Sitting of 16 March 1983

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

    Serpell Report
    Mr. Andersonasked the Secretary of State for Transport when he expects to announce his formal decisions on the recommendations contained in the Serpell report.
    The Secretary of State for Transport (Mr. David Howell): The Serpell committee identified potential cost savings worth more than £200 million a year by 1986. I am giving the British Railways Board my full backing in achieving these improvements as soon as possible. I shall announce decisions on the longer term issues when all the facts have been considered and the necessary public debate has been completed.
    Mr. Anderson: Although there may be good electoral reasons for postponing a decision, the continued uncertainty is bound to affect adversely both customers and morale in the industry. Will the Secretary of State consign the report to the dustbin once and for all, thereby putting hon. Members and others out of their agony?
    Mr. Howell: To do so would be shortsighted from the point of view of the railway and its customers. The Serpell report illustrates the costs of different parts of the network and of the business. If the Government are to preserve and develop the railway system in the best possible way, it is important that they should know the costs of the different parts. Perhaps the hon. Gentleman shares my objective of preserving and developing a high quality national railway. If he does, he should welcome the illustrative nature of the cost analyses in Serpell and the shorter term proposals that a high-quality service can be provided with cost savings.
    Sir Anthony Fell: What does my right hon. Friend mean by "the necessary public debate"?
    Mr. Howell: My hon. Friend will recognise that the debate has moved fairly substantially since the publication of the Serpell report. Indeed, a debate has already taken place in the House. In the next few months I would expect to hear a further expression of views on the future potential and development of railways. That is the type of debate that I have in mind. I hope that that helps my hon. Friend.
    Mr. Skinner: In view of all the worries expressed throughout the country, as exemplified in questions from both sides of the House, and in view of the number of jobs
    220
    at stake in the railway industry, would it not he advisable for the Minister to say that the Government reject the variant suggestions and conclusions in the Serpell report?
    Mr. Howell: The Serpell report illustrates the costs of the system. The Government do not regard the Serpell report as offering a programme for closures. It has to be emphasised that the report is not a blueprint for closures, but an illustration of how much the system costs to run. That is the first move towards developing new methods of preserving the system. If the hon. Gentleman wishes the railway system to rot from neglect——
    Mr. Cryer: It is the right hon. Gentleman's neglect.
    Mr. Howell: —because people refuse to face the costs, his method of turning a blind eye to the facts in the Serpell report is the best way to do that.
    Mr. Fry: Does my right hon. Friend recall that one of the recommendations of the Serpell committee, and an alternative that British Rail management has examined, is the replacement of trains by effective bus services where great losses are being incurred? Does my right hon. Friend agree that the sooner that aspect of the report is examined the better it will be for the finances of British Rail and its future and that of the travelling public?
    Mr. Howell: That is one of the alternatives raised by Serpell for making good use of transport support and transport resources in providing local transport needs. Another option to consider is the use of the bus and other new technologies on the existing railway system. These sorts of possibilities must be immediately examined. They were promoted by the Serpell report, and the sooner they are examined the better.
    Mr. Booth: Does the Secretary of State accept that the Serpell report shows a great drop in investment expenditure by British Rail since the Conservative party came into office? How can the high quality rail service, which the Secretary of State said he wished to see, be brought about without some steps being taken to restore the level of investment expenditure that existed when his party came to office?
    Mr. Howell: If the existing investment in new high quality equipment was being properly used, if the Bedford-St. Pancras railway equipment, which is £150 million worth of investment, was being manned and operated instead of lying idle, and if there were no repetition of the disputes that took place last year, which drained more than £170 million out of the railway system, it would be easier to see how resources could go into investment. I do not remember the right hon. Gentleman being critical about that. If he had been, perhaps the railways today would have more resources for the investment they need.

    Manchester Airport
    Mr. Easthamasked the Secretary of State for Transport what is his policy towards the provision of a rail transport link to Manchester airport.
    The Under-Secretary of State for Transport (Mr. Reginald Eyre): I understand that the British Railways Board is undertaking a detailed study of such a rail link, and my right hon. Friend and I will consider any proposals which it puts forward.
    Mr. Eastham: May I stress how important it is to Manchester International airport that all support and urgency should be given to that project, which we seem to have been talking about for years? It is most important, not only for the Manchester area, but for the whole north of England and as far as the Scottish coast. It is also vital for industry, commerce and tourism. Will the Minister make every endeavour speedily to introduce that rail link, which is urgently needed?
    Mr. Eyre: We discussed this subject last night. Indeed, the Government gave their support to the Second Reading of the British Railways Bill, which gives power to safeguard the land necessary for the Manchester airport link. It is for British Rail to judge whether there is a case for investment in that link and to make proposals, which we shall then consider.
    Mr. Litherland: Does the Minister agree that there is an urgent need for the link in the light of the electrification of the line between Manchester and Preston and the Windsor link project? In addition, the link with the airport would be beneficial both to the inner city link and the local railway network. As my hon. Friend the Member for Manchester, Blackley (Mr. Eastham) has emphasised, there is an urgent need for it, as is would bring jobs to a very depressed area.
    Mr. Eyre: The Government supported the British Railways Bill, which was debated last night. The hon. Gentleman is right to emphasise the connection between this scheme and the other two schemes. However, in all those schemes it is for British Rail to consider the issues involved and to make its proposals in due course.
    Mr. Andrew F. Bennett: Does the Minister accept that, in view of his words last night, people in Greater Manchester will be very disappointed to learn that although the Government supported the Bill, they gave no cash commitment to let British Rail build that link? The people of Greater Manchester want a clear commitment from the Government that they will put up the money, and that it is put up before there is any talk of a further terminal at Heathrow or any proposals about Stansted. The north of England wants a fair deal from the Government.
    Mr. Eyre: I have explained that it is for the Britsh Railways Board to consider the investment aspect of those railway developments and to bring forward proposals. The Government will then give its representations careful and prompt attention.

    Rural Bus Services
    Mr. Stephen Rossasked the Secretary of State for Transport what representations he has received about the future of rural bus services in the United Kingdom.
    The Under-Secretary of State for Transport (Mrs. Lynda Chalker): I have recently received copies of the report entitled "The Country Would Miss the Bus" prepared jointly by Rural Voice and the Bus and Coach Council.
    Mr. Ross: Will the Minister respond to the views expressed in that report, particularly from consumer bodies and others, who state that shortsighted cuts now in financial support are bound to lead to greater costs later, particularly in terms of health, social services, housing and so on? Is the Minister responding to the report?
    Mrs. Chalker: The report, which is extremely welcome, is clear proof that the bus industry is thinking both positively and constructively about future services. It is interesting that the report cites the way in which bus services for non-commercial, non-shopping trips, such as for educational, health and social service purposes, can be brought together most effectively in rural areas to provide a service that can no longer be maintained by the existing services. However, we are well aware that the subsidy must be given direct to those rural area services that need it rather than being spread among those services that can cope without subsidies because of the volume of traffic.
    Mr. Newens: Does the Minister agree that many rural areas adjacent to urban districts suffer badly from cuts in bus services? Is it not impossible to operate bus services at a profit in many such areas, particularly during off-peak hours? In those circumstances, do we not have a right to ask the Government to give more public support to ensure that more services are not lost?
    Mrs. Chalker: The hon. Gentleman always talks about more public support, but the traditional forms of support are not necessarily the best way of coping with the changes that have occurred in the past 25 years, during which time bus patronage has fallen off dramatically. We have doubled expenditure on the bus industry since 1978 and it has enjoyed more than a ten fold increase over the past 10 years. Therefore, there is no question of resources not being available where they are being wisely spent. However, it is important that the resources should be directed to those services that need them and that maximum flexibility should be achieved in providing the right type of service, particularly in rural areas. I think that paragraph 4(10) of the report that I mentioned says that the off-peak periods can often be used most efficiently for other services.
    Several Hon. Members rose——
    Mr. Speaker: Order. With respect to all those concerned, we should move a little faster now.
    Mr. Crouch: Does my hon. Friend agree that the sight of half empty 32-seat buses on many rural runs tends to encourage the National Bus Company to discontinue its services and that that is not the solution? Those who live in rural areas and do not have their own transport have a real transport problem. Could not the bus company show a little more imagination by introducing mini-buses or midi-buses to meet the needs of those people?
    Mrs. Chalker: I thoroughly agree with my hon. Friend. The introduction of mini and midi-buses that will serve the people in rural areas well is part of the flexibility allowed by the 1980 Act.
    Mr. McCrindleasked the Secretary of State for Transport what consideration he is giving to the use of private mini-buses in urban areas.
    Mr. Eyre: I welcome the important part that minibuses already play in enabling disabled people to get about in both urban and rural areas. I should like to see their role extended in a way that complements conventional public transport, and I am considering how the legislation might be simplified to help this.
    Mr. McCrindle: Is it not true that a route structure of mini-buses in urban areas such as Greater London might well lead to a lessening of congestion and to a competitive

    223
    pricing structure that would encourage commuters and others to leave their cars in the suburbs while in no way materially affecting the continuing role of such bodies as London Transport?
    Mr. Eyre: From his description of the service, I thought that my hon. Friend might be referring to the proposals of the Associated Mini-bus Operators. It would be for London Transport to decide whether to enter into an agreement to allow such services to run. However, as my hon. Friend knows, my right hon. Friend the Secretary of State has an appellant function which precludes my discussing the merits of that type of application.
    Mr. Spriggs: Will the Minister and the Secretary of State have a look at what St. Helens transport department did with an old bus? It has made it possible for people in invalid carriages or chairs to travel on that bus, because a hydraulic platform has been fitted. Will the Government consider that at the first opportunity and recommend it to other transport authorities throughout the country?
    Mr. Eyre: I am grateful to the hon. Gentleman for having cited that case, which I shall certainly examine. I am told that the Transport and Road Research Laboratory is also doing substantial research in that area. We are certainly willing to consider providing facilities that assist the disabled.
    Mr. Robert Hughes: When considering the use of mini-buses in urban areas, will the Government set their face firmly against any possibility of individual mini-buses franchising operations that are directed by one operator? Will the Government bear in mind what happened in Hong Kong and Kuala Lumpur and ensure that we do not have any Mafia-type operations in London?
    Mr. Eyre: I assure the hon. Gentleman that all matters and applications of that kind will be considered carefully on their merits.

    British Rail
    Mr. Marlowasked the Secretary of State for Transport whether he will discuss moves towards public and worker shareholding and participation in a developing range of British Rail activities with the chairman of the British Railways Board.
    Mr. David Howell: I shall be glad to consider any worthwhile proposals.
    Mr. Marlow: In view of the success of the privatisation of the National Freight Corporation and the apparently intractable problems between the British Rail management and unions about the Bedford-St. Pancras line, might the line not be a candidate for privatisation, just as the National Freight Corporation was? Would not something on those lines, with perhaps terminal rights at St Pancras, be a good idea?
    Mr. Howell: The first task is to get the new equipment operating on the Bedford-St. Pancras line. Certainly British Rail has been encouraged to look at new ways of harnessing private capital and to mix public and private enterprise wherever possible. My hon. Friend is wholly right to refer to the success of the National Freight Company, which was a buy-out by the employees. It is an excellent example of the right way forward. The only thing
    224
    that is missing from the scene is the sound of any approval from the Labour party for such an excellent development for the workers and public involved.
    Mr. Skinner: Have not all the privatisation proposals that the Government have brought forward been in those parts of the industries that have been most profitable, as exemplified by the hotel side of British Rail? May we be assured that if there is further privatisation of parts of the railways industry the Government will look closely at the commuter territory, where the subsidy is the greatest?
    Mr. Howell: The hon. Gentleman has forgotten that the National Freight Corporation was making a loss before it was privatised and that, for the most part, so were British Rail hotels. Now that they are in the private sector, I believe that they have a good chance, with new investment, of making a profit and bringing better benefits to the employees.
    Mr. Steen: Is my right hon. Friend aware that the chairman of British Rail is proposing to withdraw its sleeper services from the principal cities of the north-west in a month's time—from Liverpool, Manchester, Preston, Barrow-in-Furness, and all stations to Holyhead? What will my right hon. Friend do to stop that?
    Mr. Howell: I know that my hon. Friend has railed this matter previously in the House. It is, of course, for British Rail to work out how best to provide a service where there is demand and where there is profit. The matter has been brought to the attention of British Rail, and I assure my hon. Friend that his remarks and the remarks made in the House have been called to the attention of the board.
    Mr. Cohen: If the Government are to press privatisation, will the Secretary of State give an undertaking that the conditions of service and the rates of pay of those who are employed under the present system will be protected?
    Mr. Howell: Careful attention is always given in these cases to the interest, conditions and circumstances of the staff concerned. In a number of cases it is clear that considerably better conditions and better prospects are available especially when, as in the case of the National Freight Corporation, the earners became owners.

    "The Future of the Bus"
    Sir Anthony Grantasked the Secretary of State for Transport what conclusions he has reached on the report of the Bus and Coach Council entitled "The Future of the Bus" submitted to him in November 1982; and if he will make a statement.
    Mr. David Howell: I have already told the Bus and Coach Council that I welcome the careful thought the industry is giving to how it might respond to the challenges of the future. I intend to continue to discuss with the BCC and others concerned how the bus industry's indispensable role within our transport system can best be fostered and developed to meet changing needs.
    Sir Anthony Grant: I thank my right hon. Friend for that reply. Has he noted that the Select Committee on Transport is undertaking a major study of this issue and that an early-day motion, signed by 130 Members, of all parties, has been tabled stressing the importance of the role that the bus and coach industry can play in the future of

    225
    transport? Does my right hon. Friend agree that for too long the bus and coach industry—both its public and private sectors—has been the Cinderella of the railways' ugly sister?
    Mr. Howell: I am not quite sure about my hon. Friend's pantomine casting, but he is right to say that there is strong support for a development of the bus industry away from its bad image towards a new, high quality service and one that can provide for people's needs, particularly in rural areas, through mini-bus developments such as we discussed a minute or two ago in response to the question of my hon. Friend the Member for Canterbury (Mr. Crouch). The emphasis must be on changing needs. Undoubtedly, far greater development is needed of the services provided by mini-bus and voluntary service vehicles, post buses and a variety of other services' vehicles in a way that has not been done in the past.
    Mr. Stott: Is the Secretary of State aware that "The Future of the Bus" was written in the aftermath of massive cuts in mileage operated, particularly in rural areas? We know that 40 million miles were cut in 1980. In the light of that, how can the Secretary of State pretend that shire counties can carry out their remits to provide a proper service to their people when he has cut 17·8 per cent. of the shire counties' transport supplementary grants this year? I draw his attention to the summary in "The Future of the Bus", which says that the service is now deteriorating and that the community as a whole will suffer as a consequence?
    Mr. Howell: New forms of transport are urgently needed, especially mini-buses, to replace the highly expensive bus systems, which have had to be supported by ratepayers' money, and to which ratepayers have rightly objected. Our approach in future must be to get away from the old idea that it is necessary for a large 32-seater bus to run with minimal loads, at great cost, when the demand is much diminished. Diminished demand requires a new approach.
    Several Hon. Members rose——
    Mr. Speaker: Order. In view of the length of questions and answers, we shall have to have fewer supplementary questions. That is the only way to make progress.

    British Rail
    Mr. David Marshallasked the Secretary of State for Transport what payments to British Rail under section 20 of the Transport Act 1968 have been made in Scotland in each of the last three years.
    Mr. Eyre: In 1980 and 1981 the payments were £20·5 million and £20·6 million respectively, subject to audit. Final figures of payments for 1982 are not yet available, but the section 20 claim for the year was £27·8 million.
    Mr. Marshall: Is the Minister aware that public transport in Strathclyde is facing a financial crisis and that serious consideration is being given to closing three bus garages and the recently modernised underground system in Glasgow? Will he consider making section 20 payments the responsibility of central Government, not that of local authorities, as at present, thus giving a much needed boost to public transport and employment prospects in PTE areas?
    Mr. Eyre: I cannot comment on the first matters that the hon. Gentleman mentioned, because they are the responsibility of the Strathclyde regional council. In answer to the hon. Gentleman's second point, the rail services required by the PTE govern eventually the calculation of the costs involved.
    Mr. Robert Hughes: Has the Minister plans to extend to other parts of Scotland the PTA/PTE system?
    Mr. Eyre: No. To my knowledge it is confined to the Strathclyde area.

    Cycle Ways
    Mr. Andrew F. Bennettasked the Secretary of State for Transport how many cycle ways have been created using old railways.
    Mrs. Chalker: During last year, after publication of the consultant's report, 10 schemes totalling 25 miles were completed. At present, work is under way on a further 27 schemes totalling 91 miles, and more schemes are planned.
    Mr. Bennett: I am sure that people who use bicycles regularly will welcome that small initiative by the Government. Will the Minister also give urgent consideration to the Tiviot Dale line in Stockport, from which British Rail is intending to remove all traffic? It would be an ideal example of a cycleway of a longish distance, and would be a safe route, particularly for youngsters who wanted to ride out of Manchester to the more attractive parts of the Peak district.
    Mr. Skinner: Call it the Tebbit Dale.
    Mrs. Chalker: I am well aware of the hon. Gentleman's interest in the Tiviot Dale railway line, but freight trains are still using the line. The Department has not yet received an application from British Rail to close the line, but I am quite sure that decisions on its conversion, which is a matter for the local authority, will be taken as soon as any initial step has been taken by British Rail.
    Mr. Steen: Rather than spending ratepayers' money on putting traffic lights at Hyde Park corner, which has snarled up the traffic and is no use to anyone, will my hon. Friend lean on the Greater London council to spend a comparable sum on establishing cycleways in and out of London, bearing in mind that about 90,000 commuters cycle into and out of London each day?
    Mrs. Chalker: I am well aware of what the GLC has done at Hyde park corner, but it knows that if it has schemes for cycle ways within London and it puts them in its TPP they will get the Department's support.
    Mr. Dobson: Does the Minister accept that unless the Government swiftly reject most of the lunatic options in the Serpell report there will be far too much surplus railway and a large opportunity for the expansion of cycle ways?
    Mrs. Chalker: It is important that as Britain's traffic patterns change we should put those lines that are no longer used into use as cycle ways.

    HS125 Train
    Mr. Hooleyasked the Secretary of State for Transport what proposals he has received from British Rail regarding the financing of the development of an electric version of the HS125 train.
    Mr. Eyre: None, Sir, but I understand that the British Railways Board is considering various options for the next generation of high speed electric trains.
    Mr. Hooley: Will the Minister discourage British Rail from going ahead with its land-based Concorde—the APT—and ask it instead to concentrate its mind on developing the proven and highly successful HS125 and coverting it to electric traction?
    Mr. Eyre: It is for the British Railways Board to decide on the next generation of high-speed electric trains. I understand that British Rail is working on three possibilities—the APT, to which the hon. Gentleman referred and for which some important design changes have been proposed; the class 89 locomotive; and the electric version of the high-speed train, to which the hon. Gentleman also referred.
    Mr. Cockeram: In the twilight of Sir Peter Parker's reign at British Rail, will the Minister ensure that this costly and foolish project is buried? Will he assure the House that the next chairman of British Rail will be given a brief to take the fare-paying passenger for a ride on clean trains that run on time rather thantake the taxpayer for a ride, as has happened in the past?
    Mr. Eyre: I note my hon. Friend's general comments, but I must emphasise that technical decisions on the next generation of locomotives are for British Rail.
    Mr. Whitehead: Surely the point is that British Rail should be encouraged to move towards further electrification, without which the electric version of the HST and the successful APT will not be possible?
    Mr. Eyre: I am sorry, but I was unable to catch the last part of the hon. Gentleman's question.
    Mr. Whitehead: Surely the point is that we should encourage British Rail to move towards further electrification, without which the HS125 and the APT—successful though they may be—will be impossible?
    Mr. Eyre: My right hon. Friend the Secretary of State has made it clear that the east coast main line electrification proposal is dependent upon British Rail's review of the inter-city financial position. The 10-year programme is also part of the long-term debate about the future of the railways.

    Cycling Policy
    Mr. Dormandasked the Secretary of State for Transport if he will convene a meeting of interested organisations to discuss the Government's cycling policies.
    Mrs. Chalker: There was an extensive round of consultation prior to the publication of our cycling policy statement in January of last year. Since then there have been frequent and continuing discussions about those policies with interested organisations. For the time being
    228
    I wish to concentrate all available effort on producing actual schemes and leave a meeting of organisations until there are new matters for wider debate.
    Mr. Dormand: Is the Minister aware that, although cyclists generally welcome the Government's proposals, many are becoming worried about their implementation? Will she pay closer attention to three things: first, the role of the regional cycling officer, who has a vital part to play in the implementation of the plans; secondly, safety factors in the construction of bicycles; and, thirdly, better roads for cyclists? Finally, will she remember that we are talking not just about leisure and pleasure, bur about the thousands of jobs that the industry provides?
    Mrs. Chalker: I and the regional cycling officers are well aware of the attention that must be given not only to cycling matters, but to encouraging other members of the Department in cycling matters. We are well aware of safety needs and the Department is having consultations on new construction and use standards in bikes. I am also well aware of the need for better facilities and the enormous number of jobs that an increase in cycling could bring to Britain.
    Mr. Higgins: In view of the anxiety about the increasing failure of cyclists to stick to traffic regulations, at traffic lights and in the lighting of their bikes, will my hon. Friend consult the Home Office and place in the Library statistics showing how many prosecutions for such offences have taken place recently?
    Mrs. Chalker: I shall ask my right hon. Friend the Secretary of State for the Home Department whether there are such statistics and we shall do our best to make cyclists aware of their responsibilities.

    Passenger Services
    Mr. Sainsburyasked the Secretary of State for Transport what information he has on the effect on traffic resulting from the replacement of outdated rolling stock on passenger lines.
    Mr. Eyre: The effect on traffic levels is one of the factors that I expect the British Railways Board to take into account when bringing forward proposals for investment in new rolling stock.
    Mr. Sainsbury: Does my hon. Friend agree that it is important, when assessing those proposals, that there should be hard information as to their effect? Is it not probable that modern rolling stock would not only prove more attractive to the fare-paying customer but would reduce maintenance and cleaning costs? On well-used lines, such as those to Hove and Brighton, would it not be well worth while experimenting to see whether more custom was obtained as a result of using better rolling stock than we now have to suffer?
    Mr. Eyre: I have listened carefully to my hon. Friend. Research in London and the south-east shows that passengers' main concerns are over punctuality, reliability and cleaner carriages. One must achieve the proper emphasis, but I shall certainly consider my hon. Friend's suggestions.
    Mr. Stephen Ross: When making provision for the new rolling stock on the London to Southampton line, which I hope will be soon, will the hon. Gentleman ensure

    229
    that the drivers of those trains are provided with protection from such assaults as occurred last Saturday, when a driver was robbed of £50?
    Mr. Eyre: Such incidents cause great anxiety and I shall certainly draw the hon. Gentleman's remarks to the attention of British Rail.
    Mr. Stott: Further to the answer given to the hon. Member for Hove (Mr. Sainsbury), will the Minister tell his right hon. Friend that if the Government were to allow British Rail to increase its investment potential in new rolling stock and repairs, the people of Shildon and Horwich would not be faced with the redundancies that currently hang over their heads?
    Mr. Eyre: The hon. Gentleman knows that Government support for British Rail is at a record level and that it is for British Rail to generate extra resources for investment, by increased efficiency. The hon. Gentleman has posed a misleading question about Shildon because that deals with wagon repair and production and it is as a result of the profound change in investment in the new wagon system that the difficulties at Shildon have arisen. It is this which British Rail Engineering Ltd. must face.
    Mr. Forman: Is my hon. Friend aware that there is much outdated rolling stock serving the commuters of the Carshalton area, some of which is as much as 30 years old? Would it not be a good idea to impress upon British Rail the urgency of providing new rolling stock, as that would enable it to provide a better and more comfortable service?
    Mr. Eyre: I note my hon. Friend's anxiety. The British Railways Board has a good programme of refurbishment, which will provide a much improved service, but I shall be glad to draw my hon. Friend's remarks to the attention of British Rail.

    M1 Motorway
    Sir Dudley Smithasked the Secretary of State for Transport why sections of the M1 motorway are frequently unlit at night between the area of the Watford Gap service station and the M45 intersection.
    Mrs. Chalker: There have been several occasions over the past 18 months when some sections of lighting have failed on the stretch of the M1 motorway between Watford Gap and the M45 intersection—junction 17. This has been due partly to water seeping into cable joints and partly to accidental damage by contractors carrying out maintenance works. Whenever the lighting has failed it has been restored as quickly as possible.
    Sir Dudley Smith: Is my hon. Friend aware that it is extremely dangerous suddenly to have to drive from a pool of light into a dark area and vice versa? That has happened far too often recently in the area that I mentioned. Will she please do more about it than her reply suggests? Is it not time that the busiest section of our busiest road—the stretch of the MI from London to the Coventry turnoff—should be lit all the way along?
    Mrs. Chalker: There are three major questions there. The Department does not have any evidence of problems arising from cars travelling out of lighted areas into unlit areas. We light major intersections, such as that to which my hon. Friend referred. It would be uneconomic and wrong for the countryside to light every part of every
    230
    motorway, even the important section to which my hon. Friend referred. There have been only nine failures in the past 18 months. That is nine too many, but it is not a major problem.

    Greater London
    Mr. Neil Thorneasked the Secretary of State for Transport when he will give the Government's response to the Transport Committee's report, "Transport in London".
    Mr. Fryasked the Secretary of State for Transport when he intends to publish his reply to the recommendations of the Transport Committee's report on transport in the Greater London area.
    Mr. David Howell: The Government are still considering the Committee's wide-ranging proposals for the reorganisation of transport in London, but a response to other recommendations in the report was sent to the Chairman of the Select Committee on 1 March.
    Mr. Thorne: Will my right hon. Friend undertake to instruct his Department to co-operate with the GLC, the London boroughs and the south-east planning conference in preparing a report for submission to the House before July, in accordance with the recommendations of the Select Committee?
    Mr. Howell: If my hon. Friend is referring to the road programme element of the recommendations, I can tell him that the Government have every sympathy with that. We already operate our trunk road programme on that basis. My hon. Friend referred to co-operation with the GLC. With the current GLC attitude, there is not the slightest hope that there can be any realistic prospect of a properly based co-operative programme of road building in London. That is one reason why we are examining the whole organisational arrangements for London roads in the light of the Select Committee's findings.
    Mr. Fry: I have read my right hon. Friend's response to the report. Does he accept that I find it very disappointing? Will he note that there appears to be no constructive reaction to the proposal for a metropolitan transport authority, which was one of the Committee's main recommendations? Would not such an authority enable him not only to dispose of the transport powers of the GLC but to lay open the way to dispose of that authority altogether?
    Mr. Howell: The Select Committee must decide when to publish my response to its report. I cannot comment in detail on my hon. Friend's remarks. The broader reorganisation of the London transport system, under a metropolitan transport authority, is still being considered by the Government. The matter is of great importance. However, my hon. Friend knows that it raises much wider issues of reorganisation, and the Government are not yet ready to come forward with an announcement.
    Mr. Walter Johnson: Will the Secretary of State accept my view, as someone who has been involved with London transport for more than 40 years, that the only solution to the problem is for London's transport to be handed back to the Department of Transport? Is that not the only way to take the issue out of the political arena?
    Mr. Howell: I am interested in the hon. Gentleman's views. There is a widely held view that, regardless of the

    231
    antics taking place in the GLC, the longer-term organisation of the transport system for London and the surrounding areas must be based on a different pattern from that which has prevailed in the past and which has proved unsatisfactory—regardless of party politics.
    Mr. John Hunt: Does my right hon. Friend recognise the importance of providing a proper orbital route for south London? As an important first step, will he take over the control of and the responsibility for the south circular road from the GLC, which appears to he incapable to responding to the needs of Londoners in that and many other respects?
    Mr. Howell: It is questions of that sort that will be raised by the basic decisions about changing the responsibility for London's transport and roads. These matters are currently part of the Government's deliberations. It is worth reminding the House that over and above the completion of the M25, more than one third of the trunk road expenditure on schemes due to start within the next 10 years throughout the nation—that is £1,000 million—will be devoted to London and the south-east. That includes major new work to link the north circular across the east London river crossing with the trunk routes to the Kent ports. That does not solve the south circular problem, but the resources are considerable.
    Mr. Ronald W. Brown: Is it not obvious that the problems of London will not be solved in a piecemeal fashion? When will the right hon. Gentleman examine the real issue of an integrated transport system in London as the only possible solution?
    Mr. Howell: I have stated clearly that the Government are thinking carefully about these matters. We are not yet ready to announce our decisions. They raise major questions of change in organisation.

    Concessionary Fares
    Mr. Newensasked the Secretary of State for Transport how many local authorities have now established schemes providing for concessionary travel on public transport for retirement pensioners; and how many do not operate such schemes.
    Mr. Eyre: Concessionary fare schemes are for individual local authorities to decide. They are not required to notify my Department of details.
    Mr. Newens: Is the Minister aware of the superior quality of the concessions provided by most Labour-controlled authorities compared with areas not under Labour control? Is that not illustrated by the Labour-controlled Harlow district council as compared with the Conservative-controlled Epping Forest district council? Is there not an overwhelming case for a basic national scheme that provides minimum concessions so that all old people can enjoy them?
    Mr. Eyre: I agree that there are differences, but they do not follow the party political pattern that the hon. Gentleman described——
    Mr. Newens: Yes they do.
    Mr. Eyre: It is not possible to consider imposing a national scheme——
    Mr. Newens: Why not?
    Mr. Eyre: Circumstances vary widely between local authorities. They must be able to make their decisions about support in the light of their knowledge of the needs and circumstances of their areas.
    Mr. John Wells: Is my hon. Friend aware of the problems of the retirement pensioner when more that one bus undertaking operates within the same local authority district, each taking a different view of such matters as discs, which leads to confusion and difficulties for the elderly? Will my hon. Friend issue guidance on simplification and aid?
    Mr. Eyre: I am sorry to hear about such difficulties. I should welcome and encourage moves by local authorities to harmonise such arrangements.
    Mr. Booth: Is not the need for mobility and access for the elderly common to every town, city and rural area in Britain? Does the right hon. Gentleman agree, therefore, that the matter should not be left for local authorities to decide? Will he reconsider his answer to my hon. Friend the Member for Harlow (Mr. Newens) and agree that the Government should consider introducing a minimum requirement for concessionary fares to operate throughout Britain?
    Mr. Eyre: The right hon. Gentleman is right in saying that such problems are experienced by the elderly throughout Britain, but the way in which the problems are dealt with, the measures that are brought forward and the services provided, differ so much according to local circumstances that it is right to leave local authorities to make the best arrangements that they can for the population in their areas.
    Later——
    Mr. Sheerman: On a point of order, Mr. Speaker. My point relates to question 14 and to the answer given to my hon. Friend the Member for Harlow (Mr. Newens). The Minister obviously misled the House in terms of the——
    Mr. Speaker: Order——
    Mr. Sheerman: —concession pensions——
    Mr. Speaker: Order. The hon. Gentleman is very ill-mannered to remain on his feet talking when I am on my feet. He knows that he has not raised a point of order.

    Accidents (Insurance Details)
    Mr. Chapmanasked the Secretary of State for Transport if he will seek to amend the Road Traffic Acts so that it is compulsory for a party who is alleged to have caused accidental damage to give details to his insurers when the accident has occurred, whether or not personal injury is involved.
    Mrs. Chalker: No, Sir. But when we implement the proposed EC directive on motor insurance we intend to provide similar safeguards for damage to property to those which already apply to personal injury. These will compel an insurer to meet a judgment against his policyholder even though that policyholder has failed to notify the insurer of the accident.
    Mr. Chapman: I am grateful to my hon. Friend for her helpful reply. Does she agree that the amendment is long overdue if a glaring injustice is to be remedied? Will it

    233
    involve a significant increase in motor insurance premiums? If so, does that not show the extent of the current abuse?
    Mrs. Chalker: We wish to introduce the directive as soon as we can reach agreement. I cannot speculate on the increases in premiums that might be necessary. We deplore the fact that negligent drivers are seeking to evade their proper responsibilities by neither reporting accidents nor paying out of their pockets. However, they leave themselves open to damages, whatever their insurance position, and they should never forget that.
    Mr. Robert Hughes: Will the Minister undertake to conduct a thorough review of the operation of section 155 of the Road Traffic Act 1972, as it is causing tremendous resentment and, in the long run, is bound to lead to increased premiums for car drivers?
    Mrs. Chalker: I shall examine the point that the hon. Gentleman has raised. In respect of the original question, I intend to hurry the directive up so that it will afford protection to British travellers, especially when they go abroad.

    British Rail
    Mr. Michael McNair-Wilsonasked the Secretary of State for Transport what discussions he has had with the chairman of British Rail about the use of the British Rail network by organisations other than British Rail.
    Mr. David Howell: I have told the chairman that I shall consider any realistic proposals for private operation of rail services.
    Mr. McNair-Wilson: In view of the successful operation of the privately owned Orient Express on British Rail permanent way, what opinion has my right hon. Friend formed about the possibility of other private operators of a similar type running trains such as the Bournemouth or Brighton Belle again?
    Mr. Howell: There are such possibilities. British Rail has an open door to any proposals of the type that Mr. Sherwood advanced. His is a successful example of British Rail providing the infrastructure and motor power, with the rolling stock being provided by the private operator. It has a somewhat limited market. Nevertheless, the idea has paid off and proved both attractive and profitable.

    Serpell Report
    Mr. Ron Lewisasked the Secretary of State for Transport how many meetings he has had since the publication of the Serpell report with the chairman of the British Rail,ways Board.
    Mr. David Howell: I have met the chairman on a number of occasions to discuss matters of mutual interest, including the Serpell report.
    Mr. Lewis: During his discussions with the chairman of British Rail did the Secretary of State give any idea or undertaking about the likely size of the investment programme for the coming year? Further, in his discussions with Sir Peter Parker, did the Secretary of State say that the chairman's services would be dispensed with when his term of office expired this year?
    Mr. Howell: With regard to the hon. Gentleman's second point, the answer is no. The matter has not been
    234
    discussed. With regard to his first point, the investment ceiling for the coming year has not been finalised. As the hon. Gentleman knows, the investment ceiling has not been the constraint on the level of investment. The constraint has been that British Rail has seen its resources drained away through disputes and other current high costs. There is room for investment and I hope that British Rail will increasingly have the opportunity to take it.
    Mr. John Hunt: Will my right hon. Friend take this opportunity to deplore any reference to "captive commuters" in connection with the Serpell report? Is he aware that a rise in suburban rail fares on anything like the scale that is envisaged in one part of the report would lead to a massive desertion of passengers from British Rail to the commuter coach services, which are becoming increasingly popular in parts of commuter land?
    Mr. Dobson: That is absolute rubbish.
    Mr. Howell: I shall certainly do that. My hon. Friend gives me the opportunity yet again to say that the distortions and rumours about the Serpell report advocating a 40 per cent. increase in commuter fares is completely without foundation. The best way to achieve low fares is through high efficiency, better use of equipment and removal of the restrictive practices that have dogged the railways. The sooner we get on with that, the better it will be for passengers.
    Mr. Sheerman: Has the Secretary of State taken the opportunity to tell the management of British Rail that it is doing a marvellous job, including the provision of the excellent 125 inter-city service, from which many Members of Parliament benefit? In his discussions with the chairman of British Rail, will the Secretary of State say anything about the Government's restrictive practices in preventing British Rail from electrifying those lines which it wanted to electrify, even though the return on capital was proven to be good?
    Mr. Howell: With regard to the first part of the hon. Gentleman's question, as I made clear in my evidence to the Select Committee on Transport last week, British Rail has many excellent achievements to its name. The difficulty is that, sometimes as a result of the image that British Rail projects, and sometimes because of the clamour of those who claim to be the friends of British Rail—and whom I believe are not—its woes are magnified and its achievements suppressed. The HS125 programme is in the world-beating class. It is a pity that we do not hear more about its value and fewer moans about more taxpayers' money being the answer to all of British Rail's problems.
    Mr. Eggar: When can we expect my right hon. Friend to announce the successor to Sir Peter Parker?
    Mr. Dobson: Ian MacGregor?
    Mr. Howell: I cannot give my hon. Friend any information on that now.
    Mr. Robert Hughes: Why did the Secretary of State have a private meeting with Sir David Serpell before his report was well under way and advise him to orient his committee towards advice that should be given to the new chairman of British Rail? Does that mean that options A and B are what the Secretary of State intends to pursue with the new chairman?
    Mr. Howell: I did not give Sir David Serpell any advice of the type that the hon. Gentleman mentioned. My only contact with him was when he asked for an extension of the time that his committee might take in making its studies. He sought my permission for an extended term, which I gave, and the terms on which I did so are provided in the evidence to the Select Committee and relate to short and longer-term investments. The hon. Gentleman will see that if he looks at the notice in the Committee.

    Transport Expenditure
    Mr. Dalyellasked the Secretary of State for Transport to what extent he is able to break down the figure of £880 million estimated total expenditure on local transport in 1985–86 into expenditure on new construction and improvement of roads, car parks and public transport investment.
    Mr. David Howell: The figure of £880 million estimated total expenditure on local transport in 1985–86 is a provisional planning total. Decisions have not yet been made about its breakdown into roads, car parks and public transport.
    Mr. Dalyell: The Secretary of State listens to urgent requests for public investment from my hon. Friends and, indeed, in this Question Time, from his hon. Friends. Does it occur to him, when he attends Cabinet Committees, that this £880 million is precisely the figure that the Daily Express gives for Stanley airport? If road and rail investment is equal to an airport 8,000 miles away, what are his priorities in Cabinet?
    Mr. Howell: When I saw the hon. Gentleman's question it occurred to me what it might be about, just as it occurred to the excellent officials who prepared my brief for answering his question. I know that the interest of the hon. Member for West Lothian (Mr. Dalyell) lies not with the Falkland Islands but with the capital spending of local authorities. He knows as well as I do that the main problem has been that local authorities have underspent on their capital projects and allowed resources to be diverted too much into current spending, which has been inflated. Underspending on capital is one of the Government's principal worries and we want it to end. We want approved capital projects to be carried forward with finance that is available.
    Mr. Wrigglesworth: Does the Minister agree that on some road schemes, such as the A10 and A66 on Teesside, too much money must be spent on repairs shortly after the roads are opened? Will he consider the matter to see whether money can be saved on such repairs?
    Mr. Howell: We are already doing that.

    Greater London
    Mr. John Huntasked the Secretary of State for Transport when he will be giving the Government's reply to the report of the Transport Committee on Transport in London.
    Mr. David Howell: I refer my hon. Friend to the reply that I gave earlier today to my hon. Friends the Members for Ilford, South (Mr. Thorne) and for Wellingborough (Mr. Fry).
    Mr. Hunt: When can we expect a firm announcement from the Government that London Transport will be removed from the political control of the Greater London council?
    Mr. Howell: As I said earlier, the Government are not yet ready to announce their conclusions on this important matter.

  CIVIL SERVICE

    Senior Staff (Re-employment)
    Mr. Dalyellasked the Minister for the Civil Service how many civil servants at permanent secretary level who have retired during the past 12 months have been re-employed by the Civil Service on short-term contracts.
    The Minister of State, Treasury (Mr. Barney Hayhoe): One officer at permanent secretary level who has retired within the past year has been re-employed.
    Mr. Dalyell: Sir Anthony Parsons. Has the Minister read the distinguished Stevenson memorial lecture that Sir Anthony gave at the London School of Economics, in which he advocated a United Nations presence at trouble spots and UN ambassadors permanently in residence at trouble spots and, by implication, at Port Stanley? Is Sir Anthony "His Mistress's Voice", and what fate would befall permanent secretaries who made such interesting speeches?
    Mr. Hayhoe: I can confirm that Sir Anthony Parsons was the permanent secretary involved. The House must share my view that the hon. Gentleman is becoming extremely obsesssive with his curious and ill-judged campaign about the Falklands.
    Mr. Dobson: What about the Prime Minister?
    Mr. Alan Williams: Will the Minister clarify whether the individual concerned was in the employ of the Government when he made that speech, even if only part-time, and, if so, whether the normal conventions were observed?
    Mr. Hayhoe: I would require notice of the right hon. Gentleman's question about the normal conventions. Sir Anthony Parsons was in the post on 1 January 1983 and he has a part-time appointment.
    Mr. Spriggs: On a point of order, Mr. Speaker. My hon. Friend the Member for West Lothian (Mr. Dalyell) raised a proper question about the Civil Service with the Minister of State, Treasury. His response was a complete refusal to answer the question in parliamentary terms. The Minister gave a personal opinion. Can you, Mr. Speaker, do anything to defend Back-Bench Members from the attitudes of Ministers, who treat us as nothing but scum?
    Mr. Speaker: As the House knows, I have no authority over the content of Ministers' replies.

Transfer of Questions
3.31 pm
Mr. Tam Dalyell: On a point of order, Mr. Speaker. Can you protect me, as a Back-Bench Member, against the Chancellor of the Exchequer? I received a note from the Chancellor's parliamentary clerk saying that he was asked
"to let you know that your Question for Oral answer on 24 March about the cost of the Falkland Islands war is one for the Secretary of State for Defence."
I do not normally complain about the transfer of questions, but on this occasion the question to be transferred was No. 2 on the Order Paper for 24 March, formerly No. 17, which would have been reached. It read:
"Pursuant to the reply to the hon. Member for West Lothian, Official Report, 6th December, c. 346, whether he is now able to add to the reply to the hon. Member for South Ayrshire on 11th November, Official Report, c. 247, on the cost of the Falkland Islands war."
The original questions—the first from my hon. Friend the Member for South Ayrshire (Mr. Foulkes), followed quite properly by mine—were accepted by the Treasury as bona fide questions. When, lo and behold, there is a chance of an oral answer at prime time, then and only then does the Chancellor ask his parliamentary clerk to transfer the question. When I telephoned the Treasury, the good parliamentary clerk had no idea why it had been done and said that he had to consult other divisions. This raises a rather more substantial point than the simple transfer of a question.
Mr. Dennis Skinner: It stinks to high heaven.
Mr. Speaker: Order. But it is not one on which I can intervene. The Minister was well within his rights.

SOCIAL SECURITY AND HOUSING BENEFITS
Mr. Secretary Fowler, supported by Mr. Secretary Prior, Mr. Secretary Younger, Mr. Secretary Edwards, Mr. Leon Brittan, Mr. Secretary Tebbit, Mr. Hugh Rossi and Mr. Tony Newton, presented a Bill to make provision for the calculation on an historic basis of certain increases in the sums specified in sections 125 and 126A of the Social Security Act 1975 and in the needs allowances under section 29 of the Social Security and Housing Benefits Act 1982: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 109.]

Housing Associations Tenants' Rights (Scotland)
3.34 pm
Lord James Douglas-Hamilton: I beg to move,
That leave be given to bring in a Bill to amend the Tenants' Rights etc. (Scotland) Act 1980 so as to extend the right to purchase to secure tenants of certain types of Housing Association.
It is no secret that there are many housing associations in my constituency. In the Link-Barnton scheme, a large majority of the tenants would purchase their houses if they had the opportunity to do so on the same basis as council house tenants. It is clear that a large majority of British people wish to do the same whenever they have the opportunity. Although the Scottish housing associations can sell if they so wish, no tenanted houses belonging to housing associations have been sold in my constituency and in many other parts of Scotland. In Scotland, out of some 18,700 fair rent tenanted houses, at present only 20 have been sold. It appears that some housing associations are either refusing to sell or are delaying the matter.
One reason why those who live in the Link-Barnton scheme feel so strongly about the matter is that they regard the work carried out on their homes by contractors as shoddy. They believe that if they had the opportunity to buy their homes at a reasonable discount on the same basis as tenants of council houses, their homes would be in much better condition. They reject completely the argument that they could not afford future maintenance costs. They contend that people are much better at looking after their own property than a collective would be acting on their behalf.
That leads me to the next point. The Government's policy is to extend home ownership to tenants of houses financed by the Exchequer. Some might argue that the provision should also be extended to tenants in private rented property, but my Bill does not do that. It covers the position where public funds are and have been used, and deals with tenants in the public sector. It does not involve charitable housing associations, which might have erected the buildings but been funded by private sources. The Bill does not deal with sheltered housing, housing for the elderly and disabled, or special needs housing. It deals with publicly financed housing occupied by tenants of housing associations. With the exceptions that I have mentioned, between 10,000 and 15,000 households could be involved, which is not far off 1 per cent. of all Scottish households. Those tenants represent a cross-section of the Scottish community. However, Scottish housing association tenants are in a less favourable position than other public sector tenants because they do not have the right to buy. With some limited exceptions, such tenants in England and Wales certainly have the right to buy.
I hope that today the House will give tenants of Scottish housing associations the same right to buy as that of their English counterparts. If the system works well elsewhere in Britain, why should it not in Scotland? At present Scotland unquestionably has one of the lowest rates of home ownership in western Europe. Indeed, it has less home ownership than some countries in eastern Europe, yet an overwhelming majority of Scottish Members of Parliament own their own homes. Surely it is altogether

239
reasonable for us to seek to ensure that the majority of Scottish families should have the opportunity to buy their homes. I commend the Bill to the House.
3.38 pm
Mr. Jim Craigen: I oppose the Bill. I appreciate the special circumstances cited by the hon Member for Edinburgh, West (Lord James Douglas-Hamilton), but a ten-minute Bill is not the way to proceed on this complex matter. I do not wish to involve the House in a discussion of the merits or demerits of home ownership as against rented accommodation. The hon. Gentleman will know that the Scottish Federation of Housing Associations has introduced a voluntary code on the sale of houses and recently issued a circular to its members seeking to strengthen the terms of the code of practice.
The matter is complex and raises more difficulties than the hon. Gentleman described today. The first is that the housing associations have performed an invaluable role in trying to preserve the shrinking rented sector in Scotland. At this crucial stage in their development, they must be left to manage the development of sales. Moreover, the housing associations have received all-party support. Discussion on this area of rented housing has been mostly non-partisan, and I hope that it will remain so for the benefit of the housing associations.
Secondly, the housing associations have performed a vital role in inner city rehabilitation, and the hon. Gentleman will raise a hornet's nest in that area. For example, will tenants be able to get a discount before improvement, or afterwards? Will tenants buy substandard housing and then seek to get the benefits when those properties have been redeveloped by the housing associations? The hon. Member's Bill is not the best way to proceed.
The Minister ought to make his point of view clear. He should publish a discussion paper so that Members of Parliament will be aware of the minefield of difficulties that we shall face if we proceed along the lines suggested by the hon. Member for Edinburgh, West. Now that much more public money is available to enable private landlords to improve houses, the hon. Gentleman might indirectly open a door that would allow private sector tenants too to ask for discounts for the purchase of their houses. I hope that the House will oppose the Bill.
Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—
The House divided: Ayes 110, Noes 118.

Division No. 92]

[3.41 pm

AYES

Beaumont-Dark, Anthony

Chapman, Sydney

Berry, Hon Anthony

Cockeram, Eric

Biggs-Davison, Sir John

Cope, John

Boscawen, Hon Robert

Corrie, John

Bottomley, Peter (W'wich W)

Costain, Sir Albert

Bowden, Andrew

Crouch, David

Braine, Sir Bernard

Eden, Rt Hon Sir John

Brittan, Rt. Hon. Leon

Eggar, Tim

Browne, John (Winchester)

Fairgrieve, Sir Russell

Bruce-Gardyne, John

Faith, Mrs Sheila

Budgen, Nick

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

Carlisle, Kenneth (Lincoln)

Fookes, Miss Janet

Carlisle, Rt Hon M. (R'c'n)

Forman, Nigel

Chalker, Mrs. Lynda

Fraser, Rt Hon Sir Hugh

240

Fraser, Peter (South Angus)

Moate, Roger

Fry, Peter

Morrison, Hon C. (Devizes)

Garel-Jones, Tristan

Murphy, Christopher

Gilmour, Rt Hon Sir Ian

Myles, David

Goodlad, Alastair

Needham, Richard

Gorst, John

Nelson, Anthony

Gow, Ian

Neubert, Michael

Gower, Sir Raymond

Page, Richard (SW Herts)

Grant, Sir Anthony

Parris, Matthew

Gray, Rt Hon Hamish

Patten, Christopher (Bath)

Grieve, Percy

Pawsey, James

Grist, Ian

Prentice, Rt Hon Reg

Grylls, Michael

Proctor, K. Harvey

Hamilton, Michael (Salisbury)

Rathbone, Tim

Hayhoe, Barney

Ridley, Hon Nicholas

Henderson, Barry

Rossi, Hugh

Higgins, Rt Hon Terence L.

Rost, Peter

Hogg, Hon Douglas (Gr'th'm)

Rumbold, Mrs A. C. R.

Holland, Philip (Carlton)

Sainsbury, Hon Timothy

Hordern, Peter

Shaw, Sir Michael (Scarb')

Howe, Rt Hon Sir Geoffrey

Shepherd, Colin (Hereford)

Howell, Ralph (N Norfolk)

Sims, Roger

Hunt, David (Wirral)

Skeet, T. H. H.

Jessel, Toby

Smith, Sir Dudley

Jopling, Rt Hon Michael

Spence, John

Kershaw, Sir Anthony

Stanbrook, Ivor

Knight, Mrs Jill

Temple-Morris, Peter

Lang, Ian

Thatcher, Rt Hon Mrs M.

Langford-Holt, Sir John

Thomas, Rt Hon Peter

Lester, Jim (Beeston)

Thompson, Donald

Lloyd, Peter (Fareham)

Thorne, Neil (Word South)

Loveridge, John

Thornton, Malcolm

Luce, Richard

Townend, John (Bridlington)

McCrindle, Robert

Townsend, Cyril D, (B'heath)

MacGregor, John

Wakeham, John

McNair-Wilson, M. (N'bury)

Waller, Gary

Major, John

Warren, Kenneth

Marland, Paul

Whitney, Raymond

Marten, Rt Hon Neil

Williams, D (Montgomery)

Mates, Michael

Maude, Rt Hon Sir Angus

Tellers for the Ayes:

Mawby, Ray

Lord James Douglas-Hamilton

Mawhinney, Dr Brian

and Mr. Bill Walker.

NOES

Allaun, Frank

Ennals, Rt Hon David

Alton, David

Evans, loan (Aberdare)

Anderson, Donald

Evans, John (Newton)

Barnett, Rt Hon Joel (H'wd)

Ewing, Harry

Beith, A. J.

Foot, Rt Hon Michael

Benn, Rt Hon Tony

Forrester, John

Bennett, Andrew(St'kp't N)

Freud, Clement

Bidwell, Sydney

Garrett, John (Norwich S)

Boothroyd, Miss Betty

Garrett, W. E. (Wallsend)

Bradley, Tom

Graham, Ted

Bray, Dr Jeremy

Hamilton, James (Bothwell)

Buchan, Norman

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

Carmichael, Neil

Harrison, Rt Hon Walter

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

Healey, Rt Hon Denis

Cohen, Stanley

Heffer, Eric S.

Concannon, Rt Hon J. D.

Hooley, Frank

Cook, Robin F.

Howells, Geraint

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

Jay, Rt Hon Douglas

Cunliffe, Lawrence

Jenkins, Rt Hon Roy (Hillh'd)

Dalyell, Tam

John, Brynmor

Davies, Rt Hon Denzil (L'lli)

Johnson, James (Hull West)

Davis, Clinton (Hackney C)

Johnson, Walter (Derby S)

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

Johnston, Russell (Inverness)

Deakins, Eric

Kaufman, Rt Hon Gerald

Dean, Joseph (Leeds West)

Kerr, Russell

Dixon, Donald

Kilroy-Silk, Robert

Dobson, Frank

Leighton, Ronald

Dormand, Jack

Lewis, Ron (Carlisle)

Douglas, Dick

Litherland, Robert

Dubs, Alfred

Lyons, Edward (Bradf'd W)

Duffy, A. E. P.

Mabon, Rt Hon Dr J. Dickson

Eadie, Alex

McCartney, Hugh

Eastham, Ken

McKay, Allen (Penistone)

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

McKelvey, William

English, Michael

McNamara, Kevin

241

McTaggart, Robert

Smith, Rt Hon J. (N Lanark)

Marshall, D (G'gow S'ton)

Spriggs, Leslie

Maynard, Miss Joan

Stallard, A. W.

Millan, Rt Hon Bruce

Steel, Rt Hon David

Morris, Rt Hon A. (W'shawe)

Stewart, Rt Hon D. (W Isles)

Morton, George

Stoddart, David

Mulley, Rt Hon Frederick

Strang, Gavin

Newens, Stanley

Straw, Jack

O'Neill, Martin

Torney, Tom

Parker, John

Varley, Rt Hon Eric G.

Parry, Robert

Wainwright, E.(Dearne V)

Pavitt, Laurie

Wainwright, R.(Colne V)

Pendry, Tom

Walker, Rt Hon H.(D'caster)

Penhaligon, David

Warden, Gareth

Powell, Raymond (Ogmore)

Watkins, David

Rees, Rt Hon M (Leeds S)

Welsh, Michael

Richardson, Jo

Willey, Rt Hon Frederick

Roberts, Gwilym (Cannock)

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

Robinson, G. (Coventry NW)

Wilson, Gordon (Dundee E)

Roper, John

Wilson, William (C'try SE)

Ross, Ernest (Dundee West)

Winnick, David

Sheerman, Barry

Wrigglesworth, Ian

Sheldon, Rt Hon R.

Shore, Rt Hon Peter

Tellers for the Noes:

Silkin, Rt Hon J. (Deptford)

Mr. Frank Haynes and

Skinner, Dennis

Mr. Norman Hogg.

Question accordingly negatived.

Orders of the Day
  WAYS AND MEANS
  Order read for resuming debate on Question [15 March].
  WAYS AND MEANS

    AMENDMENT OF THE LAW
    Motion made, and Question proposed,
    That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of$

    (a) any amendment with respect to value added tax so as to provide$

    (i) for zero-rating or exempting any supply;

    (ii) for refunding any amount of tax, otherwise than by a provision relating to supplies to, and importation by, a government department, within the meaning of section 19 of the Finance Act 1972;

    (iii) for varying the rate of that tax otherwise than in relation to all supplies and importations; or

    (iv) for any relief other than relief applying to goods of whatever description or services of whatever description; or

    (b) any amendment relating to the surcharge imposed by the National Insurance Surcharge Act 1976 and applying to some only of the persons by or in respect of whom the surcharge is payable, other than$

    (i) an amendment providing for a different rate of surcharge to be paid by the bodies specified in section 143(4) of the Finance Act 1982; and

    (ii) an amendment relating to the Commission to be established under the Act resulting from the National Heritage Bill [Lords].—[Sir Geoffrey Howe.]

