinced. I have had the experience of serving in local government in control, in opposition, in majority control and in minority opposition: the whole gamut. I do not believe that there are any other permutations. My experience was that it was not the best form of local government.
I understand the appeal of proportional representation, especially to those who feel that they will never be in a position of control: their only hope is to hold the balance of power. When they hold the balance of power they feel that they may exert some kind of control. I understand and respect that point of view. I know how frustrating it must be to feel that one will never be in control. One leading local government colleague who now sits in another place said that he would never have had the chance to take the chair. As I say, I understand how frustrating that must be, especially to a good local government man. I hope that he will now be a good national government man.
Proportional representation does not, I feel, lead to better government. I accept that on occasion it may mitigate extremism, but so far as my experience goes it is not conducive to getting things done. I could expand on this, because it is a very interesting, almost academic point which is fascinating in itself. Perhaps however your Lordships will not ask me to deal further with it today, though I shall gladly discuss it personally with the noble Lord, Lord Beaumont of Whitley, if he so wishes. I thank noble Lords for their reception of the Bill. I hope it will have a speedy passage through your Lordships' House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Army, Air Force and Naval Discipline Acts (Continuation) Order 1983
5.32 p.m.
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne): My Lords, I beg to move that the draft Army, Air Force and Naval Discipline Acts (Continuation) Order 1983, laid before the House on 29th June, be approved.
As your Lordships will be aware, a new Armed Forces Act is passed every five years when the opportunity is taken for the provisions and procedures of the service disciplinary system to be reviewed in depth and updated as necessary. In the intervening years the annual renewal of the service discipline Acts is by means of continuation order such as the one for

1017
which I now seek your Lordships' approval. The last quinquennial Armed Forces Act was passed in 1981.
Your Lordships had the opportunity in the course of the debate on the Address to consider the broader issues of foreign and defence policy and, with your Lordships' permission, I will therefore confine myself now to matters related to personnel and discipline within the armed forces. But I will of course endeavour to answer any questions which may arise in the debate.
During its period of office the Government have demonstrated a tangible commitment, not only to the need for effective defence and the provision of resources to achieve it, but also to the well-being of the armed forces themselves. For example. in 1979 the Government made a firm commitment to restore the pay of servicemen to the levels of their civilian counterparts and to maintain it thereafter at these levels. Your Lordships will be aware that we have recently accepted the latest recommendations of the armed forces pay review body.
Of course, proper levels of pay, though essential, are not by themselves enough. The Government are also examining improvements to conditions of service which will reinforce their pay policy. Of particular importance is the accommodation of servicemen, and in this field the Government are continuing their efforts to improve the standard of accommodation. I myself was privileged to visit Lowestoft last Tuesday for the naming ceremony of the third accommodation barge which will provide greatly improved accommodation for over 800 servicemen in the Falklands.
A positive stance of this sort has rewards in the form of high morale, motivation and levels of expertise, all of which were amply demonstrated last year in the South Atlantic. The confidence of the forces in the Government and their policy is also shown in figures for recruitment and retention. Although established strengths have declined slightly since 1981, the total strength of the armed forces, at 320,600, is still higher than the figure for 1979. This, together with the improved retention rate, means that the general level of skill and experience in the forces is high while the demand for basic training is reduced. The total trained strength in the armed forces is some 14,000 above the 1979 figure.
Lord MayhewMy Lords, before leaving that particular point, could the noble Lord tell us what impact the Falklands operation has had on recruitment?
Lord Trefgarne: My Lords, if the noble Lord would allow me to finish my opening remarks, I shall most certainly be willing to deal with that point when I close the debate.
I have already referred in passing to the magnificent achievements of the armed forces in the South Atlantic. The dedication and courage which was shown during that campaign is typical of the performance and conduct of the services wherever they may be serving around the world. The reputation they enjoy for professionalism is due in no small measure to the framework of the service discipline acts within which they operate. It was George Washington who said:
"Discipline is the soul of an army. It makes small numbers formidable. procures success to the weak and esteem to all".
1018
Advances in technology and the sophistication of weapon systems may have changed the tactics and conduct of battle, but there remains the essential need for a well-trained and disciplined force. The men and women of the Army, Navy and Air Force are just such a force and we can take pride in them. I beg to move.
Moved, That the draft order laid before the House on 29th June be approved—(Lord Trefgarne.)
Lord Bishopston: My Lords, I feel sure that the House will welcome the order which has been introduced by the Minister. I should like to underline the remarks he made about the personnel of our armed forces. I had the benefit of going to the Falklands only a few months ago and was very impressed by the calibre of the task force, particularly since they had to travel 8,000 miles before they reached their destination and faced the major challenge of the Falklands campaign. From the technical point of view we were all impressed by the strategy and by the weaponry and high technology with which our armed forces are equipped. As both I and, I am sure, other noble Lords have mentioned previously, the men and women who serve in the armed forces are our greatest asset so far as our future defence is concerned. Therefore, I fully support the Minister's comments. It is most important to keep morale at a very high level.
As the Minister said, the order which he has laid before the House tonight is based on the Armed Forces Act 1981. This continued and amended the Army Act 1955, the Air Force Act 1955 and the Naval Discipline Act 1957. This is an annual order which prolongs the powers authorised by the measure. As the Act with which we are concerned was amended as recently as during the 1981–82 Session, one assumes, probably rightly, that the measure is up-to-date for the current situation.
However, we are faced with changing circumstances, especially so far as discipline is concerned. It would be helpful to the House if the Minister could go into a little more detail about the consideration which is being given to aspects of discipline. It would also be helpful if the Minister could say whether he is completely satisfied that the powers contained in the 1981 Act, even though they been so recently reviewed, are still relevant to the changing situations which face Her Majesty's armed forces, especially with regard trends relating to discipline, behaviour and so forth.
I will not detain the House longer on this particular measure because I anticipate that after the Recess, but not before, we shall be debating the White Paper on defence and that will give the House a better opportunity to deal at greater depth with some of the matters which might otherwise have been questioned under this particular measure.