    Question again proposed.

Budget Resolutions and Economic Situation
[Relevant European Community Documents: Nos. 10337/82, Annual Economic Report 1982–83, together with the final version as adopted by the Council, and 10480/82, Annual Economic Review 1982–83, together with paragraph 7 of the Fourth Report from the Select Committee on European Legislation, House of Commons Paper No. 34-iv of Session 1982–83, and paragraph 4 of the Eleventh Report from the Committee, House of Commons Paper No. 34-xi of Session 1982–83.]
3.53 pm
Mr. Peter Shore: Yesterday, we listened to, or rather had to endure, the fifth and mercifully the final Budget of the right hon. and learned Gentleman the Chancellor of the Exchequer. It was his last chance to do something to assist the British economy, to reduce unemployment and to deal more fairly with his fellow citizens—and, of course, he missed it. Instead, he has both robbed and deceived some 9 million retirement pensioners, and half as many again whose income derives from the social wage. He has made as certain as he can that the swollen army of the unemployed will not be reduced, but will actually rise in the year ahead. He has thrown an old bone to the CBI and a few crumbs to small business; for the taxpayer, he has barely restored the value of the personal allowances that he deliberately took away in his Budget two years ago.
As I said, this is the Chancellor's fifth Budget. It is useful to place it in context, to recall how we have fared

243
since he first rose to address the House as Chancellor, in June 1979. Then, when he spoke, there were 1,300,000 unemployed. When the right hon. and learned Gentleman delivered his second Budget in April 1980, the number of unemployed was 1·5 million. When he rose in March 1981, the unemployment total was more than 2·5 million. Last year, it had reached the 3 million mark. Today, when the figures of his right hon. Friend the Secretary of State for Employment are adjusted, as they should be, on the old basis, unemployment stands at 3·4 million. That is a record.
When we consider industrial production, the story of decline is very much the same. The index stood at 116 per cent. in June 1979, when the right hon. and learned Gentleman began. It was down to 109 per cent. in March 1980; it was just over 100 per cent. in March 1981 and stood at about that level in March 1982. Today, thanks to the jump of yesterday's figures, it is 102·4 per cent. That shows a decline of no less than 12 per cent. in industrial output over the period of the right hon. and learned Gentleman's stewardship.
It is worth recalling as a backcloth that in 1979 the North sea was yielding output worth £5·7 billion per annum. In 1980 it had risen to £8·8 billion, in 1981 to more than £12 billion and last year to no less than £14·4 billion per annum. Again as background, in 1979 investment in our manufacturing industry, which is surely very important, was up 7·3 per cent., reflecting the general policies of expansion which were then coming through from the Labour Government. In 1980, investment in manufacturing industry was minus 6·4 per cent. In 1981, it stood at minus 13·5 per cent. and in 1982 minus 7·5 per cent. The forecast for this year is again for a minus, of more than 3 per cent.
The proportion of our national income taken in taxation was 36 per cent. when the right hon. and learned Gentleman arrived at No. 11. It went up to 37 per cent. in 1980 and to 40·5 per cent. in 1981. It was still 40 per cent. last year and, as a result of yesterday's Budget, it will be down, if all goes well, to 39 per cent. That represents a 3 per cent. increase in overall taxation from 36 per cent. to 39 per cent. since the right hon. and learned Gentleman took office.
Those figures are a record of failure without parallel, certainly in post-war British history, and at least equal to the worst times of the inter-war period as well. The great bonus of North sea oil, which now accounts for 5 per cent. of gross domestic product and which, properly used, should have augmented the wealth of the nation, has been squandered. The Chancellor has managed over the past five years to make us a poorer nation—5 per cent. poorer in GDP—than we were when he took over.
It is a truly awe-inspiring record. The only thing that inspires more awe is the right hon. and learned Gentleman's failure to grasp, or even to begin to comprehend, the damage that he has done. Early in yesterday's Budget speech, the right hon. and learned Gentleman had this to say:
"In 1979 it was clear that the long-term decline of Britain's relative position in the world economy called for a fresh start, for a radical new beginning."
He has certainly stopped the
"long-term decline of Britain's relative position".
He has, instead, produced an absolute decline greater in extent than that experienced by any other industrial country.
244
That is the background against which we must weigh and judge the measures in yesterday's Budget—a Budget which was, as we were told in the final sentence of the Chancellor's speech,
"a Budget for the family, a Budget for enterprise—and, most of all, a Budget for Britain's continuing recovery."
Before I examine those claims about the Budget, I want first to deal with the fraud and deceit perpetrated yesterday on 9 million retirement pensioners—the disguised clawback, from next November, of £1 per week for all retirement pensioner couples. The House will recall that the Chancellor told us in his autumn statement that in his view he had overpaid the pensioners in their uprating of November 1982 and that it was his intention to claw back the 2 per cent. to 2·7 per cent. overpayment when the next uprating occurred this November. That intention was specifically reiterated in the public expenditure White Paper that was published last month. The White Paper accounts were duly "adjusted" to subtract £180 million in 1983–84 and a further £500 million in 1984–85.
As the Chancellor became increasingly aware., in the months following his November announcement, that his decision was fiercely resented by pensioners and was subject to strong and continuing criticism in the House, it appears that some rethinking took place. What was the right hon. and learned Gentleman to do? With £2¼ billion to give back in various forms of tax relief, which is the sum that he had yesterday, it should not have been a very difficult decision for the Chancellor. But the right hon. and learned Gentleman does not accept that pensioners deserve any priority when it comes to concessions. The problem was either to stick to his original and disgraceful decision or to give way to a group that he does not think deserves any special treatment.
Yesterday the right hon. and learned Gentleman decided to solve the problem by altering the rules of the game. On his own admission, inflation is likely to rise. It is assumed that it will run at 6 per cent. from the second quarter of 1983 to the second quarter of 1984, which would clearly justify a 6 per cent. uprating. The right hon. and learned Gentleman has decided to apply a new method of calculating next November's uprating. Instead of a judgment about inflation a year ahead, he has decided to base his judgment on the 12 months of inflation up to May 1983. He does not yet know with certainty what the rate will be for the 12 months ending May 1983, but he has a shrewd idea. As he told us yesterday, it is likely to be 4 per cent. That will almost certainly be the lowest level of inflation that we shall experience, as his own forecast for 1983–84 demonstrates.
But 4 per cent. is a convenient figure. If it is applied to the pension uprating in November 1983, it will meet the right hon. and learned Gentleman's requirement almost exactly. He will have clawed 2 per cent. back from retirement pensioners. How does he justify this? First, he gives us the reassuring news that
"There will be no question of asking pensioners to return any of the pension money they have already received."
That means that he will not take back retrospectively from pensioners. No doubt that news will be greeted with some relief by our senior citizens. The right hon. and learned Gentleman then had the effrontery to say that pensioners would be better off getting a 4 per cent. increase in November because
"if we had retained the old system, and taken full account of last year's 2·7 per cent. overpayment, the increase in benefits would have been significantly smaller than is now proposed."

245
Lucky pensioners! Instead of getting 6 per cent. docked by 2·7 per cent. for overpayment, leaving them with 3·3 per cent., our Chancellor has, with typical generosity, decided to give them 4 per cent. No doubt Conservative Members had that in mind when they waved their Order Papers in approval as the right hon. and learned Gentleman resumed his place at 5 o'clock yesterday.
It is not only the pensioners who will be caught by the new clawback. It will extend to all social security beneficiaries, including those receiving sickness and invalidity payments and, of course, the 3.5 million unemployed. From November those who are still within their first year of unemployment will have the 5 per cent. which was so disgracefully taken from their predecessors' payments two years ago, but their uprating will be docked just like that for national insurance retirement pensioners.
That is not the end of the matter. There are public service pensioners, including retired service men, policemen, teachers, civil servants, local government employees and others, whose uprating is linked to that of the national insurance retirement pensioners. Yesterday the Chancellor told us:
"Linked public service pensions will be raised in November by the same percentage as benefits."—[Official Report, 15 March 1983; Vol. 39, cc. 134, 157, 143.]
That is clear enough. Thus, he stated his intention to apply to them the same 4 per cent. uprating in November and to dock the same 2 per cent. clawback from the 6 per cent. that the uprating might otherwise have been.
But what do we find? Last night, after the right hon. and learned Gentleman had delivered his Budget speech, the detailed Supply Estimates became available in the Vote Office. The relevant passage reads:
"allowance has been made … for a pensions increase from November 1983 of 5 per cent. offset by a 2·5 per cent. abatement to allow for the fact that the provision in the November 1982 uprating for the rise in prices since November 1981 exceeded the actual rise."
Then, to make the matter crystal clear:
"the net pensions increase allowed for"
for this wide group of pensioners:
"is therefore 2·5 per cent."
Either the Chancellor wittingly or unwittingly misled the House yesterday—his words were in direct contradiction to the statement that I have quoted—or this is yet another example of crass bureaucratic error arising from last-minute changed decisions by the Treasury.
The Chief Secretary to the Treasury (Mr. Leon Brittan): It might be for the convenience of the House if I explain now that the Estimates will be corrected. Those referred to by the right hon. Gentleman were prepared before the Budget statement, and the corrected Estimates were referred to by my right hon. and learned Friend.
Mr. Shore: The House is grateful to the Chief Secretary for making his immediate explanation. We now understand that the problem was as I suggested it might well be—crass bureaucratic error arising from last-minute changed decisions by the Treasury. The figures that have now been withdrawn reveal the full extent of the clawback that the Government had in mind originally before they thought up at the last moment the wheeze of a new method of calculating the uprating. They were clearly envisaging a 5 per cent. uprating in November that would be reduced to 2·5 per cent. as a result of clawback.
Mr. Ioan Evans: The Chief Secretary intervened to say that a correction would be made but he did not say what the correction would be. Will the right hon. and learned Gentleman give us more details?
Mr. Shore: The right hon. and learned Gentleman has his opportunity to go a little further if he wishes to do so.
Mr. Brittan: I made it clear that the uprating will be in line with the method announced by my right hon. and learned Friend the Chancellor of the Exchequer.
Mr. James Hamilton: Retrospection.
Mr. Brittan: As the House will have heard clearly when my right hon. and learned Friend spoke yesterday, the exact figure will not be known until 17 June, when the inflation figure for May is announced.
Mr. Shore: We are grateful for that clarification. We now know that public service occupational pensioners will be treated to the same concealed clawback as other pensioners from the same date in November.
Mr. David Ennals: Surely there is a further sinister aspect to the last-minute decision that was taken by the Chancellor of the Exchequer after his papers had been prepared. That is that he considers that inflation will increase at a faster rate than he had anticipated.
Mr. Shore: My right hon. Friend is correct. Ministers have made two adjustments. They have changed their decision about the clawback and uprating at a very late stage, too late to correct the Supplementary Estimate. Further, at a late stage they have revised their estimate of the level of inflation from 5 per cent. to 6 per cent. in the year ahead.
I return to the main themes of the Budget:
"a Budget for the family, a Budget for enterprise—and … a
Budget for Britain's continuing recovery."—[Official Report, 15 March 1983; Vol. 39, c. 157.]
As for the family, of course, there are pensioner families, but perhaps we have said enough about them already. When the Chancellor speaks of the family, I suspect he has mainly in mind those people with children. He has increased child benefit by 65p per week per child, an increase of 11 per cent. He claims that this is a higher real value for child benefit than at any time since he took office. That is an odd way of putting it, because, among the first decisions he took in June 1979, one was to cancel the previously announced 50p increase, proposed by his Labour predecessor to take effect in November 1979. The new level of £6·50 per week per child would be just 4p less than it would have been had the November 1979 increase not been cancelled and had the increase simply been
Then there is the uprating of the personal allowance. The 14 per cent. increase in the allowance for the single and the married man substantially restores what the Chancellor wrongly took away in the 1981 Budget. But no one should imagine that the burden of direct taxation is back to what it was when the Chancellor took over four years ago. Within the income tax system, he has carried through, and still sustains, a substantial redistribution of income tax in favour of the better-off and adverse to those on low incomes. That has been brought about at the top end by the reduction of the tax rates and the extension of the higher rate bands, and at the lower levels of income

247
by the abolition of the 25 per cent. lower rate band, which means that people with modest income levels come straight into the 30 per cent. tax band.
What the Chancellor has totally failed to take account of, let alone to correct, has been the effect of his deliberate policy of further increasing direct personal taxation through his annual increases in the national insurance contribution. This is imposed on people earning as little as £30 per week and remains at the 8·75 per cent. rate for those earning up to one and a half times average earnings. This increase in direct taxation has imposed an extra burden of nearly £3,000 million per annum on those at work. Of course, national insurance contributions go up by another 0·25 per cent. this year.
Before we can properly assess the effect of all this on family incomes and budgets, we have also to take account of the other matters that relate to their cost of living—the guideline increase in council rents of 85p per week, the estimated—by the Chartered Institute of Public Finance and Accountancy two days ago—increase in rates nationally of some 7 per cent., the increase in school meals charges, the increase in Health Service charges, and the range of increases in the prices of nationalised industries, most notably electricity and gas. What is certain is that, with the halving of the provision for transport subsidies, bus and train fares will all rise again. Of course, the prices of beer, spirits, petrol, the vehicle excise licence and cigarettes are up again from the moment of the Budget resolution.
Not surprisingly, families at the top end of the income range will do well. They will get more tax relief; there is no national insurance charge on the greater part of their income; they will have additional mortgage relief, now that the limit has been raised to £30,000.
I shall not spend long on the claim that this is a Budget for enterprise. Encouragement to small firms is in principle welcome to us. We are particularly pleased to see the small engineering firms investment scheme reopened; after all, we introduced it. Equally, we welcome the specific measures for encouraging the introduction of new technology.
Even the Chancellor, in spite of the inordinate space which he devoted yesterday to describing the minutiae of these measures, must understand that their effect on the economy will be no more than marginal. Of the four principal schemes, small engineering will cost £39 million; the enterprise allowance, £17 million; business start-up, £25 million; and reduced corporation tax, £40 million.
Mr. Dennis Skinner: Are the figures correct?
Mr. Shore: We are not even sure of that. Those four schemes amount to a total stimulus of £121 million. It would be interesting to know how many jobs the Chancellor thinks that those measures in aggregate will create. Similarly, the tiny package of measures designed to assist the construction industry—the conversions to small industrial workshops, the extension of stock relief to house builders, the extension of the industrial buildings allowance and the development land tax concession on developments for the owners' own use—are trivial; indeed, most are scored in the Red Book as negligible in terms of expenditure during 1983–84.
The stark reality, as opposed to all the rhetoric about assisting small firms, is contained in the figures for
248
company liquidations. Last year, after three similar packages of assistance for small businesses, the number of company liquidations reached 12,000, the highest figure recorded since the war.
The Budget representations of the Confederation of British Industry, designed to make Britain more competitive, as it puts it, have been largely spurned. The 0·5 per cent. reduction in national insurance surcharge and the small engineering firms investment scheme are all the CBI got. I doubt whether those concessions would even show up on any percentage measure of United Kingdom industrial competitiveness.
That brings me to the main claim of the Budget: that it is
"most of all, a Budget for Britain's continuing recovery."—[Official Report, 15 March 1983; Vol. 39, c.157.].
Taking account of all the tax changes that the Chancellor has announced, as the Red Book shows, the relaxation of taxation, over and above indexing, is £1,670 million in 1983–84 and £2,235 million in a full year. With national income now totalling just on £300 billion, this amounts to a stimulus of 0·6 per cent to 0· per cent.
A stimulus of this size will certainly not bring recovery; equally certainly, it will not reduce unemployment. Indeed, as we all know, the public expenditure White Paper forecasts a further rise in the number of unemployed of 280,000 in 1983–84. The only effect of the Budget on unemployment that I can see will be the statistical effect of those changes on counting, which the Chancellor announced yesterday. They will mean that 90,000 men between the ages of 60 and 65 who now register at unemployment benefit offices, to protect their pension rights when they reach 65, will be relieved of that obligation. They will therefore disappear from the unemployment count. The 42,000 men over 60 who are registered as unemployed and on supplementary benefit, while waiting to qualify for the higher long-term rate benefit, will also disappear the moment they come on to supplementary benefit.
Last November the Secretary of State for Employment at a stroke reduced the number of registered unemployed by some 240,000 by changing the basis of calculation from those registering at jobcentres to those actually claiming benefit. That is one way of reducing unemployment and no doubt giving evidence of recovery. But it is not our way, and the people will not be deceived for a moment.
As for the prospects of recovery, we all recall last year's Budget, then described as a Budget for industry, a Budget for people and a Budget for jobs. Since then unemployment has risen by a further 300,000 and the growth of output, far from reaching the 1·5 per cent. predicted in the Red Book, rose by just 0·5 per cent. last year. What reason have we for being any less sceptical about the forecast this year? Certainly it is not because of any measures taken by the Chancellor himself. He has stubbornly stuck to his last public sector borrowing requirement target of £8 billion, 2·75 per cent. of gross domestic product. Britain has, and will continue to have, as the Organisation for Economic Co-operation and Development pointed out in its December 1982 economic outlook, the tightest fiscal stance of any of the seven major industrial countries.
We not only finance our current expenditure, but we finance out of taxation a substantial part of our capital expenditure. We are doing that in the middle of the worst recession for half a century. The Red Book optimistically

249
forecasts an increase in GDP of 2 per cent. in 1983 over 1982 and as much as 2·5 per cent. in the first half of 1984 over the first half of 1983.
Much of that is contingent upon the Chancellor's expectations of improvement in the world economy. There are signs of recovery in the United States, which, ironically, began precisely when the United States authorities suspended their M2 money supply targets. Further, the $5 reduction in oil prices, if the OPEC agreement holds, will also assist most non-oil countries. As the Chancellor reluctantly confirmed in his Budget speech yesterday,
"The lower exchange rate gives industry an opportunity to improve its competitiveness".—[Official Report, 15 March 1983; Vol. 39, c. 140.]
The right hon. and learned Gentleman can say that again. Indeed, the devaluation of 18 per cent. against the dollar and of about 13 per cent. against the basket of currencies is the only reason why exports are now predicted to rise by 5 per cent. in the first half of 1984 over the first half of 1983 while imports remain at the same 5 per cent. level.
But even if, contrary to all expectations, the economy did grow by 2 per cent. this coming year, such growth is well below the productive potential of the British economy. That means that unemployment, on the most favourable assumptions, will continue to rise and that we shall continue to suffer from vast underuse of our industrial capacity.
What is needed now is not a tinkering Budget but a major change of economic policy, one that makes the creation of wealth and the reduction of unemployment the central goals. Last week I outlined the shape and order of magnitude that a first recovery Budget would need: a substantial increase—not a decrease—in public expenditure, particularly on capital projects, housing and industrial investment, a substantial reduction in taxation and a sharp cut in interest rates—a stimulus to the economy equal and amounting to about 3 per cent. of GDP.
That is the order of magnitude with which we have to begin to address the size of our economic and industrial problems. However, the Budget is almost irrelevant to these, the real problems of our economy. Our great problems remain lact of demand, lack of competitiveness and the failure to modernise and invest in new and old industries alike. The waste of our resources, human and material, is truly appalling. The cost to the Exchequer of 3·5 million unemployed is now well over £15 billion per annum. The capacity of our manufacturing industry remains terribly underutilised. The estimate that was made in 1981 put the figure at 27 per cent. underutilisation and the latest National Institute of Economic and Social Research update in February 1983 puts it higher still, at about 30 per cent.
This is a know-nothing, learn-nothing Government. We can say that with real evidence and conviction after the fifth in this terrible series of Budgets. It is in our view essential for the national interest that the Government be swept away long before they have another chance of inflicting further injury on our people and our country.
4.24 pm
The Chief Secretary to the Treasury (Mr. Leon Brittan): The right hon. Member for Stepney and Poplar
250
(Mr. Shore) decries the Budget as a tinkering Budget. Usually, on the customary occasions when such allegations are made, the right hon. Gentleman puts forward detailed proposals as an alternative. It is true that on this occasion he urged a more dramatic and grandiose approach, but I am not surprised that he declined to go into any details. The central difference between the right hon. Gentleman's approach and ours is our belief that to achieve the objectives of recovery it is necessary to defeat inflation and inflationary expectations. Therefore, any attempt to stimulate recovery on the basis of reviving inflation, which is what plainly lies behind the right hon. Gentleman's proposals elsewhere, if not today, is doomed to end in tears. That is why the centre of our strategy has been a determination to bring down inflation and interest rates. The Budget maintains that strategy. That continuity itself is important.
Combined with the maintenance of that general strategy, the Budget contains specific measures to encourage recovery more directly—tax cuts for people to help incentives and reduce the tax burden and tax cuts for business to help reduce costs and improve competitiveness. There is also a wide range of other carefully directed measures, some specifically focused on the unemployed, others on particular sections of the economy and others designed to further recovery across the board.
In adhering to the medium-term financial strategy in putting forward our proposals, what we are doing is deciding not to finance lower taxes by higher borrowing. The tax cuts announced yesterday have been earned by our success in controlling expenditure. That is why this is not an election Budget. It is a recovery Budget.
The restraint on borrowing is by no means draconian. It is in line with the level of borrowing that we had in the 1950s and 1960s. As a result of our prudent fiscal and monetary policies inflation has come down dramatically and, as we saw again yesterday, those policies have permitted interest rates to fall.
When I last addressed the House in a general economic debate on 19 January, I noted that when interest rarer rose in the autumn of 1981 we were able to overcome the setback by sticking to the fundamentals of our policies. I said that we would overcome the rise in interest rates in January in the same way. So, indeed, it is proving to be. Market rates have eased; permitting the clearing banks to cut their base rates yesterday.
In challenging the claim that this was a Budget for recovery the right hon. Gentleman asked how many jobs would be provided by it. It is not possible to say with certainty that X thousand new jobs will be created. I shall tell those who ask exactly why. The calculation for which Opposition Members are asking is appropriate for those who try to buy jobs by extra spending. However, such calculations are illusory. Sustainable growth and jobs are not in the gift of this or any other Government. They are a product of the energy and enterprise of individuals.
The Government's job is to secure the financial stability and set the framework within which efficiency brings its own reward and business and individuals have the confidence to invest for the future. As inflation comes down, consumers spend more, and wage settlements become more realistic as people pay attention to real gains in efficiency and stop concentrating on forecasting future inflation rates. Lower interest rates also boost consumer spending. The 5 per cent. fall in mortgage interest rates

251
since November 1981 is the equivalent of a pay rise of around 10 per cent. for the average family on a new mortgage but on a non-inflationary basis.
Dr. Jeremy Bray: Will the right hon. and learned Gentleman give way?
Mr. Brittan: I should like to proceed a little further, if the hon. Gentleman will allow me.
Lower interest rates boost company cash flow. Each 1 per cent. fall in interest rates means £300 million for companies in a full year.
The signs of gradual resumption of growth deriving from following that approach are apparent. It is not the Treasury, but outside commentators, including the CBI February trends inquiry, who have pointed out the growth in consumer expenditure, the increase in industrial output, which even the right hon. Gentleman felt obliged to comment upon, and the improvement in the construction industry output. Those are what we must build on if we are not to abandon the financial stability that has now been established. It is right to operate within the proper restraints of a prudent fiscal framework, but within that fiscal framework the thrust of the Budget measures is, and rightly is, to help industry and thereby promote employment.
Dr. Bray: The Chief Secretary to the Treasury says that it is a prudent, fiscal framework. The borrowing requirement is as forecast in the 1980 medium-term financial strategy. That strategy said that the borrowing requirement would have to be corrected for cyclical variations. Since then the Government have complained constantly about a recession. If there has been such a recession, why are the Government keeping to the borrowing requirement that they planned in 1980?
Mr. Brittan: The hon. Gentleman is mistaken. There have been corrections in the medium-term financial strategy. I am surprised that, as an assiduous student of these affairs, he has not noticed them.
If one looks at the Budget, one sees a variety of measures designed to assist recovery and provide the opportunity for growth in employment. Some measures apply across the board and others help small businesses specifically. I cannot help feeling that when hon. Gentlemen noticed the extent to which those measures assisted small businesses they felt obliged to change tack and complain that big businesses were not helped enough.
Mr. Robert Sheldon rose——
Mr. Brittan: Hon. Gentlemen are mistaken, because while some measures help small business, others affect businesses which cannot possibly be called small—the North sea oil industry, some construction industries and so on. The measures are broadly based. If I were asked which apply across the board and are directly focused on cutting costs and improving employment prospects as a result, I should refer first to the national insurance surcharge reduction.
Mr. Sheldon rose——
Mr. Brittan: I must make some progress. I shall give way to the right hon. Gentleman a little later. Across the board, the national insurance surcharge reduction—
Mr. Sheldon rose——
Mr. Brittan: I understand why the right hon. Gentleman does not want to hear this. His Government
252
introduced the national insurance surcharge. They then nearly doubled it to 3·5 per cent. In hardly more than 12 months it has been reduced from 3·5 to 1 per cent. and is now barely a quarter of what it was.
The right hon. Gentleman also does not want to hear, but he is going to, about the measures to boost small firms and the fact that we have cut the small companies rate of corporation tax from 40 to 38 per cent. If the right hon. Gentleman were as interested in promoting employment opportunities as he pretends, he and his right hon. and hon. Friends would welcome that and the fact that there is another major measure to encourage employment prospects—the boost to the business start-up scheme, the change to the business expansion scheme which provides uniquely large incentives to invest in unquoted companies, both new and expanding. From April the scheme——
Mr. Sheldon rose——
Mr. Brittan: —will apply not just to new companies but to any existing unquoted companies. The relief available to individuals putting their money into equity investment will be increased greatly. The right hon. Member for Stepney and Poplar referred in carping terms to the small engineering firms investment scheme, but people in the west midlands and other parts of the country who heard the news did not react in similarly carping terms, because they recognise that this measure will plainly assist industry to re-equip and improve employment prospects.
Mr. Sheldon rose——
Mr. Brittan: The right hon. Gentleman cannot contain himself, so I shall give way.
Mr. Sheldon: I am grateful to the right hon. and learned Gentleman for giving way, because he has said throughout the Government's life that once inflation had been reduced employment prospects would increase and unemployment would be reduced. However, we know from the Red Book, and from what was said yesterday, that inflation will increase from 4 to 6 per cent. When will we achieve a reduction in unemployment?
Mr. Brittan: As the right hon. Gentleman was a member of a Government who saw inflation rise to 27 per cent. and set in train developments that led to an increase of 22 per cent. in inflation, and as we have reduced inflation from 22 to 5 per cent., the right hon. Gentleman should derive small comfort from the fact that an increase in inflation from 5 to 6 per cent. is predicted. The Government have brought about circumstances in which low inflation is the order of the day. The right hon. Gentleman may be jealous and may deplore that that has been done, but he cannot take away the achievement.
Of course the right hon. Gentleman does not wish to hear about the measures which, within that prudent fiscal and financial context, will further employment. He does not want to hear me talk about the package of measures designed to boost investment in industry, including additional assistance to computer software advisory services and a new scheme to plug the gap between development and commercial production.
Hon. Gentlemen talk sometimes about the real economy. That is the real economy. If they were as concerned about economic development and growth and employment prospects as they pretend, they would welcome with open arms the fact that we have taken

253
measures with regard to the taxation of the North sea oil industry that will help the development of North sea oilfields, which will mean extra work for the offshore supply industry.
Mr. Robin F. Cook rose——
Mr. Brittan: I assure the hon. Gentleman that I shall give way to him later. The measures that we have introduced are not designed solely to tinker and deal with small businesses. They are concerned with one of Great Britain's most important industries and are designed to safeguard its future.
Special attention has been paid to the housing and construction industries precisely because of the considerable employment consequences. The measures that my right hon. and learned Friend the Chancellor announced in relation to those industries are of immense significance—the increased expense limits for home improvement grants, additional capital spending allocations for enveloping schemes—and those who are concerned about our inner cities will know the profound implications, far beyond the sums of money involved, involved in upgrading the external fabric of whole streets of terraces of rundown houses on behalf of, but at no cost to, the owners.
Mr. Cook rose——
Mr. Brittan: These schemes usually cover 100 to 200 houses. We are therefore talking not about the smallest construction firms but about medium-sized ones.
Mr. Cook: The right hon. and learned Gentleman knows that the expenditure to which he has referred will come out of the contingency reserve and will not increase public expenditure. If we are to believe that these figures will increase employment, will the right hon. and learned Gentleman tell the House by how much he thinks the Government Actuary should revise his planning assumption that unemployment will increase by 300,000 during the next financial year?
Mr. Brittan: The hon. Gentleman is under a complete misapprehension. I am not boasting that these schemes will increase public expenditure. I say that they will improve employment prospects, and I explained earlier why it was not possible to gauge that by a financial calculation saying that £X will produce X jobs.
The schemes are important, and some direct measures are designed specifically to assist unemployment. The hon. Gentleman would do well to heed the fact that we are extending the enterprise allowance scheme, which helps unemployed people to set up in business, from five pilot areas to the whole country. Those who purport to speak for the unemployed may shake their heads because they do not like the unemployed going into business on their own account and being assisted in that way, but there has been a most encouraging response to the pilot schemes, with 2,000 or so successful applications. Those who laugh at that laugh at unemployed people seeking to help themselves by creating new jobs for themselves. There is evidence that new businesses are creating additional employment, quite apart from the other employment measures that we have introduced.
In addition to introducing the wide variety of measures to which I have referred affecting businesses large and
254
small, as well as particular and important sectors, the Budget also contains tax cuts and social security improvements which together add up to considerable focus of attention to and support for the family. Tax cuts also help business by increasing incentives, and all business men would agree on the importance of motivation. They also promote lower pay settlements and increase opportunities for business products.
The tax cuts stand on their own merits. There is no reason to apologise for them. There is a need to improve incentives at all levels. I readily accept the point repeatedly made by Opposition spokesmen that the tax burden is higher than it ought to be, but the House would do better to ask why that is so rather than to trade statistics in a barren way. Taxes are higher than we would like because of the need to bring down public sector borrowing at a time of continuing upward pressure on public expenditure. Secondly, it is worth pointing out that the cost of national insurance contributions—a crucial element in the tax calculations made by the Labour party—has been necessary to finance social security.
It is right to ask those in work to make sacrifices to help those less well off. For example, it is significant that the national insurance retirement pension will be about three per cent. higher in real terms in November 1983 than it was in November 1978. I do not believe that that is deplored by the Labour party, but that 3 per cent. alone costs nearly £500 million—equivalent to 0·5p off the basic rate of income tax. Those who criticise the increase in the burden of taxes would do well to explain what expenditure they would like to reduce if they do not like that increase.
Mr. Skinner rose——
Mr. Brittan: I shall not give way at the moment. The House ought to pay attention to a third reason why we have not been able—and I readily admit it—to make the progress——
Mr. Skinner: The right hon. and learned Gentleman is frightened.
Mr. Brittan: The hon. Gentleman will see whether I am frightened. There is a third reason why the Government have not been able to make the progress that they would like to reduce personal taxation. When, within the prudent fiscal and monetary framework that is essential for recovery, it was possible to begin to reduce the burden of taxation, we decided to start by reducing the burden of taxation on industry. At a time of world recession, that was the right priority. We started by reducing the national insurance surcharge to a quarter of its level under the Labour Government. That cost nearly £2 billion. In addition, we improved the stock relief scheme, which cost nearly £500,000. Those were priorities for industry, and they were the right priorities.
Mr. Skinner: Has the Chief Secretary made an estimate of the amount of tax that will be lost as a result of the loans by British banks to many rescheduling countries? Has he taken into account the revelation in most of the City columns of the newspapers that the Inland Revenue will allow tax relief on bad debts? Has he taken into account the massive amount of bad debts that were set aside in the announcements of the four clearing banks in the last three weeks? What is the right hon. and learned Gentleman's total calculation, in view of the recent

255
estimate of a loss of more than £100 million to the Exchequer as a result? Would not our widows and pensioners like to get their hands on that £100 million?
Mr. Brittan: My right hon. Friend the Financial Secretary informs me that the basis of the hon. Gentleman's statement about Inland Revenue treatment is not correct.
Mr. Skinner: Oh, yes, it is.
Mr. Jack Straw rose——
Mr. Brittan: I am sorry, but I must proceed. As I have said, the reasons why it has not been possible to make the progress in reducing personal taxation that we would wish have been genuine and reputable, but at last the moment has come when we can make substantial progress in assisting personal taxation.
The 14 per cent. increase in allowances introduced by the Chancellor yesterday equals two-and-a-half times what was necessary to adjust allowances in line with inflation. If one takes particular account, which one is entitled to, of the age allowance—people who on the whole are not paying national insurance contributions—one is talking about an increase to £3,755 for a married person and £2,360 for a single person. Those are real improvements.
It is also worth pointing out that, taking the position cumulatively since 1978–79, real take-home pay is higher at all earnings levels than corresponding earnings in 1978–79.
Mr. Straw: Have not the so-called tax cuts announced by the Chancellor yesterday merely restored the burden of taxation to its pre-1981 Budget level? In other words, the Chancellor gave back to the British people that which he took away in 1981. Is it not also true that at all income levels up to £300 a week the proportion of direct taxation, including national insurance contributions, is still much higher than it was when Labour left office? That is the reality and the Chief Secretary cannot escape from it.
Mr. Brittan: It was about 1 per cent. higher, but if the hon. Gentleman heard me he would know that I was not trying to pretend anything to the contrary. I was explaining exactly why we had not made the progress we would have wished and why we had been able to make progress this year. Instead of welcoming the progress that we have made this year, the hon. Gentleman decries the position as a whole. As I have said, estimated real take-home pay in 1983–84 will be higher at all earnings levels than corresponding earnings in 1978–79.
Social security has occupied the attention of the House and was referred to by the right hon. Member for Stepney and Poplar. My right hon. Friend the Secretary of State for Social Services hopes to catch Mr. Speaker's eye tomorrow to give further details of our proposals. However, some points should be made now. They must be taken together with the tax proposals and looked at in the context of what we are doing for the family as a whole.
I refer above all to child benefit. After the increase that my right hon. and learned Friend announced yesterday, child benefit will be at its highest ever level in real terms. That is a major achievement. It is particularly important to low-income working families and will help them avoid the unemployment trap. As it happens, it was I who before the Budget saw the all-party parliamentary group for
256
children. I vividly recall that the figure that it asked for was exactly the figure that we have now introduced. That is an important and significant achievement.
Mr. Frank Hooley rose——
Mr. Brittan: The uprating method also exercised the right hon. Member for Stepney and Poplar. He castigated the Government for the change that we have announced. However, he does not do so in good faith, because his allegations of fraud and worse do not come well from him, given the record of the Labour Government. The Government are pledged to maintain the value of the pension, but they have done more than that. The pension today is higher in real terms than when the Conservative party came into office and it will still be after the changes announced by my right hon. and learned Friend the Chancellor of the Exchequer. There is no doubt about the realities of the position.
The late Brian O'Malley said:
"I believe that I have demonstrated to the hon. Gentleman that the historic method is, in the end, the fairest method "— [Official Report, Standing Committee B, 12 December 1974; c. 191.]
That was the view of Mr. O'Malley, because it was right. Those who were receiving benefits knew that what they were getting was based upon reality and not upon a forecast. If the House wishes to discuss deceit and fraud it might listen to the weasel words of Mrs. Barbara Castle when she introduced the change to the forecast method:
"It is clear that if we had this time adopted the historic method, an additional burden would have been put on the worker and the wage earner of £500 million for this uprating, and it would have had inevitable consequences in due course on the contribution rate."—[Official Report, 7 April 1976; Vol. 909, c. 431.]
When the right hon. Lady spoke about the burdens on the worker and on the wage earner, she meant that if she had not changed the system to that to which the Government are now returning, the taxpayer would have had to pay £500 million. She was making that change to save that £500 million. What is more——
Mr. Stanley Orme rose——
Mr. Brittan: Furthermore, the equivalent of £500 million in those days is nearly £1 billion today. Therefore, the Opposition would do well to avoid such allegations.
Mr. Orme: During the five years when Mr. Brian O'Malley, Mrs. Barbara Castle and the Labour Party were in Government, the real increase in pensions was 20 per cent., but after four years of this Government the increase is only 5 per cent.
Mr. Brittan: That does not answer the question about the method. It is a case of the right hon. Gentleman not liking what he has heard and raising other facts. The explanation given by Mrs. Castle was as plain as a pikestaff. That change was introduced to save the equivalent of £1 billion today.
My predecessor, the former Chief Secretary to the Treasury, knows what was done and why it was done. There is no reason for my hon. Friends to feel defensive on the issue. There is even less need for my hon. Friends to feel defensive about social security when hon. Members take into account the other changes announced by my right hon. and learned Friend in the Budget: the restoration of the 5 per cent. abatement of unemployment benefit, the extension of the long-term supplementary benefit to the unemployed, sick and disabled over 60, and the important removal of the invalidity trap. The extension of the

257
widows' bereavement allowance for a second year was welcomed by those speaking on behalf of widows. Widows' organisations have been asking for that for some time and I am proud to defend and explain that extension at the Dispatch Box. All the improvements, as well as the increase in supplementary benefit disregards and the real increase in the amount that the sick and disabled can earn before losing their benefits, are real advantages that the Government have introduced.
It is true that the achievements that I have referred to are more than matched by the promises of the Opposition. However, it is always easy to match real achievements with spurious promises. The Opposition parties seem intent on developing something like a common economic programme. The right hon. Member for Stepney and Poplar has rapidly been losing his enthusiasm for announcing major devaluations. The SDP-Liberal alliance has suddenly become far more attracted to massive reflation. Why is it more reticent about pay restraint than it was?
Some hon. Members may ascribe that change of heart to sensible second thoughts by the right hon. Member for Stepney and Poplar about the folly of his previous proposals. Some hon. Members might imagine that the alliance has realistically decided that statutory pay restraint was unworkable. But those optimists would be wrong.
The real reason why the Labour party has changed its tune is that it has learnt that its previous policy was profoundly unpopular. The alliance, for all the boasting by the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) about his prudence as Chancellor, now thinks that Socialist economics is the way to win the Socialist vote from Labour.
The programmes that the Opposition parties offer are fatally flawed. The right hon. Member for Stepney and Poplar is a master of instant Budget-making. It is much easier in opposition and I wish him the joy of making many more such instant Budgets. His latest attempt proposed £11 billion in extra spending or tax cuts. It is not surprising that he shied away from unveiling that in the House today. At least he need no longer feel alone, because the SDP-Liberal alliance now speaks the same language. The effect of all such programmes, now as in the past, would not be more jobs but higher inflation or higher interest rates, or probably both.
The right hon. Member for Stepney and Poplar and his hon. Friends and the right hon. Member for Hillhead and his hon. Friends claim, of course, to have proved the soundness of their policies on the Treasury model. Not only the Government but outside commentators as well have repeatedly stressed that neither the Treasury's model nor that of anyone else can give more accurate results than the assumptions and information fed into it.
The Labour party has no credible policy for incomes. Its so-called national economic assessment is only a social contract by another name. The Government are not dependent upon it in the way that the Labour party is. It is a social contract to be agreed with the unions, whose power and privileges the right hon. Member for Stepney and Poplar and the Labour party would strengthen further. That is the same social contract under which price inflation rose to a peak of 27 per cent. and wage inflation to nearly 30 per cent. The present leader of the Labour party, who
258
is not in the Chamber today, has described that social contract as a "success". God preserve us from any further such successes. Neither the Labour party nor the alliance seems to grasp the importance of confidence. Just to announce less control on monetary growth and a huge increase in borrowing would have a devastating effect on markets.
The House knows that the Government have kept to the path of monetary and fiscal responsibility. We have avoided, more than any previous Government, the temptation to go for election bribes. However, the Government have provided a further credible and balanced instalment of policies designed to lead, as they will, to a sustainable recovery of growth and jobs.
4.58 pm
Mr. Richard Wainwright: The Chief Secretary to the Treasury regaled hon. Members with his routine speech of glib abdication of responsibility for stimulating the economy, to which he has added some wholly ill-founded suggestions that the alliance is going soft on incomes policies. At the end of our debate I trust that some hint of evidence will be dredged up from somewhere to back up that fact, but there is no substance whatever in it.
The Chief Secretary fell back on routine abuse by saying that the policies of the alliance would destroy confidence. It is time that the Chief Secretary realised that, although the confidence of financial markets is important, an important source of confidence is those who manage and work for our great industries. Their confidence has been destroyed during recent years by attacks on them by a Cabinet in which our traditional industrial areas are thinly represented.
The less appropriate the Government's financial strategy becomes, and the less relevant their policies, the more doggedly the Chancellor pursues them. In a world economy which the Chancellor said yesterday was full of inconsistencies, he proudly boasts of his four-year consistency—like that which Emerson rightly called
"the hobgoblin of little minds".
No wonder the Chancellor of the Exchequer's Budget speech wholly failed to explain why this strategy—which the Government parade as an alibi for their behaviour, and which was devised four years ago in a climate of rocketing oil prices, rampant world inflation and low productivity—is perversely held to be still relevant today. The Chancellor of the Exchequer attempts to make a virtue out of slavish obedience to what was planned in the quite different economic circumstances of four years ago.
With productivity rising and inflation still falling—at least at the moment—a substantial stimulus could have been included in the Budget to create more jobs without any risk. The case of the Liberal/Social Democratic alliance is that it should have been provided. Instead, the Budget aims only at a very modest growth in output, which Ministers admit will not be sufficient to stem the continuing rise in unemployment during the next 12 months. We say that total abolition now of the national insurance surcharge and a major programme of capital projects should have been the minimum response to the plight of the unemployed and of so much of industry today.
In our view, the British people have been, and are still being, extraordinarily patient and long-suffering in the face of this growing waste of human and economics

259
resources alongside important public needs which are left to grow worse. The alliance strenuously opposes such a narrow-minded Budget, which is wholly divorced from the reality of rising unemployment and the ever-rising number of business bankruptcies. Neither the Budget speech nor the Red Book does anything to reveal the Government's policy for the sterling rate of exchange. It is very odd that a Government who continually claim that their duty is limited to creating a proper environment for industrial recovery should not take the House into their confidence on the central issue of the exchange value of sterling and their policy for it. As far as one can tell, last year and into January this year, the Government were manifestly using interest rates to defend the pound. Whatever they said about leaving the pound to market forces, they were clearly manipulating the exchange rate to defend what we believed, and said at the time, was an artificially high pound. Perhaps the Government have now abandoned that policy, but the Budget is strangely silent on that point. If this debate is to be meaningful, the Treasury Bench must tell us what its policy now is on the exchange rate of sterling.
The £8 billion limit on the public sector borrowing requirement is based on mere dogma and it ill becomes the Treasury Bench to rebuke this side of the House for political and economic dogma when the figures in its Budget strategy are the products of its own particular dogma. I have heard nothing yet by way of carefully argued evidence to support that figure of £8 billion. It seems to be a matter either of convenience or of compromise. Again, if the debate is to be meaningful, the Treasury Bench should tell us the virtues of that figure, which we consider to be manifestly too small.
The Government claim—again, without evidence—that a higher figure would carry the severe risk of higher interest rates, but they should explain how they have been able to borrow over the past two years far more than they have needed without provoking rises in interest rates on that account. It ill becomes a Government who have been going into the markets to borrow more than was required for their needs at the time to say that the public sector requirement must be limited to £8 billion because to increase it would hike up interest rates. The Government have much more explaining to do on all those issues, and during the next few days this House is the place in which to do it. We look for a response from the Treasury Bench on those central matters.
On a more specific point, we are glad to welcome the rise in child benefit, which the Chancellor of the Exchequer was correct to describe as one of the most soundly based social security benefits in our system. We also, naturally, welcome the rise in the limits for employee shareholding tax concessions. For a long time we have argued that that limit should be automatically raised with the increase in salaries and so on. I am glad that our argument has been heeded and that that welcome change has been made.
The business expansion scheme seems to be well based. There has been a good deal of discontent during the past few months because so many of those concessions were limited to new businesses, thus leaving out in the cold those who had succeeded in starting small businesses some years ago, before all the new concessions were available. Likewise, we welcome the extension of the loan guarantee scheme and the lower rate of corporation tax on small
260
businesses. In particular, we welcome the spread of the enterprise allowance throughout the country, which will certainly be a boon to the genuinely self-employed.
I say "in particular", because there is a suspicion that some of these other so-called small business reliefs are in fact aimed much more at businesses that could be firmly described as medium-sized and on the way to being large. When we offer concessions, quite rightly, to the medium-sized business that is on its way up, we must not forget the genuinely self-employed who are running one-man businesses or small businesses staffed by their families. They need considerably more help than they will receive in this Budget or have had in the past.
At the top of the blacklist is the diddling of our pensioners and those who rely on benefits that are uprated every November. I hope that someone from these Benches will be called to speak in tomorrow's debate, which relates more specifically to social security matters. However, in registering our contempt for this manoeuvre, I should like to make two points. First, if there is any merit in changing the basis of uprating to the actual inflation rate, rather than the expected inflation rate, this year is certainly the wrong time to do it. To do it at a time of rising inflation is quite unjustified.
Mr. John Browne: The hon. Gentleman says that there has been diddling on the pensions, but does he deny that during this Government's period of office prices have increased by 70 per cent. while pensions have increased by 75 per cent., and have therefore been more than protected in net terms?
Mr. Wainwright: The hon. Gentleman vies with his Chancellor of the Exchequer in having no sympathetic understanding of what it is like to be a pensioner without other means. Many of the pensioners he talks about who benefited from small real upratings in previous years are now dead. However, I am in part talking about those who are just entering retirement. It is no good telling them that their predecessors—some of whom are now in the cemetery—saw a slight improvement in the early years of this Government.
That same lack of understanding and sensitivity was betrayed yesterday by the Chancellor of the Exchequer. He is so remote from the financial realities of being a pensioner that he actually said:
"There will be no question of asking pensioners to return any of the pension money they have already received".—[Official Report, 15 March 1983; Vol. 39, c. 79.]
One could hardly conceive of a senior Minister who could be so remote in his Surrey fastness from the conditions of life for ordinary pensioners who do not have other means as to suggest that there could be even the remotest possibility of asking them to return money that was properly paid to them.
I must make it clear—even though people tend to speak with forked tongues on this issue—that we deplore the new lease of life that has been given to the unjustified mortgage interest relief. It is a relic of an ancient taxation system which we hoped was withering on the vine. We do not suggest that it should be totally abolished at a stroke, because we realise that people have entered into commitments expecting it to have a permanent place in our tax system. That relief should have withered on the vine.
We have always been strong supporters of home ownership. The proper course for the Government was to relieve the stamp duty on house purchase. That would have

261
been much fairer, it would not have distorted the tax system, and it would have removed a block on the free exchange of houses. Moreover, it would have been a real benefit to first-time house buyers. Here again, the southeastern base of the Cabinet is clearly revealed. How many first-time buyers outside the south-east of England are likely to spend £30,000 on a house? Here, I do not rely on my own authority. In today's Financial Times, over the signature of no less than Mr. Sam Brittan, we read words which deal the Government a double blow, because he attacks their foolish interest rate fears as well. He says, speaking of the extension to £30,000 of the mortgage relief:
"this is the type of distortion which does more to raise interest rates than a quite substantial increase in the Budget deficit would do."
That is perfectly true. House prices will rise. There is a risk of interest rates rising because of that concession to a particularly narrow class of citizens who have no claim on priority at such a difficult time.
The Financial Secretary to the Treasury (Mr. Nicholas Ridley): The hon. Gentleman says that a slight increase in lending on mortgages might cause interest rates to rise.
Mr. Wainwright: Mr. Brittan said that.
Mr. Ridley: The hon. Gentleman assented to the proposition—whereas a few minutes ago he said that another £4 billion or £5 billion on the PSBR would not cause interest rates to rise. Will he explain that dichotomy?
Mr. Wainwright: I hoped that that would be apparent to a Treasury Minister. The credit of one of the few industrial countries that is more than self-sufficient in energy has a far higher rating than houses. I rely on Mr. Brittan's experience of financial markets to justify what he says.
Mr. Straw: Does the hon. Gentleman agree that another way of ensuring that interest rates did not rise, if there was an increase in public borrowing, would be to reintroduce exchange controls and to ensure that the £1,000 million a month of British people's savings at present being forced abroad was kept in this country? That would have a beneficial impact on the exchange rate. Does the hon. Gentleman's party accept that we cannot have sensible reflation without an increase in interest rates, unless there is a reintroduction of exchange controls?
Mr. Wainwright: I am grateful to the hon. Member for giving me a first-class opportunity to show how hollow the Chief Secretary's foolish claim was just now that the alliance had become part of a Socialist opposition. In no way do I agree with anything that the hon. Member for Blackburn (Mr. Straw) has just said.
The sad fact is that, although we in this House did not expect the Government to change course, many people outside hoped against hope that their jobs would come back again, their companies would be rescued, and their prospects would be improved as a result of a change of heart in the Budget. That has not happened. There is no engine of recovery here. There is just a rather timid bid for votes.
5.14.pm
Sir Hugh Fraser: We have heard an interesting speech from the hon. Member for Colne Valley (Mr. Wainwright). I am not sure whether he is speaking for the mass of the alliance or as the shadow Chancellor, because I do not know his position in his party's hierarchy. We have heard two shadow Chancellors addressing the House this afternoon, one a pale shadow of the other, although they denounce any mutual connection.
This debate should be viewed against the general condition of the world economic situation. I am sure that the Conservative Front Bench paid attention to the speech that was made yesterday by my hon. Friend the Member for Bath (Mr. Patten). It is against that general consideration of the world situation that the Budget has to be judged in large measure.
I know that the hon. Member for Colne Valley has something in common with the other shadow Chancellor. They both believe that immensely more should have been pumped into the economy. In my view it would be extremely rash to do that. My right hon. and learned Friend the Chancellor was attacked by the Leader of the Opposition and wrongly compared—as far as the analogy went—to Disraeli's attack on Peel. It is better to see my right hon. and learned Friend as well-spread stuff—muck is always best well spread—almost like Zeus descending on Danae in a shower of golden rain—perhaps so spread as not totally to impregnate any sectors, but nevertheless as one who was able, within the limits, to do a great deal for many people and many industries. For that reason we should welcome the Budget.
Later in my speech I shall mention the construction industry, where it is probably easiest to make injections of private or public capital to decrease unemployment. I agree with one thing that the Leader of the Opposition said yesterday, and that is that the world is suffering from hyper-unemployment, and certainly the construction industry is one area where something can be done in that respect.
I have read the Red Book, and in my view the Treasury forecasts for this year on world trade are optimistic. Naturally I hope that they are right. Certainly it is commendable that last year, for a variety of reasons, this country did not drop back in its proportion of world trade. That was a considerable achievement, to which the Government and the lower value of the pound contributed equally. Nevertheless, it was an achievement.
I have a grave fear that even the American recovery could be something of a flash in the pan. In the past three years Ministers here and in the United States and elsewhere have said again and again that they see a pickup in activity. Of course there is a pick-up in activity when the world has been destocking for three years. There is a cyclical pick-up, which is bound to occur at certain points. However, it would be ludicrous to suggest that this country could be the engine, efficient though it may be, to drag the world out of recession.
The Chancellor has sought to ensure that the economy remains sound. With a sound economy it will be possible for our Prime Minister and the other Ministers who are involved to go to the Williamsburg conference to deal with the great problems of world debt, world interest rates, growing protectionism and massive and continuing currency instability. Until steps are taken to deal with those matters, our internal problems are a battle that

263
cannot be won here or on Wigan pier or on the playing fields of Eton. Measures must now be taken by the leading world powers to make the system wearable and bearable. I have great hopes for what my right hon. and learned Friend can achieve at the conference, but it will not be easy.
In spite of my right hon. and learned Friend's achievement, the International Monetary Fund's wider provisions have still to he ratified by Congress. Therefore, my right hon. and learned Friend is right to back a sound economy in Britain, and the Prime Minister's hand will be strengthened in the difficult days to come.
My right hon. and learned Friend has shown what might be called a microeconomic approach. For the construction industry the Budget is generally good. I know that the hon. Member for Colne Valley does not agree with the help that has been given on mortgages, although I do not know whether he says that to his electors. Repair grants have been increased by 20 per cent.—a process known by the particularly ugly word "enveloping". Towns such as Stoke-on-Trent will benefit considerably from that. It will encourage considerable growth in the private and public construction of homes.
In addition, the new tax regime for the development of smaller fields in the North sea will be a real and important benefit to the construction industry. There will be a reduction of about £800 million in tax over the next four years. As long as oil prices remain stable, that will be a great benefit to the construction industry, especially in Scotland.
My right hon. and learned Friend proposes to increase expenditure on construction by 10 per cent. In my view, more could have been pushed into this year's road programme. In addition, there are two further matters which would help the construction industry to which I wish to draw my right hon. and learned Friend's attention and for which I hope to attract the Government's support. First, there is the need for the Government to back a major construction project supported by private finance. There have been many such schemes floating around.
With hindsight it can be seen that it was a mistake for the Government not to back the North sea gas-gathering pipeline. If national and international banks had been encouraged to spend money on that it would have been a far better investment than to invest money in parts of the world where it is wholly ineffective and inappropriate and is partly responsible for causing distress in the world banking system. I hope that the Government will look carefully at any new proposals that are put forward.
I hope that the House will have been circulated with the proposals for a cross-channel link for road and rail—the Euro-link—which could be privately financed and of which the redoubtable Mr. MacGregor and Sir John Howard and Partners are sponsors. Just as it was a great error that the Government failed to support the gas pipeline, so it would be a great error if they did not consider such a programme seriously. It would create 50,000 jobs in France and 50,000 jobs in Britain. Its need does not so much arise from the Common Market as from the inevitable and current growth of transport requirements between Britain and the continent. I hope that when the scheme is put forward the Government will give it full consideration.
A matter which may seem trivial to some is the development land tax. It is positively holding back development. It is a hangover from the Labour
264
Government's Community Land Act of 1975, which proved to be inoperable and inefficient. But we are still left with this tax, although my right hon. and learned Friend has gone some way towards reducing it. It remains at a high level, despite having been reduced from 80 to 60 per cent., with certain helpful exceptions. It brings in only about £20 million a year. I can assure my right hon. and hon. Friends on the Front Bench that, limited though my experience in business is, that is holding up a considerable amount of development and therefore construction. That is particularly true for older factories in the broad constituency of the Birmingham area. Some old factories there are almost valueless at the moment in terms of what is called "relevant base value" and would be heavily taxed if they were to be developed. There should be a tax, but not at this level, because in addition, an element of capital gains tax also has to be paid.
I do not say that there should not be a tax on unearned increments, but the matter could be better dealt with by a straight capital gains tax of 30 per cent. or by such profits being charged to corporation tax. That would create a different climate in many areas. I declare an interest, because there are two companies with which I am involved and which, because of the huge loss in tax, are hesitant to sell such property, which, on their books, is still of considerable value. An adjustment of this tax would lead to a much quicker reorganisation of British assets.
In a period of industrial decline we should set that in motion as quickly as possible. It would lead to the swifter reconstruction of companies and the redeployment of assets and would push more money into the Treasury at a lower rate of tax. It would also undoubtedly create employment in the construction industry. Many developments are being held up by this rather trivial tax. It is a heavy burden, not perhaps for the nation, but for many of our smaller companies. Above all, it would free more assets for gainful use. Therefore, I hope that the Government will give it their consideration and switch the tax on unearned increments into either capital gains or ordinary corporation tax. That would make a considerable difference. To quote my own experience, were this impediment and tax to be removed new development would provide employment on two sites for at least 400 people in the construction industry. I suggest that for a small sum a considerable step forward could be taken.
In its broader aspects the Budget can be generally welcomed. However, I remind my right hon. and learned Friend and his colleagues on the Front Bench that the real test does not lie in a sensible and reasonable Budget, but in the resolution of the world economic problems in the year to come.
5.30 pm
Dr. Jeremy Bray: I hope that the Chief Secretary will listen to and act upon the urgings of the right hon. Member for Stafford and Stone (Sir H. Fraser), especially on the international cooperation now needed and in the undertaking of capital projects for which there is not only a great need but a yawning gap in the construction and capital goods industries which can supply them.
This is the last Budget debate before the general election, so it is proper to review the strategy and achievements of the Government and the alternative choices for the future. Some Conservative Members and their supporters in the press argue that the Government