Lord Trefgarne: My Lords, I am grateful to the noble Lord for his reception to this order, and perhaps I might seek to reply to the point made by the noble Lord, Lord Mayhew, when he intervened during my opening remarks. There has been no discernible longterm effect on recruiting from the Falklands conflict. There was some immediate, short-term effect I understand—but nothing having any long-term implications.

1019
On the point made by the noble Lord, Lord Bishopston, one of the matters to which I attended when I first arrived at my present department was to inquire about the level of discipline because I, like everyone else, had read a number of reports about service problems. But I am convinced that the general level of discipline in our armed forces is as good as it ever was and no worse than in the rest of the community. Incidents caused by servicemen do tend to hit the headlines rather more than they do when caused by civilians, for reasons I am not immediately clear about. In general, we have no cause for worry about the general level of discipline and behaviour among our armed servicemen.
As was said by the noble Lord, Lord Bishopston, we are anticipating a debate on defence matters generally in the autumn. I, too, will contain my wider observations until that occasion. I beg to move.
On Question, Motion agreed to.

International Jute Organisation (Immunities and Privileges) Order 1983
5.42 p.m.
Lord Lyell Lord Lyell rose to move, That the draft order laid before the House on 29th June be approved.
The noble Lord said: My Lords, the international Agreement on Jute and Jute Products, a copy of which was laid before the House on 22nd March 1983, was opened for signature on 3rd January this year. It was signed on behalf of the United Kingdom on 6th June. The main element in the agreement is the establishment of an International Jute Organisation. The purpose of the draft order before your Lordships is to accord the organisation legal personality. Once this is done, we can proceed to early ratification of the agreement.
The organisation will propose, approve and seek finance for projects in the fields of research and development, cost reduction, market promotion, competitiveness (particularly in relation to synthetic products) and, above all, dissemination of information. The agreement does not provide for market stabilisation measures, although it does envisage that further consideration may be given to the possibility of stabilisation of prices and supplies.
The headquarters of the organisation is situated in Dhaka in Bangladesh. The Government of Bangladesh will conclude a headquarters agreement with the organisation to accord it such privileges and immunities as will be considered necessary for the organisation's efficient funding in Bangladesh. However, we must meet our obligations under the jute agreement by according the organisation legal personality. This means that the organisation will be able, where necessary, to conclude contracts, buy and sell property and to institute and defend legal proceedings in those states. The order does no more than that. It grants no privileges and no immunities to the organisation. I very much hope that your Lordships will approve this draft order, thereby signifying your
1020
recognition of the important work to be performed by the International Jute Organisation. I beg to move.
Moved, That the draft order laid before the House on 29th June be approved.—(Lord Lyell.)
Lord Ponsonby of Shulbrede: My Lords, may I thank the noble Lord, Lord Lyell, for explaining the purpose of this particular order. It is an order of concern to the United Kingdom, as the main trading centre for jute. I wonder whether the noble Lord can tell your Lordships what benefits to the United Kingdom will flow from the establishment of this organisation. Perhaps he can also tell your Lordships how many people in this country will benefit from the immunities and privileges conferred by this order. Your Lordships will recall that earlier today, when we were discussing quite another matter during Questions, considerable concern was expressed by a number of your Lordships from different parts of the House about the extension of immunities and privileges to various persons of one sort of another.
Finally, can the noble Lord tell your Lordships what effect, if any, the establishment of this organisation will have on our own Exchequer?
Lord Lyell: My Lords, I am grateful to the noble Lord for his reception of my moving of this order. The noble Lord asked three specific questions. If I may take the two easier questions first—his second and third questions—the noble Lord asked how many persons would benefit from the immunities and privileges conferred by this order. I am sad to have to tell the noble Lord that this order confers no immunity or privilege upon any person. If the noble Lord's interest was excited by the various references, I am sorry to have to disappoint him. I am also able to tell the noble Lord—although possibly this might be of greater interest to him—that the effect of this order on the Exchequer will be absolutely nil; it will have no effect at all on the Exchequer.
As to the benefits of this order to the United Kingdom, I am pleased to be able to tell the noble Lord that United Kingdom merchants and manufacturers concerned with the jute industry have welcomed this agreement. Indeed, your Lordships will be interested to know that although the jute industry is only a very small industry now, the spinning of raw jute and the manufacturing of jute goods in the United Kingdom is carried out almost exclusively in the Tayside region—that is, my own home area. Above all, Dundee used to be the centre for jute. It still is a very important industry there, and the surrounding county of Angus, which is now the region of Tayside, is still very much concerned with the jute industry.
It is a slightly personal good wish when I say that I am very happy to assure the noble Lord, Lord Ponsonby of Shulbrede, and other noble Lords that the agreement to which we are giving legal personality in this country by means of this order has been very much welcomed by the jute industry. I hope that will prove to your Lordships that there are benefits to the order now before us. With that short explanation, I beg to move.
On Question, Motion agreed to.

Weights and Measures Act 1963 (Wine and Grape Must) Order 1983
5.49 p.m.
Lord Lyell Lord Lyell rose to move, That the draft order laid before the House on 28th April be approved.
The noble Lord said: My Lords, I beg to move the draft order standing in my name on the Order Paper, and I should like to speak at the same time to the Weights and Measures Act 1963 (Amendment of Schedule 3) Order 1983. If any of your Lordships wish to discuss these orders separately, of course I would accede to any noble Lord, but if I see no sign of disagreement I shall speak to them together.
These two orders do have one thing in common. They are both concerned with the trade in wine, a subject which I know to my cost from answering questions here about a year ago is very dear to the hearts of many of your Lordships. The growth in sales of wine over the past decade has been matched by a growing number of complaints about sales of table wine by the glass and the inability of consumers to know how much wine they are getting for the price they pay.
Your Lordships may recall that questions have been asked in this House from time to time, and usually these have been led by my noble friend Lord Chelwood, about proposals for introducing a voluntary code of practice to standardise the quantities in which wine is sold by the glass and whether this would be supported by prominent display—for example on a price list, a wine list or menu—of both the quantity offered and the price.
I am happy to report that plans for introducing such a code are now well advanced. The order to amend Schedule 3 to the Weights and Measures Act 1963 is designed to make it possible for the licensed trade to follow the voluntary code of practice. This has been prepared by a working group of the trade which has been chaired by the Brewers' Society, and it includes also organisations representing licensed victuallers, hoteliers, restaurateurs and caterers. This group first met in January 1983. All of this group quickly agreed that if they were to recommend to their members rationalisation of quantities of wine sold by the glass rather more flexibility than is currently provided by the law required. Schedule 3 to the 1963 Act does, among other things, specify those capacities measures which may only be used by traders in measuring out alcoholic drinks and other what we call non-prepacked liquid products.
The present list in the Act includes those imperial measures in which certain draught spirits, beer and cider may only be sold, as well as 4, 5 and 6 fluid ounces which could, if the trade so wished, be used for measured glasses of draught wine. The trade however have become accustomed to buying wine in metric quantities since bottles were first required to carry a quantity marking in the United Kingdom under EEC requirements in 1978. Many of their members are likely to want to standardise their sales of wine by the glass by using the same system of measurement; but they felt that the existing legal measures of 100 ml, 200 ml and 250 ml were either too small or too large for general use. I must say that the surprise that I see
1022
on the faces of noble Lords opposite is shared by me; when I ask for a glass I am very happy to receive any measure.
I am sure that your Lordships will agree that there are already too many legal options available in Schedule 3. It was this factor that attracted the only reservation entered by consumer interests in the course of the statutory consultations undertaken by the department preceding publication of the draft order. The initial proposal was to add just two sizes, 125 ml and 150 ml, to the list of legal capacity measures. The trade promptly responded to consumer reservations by recommending in their voluntary code that where retailers choose to dispense wine by the glass in more than one quantity they should restrict themselves to two sizes, drawn either from the metric or from the imperial range, and that there should be a gap of not less than 50 ml between sizes drawn from the metric range or not less than two fluid ounces in the case of the imperial range.
My honourable friend the former Minister for Consumer Affairs in the previous Administration wisely in my view, and I am sure in that of many of your Lordships, agreed to a further request from the trade working group to add a third size of 175 ml. I am afraid that I am not able to demonstrate to your Lordships the capacity of the glasses; I do not know whether it is in order to bring in the various liquids and consume them in your Lordships' House; but I am afraid I am not able to display the glasses of these particular sizes to your Lordships. The addition of the third size of 175 ml means that a retailer who exceptionally wished to offer two sizes could use both 125 ml—this already has strong support in the trade—and 175 ml, and at the same time he would observe the 50 ml obligatory gap.
The purpose of this particular order is to facilitate the adoption of the trade's voluntary scheme for table wine which is sold by the glass. Your Lordships may feel that such a code does not go far enough in that it does not include sparkling and fortified wines. I stress that this is a voluntary scheme and it reflects the very considerable increase in the consumption of table wine. There is no reason why any trader who wishes to do so should not adopt the same principles for other intoxicating liquors; the only constraint on him is that he must choose measures from the list in Schedule 3 to the Act, including of course the three new measures. The additional sizes are to be limited to sales of intoxicating liquor; there has been no pressure for their use in other circumstances. This restriction will avoid the need for local authorities to purchase separate standard measures in the three new sizes for other uses.
The order will not make it obligatory for the trade to sell wine by the glass by quantity or in a specified quantity. There is however wide support for the voluntary code of practice, and the Government hope that increasingly both members of the trade organisations which produced the code and other wine retailers will abide by its terms. It is the Government's firm belief that this voluntary approach could succeed in putting some much needed order into this trade where previous attempts to find a legislative solution have failed.
Discussions on technical regulations that will be needed to provide for the lining, testing and stamping

1023
of wine glasses to be used as legal capacity measures and to amend the intoxicating liquor measuring instruments regulations are already in hand. I hope that these will come into operation before 1st December 1983, which is the operative date for the draft order. It was originally thought that the operative date could have been brought forward to 1st November this year; that was the date which was given in the Department's Explanatory Memorandum. But on reflection this was considered to be unduly optimistic. I believe your Lordships will share my hope that lined glasses or suitable measuring instruments will become available in sufficient quantities to allow the trade to bring their voluntary code into operation early next year.
If I may turn briefly to the draft Wine and Grape Must Order, this is necessary to meet our obligations to the European Community to specify the quantities in which both what are termed "still" table wines and grape must must only be prepacked. The provisions of the order will take effect progressively between 1st January 1984 and 1st January 1989. The obligation derives from Directive 79/1005/EEC which was considered in draft—I spell it d-r-a-f-t—by the House of Commons Select Committee on European Legislation on 11th January 1978. Wine bottlers in the United Kingdom accept the need for standardisation of bottle sizes, and this order does have the support of both trade and consumer interests. In response to representations from trade organisations that special arrangements should be made for vintage and other wines, your Lordships will note that the order will continue to allow wines already bottled in other sizes before 1st January 1984 which have been laid down or are still in the distribution chain to be sold.
Finally I am sure that your Lordships will wish to know that both of these orders were considered by the Joint Committee on Statutory Instruments but the Committee did not draw the special attention of your Lordships' House to either order. My Lords, with that I beg to move the first order standing in my name.
Moved, That the draft order laid before the House on 28th April be approved.—(Lord Lyell.)
6 P.m.
Lord Ponsonby of Shulbrede: My Lords, may I again thank the noble Lord, Lord Lyell, for a very full explanation of a complicated and potentially confusing matter. It is a matter which is of great concern to the consumer, and I fear that the confusion is likely to continue for a considerable period of time. It seems to me that the consumer can either enter an imperial measure wine bar or a metric measure wine bar. Therefore, he will be faced with four different amounts which he might receive in his glass of wine.
Can the noble Lord say how long it is proposed that imperial measurements and metric measurements shall continue to coexist side-by-side? At the same time, can the noble Lord tell your Lordships whether there is any intention on behalf of the Government to apply the requirements for metric measurements to the service and sale of beer and milk or whether these will continue to be sold in imperial sizes?