265
have achieved their goals. They say that inflation will reach the pensioner's low of 4 per cent. in the retail price index figure to be published in June. Was that reduction in inflation to be achieved without regard to unemployment and the loss of output? That was certainly not the intention in the original statement of the medium-term financial strategy in 1980.
That statement warned of some initial losses in output, the size and duration of which would depend on how quickly behaviour—especially in pay bargaining—took account of the new monetary environment. The Government's commitment to a progressive reduction in money supply growth was intended to provide a firm basis for expectations of falling inflation. The 1980 statement said that the Government intended to set a target range consistent with the annual growth of the money supply being reduced to about 6 per cent. in 1983–84. It insisted that there would be no question of departing from the money supply policy. All that was necessary to lay the firm foundation for expectations.
What has happened? The mid-point of the target ranges would have increased sterling M3 by 29 per cent. from February 1980 to February 1983. The actual increase has been 51 per cent. and prices have increased by 33 per cent. Therefore, there have been structural changes in the monetary system. The pressure gauge that the Government chose to guide them through dangerous waters has broken down. The Government have not known how hard they have been squeezing. By 1982, the monetary policy was taking into account a range of indicators, including the exchange rate, but with no rationale for how hard to squeeze. As shown by cost competitiveness, real interest rates and interest rate differentials with other countries, monetary policy has been and remains far too tight.
The 1980 statement acknowledged that the borrowing requirement was affected by the economic cycle, but no adjustment was made to the path of the public sector borrowing requirement to allow for the greater than expected depression. The fiscal balance has been fiercely deflationary. The effect of the medium-term financial strategy was to produce a misguidedly savage bout of deflation. Gross domestic product has fallen by 6 per cent. and manufacturing output by 19 per cent. since the Government took office. Unemployment has risen from 5–4 per cent. to an appalling record of 13 per cent. It is no wonder that inflation fell simply as a consequence of deflation, whatever monetary policy might be.
Far from Britain's depression having been caused by world recession, the Government have led the world into depression. As OECD studies have shown, the greater part of the depression is due to policy, not to the second oil shock. The squeeze as measured by the cyclically adjusted Budget change during the four years 1980–83 has totalled 6 per cent. of GDP, which is £16 billion, compared with an average of 1 per cent. in OECD as a whole. Japan is the next highest country at only 3·4 per cent. The Government squeezed twice as hard as the next highest country, and six times as hard as the OECD average, and the British squeeze started first.
For those still in work, the Government claimed a remarkable increase in productivity—but productivity in manufacturing industry has increased by only 4·7 per cent. since the Government took office—and that involved the closure of much of the less efficient capacity, with no
266
efficient capacity to replace it. Investment by manufacturing industry has fallen by 33 per cent. in real terms and training in industry and research and development—the seed corn for future growth and productivity—have been cut sharply throughout industry. The profits of the non-North sea oil companies have fallen by 31 per cent. in real terms, and the North sea oil companies will now follow
In the latest financial statement, the Government expect national productivity to increase by no more than 2 per cent. to 2.5 per cent.—as it did for 18 years before the Government took office and before they set about laying what they call their foundation for growth. Has the nation suffered all that loss of output and unemployment simply to return to where we were in 1979?
With such an appalling record, how have the Government managed to retain support? It cannot all be put down to the behaviour of the Labour party, the Falklands factor, or the mild winter. The Government have ensured that the majority of those who remain at work have not seen their standard of living suffer significantly. Real personal disposable incomes have fallen by only 3·2 per cent. and real consumer expenditure by 0·5 per cent. By protecting the personal spending of the majority, and increasing the income of the highly paid opinion-forming elites, while depressing the unemployed and cutting back on all sorts of investment for the future, the Government have bought short-term political support in the most contemptible and destructive way.
Yet it is incredible that at the same time the Government have succeeded in a claim to virtue. They propagate an economic theory whose failure, they argue, only confirms the decrepitude of the British economy, thus undermining the self-respect as well as the performance of British industry. The theory has broken down, but it can be laid to rest only by being replaced by a better theory. Political debate in a democracy cannot tolerate a theoretical vacuum. The claim to moral virtue can be shown as an evil fraud only by being contrasted with true morality.
The Government's mistake has been to treat the intermediate target of the money supply as a replacement for, instead of a supplement to, the final objectives of stable prices, full employment and growth. Under Bretton Woods, the exchange rate and the current balance were useful, if much abused, intermediate targets. They were never regarded as substitutes for the final objectives.
If we had perfect control of the economy, we could forget about the intermediate targets and concentrate on the final objectives, but because our understanding of the economy is so uncertain and our models are changing and far from perfect, it is useful to have indicators—the exchange rate, the current balance and even the money supply—to warn us of impending trouble. They are useful tools like the oil warning light, the battery charge indicator and the fuel gauge—but whoever heard of a driver driving on the oil warning light alone? That is what the Government have been trying to do.
The apparatus to pursue a balanced combination of final objectives and intermediate targets has been demonstrated. I sent the specification to the Treasury in 1972 when many people were working on it and long before all this monetarist nonsense gripped the minds of half-educated policy-makers and pundits. But it was ignored by the Treasury under the Heath Government and the Labour Government who followed it. Now it has been demonstrated on all the United Kingdom models. There is

267
much practical work to be done, but on 25 February Treasury officials demonstrated their first work on those lines on the Treasury model, in the Treasury, to the Treasury academic panel and attested to its usefulness. The Treasury and Civil Service Select Committee will publish further work using the more relevant exchange rate and intermediate target in its report in April or May on international monetary arrangements.
In practical application, these new policy optimisation methods will be quite conventional in their public presentation. The Government will say "In pursuit of our priorities, these are our spending, taxation and interest rate plans, and this is what we think is most likely to happen. Things are bound to depart from this course, and, as they do, this is how we shall respond, depending on the nature of the departure." On the exchange rate, for example, the Government will say "This is what we think will happen to prices and the exchange rate and their combination, which is the real exchange rate. We shall not die in the defence of that as a target, but as it departs up or down so we shall lower or raise interest rates."
A stable market needs such guidance on expectations. To give the Government credit, that is what they attempted to do in the medium-term financial strategy, but in a halfwitted way, with the wrong target and by the wrong methods. So much for the theory. It learns from the limitations of Keynesian demand management and monetarist targetry and it is capable of expressing widely differing political priorities. It is needed to guide the implementation of Labour's strategy, just as it can demonstrate the failures that could have been expected from monetarism before it was ever tried.
Such macro-economic policy-making, though necessary, is not sufficient on its own. If one takes the return to full employment, it emerges that of the 3 million-plus new jobs that we now need to reduce unemployment to under 1 million, only plus or minus 500,000 will come in manufacturing. As output recovers, employment in manufacturing could continue to decline. We shall need 2 million new jobs in private services and 1 million in public services. If we convert those figures into the numbers required in parliamentary constituencies, where we have a greater feel for what is happening on the ground, we shall need 3,000 new jobs in private services and 1,500 new jobs in public services in each constituency. That is the conclusion which emerges, whether one looks at the social preferences of workers, past trends of employment in different occupations and industries, the economies of new technology, the economic models, or the pattern of employment that already exists in a richer country such as the United States.
I can see how 3,000 private service jobs may appear in Carshalton or Reading, but it is not so easy to envisage them appearing in Motherwell or Middlesbrough where the manufacturing jobs have been lost. It can be done, but it will need quite different industry, employment and training policies.
When it comes to wage bargaining, Governments are like rabbits and this Government are no exception. They are hypnotised by the glare of oncoming norm-setting incomes policies, instead of figuring out what the objectives of wage bargaining are. By all means let us have a national economic assessment by which Governments arrive at the priorities and plans that I have mentioned, but let us also think about the round of negotiations on wage
268
relativities between employers and the unions in their separate bargaining groups that could usefully precede such a national assessment.
If one asks wage bargainers what they are really worried about, whether it is by how much prices have increased, by how much the employer's profits have increased, or how big an increase other workers down the road have been given, 90 per cent. of the wage bargainers will say, 90 per cent. of the time, that they are motivated by how much others got down the road.
The preliminary round can properly concentrate on relativities. After the national assessment, we must be realistic about the ratification round in separate bargaining groups which must follow and in which Governments can give incentives for ratification, such as guarantees or partial guarantees of achieving agreed differentials. It is by looking in detail at the process of collective bargaining and the objectives of unions and employers—the mechanics of wage bargaining—that we can feel our way towards a system of free collective bargaining which avoids inflation without the appalling present cost in unemployment.
I said earlier that the Government have got away with a claim to moral virtue. That is probably at the root of the problem. The moral outrage of the Government's policy is that they have chosen a course which has been deliberately calculated to enrich the rich and enfeeble the poor. A deeper depravity in their claim that there is no alternative and that this is the nature of the economic behaviour. It is not.
I had hoped, Mr. Deputy Speaker, that, much though we like to see you in the Chair, Mr. Speaker would have been in the Chair, because he understands what I am about to say as he has a background of Nonconformity. Nevertheless, I am sure that you, Mr. Deputy Speaker, are no less knowledgeable.
Both the Prime Minister and the Chancellor lay claim to the childhood influences of Nonconformity. It is a tradition in which I, too, was brought up—not in the Grantham corner shop or in the Port Talbot town clerk's department but in the manse where, as in all manses, the grace of our Lord was sorely needed to tolerate and wean the brethren away from so many perversions of religiosity.
The misunderstanding that rules in Downing street was common enough. It is the self-righteous obsession with the law. In Downing street, it is laws of all types—the money supply, competition, the market, of property and possession, moral duty and any code by which one can ensure one's own righteousness. They behave like the unconverted St. Paul, persecuting the brethren who have seen a better way, and they believe themselves justified by works codified and dead.
If neither principalities nor powers can separate us from the love of God, what chance has the money supply, inflation or the public sector borrowing requirement?
"Seek ye first the kingdom of God …
and these things shall be added unto you."
What that means is that if there is a problem, for Christ's sake tackle it. That problem today is unemployment.
We do not have a monopoly of spiritual wisdom on this side of the House. There are many past and present Conservative Members at whose feet I would cheerfully sit, but the distress that the nation is suffering and the intellectual squalor in which its economic policy is now made is rooted in a moral inadequacy, a mistake, what

269
used to be called a sin, which can be forgiven if they seek it—that is for them—but which must not be left to corrupt and destroy this nation.
5.49 pm
Mr. John Browne: My right hon. and learned Friend the Chancellor of the Exchequer has, in my opinion, presented a responsible Budget in which he has resisted the temptation of electioneering gimmicks that have been practised by Governments of both major parties and because of which we—especially the unemployed—are now suffering. The old policies of eyewash, gimmicks and con tricks, with which Governments have purchased the votes of the public, not with their own money but with other people's money and with inflation, are finished. We are now seeing a new style of Government—a Government who are prepared to face reality, have integrity and put national interests before sectional interests.
As my right hon. Friend the Member for Stafford and Stone (Sir H. Fraser) said, the world economic position is worse than many people realise. It is extremely uncertain. The recession is not only very deep, but few people seem to have yet realised its full depth and implications. The international lending crisis is far from over. The price of oil—a key world commodity—is uncertain, as are international exchange and interest rates. The outlook for the key American interest rates is uncertain, because, with a declared deficit of $200 billion this year that will probably exceed $300 billion by the end of the year, with a money supply, on an M2 basis, now expanding annually by 25 per cent., and with the drying up of the petro dollar recycling from the Gulf into American banks and the American economy, there is now a real chance that, far from falling, American interest rates could increase substantially.
If ever there was time and a need for responsible budgets in the western world generally, it is now. An imprudent rush for the synthetic recovery that is urged upon us, especially by Labour Members but also by other right hon. and hon. Members, may win votes and be highly popular, but it would result in another spiral of inflation and throw all our painful efforts of the past four years to the wind.
In our many different ways we have all sweated like mad during the past four years to control and to reduce inflation. Although the battle is not yet won, there is now room to receive some of the benefits of our success. My right hon. and learned Friend has balanced those benefits between two sectors by providing incentives for national enterprise and showing compassion for those most in need—the poor.
I am especially glad to see my right hon. and learned friend concentrate on raising allowances rather than lowering the standard rate of tax. This benefits most the poor. I am especially pleased to see his illustration that, by holding the nominal increases in allowances to the same level as last year, which gave a real increase of 2 per cent., we can all share in the battle against inflation, because this year the real increase in those allowances is 8·5 per cent.
The Budget meets the promise made by the Conservative party before the general election fully to protect pensions. They have been more than fully protected. I am sorry that the hon. Member for Colne
270
Valley (Mr. Wainwright), whose views I respect, mentioned talking with forked tongues when I intervened in his speech. But to say that pensioners who are now dead have benefited, and that others do not, is untrue. Pensions were increased for everyone, and the new pensioner still benefits from the increases that were given even to pensioners who have sadly died. During this Government's term, prices have increased by 70 per cent. but the net increase in pensions is 75 per cent., so that pensioners are 5 per cent. better off now than they were when the Government came to office. That is good news, but we must remember the cost of such provisions. There are 600,000 more pensioners now than at this time last year, which is a significant structural cost in the national budget. It must be paid for somehow.
The Budget also provided that charities should be exempt from capital transfer tax and that covenant relief should be increased to £5,000. I especially liked the thrust in my right hon. and learned Friend's speech towards private initiatives to help charities and to boost charitable activities.
This thrust is again reflected in the measures on housing. The increase in mortgage rate relief will encourage more investment in housing, but even more important was my right hon. and learned Friend's encouragement to local authorities for what he calls "enveloping". It means that the local authority has responsibility for the outside of the house while the tenant is responsible for the inside of the house. This encourages the individual to invest in his house and to be proud of it. I heartily applaud individual action and responsibility.
On the business side of the balanced giving of benefits, I mention first the national insurance surcharge—the grotesque Socialist tax on jobs that was so strongly supported by the Liberal party. The Government have reduced the national insurance surcharge to 1 per cent. That, together with all the prior reductions made by the Government, will cost £2 billion. That money must be found from somewhere. I fought for the abolition of the surcharge. I am a small business man who speaks to many small business men in my constituency and professionally, and I believe that the remnant of the national insurance surcharge and the employer's contribution are a real disincentive to employment. Many small business men I know are scared to expand their businesses and do not wish to employ more people because of the inherent problems. We must consider with more determination, the reduction of the employer's contribution and the abolition of the surcharge.
My right hon. and learned Friend provided many incentives to enterprise, and concentrated in his Budget on high technology and new and small businesses. I heartily support all his excellent measures. However, I should mention several specific points.
We laud the loan guarantee scheme, which has been increased to £600 million, but it is expensive borrowing. It provides a possible source of money to new companies, but it is expensive. Most importantly, it represents loan capital, not equity, and to get business off the ground we need equity finance. Although we completely approve of the loan guarantee scheme, we must not be carried away, because there is still a serious equity shortfall.
My right hon. and learned Friend has given us some incentives for equity investment, and I support his moves on capital transfer and capital gains tax. I also heartily support the business expansion scheme, which will help

271
mature as well as new and small companies. However, the scheme still excludes insiders from benefiting. It may sound strange, Mr. Deputy Speaker, but if one of your friends is starting up a new company, surely those who know him best—probably his relations—are most likely to invest. They know him best. They will be willing to take the risks. Why not encourage them, as well as outsiders? We can argue that it is risky. However, I believe that if the Government are to encourage the entrepreneur to take risks, the Government must take risks, too. I press the Minister, when he replies, to tell us whether there is any chance of a re-think on this matter in Committee.
I support the Chancellor's moves on petroleum revenue tax and royalties, which will encourage the renewal of exploration and exploitation of the oilfields around this country, but there is an awesome difference between his treatment of the oil industry and of the banks. Here I declare an interest as adviser to one or two banks.
Mr. David Winnick: Only one or two?
Mr. Browne: It appears that the jury has been out—the Treasury has thoroughly deliberated this matter for a long time—but that sentence on the banks has been suspended. That may seem very funny—the banks are often seen as a good target—but this has caused uncertainty, and uncertainty creates worry and speculation. I hope that the Minister will urge the Chancellor at least to let us know the results of those long and detailed deliberations at the Treasury. What options have been presented to my right hon. and learned Friend?
The Chancellor has helped to make our businesses more cost competitive and encouraged them to be more market competitive. Business men are now encouraged to concentrate more on product design, quality of production, prompt delivery and competitive after-sales service—all critical elements of the marketing mix in which we have obviously failed. We have only to look at the average car park in England to see that, although there is a demand for cars, less than half the cars bought are British. That is not because British cars are more expensive, but because they are so often the wrong products or designed for the wrong market. Price is only one aspect of market competitiveness. I am thrilled that the Chancellor has given incentives to business men to become more market competitive.
I support the Budget in general, but I believe that more should be done in certain areas. We need a bombshell of incentive from the Government to get more equity investment into new and small businesses. The action must be simple and on a large scale. It must make an impact. We do not need 76 different measures presenting complex legal and accounting difficulties. We need a simple bombshell, and I have called for one on a number of occasions over the years.
I realise, however, that if inflation is to be reduced and contained, we can have more incentives for recovery only if Government spending is checked and reduced, and that can happen only if we break the employment cartels. On one side there are massive closed shop unions which can make demands. On the other side, to my amazement, massive state monopolies are still in existence after four years of Conservative Government, and they can charge any price they like, even if it is totally out of line with the market. That results in a hidden double tax on the consumer. The consumer pays his taxes and then pays a
272
monopoly price for gas, electricity and so on. He has to pay, because he cannot go anywhere else. Until the employment cartels are broken and more freedom and enterprise are introduced, Government spending will continue to increase. It is economically vital that they are broken, and I hope that this will be done in the next Parliament.
Finally, in general I strongly support the Budget as caring, responsible and, in the long term, which is most important, totally in the national interest. I thank and congratulate my right hon. and learned Friend.
6.4 pm
Mr. A. E. P. Duffy: It is interesting to note that the debate so far has produced sharply contrasting speeches from the two sides. I hope that it will continue that way.
I cannot resist taking up one point made by the hon. Member for Winchester (Mr. Browne) in his very provocative speech. He claimed, both at the outset and in conclusion, that the Chancellor's Budget was a responsible one. In his eyes, that was perhaps its major virtue. I ask him to reflect on the powerful speech of my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) who argued for a Budget relevant to the needs of the economy and its work force as well as to the various sectors and regions. Coming from the north—although not so far north as my hon. Friend—that appealed greatly to me, and I was very sympathetic to his reminder that we tend to see things rather differently in the north and that we are somewhat sceptical about the way in which our economy seems to be becoming biased in favour of the south.
I recognise at the outset the connected themes of the Chancellor's strategy. We all agree with his wish for lower inflation and recovery in demand and, through competitiveness, a recovery in output and jobs. Indeed, the Labour Government pursued the same strategy. We part company from the Chancellor, however, en the way in which he is pursuing that strategy and, once again, is pinning it to the size of the public sector borrowing requirement, as though that were sacred. We also part company with him on the manner and choice of his tax-cutting options and the way in which he has set about helping industry. I suspect that the Opposition, among others, will judge his performance on those criteria.
On the borrowing requirement, a large body of respectable opinion, including the London Business School, the National Institute of Economic and Social Research—I could mention others—believes that the Chancellor should have given away more than he has. Those bodies are agreed that the recession is so deep, the unused capacity in industry so great and the unemployment trend so persistently gloomy that the Chancellor must inject more demand into the economy to help to lift it out of the recession. Instead, however, he has opted for 2·75 per cent. of GDP for his borrowing requirement—the lowest ratio of Government borrowing to national income in the OECD area, which is perhaps a judgment in itself.
On tax-cutting options and the consequences for social justice, the Budget still leaves the average low-paid taxpayer with a heavier tax burden than when the Conservative Government came to power. Tax allowances are lower in real terms, and even child benefit is only marginally higher, as the Chief Secretary admitted. The Chancellor must cut a further 3p from the standard rate of

273
income tax before families pay the same proportion of their gross earnings in tax as they paid when the Government took office.
The better off, however, will be substantially better off, thanks to the regressive income tax regime that has been shaped by the Tory Government over the past four years. A BBC computer prediction has claimed that the family of an average unemployed worker would benefit from the Budget to the tune of £4 a week; the family of a manual worker by £5 a week; and that of a skilled worker by £2 a week. However, at the top level of earnings—for example, a stockbroker—the benefit would be £17 a week.
Mr. Anthony Beaumont-Dark: It depends on how much he earns.
Mr. Duffy: It depends much more on the shape of the tax structure.
Mr. Paul Marland: Rubbish.
Mr. Duffy: As a further illustration for the benefit of the hon. Member for Gloucestershire, West (Mr. Marland) who has just called out "Rubbish", taxpayers will now enter the 60 per cent. tax bracket at incomes of £36,000 as against £31,500 at present. This is clearly a Budget for the better off. It is certainly not a Budget for the old and the unemployed.
The Chancellor told the House that it was only fair that concessions should now be given to those who accepted that sacrifices had to be made in 1981. But the handouts announced yesterday will primarily help those with jobs, whereas Britain's 3 million unemployed, who have made the supreme sacrifice at the altar of monetarism, will receive only derisory increases in welfare payments. My hon. Friend the Member for Penistone (Mr. McKay) and I, who represent areas in South Yorkshire where special steels are made—one of the brightest sectors of our economy until recently—are only too painfully aware that many of our best workers have recently lost their jobs through no fault of their own. We speak from that experience when we say that the unemployed are almost neglected by this Budget.
My third test of the Budget relates to industry. Practically no serious economist believes that personal tax cuts should take priority over aid to industry. After all, there is no shortage of consumer demand in the British economy. The Prime Minister almost said as much at Question Time yesterday afternoon. Therefore, I cannot see how the Chancellor's concessions can give the type of fillip to industry that is needed to reduce current unemployment in the Yorkshire and Humberside region, and in the city of Sheffield in particular.
The Yorkshire and Humberside region sinks into deeper and deeper trouble as the dole queues shoot up to a new high of 15 per cent. of the work force. In the inner areas of the major conurbations of south and west Yorkshire there exist the familiar city centre problems of substandard living conditions and poor public amenities, as well as lack of jobs. Yet the region is to receive only £37 million from the Government's new package to revitalise run-down industrial areas. Bradford, Hull and Wakefield will benefit, but there was no word or hint yesterday about Doncaster, Leeds, Barnsley and Sheffield. The Yorkshire and Humberside region is a good proving ground for
274
testing Britain's industrial prospects. It is an area in which a pick-up in the economy would soon manifest itself with the right policies and encouragement. But this is not a Budget for Yorkshire and Humberside.
"By the time the Chancellor sat down",
ran a piece in today's Sheffield Morning Telegraph,
"the conversation was desultory. It was as if he had wiped the assembled gathering of Sheffield business men with a luke-warm sponge."
Those Sheffield business men had been invited to come together yesterday afternoon to a communal Budget watching afternoon. The article continued:
"Albert Winter, chairman of steel re-rollers Eaton and Booth, did some hurried calculations on a note pad … `It would appear that what we will save through the reduction in the national insurance surcharge will just about pay the extra cost of fuel to get our stuff to the customer or the docks,' he said.
That summed up the effect of the Budget on 25 Sheffield business and commerce executives who accepted the invitation … The majority of the guests found little of cheer in Sir Geoffrey's annual prescription.
'Pedestrian,' suggested one estate agent. 'Boring,' said the young man from a solicitor's office. `Not even amusing,' said another. Chamber of Commerce president-elect Alan Goodall was a little more polite, but equally disappointed. `There is not a lot in the Budget for the average local company,' he suggested."
That shows that this is not a Budget for Sheffield. Unemployment in Sheffield grew last month to 42,000–14·5 per cent. of the work force. Yet there was no hint yesterday from the Chancellor about the Government's plans for extending or replacing the temporary short-time working subsidy.
The Government have spent a great deal of time and money cutting the capacity of Sheffield's steel works—slashing jobs from 43,000 to fewer than 20,000 since 1979. Why do not the Government recognise the area as a steel closure area for the purpose of obtaining EC and regional assistance?
Furthermore, what assistance do the Government intend to give the new "streamlined" industry—that which will survive—first, to promote research and development, secondly, to train and retrain the existing and future work force and, thirdly, to offset high energy costs?
Sheffield is the first local authority in the United Kingdom—perhaps the first in Europe—to create an employment department. Its aims, among others, are to prevent job losses in the city, to alleviate the worst effects of unemployment and to stimulate new investment. One would expect any normal Government in present circumstances to welcome and assist such local initiative and enterprise. But not this Tory Government, who have cut Sheffield's spending and are also punishing Sheffield through the grant penalty system, despite its unemployment, its industrial wasteland and its inner city problems. Meanwhile, one child in every three taking school dinners in recession-hit Sheffield now receives free meals.
It is clearly morally wrong that the costs of the recession should be borne disproportionately by the weakest and most vulnerable groups in our society. They, above all, deserve to be treated generously before money is distributed in tax concessions to the better off. Contrary to the Chancellor's claim yesterday, this is neither a Budget for the family nor a Budget for enterprise.
6.17 pm
Mr. John Loveridge: It is an honour to follow the hon. Member for Sheffield, Attercliffe (Mr. Duffy) because he is respected on both sides of the

275
House, although he will not, I know, expect me to agree with much of what he said this afternoon. None the less, he made a significant point in stressing the difference in the effects of the recession between the north of the country and the south.
There is one significant factor here on which he might like perhaps to reflect in the future. In the north, the ratio of large firms to small firms is greater than in the south. To that extent the Chancellor's aim in directing help to small firms may encourage the founding of them on a greater scale in the north than has been the case in the past. I hope that that will prove helpful.
The hon. Gentleman also spoke of the Chancellor being encouraged from various sources to "give away" money. I do not like that phrase. The Chancellor has no money of his own to give away. All he can do is his best for the country as a whole. In thinking, as the hon. Gentleman did, that the public sector borrowing requirement target of 2·75 per cent. of GDP was too low, we should reflect on the fact that the Chancellor inherited a high external debt in 1979, amounting to about $22 billion. That debt has now been reduced to $12 billion.
It seems to me that my right hon. and learned Friend's Budget has been prudent, purposeful and compassionate within the means that he had at his disposal. There had been the long-term growth of Britain's external debt when he took office. Speaking in the public expenditure debate in January 1974 I spoke of
"the growth of debt which we see ominously looming on the horizon—and not a very distant horizon. I believe that the longterm outlook for Britain is good, but the oil crisis"—
the sharp increases in the price of oil had just occurred—
"has undoubtedly hit our country hard. Our debts abroad could grow to much more than £10,000 million"—
and they did so grow. It was that heavy burden of debt that my right hon. and learned Friend faced in 1979, and I believe that he has been wise to take measures to reduce it.
In the same debate in 1974 I said:
"there is no stable base for world currencies. We may expect, therefore, to suffer more from volatile markets and from crises over our currency than we have done hitherto."—[Official Report, 29 January 1974; Vol. 868, c. 302.]
My right hon. and learned Friend has been wise in those circumstances to reduce the heavy burden of foreign debt. That reduction has placed Britain in a much better position in the present dangerous world of heavy recession and heavy unemployment. He will be able to go to Williamsburg with a strong hand to try to gain an increase in world currency, perhaps an increase as great as that which came about after the second world war with the Bretton Woods system. Some such new system is badly needed and I believe that the reduction in our own levels of debt, above anything else, places my right hon. and learned Friend in a good position to encourage new currency reserves for the world.
So much for the prudence of the Budget and the background to it. It is that prudence which has enabled interest rates and inflation to be reduced.
I said that the Budget was purposeful, and that surely must he seen to be so because of the help that it provides, as did the previous Budget, for industry. We know that industry is in great difficulties, especially manufacturing industry. It is wise, therefore, to give every help possible to that aspect of the economy.
Thirdly, I said that the Budget could be seen to be compassionate. It brings improved tax thresholds,
276
improved child benefit and more help for the aged and for widows. It will produce a measure of true compassion for those who are in need. There are plans for record social service payments in 1983–84 of £34,394 million and health services payments of £14,608 million. These plans, which are contained in Cmnd. 8789, are a significant improvement on anything in the past. I do not understand how anyone can in all fairness accuse the Government of lacking compassion. I salute my right hon. and learned Friend on the prudence, purpose and compassion that is to be found in the Budget.
The consequences of the world recession, which have hit manufacturing sales and employment so hard, have to be met. Fortunately, service industries have been less affected by the recession, but the Chancellor has striven to help new enterprise and to provide the maximum chance for existing small and medium-sized firms to grow within the present world economic climate.
I am grateful to my right hon. and learned friend for the patience that he has shown over the years in listening to me and the officers of the Conservative Back Bench smaller businesses committee. I am grateful also for the way in which he has responded with measures that have been helpful to the small business sector, which we believe to be so important for Britain's recovery and for the creation of jobs. It is a tribute to the interaction between Back Benchers and the Government that so many measures have been introduced.
My own Small Firms Expansion (Inquiry) Bill of January 1981—comparatively early in the life of the Government—listed 50 areas in which Government action was needed. In all those areas some form of Government action has come about. It can be seen that this has been a listening Government led by a listening Prime Minister, Chancellor and other Ministers, many of whom have met the officers of the smaller businesses committee to hear the issues that we wanted to raise. It is not often that a Back Bencher expresses gratitude to members of a Government for listening. I have myself done the contrary, but on this occasion I wish to express appreciation.
More measures will be needed for small businesses, but even before this Budget the Government had taken nearly 100 individual steps helpful to the small firms sector. In January this year, together with my hon. Friends the Members for Luton, East (Mr. Bright), for Bristol, North-West (Mr. Colvin) and for Hertfordshire, South-West (Mr. Page), as well as Dr. Christopher Thompson, we published a policy book entitled "Moving Forward — Small Businesses and the Economy". In that book we proffered many fresh suggestions to the Government to help the small business sector. The response to a number of the suggestions is visible already in the Budget. That is prompt reaction by the Government and hon. Members on both sides of the House will be glad to know of the Government's response to Back Benchers' suggestions.
In the preface of the book I wrote:
"Our economy is dominated by very large firms. So much so that nearly half of the 500 largest firms in the European Economic Community are British based. Large firms will increasingly turn to automation in the future and the workers in them will be replaced by machines. One of the best ways to find these people new jobs is by expanding the small business sector. This book sets out to show how this can be achieved. The Government has done much to stimulate the founding of new firms but more needs to be done, particularly to enable existing small firms to expand and develop new products. I do not think it an exaggeration to believe that small and medium firms can

277
provide at least one millon new jobs that could not otherwise be found. If I am right then it is worth the Government concentrating a great deal of effort on the expansion of this sector."
The overall effect of all the measures so far taken for small firms must bring that hope nearer to reality. Of course we would like to see more done—who would not?—but I cannot accept the view of the right hon. Member for Stepney and Poplar (Mr. Shore) that the measures contained in the Budget are merely "trivial" in their effect. It is not the greater "spending" he wanted that matters. The factor that really matters is earning, not spending, and somehow we must try, those of us who believe that small and medium-sized business can greatly help the economy, to carry our conviction not only to Conservative Members but to Opposition Members as well. We believe that it is in the small business sector that new jobs are to be made. They will come from increasing earnings, not from excess government spending. The Government have taken steps to achieve that.
Mr. Orme: I have been following the hon. Gentleman's argument carefully. My hon. Friends and I are concerned that both small and large businesses prosper, because they are the basis of the economy. How does the hon. Gentleman account for the record number of closures that have taken place? Bankruptcies are running at about 35 a day. What does the hon. Gentleman say about that?
Mr. Loveridge: Of course it is sad that there should be a high level of bankruptcies and that the whole world economy should be in recession, with perhaps 30 million unemployed. With such a widespread recession it is inevitable that there must be some closures. The miracle is that there are not even more. But is it not a good thing for the Chancellor to address himself to the fact that we need to encourage the expansion of existing small firms and the founding of new ones? The establishment of new firms has been of substantial benefit to the nation. Many new firms will be founded and there will be much expansion by existing firms because of the measures that the Chancellor has announced in this Budget.
The exchange of ideas between Back Benchers and Government is important, not just in terms of a Conservative Government. The exchange of ideas across the Floor of the House is also to be encouraged. The loan guarantee scheme is an example. When I and the officers of the smaller businesses committee first put forward the view that this country should have a loan guarantee scheme similar to those abroad, we were met, both in official and in banking circles, with a courteous scepticism, but scepticism none the less. It is therefore a great satisfaction that the Government are raising the ceiling for this scheme to £600 million.
I should have liked to see a substantial increase in the amount available to individual firms as well, but the £600 million is no small addition to the loan capacity of our banking sector for small firms. I congratulate the Government on this bold response to our requests for such a scheme to help bridge the "equity gap". Care is needed to ensure that the lending is wise and that there are no unsustainable losses. The scheme helps comparatively small firms most.
We remain concerned that there is an equity gap for medium-sized firms. The small business expansion
278
scheme, under which an individual may put up to £40,000 a year into a single business, provides the opportunity to raise substantial fresh capital for medium-sized businesses. They will also be able to take advantage of the loan guarantee scheme and normal banking and institutional facilities.
The plight of the medium-sized manufacturing firm is serious. The census of production shows that in 1963, 4,100 firms in manufacturing industry had over 200 employees. By 1979 the number had fallen to 2,900. The future of the medium-sized manufacturing firm was clearly under threat then. Much needs to be done to revive these firms.
Older firms that had built up capital assets over the years were threatened with making forced sales of assets to pay capital transfer tax and other capital taxes on death. New firms found difficulties in raising capital without surrendering a large proportion of their equity. So the horizons for both old medium-sized forms and new fast-growing firms in manufacturing were limited. The newer firms were sometimes stuck because, although they knew how to expand, they could not safely raise the capital, while the older firms were frightened to expand because of the threat of forced sales on death.
The improvements in capital taxation which have been made by the Government, including additional indexed and other relief in the Budget, are therefore to be welcomed. More still needs to be done to remove the threat from a succeeding generation of owners. If there were a rolling provision for relief, it might be possible to avoid the risk of firms having to close, almost by accident because of a death.
The total additional lending and investment now available, over and above that normally to be found from banks and institutions, will do much to fill the gap that has been noted for so long. It was noted in 1931 by the Macmillan committee and again by the inquiries into small firms and financial institutions chaired by the right hon. Member for Huyton (Sir H. Wilson) in 1979 and 1980. The Government are to be congratulated on doing so much to bridge the gap.
The profit-sharing options, the small industrial workshop scheme, the small engineering firms investment scheme which is to be re-opened, the encouragement for employee buy-outs, enterprise zone, free ports and substantial cuts in the national insurance surcharge together provide a chance for the creative and enterprising that has not been equalled for decades. The recognition by the Government that the small business sector can play a large part in Britain's economic recovery is welcome.
I am glad too that the smallest firms have not been neglected. The earlier relief under 714 certificates and the enterprise allowance scheme give the man who is on his beam ends and who is stuck without a job the chance to enter into the main stream of purpose, on however small a scale. That surely is a joy for all of us.
I am sorry that the Government were not able to do more to bring in a graduated system of corporation tax. They have done much and what they have done is a great improvement. None the less, there is still a hump in the tax to be paid when a firm grows from small to medium to large. Because of the way the relief works, there is still an excess payment over and above the standard 52 per cent. to be paid for a large range of medium-sized firms. Anything that discourages the growth of business is to be abhorred; that is a strong word but it is the correct one.

279
The Government have reduced the hump from a corporation tax rate of 60 per cent. for the medium-sized firm to about 55 per cent. So they have listened again, particularly since last year when the hump was up at 66 per cent.
The Government should recognise the resentment of the smallest businesses against form filling and regulations. One can sympathise strongly with the views expressed in last night's adjournment debate by my hon. Friend the Member for Banff (Mr. Myles).
There is a need to increase high technology for greater output and productivity. There is also a need for more small and medium firms to provide jobs. This Budget will help both. It is a fair Budget in its efforts to distribute what can be distributed as widely and fairly as possible, while still providing an incentive for growth.
Some measures for the future which we would have liked to see were not in the Budget. I hope that the Government will give thought to them for the future. There is a case for a further study of capital taxes, both capital transfer tax and capital gains tax, to see whether they are restricting the growth of business. The loan guarantee scheme should not only be so buoyant in the amount available under it—the £600 million that was so welcome—but there should also be the possibility of increasing the ceiling under the scheme for individual firms.
We should like to have seen enterprise bonds in some form. Small firms could buy them in an indexed form to save up out of profits, say for three years, in order to buy new machinery in the future. They should not have to turn to lease-lend arrangements to obtain the benefit of the present tax advantages for expansion.
We should like to have seen some relief from rates for very small businesses. Many businesses—especially in northern towns—are under severe pressure from rates, which, in some cases, are forcing them towards closure. I hope that the Government will consider a measure of relief for such little businesses.
We should like to have seen even more attention given to the training of business men. Many of them do not know how to deal with their accounts. They do not understand such things as cash flow or how to present their cash outlook to banks when they go to them. We should have liked to see an extension of formal training, even if only for a few days, to try to bring a greater understanding to a wider range of small business men who need it to prevent them from getting into trouble.
One aspect that the Government should consider—it is a difficult area—is the transfer of pension rights. It is often difficult for a man who has done well in a large firm, who is perhaps highly qualified, to transfer to start in a small firm, because of the restricted amounts that he can get back from the money that has gone in to his pension fund. I can see that there are grave difficulties for the Government in this, but I hope that they will examine the matter closely to see whether an improvement can be made to ensure that such educated and able men can move into the small business sector. Many are now discouraged from doing so.
One other aspect is that we should have liked the Government to take positive measures, as the American Government do, to ensure that small firms get a fair share of Government and public authority orders. I hope also that the splendid small business expansion scheme will not be spoilt by the complexity of the rules applied to it and that as far as possible they can be kept simple.
280
I am grateful to the Chancellor on behalf of the whole small business sector. That sector can create jobs on a vast scale. The Government have now recognised this and are taking action to make it possible.
6.44 pm
Mr. David Winnick: The most immediate questions that must be asked about the Budget are simply these: will the Budget do anything genuinely to reduce mass unemployment? Will we see an end to the continuing and endless massive redundances and plant closures, such as in the west midlands in the past three or four years? The answer is no. There is, as is to be expected from the Government, further fiddling with the unemployment figures for cosmetic reasons. On the Government's own estimates of public expenditure it is likely that unemployment will rise in the next financial year by 280,000. That excludes school leavers. Let there be no doubt in the House about what that mears in terms of human misery, poverty and all the other things that go with unemployment.
The Opposition are pleased that the 5 per cent. abatement of unemployment benefit is to be restored. We have requested and demanded that from the beginning. It was elementary justice that it should be done. The Government give the impression that if they could have got away with it they would not have restored it at all. Nevertheless, it is to be done in November. There will be no retrospection, so the unemployed who have been subject to what is in effect double taxation will have lost for 16 months by November. That is wrong.
The earnings-related benefit introduced by a Labour Government, who did at least do something to cushion the effects of redundancy and so on, is not being brought back. Tax rebates will still not be paid to the jobless until the end of the financial year. That was done for all sorts of reasons, perhaps because of industrial disputes not involving the unemployed, and no doubt for administrative reasons, savings on expenditure and so on. However, I consider it to be unjust. Surely when one becomes unemployed one wants to be able to cash in as many assets as possible, for the most obvious reasons. After all, at the end of the day that money is owed to one by the state.
I am also pleased that the ceiling for receiving supplementary benefit has been raised from £2,500 to £3,000. That is only right and proper. The Government have been asked to do that for some time. My view remains that the new ceiling is too low. If one takes into consideration redundancy payments and all one's savings, sometimes accumulated over a lifetime's work, one realises that the proposed sum remains too low. That is all the more so when one bears in mind that so many of the people adversely affected are in their late 40s or 50s, so the chances of their getting another job become increasingly remote. For all those reasons, if one says that if people have a certain sum which, by present-day standards, is not high, they cannot receive supplementary benefit, that means that someone in his late 50s whose chances of getting another job are not very good has to use up many of his savings, which were probably for his retirement. It may be difficult for the Financial Secretary and others in the Conservative party with substantial means to understand that. I am talking about people who have no great capital, who have saved up over their lifetime and want to protect those small savings.

281
There is no doubt that those on the lowest incomes have suffered the most from the increase in income tax and national insurance contributions since this Administration took office. We all remember the Government's promise that they would reduce taxation. Much was made of it during the last election campaign. However, much has to be made of the fact that those on lower and average incomes have lost as a result of the tax measures taken by the Government. A married man, with two children under 11, on half average earnings paid 12·5 per cent. in income tax and national insurance contributions in 1978–79. He now pays 18·6 per cent. Many people are on three quarters of average earnings. For them the figures are 20·8 and 24·7 per cent. Those on average earnings paid 25·2 per cent. in income tax and national insurance contributions in the last year that Labour was in office and now they pay 28 per cent. There is not much evidence there of a reduction in income tax as promised by the Conservative party when it was campaigning for office.
It would not be true to say that that increase in the tax burden applies to all of the community. After all, we are dealing with a Right-wing Conservative Government. Let us consider a married man, with two children under 11, who is on five times average earnings. He paid 49·7 per cent. in income tax and national insurance contributions in 1978–79. He now pays 44·3 per cent. That is not a bad reduction for someone on five times average earnings.
The hon. Member for Winchester (Mr. Browne) told us that he was an adviser to one or two banks. Perhaps it is three or four. One of these days we may find out how much the hon. Gentleman earns. He is always keen to lecture us about trade unions and workers.
A person earning seven times the national average paid 58·9 per cent. in income tax and national insurance contributions in 1978–79. He now pays 48·7 per cent. That is no doubt a welcome reduction for those earning very substantial sums. It should be compared with a person on one half or three quarters of average earnings.
One must take into account also the increase in indirect taxation, such as VAT, which was almost doubled from the moment that the Government took office, the Government's deliberate policy of increasing gas prices by 10 per cent. in real terms each year for three years and the exorbitant rent increases that council tenants have had to face for the past three years. Those with average or below average incomes have suffered a great deal as a result of the Government's policies.
The Government have, however, looked after their own. While some limited help will be given in income tax and child benefit, the forthcoming national insurance contribution increase will affect all those in employment. No one should be surprised that a Tory Government look after their own. One of the reasons for the Tories being in office is to ensure that the rich and prosperous do well at the expense of the rest of the community. One would not expect anything else from a Conservative Government, bearing in mind the nature of this Administration.
My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) made some observations about the pension increase. What I and I am sure my right hon. and hon. Friends and pensioners would like to know is the increase that retired people will actually receive in November. What will the figure be? It seems that the clawback will be institutionalised in the new arrangement
282
announced yesterday by the Chancellor. All the signs are that retired people will receive an increase of about 4 per cent.
The country needs a Budget that will reverse the tide of mass unemployment and deflation. Ministers are sensitive to the accusation that their economic policies have been responsible for the increase in unemployment during the past three to four years. When I made similar remarks during the debate on the Queen's Speech I was taken to task by the Leader of the House, who quoted what I said. He was keen to deny my charge. I repeat it. Many of the economic policies that have been operated since May 1979 have undoubtedly contributed to the increase in unemployment. No one who studies the facts can believe the Government when they pretend otherwise and say that all the unemployment is due to the world recession and external factors.
Mr. Ridley: Will the hon. Gentleman comment upon the fact that policies similar to those of his party have been practised in France, where there has been the steepest rise in unemployment of any European country?
Mr. Winnick: I do not believe that unemployment in France has reached the level that it has in Great Britain. I shall compare what has happened here with what has happened in other countries.
Manufacturing output in the United Kingdom fell 19·5 per cent. between May 1979 and December 1982. The average fall in manufacturing output in OECD countries was only 5 per cent. during the same period. Can one really believe that a fall of nearly 20 per cent. in manufacturing output, which is far greater than that in the OECD countries, is not due to Government policy? Will the Financial Secretary deny that? The 1982 index of manufacturing output showed the lowest annual average since 1967, and clearly it was the result of the Government's deflationary policies.
The Opposition believe that there must be a great injection of demand in the economy to overcome the deflation to which I have referred. The Government must increase public expenditure. We make no apology for saying that. Much more needs to be done than the tinkering mentioned by the right hon. and learned Gentleman the Chancellor of the Exchequer in his Budget statement yesterday.
I take an interest in the construction industry. The Chancellor mentioned one or two proposals. They will add up to some £60 million in 1983–84. That will not overcome the problems in the industry. I give the House an example that has been given before. The amount of council house building is now the smallest since the 1920s. In my borough there is a long waiting list of people who desperately need council accommodation. I am sure that it is the same in many other places. I have been trying to get over the point in housing debates, in the Select Committee on the Environment, of which I am a member, and elsewhere that the only way in which many people who cannot afford a mortgage will resolve their housing problem is by renting accommodation from the local authority. They will not resolve their problem through the privately rented sector.
I am in favour of owner-occupation. A Labour Government introduced the option mortgage scheme. That scheme helped many people who otherwise would have found difficulty in becoming owner-occupiers. Although

283
I want to see an injection of demand in the construction industry, I am not in favour of increasing the tax relief on mortgages to £30,000. I do not believe that it is necessary. I believe that that money would he better spent assisting in the provision of the type of accommodation to which I have referred.
I am in favour, as is my party, of continued assistance to people who are buying their own houses. There is a strong case for continuing tax relief on mortgages, but one must also remember the way in which subsidies for local authority housing have been drastically reduced under this Government. If one compares the figures for tax relief on mortgages with the subsidies received by council tenants, they show that council tenants receive a lower subsidy, which is being virtually phased out. That is why council tenants' rent increases have been so substantial. They have been more than double the increase in retail prices during the period the Government have been in office.
The Government have given up the objective of reaching full or nearly full employment. This is the first Government in the post-war period to reject the objective of full employment. They want people, including the unemployed, to believe that there is no alternative to the present policies. That is much the same as the line advocated in the 1930s; then the Labour party and some Conservative Members, such as Harold Macmillan in his book "The Middle Way" and in speeches, argued that there was an alternative to mass unemployment and deflation. It was said by Tory Ministers—it was the Tory orthodox line at the time—that they were quite wrong. The same thing happens now, when the arguments and speeches of the right hon. Member for Chesham and Amersham (Sir I. Gilmour), whose book has just been published, are dismissed.
The Government's line is simple and clear. They hope that people will believe that there is no alternative. The Labour party has much to do to convince the country that there are positive alternatives. We have a lot to do to persuade our fellow countrymen that there is no reason why there should be more than 3 million, probably 4 million, unemployed. It is a lie to suggest that there is no way of organising the economy other than on the basis of what has been done in the last four years.
I admit straight away that the Labour party has not yet succeeded. There may be many reasons. The fact that most newspapers are hardly pro-Labour does not help our case. We have yet to convince and persuade the country of the alternatives.
According to a poll in The Economist two or three months ago, many unemployed people said no when asked whether they blamed the Government for the level of unemployment. I was not particularly surprised. No doubt many Conservative Members consider that a victory, but I consider it a defeat. The unemployed should understand that there is no reason why they should be on the dole queue. There is no reason why people in their 50s must despair at the thought of never working again. It is bad enough for school leavers who go straight on to the dole queue, but think of what it must mean to a man of 56 or 57 who finds himself redundant. What chance is there of his finding a job today in the west midlands? What realistic possibility is there of finding employment? Such people are obviously full of despair. In many cases they have the humiliating feeling that it is somehow their fault, but it is
284
nothing of the kind. We must persuade them that it is not their fault, but, rather, that much of the difficulty springs from the philosophy and practice of this Government.
Labour's job is to give hope to our people. I want to see a reversal in the tide of mass unemployment. That will be the first priority for a Labour Government. We must alleviate the despair and poverty in which many people now live. I receive letters from constituents explaining the limited incomes on which they live and asking whether by representation to the DHSS they might receive more. They itemise their expenditure and how much they receive. That is the sort of life now experienced by so many of our fellow countrymen who do not act as advisers to two or three banks and have no large amount of capital, inherited or otherwise. That is the sort of life now experienced by many of the people whom Labour Members represent.
Until the Government leave office, we shall not see any change. There will be the continued industrial devastation and sharp economic decline from which the country has suffered in the last four years. The most essential need of all in political terms is quite clear. We must remove the Government from office and give our people hope through a return to policies that will prevent unemployment of 3 million or 4 million.
7.4 pm
Mr. Anthony Beaumont-Dark: The hon. Member for Walsall, North (Mr. Winnick) was right to ask why, when we have well over 3 million unemployed and when there are considerable problems—I come from the west midlands and no one knows that better than I—the Labour party does not seem to pick up that disaffection. The panaceas that it offers seem on the surface to be enviable. It promises to spend £10 billion or £15 billion of other people's money. It vies with the TUC in upping the ante almost daily. Why then, according to the latest opinion polls, do people put the Labour party third?
Yesterday, the Leader of the Opposition said that he would like the Government swept from office so that a wonderful, resurgent Socialist party could take over, run the country as it should be run and get unemployment down to 1 million. Why is the Labour party not believed by the man in the street? We do not need to ram home some political philosophy in the hope that people will believe it. Successive Governments since the war have promised to spend this and that as a way of protecting everyone against the ravages of inflation, as if the money grew on a banyan tree and was given out each morning without anyone having to work for it.
This and the previous generation have seen those promises fail and the tree wither. People are willing to put the Government in the highest ever position in the opinion polls because they believe that they are pursuing an honest policy which in the end will give true and solid growth.
There are many good things in the Budget, but there is also much to do. I was encouraged to hear my right hon. and learned Friend the Chancellor mention the west midlands and its problems twice. The Budget contains some measures—£100 million here and £30 million there—that will help. I am delighted that my right hon. and learned Friend plans to come to Birmingham in April to see the situation for himself and to discuss with business men the problems that we face. It is not yet fully realised

285
how grievously industry has suffered in an area such as the west midlands, which is the bedrock of manufacturing industry.
In the 1920s, the west midlands had the glamour industries, such as the motor industry, and the white goods industry. At that time unemployment was like a forest fire surrounding the midlands, but it was only 2 per cent. in the area. Now, through the policies of successive Governments, the area is stuck with the mature industries, such as the motor industry and the declining industries.
People need only to see the problems for themselves to realise that it is not carping to suggest that there is much to do, not just for small businesses but for large businesses. It is fashionable and proper to try to breed new growth industries, but it must be remembered that the large businesses employ many people, and their problems must be attended to as well.
I should like to have seen the national insurance surcharge finally go. It should never have been introduced. It was a tax on exports rather than imports. If there is to be an autumn Budget—I hope that it will mean more to give away—I should like the NIS finally to go.
For some time I have peddled the idea of rate relief for manufacturing industry. That is a fair suggestion. If it is good enough for farmers, who are among the most prosperous people in the land as well as being in the most prosperous industry, surely an ailing industry has a right to a share of that relief. From my experience in local government, I believe that it is possible for capital expenditure to be incurred with non-revenue implications. If so, that ought to be encouraged. That is investment, not spending or frittering money away.
There are many good strategies in the Budget. Growth industries for the future often start with small beginnings and enormous risks. In the Budget, the Government are encouraging new businesses. Those who do not take advantage of the incentives, clearly do not wish to start a business or take any risk whatsoever.
The business start-up scheme is most imaginative and sensible. It is splendid that it is to be extended to expansion schemes, because existing businesses have moaned, quite rightly, that they are unable to get tax relief. I have been involved in a scheme to set up a new business—Birmingham Executive Airways—at Birmingham airport. The start-up scheme was useful. The new business it will take from British Airways some routes that it cannot use because its aeroplanes are too big, and it will provide 46 jobs in the west midlands. If every firm could create a few jobs, unemployment would fall. The new business will help Scotland, because two new Jetstream aircraft costing £3 million will be bought from British Aerospace at Prestwick, and that will create jobs in Prestwick.
The business start-up scheme has been described as small, but the ramifications throughout the country can be considerable. I hope that more people will use that facility. Any help that can be given to west midlands engineering firms to re-eqiup themselves will be of tremendous importance, and I hope that the west midlands will get its proper share of any advantages that are offered. Unless the west midlands is rebuilt, any hope of rebuilding industry in this country will be virtually lost.
Yesterday my right hon. and learned Friend the Chancellor of the Exchequer mentioned free ports. I hope
286
that the concept of free ports is not docks by the sea. Free ports are of tremendous importance. They could do much, mainly psychologically, for the west midlands. They could give the west midlands a name for being ready and willing to go, because it certainly is.
The Budget is a step in the right direction. I said on another occasion that the industries of the west midlands had their backs not against the wall but against the precipice. Industry has come perilously close to being in that terminal position. From the talks I have had with business men, some of whom had their backs against the precipice, the view appears to be that an upturn is beginning. Industry is in a convalescent period. If the Goverment had given too much too soon, the distortions would have been disastrous, and a big increase in imports would have occurred. There are steps in the Budget that are in the right direction for encouraging industry.
In the past we have had two Budgets in one year. That does not mean that mistakes were made. If the Government's money targets are achieved and they have money in hand towards the end of this year, I hope that they will come forward with more measures to help industry. That would be the right time, because industry is willing to grow. It has made itself more efficient. This Budget will give industry the confidence to take risks that will make it more prosperous. The good news is coming. In the last Budget the country had further hard things to bear. The Government have made a good start and should press on to help not individuals, but companies, which, in their turn, will create real jobs.
7.16 pm
Mr. Martin J. O'Neill: I remained in the Chamber with some reluctance when speeches of a national nature were being made and I was relieved when I heard the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) speak of the problems of the west midlands. When listening to the Chancellor yesterday, I gained the impression that the west midlands was the only part of the country in need of special assistance.
I should like to discuss the Scotch whisky industry, which is in many respects at the mercy of the Chancellor. That industry, which used to employ about 27,000 people, exists in a variety of forms. It employs small groups of people in distilleries in remote parts of Scotland. Therefore it fulfills not only an employment function but an important social function, as it is the only source of industrial activity within those areas. The industry sustains some of the older crafts, one of which is cooperage, which is dying out as a trade throughout the country.
The hon. Member for Upminster (Mr. Loveridge) said yesterday that we had a listening Government. Ministers have been willing to grant audiences to visiting groups from Scotland. The Scottish Whisky Association, the Scottish Trades Union Congress whisky committee and the central region local authority made representations to Ministers in the Treasury urging the smallest possible rise in duty, and if possible no rise at all. I heard with some disappointment that there was to be an increase of 25p on a bottle of whisky. Although an increase of 25p on a bottle works out at 1p a nip, rarely is only 1p passed on to the consumer by the bar owners. Invariably it is an excuse for a bigger increase. There will be a further reduction in the consumption of Scotch whisky and a further erosion of the home base of this vital industry.

287
In the past three Budgets, increases in the price of whisky have amounted to £1.18 p. Of the price of a bottle of Scotch, £1.43p can be attributed to the activities of this Government. Before the Budget, duty accounted for 80 per cent. of the price of a bottle of whisky, 49 per cent. of the price of a bottle of wine and 38 per cent. of the cost of a pint of beer.
An argument can be advanced for some measure of parity between the various drinks. On this occassion whisky has not been treated more severely than any other drink in terms of the alcoholic content, but at a time when the industry is in severe difficulties and when massive redundancies have been announced in recent weeks and months, it had hoped that the Government would be prepared to do more. The malt and grain distilleries are operating at about 38 per cent. of capacity. The blending and bottling process, which takes place three or five years after the whisky has been laid down, is operating at 63 per cent. of capacity. In the long term there will be an even greater reduction in blending and bottling, with the consequent effect on employment in those areas.
The labour force in the Scotch whisky industry, of about 27,000 in 1979, has now fallen to about 21,000. The Scotch Whisky Association said in December 1982 that its survey had shown a loss of about 5,770 jobs over a three-year period. Since then, in the first three months of this year, about 1,000 jobs have been lost in the industry. In my constituency, the largest distillery in western Europe, the Carsbridge distillery in Alloa, has shed about 250 jobs. It is a grain distillery and is different from the small malt distilleries that attract some public attention and sympathy. Some people might say that the method of production of grain whisky is akin to that in a simple chemical works. However, the product still has to be laid down for three or five years, and grain whisky produces a drink in the best blends that is comparable with the best of the malts for those who have a predilection for that type of whisky.
The problem is twofold. I see that the hon. Member for Moray and Nairn (Mr. Pollock) is in the Chamber. Following the announcement of redundancies, he and I participated in a radio programme in which we discussed the common problems of the industry and the fact that the impact that the industry had on a small village was similar to that on a medium-sized town such as Alloa, where the Carsbridge distillery is to be closed. Thus, no part of Scotland can be left untouched by such a process of erosion and decline in the Scotch whisky industry.
The recession has led to a change in expectations. In 1978 it was estimated that the annual increase from 1978 to 1990 would be about 4·4 per cent. However, the figures have had to be revised and last years demand fell by about 2 per cent. Stocks are now in excess of demand and that, in turn, leads to cuts in distillation. Thus, there has been no increase in sales, a reduction in stocks and a cut in distillation. The whisky distillers must now look for other ways of selling their product.
Normally, the product is sold in bottles that are exported, or is sold in bulk. There is a debate about the desirability of selling whisky in bulk, although I do not propose to go into it now. However, as bottle sales of Scotch have declined, so the bulk side of the industry has increased. In 1979, 184·6 million bottles were exported. In 1980 the figure was 170·9 million and in 1982 it was 163·2 million. However, the bulk export of blended whisky has resulted in an increase from the 1979 figure of
288
49·5 million bottle equivalents to a 1982 figure of 61·3 million bottle equivalents. If the value in 1982 of a bottle that is exported is compared with the bulk export of an equivalent bottle, the bottle price is £4·50, whereas the bulk price for a bottle is £1·21. That means that it becomes very attractive for the foreign bottlers of bulk whisky to aim for the cheaper end of the market. The inferior quality whiskies then start getting a hold of the markets abroad, and that results in the further undermining of the quality end of the export market.
I am talking about the type of industry that the Government's industrial advisers tell us we should support. Often we are talking not just about the Distillers Company Ltd. or about large multinationals such as Lonrho, but about small firms that are operating on a narrow base, with few employees, producing high-quality products whose integrity must be protected. The United Kingdom's tax regime is crucial to the protection of that integrity. However, the Budget has not done as much as it could have done to help those firms.
The Scotch whisky industry is under tremendous attack from foreign firms that use malt whisky that is exported, for example, to Japan, and then mixed with the local product to produce something like whisky. For example, the Santory brand enjoys the patronage of a member of the Thatcher family. The Prime Minister's son apparently appears in advertisements in Japan to promote that product. A parent cannot be responsible for what her son does for a living in the middle of an economic holocaust, but it does not behove a Government who stress economic nationalism, the quality of British products and the competitiveness of their price to do so when a member of that family is undermining the efforts of those who are trying hard to protect and support what has been for many years one of our major dollar earners. We might have hoped that the industry would also be a yen earner as the Japanese come around to enjoying our national drink.
The problem is complicated, and it is not simply a matter of saying that a penny on a nip is not very much and that even those unemployed who like a drink can still afford to pay it. The problem is more complex than that. Bar owners the world over will use the opportunity of a 1p increase to enlarge their profits. In addition, our base within the United Kingdom is being undermined and the Government are ignoring the representations by all sides of the whisky industry in Scotland. They are also ignoring the representations of local authorities in Scotland that have to face the reduction in rate revenue. Indeed, the hon. Member for Birmingham, Selly Oak thought that it might be desirable for rate relief to be extended to industrial companies. At present, many of the local authorities in Scotland find their rate base is being severely eroded by the closure of whisky distilleries. If they are not in production and are closed, they do not pay rates and so those local authorities have less revenue with which to fund the services for which they are responsible.
I make no apology for introducing a Scottish note into an area of debate that may be narrow and restricted. The industry always looks to the Chancellor of the Exchequer for assistance. I recognise that some assistance has been given in the past 12 months by the deferment of duty, but it has not been enough to stem the flow of redundancies and closures affecting large multinational companies such as the Distillers Company Ltd. as well as the small privately owned distilleries that contribute so much to the economic life and well-being of the highlands of Scotland.

289
I ask the Government again to consider providing other forms of help to deal with the problems of what for many years has been one of our biggest export earners and one of the industries that have contributed to our balance of payments in a way that some of our traditional industries have never matched.
When we talk about whisky, we are not just talking about people in distilleries or bonded warehouses. We are talking about the bottling industry and the packaging industry, both of which at present are having considerable difficulty in keeping alive. I say that in spite of the fact that in my constituency we have one of the most modern and efficient bottling plants in Europe. I know that there have been 300 or 400 redundancies since 1979 in that plant alone. We are talking about help for an industry which has contributed to the British economy, and which in many respects has reduced the burden on the taxpayer, at a time when one would have hoped that the Government would be more sympathetic to the pleas of trade unions, the management, and those of us who are consumers.
7.30 pm
Mr. Peter Hordern: I agree with the hon. Member for Clackmannan and East Stirlingshire (Mr. O'Neill) about the difficulties that the Scotch whisky industry is going through at present. I sympathise with him when he says that whisky duty should not be increased. I believe that it would have been preferable to increase tobacco duty somewhat more, particularly as tobacco companies are doing quite well. Moreover, if the duty on spirits—whisky in particular—were not so high, it is possible that the duty on Scotch whisky charged by the Japanese would not be so high. That is one way in which the Japanese keep our products out.
When Harold Macmillan was Chancellor of the Exchequer—many years ago—he said that the difficulty about writing Budgets was that one had to use last year's Bradshaw. Nowadays the Chancellor has to use international timetables, not knowing whether the aircraft will fly at all, and bear in mind the fact that timetables are always shifting. He has to take into account not only what is happening here, but what is likely to happen in America, and the price of oil now has a major effect upon our fortunes. A recovery in world trade and a real improvement in production and growth is unlikely unless the United States is involved. Although the European Community accounts for a much larger share of world trade than it did, it is surely inconceivable that recovery, let alone growth, is possible unless the tide of recession turns in the United States. Our own fortunes as a trading nation depend on a resumption of growth in world trade, and in America in particular.
There seem to be some signs of recovery in the United States at present. We must hope so. Certainly the pound is lower against the dollar than it has been for many years, and the opportunity for our exporters lies ready to hand. It is strange that the fall in the value of the pound against the dollar should have come at a time when we are registering such substantial surpluses on our balance of payments, without taking account of our oil surplus, whereas the Americans are now showing a substantial deficit on their trading and current accounts.
290
The high level of real interest rates in America must be one reason for that apparent disparity, coupled perhaps with what has come to be known as the Shore factor. If we ask ourselves why interest rates are so high in America—they are important, because they affect the structure of interest rates everywhere—the answer must be that the public sector deficit in America is high—over 7 per cent.—and has been rising for many years. If we ask ourselves why the deficit has risen, we are bound to acknowledge the huge and growing cost of expenditure on defence that America has undertaken on behalf of NATO. No Conservative Member resents that expenditure.
However, if the Americans are prepared to shoulder the burden of defence on behalf of the Western Alliance, and if the level of interest rates is set by that obligation, it is as well to see which country has a favourable balance of payments and could best help to alleviate that burden. There is no question but that the finger points unerringly to Japan. Japan has a massive surplus on its balance of payments account, and the proportion of Japan's GNP taken up by public expenditure at 4·7 per cent. is much lower than in the United States at 7·1 per cent. As Japan unquestionably benefits as much as any of us from the protection of the United States, it is to Japan that we must look to put it right.
The Americans are right to complain about the effects of the European Community's common agricultural policy. The more one hears about that policy, the more wasteful and damaging it appears to be. After all, Mr. Tugendhat, the EC Commissioner who is responsible for the European budget, was quoted last week as saying:
"If the Commission's proposal for a 5·5 per cent. increase in farm prices was accepted, this would lead to a rise in spending next year which would be double that of the increase in available own resources."
Where that leaves us in relation to our claim for more money from the European Commission I do not know, but the signs are not good. It occurs to me that if we are to expect a genuine revival in demand in America, we must allow it access to our food markets, particularly as we cannot afford to continue financing the CAP on the present scale.
If we consider our own prospects, clearly much depends on the price of oil and a level of production set far above that which the market is prepared to pay can last. It is impossible for the Chancellor to do his sums accurately. It must be like trying to ride on a switchback railway without the benefit of rails. His only recourse, it seems to me, is to keep a tight course. Certainly, that has been done in the proportion of GNP that is taken up by the borrowing requirement. However, in one respect it is not as tight as it was a year ago. I refer to the contingency reserve, which, this time a year ago, was £2·5 billion. Now it is a little over £1,000 million. I see no reason why the prospects for this year are so much more certain than they were a year ago. I should have thought that the contingency reserve was rather low.
I come now to the Budget. I welcome the Government's achievement in reducing inflation to its present 5 per cent. I do not doubt that this achievement has been made possible, if not by closely controlling the money supply all the time—there have been many deviations from a close and narrow path—at least by reducing the Government's borrowing as a proportion of GDP to the 3½ per cent.

291
where they said that it would be. At any rate, the first objective that the Government set themselves, to reduce inflation, has been achieved.
However, I do not think that the Government will rest content with that. Certainly it is clear from the expenditure that the Government propose on training and retraining and on the community development programme for the long-term unemployed, that unemployment is now the main priority. That reducing inflation is a necessary condition of returning to fuller employment is certain. We could not have carried on printing money, subsidising nationalised industries' prices, and trying artificially to keep interest rates low, as Governments used to do, without permanently damaging our economy. That lesson has been well and truly learnt.
Inflation has been brought down, productivity is at its best level for some years, and there are signs that an industrial recovery is about to take place. Nevertheless, unemployment is the most depressing feature of our economy and society. However much the Government may do in their training programmes and in their provision of special programmes for the long-term unemployed, we know that those are only palliatives that do not address the main problem of our times—how to find a way in which the productive and human resources of many people that are at present laid waste can be used.
No one can claim that one Budget can change the prospects for employment on its own, but it can change the climate in which business and industry have to work. We should recognise that industry, conscious of the enormous sacrifice that it has had to make to meet a much reduced demand, sees the public sector still growing, and growing in a way that is insensitive to the needs of industry. Only yesterday the figures came out again showing that the National Health Service has increased its numbers, as it has done every year since the war. They were up by another 23,000 last year alone, making 90,000 since the Government were elected. One must contrast that growth, and the growth in the number of administrators and technicians, with the serious losses that industry has experienced.
There have been profound changes for the better in the control of public expenditure—notably in the cash limits regime—but there is still no proper distinction between public capital expenditure and current expenditure. It may be that, for the purpose of raising revenue or borrowing, there is no effective difference between the two for the Government. But for the private sector there is a profound difference between Government revenue expenditure and capital expenditure. The first is properly a form of redistribution of income, whereas the second has a material impact on the order books of companies, and it is the second that industry and business wish to see grow.
It would be helpful if this distinction were set out clearly in the national accounts. The House will remember the old distinction that used to be drawn when revenue was placed alongside expenditure and below the line capital expenditure was set against borrowing. If we were to make a distinction, we would find that total current expenditure would be £128·1 billion for 1983–84. On the other hand, to meet this, the total revenue is expected to be about £134 billion, so there is a surplus to carry forward to capital expenditure of £6·2 billion. The total capital expenditure required is £11·25 billion, and thus we arrive at a borrowing requirement of £5 billion, to which needs to be
292
added capital grants to the private sector and the contingency allowance, making the public sector borrowing requirement £8 billion.
Total capital expenditure is expected to be 12 per cent. higher than in 1982–83, but that is only because £1 billion was underspent last year by local authorities. Although the total outturn of public expenditure for 1982–83 was 43·5 per cent. of GDP, we should remember that this proportion was only 40·5 per cent. in 1979–80. Even more important is the fact that we now spend less than 10 per cent. of total Government expenditure on capital investment compared with 20 per cent. 10 years ago. That figure alone explains why the construction industry is in such poor shape. That is why the national accounts need to be redrawn.
Furthermore, it would also be helpful to Government Departments to make that essential distinction between current and capital expenditure. Some £2 billion was raised by the sale of council houses last year, but the land register, which the Department of the Environment has available to it, shows a return of 100,000 acres of land which has already been earmarked for development. That land is owned either by the local authorities or by the nationalised industries. We should also notice that the local authorities have at present borrowed £5,000 million from the banks for their general purposes. Can we seriously imagine that any business or industry at present would borrow money from the banks in order to hold development land surplus to requirements?
The Government have the power to instruct local authorities and the nationalised industries to dispose of development land if it has not been brought into use within the next two years. There is not a single step that would do more to put the construction industry to work than to instruct the local authorities to dispose of that land as soon as possible. At present those authorities are holding on to their land in the hope that a better price might be obtained if inflation does its work. As many of them brought their land during the property boom of 1972–73, it is tantamount to saying that the country should still be paying for the excesses of that time. I hope that local authorities will be instructed to dispose of their land and that from that source the Government will receive an extra £1 billion each year for the next three years.
The general taxpayer, as well as the construction industry, would be perfectly justified in asking what we thought we were doing by financing an extremely expensive land bank. Every business has to look carefully at its capital assets to see whether they are being used for the best purpose, and I cannot see why Government Departments should be in any different position. Without altering the size of the PSBR, it should be possible greatly to increase the scale of public capital expenditure on roads, drains and housing and to allow the nationalised industries to carry out more capital expenditure as well.
I welcome the changes that have been made in raising the threshold of the allowances and increasing child benefit. However, I want to say a word or two about that part of current expenditure that is related directly to helping industry, unemployment and business activity in the regions. It must be said that my right hon. and learned Friend has produced proposals that are of great complexity. I do not doubt that they are of great assistance to the areas to which they are directed, but they are of great complexity and represent rather a patchwork quilt. Other countries have precisely the same problems and

293
difficulties of regional unemployment as Britain, but they do not appear to try to meet them in the same way as we do.
For example there is no Department of Industry in West Germany or the United States. That has not prevented them from achieving a much better industrial performance, and indeed regional performance, than we have. We should also bear in mind the fact that the Department of Industry was spawned from the old Department of Technology which was thought up by the right hon. Member for Huyton (Sir H. Wilson) in his white heat of technology phase. It was also thought up to give Mr. Frank Cousins a job. From those small beginnings the enormous Department of Industry has grown, but when a study of regional incentives was commissioned by the Department some two years ago it found that no discernible benefit to employment in the regions had been gained by the lavish grants that the Department had made.
It does not necessarily follow that because the present system of grants and payments has proved ineffective in preventing unemployment, any other system would do better. However, unemployment in some of the regions, particularly in Northern Ireland, is now so great that experiments must be tried. It is for that reason that I should like the payment of corporation tax by companies operating solely within the Province to be abolished. That would cost about £40 million. Whatever the cost, it would surely be worth while discovering whether the absence of tax might not engender much more business activity than the presence of cash grants. When we observe the striking movement of workers away from manufacturing into the service industries, surely any attempt to halt that trend should be assisted by tax relief rather than by cash payments.
One unintended consequence of the present scheme of cash grants has been to assist large capital projects which may well have been carried out in any case and which employ few people. It would surely be much better if we could relieve small businesses from corporation tax altogether. Therefore, I hope that my right hon. and learned Friend will consider an increase in the limit for small companies—to some extent he has done so—and in due course abolish the tax below that level altogether.
Another helpful step would be to encourage companies to borrow long-term money on the market. As the House knows, to meet the money supply targets the Government have borrowed far more than they need for their own purposes in order to counterbalance a marked increase in bank lending to private individuals and industry. In doing so, the Government have made it virtually impossible for companies to borrow long-term on the markets. It would surely be helpful for such companies if they were able to borrow money by means of deep discounted bonds with a low rate of interest. That would be particularly attractive to high taxpayers. I cannot see why such taxpayers should not be encouraged to lend directly to business rather than automatically to the Government. It is also a striking phenomenon that such discounted bonds have been encouraged by the Government, but, because of the tax treatment by the Inland Revenue, they have met with virtually no success. Such bonds should be taxable on their capital gains and not made subject to income tax in the
294
hands of the subscriber. The proposal that my right hon. and learned Friend made yesterday to tax them on their redemption or sale is of no use.
I should like to see early retirement on full pension allowed for those who have reached the age of 60 and who have been unemployed for over a year. By that means, 270,000 people would be removed from the unemployment register. If, in carrying out our election pledge, the earnings rule were abolished as well, there would still be an incentive to take up part-time work in another business, or even to become self-employed.
I wholly approve of the measures that my right hon. and learned Friend has taken to provide a stronger safety net for those on low incomes and for those who need help, whether they are pensioners or those who receive supplementary benefit in one form or another. But the subjective payment of cash grants to those who do not need help in industry should be halted. I feel sure that it is worth while trying to experiment to see whether relief from tax for small businesses will not do more to engender a spirit of confidence and enterprise than any manner of Government assistance. We should encourage the smaller businesses—the newer technological and electronics businesses—because upon those and upon our service industries will depend the change in our fortunes that we all wish to see, and upon which fuller employment ultimately depends.
7.50 pm
Mr. Tam Dalyell: The hon. Member for Horsham and Crawley (Mr. Hordern) made a thoughtful and interesting speech. I want to follow him in his references to the construction industry and the regions. I wish to argue the case for more public investment to be paid out of the window on the oil revenues, and to say that we should not give away a good deal that the Chancellor of the Exchequer has given away. I wish especially to argue the case for spending more on water and sewerage systems, which are causing problems in whole areas of Britain.
There are more than 146,000 miles of public sewers in the United Kingdom, with probably as many miles of private sewers. In most of the inner city areas there are more miles of sewers than roads. They form an enormous capital asset—more than 80 per cent. of one of the most capital-intensive industries in Britain. The total capital renewal cost has been estimated by the Institution of Civil Engineers as £40,000 million before the end of the century. It follows that the importance of the sewer network to our way of life cannot be over-estimated. Industry relies heavily on the network to remove safely waste products that result from manufacturing processes. The environmental benefits from the reduction in pollution of natural watercourses and lakes, and the public health aspect, cannot be over-estimated; nor, indeed, can the damage from damaged sewers.
The present system is decaying rapidly. It has reached the stage at which the many parts that have collapsed and been replaced by miles of sewers are in an unknown condition, but highly suspect because of their age. Much of our basic infrastructure was constructed by our Victorian and Edwardian forefathers. It is a tribute to their handiwork that those magnificent constructions have lasted for so many decades, but we cannot continue to live in our Victorian and Edwardian heritage forever.

295
Sewer collapses are averaging more than 10 a day. While the most dramatic examples are in the north-west, Greater Manchester and the city of Glasgow, where the sewerage systems are among the oldest, there are daily examples in almost every other industrial city and suburb to remind us that the problem is nationwide. Certainly industrial constituencies such as West Lothian are becoming gravely affected.
Despite the additional resources that have been allocated in recent years, many water authorities simply do not know where their sewers are, let alone their condition. A recent survey by the Severn-Trent authority showed that £100 million was needed during the next 10 years simply to maintain the present system. That authority's plans envisage the expenditure of only half that sum.
The case that I am making for sewers has been confirmed on a national level by the recent report of the House of Lords Select Committee on Science and Technology, which produced two significant facts supporting my case. Their Lordships say that £140 million per annum needs to be spent on maintaining our present water system without improvement. Only some £90 million is being spent, which leaves a shortfall of £50 million. They say that £310 million per annum is required to maintain the existing sewerage network, but only £205 million is being spent. That is a shortfall of £105 million.
The substantial loss of water through the system must be taken into account. The Monopolies and Mergers Commission reported that leakage was about 25 per cent. in the Severn-Trent area. The Anglian water authority recently reported that £500,000-worth of water is lost per year in the Northampton area alone. That that is not untypical was confirmed by the water authority last October, when it said that the leakage rate was quite normal and better than in some regions, which lose nearly 50 per cent. of their water through leakage. On a national level, the technical working party of the Department of the Environment calculated that 18·6 litres of water are lost every hour for every property in the United Kingdom on mains water supply.
It is easy to understand why collapses take place. Sewers are built below ground, and in our country out of sight is out of mind—especially for the politicians who decide the priorities of public expenditure. There are no votes in the sewers. I have been interested in the subject for some time. I recently attended a conference at the Institute of Civil Engineers in Great George Street. Pictures of 19th century persons on the walls include five who were Members of Parliament. They may have been returned by rotten boroughs, but they were not unconcerned with rotten sewers. They did something about that. I am not sure that we pay the same attention to the issue.
There has been a progressive decline in the ability of Governments of all political colours to pay for the ever-increasing demands of citizens for social services, defence and, recently, the cost of the recession. That has all led to increasing pressure to cut capital spending to continue financing the public sector wage bill, social security and local government.
I notice that, following the recent water strike, which I shall not bring into this debate, a spokesman for the water industry said that it was hoped to meet the cost of the settlement from internal economies. I very much hope that that does not mean more cuts in capital expenditure, which
296
would merely mean that water workers had priced themselves and the private sector construction workers out of jobs.
There is increasing pressure on the capacity of water mains and sewers. Above ground, ever-increasing traffic brings its weight to bear on narrow, unsuitable streets running above crumbling sewers. In rural areas, increasing populations and new developments have brought more and more stress to bear on the basic infrastructure. In this day and age, with more than 3 million unemployed, we cannot neglect the importance of sewer renewal for jobs. A calculation by the federation of contractors shows that not only is such work labour-intensive—more than 50 per cent. of the cost involves labour—but that if we take into account lost taxation, lost insurance contributions, unemployment benefit and its attendant entitlement to rent arrears and rate rebates, the real cost to the Treasury—I cannot over-emphasise the statistics—of £100 million spent on sewer renewal is probably only half of those other costs. For every £100 million spent on sewers, the real cost that is arrived at from more people being at work, greater prosperity among contractors and the reduced unemployment benefit that must be paid out is only £50 million.
Not only would large numbers of real jobs be created in areas of vital importance, but, because the construction industry is domestic, those jobs would be British. Moreover, they would be provided in precisely those areas where unemployment is most serious—the west midlands, Greater Manchester, the north-east and the Greater Glasgow conurbation. Further still, prosperity would return, to some extent, to the suppliers of materials.
My case is entirely consistent even with the Government's economic approach. They say that they are looking for jobs that are real, not illusory, in the wealth-creating sector, not the wealth-consuming sector, in Britain rather than in Japan and which improve the efficiency and competitiveness of other industries. Every hon. Member must know that potential buyers of a business always ask what the water supply in the area is like. Clean water and efficient sewage disposal are essential ingredients of civilisation. To keep the system in good repair inevitably costs money, and its paramount importance was recognised by our ancestors.
There are two sources of information about the condition of sewers. There are repair data and sample television survey data. We learn from repair data that there are about 5,000 incidents a year, of which 3,500 are collapses and 1,500 are major blockages that require excavation and repair. Such repairs cost about £70 million to £100 million a year.
The data from sample television surveys look rather worse. Many sewers are affected and the old ones are the worst. About 2 per cent. of 50-year-old sewers are defective, whereas 15 per cent. of 100-year-old sewers are defective. One should compare that 15 per cent. with the mere 0·1 per cent. of the system that is repaired each year. The survey data suggest that the expenditure on repair each year should be about £400 million a year, rather than £70 million to £100 million. However, not all the defective systems will require attention. The industry has spent about £110 million dealing with hydraulic overloading problems, so perhaps the overall expenditure required will be less than £400 million. That depends partly on the skill with which we identify priorities.
There are rather more water mains than sewers. Britain's would go around the world 8·5 times. The

297
problem is principally one of cast-iron corrosion. Almost all water mains over 40 years old are made of cast iron and few are protected against corrosion, either inside or out. As 50 per cent. of the distributed water is corrosive and 10 per cent. of the soil is corrosive, Britain has a real problem which is locked underground. The problem emerges as bursts, power pressure or discoloured water. The current estimate is that there are 80,000 bursts a year which cost about £25 million to repair. There are also about 80,000 customer complaints each year which cost about £12 million to deal with.
At present, about £40 million is spent each year on replacing or relining water mains. At that level it will take 70 years to deal with all the unlined water mains that are over 40 years old. That does not even take into account the younger mains, which are likely to cause the same problems in a similar period of time because they have thinner walls.
The existing standard of service, which is already unsatisfactory in many respects, such as the quality of water, will be made much worse unless more money is spent. During the recent water troubles, it was suggested that compensation at a rate of 10p a day should be paid. That compensation was regarded as derisory, as people would have to suffer from having no water supply. The fact remains, however, that we take the water industry and the provision of water for granted. Suddenly, and mostly at the same time because sewers age together, we will be faced with a formidable problem.
I am conscious that other hon. Members wish to speak and I shall take just two more minutes. No speech on public expenditure from me would be complete without a reference to the Falklands. I should like to pay tribute to the Financial Secretary to the Treasury, whose role has been honourable. It was not his fault, whoever else's it was, that the present circumstances have arisen. He did his best in 1980.
As I was lucky enough to be called in the debate on public expenditure, I should merely like to repeat questions that I asked the Treasury last Wednesday. In the interests of brevity, I shall just refer to seven of them. First, I referred on 9 March to the enormous defence costs of £684 million for 1984–85. Is that the Treasury's present estimate? I am told that the figure has increased steeply. Moreover, I should like to repeat my question about the type 23 destroyers, not so much to find out about the destroyer itself, but as an example of what is happening. Three months ago the estimate of its cost was £65 million. It then came to £85 million. I was told in a parliamentary answer this week that it was £90 million, and I am told by people in the industry that we shall be lucky to get it for £110 million.
What does the Chief Secretary think of those estimated rip-roaring and inflationary costs? The fact remains that one can take it as a thumbnail sketch these days that a replacement will be three times as expensive in real terms as that which it replaces.
My third question is a repeat of that at the bottom of column 892 about the requisitioning of ships. A mass of ships were requisitioned, including 25 British merchant ships and others, which I described both in questions and in a previous public expenditure debate. Examples are the
298
Swedish ship Linne and the ships that we had to charter from Norway and Denmark. What is the total of those requisition fees?
Fourthly, I wish once again to draw attention to the 1.2 per cent. reduction in the gross domestic product, the 6·4 per cent. reduction in education expenditure, the 54·8 per cent. reduction in housing and the 15·5 per cent. reduction in overseas aid. Those figures are the blackcloth to the Budget, and it is supremely ironic that we should have such a Budget and such defence expenditure when only last week a technological university in my constituency—Heriot Watt—was fined £20,000 for the heinous crime of having exceeded its quota of engineering students. It is a very odd country that penalises a high grade institution such as Heriot Watt university for taking on just a few more students than it should. It is absurd, ridiculous and policy gone mad.
Fifthly, at the bottom of column 894, I asked about the cost of the Mount Kent station that is being built, where concrete will be carried by helicopter, at a cost of thousands of pounds an hour, because of inclement weather and difficult terrain for the poor old mules, even if we had them. Do we wish to get deeper and deeper into such a financial commitment, because very soon—this is not the place to argue it—we must leave those islands and negotiate on their future? If not, they will become our Vietnam and the sheer pressure on finance will dictate our activities in South America.
Sixthly, I return to the airport at Port Stanley, and I couple with it my seventh question at the bottom of column 895. We are spending millions of pounds on an airport that is 8,000 miles away. The Chief Secretary to the Treasury must be involved in the Cabinet Sub-Committee that is considering the matter. What does he think, in his present ministerial berth, with his colleagues asking for peanuts for either housing or education—during transport questions today his hon. Friends and mine asked for pittances for their areas—when the Daily Express tells us that the runway at Port Stanley will cost £880 million? I am told by reputable people who were involved in the construction of Edinburgh airport and who know about instrument landing systems that the airport will require a category 3B instrument landing system and at least 75m of runway,. which will cost millions of pounds. We must also overcome corrosion problems.
The amount of money that we are putting into the South Atlantic is mind-boggling. I ask the Chief Secretary, with some friendliness, whether it is not about time that he worried about the financial mess that we are getting into. That commitment will only distort our entire budgetary strategy.
8.12 pm
Mr. Nigel Forman: A week ago tonight at almost exactly the same time I spoke after the hon. Member for West Lothian (Mr. Dalyell). On that occasion his mind was deep in the bogs of the Falkland Islands, as it was a few moments ago in his concluding remarks. However, for the majority of his speech tonight, he was more bogged down in Britain's sewers and there was only a little burst on the Falklands at the end of his speech. I shall not follow him down those channels, because there is a real danger of becoming obsessed with such matters.
I prefer to direct my remarks to the aspects of the Budget that interest me. There are three ways to consider such a Budget. The first is to ask what it does to deflate

299
or to reflate the economy. The second is to consider what it does to advance or to retard the Government's strategic tax objectives, and the third is to ask what it does for different groups in society who want more of this or less of that.
A consensus seems to have emerged that the overall effect of the Budget in a full year will be mildly reflationary to the tune of about £2·5 billion to £2·75 billion. That is good news for the economy, and I welcome it. However, we must realise that reflation—if that is the right word—of about £2·5 billion is marginal in terms of the present British economy, which has a money GDP of about £270 billion. It represents about 1 per cent. of the total. It is marginal also in the global context, to which several references have been made in this debate.
As the United Kingdom now accounts for about 4 per cent. of world GNP and 8 per cent. of world trade, one must be realistic about the role of this country as a locomotive, or whatever the fashionable metaphor may be.
In terms of the macro-economic effect of the Budget, the dilemma is that if my right hon. and learned Friend had chosen to do enough to make a really dramatic impact on demand, he would have had to give the economy a massive stimulus, and that would have threatened to increase inflation and make our balance of payments worse. We all know from bitter experience that in the long run that process would have led to the loss of more jobs.
Therefore, the Chancellor was right to reflate cautiously, but cautious reflation has little or no impact on real activity in the economy and precious little effect on jobs. From a macro-economic point of view that is also sad for those of us who want to see a revival brought about as prudently and as quickly as possible.
So far as we manage to stay on the path of Treasury rectitude, so far as attitudes to pay bargaining remain realistic, and so long as oil prices and sterling continue to be relatively depressed, our gains in productivity and competitiveness—which I welcome—are unlikely to reduce unemployment. On the contrary, as table 3·8 in the Red Book shows, unemployment is likely to increase in the short term.
When we look at the macro-economic picture, there seems to be no convincing alternative to the Government's cautious and responsible policy. However, Samuel Brittan wrote in the Financial Times today an interesting economic assessment of the Budget, and I agree with one point he made, which seemed to be consistent with the Chancellor's strategy. He said:
"If productivity is rising and inflation falling"—
we must all hope that that is the present macro-economic picture·
"it would surely not be dangerous to have a more stimulative policy if that proves necessary."
I hope that will be the conclusion that my right hon. and learned Friend draws if he considers any further measures later in this calendar year.
I do not believe that the Budget has helped the Government to advance towards their strategic tax objectives. I regret that, because such objectives should be in the mind of any Chancellor when framing his Budget. What we want in the long run is not only a lower incidence of direct taxation at all levels of income, for all the reasons with which we are familiar, but a parallel attack on tax expenditures—on tax allowances and the rest. The logical outcome of that policy, and the goal towards which we
300
should be working, would be the introduction of a fully fledged tax credit scheme. In the early 1970s a previous Conservative Government came close to inaugurating such a scheme but, regrettably, the scheme was stifled more or less in its infancy by Barbara Castle, who was Secretary of State for Social Services in the 1974–79 Labour Government.
In this context, the increase in child benefit is a welcome step towards our strategic tax objectives, but the increase in mortgage interest relief, popular though it is with many of my constituents and with home owners throughout the country, is a step away from the objective of a simpler system of lower direct taxation. The decision to restore the 5 per cent. cut in unemployment benefit, however, is a step in exactly the right direction not only on grounds of tax strategy but on social grounds. Unemployment benefit now comes into taxation, which is the correct approach to these matters, and this is entirely consistent with a general move towards a tax credit scheme.
I realise that there is always a conflict in the difficult area of overlap between taxation and social security, between clarity and simplicity on the one hand and complexity and equity on the other. I believe that the only way to solve that problem is to move purposefully, although I fear all too slowly, towards a tax credit scheme. No doubt the Minister will tell me that the real difficulty is the Inland Revenue Staff Federation, the unwillingness to instal computers quickly enough so that these matters can be dealt with on one pattern and so on, but we heard all that in the early 1970s and the story is wearing rather thin. I hope that more purposeful progress can now be made.
The third angle of the prism through which I wish to consider the Budget is the more conventional aspect of how it affects the various social groups in our society. In that respect, I believe that it is a very good Budget, especially in terms of social policy. That is very important for a Conservative Government at this stage in their career, as in recent months there have been one or two unfortunate incidents in which unfounded and non-authoritative stories have been leaked about what a future Conservative Government might do in the social policy sphere. I regarded most of those rumours, happily, as ill founded. In so far as they had any foundation, I regarded such policies as ill advised and I was delighted when my right hon. and learned Friend's Budget gave the lie to that kind of smear campaign by the Labour party.
I refer especially to the good news for the low paid in work, with the raising of personal income tax allowances and thresholds and the good news for families with children with the raising of child benefit and one-parent benefit, which is increasingly important in this country which now has nearly 1 million one-parent families.
There is also the good news for pensioners and others in receipt of state benefits. There was a good deal of argument about this earlier in the debate, but I believe that the Opposition have lost sight of the two main points. First, we have kept pensions ahead of the rise in prices throughout the period 1978–83, fulfilling our clear pledge to the people. Secondly, we have in no way deprived them of the windfall gain, if I may so put it, that they received from the previous system of calculation last time around. Nor need we be apologetic about changing the method of calculation. As my right hon. and learned Friend the Chief Secretary pointed out earlier today, that was done on a

301
previous occasion by Barbara Castle to save money. The difference is that we are not doing it specifically to save money, but because we believe that the historic basis is the right basis for the system and that it should never have been changed to the present temporary basis.
In all those ways and in many others, such as the help for the severely disabled, the help to solve the problems of the invalidity trap, the help for those on supplementary benefit through the capital disregards and our package of tax measures to encourage donations to charities, the Budget gives the lie to the Labour argument that somehow Conservatives are not to to trusted with great and important issues of social policy.
In the context of helping different groups, I should like also to mention the imaginative aspects of the Budget in terms of alleviating—I say alleviating rather than solving—some of our tragic unemployment problems. Clearly, the Budget has had a positive effect under a number of headings. Those parts of the Budget which deal with housing and construction must be welcomed in this respect. At present, far too many workers in the building and construction industry are unemployed. One of the quickest ways to bring unemployment down, or to slow the rise of unemployment, would be to get many of those people back to work.
I warmly welcome my hon. and learned Friend's decisions on job flexibility and job creation. I welcome the extension of enterprise allowances to the whole country, which must be a move in the right direction, and the imaginative new scheme for part-time job release. On this point I should like to draw the attention of the Treasury, if it has not already noticed it, to an interesting article in Lloyd's Bank Economic Bulletin of September 1982 in which Christopher Johnson pointed out that, with sensible measures to encourage part-time work, it would be possible, with a doubling of the present number of part-time jobs over a number of years, to reduce unemployment by as much as 2 million people. Clearly, there should be a major effort to encourage part-time work.
I was also pleased with the measures for small and new businesses, to which my hon. Friend the Member for Upminster (Mr. Loveridge) referred. I am delighted with the measures to encourage technology and innovation. It is in that sphere, where there is a package worth £240 million over three years, that the future of this country lies, if we are to compete successfully and favourably in the world.
This has been a cautious Budget at the end of a long line of cautious Budgets. It has been a conservative Budget, but none the worse for that, and a Budget which allows the prospect of a further stimulus later in the year, something to which Sam Brittan refers in the article that I have already mentioned.
The sad truth is that there are limits to what any sensible Government on their own can achieve. Even if this had been a miracle-working Budget, there are still limits to what any modern Government can achieve if they are to be sensible and retain contact with reality. So much more depends on the people of this country and especially on the two sides in pay bargaining. So much more depends upon our joint efforts to improve our competitiveness and performance. All these things are the key to the future, not only to bringing inflation down, but to bringing
302
unemployment down. These vital matters are to a greater extent in the hands of the British people than in the hands of Government.
In all aspects of industry and commerce we must try to restore the profitability of British industry which, as is evident from paragraph 3.40 of the Red Book, is disastrously low, with an average real rate of return of about 3 per cent. now, compared with 10 per cent. on the same basis in the early 1970s. That must be a priority task for anybody involved in British industry and commerce.
At the end of the day there is a great responsibility on all Governments and on economic decision-makers both in this country and abroad. It is only by making imaginative joint efforts with them at the Williamsburg summit and elsewhere that we will be able to bring real hope to the millions of tragically unemployed people in this country and to all those in this and other countries who look to their Governments and decision-makers for enlightened leadership for the future.
8.28 pm
Mr. James Hill: One aspect of Budget day which does not change is, of course, the ritual of the Budget debate. No bridge hand has such an instant post mortem. Television commentators, newspaper editors, Opposition Members and tame or not-so-tame pundits from the London School of Economics or the ivy-covered universities are trotted out and dusted off. Only 10 minutes after the Chancellor has resumed his place, regardless of whether it is a highly technical Budget, the pundits are able to judge the short-term and long-term effects and generally to produce instant judgments.
The public are immediately bewildered—almost shocked—by the varying views on the Budget. I suppose that we confound them still further. Our debate on the Budget continues for four days and alternative Members find parts of the Budget which will delight them or horrify them. Only 24 hours after raking over all the information, the forecasts are made by the pundits, leaving Back Benchers on both sides of the House with the options of boring by endless repetition, selecting issues which they feel will have an effect on their constituents or asking for the unobtainable. The latter course is taken predominately by Opposition Members. I shall take the middle course and select issues that will have an effect on my constituents—future prosperity and employment, or unemployment, percentages in Southampton.
One of the jewels in the Budget statement was my right hon. and learned Friend's reference to the findings of a policy committee on whether it would be in the national interest to have free ports. This is an imaginative and forward-looking concept and I understand from the speech of my right hon. and learned Friend the Chief Secretary that the necessary legislation to bring several names forward for what I should say is almost an honour will be introduced in the Finance Bill. When that has been done, the free port sites will be selected.
The sites will be selected on an experimental basis but I can tell my right hon. and learned Friend that there are over 400 free ports in the world, dealing with almost 9 per cent. of world trade. In the immediate vicinity of the United Kingdom there is the active port of Hamburg. In the Irish Republic there is a prosperous and active free airport and port called Shannon. One of our Crown

303
colonies, Hong Kong, has been a most successful free port in the past. Even in the United States, Miami, Florida, is an active and prosperous free port.
There will be a great deal of employment in these customs-free zones. There has been support from the Institute of Directors, the Department of Trade and Associated British Ports, the latter being anxious to get off to a new start. My right hon. and learned Friend will know that Associated British Ports is an imaginative privatisation of the 19 ports formerly known as the British Transport Docks Board, and that 49 per cent. of the shares were sold. If any one of the 19 ports became a customs-free zone, the prosperity of Associated British Ports would be given a tremendous boost.
Never being one to stand back, I brought a delegation from Southampton to the Department of Trade to discuss these matters. The delegation consisted of council officers, the city planning officer, the chief executive, the leader of the Conservative-controlled council and a representative from the board of the Southampton port of Associated British Ports. It was understood that a case would have to be presented to obtain a rating for consideration as a customs-free port. This I hope they will do. There is a great deal of co-operation in Southampton and everyone is 100 per cent. behind the idea of a free port.
People should not misunderstand; a free port is not somewhere they can buy a bottle of whisky duty-free and walk out of the gate with it. It is a place into which the containers of the world can be shipped and re-packed for a whole of the Community, if necessary, without any paperwork. Goods can be imported into the customs-free zone, assembled by a local work force and exported as completed articles without any customs duty being payable. Of course, this would create much employment. It is an extension of the enterprise zones which my right hon. Friend announced over 18 months ago.
The establishment of a customs-free zone would lead to more trade in the area. Hong Kong is a typical example. Statistics prove that in most areas where a free port is established the volume of cargoes goes up three or four times. The reference in the Chancellor's speech to free ports was most important. The experiment will be criticised by the media and by the very people who are employees of the Chancellor—Customs and Excise. They will not be happy if their traditional powers are bypassed. Nevertheless, this should not deter the Government. The experiment will prove satisfactory. Certainly I shall be pushing the claim of my constituency.
I want to refer to several other matters lest they do not get enough coverage. It is first-class that home repair grants are to be increased by 20 per cent. Local authorities will be able to improve the fascia of the buildings and do external maintenance in a street if the private owners give them permission. If the scheme is taken up fully, it will cost £60 million in 1983–84.
The national insurance surcharge, which has been mentioned by everyone, must go eventually, but I am not one of those Members who ask today for the unobtainable. During the lifetime of another Parliament we should be able to remove the remaining 1 per cent.
The business expansion scheme is imaginative but there are snags. It improves the business start-up scheme, which has had a tremendous impact for people wishing to start their own small businesses. Coupled with the loan guarantee scheme it is proving extremely useful, but I would point out to the Treasury a major problem. The
304
ordinary person who wishes to set up a small business and who has no credit rating, no experience and no audited accounts for three years, runs into a tough stumbling block because he cannot provide sufficient references to enable him to get a lease on a property. That could be closely looked at. The banks could be directed by my right hon. and learned Friend to give those references as and when they are demanded.
I praise my right hon. and learned Friend as he has done something about a matter that has been worrying me for some time. There has been a criticism that the people who have been thrifty and have saved are not allowed supplementary benefit until they have got their income down to a certain level. At one time it was a ridiculous level. I think that it was in the hundreds. My right hon. and learned Friend has removed that criticism and raised the level to £3,000. Another jewel in the Budget is that £1,500 of the surrender value of a life assurance policy will not be counted as savings. For most people who are thrifty and work hard, that is about the sum that they expect to receive from their life assurance policy. That is a clear sign that this is a compassionate Budget and that the Government will not penalise those who are thrifty and who put a few pennies aside for what will eventually come to most of us. That is a time when those savings are most needed.
No one has yet mentioned the man over 60 who does not want to be a burden on the state, but who is forced to sign on at the unemployment exchange for his card to be stamped, so that at the age of 65 he can receive his pension. He will no longer be forced to do that, so his dignity will be restored. He will get those credits. From the age of 60 to 65 he will be able to ensure that his pension will not be tampered with because those credits will be put towards his pension. However, only 90,000 people will be affected by that.
This is an excellent Budget, which encourages business. It is a compassionate Budget, which has brought in fresh ideas for small businesses, particularly free ports. I wish my right hon. and learned Friend every success. Let us hope that the numerous pundits are proved, once again, disastrously wrong.
8.42 pm
Mr. Raymond Whitney: In previous economic debates I have said that the real debate is between hon. Members on the Government Benches. The debate is between those of us who believe that the way to economic health has to be through following a firm monetary policy and those of us who take a different view. There is a difference of perhaps £1 billion or £2 billion between us about the size of the public sector borrowing requirement. That has been the real debate. Tonight, that is literally the debate. It is extraordinary that no Opposition Back-Bench Members are present, given our professions, all the shades of opinion and the deep concern about the state of the economy. None of them wishes even to offer his thoughts to us. That should not go unremarked in the country.
We are almost obliged to operate in a partisan manner when we conduct our affairs in the House and in the country. One measure of the impact of the Budget is to look at the reaction from both the Opposition parties and the press. I take great comfort from the extraordinarily unconvincing response both from political parties and the press.

305
The Leader of the Opposition, obliged to speak immediately after my right hon. and learned Friend the Chancellor sat down, deeply disadvantaged in being less than economically literate, was therefore furnished with a brief for the occasion, because clearly his research staff did not trust him to enter into one of his usual extempore forays. His contribution was extraordinary and seemed to turn entirely on the future of the Shildon railway works, not unconnected perhaps with its proximity to Darlington. Some eight or nine days ago the Conservative party was being accused of some dastardly plot by leaning on British Rail to keep the repair works at Shildon open to have an impact on the Darlington by-election. The Leader of the Opposition concentrated most of his speech on his belief that the railway works were threatened with closure. There was no suggestion from him of any alternative strategy.
We were, therefore, looking forward this afternoon to the speech of the right hon. Member for Stepney and Poplar (Mr. Shore) to see whether he would offer some ideas. He had many criticisms. He said that taxes were too high, that the increase in the various taxation levels were also too great, and that the reductions that we had made in other taxes were inadequate. It all added up to an impossible piece of arithmetic. At one stage he mentioned the order of magnitude of his proposals. However, "order of magnitude" came there none.
The right hon. Member for Stepney and Poplar said that he wanted a substantial increase in public expenditure, a substantial decrease in taxation and sharp reductions in interest rates. Everyone knows that that package is mutually exclusive and economically illiterate. The right hon. Gentleman did not quantify his proposals. Outside the House he occasionally ventures some figures, which may be £10 billion or £11 billion depending upon the time of the day or whether the moon is in the firmament, but he knows that he could not offer such figures to the House. They would not stand up for a moment. He was well advised not to venture a figure.
The hon. Member for Colne Valley (Mr. Wainwright) seemed to be speaking not just for the Liberal party but for the alliance. He offered the same figureless formula—give away more, spend more all over the place and somehow retain interest rates and force down inflation. Everyone knows that that is nonsense. For that reason the debate is among those of us on the Conservative Benches who have a responsible attitude towards such matters.
The press view is interesting. To the Daily Mirror the Budget was dismal, joyless and drab. The Guardian seemed to have some difficulty in deciding its views on the Budget. The headline said that it was an each-way gamble, but it was then condemned as being mild and melancholy. I am glad that it was a mild Budget, because this country's economy did not want an exciting Budget. It wanted a sensible one which would do precisely what my right hon. and learned Froend the Chancellor is aiming to do, which is to hold on to the strategy but, within that strategy, to offer what he has in terms of genuine increases in benefits to old-age pensioners—keeping their pensions above the inflation in prices—increases in child benefit, and increases in the other social security benefits. Those are great achievements within a framework which has also allowed further increases to industry.
I commend all that has been done, and is now being offered, for small and medium-sized firms. Many of my
306
hon. Friends have elaborated on this subject and I shall not go into details. The Chancellor mentioned the new business expansion scheme, the improvement in the business start-up scheme, employee options, profit sharing, the loan guarantee scheme and the small workshop scheme. Those schemes and all the changes that he announced are to be welcomed.
When these measures are put into practice, I hope that the Chief Secretary will ensure that there is a more intensive and effective information effort. Last year, it seemed that the information reached the head offices, but it did not seem to filter down to ordinary people unused to these things, for whom it took a long time for the penny to drop. I therefore hope that the considerable resources of the Treasury information machine or the COI will be made available so that every accountant, tax adviser and bank manager has a ready source of information to stimulate and encourage those who are waiting to take advantage of the scheme to start up or expand their own businesses.
I echo the point made by my hon. Friend the Member for Winchester (Mr. Browne). I hope that my right hon. Friends will continue to look hard at the possibility of promoting the development of equity capital. We all know the problems, but if in doubt I hope that my hon. Friends will take a chance. We could wear the odd sleepless night by the inspector of Inland Revenue because of the stimulus that that would give to British industry. That is the way in which we shall create jobs.
The way in which the economy has been run provides many lessons which people are learning quickly. Perhaps the significant message of the absence of Opposition Members is that ordinary people now understand what the Government are trying to do and are supporting them in their efforts.
Mention has also been made of the international background against which our economy is beginning to move. This year our demand will increase by more than 3 per cent., and over the next 12 months growth will rise by 2½ per cent. That is probably as near to the safety limit as we can go, given our national circumstances such as the oil and exchange rate problems.
We are playing our part in getting the world out of recession. There is no question of an economy the size of our own being the locomotive, but we have a significant part to play. When the Prime Minister goes to Williamsburg she will be able to tell a story of Government determination and courage as well as saying that a deep sense of realism has dawned in the British people.
8.53 pm
Mr. Graham Bright: The emphasis by the Government on helping small business over the lifetime of this Parliament is fully endorsed by myself and my hon. Friends who are supporters of the Conservative smaller businesses committee. We are particularly pleased at the Government's response to the arguments that we have advanced during the last four years. The changes in personal taxation will undoubtedly help small firms. More importantly, the change in interest rates will go a tremendous way to help those firms, particularly the many that are now starting up.
Many people have described the national insurance surcharge as a tax on jobs. That has been particularly so for small firms. It does not matter quite so much for large firms, which can absorb such costs, but the small man with

307
a few members of staff thinks before employing another. The changes in the rates of interest, the reduction in the small companies rate of corporation tax from 40 per cent. to 38 per cent. and the increase in the limits at which the initial rate and the full rate of 52 per cent. apply will give tremendous encouragement to small firms to expand. The sharp transition from the initial rate to the full rate has been of major concern to small firms in the past, but that has been substantially alleviated and the hump, to a large extent, has been left behind. I thank the Treasury team for examining that problem and giving it due consideration. If small firms are able to build up capital investment funds through the creation of what I call "enterprise bonds", their prospects will be transformed even more, because they can bank their reserves and finance their businesses from their own generated profits.
It is not simply the initial funding and finance of small firms, whether or not incorporated, that matter. The flow of external investment into small businesses and the availability of lending money to them is vital. All the research that has been carried out since the report by the Bolton committee in 1971 confirms that.
The business start-up scheme, which has been in operation for the past two years, offers excellent incentives to outsiders to invest in new and small companies, provided the necessary conditions can be met. I was delighted to learn that those conditions are to be altered and the scheme transformed into the business expansion scheme. Many hon. Members have argued for that transformation since the scheme started. I shall be interested to examine the detailed conditions set out in the Finance Bill. The additional capital that outside investors can put into a small firm is often crucial to the decision whether to expand. It should not be hampered by the Inland Revenue's obsession with tax evasion. I trust that the House will ensure that the Inland Revenue does not tighten up that provision too far and that those funds come in so that the business expansion scheme can take off and inject a great deal of money into small businesses.
It is equally gratifying to note how successful the loan guarantee scheme has been since 1981. Additional lending to small firms has been made possible and the doubts of the many sceptics, especially those in the Treasury and the banks, about the need for the scheme have been confounded. The extra £300 million that my right hon. and learned Friend has made available will make it easier for small firms to borrow on terms more comparable to those for large companies and bring the pattern of lending closer to that of international rivals.
An original trial scheme of £50 million got the loan guarantee scheme under way, and it is tremendous to see that it has blossomed in such a short time to £600 million. That is a tribute to the Treasury and to the Government, who have put their weight behind making the scheme work. The principles behind both schemes are right and have been vindicated entirely by experience. I am confident that they will be even more successful in their extended forms.
The role to be played by small businesses in the economy clearly illustrates the difference between the two major political parties. The Government recognise small businesses as a vital ingredient in our industrial and commercial life. The independence and the self-reliance shown by their owners are qualities that hon. Members wish to foster in the nation's interest. Small businesses produce manufactured goods and provide essential
308
services that fill the gaps in the markets that no large private or state-owned organisations could even think of supplying.
The concern for the small businesses expressed by the right hon. Member for Ebbw Vale (Mr. Foot) in his response to the Budget statement was a rare example of this piority being recognised by the Opposition. He did not say—perhaps he could not bring himself to say—that "Labour's Programme 1982", endorsed at its party conference, provides for the expropriation of small firms by employees acting with the consent of a Labour Government but without that of the owners and families. That is a true measure of Labour's concern. We believe in ownership by people who have founded and contributed to the prosperity of their enterprises. We believe that employees should be encouraged to invest in and share in the profits of the firms from which they work.
Unemployed people should be given the opportunity to start new firms. The extending of the enterprise allowance is a great tribute to the Government. They set up a pilot scheme to monitor the situation. That scheme was successful and an extension has been made. A few weeks ago it was announced that there are now 210,000 more self-employed people in this country. Those 210,000 people are just a start. Soon they will employ others. That is how small businesses will continue to grow.
The growth of the small firms sector is the only way to rebuild the foundations of our economy on a secure basis. The preservation of genuine free enterprise and real democracy depends upon it. The measures in the Budget will help us to achieve those objectives. They are the objectives that we set out to reach four years ago. I and those of my colleages who wrote the book "Moving Forward—Small Business and the Economy", which was published a few weeks ago, set out those objectives again, I commend the courage and consistency with which the Government have acted to help to realise them.
9.1 pm
Mr. Stanley Orme: I shall address myself to the problems facing industry and the economy, as well as to unemployment. Much of the debate has centred on industry and employment. However, I want first to return to the subject of pensioners, to what the Chancellor of the Exchequer said and to what the Chief Secretary said in response to my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) and me.
The Government are showing great anxiety about the situation of pensioners and the change that they have made in the assessment. Whatever the Government may say about the change that the Labour Government made in assessment between 1974 and 1979, pensioners were never worse off and were always better off then. They were 20 per cent. better off in real terms when we left office in 1979.
On the Government's figures, pensioners are 5 per cent. better off after four years of Conservative Government. Pensioners are being cheated by the change that the Government are making. The abatement will catch them in November, particularly if inflation is assessed at about 4 per cent. in June or July. The Chancellor of the Exchequer has said that inflation will have increased by November, so the clawback will operate.
Mr. Ridley: Rubbish.
Mr. Orme: The Government are very sensitive on this issue. We shall ensure that pensioners are fully aware of what has happened.
On 10 March 1983 the Financial Times asked:
"Is Britain falling to pieces?"
The article continued:
"There is plenty of evidence on the surface to suggest that it may be—patched and pot-holed urban roads, peeling paint and boarded windows on dilapidated council estates, motorways with cracked bridges and miles of lanes closed for repairs."
The same question could be asked about British industry. After the long years of recession and an overvalued pound, the manufacturing sector is certainly leaner, but rather than being fitter it is on the point of total collapse. Some industries are close to disappearing altogether. As the assistant managing director of Birmid Qualcast is reported to have said:
"Any further rationalisation would be decimation."
Perhaps the Secretary of State for Industry, when he speaks in this debate, will comment on that.
Since May 1979, our people have been waiting for the action that this Government promised during the general election of 1979. They are still waiting, and they will continue to wait. This Budget will take the nation no closer to the fulfilment of the promises that the Government made in 1979. In fact, this Budget will deepen the recession that has a stranglehold on our economy.
The construction industry has been mentioned, both in the Budget statement and in the subsequent debate. The so-called incentives to that industry are marked by a seeming lack of awareness of what has happened to the industry, and the seriousness of the crisis that it faces. Output has fallen by 18 per cent. since 1979. Nearly 69,000 jobs were lost in the industry in 1982, and for the first time since 1929 employment in the industry has dropped to nearly 1 million. One in eight of those who are unemployed last worked in that industry.
The measures that the Chancellor has announced give little prospect of expansion. The capital and current spending problems of local authorities will continue to depress that industry. Only the top end of the housing market will be booked by the mortgage relief that has been given. My hon. Friend the Member for West Lothian (Mr. Canavan) told us about the work that needs to be done to the sewers in inner cities. It will cost tens of millions of pounds to put right rundown Victorian sewerage systems. Such are the issues that should be tackled and are not being tackled, particularly as a result of the cuts in local government expenditure.
All that the Chancellor seems prepared to offer by way of hope to the unemployed is the enterprise allowance scheme. How will that help the unemployed school dinner lady, the out-of-work 17-year-old, or the redundant steel worker? What hope for the future has the Chancellor to offer them?
This is a marginal Budget. Industry will reap no benefits from it. Aid to small firms is all well and good, but large enterprises also looked to the Budget for signs of a reprieve. They looked in vain. Hon. Members may have heard Sir Monty Finniston say this morning on the radio that this Budget has nothing to offer major industry in the United Kingdom. He said that the depression that exists in major sectors of our economy, including the manufacturing sector, will not get better as a result of these Budget proposals. To keep the public sector borrowing
310
requirement at the same level through the next fiscal year will mean no fiscal boost to the economy, no growth in demand, and no expansion of industry.
I shall outline the background to the Budget. We have 4 million people unemployed. Our industry is not just run down; large parts of it are closed, possibly for ever. Apart from my time in this House and in the Royal Air Force, I spent all my working life in manufacturing industry. In areas such as Trafford park, the west midlands, London and elsewhere, we had major industrial centres. Certainly, the rundown has been taking place over a number of years, but what happened in 1979 is without parallel in our society.
In the west midlands over 367,000 people are out of work—·6 per cent. of the population. That was referred to by my hon. Friend the Member for Walsall, North (Mr. Winnick) and by the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark). Dunlop has closed its Erdington plant, making 1,000 workers redundant. The Round Oak steel works has closed, with a loss of over 1,200 jobs. GEC in Coventry laid off 600 workers last December and Lucas Electric shed 1,200 jobs last January. Yet the west midlands is the centre of our industrial society. If we cannot produce wealth we shall not be able to make the improvements in our society that we want, such as improving the Health Service, social benefits and the infrastructure. What is happening is catastrophic.
Mr. Winnick: Does my hon. Friend know that in May 1979 the registered unemployment rate in the west midlands was 5·1 per cent. and it is now over 16 per cent.? In my travel-to-work area it was 5·1 per cent. in May 1979 and it is now over 18 per cent. Those are the official figures.
Mr. Orme: My hon. Friend only underlines the seriousness of the position. I do not believe that he ever thought that he would see such a situation arising in the industrial heartland of the United Kingdom.
The Government only tinker with the position; the Budget does nothing to deal with it. In the northern region over 235,000 men and women have lost their jobs—18·1 per cent. of the population. In the north-west the jobless total is over 447,000—16·5 per cent. of the population. Nor does the south escape. London, East Anglia and the south-west are also facing such difficulties. The Gloucestershire diesel engine company of R. A. Lister lost 225 workers in January. Metal Box in London lost 300 workers and Fords at Dagenham responded to the recession by laying off 3,000 workers in February. Not a single area in Britain has escaped. The Government cannot continue to blame everyone but themselves for the problem.
We keep hearing two reasons for the problem. One is oil prices and the other is the world recession. Why is Britain—an advanced industrial nation—at the bottom of the OECD's league table? The blame lies firmly at the Government's door. They have created a climate in which private industry has been forced out of Britain, despite their claim to support the private sector. Examples are the Timex factory in Dundee and Linotype-Paul in Cheltenham, and I have just been informed that the ICI plant in Blakely, Manchester, is to be transferred to Brussels. Therefore, through their blind and inflexible policies, the Government are driving industry out of Britain. We should like the Secretary of State for Industry to answer those points.