1024
I was also surprised that these particular orders and regulations are not to apply to sparkling or fortified wine. This means—and perhaps the noble Lord will confirm this—that for the purchase of sherry or vermouth in a wine bar or in a pub there are no requirements laid down for the actual measures in which these should be served. This is slightly odd, in a sense, when the measures are to apply to the sale of grape must which, I understand. is hardly ever sold across the counter in the United Kingdom. Perhaps the noble Lord can say why the application of the order is restricted in this way.
I understand that brim-measure glasses are not allowed when wine is served. In view of this can the noble Lord say whether the Government have any intention of phasing out brim-measure glasses for the service of beer? These points need clarification on the coming into force of these orders. In other respects we welcome these two orders.
Lord Mayhew: My Lords, I come rather fresh to this subject although I have from time to time drunk wine by the glass. I listened very carefully to the introductory speech of the noble Lord and came to the conclusion that there is not much here to cheer or safeguard the simple consumer of wine. First of all, there is no obligation whatever, as far as I can see, on any seller of wine to use a standard glass at all. It is precisely those sellers of wine against whom complaints have been made in the past who will continue to sell short measures despite anything that the Government are doing, with the added advantage to themselves that the Government will be giving a false sense of security to customers with all this rigmarole which we have just heard about. Listening to the noble Lord, anyone might think that the consumer was being safeguarded, but there is nothing in what the noble Lord said which safeguards the consumer against the dishonest retailer. His words will, as I say, merely give a false sense of reassurance.
Let us suppose the customer was not reassured and that he was alert, he must still find his way between the imperial measure and the metric measure, between the 125 ml glass and the 195 ml glass.
Noble Lords: 175 ml.
Lord Mayhew: We are already confused in this House, my Lords. Even noble Lords do not know the difference between 175 and 195 ml glasses. Again, listening very carefully to the noble Lord, another thing which struck me was that the group to which he referred—the trade—and the Minister had taken their decision about metric plus imperial measures after, and not before, the consumer interests had been consulted. I should like reassurance on this point. The consumer interest to which he referred and which was consulted has approved the final complicated conclusion which was put forward by the interested group. I have no doubt that the Government have the best of intentions, but I cannot say that anything in the noble Lord's speech convinced me that much is to be done for the consumer by this order.
6.8 p.m.
Lord Lye11: My Lords, I am very grateful for the interest shown by the noble Lord, Lord Ponsonby of Shulbrede, and particularly grateful for the close attention paid by the noble Lord, Lord Mayhew, to my remarks, which were complicated. I did not ask the indulgence of your Lordships to make them any easier. Indeed, your Lordships will be aware that consumer legislation, particularly in this area, which is so dear to our hearts as well as to other vital organs of the bodies of your Lordships, is complicated.
I shall first attempt to deal with the questions put by the noble Lord, Lord Ponsonby of Shulbrede. He, and I am sure, your Lordships, will be happy to learn that any set of measures, whether imperial or metric, which are to be used by sellers of open wine in glasses will, of course, be advertised so that the consumer or the customer who wishes to drink wine will know what he is getting and will be able to draw a comparison to know whether or not he is receiving fair value. Clearly, if the consumer feels that the seller of the wine is overcharging in any way, the consumer can take his custom elsewhere.
The noble Lord, Lord Ponsonby of Shulbrede, asked about imperial sizes and metric sizes and, above all, whether any imperial sizes would be prohibited. Certainly there is no intention of imperial sizes being prohibited. Indeed, there are adequate imperial sizes in Schedule 3 to the Weights and Measures Act.
Among other things, the noble Lord also asked about grape must. I am no expert in chemistry or on the precise moment of time when grape juice ferments, but I understand that grape must—the substance set out in the order—is grape juice before fermentation is complete. So far as I am aware, grape must is not bottled in the United Kingdom. Indeed, the noble Lord may care to look at page 3 of the grape must order. The noble Lord mentioned vermouth. In (d) he will find the reference to:
"British wine (e.g. fruit or tonic wines)".
Certainly the noble Lord and I have discussed the merits of ginger wine, elderberry wine, sloe wine and other extremely intoxicating brews not covered by the order before us this evening. I am able to tell the noble Lord with the full authority of the department that grape must is grape juice before fermentation is complete.
The noble Lord also asked about brim measures. We understand that it is not customary to serve wine in glasses filled to the brim for reasons which I am sure would be evident to the noble Lords, Lord Ponsonby of Shulbrede and Lord Mayhew, and indeed to all your Lordships. Very few serving people have steady hands to fill glasses absolutely to the brim without spilling any. I am not aware of whether this problem is prevalent in your Lordships' House. Certainly we tend to be satisfied with the measure of any glass of wine sold in your Lordships' House, as well as with the quality. The Government are aware that some people, and particularly enforcement bodies, are concerned about the allegations of other short measures in glasses, for instance, of beer. All the available evidence has recently been reviewed, and we have concluded that an overwhelming case for action at the present
1026
time has not necessarily been made out, but we shall keep the matter under review.
The noble Lord asked why the code did not cover sherry or vermouth. I understand that the reason is a question of demand. The main demand for action in the sale of intoxicating liquors by the glass has been on table wine, where, as I pointed out to your Lordships, sales have increased considerably since we joined the EEC. There are various small sizes in the list of legal capacity measures which are eminently suitable for sherry, vermouth and other similar liquors. Your Lordships will find that the capacities come right down through the range of 50 ml and a number of small imperial measures. I think it comes right down to 1 ml or one-sixth of a gill. One-fifth of a gill is placed up in various establishments in Scotland. They point out proudly that they are selling one-fifth of a gill, and even our side of the Border they are happy to do that. I hope that I have covered most of the points raised by the noble Lord, Lord Ponsonby of Shulbrede.