311
On 3 February the work force at Linotype-Paul was told that 500 jobs were to be lost and the works transferred to Germany. That was despite the company's profitability and the workers' record of high production and low wage settlements. We keep hearing from the Government about competitive industry. I am giving the House some examples now of competitive industries that have been driven out of the United Kingdom.
Mr. Ridley: As the right hon. Gentleman is talking about a firm in my constituency, what action does he think that the Government have taken to drive out Linotype-Paul? Is he aware that it moved out because the alternative new generation machine has been developed in Germany? It has nothing to do with Government policy. Had he asked the work force, he would have found that out.
Mr. Orme: The Minister should have a word with some of his hon. Friends who represent constituencies in that area, especially the hon. Member for Cheltenham (Mr. Irving). I have written to the Secretary of State for Industry, who has met the managing director of Linotype-Paul. I am still waiting for a reply. There is no reason why that firm should leave the United Kingdom. One thousand nine hundred workers at Timex in Dundee have been declared redundant, and the work is to move out of Britain.
Those are the real results of Information Technology Year, 1982, despite the propaganda that we have been fed by the Government. They demonstrate the Government's failure to support and invest in high technology industries. The Minister for Industry and Information Technology is in the Chamber, and he cannot deny that statement. Those examples demonstrate the abrogation of social responsibility of multinationals that are allowed to move and invest out of the country at will.
A Labour Government would take powers similar to those in France and Italy, which have an understanding with mulitnationals. They do not allow them to ride roughshod over their countries and Governments. I have been passed some good news for the House. It was announced on the nine o'clock news that Mr. MacGregor is to be chairman of the National Coal Board. When I deal with the steel industry, I shall say something about that.
What have the Government done to encourage our industries? Since 1979, 1·5 million jobs have been lost in the manufacturing sector. Investment has plummeted by 33 per cent. Manufacturing output as a whole has fallen by 19 per cent. The slump in basic essential industries such as steel, shipbuilding, engineering and textiles have been especially severe. Since May 1979, output in metal manufacturing has fallen by 30 per cent., textiles by 30 per cent. and engineering by 17 per cent.
Mr. MacGregor was given a large sum of money to run the steel industry. We wonder what agreement has been reached for his takeover of the National Coal Board. The steel industry has continued to be in the front line of the recession. What is the price that the steel workers and the steel industry have had to pay for the recession, the lack of demand and the imports that have flowed into Britain? Capacity has been cut by about 40 per cent. and more than 100,000 jobs have been lost. That is many more than in other European countries. Further reductions could undermine the future ability of the steel industry.
On 22 October 1982, the Secretary of State told the House that any closure of major steel works would be the responsibility of the Government. In December, he
312
committed the Government to the continuation of five major plants, yet on Monday he was not prepared to deny the possibility of massive job losses at Ravenscraig and the possibility of the closure of its strip mill. When he speaks later, I hope that he will tell the House where he stands on the survival of Ravenscraig.
Mr. Allen McKay: Is my right hon. Friend aware that 82 per cent. of tube steel is flowing in from abroad? Is he further aware that the special steel industry in Sheffield has been decimated by the input of steel from foreign countries? The Government have done nothing to stop that.
Mr. Orme: My hon. Friend is absolutely right; about eight years ago 6 per cent. of the United Kingdom's steel was imported, whereas imported steel now represents about 38 per cent. of the whole. That shows the seriousness of the problem.
Mr. Whitney: Will the right hon. Gentleman give way?
Mr. Orme: No, I must get on.
Privatisation is no answer to the problems of British Leyland either. BL is the only major British car manufacturer and should be supported. More than 200,000 jobs in the vehicle production industry have been lost since May 1979. That has sent shock waves through many other sectors of industry, both public and private. The west midlands has felt the main bite of the redundancies, but they have taken place in plants throughout the United Kingdom, especially among component suppliers.
Both existing and future British industry is being undermined. This year, about 9,000 craft and technician apprentices will be recruited into the engineering industry. That is lower than any previous year—in 1974, there were 32,000 craft apprentices. Moreover, that reduction is occurring when unemployment among young people is reaching record and tragic proportions. It is a scandal.
The Government have made a great deal of their support for new technologies, especially information technology, yet the publication last week of the authoritative NEDC report called "Policy for Information Technology Industry" shows how inadequate our national effort in this regard has been. It says:
"Taken in an international context, the performance of the UK IT industry has been less successful and it is a matter for concern that the industry's full potential is unlikely to be realised if the current trend continues …
The UK's nearest competitors geographically—France and Germany—have developed national policies to encourage the international success of their respective IT industries."
Our information technology industry cannot achieve its full potential without an effective national policy to encourage it.
The report continues:
"Information technology in the UK is characterised by two features. First, the UK IT industry is relatively small and also fragmented … Secondly, while there is a plethora of welcome initiatives to stimulate the UK IT industry, these appear as a largely unco-ordinated response to a wide variety of competing demands for severely limited resources and expertise."
The Minister for Industry and Information Technology (Mr. Kenneth Baker): In view of what the right hon. Gentleman has said, no doubt he will get around to welcoming the Chancellor's commitment yesterday of a further £185 million to research and development in the new technologies, which follows last year's commitment

313
of £100 million. We are spending five times what the Government of which the right hon. Gentleman was a member spent on new technologies in 1979. We should recognise those facts.
Mr. Orme: We recognise what the Government have failed to do, which is to invest at the proper time and to maintain that investment, especially when our main competitors—never mind Japan but even France and Germany—are doing so. We have had many press releases from the Minister, but not a lot of real action.
As I have already said, imports of manufactured goods have increased by 10 per cent. while the volume of exports has dropped by 4 per cent. Last year, for the first time in more than a century, Britain suffered a deficit in manufactured goods of more than £643 million. Import penetration in textiles and clothing has risen to nearly 70 per cent. of all textiles and garments sold, from about 30 per cent. 10 years ago, and employment in that sector has fallen from 800,000 to 525,000 since 1979.
In the face of those facts, can the Government still claim that there are no alternatives? The Labour party knows that there are. Our manufacturing industry must be saved because of the production, wealth and jobs that it creates. The Labour party is committed to regenerating British industry and, as my right hon. Friend the Member for Stepney and Poplar said, we shall reduce unemployment to below 1 million within the lifetime of a Labour Government. We shall not leave industry to flounder in the sea of free market forces.
With every other successful industrial country, we must have a national economic strategy to plan the economy with regional and local input. That is why we emphasise the crucial role of industrial democracy, tripartite sector committees and local planning. At the centre of the planning framework we shall set up a planning council, and the new National Enterprise Board will be given more powers and resources to innovate and to invest. It will work closely with a national investment bank set up to channel resources into the wealth-creating sectors of the economy. [Interruption.] Conservative Members laugh about that. We are talking about 4 million people unemployed and about areas of the United Kingdom that are now barren of industry. The Labour party is determined to rebuild Britain's industrial strength by working with unions and management to plan industrial development. Our aim is not only to save companies and factories from closure, but to back the creation of new companies and new science-based industries, to be led by new public enterprise and supported by the development of industrial democracy. There should be more expenditure on construction, telecommunications, the railways, hospitals, schools, housing, the improvement of roads and the conservation of energy. That is not wasted money, as the Government would have us believe. The use of public money in those ways will create jobs immediately in the public and private sectors and will be of lasting benefit to the nation.
This is a no-hope Budget for employment and industry. We need a Budget for jobs. Britain is at the crossroads as a major industrial power. Unemployment will increase as a result of the Budget, and that will threaten the very social fabric of our society. Those problems, with unemployment at such a high level, with young people unable to get a job
314
for years, not just for months and weeks, and with the middle-aged having no chance of returning to work in many key industrial areas, are the background to our discussion of this Budget.
The matter is serious for both the House and the nation. If we are to succeed we must have an industrial base. In the past, industry was treated as a second-class citizen. Those who worked either on the shop floor or in management were not given priority in society. We have seen what the Japanese, the Germans, the Americans and the French have done. Our priority will be to create industry where it has been decimated, to save industry where it exists and, above all, to get our people back to work. We are concerned with getting Britain back to work, and only a Labour Government can achieve it.
9.30 pm
The Financial Secretary to the Treasury (Mr. Nicholas Ridley): The right hon. Member for Salford, West (Mr. Orme) succeeded in speaking for half an hour before he mentioned the Budget, and he did not mention the customers of industry at all.
Unlike the right hon. Gentleman, I know something about Linotype-Paul. There is no question that any action of the Government was responsible for the change. It was nothing to do with incentives or lack of them. Linotype-Paul is a profitable company which, for perfectly proper commercial reasons, has decided to manufacture its products elsewhere. That gives the lie to the right hon. Gentleman's whole speech. For the right hon. Gentleman to suggest that the whole industrial decline of this country can be laid at the feet of the Government is utter nonsense. There must be demand for British goods. There is plenty of demand for goods, but not necessarily for British goods.
The hon. Member for Clackmannan and East Stirlingshire (Mr. O'Neill) made an excellent and well-researched speech about the whisky industry, but he will agree that the problem is lack of demand for whisky. We have to address ourselves to the problem of finding things that people will buy. Nobody has tried harder than I to improve the supply prospects of the whisky industry. Taxation is not the problem. The duty has been reduced by 28 per cent. since 1975, and in real terms the retail price of a bottle of whisky is almost half that of 20 years ago. That should show the Opposition that they cannot simply pin the blame on the Government.
My right hon. Friend the Member for Stafford and Stone (Sir H. Fraser) said much about development land tax. Anyone who wishes to bring old factories into modern repair and sell them at a profit may do so without having to pay that tax. The tax is payable only where reclassification takes place as part of a planning process and a windfall profit results. I do not think that my right hon. Friend is right to blame development land tax for some of the troubles of the building industry.
My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) spoke about the growth in the number of Government servants. It is not for me to comment on the National Health Service, but in Customs and Excise and Inland Revenue, total numbers of staff have been reduced by 14,000 since the Government came to office. That is a decline of 13 per cent.—an achievement which I am sure my hon. Friend will recognise as an example of good management and curtailment of bureaucracy. I hope that

315
he will pay tribute where tribute is due to those in the public service who have established more efficient working practices.
Mr. Andrew F. Bennett: Will the right hon. Gentleman give way?
Mr. Ridley: I shall not give way at the moment; I have only just begun my speech.
The right hon. Member for Salford, West was rightly concerned about jobs. A disappointing aspect of the debate has been the Opposition's total failure to pay due regard to what is done in the Budget to increase real jobs for the future. This is the European year of the small and medium enterprise. I do not suppose that that appeals to the Labour party, but it appeals to us, and to the hon. Member for Colne Valley (Mr. Wainwright), who welcomed the many measures in the Budget which will help small businesses and thus produce more jobs.
The right hon. Member for Stepney and Poplar (Mr. Shore) pooh-poohed the whole operation and said that it did not cost enough. I should not like to take the right hon. Gentleman out to dinner if I were paying the bill, as he is obviously the sort of chap who will always choose the most expensive item on the menu just because it is the most expensive. Perhaps he will change his tune if I tell him how much the small business measures in the Budget will cost. The cost in 1983–84 will be only £140 million as they relate mainly to the corporation tax side and will not come through until next year, when the cost is estimated at £380 million. If that is not a major shot in the arm for small businesses I do not know what is.
My hon. Friends the Members for Upminster (Mr. Loveridge) and for Luton, East (Mr. Bright) and many others recognised how much the Budget does for small and medium businesses. It is a rich crop indeed. I pay tribute to my hon. Friends for their pamphlet "Moving Forward", which inspired the Government to take many of their recommendations on board, and for their continual pressure on us to introduce measures to provide more jobs through small and medium businesses. The extra £300 million borrowing available under the loan guarantee scheme will be a major help to such enterprises, as will the reduction of the small profits rate of corporation tax to 38 per cent. and of the marginal rate between that and the main rate to 55 per cent. As has been pointed out, the hump is very much smaller. I am sure that my hon. Friends will agree that the best way to smooth the profile of corporation tax is that which we have chosen and which now extends right up to profits of £500,000, embracing the medium-sized firms about which my hon. Friend the Member for Upminster rightly expressed great concern.
I draw my hon. Friend's attention to three other measures that will greatly help medium-sized private firms. The rate of relief for minority shareholdings in unquoted companies is increased from 20 to 30 per cent., which will make a great difference to their ability to pay this tax. In addition, although this was not in my right hon. and learned Friend's speech, we intend to extend from eight to 10 years the period over which capital transfer tax may he paid by those in this category. Moreover, capital gains tax relief for retirement has been increased from £50,000 to £100,000 to encourage people to keep their money in their businesses.
316
Those reliefs, although the Labour party cares not a fig for them, will be a great help in persuading people that it is right to stay in their businesses, to expand them and to provide more jobs.
Dr. Bray: How does the right hon. Gentleman reconcile the 75 or however many special provisions for small firms with the high principle of non-intervention in the market which seems to exclude such discrimination? In particular, did he read the interesting article by Samuel Brittan saying what a lot of nonsense all this was?
Mr. Ridley: The hon. Gentleman is out of date. The 75 has been indexed and is now well over 100. To take away discrimination may be to even up the balance. The discrimination that successive Governments have built in against those who invest in equity as opposed to lending money has caused serious distortions, which may well be at the heart of the problen to which the right hon. Member for Stepney and Poplar referred.
On the business expansion scheme, I start from the premise that many of my hon. Friends found it too complex and restrictive in its previous form, as my hon. Friends the Members for Southampton, Test (Mr. Hill) and for Luton, East have said. The restrictions were deliberate, as it was intended to target the scheme on start-ups. With the experience that we now have, we have decided to widen it to all unquoted companies apart from those on the unlisted securities market. If there are restrictions in the scheme when it comes before the House, I hope that my hon. Friends will at least acknowledge that Ministers have taken those decisions and have cut the restrictions to the minimum to preserve confidence in the new scheme.
The scheme may cost up to £75 million in a full year—I hope that it will cost more—and I hope that it will be a great help to those medium-sized businesses to which my hon. Friends have referred. For the first time it extends these privileges to all unlisted companies, whatever their size. Full details will be included in the Finance Bill, but it might help the House to know that it will start with shares issued after 6 April 1983 and run until April 1987, at which time the next Conservative Government will no doubt extend it.
The limit for subscription to shares in any one year is increased from £20,000 to £40,000. We have done away with the 50 per cent. limit on share capital, subject to business expansion scheme relief, which was one of the main complaints of my hon. Friends. Relief will be claimable more quickly. On the other hand, individuals will not be allowed to replace their existing loans to companies with equity subscribed for under the business expansion scheme. I must say for the benefit of my hon. Friend the Member for Winchester (Mr. Browne) who told me that he would not be able to be present for the reply, that it is not possible to allow the scheme to be available to the directors and senior employees of a company. The scheme is for outsiders to put in additional and new equity and to keep it in the company for at least five years.
I believe that with loss relief on unquoted shares and with the purchase of own shares relief, which we introduced last year, and with the new business expansion scheme, small and medium-sized businesses will be provided with a shot in the arm unknown in any other industrial country in the world. No small or medium-sized company need miss the chance to expand through lack of capital. What this will do for jobs, to improve the gearing

317
of industrial companies and to reduce bank lending remains to be seen, but the opportunity is now there for those who are prepared to take it.
Mr. Cook: Before the right hon. Gentleman congratulates himself and his Government any further on what they have done for small businesses, would he like to explain to the House why small and medium-sized businesses have been going into liquidation at the fastest rate since records first began, and why they are currently going bankrupt at the rate of 40 per day?
Mr. Ridley: The hon. Member for Edinburgh, Central (Mr. Cook) should not measure one side of the account without the other. There has always been a large number of companies going bust and a large number starting. It is the net number that the hon. Gentleman should measure.
We have been considering how to make the work of computing and paying taxes simpler for small businesses. Those who cannot afford a wages clerk or a computer put in long hours working out their liability for PAYE and VAT. On VAT, we are asking for the views of small business men and their associations on whether they would welcome a switch to a system of annual accounting and payment of VAT. This would not obviate the need to keep records, but it would mean that calculations would have to be done only once instead of four times a year. This change would be helpful to their cash flow, although not, alas, to ours. It would mean that companies would have to accumulate the necessary funds by the end of the VAT year and it could not be optional. The Government are prepared to consider this only if the clear majority of those concerned are in favour.
We have not yet found a way of providing for annual accounting for PAYE. The cost of doing so would be large, but I think it worth drawing it to the attention of business men that they may engage and reward their employees on a net of tax basis. For businesses in certain trades, mainly those that employ piece workers, this could be very beneficial. We are considering whether there is more that the Government could do to help businesses interested in arrangements of this type. Tax inspectors are ready to explain this method of payment and to assist those who wish to switch to it.
Although we are not making any major changes to capital gains tax this year, the Chancellor announced increases in the amounts of a number of the reliefs. The doubling of the limit for retirement relief is an important component, which I have already mentioned, of our strategy for encouraging owners to keep their capital working in their businesses until their retirement. We shall also be providing relief where gains on overseas bank accounts are made by those resident but not domiciled here. We are also proposing to withdraw two reliefs—the exemption for gifts up to £100 and the facility for the payment of capital gains tax by instalments. In the light of recent changes in the tax, especially the substantial increase in the threshold and the rollover reliefs for gifts and settled property, these reliefs are now of little practical significance. I recognise that the tax remains excessively complicated, but these proposals provide a modest but useful simplification.
We have sought to increase the range of borrowing instruments. I agree entirely with my hon. Friend the Member for Horsham and Crawley that we would like to
318
see companies borrowing more from the markets and less from the banks. We would like to cheapen and stabilise the flow of long-term funds to companies.
There are three ways in which companies may raise long-term finance. First, there is the conventional full coupon issue, which has always been available. The only modification here is increased flexibility in the terms. It will be possible for such stocks to be issued at a discount of up to 0·5 per cent. a year up to a maximum of 15 per cent., with that discount being subject to capital gains tax in the hands of the investor. Although it will not be deductible by the company, it will have greater scope to use the discount as a way of varying the yield on successive issues of a particular stock—in other words, shelf issues.
Secondly, as originally announced in the statement by my right hon. and learned Friend the Chancellor of the Exchequer in June 1982, companies are permitted to issue indexed stock. Index bonds can be issued in broadly two forms, which I will call the capital route and the income route. Under the capital route the bond is structured so that indexation constitutes a capital uplift of the principal. The borrowing company will not be able to claim a deduction for this uplift against its profits for corporation tax purposes, but the investor will be subject only to capital gains tax, which, given the indexation provisions introduced last year, will frequently mean little or no liability.
Mr. O'Neill: On a point of order, Mr. Speaker. Does the Minister's speech constitute a reply to the debate, or would that be better achieved by means of a circular from the Treasury?
Mr. Speaker: Order. Perhaps the Minister will continue.
Mr. Ridley: It is incredible that a means of facilitating industrial borrowing, which could lead to the provision of more jobs, should be treated to such a cavalier and cheap interjection.
Under the income route the bond is structured so that the indexation generates additional sums of interest. These can either be paid out year by year or rolled up and paid out with the capital on redemption. Under such an arrangement the interest will be deductible to the borrower and subject to income tax in the hands of the lender. Coupon interest actually paid will, under either route, be treated as at present.
The third category is zero or deep discounted bonds, which were the subject of the recent consultative document. Many of the responses asked us to abandon the concept of symmetry—the principle that the discount should be treated for tax purposes in the same way both in the hands of the borrowers and the investors. This concept is not an obscure piece of theology but a simple piece of common sense. It takes little imagination to see how departure from symmetry would enable a company to both borrow and lend the same amount, at great cost to the Revenue.
However, an alternative proposal attracted support. The discount would still be treated as an income item for borrower and lender, but the borrower would be allowed to deduct the discount as it accrued on a compound basis, as is the practice in the United States. The lender would pay income tax on the accrued discount only when the bond was sold or redeemed. Any further gain or loss chat

319
he made as a result of the general shift in interest rates, for example, would be treated as a capital item. This proposal represents an attractive compromise. We have no hang-up over symmetry, only over arbitrage. There is a degree of asymmetry in timing, but the scope for arbitrage is limited. Companies get relief as the discount accrues, giving a cash flow benefit, while lenders pay tax only after they have received funds from disposing of the bond. We propose therefore to introduce legislation in the Finance Bill to provide for taxation in this way.
I should now like to answer many questions put by the right hon. Member for Stepney and Poplar, who is no longer with us.
Mr. Cook: He is coming.
Mr. Ridley: I am glad to hear that.
I should like to compare the burdens which the Government have placed on different sectors of society. In 1978–79, persons paid 76 per cent. of the non-North sea taxes and companies paid 24 per cent. After this Budget, persons will pay 79 per cent. and companies only 21 per cent. As the Chancellor said, that represents a switch of £3 billion from business to persons. In many debates we have been urged to reduce taxation on companies. There are many reasons why we should and why we have done that. Not least is the fact that the fall in profitability has reduced the corporation tax yield. The national insurance surcharge will have been cut from 3½ per cent. to 1 per cent. in August and national insurance contribution increases have been limited for business as against employees. Despite that, and despite the fact that the Government have got spending under control, although it is still high, if inflation was to be squeezed out and we were to have lower public sector borrowing requirements, it was necessary to increase personal taxation.
I want to discard another of the Opposition's main cards. They want to place more of the tax burden on those in the higher income groups. The hon. Member for Walsall, North (Mr. Winnick) made much of this. Unfortunately, we have done this on capital transfer tax and I regret it. Over the most of the scale, capital transfer tax is more onerous today than it was in 1975. To put this right would cost £75 million over and above the £50 million cost of the measures proposed yesterday by my right hon. and learned Friend through indexation of the CTT rate bands.
The right hon. Member for Stepney and Poplar said recently, when putting forward Labour Budget policy, that a Labour Government would restore CTT to the proper levels. I presume that means that he would reduce the rate bands by £75 million, because those were the bands which the right hon. Member for Leeds, East (Mr. Healey) brought in. We have reduced the absurdly high rates of income tax. The Opposition seem to think that there is a crock of gold to be got out of increasing rates of tax on the better off. It is not so.
To go back to 1978–79 income tax rates would produce £700 million, assuming the higher rate bands were kept at 1978–79 real levels. This would buy less than 1p off the basic rate of income tax, or allow thresholds to go up by about 4 per cent. But there is more to this than arithmetic. The policies of the Opposition are the politics of envy and of job destruction. The right hon. Member for Stepney and Poplar said that the main object of his party in its Budget would be the creation of wealth and the reduction of
320
unemployment—those were its central goals of policy—but we cannot create wealth by chasing the wealth creators away. If impossible burdens are put on those who can manage businesses, all that one does is invite them to go and manage businesses overseas. That is the failure of Labour party policy which it has never been able to face.
Mr. Shore: It is a fact, in spite of all that the right hon. Gentleman has said about higher taxation under the Labour Government, that during our five years in office GDP rose by 10 per cent. Under the opposite policies of the right hon. Gentleman and his colleagues, GDP has fallen by 5 per cent.
Mr. Ridley: But the right hon. Gentleman's Government trailed the world, whereas we shall lead it.
Nothing gives me more pleasure than that we have been able to increase personal allowances by 8½ per cent. over indexation. I should like more. I was asked to make comparisons by the right hon. Gentleman, the hon. Member for Motherwell and Wishaw (Dr. Bray) and others. The hon. Member for Motherwell and Wishaw mused about why the Labour party was in such a terrible state and so unpopular. My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) joined in the musing, which I thought was unkind of him. One should not be gleeful at private grief.
The hon. Member for Motherwell and Wishaw wondered whether the squabbles in the Labour party had brought it so low. He asked: is it the Falklands factor? I thought that I was going to cry. He went on to ask: has it been the mild winter? He answered that by saying: no, it is not. It is because this wretched Government have kept the standard of living of those in work at a high level. What a terrible accusation. What a disgraceful thing to have done. What a monkey that makes of the right hon. Member for Stepney and Poplar, who tried to make out that everyone is worse off.
The truth is that since the Labour Government left office income tax thresholds are 5 per cent. higher in real terms. Net of tax pay for those on average earnings throughout the period is up 8 per cent. in real terms. The percentage paid in income tax for those or, average earnings without children is down 1 per cent. The percentage paid in income tax for those with two children on average earnings is also down 1 per cent.
Mr. Cook: What about national insurance contributions?
Mr. Ridley: I shall come to national insurance contributions.
Dr. Bray rose——
Mr. Ridley: I shall not give way.
National insurance is not a tax. It is a necessary increase——
Dr. Bray rose——
Hon. Members: Give way.
Mr. Speaker: Order. If the Minister does not wish to give way, he is not obliged to do so.
Mr. Ridley: The national insurance contribution is not a tax. It is necessary to pay for the cost of the retirement pension. I want to come to what right hon. and hon. Members have——
Dr. Bray rose——
Mr. Ridley: I shall not give way.
I want to come to what right hon. and hon. Members including the hon. Member for Colne Valley have called a cheat. They said that we have robbed, deceived and diddled the pensioners. Our pledge was simply that we would price protect the value of the retirement pension. Between November 1978 and November 1982 prices rose by 61 per cent. We estimate that by November 1983 they will have risen by 70 per cent. If the figures that my right hon. and learned Friend gave yesterday are achieved, pensions will have risen by November 1982 by 68 per cent. as opposed to 61 per cent. for prices and by November 1983 by 75 per cent. as against 70 per cent. for prices. I require the Opposition to withdraw those words and the charges that they have made.
Mr. Cook: Will the right hon. Gentleman give way?
Mr. Ridley: I shall not give way. I ask the Opposition to stop using emotive and untrue language. They know full well that we have stood by the pledge that we gave to pensioners at the last election. They have no conceivable justification for the campaign that they are waging to deceive the pensioners, fiddle the facts and cheat the electorate about the reality of what the Government have done. I shall not give way to that.
Even if we include national insurance contributions in the calculations that I gave earlier, the net of tax pay for those on average earnings has increased 4 to 5 per cent. in real terms between the time when the Labour party left office and now. I accept that the percentage paid in tax by those on average earnings after income tax and national insurance contributions is up 1·5 per cent. I give the hon. Member for Edinburgh, Central (Mr. Cook) his little point.
Mr. Cook: The Government said that they were going to cut it.
Debate adjourned.—[Sir George Young.]
Debate to be resumed tomorrow.

Laurel Way Housing Society
Motion made, and Question proposed, That this House do now adjourn.—[Sir George Young.]
10 pm
Mr. Andrew F. Bennett: I welcome the chance to raise the problem of the Laurel Way housing society. I want to make it clear how much I appreciate the efforts of Mr. Green, Mrs. Birch, Mr. Syers and all the other co-owners of the Laurel Way housing society to try to sort out the problems of the society and the highly effective and efficient job that its present managing agent, D. C. Goodenough and Company, has done in trying to put the society's affairs in order and the dwellings made fit.
Equally, I am aware that the present members are divided between those who want in the end to buy their homes, once they have been made fit, and those who want to remain co-owners. I hope that both groups will be able to fulfil their desires.
The aim of raising the issue in the House tonight is to try to ensure that the sad events that have occurred in this housing society over the past 10 years will not be repeated elsewhere.
The police were asked to study the way in which the society was managed, first, by the Collingwood housing society and, secondly, by Grange Estates. The police were satisfied that no criminal prosecution could be brought. The society took legal advice to see whether civil proceedings could be taken successfully, and concluded—mainly, I believe, because of the delays in taking civil action—that it would be impossible to bring successful civil proceedings against the culprits.
I tried hard to persuade the Housing Corporation that it had a clear moral, if not legal, responsibility for much that went wrong. It was keen to deny this and always argued that it was the responsibility not of those in London or in its regional office but of the managing agent, Mr. Whealing. The Housing Corporation made that clear on many occasions.
In the light of the experience of the Laurel Way housing society with the Housing Corporation, I believe that the general public should be warned that the Housing Corporation is not what many people believe it to be—a public watchdog, giving a seal of approval to those it helps. Although the corporation asks searching questions when anyone wishes to borrow money, and takes a long and sometimes seemingly bureaucratic time to decide whether to lend money, it accepts no responsibility for the propriety or good behaviour of the housing groups that it helps.
I believe that that was the major problem with the Laurel Way housing society. Because the Housing Corporation was involved, many people believed that it had given its seal of approval. Therefore, they did not ask enough searching questions at the right time. It may be a little harsh, but I feel that the Housing Corporation's notepaper should carry a warning similar to that on cigarette packets or advertisements—"Housing warning. The Housing Corporation may allow your home to be damaged; treat with suspicion." There are far too many people who still believe that in some way the Housing Corporation guarantees not just the money but the general

323
behaviour of those people who borrow the money. There have been incidents up and down the country where that has been proved wrong.
Just as no one has successfully sued a cigarette company for causing cancer, so no one can successfully sue the Housing Corporation for failing to supervise one of the housing societies or associations. However, I feel that it has a clear moral responsibility which, on occasions, it should accept.
Some time during 1966–67, a Mr. Derek Stephenson owned a piece of land behind Mauldeth road in my constituency. He owned it via his company, Sackville Estates. He and a Mr. J. V. Whealing and others founded the Laurel Way housing society, developed the land, and built 53 dwellings as a co-ownership scheme. Not only did Mr. Stephenson sell the land to the society, but he also offered his services as architect, while Mr. Whealing, via Whealing, Houghton and Toms, quantity surveyors, offered his services as quantity surveyor. Via the Collingwood housing society, Mr. Whealing became the managing agent of the scheme and secretary of the Laurel Way housing society.
Mr. Stephenson employed a Mr. David Breeze to carry out the design work for his firm of architects. At the time, Mr. Breeze happened to be a Stockport councillor and, it is claimed, perhaps rather more unfortunately, served on the planning committee that gave approval to planning permission for the scheme.
The scheme turned out to be somewhat unconventional, and we now know that it contained a major design fault. The building firm involved in the construction, Hugh Owen, was run by Idris Owen, my predecessor in Stockport, North and a former mayor of Stockport.
The dwellings were finally completed between January 1971 and January 1972. Almost as soon as the houses were occupied, complaints started about water penetration and major problems of damp. From the few documents available for that period that were not destroyed, it appears that the society had major arguments with the builders about the problem of water penetration, and it clearly believed at that stage that it was due to poor workmanship. We now know that that was unfair, because it is clear with hindsight that the real problem was a major design fault.
It is also unfortunate that Stockport council's records of the original planning permission, the building inspector's report and all the information that went backwards and forwards between the architect and the builder are not available, either because of the change from the old borough of Stockport to the new metropolitan authority or because the managing agent for that period got rid of the material.
It is worrying that Mr. Whealing, as managing agent, never advised the Laurel Way housing society to pursue what was wrong. He merely pressed the builders to undertake minor remedial work, and in 1976 he suggested to the Housing Corporation that it could pay out the final settlement of accounts for about £8,000 on the basis that this was a considerable reduction to take into account the amount of remedial work that had to be carried out.
At that stage the design fault had been identified by some people, but Mr. Whealing clearly did not feel that he ought to persuade anyone to take legal action either against the local authority, for not carrying out its duties under the building regulations against the architect for the design fault or against the builder, if he still believed that it was a case of bad workmanship. It is my belief and that
324
of counsel who have studied this issue that, had he then given advice for action to take place, there was a good chance that it might well have succeeded. However, I accept that other arguments are involved, such as whether the architect had insurance cover and whether the money might have been recovered.
Why did Mr. Whealing, as secretary to the society and managing agent, not get proper surveys carried out to establish what was wrong? That is a mystery. Equally worrying is why the Housing Corporation did not press him to do so when it had evidence that things were not right. Mr. Whealing, an experienced man in property and estate management, failed to carry out his duties—or did he choose not to carry out his duties?
In 1978 the Housing Corporation was prepared to hand over the development to the Laurel Way housing society on the basis—as was said at the handing-over ceremony—that the problems had been sorted out. After 1978 the problems continued and water penetration got worse. After 1978 the Housing Corporation persuaded Mr. Whealing to leave Collingwood housing society without making public the reasons. The housing society was not satisfied with Mr. Whealing at that time. Mr. Whealing took the business of managing the Laurel Way housing society to a new company that he created—Grange Estates. Instead of putting Laurel Way housing society's problems into fresh hands, he took them with him and the problems continued.
During 1980 and 1981 reports were obtained from the National Building Agency. That involved the society, with considerable difficulty, having to borrow more than £00 to remedy the defects. The work is now in hand. I hope that it will solve the problems once and for all.
Once the first report from the National Building Agency was obtained in 1980, Mr. Whealing, instead of showing it to all the members of the society, called a meeting and encouraged members to imagine that they could buy their houses without the repairs being done under the Government's 1980 legislation. That could have resulted in some people buying properties with major defects and others buying from them without any knowledge of the position. That would have been a grave scandal. Public health inspectors were suggesting at that time that some of the houses were so unfit that they ought to be made the subject of closing orders.
When the majority of the co-owners discovered the reports and the misleading information that they had been given, they insisted on dispensing with Mr. Whealing's services. The new managing agents have brought a professional approach to the issue and the position of the society has improved.
Why did the Housing Corporation not use its powers to compel Mr. Whealing to take action in 1976 or thereabouts against the architect, the builder or the local authority, or all three, relating to the defects about which the technical staff of the Housing Corporation knew?
Why did the Housing Corporation insist that Mr. Whealing should leave the Collingwood housing association? If it had sufficient grounds for insisting that he should leave Collingwood, why was the Housing Corporation prepared to see him set up Grange Estates? I do not believe that it could have stopped him setting up Grange Estates, but it could have insisted that Grange Estates should not manage schemes which had Housing Corporation money in them, such as Laurel Way and others in Stockport and south Manchester.

325
Why did the Housing Corporation allow Grange Estates to talk to the co-owners about buying in 1981 when the defects were known but had not been divulged to the co-owners?
Will the Minister consider the propriety of councillors involved in giving planning permission allowing building inspectors not to carry out their full duties, because some of the defects that came to light suggested that some of the drains were not properly inspected when the original building was taking place? It is disturbing to have a scheme being supervised by an architect, who was a member of the local council, when the council's building inspectors were supposed to be supervising that work.
Finally, the Housing Corporation did not look after the public interest. Should it not say that it made a mess of things, and that it did not provide the supervision that people could reasonably expect? Instead of expecting the co-owners to make good the defects and the damage, should not the Housing Corporation give a grant rather than a loan to put the matter right? After all, it was the inefficiency and incompetence of the Housing Corporation that failed to ensure that legal proceedings were taken early enough, which might have made it possible for the co-owners to recover from those responsible the money to put the property right.
I realise that the Minister will claim that he has fairly limited responsibility, but a public body scandalously failed to carry out what most people believed was its moral responsibility to supervise the investment of public money in such a scheme. I hope that the Minister will be able to set some of those fears at rest tonight.
10.15 pm
The Under-Secretary of State for the Environment (Sir George Young): The hon. Member for Stockport, North (Mr. Bennett) tempts me with his constant references to health warnings and smoking to make the long speech about the evils of smoking that I would have made in my previous capacity. However, I shall resist that temptation and begin by congratulating him on raising the important and interesting case of the Laurel Way co-ownership society. He has ably and fully demonstrated the difficulties that the members of that society have experienced in their efforts to secure the repair and improvement of their properties, following the occurrence of construction defects. I endorse the hon. Gentleman's remarks about the efforts of the members of the cooperative, acting in a voluntary capacity, to tackle the very serious problems facing both them and their neighbours.
The hon. Gentleman has also demonstrated their persistence and his energy in pursuing various matters with the Housing Corporation. He has effectively turned the attention of the House from the previous Budget business of the day to focus on the specific topic of immediate concern to a group of co-owners at Heaton Mersey in his constituency. I shall try to shed some light on the issues that he raised, when he spoke with feeling and detailed knowledge on the subject. Perhaps it would be helpful to provide the House with some essential background on the recent history of the Laurel Way housing society and its dealings with the Housing Corporation. In doing so I shall sketch in the picture on co-ownership societies in general and shall explain the relationship between the Department of the Environment and the Housing Corporation,
326
including the responsibilities that my right hon. Friend the Secretary of State for the Environment has with regard to that body.
As the hon. Gentleman probably knows, co-ownership societies have existed since 1961 to offer their members a form of collective ownership in which they have full responsibility for the management of their own estates. Around 40,000 flats and houses have been provided by these housing associations in England, Scotland and Wales. These dwellings have been constructed on estates consisting of seven to 100 or more units. The estates are run by an elected management committee which is answerable to the co-owners, although it may use professional agents and contractors to see to the day-to-day maintenance and management of the properties and common facilities.
These societies are industrial and provident societies registered with the Registrar of Friendly Societies and normally also with the Housing Corporation, which approves their rules. Under these rules the members jointly own their land and property and only the co-owners themselves can be members.
On joining, each member buys a small non-returnable share in the society, pays a returnable deposit, and signs a tenancy agreement under which he or she is bound to make a regular contribution to the costs of the society, including its mortgage and maintenance expenditure. The monthly charge is linked to the value of the property when first occupied by the co-owner and the costs of upkeep, including repairs and additional loan charges that may result from major works—as happened in the case of the Laurel Way society.
These societies may receive financial help from the Housing Corporation in the form of interest-bearing loans for the initial development of the scheme and for any subsequent works. The society, through is members' monthly payments, bears the full cost of such loans at the current rate of interest charged by the corporation. Although co-ownership societies do not qualify for grant aid from the Department in the form of housing association grant, they enjoy tax relief on behalf of their members, deducted at source from their mortgage and qualifying loan charges.
Members are free to leave at any time. When a co-owner leaves and is replaced after at least five years of membership, he or she is entitled to a cash sum from the society which is based on a percentage of any increased value of the property and also credits the co-owner with the sums that he or she has paid towards the repayment of the society's joint mortgage for the scheme. However, under the 1980 Act, co-ownership societies may, subject to certain conditions, sell the individual properties to their members. This has proved extremely popular with co-owners. This provision enables members to achieve full owner-occupation at the cost of repaying the joint mortgage.
Since the power was made available, over 20,000 co-ownership dwellings have been sold and further sales are in the pipeline. Before proceeding to such a sale, however, societies, as in the case of the Laurel Way housing society, normally take steps to ensure that the properties are in a good state of repair and do not suffer from any structural defects—especially those which might be common to all the properties and which may require joint action by all the

327
members. This is no more than common prudence would dictate, and is manifestly in the interests of the co-owners themselves.
The hon. Gentleman touched on the role of the Housing Corporation, which was set up by the Housing Act 1964 and was granted further powers under the 1974 and 1980 Acts. Its role is to promote, fund and supervise housing associations in their task of providing homes. Its management is vested in a chairman and 11 board members appointed by my right hon. Friends the Secretaries of State for the Environment, for Scotland and for Wales. Its work is directed from its headquarters in London, but day-to-day contact with individual associations is maintained by a network of regional offices throughout Great Britain. In the case of the Laurel Way housing society, its contact point would be the north-west regional office in Manchester. The corporation has direct responsibility for the management and control of the capital funding for housing associations within cash limits set for each country by my right hon. Friends the respective Secretaries of State, but they do not themselves have any involvement in particular associations or schemes.
Mr. Andrew F. Bennett: Will the Minister make it quite clear that when the societies say that they have got funding from the Housing Corporation, that tends to mislead people into believing that the corporation is doing a little more than providing the money and that it is in some way guaranteeing the propriety of the housing association or housing society?
Sir George Young: I understand what the hon. Gentleman is saying, but it betrays some misunderstanding of the role of the Housing Corporation. The society, as a co-ownership body, should be self-sufficient. The corporation has an involvement in registration initially, and in the approval of the loans, but normally little else. It has power to audit the accounts that have to be submitted each year under the registered housing associations, and it has the power to conduct inquiries under section 19 of the 1974 Act, but it is up to the co-operative itself to deal with most of the day-to-day management of the development. It is its responsibility initially to make sure that the development is effected in a responsible way. I shall come back in a moment to the role of the Housing Corporation, and I hope that I shall say something helpful in that respect.
The Laurel Way housing society has a scheme consisting of 18 two-bedroomed flats and 35 three-bedroomed houses, constructed in 1971. It is a co-ownership society supported by 40-year mortgages with the Housing Corporation and the Leeds Permanent building society. It is self-financing and receives no subsidy other than in the form of option mortgages. The society has always maintained full repayments on these loans from the monthly contributions made by its members. However, it has had two setbacks to which the hon. Gentleman referred.
The first was when damp penetration occurred shortly after completion of the scheme. This led initially to a dispute between the society's architect and the contractor who had built the scheme. Each denied responsibility for the defect. The Housing Corporation's regional technical officer agreed remedial works with the society, which
328
were then carried out by a different contractor. This operation proved to be successful, and did not require an additional loan.
The second setback arose when further defects became apparent and a full survey was commissioned from the National Building Agency in 1981. The NBA concluded that major works would be required to eradicate the new structural problems and further damp penetration that was identified. The initial estimate for the work was £450,000.
The society was advised by the Housing Corporation to consider litigation against any party involved in the original construction. The corporation agreed in principle to make further loans available for remedial works, subject to arrangements for such loans to be repaid. There is no provision for grants to a co-ownership society in those circumstances. The society finally obtained counsel's opinion in March 1982 which established, as the hon. Gentleman said, that it had no claim against any party involved. Following this, the corporation again stated that loans would be available and was prepared to accept a position whereby, provided that all rental income was used to service loans, rents would not have to rise immediately to the normal level required by the co-ownership rental calculations. The loans would be repaid by rent increases, sales to members or a combination of both.
The society obtained a tender for remedial works that was submitted to the corporation in October 1982. This was accepted, subject to assurances from the society about repayment of the loan.
The society's managing agents finally put forward a package in November 1982 showing proposals for the repayment of the loan, and on 1 December 1982 the regional office approved the package and the granting of further loans of £310,000 to enable the remedial works to proceed. As far as I am aware, no further problems have arisen and the repairs contract is proceeding.
An important aspect of this story was the society's decision to pursue the sale of individual properties to those of its members who wished to buy under the powers granted to them by the Housing Act 1980. Approval in principle to sales was given by the Housing Corporation in December 1981, subject to the properties being brought into a satisfactory state of repair. Those sales to individual members must enable the society to pay off all Its debts, including the further loans issued for repair works.
If seven or more members do not purchase their flats or houses under this arrangement, they may perpetuate a viable co-ownership society under their existing tenancy agreements. The detailed terms of the sales and the resulting arrangements for the remaining co-owners who do not wish to buy are matters that cannot be resolved until the current building works have been satisfactorily completed and the final costs assessed.
In that time changes of membership and other factors might affect the eventual outcome. We cannot anticipate the future course of events and the negotiations that will be necessary. The Housing Corporation will advise the society and will tell it the conditions that will be applied to the corporation's consent that must be granted if the sales are to go ahead.
Looking back over the events, the most significant feature is that, despite the problems outlined by the hon. Gentleman, the society has maintained its mortgage payments. Looking forward, the signs are that the society will be able to cover the additional loans without difficulty and that individual sales will be achieved on favourable

329
terms. The corporation has been acting generally within the remit given to it. While I cannot answer for, and indeed may not be aware of, all the detailed negotiations in which it has been engaged on this case, I am satisfied that its officers have been anxious to pursue the interests of the Laurel Way society and its members as far as they are able, bearing in mind the fact that they have been dealing with a co-ownership society that is fully responsible for the upkeep, repair and maintenance of its properties.
Towards the end of his remarks, the hon. Gentleman asked me several questions. Happily, they are all directed either to the local authority or to the Housing Corporation rather than to me. I shall pass his questions to the responsible authorities, and I shall ensure personally that he receives replies to them, including the specific
330
questions about the relationship between Mr. Whealing and the Collingwood housing society. The Housing Act 1980 specifically precluded duality of interests, which, until then, was perfectly legal. Perhaps the post-1980 divorce to which the hon. Member referred was a result of the introduction of that legislation.
I am grateful to the hon. Member for drawing the facts of this case to our attention and for enabling me to clarify certain points for the benefit of the House this evening. I have no doubt that he will continue to follow the progress of the society in the resolution of any further problems, and I am sure that the Housing Corporation will continue to provide advice and practical help when required.
Question put and agreed to.
Adjourned accordingly at twenty-nine minutes past Ten o'clock.

CIVIL SERVICE
  Civil Service Unions (Meeting)
  Civil Service Unions (Meeting)
  Complaints Procedure
  Complaints Procedure
TRANSPORT
  Severn Bridge (Tolls)
  Severn Bridge (Tolls)
  Humber Bridge
  Humber Bridge
  British Rail
  British Rail
  Lorries (Mudflaps)
  Lorries (Mudflaps)
  British Rail (Rolling Stock)
  British Rail (Rolling Stock)
  Roads (Hampshire)
  Roads (Hampshire)
  Drink-Drive Campaign
  Drink-Drive Campaign
  Merseyside
  Merseyside
  Serpell Report
  Serpell Report
  Road Construction (Private Capital)
  Road Construction (Private Capital)
  British Rail Engineering Ltd.
  British Rail Engineering Ltd.
  Transport Supplementary Grant
  Transport Supplementary Grant
  "The Future of the Bus"
  "The Future of the Bus"
  M25 Motorway
  M25 Motorway
  M40 (Transport Study)
  M40 (Transport Study)
  Road Construction Contracts
  Road Construction Contracts
  Roads (Greater London)
  Roads (Greater London)
  A40 (Improvement Schemes)
  A40 (Improvement Schemes)
  South Woodford-Barking Relief Road
  South Woodford-Barking Relief Road
  Port of London Authority
  Port of London Authority
  Vehicle (Testing)
  Vehicle (Testing)
FOREIGN AND COMMONWEALTH AFFAIRS
  Disarmament Conference
  Disarmament Conference
  Diplomatic Service
  Diplomatic Service
  Consultants
  Consultants
  Foreign Affairs Council
  Foreign Affairs Council
  Taxation (Overseas Assets)
  Taxation (Overseas Assets)
NATIONAL FINANCE
  Weekly Earnings
  Weekly Earnings
  Tax Evasion
  Tax Evasion
  Free Ports
  Free Ports
  Seafarers (Taxation)
  Seafarers (Taxation)
INDUSTRY
  Ferrous Foundries (Closures)
  Ferrous Foundries (Closures)
  Loan Guarantee Scheme
  Loan Guarantee Scheme
ENERGY
  Nuclear Accidents
  Nuclear Accidents
  Environmental Pollution
  Environmental Pollution
HOUSE OF COMMONS
  House of Commons Commission
  House of Commons Commission
EDUCATION AND SCIENCE
  Welsh Language Forms
  Welsh Language Forms
  Higher Education
  Higher Education
  Library Service (Hersham)
  Library Service (Hersham)
  Medical Students
  Medical Students
  University Grants
  University Grants
  School Allocations (Appeals)
  School Allocations (Appeals)
  Textile Technology
  Textile Technology
  Schools (Admissions and Appeals)
  Schools (Admissions and Appeals)
HOME DEPARTMENT
  Mr. Clive Moore
  Mr. Clive Moore
  Greenham Common Protesters
  Greenham Common Protesters
  Constituency Electorates
  Constituency Electorates
  British Citizens (Police Information)
  British Citizens (Police Information)
  Prisons (Staff)
  Prisons (Staff)
  Police Sergeant O'Leary
  Police Sergeant O'Leary
  Minimum Sentences
  Minimum Sentences
  Commonwealth Citizens
  Commonwealth Citizens
  Squatters
  Squatters
  Trafalgar Square (Crowd Safety)
  Trafalgar Square (Crowd Safety)
  Parliamentary Elections (Spending Limits)
  Parliamentary Elections (Spending Limits)
  Coroners' Courts
  Coroners' Courts
SCOTLAND
  Health Boards (Allocations)
  Health Boards (Allocations)
  Dental Treatment
  Dental Treatment
  Suicides
  Suicides
  Women's Aid
  Women's Aid
  Health Boards
  Health Boards
ATTORNEY-GENERAL
  Retired Judges (Legal Advice)
  Retired Judges (Legal Advice)
  Welsh Language Forms
  Welsh Language Forms
  Judge Robert Charles Chope
  Judge Robert Charles Chope
  Conspiracy and Protection of Property Act 1875
  Conspiracy and Protection of Property Act 1875
WALES
  Medical Practitioner Committee
  Medical Practitioner Committee
  Roads
  Roads
  Teachers (Unemployment)
  Teachers (Unemployment)
ENVIRONMENT
  Wild Plants
  Wild Plants
  Sheltered Housing
  Sheltered Housing
PRIME MINISTER
  Genetic Manipulation Advisory Group
  Genetic Manipulation Advisory Group
EMPLOYMENT
  Housing Benefit
  Housing Benefit
  Weekly Earnings
  Weekly Earnings
  Miss K. Hardcastle
  Miss K. Hardcastle
  Employment Statistics
  Employment Statistics
  Special Employment Measures
  Special Employment Measures
EMPLOYMENT
  Maternity Leave and Pay
  Maternity Leave and Pay
TRADE
  Spain
  Spain
  Tourism (Consultants' Review)
  Tourism (Consultants' Review)
  Consumer Credit
  Consumer Credit
  Aviation Facilities
  Aviation Facilities
  Textile Goods
  Textile Goods
NORTHERN IRELAND
  Agriculture (Smuggling)
  Agriculture (Smuggling)
  Animal Health
  Animal Health
  Prisons (Staff)
  Prisons (Staff)
SOCIAL SERVICES
  National Insurance
  National Insurance
  Supplementary Benefit
  Supplementary Benefit
  Benefits
  Benefits
  Housewives (Invalidity Benefit)
  Housewives (Invalidity Benefit)
  Zomax
  Zomax
  Overseas Service Volunteers
  Overseas Service Volunteers
  Chromosomal Disorders
  Chromosomal Disorders
  Dental Treatment (Anaesthesia)
  Dental Treatment (Anaesthesia)
  Abortion Counselling (Merseyside)
  Abortion Counselling (Merseyside)
  Widows (Contributions and Benefit)
  Widows (Contributions and Benefit)
  Geriatric Care
  Geriatric Care
  Family Planning Clinics
  Family Planning Clinics
  Histopathologists (Leeds)
  Histopathologists (Leeds)
  Elderly Persons (Vitamin Intake)
  Elderly Persons (Vitamin Intake)
  Dental Treatment (Waiting List)
  Dental Treatment (Waiting List)
  Nurses (Special Hospitals)
  Nurses (Special Hospitals)
  Heating Allowances
  Heating Allowances
  Pensioners
  Pensioners
  Mr. G. Bowskill
  Mr. G. Bowskill
  Nurses
  Nurses
  Consultants
  Consultants
  Orthotists
  Orthotists
  Male Midwives
  Male Midwives
  Occupational Pension Schemes
  Occupational Pension Schemes
DEFENCE
  Nuclear Deterrent (Costs)
  Nuclear Deterrent (Costs)
  Public Relations
  Public Relations
  Nuclear Defence—Key Points
  Nuclear Defence—Key Points
  Binary Nerve Gas Weapons
  Binary Nerve Gas Weapons
  Mycotoxins
  Mycotoxins
AGRICULTURE, FISHERIES AND FOOD
  Food Prices
  Food Prices
  Council of Agriculture Ministers (Meeting)
  Council of Agriculture Ministers (Meeting)

Preamble
The House met at a quarter-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Rochester.

Lord Bauer
Peter Thomas Bauer, Esquire, having been created Baron Bauer, of Market Ward in the City of Cambridge, for life—Was, in his robes, introduced between the Lord Vaizey and the Lord Charteris of Amisfield.
Lord Cameron of Balhousie
Marshal of the Royal Air Force, Sir Neil Cameron, GCB, CBE, DSO, DFC, AE, having been created Baron Cameron of Balhousie, of Balhousie in the District of Perth and Kinross, for life—Was, in his robes, introduced between the Lord Flowers and the Baroness Airey of Abingdon.

Private Cars: EEC Systems of Testing
2.44 p.m.
Lord Inglewood: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government which other countries in the EEC which have a system of regular testing of private cars on the lines of our MOT tests have adopted a system with biennial inspection.
Lord Lucas of Chilworth: My Lords, I understand that only the Federal Republic of Germany have a system of biennial testing.
Lord Inglewood; My Lords, do we know what other countries have any system which is at all comparable?
Lord Lucas of Chilworth: My Lords, the testing in other countries is similar in that Luxembourg tests annually, after three years, Belgium annually after four years and the Netherlands after five years. In France, Denmark, Greece and Ireland, no testing takes place.

Closed Shop and the Gennard Report
2.46 p.m.
Lord Oram: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they have modified their views about the closed shop now that the Gennard report has been completed.
The Minister of State, Northern Ireland Office (Lord Gowrie): My Lords, Professor Gennard has not yet presented his completed report to the Department of Employment, although I understand that he expects to do so very shortly. When the report is received a copy will be placed in the Library of your Lordships' House.
Lord Oram: My Lords, is the Minister aware that I have received from the Library a closely-written, six-page summary of Professor Gennnard's report? Was that not available to the Minister in preparing his Answer to my Question? If I send him a copy, will he not appreciate that the employers who responded to Professor Gennard's inquiries showed by a majority that they saw more advantages than disadvantages in having closed shops because they provided improved industrial relations procedures; for example, by avoiding inter-union competition and increasing control over trade union membership?
The Earl of Gowrie: My Lords, speaking for myself, I prefer to await the report rather than a synopsis, and I have not read any synopsis; but I shall, of course, pay close attention to the report. As to whether employers prefer the closed shop or not, that would not seem to me to prejudge the issue of whether closed shops are desirable or not.
Lord McCarthy: My Lords, would the noble Earl agree that he is going to have to publish Gennard in the end? Would he not agree that it would be rather better if he could tell us now that the Government intend to publish Gennard as it is given to them, and not in any way to take out bits that might be contrary to their policy?
The Earl of Gowrie: My Lords, when I said that the report when it is received will be placed in the Library of your Lordships' House, I did not mean a Government synopsis of the report.
Lord Brockway: My Lords, in view of the fact that many large companies have indicated that they prefer the method of the closed shop, would the Government, in giving consideration to this proposal, consider allowing a conscience clause for those who do not wish to be members of a closed shop, provided that they give their subscriptions to charities instead of giving them to the trade unions?
The Earl of Gowrie: My Lords, when I have read the report I shall be happy to consider anything which may arise out of it. I would remind your Lordships that the legislation of the previous Government in relation to the closed shop was found to violate the European Convention of Human Rights; and I also have to pay attention to that.
Lord Glenamara: My Lords, will the noble Earl say whether the report deals with the closed shop in the two branches of the legal profession?
The Earl of Gowrie: My Lords, I am not able to say that because I have not yet read the report.

Isle of Islay Economic Situation
2.48 p.m.
Lord Belhaven and Stenton: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majestys' Government what action they are taking or plan to take to mitigate the serious economic situation in the island of Islay resulting from the closure of four out of the eight distilleries on the island, and the virtual closure of one other, coupled with severe difficulties and near bankruptcies in the hotel industry and job losses in the agricultural industry.
The Minister of State, Scottish Office (The Earl of Mansfield): My Lords, Her Majesty's Government are aware that the current economic recession has caused difficulties for the industries indigenous to Islay. However, our policies have achieved a substantial reduction in inflation which will help industry generally and we have increased support both for agriculture and for the Highlands and Islands Development Board. The board has extensive powers to assist a very wide range of economic and social development, and will continue to encourage and support potentially viable developments on Islay.
Lord Belhaven and Stenton: My Lords, I thank my noble friend for that reply and for the not very encouraging nature of it, apart from the Highlands and Islands Development Board, which, I know, does a good job. I regret that I cannot congratulate him or, through him, his right honourable friend on increasing the whisky tax yesterday. May I ask two supplementary questions: First, have the Government any firm plans to introduce new industry to those areas which are affected by the destructive attitude of the Treasury to the whisky industry? Secondly, have the Government any plans for a free port in the Highlands and Islands area?
The Earl of Mansfield: My Lords, dealing with my noble friend's first point, I have to remind him that so far as increases on spirits are concerned duty levels over the past three years have been relatively low. Whisky duty is now 28 per cent. lower, in real terms, than in 1975, and the real price of whisky is nearly 50 per cent. lower than it was in 1962,
My noble friend then asked me about the activities of the Highlands and Islands Development Board. The House will know that that is the Government's main development agency for that part of the world. In the past six years it has been very active so far as Islay is concerned. It has spent a total of over £2 million of the taxpayers' money in assisting developments which have cost nearly £5 million. Finally, my noble friend asked me about free ports in Scotland. That was mentioned by my right honourable friend the Chancellor of the Exchequer in his speech yesterday. As the House will know, one or more are to be set up in the United Kingdom.
Lord Lloyd of Kilgerran: My Lords, in the absence of my noble friend Lord Mackie of Benshie, may I ask
724
the Minister whether the Government have in mind any special arrangements for giving travel concessions to those on this island who are made unemployed as a result of this recession?
The Earl of Mansfield: My Lords, I think that the House debated that aspect of the unemployed last Friday. We have a number of subsidies so far as shipping services and charges to Islay are concerned. I do not think that the Government have plans for going beyond that.
Lord Glenkinglas: My Lords, will my noble friend remember that there are many areas in Scotland, and not only Islay, which depend very largely on the whisky industry, and they are all in rather difficult rural areas? Will he also bear in mind that the only hope of developing many of the Highland areas is the low price of petrol, which is a fact which one of his noble colleagues did not seem to know about last week, but it is true. The distances in these areas are enormous and this budget has hit both whisky and petrol.
The Earl of Mansfield: My Lords, I bear in mind the points that my noble friend makes. His points relate to the Government's general economic policy regarding rural areas. Perhaps one should consider what this Government have done for agriculture and, moreover, for the Highlands and Islands in the amount of money which has been devoted to the Highlands and Islands Development Board. The allocation has gone up from £12.8 million in 1978–79 to £30.4 million in 1983–84. One can see just how much the Government are doing in this direction.
Lord Kirkhill: My Lords, is the noble Earl the Minister able to say what is the real price of whisky today if 1962 were to be taken as the base year for calculation?
The Earl of Mansfield: My Lords, I cannot because my mind is not clever enough to do the percentage sum. But I will do it and write to the noble Lord.
Lord Stodart of Leaston: My Lords, in confirming what my noble friend Lord Glenkinglas has said about the difficulties facing distilleries on the mainland, may I ask whether, if it is correct that the cause of the difficulties is owing to lack of demand for whisky, my noble friend is able to say how demand can conceivably be stimulated by putting up the price? Considering that his right honourable friend was flexible enough to exclude pipe tobacco from his tobacco allowance, would it not have been possible to exclude whisky from the duty on spirits?
The Earl of Mansfield: My Lords, the real reason that the whisky industry finds itself in the difficulties that it is in is the result of the world-wide recession. Some 80 per cent. of whisky which is produced in Scotland goes for the export market. Therefore, while I agree that the level of duty has some effect upon demand, it is really the recession which has caused the present troubles in the industry.
Lord Cledwyn of Penrhos: My Lords, is the noble Earl able to confirm whether Islay is within the scope

725
of the integrated development programme for Scotland? Can he say when this programme is to begin operating? When it begins operating, can he indicate what help that will give to Islay?
The Earl of Mansfield: My Lords, the integrated development programme is for the Outer Isles, which I am afraid does not include Islay which is not very far from the mainland. Secondly, the plan is already in operation. It will last for five years; but, as I have said, I am afraid that Islay is outside its scope.
Lord Ferrier: My Lords, does my noble friend imply that the addition of 25p to the cost of a bottle of whisky is not inflationary?
The Earl of Mansfield: Taken in isolation, my Lords, of course any increase in the price of anything is inflationary. But I would hazard a guess that the Chancellor has to balance his books, and what in this case he has taken with one hand he has given away with another.
Lord Shinwell: My Lords, I declare my interest before I ask my question. My interest is that whisky is the only sensible drink to consume. I advise everybody to take advantage of it. But how can we take advantage of it when we have an explanation by somebody associated with Scotland—that is, the Minister himself—who provides such a shocking Answer? Is not the answer to those on all sides of the House who have complained about this onerous tax that the Chancellor should reconsider the situation and provide justice for Scotland?
The Earl of Mansfield: My Lords, I totally agree with the noble Lord, Lord Shinwell. Whisky is the drink for me, especially when compared with foreign muck. Nevertheless, the Chancellor has a different road to follow when it comes to raising revenue and I do not believe that the consumers of gin and other such spirits would like to bear the cost of the duty which is raised on whisky if it was ameliorated in that particular direction.
Lord Derwent; My Lords, I hesitate to speak on a Scottish matter, but can my noble friend tell me whether I can help our Scottish friends by drinking more whisky?
The Earl of Mansfield: Yes, of course, my Lords; and if my noble friend cares to drink malt whisky, that will provide even more help and it will do him more good.
Lord John-Mackie: My Lords, will the noble Earl draw the Chancellor's attention to the whisky advertisement in the press today for White Horse whisky where the horse is shown with a large tear in its eye?

Single Homeless People and Social Security
2.59 p.m.
Baroness Jeger: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what is the present standard rate of social security benefit to single people without an address; and whether any changes are proposed in the present arrangements.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne): My Lords, the present rate of supplementary benefit payable to single people without accommodation is equivalent to the rate payable to non-householders, that is £20.55 per week. This matter is under review but early change is unlikely.
Baroness Jeger: My Lords, can the noble Lord the Minister say why a person without an address receives £20.55, whereas a single person with an address receives £25.70, plus housing costs? Is he aware that it is more expensive to be homeless than to have a home? This is because of having to eat out and make do in all kinds of ways. Secondly, is it the department's policy that if a homeless person finds some lodgings, that the department will advance the rent which most landlords demand—quite properly—in advance, or are these people pushed around in the complications of the new housing benefit regulations so that they end up losing the chance of the lodgings that they have found?
Lord Trefgarne: My Lords, the answer to the noble Baroness's second supplementary question is "Yes". We are, as a matter of principle anyway, prepared to make single payments for the purpose the noble Baroness describes. As to her first point, the reason for the difference in these rates is that it was thought anomalous that a single homeless person who had no contribution to make to household expenses should receive a higher rate of benefit than people who are living in and contributing to a friend or relative's household.
Baroness Jeger: But, my Lords, I was asking that they should receive the same, not higher.
Lord Trefgarne: My Lords, I am aware that that is what the noble Baroness was asking, but I was explaining why it was we thought that in general they should get less than persons in other circumstances.
The Earl of Longford: My Lords, will the noble Lord look into the arrangements made at present for homeless people without fixed abode? Is he aware that in fact they are taken off to a separate office in, I believe, Scarborough Street? Will he satisfy himself that they are not treated worse than those who have an abode? Would he make sure about that?—because all my information is that they are treated worse if they have not got a fixed abode.
Lord Trefgarne: My Lords, I will certainly look into the problem which the noble Earl raises, particularly if he would like to draw a particular case to my attention.
Lord Davies of Leek: My Lords, is the noble Lord aware that in this recession period many of these young men and women drift away from their homes,

727
have a sense of shame and, in our large cities, can sink into crime and everything else unless they have a chance of re-creating their lives? Consequently it is beyond our belief-is it not?—that when they are homeless they should have less than those who have a home, when they are genuinely trying to seek work.
Lord Trefgarne: My Lords, those who are likely or are about to incur the sort of costs the noble Lord refers to are, as I said to the noble Baroness just now, entitled to a single payment to enable them to do that. The diffculty, particularly in some urban areas, very often is to find the accommodation they require. The responsibility for the provision of accommodation for homeless people rests in general with local authorities, but my department does have responsiblity for what are called "resettlement units".

"Democracy in Trade Unions" (Cmnd. 8778)
3.2 p.m.
Lord Boyd-Carpenter Lord Boyd-Carpenter rose to move, That this House takes note of the Green Paper, Democracy in Trade Unions (Cmnd. 8778).
The noble Lord said: My Lords, I rise to move that the House takes note of the Green Paper which is entitled Democracy in Trade Unions. In view of the exchanges at Question Time perhaps I should make it clear at the outset that, being myself one of that underprivileged majority who have not read the lucubrations of Professor Gennard, I shall not be seeking to refer to that, to me, somewhat mysterious personage in the course of this debate.
The technique of the Green Paper is one which has been substantially developed in recent years and is, I would suggest to your Lordships, a salutary one. It enables a Government to put forward ideas and possiblities for future development and future legislation without being committed to action in respect of any of them. It gives an opportunity for views of all sorts to be ventilated on such issues in advance of a Government coming forward with legislation, with all the constraints and restrictions that the legislative process itself involves.
I would suggest to your Lordships that a subject such as this-certain aspects of the law governing trade unions-is peculiarly apt for the Green Paper treatment, inasmuch as this is a subject on which views vary very widely, not only between the two sides of the House but also on both sides of the House. It is therefore one which this House, in particular, with the massive reservoirs of experiene which are at its disposal in these matters, can and should profitably discuss without any of us feeling at the end of the day that we have found it necessary to take firm or rigid positions on any of the issues. As I understand it, my right honourable friend the Secretary of State for Employment has asked for comments by early April, so that the comments of your Lordships will be before him in good time before he has to move further forward and advise his colleagues in the Cabinet as to what action, if any, should be taken.
This particular Green Paper deals with three aspects of the law governing trade unions, but I think I should
728
begin, before plunging into them, by making one general comment. There are people—and I think there are some in your Lordships' House—who take the view that we tend to exaggerate the importance of legislation in industrial relations matters and that there is so much good that can be done in that vital area of our activities without legislation that we should not therefore allow ourselves to become obsessed with the technicalities of the law and of the legislation governing industrial relations and the industrial area.
I have some sympathy with that view, but I am bound to remind your Lordships that there are three reasons why the law governing industrial relations generally has to be kept under fairly regular review. First of all, there is the importance of the trade unions. The powers of good or ill for the wellbeing of our nation and its economy which they wield are so substantial that neither Parliament not anybody interested in public affairs can fail to give them attention. Secondly, there is the power which the unions wield over their own members; and as their membership is broadly of the order of some 10 million people which, with their families, takes one into very nearly half the population of this country, it is obvious again that it must be the duty of Parliament to see that those powers are reasonable and are reasonably exercised.
Thirdly, there is the fact that as trade unions stand in a position of special legal privilege—I have in mind the immunity from damages resulting from a trade dispute—it is essential that they should always be in a position to justify their legal standing and their eligibility for this very substantial privilege, because it is a privilege of great importance to be able to do what no other body of men could do freely and with impunity, when any other body of men would be liable to be hauled before the courts. Those who hold privileges do have, by reason of holding those privileges, certain responsibilities.
This particular Green Paper deals with three aspects of this complex subject. First, it deals with the question of ballots for elections inside the unions; secondly, it deals with ballots in respect of strike action; and, thirdly, it deals with the political activities of trade unions. In opening this debate I will endeavour to refer with proper brevity to some aspects of those three sides of the matter.
Taking them in the order in which they appear in the Green Paper, I will start with Chapter 2: the question of elections inside the unions. I am bound to say at the outset that I find this part of the Green Paper the least impressive part of it. It gives a little—and I say this with all due deference to my noble friend—the impression of not being completely thought through. For example, it appears to ignore the fact, of which I think most of your Lordships are aware, that inside trade unions in the course of the year literally thousands of elections take place—elections of shop stewards, elections to district committees, elections to branch committees, elections of branch officers, elections of regional officers and elections to regional committees—leading up to the major offices of general secretary and president. To seek to provide that all that multiplicity of elections should be formally conducted by ballot has a touch of unreality about it. It would certainly be an expensive process, although I would

729
say in this context that I personally very much regret the refusal of the trade unions, so far, to avail themselves of Her Majesty's Government's offer of financial help in respect of ballots.
Having said that, it seems very difficult to know where one should draw the line. Elections of senior national officers of the major unions are matters of public importance, and they should be conducted in the open with the fullest care to see that they are properly conducted. But it really is straining that concept very far to suggest that the same procedures are necessary or desirable in respect of the election of a shop steward or a member of a local committee. Therefore, the first question which I would ask, and which the Green Paper does not answer, is: where should the line be drawn?
The other aspect of this part of the Green Paper which left me in a state of some doubt is the emphasis put on the fair counting of the votes. Of course, the fair counting of the votes is proper, necessary and right. But if an election is going to be fiddled, if it is going to be conducted improperly, that process will generally have taken place a long time before the votes come to be counted, and the counting of the votes is itself, in those circumstances, no more than a formality. If, in parenthesis, I may illustrate that general proposition from the political sphere, I recall that when my father was a Member of another place he was speaking rather complacently to a colleague from Northern Ireland about the high percentage poll he had had at a recent general election. My father was very proud of the fact that his poll had exceeded 90 per cent., at which his Northern Ireland colleague smiled and said, "My dear fellow, that's nothing. If you look at my last election, I polled 105 per cent." I tell your Lordships that ancient but, as it happens, true anecdote simply to illustrate that I think it is a mistake to put so much of the emphasis on the counting of the votes, as the Green Paper does, unless the whole electoral process is going to be properly supervised.
The only suggestion that I can make is that, instead of legislating to provide particular systems of election, it might be possible to put responsibility on the certification officer, so that if the affairs of a particular union were blatantly and scandalously misconducted in respect of elections the certification officer might have to take steps in respect of the standing of the union. That would seem to me to be, possibly, the only practical method of enforcement of what otherwise seems to be, in this context, the least impressive part of the Green Paper's proposals.
Therefore, I pass quickly to strike ballots. I am very glad to see that the noble Lord, Lord Gormley, has indicated his intention to take part in the debate, because he, of all your Lordships, must have followed with a certain interest the proceedings, as lately as last week, in that great union of which he was until so recently president. That was certainly an example of the merits of the provision in union rules for a ballot before strike action, since it enabled the good sense of the membership to secure that the miscalculated, ill-judged proposal of the executive of the union to bring out the whole of the union, in order to try to secure the continued operation of a largely worked-out pit in South Wales, did not prevail. It was extremely reassuring as to the good sense of the union member,
730
and a very powerful example of the advantage of the system of a ballot.
That ballot, as I understand it—and the noble Lord, Lord Gormley, will correct me if I am wrong—was provided for under the rules of the union, which I think state that 55 per cent. of those voting have to favour a strike for the strike to operate. What the Green Paper deals with is the further question—and it is not quite the same question—as to whether legislation should lay down that there should be a ballot before a strike takes place. Once you talk of legislation in this respect, then, of course, you have to consider the question of enforcement. I suggest for your Lordships' consideration of this matter an aspect of it which is not mentioned in the Green Paper; that is, whether there is a distinction between a strike in a major public utility—a strike which can inflict general hardship on the community and, perhaps, help to paralyse the national life—and a strike in an ordinary company or firm of moderate size.
I think there is a real difference in principle here. A strike in one of the major public utilities does enormous damage to the community and does enormous damage to other wholly innocent and unconnected people. The only people to whom it does not do any damage are the members of the board of the public utility concerned, whose remuneration continues on exactly the same basis as before and whose normal life is no more disrupted than is that of any other member of the community. On the other hand, in the case of the ordinary traditional type of strike in a particular company the community as a whole is only, if at all, modestly affected, but those who run that company and who are dependent upon its profitability are very directly put at risk. Therefore, there seems to be a distinction of principle between these two types of strike, and it falls for consideration—some of your Lordships may offer views on this—whether, at any rate in the first place, provision for a ballot before a strike should be confined to the major public utilities and not applied generally across the field.
There is ample precedent for this. If your Lordships go back to the Conspiracy and Protection of Property Act 1875—which, as your Lordships know, was, in a way, the original charter of freedom of action for trade unionism—it will be recalled that under Section 4 of that Act (a section which endured down to 1971) it was made a criminal offence to interfere with the supplies of electricity, gas and water. That was repealed in 1971, and it was rightly, in my view, so repealed because it relied—as perhaps might have been expected in 1875—on criminal sanctions.
When your Lordships are considering enforcement of trade union law today, I think most noble Lords will feel that criminal sanctions, except in the case where there is violence involved, are inappropriate. First, I dare say, in the absence of my noble and learned friend the Lord Chancellor, that the criminal courts are very slow in operation; and, secondly, all that you are apt to do is to make martyrs of individuals as a result of proceedings which take place weeks and weeks after the whole matter has been cleared up.
The effective sanction, if we want one, for enforcement of trade union law lies in the civil courts, and particularly by way of action against the funds of the

731
union. Nothing induces more responsibility and care in any of us than responsibility for looking after other people's money. The knowledge that certain action could endanger the funds of the union is a real cautionary force in the mind of anyone in these circumstances. So I would suggest for your Lordships' consideration that the immunity for trade dispute action which exists generally might well be withdrawn in the case of strikes in a major public utility which have not been previously authorised by a ballot of the members.
One can sometimes learn from the experience of other countries. In the United States, under the Taft-Hartley Act the President can, by proclamation, provide for a cooling off period of, I think, some 80 days. Even at the end of those 80 days a strike cannot take place until a ballot of the unions concerned has been carried out by, I think it is called, the National Labour Relations Board. That is an indication that in this kind of sector, the major public utility sector, other countries have been giving some thought to the matter.
I hope none of your Lordships will regard it as offensive, because it is certainly not so intended, when I say that it is a fact that strikes in public utilities always seem to bring out collectively the worst in our own people. To take the water strike, for example, to which my noble friend Lord Nugent of Guildford referred so eloquently the other day, none of the individual strikers would have dreamt of going into anybody's home and saying, "I will turn off the water unless I am paid some extra money". None of them would have wished, as was brought out in a letter in The Times the day before yesterday by my noble and gallant friend Lord De L'Isle, to expose the inhabitants of a great city to 19 times the concentration of lead in their water which the World Health Organisation regards as tolerable. No individual would do that; yet collectively, because it is done as part of a collective dispute, just those kinds of things are done. They give rise not only to the hardship to which I have referred but also, perhaps, to long-standing bitterness. If those asked to take part in such action by way of strike were to be asked in advance to ballot as to whether they were prepared to take this action, it might have an extremely salutary effect. That is the thought I want to leave with your Lordships.
Finally, as regards the political expenditure of trade unions, the issue has lain for many years between contracting-in and contracting-out. The issue is very simple: do your Lordships think that under the present system of contracting-out a number of people contribute to the Labour Party who do not wish to but who, for one reason or another, do not like to take the necessary step to contract out? I would ask those of your Lordships who have any doubt on the matter to look at the extraordinarily interesting table on, I believe, page 25 of the Green Paper, which shows the percentage of members of different unions or sections of unions who contribute to the political levy. It shows on the one hand that there are a number of unions and sections of unions where over 96 per cent. contribute to the political levy. There is really no reason to believe that 96 per cent. of those union members are supporters of the Labour Party, least of all at the present
732
moment. One is driven irresistibly to the inference that the present procedure under which either a shop steward or a branch secretary has to be informed of a member's desire to contract out, particularly in closed shop industries, constitutes a very real deterrent. If this is right, people are being conscripted into paying to support a political party which they do not wish to support.
I do not believe that any loyal member of the Labour Party would wish to have it described as an organisation maintained by involuntary contributions. Those who resist a change to contracting-out must face this dilemma: either there are very few people paying the political levy who do not want to, in which case to change to contracting-in would do the Labour Party very little harm, or there is a very substantial number who do not want to, in which case the Labour Party is being supported by those who do not wish to help to finance it. That is a position which any self-respecting member of any party would find most disagreeable and unpleasant. Therefore I suggest that the time has come to consider moving back to contracting-in. That is the spirit of the 1913 Act. It is spelled out there very clearly that nobody should contribute to a party to which he does not wish to contribute. I do not believe that any noble Lord really believes in his heart that that is the position today.
There is also the curious fact that the decision to set up a political fund and support the Labour Party required only one ballot. There is no machinery for further ballots. Many of the ballots were taken very soon after the Trade Union Act 1913. In many unions, therefore, there is probably no single person still working who actually took part in the ballot. Is it necessarily to be assumed that those who were prepared to pay money to support the Labour Party of Keir Hardie are necessarily and automatically similarly disposed towards the Labour Party of Mr. Foot, or whoever it may be who will shortly succeed him? I do not know, but this raises quite serious questions—and serious questions, I say with great respect, for the consciences of the Labour Party in particular.
I hope and believe that this will be a valuable debate. I open it with great diffidence because I know well that there are many noble Lords with vast experience of this matter on both the employers and the trade union side. I am very glad to see from the list that many of them are to contribute to the debate. I hope that it will prove helpful, not least for the Green Paper purpose of helping to advise Her Majesty's Government. I would end by reminding your Lordships on this controversial subject of some words spoken by the great Master of Balliol, Benjamin Jowett, at the end of a very difficult college meeting: "Remember, gentlemen, none of us are infallible, not even the youngest of us". I beg to move.
3.29 p.m.
Lord McCarthy: My Lords, I should like to begin by congratulating and thanking the noble Lord, Lord Boyd-Carpenter, for initiating a debate on this very interesting subject and for the moderate and critical way in which he has approached the Green Paper. I do not say that I agree with everything which the noble

733
Lord has said. I shall have something to say about some of the matters with which I do not agree as I go along. However, some of the points which the noble Lord made I find myself in agreement with—which is a pleasant change—at the beginning of our debate this afternoon. I should also like to thank the noble Lord for having, as he said, brought out many people to speak in this debate, many on our side of the House. There are other people on our side of the House who would have liked to be here today to make a contribution to this debate, but who unfortunately were unable to come. I apologise on their behalf, but the "League of ex-General Secretaries and ex-members of the General Council of the Trades Union Congress" is well represented on the list of speakers and they will be making their contributions as the afternoon wears on.
I should like to start in a critical way by making perhaps half a dozen points about this Green Paper. First, I wonder why it is a Green Paper at all. The noble Lord, Lord Boyd-Carpenter, is quite right when he says that Green Papers are a very good institution. But, for the most part, Green Papers look at both sides of the picture. Certainly the previous Green Paper which the present Government introduced on trade union law and which led to the 1982 Employment Bill looked at both sides of the case. In fact, I used to say at the time that it was rather longer and more persuasive on the case against further legal regulation—at least that was my of looking at it—and rather shorter on that in favour of more legislation. Maybe that is why the present Green Paper takes a different approach.
This Green Paper does not give a balanced view for and against. It is more a "Black Paper" than a Green Paper; indeed, it is more a "Blue Paper" than a "Black Paper"—it is a blue touchpaper, is this Green Paper, and I am not going to set light to it and retire immediately. I say to the House that this is a highly controversial Green Paper which argues one side of the case. It argues one side of the case in a tendentious and misleading way. It is tendentious and misleading when it is not plain wrong. Perhaps I can quickly give six random examples.
It is not true, for example, as the Green Paper says, that the Donovan Commission drew particular attention to the low level of participation in trade unions. It mentioned this in only six lines in paragraph 172 of its report and put forward no proposals. Indeed, in those six lines the main point of the Donovan Commission report was that it showed that there was no general disquiet among members of trade unions over the conduct of elections.
Secondly, it is not so, as this Green Paper says, that the scene in relation to participation in trade unions "has hardly changed" since Donovan's day. A survey which the Department of Employment authorised and paid for showed that there has been a considerable degree of change in methods of union government and in degrees of participation since Donovan. It is also not so that the absence of further change in the direction which the Government would like to see is the result, as the Green Paper suggests, of a "lack of will" on the part of the unions. The fact is that the same Department of Employment survey showed that unions changed their governmental procedures and
734
systems to deal with the problems they face day by day and not to deal with the Government's views on what those problems ought to be.
It is not true that the unions have refused—and to some extent the noble Lord, Lord Boyd-Carpenter, referred to this point—to take the Government's money for ballots because they are obstinate. They distrust the party opposite. They distrust the purposes for which this facility is being introduced. They remember the way in which, in the Industrial Relations Act 1971, a whole series of benefits hinged on the acceptance of registration. In view of that history the unions are, quite understandably, not cooperating over the ballots and the money for the ballots. But it is not a matter of obstinacy, it is one of fear; fear and suspicion of the Government's motives.
Also it is not true that the power of the trade union movement comes from its legal privileges, as the Green Paper says. If the power of the unions was a function of legal regulation and legal provision, the AUT would be as powerful as the NGA, which unfortunately is not the case. The fact is that a whole range of technological and market factors affect union power. The state of the law and the legal status of trade unions in law is not a result of that, and the legal situation is not the consequence of their power situation.
It is not true either—and the noble Lord also referred to this point—that the legal status of British trade unions is unique. It is a little unusual, but other countries began with a system of common law liabilities and immunities, and other countries now have more extensive rights—for example, in relation to a striker breaking his own contract of employment—than we do in this country. The status may be odd, but it is not unique, and is not particularly beneficial to the trade union movement. It is not true that leaders of trade unions possess the power to initiate industrial action. That is regulated by the rule book. There is no evidence whatsoever that union members are denied a fair opportunity to register their views.
I told your Lordships that I took these six examples of the report's being misleading at random. Perhaps I did not take them quite at random, because they all come from page one of the Green Paper. At this rate of inaccuracy and error 1 have worked out that there are 300 errors in this Green Paper. I have to tell the House that I did not get that far; I reached page 10 and found that the rate of error was about right, and then I gave up.
The first major point I wish to make is that this Green Paper is a partisan, biased, inaccurate and one-sided version of events. My second point is to ask, what is behind it all? What is the central agument running underneath this misrepresentation of fact? I call it ballotomania, which has nothing to do Arnold Haskell—the view that the other fellow would be done good to if he subjected himself to a continuous process of voting on all issues, and for all offices, all the time; and that if it did not do him any good then at least it might confuse him. This is combined with a great reluctance—as I will go on to argue—to accept that anything of that kind should be applied to oneself, to one's institutions or to one's power bases. It is a one-sided form of ballotomania.

735
That is really what is in this Green Paper. For example, paragraphs 32 to 46 tell us that ballots are always better than a show of hands. They tell us that direct elections are to be preferred to indirect elections. They suggest that periodic ballots are better than once-for-a-lifetime ballots. Most importantly, they suggest that no industrial action can be justified without ballots. That is my second point.
My third point is on a point of the Green Paper where reality begins to break in—and we have to thank the people who assisted the Government to write this Green Paper—when we come to talk about how we would bring about ballotomania. It is quite true, as the noble Lord said, that when the Government begin to talk about what they propose to bring into effect in relation to elections, the Green Paper itself grows very uncertain. It believes, and I think it may be right, that one cannot force trade unions down the road to ballotomania without taking away those existing immunities which remain after the 1981 and 1982 legislation.
The report considers a number of other alternatives and in the end we are told in paragraph 52(a) about the man in possession. If the unions refuse to remodel their constitutions in the direction of ballotomania, we have a picture of the civil servants taking over and actually running the unions. There is a wonderful picture of "Sir Humphrey" taking the chair at the AEU's Tuesday executive committee meetings in the Peckham Road; it is a marvellous picture if one has enough imagination. The Government look at this, of course, and see that it will not do. In the end—as the noble Lord suggested—they do not really have any effective way of driving trade unions into this particular one-sided cul-de-sac.
Similarly on strike ballots, the Government have a very great deal of information to make them more careful. They have the example of their own compulsory strike ballot in 1972 for British Rail. They have the evidence of the Donovan Commission taken in respect of compulsory ballots in the United States and Canada which the noble Lord, Lord Boyd-Carpenter, mentioned also, where the evidence continues to be that unions win the compulsory ballots of the National Labour Relations Board and that they make strikes much more difficult to settle afterwards; and that, in general, these provisions are no longer used. So they have a very great deal of evidence to make them doubtful about what kind of sanctions they might be able to introduce to carry through ballotomania.
This brings me to my fourth point. In this Green Paper, as far as one can see, there are two very general, abstract, unsubstantiated arguments as to why we should struggle through and find legal forms to force us into this particular avenue. One argument is the importance of these institutions, which the noble Lord also mentioned. The trade unions are so important, so vital, they can do such potential damage to the economy, that we must ensure that anybody who acts on their behalf has the maximum degree of representativeness and support among the membership. That is the first argument. I prefer that to the second, At least they do not have to have any facts for that one.
The second argument is that there is "widespread concern" that "time and again" unions have been
736
shown to be out of touch with their members and that there is therefore "a possibility" of malpractices, and so on. In other words, single examples, and indeed for the most part no examples, are quoted: our old friends the four dinner ladies, the three railwaymen, the two local authority workers and the one chicken sexer we heard so much of in the 1982 legislation debates—isolated and unsubstantiated examples of widespread concern and people being out of touch.
There are things one can say on both these arguments. First, there is the general argument; what I call the Athenian democracy test. No one needs to come to this House, and I certainly would not attempt to do so, to say that trade union democracy is satisfactory or perfect or universally effective. What system of democracy is? The test is whether in general terms it stands up reasonably well to, say, the level of democracy in the CBI, where they never have any votes, where they do not have any motions, where there is no representative elections and where nobody really knows how the body emerges which runs the organisation. Or, for example, the Conservative Party, if I dare say so, where the leader nominates and sacks the chairman. Nobody says they should be regularly re-elected, and nor do I. Or, for example, professional associations, where very frequently there is no branch structure, where the nominated executive of the great and the good by and large greatly exceed the elected representatives. Or where we have such wonderful institutions, such bizarre creations as the grand general meeting of the British Medical Association. Or take private industry; take the chairman and board of directors of ICI, or Unilever. Even Mr. Ian McGregor was not elected, not even indirectly; he was nominated.
I shall be told that this is all stupid and all silly. Of course it is. It is silly to suggest that these institutions should be trnsformed into Athenian democracies and it is ridiculous to suggest that they are bad and imperfect institutions, and have no right to take action in their members' interests, if they fail that test. All I am saying is that on that test, on the Athenian democracy test, the trade union movement is further down the road than all those other institutions.
So we come to malpractices—the four dinner ladies, the three railwaymen, and so on. There are two points to make about that. First, I do not believe—and here I think the noble Lord was, to some extent, coming with me—that minor malpractices, in the sense of things done which are not completely in conformity with the rule book, are any more common in trade unions than in, say, local elections—certainly not in the local elections I have known. The point about minor malpractices is that the overwhelming majority of them do not matter because the overwhelming majority of them do not affect the result. That is the point about most malpractices in most trade unions, that they do not affect the result; in the same way as most of the people who do not quite fill in the nomination forms in local government, and the fact that the names of people are put down in the wrong order, do not affect the result, either.
The second point is that if it be true—I say this very seriously to the House, and I do not want to be misunderstood—that there is widespread concern, if it be true that a large number of our fellow citizens

737
believe that time and again unions are out of touch with their members, have not the Government some responsibility for this? Has not the press some responsibility for this? Is not this a legend which has been deliberately created and sedulously spread around the country? I use these words very carefully, and I hope I am not going to be misunderstood. It was Dr. Goebbels who said that if you repeat unsubstantiated generalisations often enough people believe them, and once people believe them you can argue that you must do something about them in order to reassure the people. That is the argument of guilt by association and misrepresentation, and it is not a very nice stable.
Now I come to my penultimate point, and that is how sad it is that in this Green Paper this Government—even this Government—have gone so far from seeking to argue their case by reference to the facts, because there are facts about this matter. There is a connection between this Green Paper, for example, and poor old Professor Gennard. There is a connection between this Green Paper and the fury on the Government side at the publication by the Department of Applied Economics of its research about the consequences of the abolition of wages councils. There is a connection between this Green Paper and what was said by the noble Earl, Lord Gowrie, in the previous debates we had in this House, when we sought to guote the results of Mr. Daniel's investigations for the PSI into the effects of the Employment Protection Act. There is a connection between this kind of thing and the most recent research of the Institute of Manpower Studies, which we are told, according to the Observer, has proved the total worthlessness of the young workers' scheme. In all these areas, and in the area of this Green Paper, there are facts, there is research, there is evidence. But it does not point in the direction in which the Government wish to go. Therefore, in all these areas, particularly in the field of industrial relations, systematically and collectively the evidence has to be ignored.
I will give the House three very quick examples of evidence which lean against what this Government are suggesting in respect of legislation in the field of elections. There is no correlation between frequent and regular use of ballots, or postal ballots, and the political composition of the leadership or the degree of militancy of the leadership. There is ample research on this matter, and it was reinforced by an article, again in the Observer, by Mr. Robert Taylor, on 30th January, quoting some research, funded by the SSRC, by Messrs. Martin and Undy. Secondly, there is no correlation between militant leaderships in unions and abuse of the strike weapon, or even unusual use of the strike weapon. Right-wing trade union leaders have strikes just as frequently as left-wing trade union leaders. There is no observable correlation. The facts which lead them into strike action are much wider than their political position.
What undue use there is of the ballot—this is the most appalling example of neglect of the facts—produces not moderation but factionalism. There is a point at which, if a union moves into a constant, perpetual situation of re-election, not simply of its national executive but also of its general secretary and its president, all its officers and all its full-time officials,
738
and everybody given any authority in the organisation, the union inevitably becomes a series of factions; because winning the faction battle is absolutely essential for those who win and for those who lose. The real argument against ballotomania in trade union government is that it leads inevitably to factionalism. History indicates—I do not say that it is invariable—that one begins with Left-wing faction and, 10 years later, one perhaps gets Right-wing faction. That is the way it tends to happen because the Left organises quicker than the Right. That is the great case against ballotomania in elections.
But the same kind of evidence can be adduced in respect of strikes. First, as I have said, there is all the old Donovan stuff against compulsory strike ballots. More important, anyone could have told the Government—indeed, I suggest that their civil servants know only too well—that one of the most developed features about contemporary trade union behaviour is the development of ballots or, at least, the development of mandation—partly because of less authoritarian structures, partly because of changes in bargaining systems, and partly because the workers are very uncertain about what is a reasonable wage in the centre of a recession when most of the time they have very little chance of getting anything like the maintenance of their real income. The only way that a trade union leader can cover himself is to go through some process of mandation. That is the great feature of the British trade union movement at the moment: the refusal, with exceptions—and those who are exceptional come a cropper in the end—of trade union leaders, on the whole, to take these actions without a process of mandation.
The noble Lord mentioned the water workers. Of course the water workers had ballots. They had several ballots and every time the Secretary of State told them that they did not have a mandate they had another ballot and they got a bigger majority. So there are plenty of ballots about. One does not have to enforce them by legal regulation. All the evidence shows that if one tries to enforce them by legal regulation one gets the reverse of the answer that one wants.
Finally, and I do not expect the House to agree with this because I have said it before but I feel that I must come along and say it every year or so, the postal ballot for many purposes is a primitive and easily manipulated form of consulting large numbers of people. Anyone would prefer, if it were possible, to have all those affected in one room, even a very large room, in conditions of order where the case could be explained, where one could answer questions, where there could be motions and where there might be amendments. After all this is how we conduct our business. We do not ask that the business of the House on important complicated issues shall be decided by secret ballots. Even when we vote we put our names down. That is our system of conducting our business, yet we believe that for working men there is something essentially and intrinsically bad about the open system of democracy and that they must have secret ballots. I suggest that we look at this very carefully. One is either over-influenced by a few television programmes or, frankly, one has a rather low opinion of what ordinary people can do with the processes of democracy.
I come now to my final point. Am I saying,

739
therefore, in taking this line, that we need no law in this area? Of course not. We have argued in the past for law. For example, the Donovan Commission argued for the establishment of a statutory review body. To some extent the TUC has created such a body but it does not have surveillance over election rules. I see no reason—indeed, I would be in favour of it—why the present powers which the High Court has, and which the ordinary courts of the land have, to quash union elections on the basis of proven malpractice outside the rules or contrary to the principles of natural justice should not be given to industrial tribunals. I see no reason, because it is rather expensive and slow to do it the present way, why the whole of those rights should not be given to industrial tribunals—a tripartite system which is more easily and rapidly available, moving up to the employment appeal tribunal and perhaps then to the Court of Appeal. I see nothing against that. It would make it much easier for people to contest malpractices in union elections. It would be cheaper and they would get rather more understanding.
Finally, on balance I believe that the best form of ballot is not a postal ballot but a ballot undertaken, as do the National Union of Mineworkers, at the place of work after things have been explained. If the Government really want to encourage union democracy, let them introduce legislation which gives trade unions the statutory right to conduct meetings to discuss issues with their members and, if necessary, to ballot their members at the time that suits them with facilities provided by the employer. If one wants legislation, have that kind of legislation, but not the biased, misrepresenting, one-sided legislation represented in this Green Paper.
3.55 p.m.
The Earl of Gowrie: My Lords, I feel about the noble Lord, Lord McCarthy, rather as I do about the composer Liszt—I prefer his technique to his tunes. It is, of course, again for me a pleasure to return from the deep, deep peace of Northern Ireland affairs to the hurly-burly of the industrial relations chaise-longue. I am conscious that this is far from being the first time that we have discussed industrial relations reform in your Lordships' House. Since coming into office the Government have brought before your Lordships two major Employment Bills and we have also debated an earlier Green Paper—on Trade Union Immunities—as well as codes of practice on both picketing and the closed shop.
I do not apologise for the fact that we have adopted what some might see as a piecemeal approach rather than seeking to rewrite the statute book at a stroke, so to speak. Indeed, I think that there has been great virtue in this way of proceeding. We have tried at each stage to identify those areas where the need for reforms have been clearly established and accepted by the vast majority of the country. And at each stage we have carried out extensive consultations to make sure that we have got our proposals right. That is the spirit in which I welcome today's debate. I congratulate my noble friend Lord Boyd-Carpenter for initiating it and I congratulate him also on his very penetrating analysis of the problems. Indeed, my noble friend's analysis makes much of my speech supererogatory and if you
740
wish to tend to the Government's overall view of this issue your Lordships could hardly do better than to study the opening remarks of my noble friend.
I believe that this process of consultation step-by-step has been essential and that its benefits can be seen not in what I am saying but in the very general acceptance which the 1980 and 1982 Employment Acts have in fact now gained. There are few people in the land who now believe that we can or should return, for instance, to the law on picketing or the law on the closed shop as it was in 1979. I, for one, look forward to seeing how much of a showing the restoration of the pre-1980 position on picketing and the closed shop gets into the next Labour Party election manifesto. I believe that the great majority of the British people have welcomed the changes to the law on industrial action made by the 1980 and 1982 Acts, and have settled down to them. I include, of course, the great majority of members of trade unions themselves.
The Green Paper which we are debating today is a part of this same step-by-step process. It identifies issues which are of major concern to our society. It raises problems about which people are anxious and alarmed. But it does not rush to quick or easy judgments about the remedies for these problems. Instead, it puts forward the options for change—the pros and the cons—quite open-mindedly. We want to encourage a sensible and rational debate so that if we do decide that legislation should be brought forward the measures introduced will be practical, sensible, workable and well understood.
My Lords, I must say, however, that this Green Paper is different from the other industrial relations reforms which we have introduced hitherto, in a key respect. The reforms that we have introduced up to now have essentially looked outward. They have been concerned primarily with the effects of trade union action on people outside the trade unions—on employers and employees; on third parties caught up in disputes over which they have no control; on society as a whole. We have tried to provide remedies for injustices which people outside the trade unions—the non-union member, the non-union company, employers and the public generally, as I said—can and do suffer as the result of irresponsible industrial action. But the 1980 and 1982 legislation has had little, if anything, to say about the way in which trade unions conduct their internal affairs.
By contrast, this Green Paper looks not outward but inward. It looks at the way in which trade unions are run, at the way in which their leaders are elected and at the way in which key decisions—for instance, the decision to strike—are taken. It asks whether the way that trade unions organise themselves and their activities is any longer adequate for the needs of their own members and for the role which they have come to play in our society. In a sense this Green Paper and this debate in the name of my noble friend pose a fundamental question. The question is this: can we continue to regard the internal affairs of trade unions as something outside the legitimate concern of public policy? That is the fundamental question which the Green Paper poses. I for one believe that we cannot, and I want to say why.
The absence of legislative safeguards in respect of trade unions' internal affairs is quite remarkable, for

741
instance, when comparison is made with the position of other bodies—with the position, say, of companies. It is now well over 100 years since the first Companies Act was passed in 1862. Since then the company as a legal entity has been closely controlled and its purpose and behaviour defined and regulated. Its shareholders, its directors, its creditors and its debtors all have separate rights and duties. Indeed, Parliament has thought it right in recent years to regulate the affairs of companies in ever greater detail; some might say in too much detail. Since the last war there have been Companies Acts in 1948, 1967, 1976, 1980 and 1981. It might interest your Lordships to know that as a result of these various statutes company directors can face civil action or criminal prosecution for almost 100 different offences.
These legislative safeguards have always been seen as a quid pro quo. They are a quid pro quo for the concept of limited liability. Before Parliament intervened, trading with limited liability was illegal at common law and it was considered a fraud on potential creditors. But it gradually came to be seen as the means by which investment could be attracted and the totality of wealth increased. Indeed, it seems to me that the invention of the limited company, with the safeguards that now police it, can be credited as being a brilliant invention for this purpose.
Here is the clear parallel that we make with trade unions. Like companies, they have a great privilege conferred on them by statute—the privilege of immunity against common law actions when they are acting in contemplation or furtherance of a trade dispute. Again, before Parliament intervened, most trade union action was illegal—a criminal conspiracy in restraint of trade. But, as with companies and limited liability, it came to be accepted that if trade unions were to survive and play their valuable role in society they must have some protection against actions at common law. And yet there is the great distinction that I mentioned: while Parliament has imposed on companies a great volume of statutory regulations in return for the privilege of limited liability, there has been virtually no attempt to regulate the running of trade unions in return for their great privilege of immunity against actions in tort.
There will of course be some who argue that the justification for this non-intervention in the affairs of trade unions is that these are voluntary organisations, more like a cricket club than a major corporation. That may indeed be the position in legal theory—indeed, it may at the very beginning have been the case in practice—but to argue that today is surely nit-picking nonsense. For thousands upon thousands of trade union members working in closed shops there is nothing whatsoever that is voluntary about their membership. More important still is the plain truth that the activities of trade unions and the decisions which trade union leaders take on behalf of their members can reach, as we have seen very recently, right into the living rooms of every home in the land. My noble friend laid great stress in his speech on the importance of industrial relations issues in respect of the public utilities. I certainly find it very hard to disagree with anything that he said there. There can no longer be the slightest doubt that the way in which trade unions exercise their industrial power
742
has the most far-reaching implications for the prosperity, and indeed for the economic survival, of this country.
This absence of legislative safeguards in respect of trade unions is all the more surprising in yet another respect. It is surprising when one remembers that Governments of both political persuasions—we remember In Place of Strife, for instance—have increasingly come to recognise in recent years that where the individual enters into a relationship with large organisations he or she may need to be protected. I think of, as an example outside the union sphere, the relationships of individuals with an insurance company, or a bank or a large retailer. Then the individual enters into such relations essentially on unequal terms and therefore needs the protection of law.
Time and again Parliament has acted in these situations to protect the individual citizen against the abuse of monopoly power. It has been pretty much common ground since the first restrictive practices legislation in 1948 that the law has to give protection against anti-competitive practices which operate against the public interest. That is why, when the Monopolies and Mergers Commission has found that a monopoly situation or restrictive practice is restricting competition, the Government have the power to regulate prices; to prevent price discrimination; to declare refusal to supply unlawful; and indeed to prevent the acquisition of companies. In recent years legislative protection has been extended much further. It has been extended to people purchasing goods, buying services, entering into hire-purchase or credit sale agreements and buying life assurance.
Against that background, what protection does the law give the individual consumer or the individual employee against trade union monopoly power? The truth is that the trade union member has little real control over the contract he enters into when he joins a trade union. In practice, trade unions enjoy vast monopoly power—power which enables them to decide literally, in the case of industries such as printing, who will work and who will not; power to force up the price of labour, and hence of goods, without any regard to what the market will bear; power to compel individuals to become members against their will; and power to affect the supply of basic services to every home in the country.
I for one would still be very concerned if the monopoly power of trade unions were only a potential danger—an anomaly arising, say, out of their particular history. But of course it would be a lesser concern if, despite the absence of statutory safeguards, trade unions in the real world, in actual practice, conducted their affairs democratically; if they acted responsibly and with restraint; if they exercised their power in the real long-term interests of their own members and of society as a whole; and if they showed a willingness to put their own house in order when any shortcomings were manifest.
I have to say that the trade union movement has all too often shown itself lacking in some of those concerns. The facts are familiar enough and I do not believe that they are very seriously disputed. There is the fact that many trade union leaders are elected on

743
the votes of a very small percentage of the membership; there is the fact that the election procedures in many unions—for instance, the show of hands at a branch meeting—have the effect of discouraging the participation of ordinary union members; there is the fact that critical strike decisions are all too often taken not by secret ballot but by mass meetings at which militants may be packed at the front to outvote and intimidate those who may be against the dispute; and there is the fact that in some unions almost 100 per cent. of members are paying a political levy to one political party despite the evidence that only half of all trade unionists voted for that particular party at the last general election.
I want to make a slightly different point. I do not think that it can be argued that these criticisms are in some way being sprung by us on the trade unions; that they are recent phenomena of which unions themselves have only just been made aware. The inadequacy of the democratic structures and proceedures of most of the major trade unions has been well documented and well known for several decades, and it has been the subject of debate whichever Governments have been in office. For example, the very low level of participation in union elections which use the branch voting system is documented in academic literature dating back to the Second World War. One example is to be found in the work done in 1968 by Mr. John Hughes for the Donovan Commission and published by the commission as a research paper—work which I am sure the noble Lord, Lord McCarthy, will remember, given his own distinguished association with the commission.
In that paper, which was called Trade Union Structure and Government, Mr. Hughes looked in much detail at the way in which unions were then governed, and in particular at the different election procedures in operation. He concluded that:
"it can hardly be said that branch block voting helps encourage membership participation; it may instead mean that a relatively small proportion of the membership dominate branch participation in union government and are content to see this sitivation perpetuate itself".
Later he went on to say:
"The traditional system of voting at the branch has in many cases failed to ensure trouble-free voting and, especially where the branch is divorced from the place of work, it severely discourages participation by the mass of members".
This kind of issue has, therefore, been debated for at least 15 years, but with a few honourable exceptions it has led to no real change in the methods of trade union government. It was in an attempt to encourage voluntary reform that we as a Government made public money available to the trade unions in the 1980 Employment Act, for the holding of secret ballots on a whole range of issues, including the election of their executives and officers; strike decisions and the rest. We did that because we wanted to remove any genuine obstacles of cost which were preventing the introduction of greater democracy within the trade union movement.
I myself remember, as a fledgling Minister in the previous Conservative Government at the Department of Employment, debates within the AUEW when the noble Lord, Lord Scanlon—who I do not think I see in his place, but of course he is on the
744
side of the angels at present—was president. The case against ballots was then argued in that union almost entirely on the grounds of cost.
The provision of public funds, which has been there for the taking, has almost entirely been ignored. Not a single TUC affiliated union has applied for the funds. With my noble friend it really is difficult for me not to draw the conclusion that for the most part the trade union movement is either unwilling or simply unable to reform itself from within.
So in that context I turn quickly to the specific issues raised in the Green Paper. As the two noble Lords who have spoken previously have said, these fall into three main packages. First, the Green Paper is concerned with the need for secret ballots for union elections. It suggests four minimum conditions which unions' election arrangements should attain. These are that voting should take place in conditions of secrecy; that all members eligible to vote should have the opportunity to do so under a system which offers the best opportunity of a reasonable turnout; that all the votes should be counted fairly; and that those who take decisions at the highest levels should be properly representative of, and accountable to, the membership as a whole.
I really find it difficult to see how anyone can quarrel with such basic or minimum conditions. Yet, as the Green Paper points out, there are serious grounds for doubting whether most trade unions meet even these standards. I have already mentioned some of the reasons: the very low turnout in many elections and the electoral procedures in many unions which seem almost designed to ensure minimum participation. The Green Paper points to other reasons, such as the obscurity of some union rules and allegations of malpractice, which some see as "the visible signs of a more disquieting state of affairs".
There is, I think, no doubt that the case for legislation to require the use of secret ballots in trade union elections is overwhelming and is seen to be such in the country. But I do acknowledge that there are a number of practical issues which have to be resolved, such as which offices should be subject to election by secret ballot; whether totally postal ballots should be required; and whether all elections should have to be carried out by an independent body. These are exactly the kinds of issue which we hope the response to the Green Paper will illuminate.
The second main area with which the Green Paper is concerned is that of strike ballots. The argument of principle for holding ballots before strikes is surely simple and unanswerable. It must be right in principle that before trade union members are called upon to take strike action, they have an opportunity to make it clear whether they want to do so or not. But as the Green Paper shows, it is not as certain how legislation would operate to ensure this and how far legislation could be effective in practice. The idea of making ballots a condition of any lawful strike was canvassed on our earlier Green Paper on Trade Union Immunities but at that time it did not, as I freely acknowledge, attract widespread support.
The experience of the United States tends to show that ballots imposed by an external agency in the course of a dispute can become a test of solidarity and