I commend the noble Lord, Lord Mayhew, on his diligence. I am grateful to him for the close attention he paid to my remarks. I assure him that no false security is granted by the order. I stressed that it will, we hope, aid the voluntary code of practice which has been agreed by this joint working group. I am able to assure the noble Lord, as I hope I was able to assure the noble Lord. Lord Ponsonby of Shulbrede, that consumers of wine by the glass will find the measures which are sold in a particular establishment advertised. If a consumer wishes to adhere to an imperial or to a metric measure, he will be able to find out exactly what value he is getting, just as I, and, I am sure, the noble Lord, when we do our shopping are able to find the value we are getting. I have to do some nimble mental arithmetic to discover whether I should put one jar of coffee back on the shelf and take another because it is better value. I am sure that the noble Lord is able to do that before he takes his first, or perhaps subsequent, glass of wine in whichever establishment he would patronise.
The noble Lord may have heard about various measures of wine. He raised the point of 125 ml or 195 ml and expressed confusion as to which size was which. After we sit down, it need not take long for me to show the noble Lord the difference in capacity—what constitutes 70 ml. I believe that the customers will know this and that the trade would be happy to know it.
The major point put to me by the noble Lord, Lord Mayhew, was that the Government had taken action on these particular measures by which wine is sold by the glass. He wondered whether we had consulted adequately. I hope that we have, but I stress that pressure was coming to the Department of Trade from various consumer interests. My noble friend Lord Chelwood asked me several questions starting in July last year, and the questioning process has gone on. My noble friend Lord Cockfield answered a number of Questions in written form later on in the year.
I hope that the noble Lords, Lord Mayhew and Lord Ponsonby of Shulbrede, and indeed all your Lordships, will agree that this is a valuable first step to regulating sizes of glasses of wine. Above all, we hope that the orders will assist the voluntary code of practice and will enable the consumer to know how much wine

1027
he or she is receiving and whether he or she is receiving good value. I stress, before we take this too seriously, that there is a valuable saying that the noble and learned Lord who normally sits upon the Woolsack has given me cause to think of many times: de minimis non curat lex, the law does not perennially concern itself with trifles. I believe this is a relatively important matter. I hope that it will aid the voluntary code. With that, I commend the first order which stands in my name on the Order Paper.
On Question, Motion agreed to.

Weights and Measures Act 1963 (Amendment of Schedule 3) Order 1983
Lord Lyell Lord Lyell rose to move, That the draft order laid before the House on 28th April be approved.
The noble Lord said: My Lords, I spoke to this order at length. I beg to move.
Moved, That the draft order laid before the House on 28th April be approved.—(Lord Lyell.)
On Question, Motion agreed to.

Dock Labour Legislation
6.17 p.m.
Viscount St. Davids Viscount St. Davids rose to ask Her Majesty's Government what action they intend to take in view of the present effects of the Dock Labour Acts, whether they are contemplating legislation, and, if so, what would be its nature.
The noble Viscount said: My Lords, I rise to ask the Question I have on the Order Paper. When a Goverment promote an Act of Parliament they usually expect it to do good, and they are very generally right. They are also usually pretty sure that it will do some harm. It is quite difficult to produce an Act of Parliament that produces no harm whatever, but the harm is usually expected to be comparatively unimportant. The Dock Labour Acts are very much in this category. They produced a great deal of good when they started, as most Acts do. They went through a long period of stability when they continued to do good, but, I am afraid, this is not a very stable world. Things have a habit of changing. What hit the Dock Labour Acts was containerisation. When container traffic came in, and later on the Ro-ro ship (on which container-carrying lorries rolled on board on one side of the sea and rolled off on the other), very many fewer dockers were needed, and the Dock Labour Acts started to go wrong.
The Acts then went through the process, which again is very common with Acts of Parliament, that the good that they did gradually decreased, while the damage that they did increased; there would come a point logically where they were doing more harm than good and when they should be repealed. But this very seldom seems to happen. Acts of Parliament, once they are on the statute book, seem to be allowed to stay there while they sink into ever greater disfavour, largely, no doubt, through political indolence or mere lack of parliamentary time. They end up in a state where they actually start harming the very people they were originally meant to help.
The Dock Labour Acts performed a very valuable purpose at the beginning. Dock labourers were very badly paid, and work was sporadic. It was difficult to get a decent living by it, and as a result, the dock labourers were not available at all times to load and unload ships. Very often, ships had to wait before they could be loaded or unloaded. The whole system was very unsatisfactory. So these Acts were produced. They laid down a number of our major ports to which they were to refer. They stated that all the dock labourers in those ports were to be listed. They stated that dock labour could be done only by these listed labourers. They laid down that the labourers were to be continuously employed by certain listed port employers, or indeed by the port authorities themselves. They laid down a levy which was to pay for all this. Dock labour boards were to be appointed to say what dock labour was, and finally a National Dock Labour Board was to be appointed to keep control of the whole system.
So far, so good. As I say, it was the coming of the Ro-ro ship and the complete change in the handling of cargo which put an end to this. Dock labourers had less work to do, their numbers started to diminish. As their numbers diminished, this highly complicated and expensive system became more and more of a burden, and the cost of registered dock labour went up just at the time when the cost of dock labour in the non-scheduled ports went down.
The difference has now reached a point which can be put quite simply. In 1950 there were 4,500 dockers in the Port of London alone. There are now fewer than 500 there, and the number is still dropping. The cost of registered dock labour as against unregistered dock labour in the non-scheduled ports is now as 7 to 3; in other words, it costs more than twice as much to give the work to a registered dock labourer. This system cannot possibly go on. No system could survive a difference like that.
The dock labourers tried two ways out. One was to go on strike, which predictably did not help; the other was to create a positively Byzantine set of restrictions in an effort to keep as much work as possible listed as dock labour and therefore keep it to themselves. The result, again predictably, was to send the registered ports further and further down the drain.
What is to be done about it? One thing that can always be done, of course, is nothing. If you leave a problem for long enough, quite often it will go away. But in this case one thing is quite certain: if you leave the problem much longer, all the dockers will go away. The problem will solve itself in that fashion, but of course at the cost of killing off all our major historic ports. That, I am sure your Lordships will agree, is quite unacceptable.