745
of support for the trade union leaders and so obscure the real issues. On the other hand, if the law were to require ballots only when they were requested by a percentage of the members, that could not so easily be represented as external interference in union affairs. Even then, as we point out, there are great problems, for example, in defining the constituency for a ballot. Again, these are just the kind of points which the Green Paper invites people to go into. The fact that I myself am raising potential objections this afternoon is evidence surely that our approach is a flexible one. I think that that fact gives the lie to those who, like the noble Lord, Lord McCarthy, claim that this is not a Green Paper.
Finally, the third area covered in the Green Paper concerns the political activities of trade unions and the political levy. What is quite clear is that in practice the present "contracting-out" system, under which the onus is on the member to say that he does not want to pay the levy, is working inefficiently and unfairly. It does not reflect the wishes of many individual trade union members. There is much evidence that the political levy is paid by many union members either without their knowledge or without their consent.
Many members are simply not aware that they are paying a political levy along with their trade union subscription, while others who would like to stop paying the levy have the greatest difficulty in doing so because the procedure for "contracting-out" is time-consuming, cumbersome or embarrassing, or because of specific difficulties put in their way.
It seems to me that the evidence on this is irrefutable. Does anyone seriously imagine that 98.4 per cent. of the members of the Transport and General Workers' Union who pay the political levy do so knowingly and of their own free will? And if they do so, why have we heard so much about the consequences of a change to contracting-in for the finances of the Labour Party? There is an iron logic here. If everyone paying the political levy is doing so willingly, then a change to contracting-in will make no difference to Labour Party funds. These funds are only at risk to the extent that those paying the levy now would, if given a genuine choice, cease doing so. An effective and genuine choice is what we believe the law should provide—no more and no less.
Therefore, these are the three main issues on which the Green Paper has concentrated. I am not, of course, suggesting that the record of all unions is uniformly bad. Some unions have made honest attempts to develop balloting arrangements which enable their members to vote in secret to elect their leaders and to have a decisive voice in strike decisions. I am very glad to acknowledge what has been done. I do not claim that the trade union movement is riddled with corruption or malpractice. The majority of trade union officials, as I know from my experience at the Department of Employment, are hard-working, honourable and highly intelligent men doing a difficult and often unrewarding job. But that job is made more difficult if they are elected by only a handful of the members they represent, or not elected at all. Nothing has done more damage to the reputation of trade unions and their leaders in this country than the spectacle of strikes being launched by a show of hands at mass meetings in football grounds or at factory gates
746
without even the pretence of proper democratic procedures.
Nobody pretends—I do not pretend; I hope that everything in my record suggests it—that the answers are easy or that legislation is the sole solution. I have no doubt that we shall hear a great deal from noble Lords opposite about the value of diversity and organic growth in the union movement. On this subject, if on no other, we can always count on noble Lords opposite to argue the case for legislative abstention and for market forces. But I must make it clear to your Lordships that, while I do not stand here with any legislative blueprint in my pocket or a ready made solution up my sleeve, I am convinced that the need for increased legislation is there. That is why we have published this Green Paper to canvas opinion in the widest possible way, and why consultation is the essence of our approach.
I have no doubt that there is a need for change. The reconciliation of freedom and responsibility is, of course, the perennial problem of any open or civilised society. It is never easy; the answers are seldom final. But no part of society and no group so powerful as the trade unions should be immune from that process for ever.
Lord McCarthy: My Lords, before the noble Earl sits down, would he not agree that the true parallel between company law and trade union law is not the degree of liability but the fact that company law is not related to a single principle of ballotomania and participation and, secondly, that on the whole the business community accepts the present framework of company law? If the trade union movement accepted the present framework, we should not be arguing.
The Earl of Gowrie: My Lords, it is my experience that trade union members certainly accept the need for increased legislation in this field. If they did not, I very much doubt whether the present Government would enjoy such support for their proposals as they do.
4.25 p.m.
Lord Rochester: My Lords, I am sure it is right that, thanks to the noble Lord, Lord Boyd-Carpenter, we should be having this debate now as part of the consultative process on the Green Paper before the Government make up their mind what legislation, if any, they should introduce or, I suppose more probably, what should feature in the Conservative Party manifesto for the forthcoming general election. Come to think of it, the debate may prove equally helpful to Liberals and Social Democrats, should the Alliance be called upon to form the next Government.
I should like to start by saying that, in the three areas which the Green Paper covers, it provides, in my view, a very useful analysis of the points for and against legislating and, if legislating, how that might be done. It would be easy to become immersed in the minutiae of the many difficult problems that are dealt with, and I shall endeavour to avoid that course because it seems best that, in speaking first for my noble friends and I hope also for our allies, I should try to cover the whole field in pretty broad terms.
I very much regret that the TUC appear unwilling, if I understand the position correctly, to join in the

747
consultative process at all, except on terms that seem to me to be wholly negative; namely, that the legislation enacted by Parliament during the last two or three years should be reversed. Before now I have said in this House that I believe in the need for trade unions and that if they did not exist someone would have to invent them in order to safeguard the interests of ordinary working people and to keep management up to its job.
But, having repeated that, I must add that, although we are constantly being told that trade unions are against ideas such as those canvassed in this Green Paper—and if we had forgotten the noble Lord, Lord McCarthy, has just reminded us—what many of us would like to know is what the unions themselves are prepared to do to remedy abuses in this field. If I may say so, I formed a considerable respect for the noble Lord, Lord McCarthy, when until recently we worked together for about two and a half years, under the chairmanship of my noble friend Lady Seear, as members of your Lordships' Select Committee on Unemployment.
But, after listening to him today, with the exception perhaps of his very last remarks concerning possible further roles for the certification officers and for industrial tribunals, I am still waiting to hear from him, from many trade union leaders and, indeed, from the Labour Party, how they propose positively to respond to the concern that really is being expressed by the general public, including millions of union members, as to how the decision-making processes of trade unions are to become more democratic.
If I may respectfully say so in the presence of the noble Lord, Lord Gormley, I fancy that he may agree with me that the governing bodies of too many trade unions in recent years have either failed to observe or refused sufficiently to recognise that power has increasingly been shown to reside in the localities and not at the centre. I only wish that there were more people like Mr. Trevor Bell, who is reported to have said last week after the strike ballot in the coal industry:
"We have got to listen to the membership, not tell them any more."
The next point I want to make on these matters is really double-edged. As has been said, on the one hand, unions wield great power, and that is particularly the case—as the noble Lord, Lord Boyd-Carpenter, emphasised—in essential services, as recent events have shown. Some of that power is of a monopolistic nature, stemming from the spread of closed shops, more particularly in the public sector. If trade unions are perceived by a society to be abusing that power, they cannot expect—and this was a point emphasised by the noble Earl, Lord Gowrie—alone of our great national institutions, to be exempt from accountability in law to their members and to the community as a whole.
On the other hand, the experience I have gained over a long period, sometimes painfully, of negotiating with trade unions prompts me to say that we, as politicians, must think very hard before bringing further legislation into this country's somewhat peculiar industrial relations system. And when we do, it should, in my view, be confined to the correction of
748
abuses that have clearly been identified, so that the law has a good prospect of sticking because it has the consent of the general body of trade unionists.
The situation in Western Europe is different. Their legislation plays a considerable part, for example, in the settlement of disputes. That is because it simply underpins what is already practised by both employers and trade unions, for in those countries, once agreements have been made, they are adhered to. Moreover, in Scandinavian countries and in Western Germany, there is a wider recognition of the need for collaboration in the creation of wealth before there is bargaining on how that wealth should be allocated.
I turn to the substace of the three subjects covered by the Green Paper. In every instance, abuses of power have, in my view, been identified, and, in principle—I stress that word—a case has been made out for legislative correction. In regard to invoking the law, however, I believe it should be used to the minimum extent necessary, and then only where legal remedies are practicable because they are likely to command a sufficient degree of consent among union members.
First, as regards secret ballots for trade union elections, I am sure the Government are right to say in paragraph 13:
"Any legilative steps which are taken must provide a full opportunity for unions to take the initiative, with the support and involvement of their members, in introducing more democratic arrangements."
I agree, too, with what is said in paragraph 32 as to voting methods:
"The wide variety and different circumstances of trade unions electorial arrangements … suggest that it would be unrealistic to attempt to achieve the desired standards by requiring through legislation a single method for all types and levels of union election".
Personally, having vivid recollections of the difficulties unions often have in practice in even, for example, persuading shop stewards to stand for election in that capacity, I think it might be best in the first instance for legislative requirements to be confined to ensuring that every union member has, at reasonable intervals of time, the right to cast a vote by secret ballot in the election of the governing body of the union. Thus, union officers would need to be elected only in so far as they were voting members of the governing body.
As for the enforcement of this statutory requirement, my preference is for the sanction suggested by my noble friend Lord Kilmarknock in discussing the amendment which was moved to last year's Employment Bill by the noble Earl, Lord De La Warr, who I am pleased to see in his place. That sanction would involve the High Court, or Court of Session in Scotland, removing the union concerned from the certification officer's list and a consequential loss of the right to tax relief for expenditure on provident benefit.
I have some sympathy with the alternative approach put forward in paragraph 54 of the Green Paper where it is said:
"if other arrangements"—
that is, arrangements other than those canvassed in the Green Paper—
"could be demonstrated to have the support of a majority of members democratically expressed, the question arises whether such arrangements could not then be accepted as a valid alternative to the specified legislative requirements".

749
It may be that one day we shall all have cause to feel that those last words in Chapter 2 are wise.
Next, on the question of ballots before strikes, I subscribe wholeheartedly to the principles set out in paragraph 56:
"if trade unions are to serve and fairly represent the interests of their members they should ensure that any important decisions are supported by a majority of the members voting in a secret ballot."
Later it is said in the same paragraph:
"Society has a right to expect that the strike weapon will be used sparingly, responsibly and democratically."
Surely those words should carry even more weight than when they were published—after the failure of the unions in the water industry to honour the undertaking in their procedural agreement to go to arbitration, and after the attempt by certain members of the national executive of the mineworkers' union at first to by-pass the admirable strike ballot procedure already available to members of that union.
Even so, I have reservations about legislating on this matter. They derive from my practical experience and I cannot in conscience fail to express them. As the Green Paper reminds us in paragraph 60:
"As the Donovan Commission pointed out, 'a law forbidding strike action before the holding of a secret ballot could not be enforced in the case of a small-scale unofficial stoppages, which make up the overwhelming majority of the total number of strikes' ".
And then:
"a balloting requirement limited to strikes might well encourage the use of …other forms of industrial action short of a strike".
And again:
"it would be even more impractical to apply a balloting requirement to action short of a strike than to unofficial strikes".
I recognise that the idea of legislating for a ballot which is triggered by a certain proportion of union members has the merit that it cannot so easily be represented as external interference in union affairs. Nevertheless, legislation would have to deal with difficult practical problems concerning the operation of a ballot and sanctions against refusal to hold one.
There is, for example, the problem that once a strike has been endorsed by a ballot, settlement might be delayed by restricting the freedom of action of union leaders. There is the problem of how the question on which the vote is to be held is to be framed. For example, if the vote is on whether the employer's latest pay offer should be accepted, what happens if he then makes an improved offer? There are other difficulties, but I will not rehearse them; they are all set out in paragraphs 64 to 68 of the Green Paper, and I will leave it at that. I suggest that if anything is to be done in this field, it might be prudent, in the first instance, to try in some way to build on the experience of recent non-mandatory strike ballots which have resulted in the decisive repudiation of such action, sometimes in defiance of the advice of union leaders.
On the question of the political activities of trade unions, I concur with the statement made in paragraph 94 of the Green Paper, and if your Lordships will allow, I should like to quote it:
"It is objectionable in principle that anyone should have to indicate his dissent from the political alignment of his union to avoid contributing to political activities or to a political party to which he is opposed. And it is objectionable in practice that anyone should have to reveal his dissent to those from whom, given the realities of the shop-floor and trade union power, he may have good
750
reason to keep his political sympathies private. Finally it is wrong in principle that a decision to contribute to a political fund should result from inertia or apathy rather than from a deliberate and positive choice.".
In my view, it follows that there is need for change in the operation of the 1913 Trade Union Act, and it seems to me that, as the noble Lord, Lord Campbell of Alloway (who is next to speak in the debate) advocated in his amendment to the Employment Bill of last year, there is a very strong case for the substitution of contracting-in for contracting-out in order to get over this problem.
Our concern on these Benches is that legislation in this field can so easily be perceived to be—I do not say that it is—a pursuit of a political pogrom aimed at the extermination of the Labour Party. We therefore think that so far as possible the approach to this matter should be even-handed as between employers and trade unions on the one hand, and political parties on the other. By that I mean that if contracting-in is to be substituted for contracting-out, there is at the same time a good case for debarring companies from making contributions to the funds of particular political parties, except with the express authority of shareholders, given at general meetings, rather than as now, when such contributions merely have to be recorded in a balance sheet.
I acknowledge that a distinction can be drawn between the corporate decision of a company and the individual decision of an employee, but I do not think that that should be allowed to impede such a change. I suppose that the only other way in which the desired even-handedness could be achieved would be through increased state funding of political parties. But that raises other issues which I do not propose to go into now.
Finally, in speaking for my noble friends and, I do not doubt, for our allies, I think it right to say that we have one further general concern about the Green Paper. It may be that there is justification for legislative change in all three of the matters covered by it, though in one—that of ballots before strikes—I have felt obliged to express reservations on grounds not of principle, but of practicality. But, as in the case of last year's Employment Act, so here we are troubled because legislation of the kind canvassed in the Green Paper would necessarily be restrictive and controversial, and we long for the time when more constructively there can be marked out ground on which employers and trade unions are able to work together to improve this country's industrial relations for the benefit of us all.
4.44 p.m.
Lord Campbell of Alloway: My Lords, along with other noble Lords, I should like to thank my noble friend Lord Boyd-Carpenter for the stimulating way in which he introduced this most important and constructive debate. I wish to concentrate on the essential services, and to look forward from today, not backward to Donovan. From where I speak, I am free to do so without preconception. I find myself in agreement with some of the views advanced by the noble Lord, Lord McCarthy, but assuredly not in agreement with the view that malpractices do not matter so long as they do not affect the result. With

751
respect, I find myself in disagreement with some of the views expressed by my noble friend Lord Boyd-Carpenter, but without reservation, and with gratitude, I adopt many of his views, especially those about contracting-in and the "check-off".
I adopt the broad analysis of my noble friend Lord Gowrie, and indeed that of the noble Lord, Lord Rochester, in all the essentials, save the question of the pre-strike ballots. I wish to detain your Lordships in order to argue against the introduction of mandatory pre-strike ballots (referred to in Chapter 3 of the Green Paper) as a means of preventing stoppages in the essential services. I wish to argue against mandatory arbitral machinery which involves surrender—the permanent surrender—of the right to strike, and I want to argue in favour of the introduction of "other means" to which reference is made in the Green Paper.
There is a world of difference between voluntary ballots under union rules, and mandatory ballots arising from enforcement and all that that entails. I would not agree with the general proposition that union funds should be put at risk whenever there is a strike in the essential services unless a ballot has been held. That would be far too wide; and I hope to return to the point in due course.
Before developing the case, I should like to seek to remove the fear, the suspicion, expressed by the noble Lord, Lord McCarthy, that the Government would ever seek to reintroduce registration akin to that in the 1971 Act. Surely the Green Paper contains no basis for such fear, and though I am not close to Government thinking, I have never heard of such a proposal.
In its distillation of the essence of available options to seek to resolve the problem of stoppages in the essential services, the Green Paper recognises straight up that there is no panacea, there is no fail-safe mechanism. It would be idle to pretend that the Green Paper is other than a prelude to discussion and consultation with a view to taking the next legislative step. It is only by legislation—and if I understood the noble Lord, Lord McCarthy, aright, he accepts this view—that the delicate balance may be reset between what my noble friend Lord Renton has referred to as the conflicting freedoms: the right to strike, and the right to enjoy the ordinary amenities of civilised living, in particular without danger or hazard to health. Surely in this matter, whatever the differences that lie between us, we can, on all sides of your Lordships House, make common cause of our concern about the appropriate remedial measures. Hence, the importance of this debate today.
Your Lordships may detect a certain want of constructive thinking in the rhetoric of the noble Lord, Lord McCarthy. Is it true that the trade unions are either unable, or unwilling, to reform themselves?—a point touched upon so eloquently by the noble Lord, Lord Rochester. One may not have regard to this Green Paper without taking into account the legislative measures already introduced by this Administration. My noble friend Lord Gowrie touched on this. These measures reflect the recognition that in the process of our social evolution the time has come for change, for review, as my noble friend Lord Boyd-Carpenter, put it.
752
It is against this broad perspective that there now arise these inward-looking questions, and rightly so. Where there is regard to essential services is the public an acceptable hostage in the contest for power between trade unions and Her Majesty's Government? In this and in other respects, do members of trade unions require protection against pressures exerted upon them by the body which often controls their means of livelihood? Should the politically-motivated activities of the trade unions generally, and in this connection in particular, be more in accordance with the views of the members? That is why the Green Paper is entitled Democracy in Trade Unions.
In this development of our philosophy, can we regard the internal affairs of the trade unions as outside the legitimate scope of governmental scrutiny? No, no longer! Here I adopt again, with gratitude, the views expressed by my noble friend Lord Gowrie. Although I have not worked it out for myself in this way, it is truly, as the noble Earl has stated it, a quid pro quo for limited liability. In practice these questions that I have canvassed before your Lordships as regards the essential services tend to merge. The hospital strikers, the water workers, afford but two examples.
The Green Paper deploys options, means of remedial action as regards these essential services. First of all, there are the pre-strike ballots; secondly, the cooling off period of say, 60 days to enable negotiations to continue, with or without a ballot on the final offer, before the resumption of industrial action. That is the temporary withdrawal of the right to strike. Thirdly, there is this mandatory arbitral machinery, with or without index-linked pensions and wages. That is the permanent withdrawal of the right to strike. There are possible combinations and permutations. There could be a cooling-off period with a ballot on the final offer and, if the offer is rejected, then mandatory arbitration, and enforceable award and the total withdrawal of the right to strike. I am wholly opposed to that solution. There are many permutations. That is why it is essential that all this should be considered and worked out in consultation with the trade unions—if only they will consult.
Because there are so many practical associated problems. Take the pre-strike ballot, a point touched upon by the noble Lord, Lord Rochester. The problems associated with these pre-strike ballots are only intensified if there are triggered ballots invoked by a certain proportion of the membership of the trade union. Who should be balloted? There are impediments to communication—take the seamen or the actors alone as two examples. How is the ballot to be conducted? Who is to word the question? How is it to be controlled, and, anyway, how does one ever impose effective sanctions for breach? But, most of all, in my submission, what has to be avoided is the denigration of the authority of the union which is involved in such a process; because it is upon that authority that we rely for the strike to be called off speedily—an aspect of pre-strike ballots that I stress before your Lordships' House. I know that I repeat myself, for I took this point in the debate on the Employment Bill. The associated problems with the statutory, arbitral machinery are not ony the permanent surrender of the right to strike—which I find unacceptable—but also the inflationary aspect of

753
the awards which has a general repercussive effect throughout the economy.
There are the associated problems of contracting-in and the check-off. This reflects two amendments of mine, No. 55 at Report stage and No. 142 at Committee during the passage of the Bill. It is not for me to reargue my own case. May I respectfully adopt what has been said by other noble Lords, in particular, in the presentation of my noble friend Lord Boyd-Carpenter, in that of my noble friend Lord Gowrie and also, with particular gratitude, in the contribution of the noble Lord, Lord Rochester. That aspect of the case, I would submit, speaks for itself.
In taking note of the Green Paper, I think that the process of interaction between these proposals in the Green Paper—and there are three of them—and the interaction on other aspects of the industrial relations law must be recognised; because the adoption of some weakens the case for the adoption of others. For example, if secret ballots for elections (Chapter 2) and contracting-in and the abolition of the check-off (Chapter 4) are to be adopted, does this not undermine the case for pre-strike ballots or triggered ballots in the essential services (Chapter 3)?
On this assumed adoption, does this not also affect the means, or the combination of the means, by which stoppages in the essential services may be prevented? Paragraphs 59 and 60 of this Green Paper (touched upon by the noble Lord, Lord Rochester) acknowledge freely that no country has introduced, or considers the introduction of, automatic pre-strike ballots other than in circumstances akin to stoppages in essential services. As the threat of politically-motivated strikes recedes, as it would recede if one adopts the proposals of Chapters 2 and 4 of the Green Paper, so the case for any further amendment of the law on secondary action weakens; and, with it, also, the case for pre-strike ballots weakens. I detain your Lordships in the hope of making the point that one cannot consider one proposal without its repercussive effect, its interaction, on other proposals as providing a fair means of resolving what, after all, is an important problem to every one of us in the country. On this I of course adopt what my noble friend Lord Gowrie has said about the secret of ballots for elections. In Chapter 2 I submit the case is overwhelming.
I take on board the problems to which my noble friend Lord Boyd-Carpenter referred. We should all be grateful to him for being able to express from the depth of his experience the view that there was a touch of unreality, that these matters required a little further working out, and that there was a line to be drawn. I, without derogation from my acceptance that in principle the case is overwhelming, gratefully accept and acknowledge the experience of my noble friend, and it is in that light that I submit that those points should be adopted.
So what is a possible solution? May I respectfully suggest one? Could we not opt for a three-stage mechanism under which the only means adopted is the cooling-off period with sanctions? At the first stage, the Secretary of State applies to the courts for a cooling-off order on the basis of some new statutory criterion relevant to maintaining the provision of essential services in the public interest. There should be an overriding discretion in the court to grant or
754
refuse such an order, even where such criterion is met on the facts of the case. The second stage could be that in the event of that order of the court anyone adversely affected would have an action against trade union funds—a member of the public, for example—where that union had authorised or organised the relevant industrial action. But after the end of that cooling-off period the union would have no restrictions upon it save those which now obtain.
Why should I propose that solution? It is because in my belief such measures as are introduced must be reasonable, moderate ones. They should only reflect the minimum measure of intervention in the internal affairs of the trade union; the minimum curtailment of the right to strike; the minimum interference with trade union authority requisite to reset this balance. Of course, no court would or should order a man to work. We should remove Section 5 of the Act of 1875 from the statute book. This is a token of earnest in our approach to the Green Paper. Here again, I gratefully adopt what my noble friend Lord Boyd-Carpenter said about this matter.
I say repeal Section 5 knowing that my views are not shared by my noble and learned friend the Lord Advocate or by my noble and gallant friend Lord De L'Isle, according to his Monday letter to The Times. I say this knowing that according to that letter my views are shared by my right honourable friend the Attorney-General who left it to the Freedom Association to institute a private prosecution, if so advised. I say to your Lordships: repeal Section 5. I say this because there is a current disparity of treatment on either side of the Border which brings the due administration of the law into serious current disrepute. I say it because implementation of this stale statute would work a great mischief with industrial relations, not only in essential services but generally; and I say it because, as I see it, it conflicts with the general philosophy of the Green Paper when seen in true perspective.
5.5 p.m.
Lord Gormley: My Lords, it is fantastic to think that one of the first debates that I am able to take part in since I took my seat in this House is to deal with the job that I have been doing for the past generation. If I do not take so long as some of the other speakers, it is not because I have not a lot to say, but because I think that time is passing and we ought to get on with the job.
In the introduction to the topic the noble Lord, Lord Boyd-Carpenter, made some general remarks. He talked about the power of the trade unions. He talked about the numbers. Of course, the numbers are a little difficult today in certain circumstances. What are we talking about—more than 50 per cent. or 60 per cent. of the working population of Britain? He mentioned the power of the unions. I can tell the noble Lord that in all my time as a national leader I had never any idea of the power that it is said we have. I do not think that many trade union leaders have any idea that they have special powers. I do not think that they work in that way. That is not the objective of their job. Their objective is to do the job that they were elected to do. We shall come to the question of elections in due course.

755
I say to the noble Lord that the impugnities that he mentioned have never been in my mind at all. I was the president of the NUM and in that way I did my job. That is why I resent entirely what is said in the first sentence on page 37 of this paper, that the uncertain legal status of trade union leaders has influenced their attitude to the law. I can say quite sincerely to the whole of this House that the vast majority of the trade union leaders respect the law and will always do so, irrespective of all the propaganda against that view which is put out daily.
Therefore, for this debate I thought I would look up what the Oxford Dictionary said about what it is that we are talking about. We are talking about democracy in trade unions. Democracy in my schooldays was the rule of the people by the people for the people. Today, it says that democracy is government by the people directly representative of any form of society ignoring hereditary class, distinction and tolerating minority views. I thought that that was what the trade union movement was about. I thought that was what the majority in the trade union movement that I know really respected.
Then I come to the question of what is a trade union. We have to define what we are talking about. The Green Paper, quite rightly, refers to trade unions. The definition of a trade union in the Oxford Dictionary—I thought I would look it up about an hour ago—says that it is an organised association of workers in a trade or a group of allied trades or a profession formed for the protection and promotion of their common interests. I look around this Chamber and ask myself, how many here are not trade unionists? In fact, the people who have been writing the legislation are the strongest trade union in the country. They are the biggest closed shop in the country. We keep trying to profess that we are talking about trade unionism. We are not. We are talking about the unions who have taken the trouble to be affiliated to the Trades Union Congress. Why do we not be honest about it? If we were honest we would know what we are dealing with.
We are not dealing with the trade union movement as we know it. We are dealing with those lads who are affiliated and who cause some problems now and again to Governments. This is what we are saying, and it is what the whole issue is about. It has nothing to do with the issue of trade unionism as such. We would have the lawyers, doctors, dentists and everybody else under this same umbrella. But we are not saying it to them because we are not afraid of them. All we are trying to avoid is what might be a conflict in the future.
I think this is the wrong way to do it. That is why I take exception to this, irrespective of the compliments people have paid me on the ballot issue. When we come to the secret ballots, I for one would never vote against secret ballots. I believe in them. I have believed in them all my life. We were brought up with the idea that secret ballots were a necessary part of the democratic proceedings, and those forebears of mine who wrote them into the rules of the National Union of Mineworkers had a sense of the future. But they did not need Governments telling them: that is why I object to the issue being contained in legislation. The people who wrote the rules of the NUM had a sense of
756
the future and a sense of responsibility, and they did not need any Government coaching to do it, or Government legislation to make it possible; and I tell you that if you try to make it compulsory it will have a retarding effect. It will have such an effect that it will never become a fact; and I say that this issue has to be very thoroughly looked at, even when you are talking about ballots for strike action. I believe in those as well: I would be stupid if I did not say that.
But ask yourself a question. It is 6 o'clock on a rough Monday morning and the lads have had a rough Sunday night; somebody says something out of place when they are going down the pit, and the lads say, "Get the hell out of it", and they walk away. Do you then say to them: "We must have a strike ballot before you do this"? It is impossible when you are trying to work out what we are trying to talk about. What you have to do is to remove the cause and effect. It takes two sides to make a battle, and while we are going along on the issue of the need to have strike ballots, we are not dealing with the issues. We are not putting the things right which should be put right in order to avoid the need for strikes. We are approaching it from the wrong direction by trying to introduce legislation today and saying that before we have a bit of a strike we must have a ballot. I agree that if we were having a national strike we should have a ballot, and must insist on that, because it affects the country so much—
Lord Boyd-Carpenter: Hear, hear!
Lord Gormley: But when you are talking about strikes you are talking about a lot of things. You are talking about people's temperaments at a certain time of the day. You have to realise you are dealing with people: you are not dealing with some dumb animals. You are dealing with people who will say to you, whether you like it not, "you can have all the legislation you want and it won't make one iota of difference." All that it will do is to build up to worse and worse industrial relations. Instead we should be sitting down and deciding how we can deal with the problems between management and men, and how we can all get working together to make industries better without the need to have any strikes.
The point was made by one speaker that it just creates a big problem, even if you have legislation, to say that strikes—even national strikes—should be conducted on a ballot basis. You must also insist at the same time that you need a ballot to get off the strike. I remember one of your colleagues in the other place when we had a little bit of a fracas. We had an inquiry headed by one of our noble Lords, and at the end of that inquiry we came to a settlement after long negotiations. The Prime Minister at that time said to me: "Joe, do we need a ballot?" I said: "Of course we do. We had a ballot to come out, and we shall have to have a ballot to come in." That is what you have always to take into consideration—the time that would be involved in getting a settlement and then getting back to work, when more mischief could flow from people's determination not to let it happen.
You have to be very careful when you say you must put these things on the statute book. None of this can be done without full consultation within the Trades

757
Union Congress, because when you are talking about those trade unions that I mentioned there must be these discussions. We have to say to the TUC: "We are open-minded on the issue. Let us sit down together and discuss it in a proper, civilised way without having any preconceived ideas in the mind. We have a completely open issue with one objective—to make this country a better country for us all to live in"—because without that knowledge none of us succeeds.
Now I come to my last point: the political affiliations argument. I do not know what all the worry is about. The trade union movement today is involved in many things. It is involved in dealing with pension schemes, and they are very big business. If you give the trade unions the idea that you are going to stop them affiliating to the Labour Party, irrespective of all the blandishments as to whether they opt in or opt out, and if you give them the idea that you do not want them to affiliate to the Labour Party, they will say quite openly: "We will ensure that no contributions go to the Conservative Party from big business." They will make problems for you: do not get any wrong impressions.
I hope we do not get to that position. If we want to get away from this idea of the unions being politically affiliated and industry being politically affiliated, why the hell do we not adopt the German system? Why do we not look at the possibilities of adopting such a system where the expenses of political parties are paid from a central fund? Why do we keep trying to kid one another that we can solve the problem in any other way? You will never, in the present circumstances, stop the unions from affiliating to the Labour Party and making contributions to the Labour Party. We formed the Labour Party. Why the devil should we destroy the party that we formed? We are not going to do it, and I say "we" although I am supposed to be retired. But I say that it will not happen; and for anybody to pretend that it will happen is foolhardy and just hitting against a brick wall. So I would say to the Minister about the Green Paper: " Take it back again, Norman; drop it in the Thames. That is the only place for it, where it is going to sail down to the sea. It is not going to make much progress other than that."
5.17 p.m.
Lord Aylestone: My Lords, there can be no greater privilege than to follow the noble Lord, Lord Gormley, in a debate on trade unionism. I am quite sure that, both in this House and in the other place, no trade unionist who has ever had any responsibility within a trade union has greater knowledge and greater respect than he has. However, I do not always agree with him and I do not on this occasion. But, on the question of secret ballots, I do.
This debate is on democracy in the trade unions. It is a pity that we are not at the same time discussing industrial relations in this country—relationships between unions and employers. However, this Green paper is a Green Paper—a paper for the purpose of discussion, as the noble Lord, Lord Boyd-Carpenter, pointed out—and I think that we should discuss it on that basis.
During the passage of the Employment Bill through
758
both Houses many, many views were expressed about the differing rule books and the differing constitutions of different unions. There was, if not a general view, a very strong view on both sides of this House that something needed to be done to bring them into line with each other, so that the power within the trade unions rested in the grass roots, in the rank and file, rather than, as in our view in some cases it does, in the executives. I rather think it would be the view of individual members of trade unions if, given the opportunity, they could state their clear views about what is necessary in adjusting and amending their own rule books. I would prefer that they do this themselves rather than it should be done by legislation; but that may not be absolutely possible.
We have seen recently—and it has been mentioned already once or twice and will be mentioned again—the importance of secret ballots. I will not say any more about it at this stage, but I will return to it later. However, we ought to have the background to this general discussion on democracy in the trade unions, because, in my view, both of the main political parties—the Conservative Party and the Labour Party—would find it difficult to take an unbiased and objective view about trade unions on trade union reform. That is because the Conservative Party have always regarded the trade unions as an unnecessary affliction—a cross which they have to bear—and are always inclined to support the management, whatever the issue before them. Whereas, on the other side, my former party, the Labour Party, despite contrary views from many of their members on certain specific issues, are unable to do anything other than appear to support the unions in every industrial dispute, at the same time making sympathetic noises in the direction of the members of the public who are inconvenienced as a result of that dispute.
It is my view that there are too many people who regard the trade unions, despite their historical past—and I am very conscious of that—simply as bodies whose main purpose, or whose only purpose, is to create unrest and to call strikes. This is a false view, it is an unfortunate view, but, unhappily, I regard it as a very prevalent view. One had only to talk to ladies with their buckets collecting water at a standpipe, or to commuters when there were no trains to take them to and from their destination, to realise how bitter the feeling about trade unions can be; and I will accept at once that it is more bitter on those occasions when everyone is affected. So before we start thinking of trade union reform or, by statute, of introducing more democracy into the rule books and constitutions, we should perhaps consider some of the reasons for industrial unrest, which, in itself, leads to anti-trade union feeling.
The present Government have a policy, so we are told, of non-interference in industrial difficulties with free negotiations between both sides of industry. As we all know, it just does not work at all. There is interference in almost every industrial dispute which looks like becoming a major one, and maybe it is right for Government to intervene. But there is no use in pretending that there is no interference.
Before we can think in terms of industrial peace, we shall have to introduce some form of incomes policy which, hopefully, will be acceptable to both sides of

759
industry. I know that incomes policies are not very popular at the moment with either of the two major parties, although Her Majesty's Opposition are trying with the TUC to work towards one. But I think that a high percentage of both sides of industry—the trade union side and the management side—would accept such a policy, based on an acceptable standard of impoved national production.
As I said, the present idea of freedom does not work. How can it, when one group of workers is offered 4 per cent. and, within a day or two, another group of workers get 14 per cent. or even 24 per cent? That is not my idea of freedom within the trade union movement or of free negotiation. I think that, given the right basis, we could then begin to think of more democracy within the trade union movement and changes in the rule books. I would again say at this stage that we might also have to think in terms of greater movement in the field of industrial relations.
During the years since the war, we have seen most organisations in this country, and in others on this side of the Iron Curtain, move towards greater democracy. For example in the House of Commons we have seen the introduction of Select Committees looking at the work of Government departments, putting Ministers on the mat, questioning them and, of course, their officials and listening to witnesses. That was a great move forward. As has already been mentioned by the noble Earl, Lord Gowrie, we have seen many amendments to company law which I think is right, and there is probably room for more still. That has been a help not only to the shareholders of companies, but to the public generally. Even within political parties, we have seen new and more democratic processes for the election of their leaders and even of Prime Ministers.
So it surely cannot be wrong that the trade unions, with a massive membership of something approaching 9 million—I am quite prepared to be corrected on the figure, because I have taken it out of the air—who have a great influence within the state, should now fall into line and introduce a more democratic system of control within the individual unions. It is right that the rank and file members of those unions should make their voices heard and their votes count within the unions. It could, perhaps, be argued that they are already able to do it, but I doubt it very much.
We on these Benches believe that trade union reform is necessary and that a more democratic control is desirable. We in this country probably have the highest density of trade union membership anywhere—certainly in Europe, if not in the whole of the free world. That is a huge force which, if correctly harnessed, could give us industrial peace and industrial recovery. It has to be harnessed to a horse which, at the beginning, may be a little unwilling, but that horse, too, could be nudged in the right direction. It would give us a system of industrial democracy not yet seen in this country, provided that the employing section is prepared to fall into line. We would then lose sight of what many people fear—that trade union executives, who are not elected by secret ballot, have considerable power over their members.
760
I suppose it is right for your Lordships to ask me what we on these Benches, the SDP, really feel about this Green Paper. I will start off by saying that we, and our allies in the Liberal Party, believe in the need for trade unions. Our view on trade union democracy is that it is a basic right for any man to join a trade union. If I may be excused an expression which I think comes from Marx, he has nothing to sell but his labour; therefore, he is entitled to sell it in the best market, But if he has the right to join a union, we must equally give him the right not to join a union if he so wishes.
We feel that the individual rank-and-file trade unionists must be allowed to participate fully, if necessary by secret ballot—I know that this is controversial, but I cannot think of any other way of doing it—in all vital matters. I emphasise the words "vital matters", because I do not believe that you need a secret ballot for the election of a shop steward, or for deciding whether the chief executive should be given another £1,000 a year. Those are not vital matters. I am referring to vital matters affecting the activities, the policies and the constitution of the union, and these should be decided by secret ballot.
We believe, too, that it is the right of a man to withdraw his labour individually, or collectively, as I have already said. Very often he may be doing that against the wishes of his own union, but that is his right. We believe there is a right for workers in the essential public services to take their case to arbitration when negotiations fail to reach decisions. I believe that arbitration is the way out of many of these problems. We trust those people who are responsible for arbitration. The chairmen who form the arbitration boards must be completely impartial and must be seen to be impartial. If there is any doubt in that direction, very often it falls before it starts.
At this stage I should like to pay tribute to the work which ACAS has done. We feel, too, that some industrial troubles could be avoided if the rank-and-file member of the union had closer contact with the executive. On the question of secret ballots of officers and executives, and on all important decisions, the only way to reach a real consensus is by what I have already described two or three times as a secret ballot—and I mean a secret ballot. The National Union of Mineworkers have proved time and time again to the whole trade union movement what can be done by a secret ballot. I agree with the noble Lord, Lord Gormley, that one could not possibly operate a secret ballot on every conceivable and minor occasion. Certainly it would be a great improvement on the present position if decisions were taken by ballot rather than by a few, shall I call then "turners up" who turn up at a trade union branch meeting, very often when the meeting is at an end: very often a sparsely attended branch meeting (we have seen this in the political field, too) when intimidation can, on occasion, take place. A ballot is a much fairer way of coming to a decision than a show of hands at the factory gate.
Regarding the closed shop, I have not read Professor Gennard's report, but I am inclined to agree with the industrialists who feel that in some cases the closed shop is helpful. My only purpose in mentioning it is to point out that when a closed shop is newly introduced into a factory or company it must be made absolutely

761
clear that those trade unionists who refuse to take part, because they were not in a trade union before, must be fully protected. We believe, too, that there is a fine case to be made out for fewer trade unions and for rather more amalgamations. This could perhaps be done by the TUC or the unions themselves. No doubt (though I do not have the knowledge) they are looking at this point.
Turning to the question raised in the Green Paper of the political levy, we believe that the individual trade unionist must himself take some active step. I am not sure that he always does. It could be argued that when he contracts out he is taking an active step. Of course he is. He has to go to his branch manager or official and say, "I no longer want to pay the political levy". But is his action quite so definite and affirmative when he contracts in? Or does he, in need of a job, apply for a trade union card, and is he then asked to sign on the dotted line?—in which case he probably signs to pay the political levy at the same time. I am not so concerned about what happens, but I am concerned that there should be absolute freedom in this respect, too.
On the other side of the coin, I should like to see greater information than we already get in balance sheets of the contributions made by companies which are simply regarded as political contributions. It would be no hardship for them to declare to whom and in what way the political contribution is made. The view of the noble Lord, Lord Gormley, is that the trade unions have no power and have no intention of using power other than for trade union purposes, especially within their own unions. But, unhappily, how frequently over the last few years have we heard of the threat of political strikes taking place, purely for political reasons? These we would strongly oppose.
Finally, we recognise that some unions are much more democratic than others. We favour a system where the individual votes of trade union members count. We would prefer that the move towards democracy in the trade unions should come from within the unions themselves but, failing that, legal reform may be necessary. Nevertheless, we fervently hope that, in one way or another, we can reach the situation in this country where the strike is used only as a last resort weapon.
5.36 p.m.
Lord Spens: My Lords, may I begin by saying that I agree with almost every word that the noble Lord, Lord Aylestone, has said—No, I am still staying on this side of the gangway!—but I want to look at the situation from another angle: the angle of the man-in-the-street going about his job who suddenly finds his whole life come crashing about him because someone has called a strike which has destroyed his business. That is referred to on page 17 of the Green Paper, at the beginning of Chapter 3, which is headed Ballots before strikes. I should like to read a couple of sentences from it, because it deals with my point:
"As the industrial power of unions has grown, the effects of exercising that power have become increasingly serious, not only for the strikers themselves and those at whom the strike is directly aimed, but for the community as a whole … In recent years it has become common for strikes to be aimed at inflicting damage on innocent third parties in the hope that the distress caused will bring about Government intervention to press the employers to yield to the unions' demands".
762
Having read that passage in the Green Paper, I thought I would have a look at what the European Convention on Human Rights has to say about our basic rights. May I list one or two of them for your Lordships. The first is that the right to life shall be protected by law. Then there is the right to respect for private and family life, home and correspondence. There is the right to freedom of expression, including the freedom to receive and impart information and ideas without interference by public authority. Then, in Protocol 4, there is the right to liberty of movement. I believe that all those rights have at times been placed in jeopardy by strikes which have taken place in this country.
There is also another basic right: the right to freedom of peaceful assembly and to freedom of association with others, including the right to form and join trade unions for the protection of a person's interests. However, this right is expressly qualified by saying that restrictions on that right may be made
"such as are necessary in a democratic society for the protection of health or for the protection of the rights and freedoms of others."
Finally, in Article 17 of the convention there is a general qualification:
"Nothing in this convention may be interpreted as implying for any state, group or person any right to engage in any activity or perform any act aimed at the destruction of any of the rights and freedoms set forth in the convention".
Why should unions and their members be protected from claims for damage to the businesses, the health, the livelihoods of the general public with whom there has never been any quarrel? There is no basic right to strike. However much the noble Lord, Lord Campbell of Alloway, talked about this, the right to strike does not exist in the European Convention on Human Rights. It has become a right, because it has been given to the unions through legislation in this country and possibly in other countries, but there is no basic right to strike. If we allow unions to continue to disrupt us, without redress, then the least they can do is to show that they are operating in a democratic manner.
There are three principal reasons or points which the unions should follow. Here again, the noble Lord, Lord Aylestone, covered them. First, all senior officials should be elected by secret ballot and should have to stand for re-election at reasonable periods. Secondly, the full negotiating procedures must be seen to have been carried out before a decision to recommend a strike is taken. Thirdly, there should be a secret ballot before an important strike is taken. Otherwise, the protection of immunity which the unions enjoy at this moment should be withdrawn. At that stage, they would be treated like any other group of people in this country. They would be subject to the law and would have to accept the responsibility for any actions they carried out towards other people.
Last July, we debated amendments to the Employment Bill. The noble Lord, Lord Campbell of Alloway, made mention of his amendment and I want to mention mine, which I eventually withdrew. It was to give the Secretary of State responsibility in certain severe circumstances for ordering a ballot to be taken before a strike was called. The Minister however, as he is no longer on the Front Bench, did not like to take that responsibility, preferring to keep out of any negotiations between employers and unions. If the

763
three recommendations I have made were to be implemented, that responsibility would be taken from the Minister and he would no longer have to worry. I believe, however, that there may still be situations in which the Government must take action short of bringing in the troops. In the case of very serious strikes in the public services, the Government cannot simply take no action, saying that they must leave the matter to the employers and the employees to resolve, because when it comes to the public services the Government are ultimately responsible for them.
I should like to see the Minister having the power, probably through an affirmative resolution, to order that in certain circumstances the immunity which unions are given under Section 13 of the 1974 Act should be withdrawn if the strike has reached such a state that the Government consider serious damage will be done to people not directly involved in it. I believe that many members of the general public see no reasons why the unions should be above the law and would like to see them having to accept those responsibilities. If the unions are to continue to enjoy these immense immunities, they must show themselves to be democratic—which they essentially are not at the moment.
I was very glad to hear in the speech of the noble Lord, Lord Gormley, who is no longer with us in the Chamber, that he agreed that there should be two important ballots: the ballot for the election of important members of unions and one for when a strike is called. I hope that the Government will go forward to produce their next Employment Bill in the next Session, and I hope that it will contain some of those points.
Baroness Gaitskell: My Lords, before the noble Lord, Lord Spens, sits down, may I ask him, since he has stated that trade unionists who get out of step or who try to put forward their own ideas must be dealt with in this way, who he thinks are going to undertake the hardest and the dirtiest work in this country? Because the trade unionists are the people who do it. It is not done by your Lordships or by me, but by the trade unionists.
Lord Spens: My Lords, I am not sure that the noble Baroness, Lady Gaitskell, is correct in that. I think that I do some very dirty work and I am not a trade unionist. I believe there are many people who do equally dirty work but who do not have to be a member of a trade union to do so.
5.46 p.m.
Lord Renton: My Lords, that last exchange reminded me that I had to clear my own drains only a fortnight ago, and on a Sunday at that! The background to this important debate, so wisely initiated by my noble friend Lord Boyd-Carpenter and which has produced so many thoughtful speeches, is that it was 20 years ago, when the late Lord Godber became Minister of Labour, that it was first suggested that the unions should, by voluntary effort and within their own ranks, put their own houses in order. My noble friend Lord Gowrie was at pains to point out the disappointment that there has been on that score.
764
However, we should acknowledge that some unions have put their house in order. I am sure your Lordships were very glad to hear what that patriot, the noble Lord, Lord Gormley, had to say. There is no doubt about the fact—and I speak with some knowledge of miners because for two years I was responsible under my Minister for their safety and health at work—that under the leadership of the noble Lord, Lord Gormley, the miners arrived at solutions to the problem of when to strike and on what conditions to strike. We saw a recent example of a national coal strike, proposed by the miners' national executive, turned down by the wisdom of the miners, within the machinery that the noble Lord, Lord Gormley, established.
The other important point in the background to this debate is that for the past three years, there have been fewer strikes in industry generally than in the last three years of the previous Government. But, alas!, in the past three years there has been a lot of trouble in publicly-owned industries and in essential services. There was the railway strike, the steel strike, the hospital strike, the recent water strike and—most unusually—even a strike in the Civil Service. My right honourable friend the Secretary of State, Mr. Tebbit, recently announced that he is to consider what should be done to prevent the community from suffering from disruptions of essential services for which they pay. He has made it clear that he is to consult the TUC and those responsible for providing the services before eventually submitting his views to Parliament. If I may say so with respect, the two Green Papers we have had so far have been valuable, but I do not consider that a further Green Paper will be necessary, because the two Green Papers we have had together cover so much of the ground that is involved and will be involved in these consultations.
Like my noble friend Lord Campbell of Alloway, I would briefly invite your Lordships to consider the options open to the Secretary of State. Of course, some of the priorities he will have to consider arise in this second Green Paper. Other options were stated in the earlier one. Experience has shown in some trade unions involved in the public service that if the members had had more of a say, and in particular an earlier say, and had had more confidence in their leaders, especially some politically motivated ones, then the disputes would not have got as far as even threatening a strike. So I suggest that Mr. Tebbit's first priority is to proceed along the lines of this Green Paper and introduce legislation for secret ballots for elections to the principal posts in trade unions. I agree with my noble friend Lord Boyd-Carpenter that we do not need to have secret ballots right the way down to the shop floor.
The next priority, surely, is to make progress with regard to moderating the effect of the closed shop by implementing the provisions of the Employment Act 1982. Then, after that, there are various options open to him after negotiation, but in considering them he will have to consider, and we should consider, how they are to become enforceable. There must be sanctions. Voluntary sanctions may not be effective. Indeed, in the past voluntary sanctions have been a disappointment sometimes; for example, voluntary arbitration. So legal sanctions will almost certainly be necessary.