There are those who would like to see all the Dock Labour Acts simply torn up. But we cannot just do that. There are still dock labourers and they have rights; and there are a number of other complications, though I shall not put them all to your Lordships at this late hour. But one just cannot do that, certainly not in a hurry.
What is really needed is a detailed study to be undertaken with some urgency, but making sure that it is thorough, taking a little time over it, though not

1029
too much because the damage is going on, and, finally, putting something on the statute book to sort out this matter. But it is complicated, very complicated indeed. I have just sat through seven days of a dock labour arbitration tribunal, in which an unfortunate small firm of inland shipowners tried to get permission to take cargo in and out of the Port of London—which, I believe, is one of the things that the Government would like to see happen. I may be considered biased in this, and so I shall tell your Lordships of just two remarks made by members of the tribunal, who might be assumed to be both intelligent and neutral observers. The chairman of the tribunal said that he was amazed that there was any traffic at all, in or out of the Port of London. Another member of the tribunal—
Lord Skelmersdale: My Lords, if I may interrupt the noble Viscount for a moment, I would point out that I think he is in danger of breaching the sub judice rule; at least that is what I am currently advised.
Viscount St. Davids: My Lords, I am not quoting exactly. I am being very careful not to quote exactly; besides which, the case is at an end. I have been very careful about that in my timing in putting down the Question. Another member of the tribunal said that it was quite clear why the Rhine was busy and the Port of London was dying. That is the position we are in. Something must be done. It should not be done in too much of a hurry, but the work needed to do it should be done very thoroughly, and done now.
6.28 p.m.
Lord McCarthy: My Lords, I should like to begin my speech by agreeing with a very large part of what the noble Viscount has said—I do not agree with it entirely, but I agree with a very large part of it—and by thanking him for raising the issue this evening in this House, because it gives us an opportunity to do two things. It gives us an opportunity, first, to discuss the real, pressing problem of what the noble Viscount says, quite rightly, is a vital British industry, and, secondly, to raise a number of general issues about how that industry has come to its present stage. It is an industry which, I suppose, has undergone one of the most consistent, systematic, sets of investigations, inquiries, and various forms of Government intervention, based on inquiry, investigation, and, in the end legislation, of almost any industry in this country. Yet it comes to be in its present state, and maybe we could learn a few lessons from that situation.
With regard to the noble Viscount's remarks about the present position of the industry, I think that I agree with almost everything that he said. All I should want to add is that, as he would admit, the position has not given any degree of security to the dockers themselves. There is still great uncertainty about the scope for dock work within the Dock Work Regulation Act. So far as one can tell from the figures in the latest report available of the National Dock Labour Board, which, I am afraid, is for 1981—there is not yet a 1982 report—the rate of decline of registered dockers is about 20 per cent. a year. If the situation went on like that, then, as the noble Viscount suggested, they would
1030
be all gone by about 1987. Even though there is a decline in the total number registered of something like 20 per cent. a year, there is a further surplus to requirements of those left of something like 18 per cent. a year. Yet there is a rate of voluntary severance from the industry, if the present situation resembles that described in the annual report of the National Dock Labour Board in 1981, of something like 5,000 dockers a year. So the situation is extremely uncertain.
The first question that I should like to put to the noble Lord who replies for the Government is whether the Government and the National Dock Labour Board have any idea when the figures are going to change direction. If the rate of decline continues at 20 per cent. a year, all existing dockers will be gone by 1987. Oh the other hand, the industry stated in the National Dock Labour Board report in 1981 that it thought that the figure would flatten out at something like 14,000 dockers. It should be down to that about now or possibly next year. Do the Government or the National Dock Labour Board, which is presumably in contact with the Government, still subscribe to the view that this progressive decline will somehow end and flatten out at something like 10,000 or 14,000 dockers? If that is the case, the situation may be containable. If it is not and if the figures have had to be revised, I hope that the Government will say so. It is then that some of the more apocalyptic suggestions put forward by the noble Viscount come into operation.
We have to ask ourselves, as did the noble Viscount: what is the solution to all this? He considered a number of alternatives. One that he did not consider—I am prepared to say myself that I do not think it is a solution at this moment and I do not think that he would disagree—is an extension of the areas of the Dock Work Regulation Act. Your Lordships will no doubt remember that when this Act was introduced by the previous Government in 1976, it was originally proposed to put a corridor around the existing ports, indeed around the British Isles, that was to be five miles wide. All classified dockwork within that five-mile radius was to be the province of workers registered under the new dock labour scheme. In this House, in the latter stages of the Bill, I think, the Bill was amended so that the corridor was reduced to half a mile. It was defined in such a way that the corridor did not run all the way round the United Kingdom but only half a mile out from National Dock Labour Board ports. It would be easy to suggest, as some people may do, that the solution would be to return to the original objectives of the 1976 Act. I do not believe that this is possible. It is worth while quickly saying why it is not possible. The noble Viscount suggested, I think, in his speech why it is not possible. I agree with him.
It is not possible because the 1976 Act misconceived the central problem. Those responsible for the 1976 Act thought, as there were grounds for thinking at the time, that the problem arose out of the dispersal of dockwork away from the traditional areas of dockwork and the giving of dockwork to workers who were not registered dockers. Therefore, if you could extend the area of registered dockwork and define registered dockwork in a sufficiently wide way, you could solve the employment and job security problems of the registered docker, and you could create within

1031
the area of the National Dock Labour Board a viable labour force that could become a permanent, efficient and mobile labour force. That turned out to be an erroneous diagnosis of the problem.
The basic problem was not the diffusion of dock work, although it took place. The basic problem was the disappearance of dock work. There are relatively few full-time dockers outside the area of the National Dock Labour Board. There are probably more full-time dockers still within the province of the National Dock Labour Board than outside its province because containerisation. roll-on roll-off, and all kinds of other technological innovation within the industry have almost destroyed the old kind of dockwork. No form of legal regulation to extend geographical boundaries can deal with that problem.
I do not think that there is any solution by extending the areas of the National Dock Labour Board Scheme. Nor do I think, as the noble Viscount said, that there is any solution in abolishing all these Acts. I am, however, bound to say that in some ways—I do not wish to be partisan—one might have expected the present Government to take this way out through the Tebbitisation of the National Dock Labour Board or what I would call Book One of Adam Smith, the removal of all forms of legal regulation and all protection for registered dock workers, freeing the labour market for dock workers in the same way as the Government want to free the labour market in the area of wages councils, the area covered by fair wages regulations, and so on.
I come now to my second question. For all the reasons put so well by the noble Viscount, this would be a disastrous policy. Not only would it destroy the central dock areas which are still crucial to this country. It would produce again what we have not seen for a good number of years—something which, on the whole, the National Dock Labour Board Scheme has saved us from. We would once again see mass industrial action in the area of Britain's docks. This, for all kinds of reasons, would be a disastrous way forward. I would like the Government to say so. I should like the Government to say tonight that, whatever solutions they may have in mind for the area of the National Dock Labour Board, they do not envisage the total and complete Tebbitisation of legal regulation of registered dock workers and the total abolition of all forms of legal regulation.
I come to the third proposal that has been suggested by the noble Viscount; that is, another inquiry. I am bound to say that I approach this with great reluctance. We talked earlier today about brim measures. The dock industry is brimful of such measures. It has had 19 investigations since 1920. It is arguable that all of them have got the problem wrong. What they have done really is to design a policy to deal with the existing problem, not appreciating that a new problem had taken its place. For example, the Devlin Report which was excellent on the issue of decasualisation failed completely to take into account the effect of containerisation.
The ACAS report and the reports before the introduction of the 1976 Act failed completely to understand how the problem was not one of diffusion
1032
but one of job loss. It is therefore with great reluctance that I come to the idea of yet another inquiry. I come to it simply because I cannot think of an immediate alternative to yet another inquiry. I am always prepared to take back that proposal if the Government can come up tonight and say what is their alternative. In the light of that, I should like to indicate two areas that any future inquiry might like to look into—.
Baroness Seear: My Lords, is the noble Lord really saying that when he cannot think of a solution to a problem he will suggest an inquiry? I find that absolutely terrifying. I have great confidence in the noble Lord. There must be a large number of matters on which he cannot think of a solution. Are we to have an inquiry into all of them?
Lord McCarthy: My Lords, they have to be sufficiently important. The noble Baroness and myself sat, I think, upon an inquiry when we did not know of a solution before we began the inquiry; by the time we produced the report we had found a solution. We can use inquiries if we have the right people to find solutions to problems. It is possibly, with great reluctance, the only way in which we can proceed. I should, however, like to indicate the two areas I have in mind.
Surely the first point is that everything depends—and I come back to the first question which I asked the Government—on whether we can really believe that there is a figure at which demand for labour in the registered ports will flatten out. If that figure is, for example, 10,000 or 8,000, the problem is manageable. The problem then become a once-for-all injection of public funds to enable the dockers in excess of that number to accept voluntary severance. We know that money—indeed, very considerable sums—has been spent in the past by the Ministry of Transport, but the greater part of the voluntary severance which goes on in the docks at present is paid for by a levy on employers. It is the cost of that levy which keeps up the cost of labour more than any other single factor in the registered ports. Therefore, my first point is that if the inquiry or the Government could arrive at some reasonable figure at which the demand for labour in the registered ports would flatten out for the next five years or so then, given the age profile—because 70 per cent. of dockers are over 40 and 35 per cent. are over 50—a once-for-all injection of funds should stabilise the industry.
My second point—and it is a much more general point—is as follows. Surely this is part of an overall problem. The areas of the most substantial old ports are in fact either the areas of high unemployment or the areas of urban deprivation. If we are to find a system of voluntary severence for the majority of existing registered dockers, what are we to give these people to do? What are we to employ these people on? Is it not time for the Government yet again to look at their complete refusal to believe that redundancy and efficiency—important as they are in manufacturing industry and in our old industries, such as the docks—must go hand in hand with planned, specific job creation?
6.42 p.m.
Viscount Long: My Lords, I am most grateful to the noble Viscount, Lord St. Davids, for introducing this debate and for letting your Lordships and the Government know of his feelings about what should be done in the future regarding the dockland labour forces and the labour Acts which come into this debate. What I have detected from the speeches of both the noble Viscount, Lord St. Davids, and the noble Lord, Lord McCarthy, has very little to do with improving the situation as it stands at present. In my view, both noble Lords have been boxing round the question because at present it is so sensitive and complicated. Therefore, I point out to the noble Viscount that he might find me indifferent on some of the facts that he wants; but I will try to help both him and the noble Lord, Lord McCarthy, as regards the future. The noble Lord, Lord McCarthy, also referred to the different Acts, commissions, and so on, defending the labour force.
The Acts to which the Question refers are the Dock Workers (Regulation of Employment) Act 1946 and the Dock Work Regulation Act 1976. I apologise to your Lordships, but I feel that I must give some background details of what those Acts are about. Regulation of dock work has a long history in the United Kingdom. The first serious effort to regulate numbers of dockers was made in Liverpool in 1912. A principal feature of the scheme, which was on a voluntary basis, was the registration of workers to identify those entitled to seek work within the port. The registration system was extended during the 1914–18 war when joint committees were set up in the larger ports to advise Government on release of men for the forces and subsequently to limit the numbers of demobilised men seeking casual work. The Shaw Inquiry in 1919 regarded registration as "the beginning of a remedy" for conditions then prevailing in the industry. Nevertheless, progress towards establishing effective schemes between the wars was very patchy.
The second world war brought about a transformation, making comprehensive provision for schemes and real moves towards decasualisation. In 1940 the first statutory schemes were introduced under an order requiring compulsory registration. In 1941 decasualisation schemes were extended to all major ports, providing the basis for a guaranteed weekly wage and imposing specific obligations on dockers.
The Dock Workers (Regulation of Employment) Act 1946 enabled schemes to be made:
"for ensuring greater regularity of employment for dock workers and for securing that an adequate number of dock workers is available for the efficient performance of their work".
In other words, the purpose was to ensure that there was an identified pool of experienced workers available to meet daily fluctuating demands for the loading and unloading of ships. Registers were established of dock workers who alone could be employed on dock work by registered employers in designated ports, the definition of dock work generally being that set out in war-time regulations, and the administration of the statutory scheme being in the hands of the National Dock Labour Board composed of equal numbers of employers and workers' representatives.
1034
Until the mid-1960s most registered dockers were casual workers often allocated only on a daily basis to employers. In 1965 an inquiry under Lord Devlin saw this casual system of employment as the source of what is called "dissension and inefficiency" in the industry. It concluded that industrial relations, working practices and modernisation in the docks would improve if all registered dockworkers were offered employment on a permanent basis and the number of registered employers was greatly reduced. The 1967 scheme, which is still current, reflected this report. The scheme was primarily directed at reducing the extent of casual employment by ensuring that the great majority of registered dock workers were employed under contract with a registered employer. I think that the noble Viscount, Lord St. Davids, mentioned that in his speech.
In the early days of the scheme a number of developments gathered pace which have radically affected the industry. There is the spread of containers and "ro-ro" traffic—which is the new roll-on roll-off container shipping which was again mentioned by the noble Viscount, Lord St. Davids—and the shifting pattern of trade towards south-east ports. The noble Viscount mentioned that there was a great change in the industry and that probably everyone had been caught out by the speed at which technology had taken over the docks—that is, the latest crane equipment, and so on. These developments reduced the number of dockers needed in all ports, but particularly on the west coast, and have given rise to disputes over the definition of dock work. The key issues in the early 1970s were: first, what should be done about the registered dockers for whom no permanent employer could be found and who were therefore on the Dock Labour Board's Temporarily Unattached Register; and, secondly, who should pack and unpack containers—the stuffing and stripping issue?
It was these two issues which gave rise to the 1972 national dock strike with the unions determined not to accept any threat of compulsory redundancy or return to the casual systems of employment. That strike was ended following the report of a committee jointly chaired by Mr. Jack Jones and my noble friend Lord Aldington. That report recommended, and the parties accepted, that except for disciplinary matters the Temporarily Unattached Register should be eliminated, and those on it at the time should be allocated to employers pending acceptance of voluntary severance by them or by other dockers whose place they could then take. This agreement was reaffirmed by the employers under the threat of another national strike in 1980.
That is not to say that it has barred all adjustment to change. In fact, voluntary severance arrangements in the industry have secured, without serious industrial action since 1972, a reduction in the registered dock labour force from 43,000 before the 1972 dispute to less than 14,000 now. My Lords, the noble Lord, Lord McCarthy, asked me the latest figure. I can only say that that is the latest figure. I had 15,000 down in my brief but a few moments ago I was able to ascertain that it is now just about 14,000.
Lord McCarthy: My Lords, I thank the Minister for that reply. I also asked him—and I hope he will tell me—about the figure of 14,000, which is the figure that the Dock Labour Board said originally was the figure below which it would not need to lose any more labour. Is that still the position?
Viscount Long: My Lords, no one can foretell the optimum level, but informed opinion in the industry suggests that we are approaching an equilibrium on the subject. I have no crystal ball to give your Lordships the definite answer to it, but that is as near as I can get.
The other and related issues which caused difficulties in the early 1970s were the definition of dock work and particularly the stuffing and stripping of containers, and the growth of ports such as Felixstowe and Dover which handled an insignificant amount of non-rail traffic when the original 1946 Act was passed, and are therefore excluded from the scheme. The Dock Work Regulation Act of 1976 aimed at taking arguments about definitions out of the area of industrial dispute and the legalistic framework of industrial tribunals applying outdated definitions by making the NDLB responsible for recommending to the Secretary of State what should be dock work. The Act provided for the scheme to be extended to "definable dock areas" within half a mile of any harbour or "harbour land" (a term with somewhat imprecise geographical limits). These provisions cannot, however, be implemented until Parliament has approved a draft new scheme, which it refused to do in 1978.
The noble Viscount, Lord St. Davids, made particular reference—or I believe he started to—to the case of Mr. Murrells. Mr. Murrells and others are engaged on trading with self-propelled barges on the River Thames out of wharves which are outside the confines of the Dock Labour Scheme. I am afraid that the matter is the subject of a case before an industrial tribunal, whose hearings I believe ended only at the end of last week. The tribunal has not yet determined the issue, and it would be quite wrong for me to comment on the substance of the case. All I would say to the noble Viscount at this stage is that this is not a case of bullying by the bureaucracy of the National Dock Labour Board, but of two parties, the board and the employers, using the machinery provided by statute to resolve an issue between them. Therefore, my Lords, it is a matter of some regret that the issue remains unresolved a year after it was first put to the tribunal.
A number of criticisms of the Dock Labour Scheme have been made, and in conclusion I will say that the Government accept that there are aspects of the manpower regime in the docks that are difficult to justify in modern circumstances. Many of the underlying problems reflected and underpinned by industrial agreements are not within the Government's power to solve. All of them will take time to solve, and to attempt to bulldoze through changes would not necessarily serve the best interests of port employers or port users. The Government have no plans to legislate at this moment. It is primarily for the
1036
industry itself, not the Government, to work towards solutions to the underlying problems and to chart the way forward.
House adjourned at five minutes before seven o'clock.

  PRISONERS: USE OF TYPEWRITERS
  PRISONERS: USE OF TYPEWRITERS
  THE 155mm NUCLEAR SHELL
  THE 155mm NUCLEAR SHELL
  THE HANDICAPPED: REGIONAL REPORTS
  THE HANDICAPPED: REGIONAL REPORTS
  PAY BEDS AT CERTAIN HOSPITALS:NUMBERS AND OCCUPANCY
  PAY BEDS AT CERTAIN HOSPITALS:NUMBERS AND OCCUPANCY