765
My noble friend Lord Campbell of Alloway mentioned that we should do without penal sanctions, and, broadly speaking, I agree with him. The only penal sanction left on the statute book—and it has been left there by Governments of both parties—is Section 5 of the 1875 Act. That makes it an offence, punishable summarily, to conspire to break a contract of employment in a way which endangers human life or does other damage. I suggest that that should remain on the statute book for the most flagrant cases. The fact that it has rarely been used is not an argument for repealing it. Indeed, the fact that it has not been necessary to use a law is very often a justification for its being there. I think we should think twice before we take it away.
The other sanctions are the civil ones: the civil sanction against individual officials or members of trade unions. Very often if large numbers of people are involved it is not realistic to try to enforce them. But there is the civil sanction against union funds, and that is perhaps the most valuable sanction of all. Then, as the noble Lord, Lord Spens, mentioned, there is the question of suspending immunities. I am one of those—I do not think everybody on this side of the House agrees with me—who feel that the immunities are outdated, and on All Fools Day 1981 I endeavoured to develop that theme, that they should be gradually done away with altogether.
What are the options? A statutory cooling-off period is better than nothing, but I do not go along with my noble friend Lord Campbell of Alloway in saying that we should invite the courts to decide whether the national interest is involved. I do not think that is a job for a judge. It is far better, if there is to be a statutory cooling-off period, that a Minister should take responsibility for it and be answerable for it in Parliament. In the interval the cooling-off period could be used by politically motivated people to whip up support for the strike, and so it may be self-defeating in its object. In any event, it is going to come to an end and we may have uncertainty at the end of that period. The next possible option is that no strike should be legal unless a week's notice of it is given. That was in the 1971 Act and has been repealed. Quite frankly, I do not think that is of much use.
The next option is a secret ballot before strike, as suggested in the Green Paper, and which was so effective in the recent coal dispute. That is an option which needs to be considered very seriously. But on some occasions we must face the fact that the secret ballot could be in favour of a strike, even in an essential service.
Voluntary arbitration is not much use, as the water strike showed. Now I come to compulsory arbitration. That is of more use, but there may be a problem and difference of opinion as to how to enforce it. If, as my noble friend Lord Nugent of Guildford suggested in that interesting short debate the other day on the Water Bill, acceptance of compulsory arbitration is made a term of a contract on which those in breach can be sued, there might be thousands of people in breach and the sanction of a civil action would be found to be awkward to enforce. I understand that compulsory arbitration caused a good deal of trouble in Australia; it did not really work.
766
I come to an option which I think needs to be very seriously considered by all concerned. The noble Lord, Lord Houghton of Sowerby, probably knows more about this than anyone. The option is this: making it a condition of service that the employee will not strike, and making it clear that he will be dismissed if the condition is broken. That does not, strictly speaking, make the strike illegal, but it does mean that there is a very stringent sanction; indeed, it could be said, the most stringent sanction of all—the man finding he has lost his job. That used to be the rule in effect in the Civil Service, when civil servants could be dismissed at will and without reason given, because they were servants of the Crown.
That, of course, is virtually the position with regard to the police at this moment. It is also the position in the Armed Forces, although in the case of the Armed Forces, and indeed of the police, there are various internal penal sanctions which I should fairly state. But if we combined that sanction, the condition of automatic dismissal if there is a strike, with compulsory arbitration, then it might be more effective. I note that the noble Lord, Lord Houghton, will be following me, and he knows so much more about this than I do. I must say that in the Civil Service I do not feel that compulsory arbitration should be regarded as a necessary quid pro quo. I know that that is a tough solution, but, as I have said before, it is an advantage and a privilege to serve one's Queen and country. The civil servants have been pretty well treated so far in pay and pensions and conditions of service and there is no reason why they should not be.
The last option I must mention is for the Government to be given the power to declare unlawful a strike which threatens the national interest. That, too, has been mentioned. That sounds justifiable enough and plausible on the surface and at first sight, but again the question of enforcement arises.
In considering these options, and perhaps others, the Secretary of State and the trade unions will, on the nation's behalf, have to reconcile two well-established but conflicting principles. The first is the right to strike, which the noble Lord, Lord Spens, was right to point out is not in the European Convention on Human Rights, but that is not the end of the matter. But surely an equally important principle is the need to maintain vital public services. To consider "a balanced solution" in this matter would be idle thinking. The needs of the community must come first. I understand that to be good socialism. It is certainly a principle which the Conservative Party supports.
6 p.m.
Lord Houghton of Sowerby: My Lords, I think we are all very grateful to the noble Lord, Lord Boyd-Carpenter, for introducing this debate. He is a master of the art of introducing thorny topics with the sharper points nicely honed down with polished language and lucid exposition. He is a master of that. We are grateful to him for raising this subject. Probably he will think of another subject, equally difficult and probably underlying considerable differences of opinion, for our consideration on another occasion. I echo the words of the noble Lord, Lord Rochester, at the end of his speech. We really should be talking more about co-operation and how we can all work together, rather

767
than spending so much time dealing with problems of disputation, disagreement, and division, both politically and industrially. That is a great sorrow in our life today; but we must do our best to work towards that.
I suppose that what we are talking about today is my life. This is my life. It is 60 years ago since I attended the first Trades Union Congress, when my noble friend Lord Shinwell was electrifying the congress with a bitter attack upon the president, as he was then, of the National Union of Seamen. My noble friend Lord Shinwell represented the Maritime Workers' Union, which was challenging the supremacy and the closed shop of the NUS. The leader was J. Havelock Wilson. That was a lesson in polemics and vituperation. I was to learn a lot about that in subsequent attendances at the Trades Union Congress.
My noble friend Lord Gormley said an awful lot in 11 minutes. He got away with an awful lot, too, in 11 minutes, I thought. I have great affection for him, but I could not believe what he said about trade union leaders being unconscious of their power. My goodness me! Was he really suggesting that the basic right of a worker to withdraw his labour is unconsciously used, en masse, without any idea of the power that that exerts on employers and on the community? No, that is not the case at all. In fact, we all know that unions are not friendly societies and they are not burial clubs. They came into existence to promote the cause of strength and unity, to try to match the forces ranged on the other side. They were not created for the furtherance of democracy. The aim of the trade union formations was to turn the working class into organised labour. First it meant strength, and later it meant power. That is what the trade union movement has been after throughout its histroy.
Democracy is the challenge to power: to restrain it, to defuse it or to lessen the dangers of the misuse of power. The exercise of that democratic restraint and intervention may come from outside, where there is harm to other persons and other interests of the community at large; and it may come from inside, where what the union is doing, and how it is doing it, is of concern to those who are members of it. Therefore, what we are really considering is whether straight intervention is necessary in the name of democracy for one purpose or the other.
The noble Earl, Lord Gowrie, referred to the fact that earlier Green Papers and legislation were dealing with the need for straight intervention to safeguard external interests from the activities of trade unions. Today, the Green Paper is dealing with the question of the internal arrangements of trade unions and whether they need the oversight or the intervention of the state.
A very admirable paper that has been circulated by the Engineering Employers' Federation—which is full of wisdom on this subject, if I may say so—refers to the fact that of the three matters we are discussing today only one (that is, ballots before strikes) relates to industrial relations. The other two are regarded as mainly social and political rather than industrial relations questions. I will deal with the non-industrial questions first. As regard the political levy, I shall just say that I was chairman of a committee appointed by
768
the Labour Government to look at the financing of political parties. My noble friend Lord McCarthy was a member of it, as was my noble friend Lord Underhill; and although the committee was not unanimous it had the advantage, in reporting on the matter, of presenting both sides of the argument, but with a majority for some measure of state aid.
My noble friend Lord Gormley said that we will never stop the workers from contributing to the finances of the Labour Party. I do not think that anyone wishes to stop them. The question is how it is done; and, probably more important still, how great is the dependence of the Labour Party on the political levy. That, in my judgment, is excessive and should be modified. The reason why we recommended a measure of state aid to political parties was to reduce the dependence of the two main political parties on their traditional sources of support. Both of them are open to criticism. No one can say that the way that the Conservative Party gets its money is free from criticism or, in some respects, of doubt as to whether or not that is a satisfactory way of raising money. Similarly, that applies to the political levy.
In West Germany state aid was introduced when that Government decided to withdraw the liberal tax relief given to industry for contributions to political parties. State aid was introduced, to replace that. In Austria, when they introduced state aid, it was to end the corruption whereby the ruling party, or parties, almost by convention, got a commission from those who enjoyed the benefit of Government contracts. That, again, was a very good reason for substituting state aid for the unsatisfactory features of voluntary help. Here we find ourselves with the substantial industrial aid to the Conservative Party, on the one hand, and the substantial trade union help to the Labour Party, on the other, with the Liberal Party and the Social Democratic Party not enjoying equal support of vested interests.
One cannot discuss this question of the political levy solely in terms of democracy within the unions. I have explained to the right honourable Member, Norman Tebbit, that when the proposal to introduce greater democracy in the trade unions on a matter of this kind is bound to have an immediate and a harmful effect on the finances of one of the major political parties, it is bound to be construed more as an attack on a political rival than it is in favour of the introduction of democracy in the trade union movement. After all, if we are talking basic English on this matter, every trade unionist who is confronted with the request to contribute to the political levy can sign a form and contract out. I know all the problems about that, and one must certainly question the very high percentage of trade unionists in some quarters who are contributors to the political levy.
The Earl of Gowrie: My Lords, the noble Lord, with all his experience of the Labour Party, will be well aware that the greatest Labour Election victory in history took place when the contracting-in system applied.
Lord Houghton of Sowerby: My Lords, I have not explained any victory or defeat by reference to what happened to the political levy after the Trade Disputes

769
and Trade Unions Act 1927. What I am saying is that when a political party is so heavily and constantly dependent upon particular sources of income, then if that is seriously disrupted there is bound to be a weakening of the financial strength of the party concerned. I think it is as simple as that.
There are devices which have been employed by unions which tend to obscure the element of the political levy from the rhythm of the payment of subscriptions, and members are not always aware or do not remain constantly aware of the fact that they are making a political contribution. But the Engineering Employers' Federation, dealing with the democracy side of this matter, or their own interests in this matter, say that their concern as employers is whether, if the payment of the levy is to be altered, employers should be required to include or should be barred from including the political levy in the check-off system of deduction of trade union subscriptions from pay. I can only repeat that I believe that a modest injection of state aid into the funds of the political parties would be a good thing for our democracy, for politics and for our parliamentary affairs. It is the only money which would go into political parties without strings and without some element of taint. I leave it there, because it will come. It will come, because I am quite sure that the political parties will not go on being financed under present conditions for very much longer.
The other question of a non-industrial relations aspect is the election of officers. This is a very intricate matter. When I left the Civil Service as a permanent pensionable officer of the Inland Revenue to become secretary of the Inland Revenue Staff Federation I was giving up a life job for a precarious appointment. I naturally looked to my union for the same degree of security with them as I had in the Civil Srvice, only with the condition that I could be removed in conditions under which the civil servant would normally not be removed. But the idea that that position should be open to re-election at quinquennial reviews, and so on, is a matter for the union to decide, having regard to the power and the position of the general secretary of the union. One has to be very careful in trying to arrange the internal business of organisations for them. They can surely do it better themselves. I see no reason at all to interfere with what the unions are doing.
I come next to the main issue of the pre-strike ballot. Here may I say that I do not think it is desirable or even possible for us to legislate to offset apathy. We cannot do that in general elections, local elections or any other elections; and some startling results can come out of the conventional methods of election. I heard a noble Lord just recently, at the time of the Bermondsey election, working out mathematically that in constituencies where there were 16 candidates, if the votes were distributed in a certain way, the elected candidate could lose his deposit. I suppose that that would be regarded as a quirk in an otherwise perfect electoral system. Okay, let it be like that. I would say that under the electoral reform system that would not be possible. I would leave that alone.
So far as strike ballots are concerned, we have had all these difficulties paraded before us from time to time. I emphasise again, as I began, that I think we
770
must bear in mind that in some cases and on some occasions strength in the trade union movement comes before democracy, because it is part of a struggle, and one is in a struggle to win. The National Union of Mineworkers, by deciding that at one stage it was going to put democracy before what might otherwise have been united action—I do not know-took the risk of weakening the union in face of a situation on which feelings were running pretty high in the union. Nevertheless, they decided that their constitution should be observed. All credit to them for that. They may have strengthened the union and not weakened it by taking that decision. Nevertheless, there are times when unions will swallow quite a lot in failure to live up to all the democratic principles in order to maintain the unity, solidarity and effectiveness of their trade union in face of a crisis. The democracy comes afterwards, when the fight is over.
Let me remind noble Lords also that the language of trade unionism is the language of conflict and war. This is an inheritance of the history of the trade union movement during the struggles of the past 100 years. One cannot get away from that. I think one must not seek to inject into the trade union movement an academic or a philosophical view of democracy in the belief that it needs it to make it more respectable in the eyes of democratic standards. I think that that would be a mistake. No, my Lords; I think the answer to all this comes in better relationships.
The record of the trade union movement and of industrial relations over the last 20 years have been worse in the public sector than in any other. I have often told my friends in the trade union movement who are in favour of nationalisation and of public ownership. "Why did you not come to the Civil Service to learn the bitter experience of political control?" Many unions went in for what they thought were the benefits of nationalisation without reckoning with the problems of political control. Now there is political control. This is creating one of the biggest problems for the trade union movement today. But the failure of successive Governments to get an acceptable principle that they could stick to for fixing public service pay has led to a great deal of bitterness and trouble inside the public sector.
I can only conclude by saying that I see no cause for state intervention on any of the matters raised in the Green Paper at the present time: far better let existing legislation take its course and get settled down and face the future in a spirit of closer co-operation and determination to overcome our disputes and difficulties, rather than stir up fresh trouble in trying to organise the business of trade unions for them without any overriding purpose or possibility of success in doing so.
6.20 p.m.
Lord Ferrier: My Lords, I should like to begin by going all the way with my noble friend Lord Boyd-Carpenter, particularly as regards his opening remarks welcoming this Green Paper as a means of discussion. That statement was confirmed by my noble friend Lord Gowrie. How welcome it is that we are able to discuss this matter without feeling that the hounds of hell are after us as regards having to make a decision now. The ground is difficult enough, as we have seen

771
today during this very wide-ranging debate. I could say a great deal, but I am not going to do so. We could discuss, for instance, the difficulties presented to us by the fact that our trade union system stems from craft unions instead of from industry-wise unions. However, I feel that it is proper that we should urge the trade unions to come and help. As the noble Lord, Lord Houghton, has just said—and I think he confirmed what the noble Lord, Lord Rochester, said—we ought to be doing that which we can agree about and not that which we disagree about.
I shall be brief because I come to a matter about which I feel very strongly. I have three particular reasons for intervening in this debate apart from my natural interest as a citizen who is concerned with the end product of my noble friend's Motion. First, in the debate on 2nd March on the Motion of the noble Lord, Lord Marsh, dealing with the Serpell Report, I emphasised that in my view the debate at that time was not an excursion into "union bashing". I hope that we can forget about that word and leave it out, because we are making a serious effort to establish the proper, permanent place of trade unions in the national economy, without which no worthwhile wealth producing plan for the railways can be worked out. That applies to may industries. I think I was right in noticing that the noble Lord, Lord Marsh, nodded his head when I said that we cannot get on with the railway problems until we have solved the problems of the trade unions. What, in fact is going on at the moment?—unpteen new trains are standing idle in a Bedfordshire siding while ASLEF, so far as I can see, renege on the settlement reached by the noble Lord, Lord McCarthy, last year.
Secondly, nearly a year ago on 15th June, during the Second Reading debate on the Employment Bill, I declared—and I repeat (and this was confirmed by what the noble Lord, Lord Spens, said in his speech)—that the people are fed up with the way in which the trade unions are conducting their affairs today. We cannot get away from that. Moreover, I quoted something written to me by an old and trusted friend. After a life's work in one of the top industries he said that in his working life he had watched:
"the unions strangle the efforts of enlightened management to improve the lot of the workers".
I thought that I would telephone him to ask whether he still felt like that. He said, "Yes, only the more so". His impression at present is that, as a whole, trade unionists—many of whom are inarticulate and unwilling to butt in—are in favour of what is going on in the House today and the means offered to us to deal with the situation by this Green Paper and the Government's policy.
I am now proud to stand up and welcome this policy which is driving forward to some form of permanent agreement with the trade unions. In doing so, I feel bound to quote from the end of paragraph 56 of the Green Paper and confirm what has been said today. It says:
"Few things have done more to lower public regard for trade unions than the spectacle of strike decisions being taken by a show of hands at stage-managed mass meetings to which outsiders may not be admitted and where dissenters may be intimidated".
That dissatisfaction has been properly deployed today.
772
My third reason for intervening is a curious one and it is to re-emphasise the importance of broadcasts, both by radio and on the "Box" in the process of democracy today—and it is democracy about which we are talking. We are on the threshold of technical advances in communications, the impact of which is so great that some of us cannot grasp it and many of us cannot foresee how far it will go. I should like to urge your Lordships, in taking note of this Green Paper, to ensure that any legislation which stems from it makes provision for safeguards such as are contained in subsections (3) and (4) of Clause 13 of the existing licence and agreement of the BBC. Despite what Mr. George Howard said on page 6 of his paper entitled Broadcasting and Politics, there must be no doubt as to where the ultimate responsibility for government lies. I agree with the noble Lord, Lord Spens, that we should plug ahead with what the Government are doing and get an acceptable settlement. Let me again confirm Lord Houghton's approval of Lord Rochester's appeal that we should work for an agreement. I believe that it is obtainable if we work hard enough.
6.29 p.m.
Lord Milford: My Lords, I am told that this is only a discussion paper, but it is a very, very cunning one. Its aim is not more union democracy; it is an election ploy to exploit and encourage anti-union prejudice. It seems so reasonable to the non-political person. It brings up no facts or evidence of any malpractice. But it is sinisterly vicious in innuendoes aimed at the non-unionists, leading them to believe that perhaps there are malpractices.
Again, it is cunning in that it exploits the fact that there are millions of unemployed on the scrap heap who deem it safer for them and their families if they remain silent and do not fight back, as they feel they should. The Tory Party is the party of the employers and has always hated the unions. From the nature of the capitalist system, with its two classes, this is absolutely natural.
I was born into a family of big business and in my youth I went into business. I was steeped in the anti-union atmosphere. In the General Strike I blacklegged and worked in the London docks unloading ships. At the defeat of the strike I remember the excited, joyful victory shout:
"We have smashed the unions and have imposed contracting-in".
Luckily for me, I also began to think after the General Strike and started to read history. I soon turned to the Labour movement and became a union member for 50 years and a member of the Cheltenham Trades Council at all levels.
This Green Paper threatens basic democratic freedom—the right of trade unions to control their own unions. What incredible arrogance from the Tory Party! What about the democracy of their party? I should like to ask noble Lords opposite how they answer the fact that they are crying out for democracy in the Labour Party and on the trade union side, yet they absolutely ignore it in their party. Let us suppose that a Labour Government suggested that company directors should be elected by a secret postal ballot of the shareholders. That is the equivalent of what the Tories are trying to do to the trade unions.

773
This document also threatens the financial viability of a political opposition party—something that is unheard of. The suggestion of contracting-in instead of out is a blatant plan to cripple the Labour Party. There are no arguments for it. It is based on fear of the hostility towards the trade unions and the Labour Party. The Labour Party was created by the trade unions to fight in Parliament for their interests. Meanwhile, the Tory Party is the party of the monopolies, the multi-nationals, the banks, insurance, and all employers. They supply millions of pounds in funds for the Tory Party. Perhaps we should propose that a secret ballot be held of shareholders on whether to send funds to the Tory Party, because at present there is none at all: just the management settle it.
The Green Paper claims that trade union power springs from legal immunities and privileges and that, therefore, the Government must supervise their internal affairs. What about the legal privileges of the owners of limited companies? They are not even obliged to pay all a company's debts in full. I have in mind, for instance, the case of Freddie Laker. The Green Paper suggests laws to compel the unions to use postal ballots for all elections, and recommends an outside authority to run any union if its executive committee defies such a law. It also suggests that employers can insist on a ballot covering non-union employees before a strike.
On the question of postal ballots, to me the objections chiefly are that postal ballots isolate members from each other and so hinder workers' discussions at the place of work. Instead of discussing the issue together, they go home, look at the television and read the papers. The mass media have tremendous powers over them because they are not meeting and discussing at their place of work. Some unions have a high turnover, and to keep addresses of all the members is a very difficult problem indeed. If postal ballots were to be held, it would be practically impossible to have a list of up-to-date addresses.
On the internal methods of elections, over the last century unions have developed a great variety of internal structures from their own experiences, the nature of their industry and their work surroundings. The present system of elections of executive councils reflects this—for instance, delegates at the annual conference, ballots at the place of work, voting at branch meetings, and postal votes at home. There have been many serious union debates on reform. The Green Paper tries to deny this.
But what about the Tory Party and its organisation? The Tory Green Paper treats all these developements with contempt and says that the only one true democratic system is the postal ballot. The trade unions exist because of the conflict between workers' and employers' interests. Therefore, they must be run by their members without their employers or the Government barging in.
Let us look at an organisation to which the trade union movements of many countries belong—the International Labour Organisation. Their document says:
"Workers' and employees' organisations shall have the right to draw up their constitutions and rules. They will have the right to elect their representatives in full freedom. They will have the right to organise their administration and to formulate their programmes.
774
The public authority shall refrain from any interference which would restrict this right or impede the lawful exercise thereof."
The Tory Green Paper cuts right across these fundamental principles. It is a tentative sounding-out of a future plan to restrict effective industrial action and to cut down the Labour Party, rather than a plan for more democracy. Unfortunately, last summer the Social Democratic Party produced a very similar document in many ways. Only a Labour victory can stop all this happening. But, of course, we must not oppose any true, fair and unbiased reform for more democracy anywhere.
6.40 p.m.
Lord Mottistone: My Lords, it is a privilege to speak following the noble Lord, Lord Milford. I have done so on many occasions. I wish, first, to thank my noble friend Lord Boyd-Carpenter for initiating the debate and for so skilfully opening it, and I must apologise to him and those who will wind up and reply to the debate if I have to leave to keep an engagement before they speak.
I agree with most of what has been said, apart, in particular, from the contribution by the noble Lord, Lord McCarthy, which I thought was not up to his usual standard. Though it was up to his usual amusing standard, its content was not as strong as it should have been in the right direction. Nor did I agree with much of what the noble Lord, Lord Milford, said, but that is not surprising.
We have a profoundly serious and difficult matter to consider, because the Green Paper tackles possible ways in which the internal organisation of trade unions may be altered by legislation. It is not for the first time that that has been done, but it certainly needs very careful thought. Indeed, the Green Paper recognises that in the tentative way in which it deals with its subject. I would not agree with Lord Milford that it is cunning, any more than I would agree with him that Tories hate unions or, for that matter, that unions hate Tories, because many of them—or, at any rate, union members—vote with them.
Because trade unions started in an atmosphere of clubbing together to tackle the problems of the day, there is a strong element of clubmanship within them. One can understand why there could be resentment on the part of their internal management, especially at any interference in their internal affairs, particularly if it were introduced clumsily. I make that point strongly because in the past there have sometimes been clumsy moves, and they definitely need to be avoided. But although trade unions might have started like clubs, for most of them that was long ago. Much as I respect the many trade union leaders with whom I have had to deal, since those early days various attitudes and practices have developed, some of which have from time to time turned out to be little short of tyranny for some of the members. This leads me, therefore, to suggest that any proposal for change on the lines of those described in the Green Paper should be judged against the criterion whether it will be beneficial to the individual members of a union—indeed, not only whether it will be beneficial but whether it can be seen to be beneficial—and unless it can be shown to be so, it is unlikely to be effective.
There is another development which also needs to

775
be considered, and which, indeed, has been by previous speakers, and that is the fact that since the trade unions were initially formed there has been a vast increase in the number of activities—activities that directly affect the everyday lives of the ordinary citizens of this country—which have become centrally administered. One result of that, as noble Lords know only too well, has been that trade unions can take action which has a tyrannical effect on the public at large. That was brought out well by the noble Lord, Lord Spens, when he drew attention to paragraph 56 of the Green Paper, which makes the point clear.
Another criterion, therefore, for judging the desirability of proposals for change is whether such change is necessary for the protection of the public. Examining briefly the three main proposals in the Green Paper against those criteria, it is suggested that the proposal for secret ballots for the more important trade union elections—and on this I agree with my noble friend Lord Boyd-Carpenter that to have a ballot for each and every election would not be sensible—is one that could be particularly beneficial to ordinary trade union members and needs to be advanced with that as its main aim. Anything less could hardly be called democratic in the sense that we normally understand the phrase; and when I say "we" I do not necessarily mean the way in which the noble Lord, Lord Milford, normally understands the phrase—but sadly he is no longer in his place. Furthermore, I suggest that this sort of change could be brought into effect without requiring any change of note in a trade union's general structure of practices. Therefore, I feel that the sooner the necessary enabling legislation for this change (and I emphasise "enabling") is introduced, the better; and anybody with doubts on the matter should read paragraph 33 of the Green Paper.
Of the alternative ways in which secret balloting for trade union management, set out in Chapter 2, might be introduced, I would favour that suggested in paragraph 54, which, I suggest, deals with many of the important points made by the noble Lord, Lord Gormley, who I rather felt from the way he spoke would agree with the general theme of what I have been suggesting, because, of course, the union of which he has lately been such an important and influential official has largely adopted the practice we are discussing, though its structure probably helps it so to do.
Turning to the question of ballots before strikes, these could clearly benefit both the trade union members who are personally affected financially by strikes and, of course, the general public in cases where public services are affected. However, Chapter 3 of the Green Paper spells out the difficulties in implementing such a requirement generally, and I believe that legislation for this purpose should probably best be delayed until after the union's own managers' secret election (if I could so describe it) has been in force for one or two years; and in the meantime the benefits to union members of secret ballots for strikes should be given much publicity.
As for contracting in, the question of political activities for trade unions described in Chapter 4 is rather different because there is no doubt, as many
776
noble Lords have said, that the Labour Party would be seriously disadvantaged financially by the introduction of contracting in. I agree strongly with the noble Lord, Lord Rochester, that we want to have nothing like a political pogrom. Indeed, in making those remarks I think I would even agree with the noble Lord, Lord Milford, on this point, which makes it particularly sad that he has left before the end of my speech. While the direct advantages to union members—and I return to my two criteria—or indeed to the general public, are less obvious in this area, I suggest that the proposals in paragraph 124 of the Green Paper, which was particularly tenative on this point, are worthy of consideration.
There is one other possibility of change which is not mentioned in the Green Paper but which was raised by my noble friend Lord Renton; namely, to add other groups of public employees to those like defence, the police and, by their own decision, the members of the Royal College of Nursing, and to have a condition of service of not to strike. There is no doubt that such a move would well satisfy my second criterion of being beneficial to the public at large. However, there are obvious difficulties. My own feeling, after many years of thought, is that it would be possible, providing there were convincing arrangements for independent assessment of pay and conditions, for groups of skilled persons to be invited to accept a no-strike clause in their contract of employment. It would be necessary to appeal to their sense of duty by laying accent on the service to the community which would be the reason for introducing the change, and my noble friend Lord Renton made the same sort of point. But I do not believe that a no-strike clause would be readily acceptable for untrained persons or persons with limited skills. Thus, I strongly suggest that the contemplation of the introduction of no-strike clauses be limited to groups of trained and skilled people.
To sum up, I would say that there is much that is good in the proposals in the Green Paper, and useful legislation can stem from it. However, any changes must be judged against the criteria of whether they improve things for both the ordinary trade union members, who must see that this is so—and without whose support any change is unlikely to be effective—and the ordinary public, whose patience has been sorely tried in recent years.
6.50 p.m.
Lord Prys-Davies: My Lords, at the outset I must declare an interest in the Paper—whether it be green or black—because my firm has been associated with the National Union of Mineworkers (South Wales Area) and its predecessor, the South Wales Miners' Federation, since the latter was founded in about 1898. But, being in a frank frame of mind, I would assure the House that personally I have not been involved with the union for the last 85 years. As we have heard this afternoon, the National Union of Mineworkers is scrupulous in the manner in which ballots are held and in the manner in which the decisions are accepted. However, I am sure that the National Union of Mineworkers will have some special interest in this paper; but I speak for myself.
In the abstract the paper contains many attractive arguments about extending democracy in the trade

777
unions. I think that most of us—probably all of us—would go along with the principle of extending democracy generally and of making officials and governing bodies effectively accountable for what they do, or fail to do. I think that that is a healthy trend. On this side of the House we do not claim that union democracy is perfect; but the tendency towards extending democratic control is healthy. Where we differ is on the question of whether or not this tendency, which is already underway—and it seemed to me that the Minister was acknowledging that it was underway—is to be accelerated by the strong arm of the law or by the unions voluntarily, with possibly the assistance of the certification office. In other words, is it to proceed organically, or by force of law?
I wish to address myself to this issue. In the Green Paper it is claimed that legislation is necessary, partly because the Government detect a lack of will—these are the words used in the paper—on the part of the unions to reform themselves. What is the evidence for the lack of will? This is merely the interpretation placed on the unions' failure to apply for public funds towards the costs of postal ballots on various matters. But there is another explanation for the unions' reluctance to claim back from the state the costs of public ballots. It is that they fear that it would lead to state control of tame unions, run by people acceptable to the Government of the day.
What is significant is that in the Green Paper no weight whatsoever is given to that explanation. The paper freely acknowledges that there are "complex problems and difficulties" in the way of legislation. That is certainly so. Unions differ. They were created at different times, to meet varying circumstances in different industries. We know how they vary enormously in size. But each union has its own distinctive identity, government, procedures, and methods of election, which have been built up on a basis of custom and practice. Custom and practice dominate the rule book in the same way as they play an important part in industrial relations. Yet again, nowhere in the paper is there a single reference to custom and practice, although one cannot get away from history and experience; and noble Members of this House will know that.
The paper, anxious for precedent, states that the Donovan Commission had "criticised"—that is the word that is used—the rule books as being "confused, self-contradictory and obscure". Well, Donovan made that observation; but he also carefully guarded himself by saying that that was so because the rule book had been altered piecemeal over the years. The rule book can be changed, and is changed, at the call of the members. The confusion, the self-contradiction, and the obscurity have no sinister implications. Indeed, if one examines the constitutions of many other organisations, one finds that a similar situation prevails.
But the present Government—who abdicate from intervention generally—propose to intervene with principles, or criteriea, or even standard rules to govern methods of voting for the election of union officials and of the principal governing body. I think it is fair to ask: What is the Government's case for this external intervention? It is claimed that there is much public concern—and the noble Earl the Minister spoke
778
of public alarm—about the electoral arrangements of unions. Those are very general words. In many trade unions there is a low turn-out. On one view—which certainly I am not pressing—it could be argued that this is evidence that the members are content with the policies and activities of their union. That could be argued. There is undoubted apathy; I accept that. I would accept that the low turn-out is an unsatisfactory feature; but against that it can also be said that it is, too, a characteristic of local government elections, as well as the elections of many clubs and associations.
The paper relies on general allegations of election malpractices, and claims that such allegations erode public confidence. Again, this is unsubstantiated generalisation. So far as I can see from the Green Paper, in the post-Donovan period surveys have not been conducted to establish the extent of alleged election malpractice and abuse; research has not been carried out to establish the extent of the alleged disquiet among trade unionists concerning the honesty with which union elections are carried out. It is my submission that, in the absence of such evidence, to legislate in order to reform electoral practices is thoroughly unsatisfactory. In fact it is ironic that the Government base their case for legislation on unsubstantiated evidence, which is far too flimsy and too biased to be accepted by a court of law.
In a democratic society it should be beyond the powers of the state to change the constitution of trade unions, save in extremely exceptional circumstances. In a dictatorship things may be different. The democratic state should intervene in the internal affairs of a trade union only where it is clearly established that it is necessary to impose from outside new and important procedures in order to protect or enforce the individual rights of members. But even if my view is misconceived, one must set against the possible benefit of legislation the hostile climate that will inevitably be created by such interference. The trade union movement is, or, at least, should be, one of the country's social partners. What kind of relationship do the Government want with the trade union movement? Do they want a stable and constructive relationship? The Government's proposed legislation, if adopted, coming on top of their two Employment Acts, will erode confidence even further and increase resentment and hostility. If we arrive at that situation what will then have been achieved?
My Lords, I will refer to but not discuss one or two other relevant questions. If the proposal is workable, can it be enforced if the unions do not yield? Will it be short-circuited? Can one, in any event, agree standard rules or agree even criteria (which, like all criteria, will be subject to certain exceptions) against which to measure present rules which will be suitable for every trade union, without impairing freedom which trade unions ought to enjoy to frame rules to meet their own circumstances? That proviso is not necessarily mine; it is the proviso of the Donovan Commission.
Before concluding, I should like to make one or two observations about the third aspect of the paper, where is is proposed that contracting-in should be substituted for contracting-out. The paper is not able to call in aid the Donovan Commission because the commission advised against such recasting of the law. Neither is there evidence from the certification officer that those

779
members who have contracted-out have been discriminated against or, to use the words of the Minister, have been "embarrassed". There is no evidence from the certification officer to corroborate that. Certainly, the paper draws attention to apparent disparities between the high contracting-out trade unions and the low contracting-out trade unions.
The noble Lord, Lord Boyd-Carpenter, drew our attention, in particular, to page 25 of the Green Paper. I have had a very good look at page 25 and attention is drawn specifically to the 36 per cent. and the 100 per cent. proportion of members paying the levy in different areas of the National Union of Mineworkers. This is specifically singled out for attention. In the North Wales area of the NUM, 100 per cent. of the members contribute to the political fund; whereas in the Durham area of the same union, only 47.2 per cent. contribute to the fund.
The authors of the paper assert that this disparity cannot be explained. How far did the authors of the Green Paper look for an explanation? I understand that in page 25 the document is probably not comparing like with like; that, in arriving at 100 per cent., the North Wales area of the NUM excludes pensioners and ex-employees of the mining industry, who do not pay the levy; whereas in Durham, pensioners and such ex-employees are included when the percentage is calculated. That could explain or go a long way to explaining the disparity. It seems to me that as the paper failed to identify this explanation, what weight can we attach to many of its other alleged factual observations? I have been able to test the paper here and I believe that there is an explanation.
Finally, my Lords, the paper's argument for substituting contracting-in for contracting-out could be presented as fair only if it was accompanied by a proposal to enforce a similar régime on companies' donations to the funds of the Conservative Party. But, on this, the Green Paper is silent.
Although the paper is described as being a consultative document, the impression is already abroad that the Government have adopted a line towards the matters discussed in Chapter 2 and that they will stick to that line whatever is said or argued in the process of consultation. It is only natural therefore that the TUC does not consider that the document offers any basis for discussion with the Employment Secretary. There are no discussions, there is no dialogue. That is a sad state of affairs.
7.6 p.m.
Baroness Lane-Fox: My Lords, contrary to the assumption of the noble Lord, Lord Aylestone, that everyone on this side of the House sees trade unions as a cross that we have to bear, in my opinion well-run trade unions can form an important part of the tapestry of the life of the community. It is necessary therefore that they should keep, and, in some cases, regain their credibility at every level, not just that they influence the wide and important issues that they enter into in the daily lives of the ordinary people. I believe that the loyalty of individual members to their unions is determined to a great degree by the support and assistance that they personally can receive. This must
780
affect the low turn-out which is discussed in paragraph 9 of Chapter 2 of the Green Paper.
For many years it was my ambition to get accepted for membership of a certain union. Not only did I feel that this would help me to achieve greater job security even as a free-lance, but that it would make me an integral part of the workforce. When I was at last admitted to membership, I had reached the late age of nearly 50. Having assured myself that here there was no political levy, I then hoped to take an active part in branch business. It was disappointing to find that branch meetings were held in a completely inaccessible upstairs room.
On one occasion only was a meeting place agreed that was possible for me. On that day, I arrived at about 7 p.m. and left at 11.30 p.m. with business still going strong. This made me realise that those who are deeply involved in branch affairs need to have extra resources of time and energy, that with the best will in the world those who are not blessed with so much staying power or time have to leave their interests to be settled by the others—never exactly a satisfactory arrangement for those with active views.
The subscription question appeared to be wrapped in mystery. After my first payment, my request was to be told when this was next due; but it went unheeded. When, after some months, I made inquiries about mine, they told me I was in arrears. I have an absolute horror of arrears and this sent my blood pressure soaring. The same performance happened each year and we limped along with more inexplicable arrears and increased subscriptions. With 12 years or so of this unsatisfactory membership I had benefited in no way and had to pay annually increased subscriptions which finally grew to be over £50 per annum.
At last, having rid myself of my initial sentimental delight of being accepted by this union after so long, I made a few inquiries as to what it could do for me. The answer was not encouraging. On account of my late membership and increasing age, there was absolutely no help or benefit available for me from the union. That was where my union loyalty ended. I wonder how many others struggle along under similar—not exactly the same—circumstances without consideration of individual conditions.
I can assure the noble Lord, Lord McCarthy, that in my case the union was quite out of touch; and I sincerely and earnestly believe that the CBI, for instance, as one of the examples that he gave, is far better organised than was the union to which I belonged. This is a different and smaller aspect from those referred to by other noble Lords today. However, I suggest that it has relevance in the low turn-out, the background to which cannot always be revealed on a vote.
To end, may I suggest that as individuals of the make-up of democracy it is the individual situation that must count in trade unionism. The Green Paper is designed to protect this better, and for that reason I support it.
7.11 p.m.
Baroness Seear: My Lords, nobody in their senses in 1983 can seriously imagine that we can run the affairs of a still great and very complex industrial country

781
without well-organised trade unions and well-organised employers to deal with the multifarious matters which have to be settled at all levels in industry. So, we must surely be agreed that, whatever criticisms there may be of both employers' organisations and trade unions, what we want to see is well-organised, strong and effective organisation on both sides in industry. For my part, I would far rather see the two sides of industry in the process of negotiation dealing with the problems that they encounter, with a minimum of interference from outside and a minimum of legal constraint. Before the noble Lords sitting on the Government Front Bench think that I am coming in behind them in a big way, let me say that a minimum of constraint does not mean none at all.
One was entertained by the disclaimers that we have heard from the Labour Benches about how very little real power trade unions exert and how very little need there is to exercise any control over their activities. It is true that there are many unions which do not wield a great deal of power, and I do not think that it will be helpful to the discussion by lumping them all together as if they are all equally effective in getting their own way and having the same degree of power in affecting the lives of ordinary citizens everywhere. But there are some which undoubtedly have very great power. It was. I understand on good authority, a very prominent politician, not on the Government Benches, who, when someobdy referred to trade union barons, commented: "Barons! they are bloody Dukes". In any democracy the concentration of power, be it in the trade unions or any other group, is something to which all Governments, if they believe in democracy, must pay attention.
Where it is seen that the concentration of power, in unions or anywhere else, can affect adversely the lives of ordinary individuals or society as a whole, then Government have a right and a duty to intervene. On the one hand, I am saying let us have as little intervention as we possibly need; but, on the other hand, do not let us draw back from the need to intervene because of any false argument that trade unions are really just voluntary associations and that what they do affects only themselves, that they should he allowed to run their own affairs as if they were some Victorian tennis club with no more effect than that on what happens to the world outside. We do not want any more Government intervention than we absolutely need to have.
I was very interested in the point raised by the noble Lord, Lord Boyd-Carpenter, at the beginning of this debate, when he seemed to me to be making a very important point about unions which wield monopoly power—and that is the key to the whole argument, surely—in important sectors of the economy which have great effect, both on the working of the economy or on the lives of ordinary individuals. It would not be too difficult to distinguish between unions which are in that position and those which are not, and a large number of ordinary trade unions in other activities which do not wield monopoly power and which do not have this kind of influence. This debate will be well worthwhile if we follow up that point and see what implications it might have for future developments.
I do not intend to do a tour d'horizon of every issue
782
of industrial relations that might conceivably be related to the Green Paper, because the Green Paper is rather a modest little document. What it is dealing with is not particularly interesting or important, dare I say. I think that it was the noble Lord, Lord Houghton, who said that there is really only one issue raised here which has to do with industrial relations as such, and that is the issue of whether there should be compulsory ballots of membership before strike action.
My own view on this—and I relate this also to the first issue about the elected representatives—is that what one really wants is elected representatives who have the full support of the people that they represent and who are then trusted to get on with the business of negotiation. What the noble Lord, Lord McCarthy, talked about as "ballotomania", which I suppose is what he means by what he calls one man, one vote when he does not like it, is really an objection to direct democracy on every conceivable issue. On this I would greatly agree with him.
What one needs is that true representatives should do the negotiation in advance of strike action and should follow through all the procedures. This is of the greatest importance. They should then be in a position to call a strike, having presumably found out that they have a very considerable degree of support. It may be—I think it would be—very desirable if the trade unions in their own rules and regulations had the opportunity of some triggering device to enable the members to intervene if they felt that they did not like the way that the negotiations were going. I do not think that this should be compulsory by law. The corollary of this is that you need to be satisfied that the people elected, the people doing the negotiations, are really representative. This strengthens the case for election of the senior officials.
Nobody in their senses, I imagine, would suggest that one should have private balloting and a postal ballot for electing every shop steward or convener who is being press-ganged into taking a job that he does not want particularly to do. But as my noble friend Lord Rochester said—and I think other speakers have said it, too—there should be elections for those members and governing bodies who are going to have a vote. If the officials doing the negotiation who report to those bodies are appointed officials and are, so to speak, the civil servants of the unions, and they do not vote, then I do not see that it is particularly necessary for them to be elected.
The people who control the unions should be subject to election and to re-election. Being elected once in a lifetime is surely not good enough to establish democratic control or to give the people with whom they are negotiating the confidence that they speak for the membership. For my part, I go along with limited—limited by level and by function—requirements for ballots for officials, but not with ballots as to whether a strike should take place. One can elaborate on the reasons for it.
My primary reason is that I think this is how negotiations should be done, by representatives who discuss and, as a basis of that discussion, come to what they think is a satisfactory solution. But there are practical arguments against it. There seems to be an assumption in the minds of some noble Lords that if,

783
buoyed up no doubt by last week's NUM strike, you go to the members, they will not want to strike. That was true last week, but there have been a great many occasions when it was not true; and once you have got people out on a ballot, how on earth do you get them back again? Knowing what the issues have been and what discussions have taken place they cannot possibly take part in the negotiations which can lead to a settlement. They cannot take part in the argument, and that seems to me to rule out the idea that this is an appropriate way of dealing with strike action. Surely it must follow that if you have a ballot to decide whether people are going out on strike then you must have another ballot to decide whether they come back again—and carrying that out in an effective way seems to me not possible at all.
That leaves the third issue, that of contacting-in and contracting-out. I noticed that the noble Lord, Lord McCarthy, was singularly and uncharacteristically silent on this subject. I cannot think that he forgot it; I do not know whether one is to assume from his silence that silence means consent or perhaps that silence means indifference—
Lord McCarthy: My Lords, if I may interrupt, it is all a matter of the division of functions. It all rests on the noble Lord, Lord Underhill, who will answer in full.
Baroness Seear: The noble Lord, Lord McCarthy, was ever a good politician. I will not press him as to what his own view may be on this matter. But whether the figures on page 25 are accurate or not seems to me to be entirely beside the point. It surely must be right that people can decide whether they want to pay a political levy or whether they do not. You do not need to go back into all the history of it or to examine the credentials on page 25—and indeed perhaps it was something of a hostage to fortune to put it in at all, because somebody was bound to pick holes in it. How much further do you need to go? In 1983, whatever might have been appropriate at the time when the trade unions were struggling for existence and when the Labour Party needed to have the trade unions behind them in order to maintain their struggling existence, that is all ancient history. Today, with the numbers and strengths of trade unions, with trade unions in a wide variety of occupations and professions where trade unions never thought to penetrate 70 years ago when the legislation was passed, surely it is appropriate that people should say whether they want to pay a political levy, and not have to contract out if they do not want to pay it. Nobody in their senses, if they were inventing legislation now, would put it in any other form.
I go along with the noble Lord, Lord Houghton—but then of course I would—and indeed I go along with the noble Lord, Lord Gormley, in saying that a little more short money, if I may put it like that, would go a long way in dealing with the problem. Obviously, the Labour Party want the money that comes from the political levy and they find it very embarrassing not to have it. Here I speak from experience as a member of a party which has not got much money. But to justify an anachronistic position for contracting-out just because the Labour Party needs
784
the money does not really stand up. So, clearly, what we have to do today is to say that the whole approach of contracting-out is out of date, and we urgently need to look at other ways of financing political parties than those we have at the present time.
7.25 p.m.
Lord Underhill: My Lords, we have had a very useful and interesting debate and our thanks are due to the noble Lord, Lord Boyd-Carpenter, for opening it, During the debate I noted in particular the contributions of my noble friends, Lord Houghton and Lord Gormley, who have brought to our House experience based on their long service as trade union general secretaries. They know the situation from within. Incidentally, my noble friend Lord Gormley has asked me to apologise to the noble Earl—he forgot to do so himself—because he has a long-standing engagement and could not stay.
There is too much loose talk about the power of trade unions, of union bosses, of trade union bullies and trade union barons—not so much in this debate, but these expressions are often used in your Lordships' House. It is always overlooked that trade union general secretaries and presidents are responsible to their elected executive committees. As someone who joined a trade union when eligible some 53 years ago. I find it very difficult to reconcile what some people describe as activities in the trade union movement with my experience over those 53 years.
The noble Earl and others said, I believe, that the trade unions are not affected by legislation. I do not know how one would describe the 1980 and 1982 Acts. The 1982 Act in particular put non-unionism on a pedestal: in fact, Mr. Norman Tebbit rather boasted that it was—and I quote—
"The most comprehensive and most effective protection for non-union employees that we have ever had in this country."
That sort of statement does not encourage the trade union movement to go in with effective consultation and co-operation, which is what we all wish to see. The Green Paper, as some noble Lords have said, does nothing whatever to tackle the real problem of industrial relations. In fact it may do the opposite; but unfortunately that is not the basis of our debate tonight.
The impression has been given during the debate that the unions have done nothing to reform themselves. May I remind your Lordships of what my noble friend Lord McCarthy actually said? He said that since Donovan, trade unions have taken steps to reform themselves and that they use more moderation; they use more ballots before and during strikes and they are becoming more decentralised. I know there is a long way to go and, as one who had to enforce the rules of a political party over very many years, I recognise the problem of tackling the questions of voluntary officials at branch level. But all the unions have their rule books, governing procedures. Most of them are very detailed and very democratic in their make-up. Many unions have disciplinary procedures to ensure that the rule books are closely followed, and generally one finds that the unions and their executives are very jealous about their rule books. It would be good for many other institutions if they followed the procedures that are laid down in the rule books. The

785
difficulty is that one often is dealing with voluntary officials; and I recognise the problem.
My noble friend Lord McCarthy said that the Green Paper was not a balanced consultative document. It is pretty clear, looking at the Green Paper, exactly what the Government would like to see achieved. But when I go through it time and time again, it strikes me that truth does try to burst out, although sometimes one has to look carefully for it. Those who spoke with some enthusiasm for more legislation should take heed of some of the points which are made in the Green Paper; and I want to examine a number of those points.
The Green Paper recognises in paragraph 18 that unions have a variety and complexity of electoral arrangements. It points out, as my noble friend Lord Prys-Davies mentioned, that procedures are part of the unions' history of sometimes well over 100 years. I thought the point that my noble friend made about custom and practice at that point not being included in the White Paper was a very important one. The Green Paper does recognise that there are major differences in union procedures; and in paragraph 48 it is suggested that imposed uniform procedure requirements may run counter to the traditions and not meet the considered views of members. That has not been mentioned today, but it is in paragraph 48 of the report.
The Green Paper draws attention to the difference between some of the unions, and the noble Earl, Lord Gowrie, referred to the AUEW. Perhaps he will indicate in his closing speech why he did that, because the AUEW is a union which elects practically all its officers at district, area, regional and national levels. It is engaging in elections almost every week of the year. The Green Paper also mentions the T and GWU, whose officers are appointed. I shall not draw a comparison to show which union is better run. All I know is that the T and GWU have some very good officers, who are all appointed.
The Green Paper recognises that some unions
"advertise jobs for national officers, interview candidates and offer them a contract of employment primarily on the basis of their professional expertise".
Some unions adopt that procedure. Your Lordships will note what my noble friend Lord Houghton said on this issue as regards his own experience; and there should be no reason to interfere with the way in which different unions operate.
I was pleased that the noble Lord, Lord Boyd-Carpenter, and others, made absolutely clear that they could see no point in balloting for the election of a multiplicity of officers. We must keep in mind that the elections of officers and committees at branch level are of the utmost importance. But, surely, they must be elected by members who are sufficiently interested to attend the annual meetings. I agree with my noble friend Lord Houghton, who said that one cannot legislate against apathy. It is the people who attend the meetings who know the membership and who know for whom they should vote when officers at branch level are being elected. Those appointed by the branch as delegates to the next tier—divisional, area or regional, according to the union's structure—will also best know the persons to be elected as officers and committee members, or the persons to be appointed to the next rung.
786
Paragraph 39 of the Green Paper admits that the system of indirect elections is deep-rooted in some unions, but it nevertheless seems to insist on urging direct elections by members. Strangely enough, in paragraph 54, many pages later, it is stated that the
"established systems of indirect voting might be held better to reflect members' needs and the diversity of interests of the membership."
I prefer to take paragraph 54 and not paragraph 39.
Paragraphs 19 and 20 set out the position relating to shop stewards. I would remind your Lordships that the overall figure of 300,000 shop stewards is given. That is a very large number of irresponsible, militant people in the trade union movement, as some people would call them. But having implied criticism in those paragraphs of the present system of electing or appointing shop stewards, paragraph 46 expresses doubt as to whether balloting for stewards would be practicable or appropriate in many cases.
We then come to the important chapter of ballots before strikes. There have been many congratulations in regard to the miners' national ballot, and your Lordships heard what my noble friend Lord Gormley said on that issue. But we must not overlook the fact that it was the national executive committee of the Mineworkers' Union which decided to have a ballot. It was the national executive committee of the General and Municipal Workers' Union which, in the case of the water workers, decided to have a ballot. One ballot went one way and one went the other way. We must not always assume, as some noble Lords do, that a national ballot will always go against industrial action; sometimes, it confirms industrial action.
I was pleased that the noble Lord, Lord Campbell of Alloway, stressed what is stated in paragraph 60; that:
"No country … has legislated to require universal, 'automatic' strike ballots"
as a condition for industrial action. The same paragraph reminds us that the Donovan Commission pointed out that there is the problem that a secret ballot could not be enforced in the case of small-scale stoppages, where there is often instantaneous action which just blows over. My noble friend Lord Gormley referred to that from his own experience. The same paragraph states that a statutory requirement for a ballot in all cases could lead to encouragement for unofficial strikes. Those who believe that action can be taken to prevent strikes in essential services might reflect that wrong action on such a matter could lead to a growth of unofficial strikes. If men feel keenly about something, they will take industrial action.
Enforcement action against union funds could lead to more unofficial action, which I am certain that noble Lords in general would not like to see develop. Alternatively, it could develop into other action which is equally damaging—"go-slows", overtime bans or working to rule. There are all kinds of alternatives to strike action. Paragraph 61 admits that there was little support for statutory ballots as a condition of any lawful strike, in response to the previous Green Paper. I noted that that view was supported by the noble Lords, Lord Rochester and Lord Campbell of Alloway.
In order not to detain the House too long, I want now to move on to political activities, because my noble friend Lord McCarthy asked that I should deal

787
with this aspect, in particular, in view of my connection with political activities of unions inside the Labour Party. It was noticeable that the noble Lord, Lord Boyd-Carpenter, was more firm on this chapter than on any other part of the Green Paper. The history of the development of union political activities is set out quite effectively in Chapter 4. I would remind your Lordships that until the Osborne judgment of 1909 trade unions paid for political activities from their normal general funds. In effect, the 1913 Act was a form of compromise and the trade unions accepted certain limitations which were placed upon them, but which were not placed upon any other organisation that wished to engage in political activity. Paragraph 74 admits that the principles laid down in the 1913 Act have stood the test of time, but it goes on to say that a great deal has changed since then.
The first change was the 1927 Act, which changed contracting-out, which had been the statutory procedure since the 1913 Act. This change was not based on any principles. Even the moderate Labour Prime Minister, the late Clement Attlee, described it as a punitive measure because of the General Strike. We must keep in mind that the political activities of the unions had no bearing whatever on that strike. The 1927 Act, which brought contracting-in, was repealed in 1946, so we reverted once again to contracting-out.
The House should be reminded of the requirements of the present law, and should compare what trade unions have to do with what other organisations do. They must conduct a ballot of all members to establish political objects, with payments from a separate political fund. There must be a majority vote and, if the proposal is approved, political rules have to be drawn up which must be approved by the certification officer. A member of a trade union must be free to contract out of paying the political fund contribution.
Noble Lords will have seen from time to time the annual report of the certification officer, who receives details of complaints by members about the administration of a union's political fund. There is strict legal control over payments for political activities, but there is little legal control over payments made by companies and other institutions. I should like to emphasise that the ballot, which is a legal necessity, is not about affiliation to a political party. It is a ballot to approve political objects and the establishment of a political fund. It is only later that a union may take a decision to affiliate to a political party. Up to the present, the decision has been only to affiliate to the Labour Party.
As some noble Lords have made quite clear, ever since its establishment in 1900 the Labour Party has always had direct affiliation with the unions. This is contrary to most other democratic socialist parties in the world, but it was a British trade union movement which took the step to form the British Labour Party. That is why the trade unions are so closely identified with the Labour Party. But a trade union member who objects to the principle of paying towards political objectives or who may dissent from paying for affiliation to the Labour Party has a legal right to contract out. If I may paraphrase what was said by the noble Lord, Lord Boyd-Carpenter, any self-respecting member of any party would find it unpleasant to have
788
unwilling members. I would say that no self-respecting person would pay a political levy if he did not support the objectives of that organisation.
Each year the Conservative Party makes a big drive, in the local press in particular, to encourage people to know more about their rights to contract out. They boast of the success that they have in putting across their view. May I quote another respected person who is regarded as having been a moderate Labour Party leader, the late J. R. Clynes, once the chairman of the Parliamentary Labour Party and a member of two Labour Governments? He wrote in 1948:
"The law (that is, the 1927 Act) was a mockery of democratic practice, which is the observance of majority rule in the internal affairs of all manner of associations to advance their avowed objects".
He wrote that the 1927 Act was the enthronement of minority dictatorship, That is what some noble Lords would wish us to return to by arranging for contracting-in. Paragraph 94 states:
"it is objectionable in principle that anyone should have to indicate his dissent from the political alignment of his union to avoid contributing to political activities or to a political party to which he is opposed".
No-one is compelled to do those things. That statement is turning democracy on its head.
Surely it is absolutely objectionable that after a democratic decision has been taken to affiliate to a particular organisation a member who supports the majority decision should be expected to sign a piece of paper saying that he agrees with the majority decision and wishes to pay. The only democratic procedure is for the minority who disagree with that majority decision to indicate that they cannot support it and that they wish to contract out. Any other course makes complete nonsense of any talk of democracy. It has even been suggested by the noble Lord, Lord Mottistone, who echoed one of the proposals in the Green Paper, that it should be made unlawful for the collection of political contributions to be made by the employer through the check-off system. I am sorry that the noble Lord, Lord Mottistone, is not here. This is because the collection of political contributions is made at the same time as a person pays his trade union fee. If we want co-operation with the trade unions, to make it a condition that there should be no collection by the employer of political contributions through the check-off system would, I believe, be regarded as gross interference. It would not contribute towards the co-operation that we wish to achieve.
May I also emphasise that all political contributions do not necessarily go to the Labour Party. They are political contributions to the political fund of the trade union. The trade union decides how much of the contribution will go to the Labour Party. Some of it is kept nationally by the unions, some of it goes to the divisional committees of the union, and some of it goes down to the branches, which often use it for political education work, not necessarily for payments to the Labour Party. I echo what has been said by other speakers: that if there is so much concern about trade union contributions the Government ought to state quite clearly what is in their mind about the contributions made by industry and commerce. Many of them make contributions direct to the Central Office of the Conservative Party. Others make indirect

789
payments to the Central Office through the united industrial councils which exist in every region of the country. They make a sort of backhanded gift to the Conservative Party.
Perhaps in future years we can also expect a Green Paper on the finances of political parties. As my noble friend Lord Houghton of Sowerby said, I was a member of the Houghton Committee. Its report needs to be updated in the light of circumstances. Even should there be contributions from the state to assist political activity, I am certain that the great majority of trade unions would still wish, on a democratic vote, to affiliate to the Labour Party. This should ever be kept in mind. If there should be any suggestion of a proposal to contract in so as to cripple the Labour Party, it would rebound upon anybody who made it. Therefore, I should like it to be kept in mind that contracting out is a democratic procedure and that contracting in would be a travesty of what all of us believe there should be—adherence to majority decisions.
7.46 p.m.
The Earl of Gowrie: My Lords, I believe my noble friend Lord Boyd-Carpenter has very good reason to be pleased with the debate which he so ably initiated. One of the many illusions of another place about your Lordships' House is that we know nothing about industrial relations. I have always learned a very great deal about this subject, speaking as a Minister concerned with industrial relations, from debates in this House. I am not engaging in mere conventional politeness when I say so. My noble friend will also, no doubt, with his usual sense of humour, have noticed that if one wishes to hear the true and authentic voice of conservatism, of defence of the status quo, of tradition, of precedent, one has only to come to your Lordships' House and listen to the Labour Party on industrial relations and trade union reform. The democratic decisions with which the noble Lord, Lord Underhill, regaled us may in many instances have been taken 50 years ago. As something of a conservative myself, I admire him for his defence of that position, but I am not sure that he should be allowed altogether to get away with it.
I am speaking, with the leave of your Lordships, for the second time in this debate. Your Lordships allowed me a good run on the principles of the Government's policy so I do not propose to say any more about them. I wish simply to deal with the points which have been made. A number of noble Lords, not least my noble friend, were anxious about the important problem of strikes in the essential services, strikes which hit the public direct and which often have their most damaging effects on those who, like the old and the sick, are least able to cope. The Government certainly share your Lordships' concern about this issue. The steps which we have taken in the 1980 and 1982 Employment Acts, together with measures to improve the democratic processes in trade unions, such as those discussed in the Green Paper and in the debate this afternoon, can do much to encourage responsible behaviour in industrial relations in the essential services, as elsewhere.
But change of this sort takes time. Recent events have led many people to believe that some specific and
790
more immediate action is needed to deal with the problem of strikes in the essential services. My right honourable friend the Secretary of State is therefore examining very carefully possible steps which the Government could take in this area, and as he has made clear recently his mind is far from closed on the matter. I undertake to see that he considers carefully the points which noble Lords have made this afternoon.
The noble Lord, Lord Rochester, suggested a sanction for failure to hold union elections by secret ballot—for instance, removal from the certification officer's list and loss of the right to tax relief for expenditure on provident benefits. That is one of the options which is canvassed in the Green Paper. I refer the noble Lord to paragraph 52. The Government will, of course, take his points into account as they consider an option which we ourselves have raised.
A number of noble Lords—this is a very substantive issue which came out of the debate—felt that the Government might be being unfair in relation to trade union contributions in respect of the Labour Party while glossing over the position of company contributions to the Conservative Party. This point was raised by the noble Lord, Lord Rochester, although in his usual polite and moderate manner; and by the noble Lords, Lord Gormley, Lord Houghton of Sowerby, Lord Milford, Lord Prys-Davies, and Lord Underhill, I should really like to lay to rest this somewhat antique canard, because, in our view, the two issues simply do not stand comparison.
First, there is the existing balance between the degree of regulation between companies and trade unions to which I drew attention in my earlier speech and which noble Lords opposite have not answered at all. In general terms, unions are much less fettered by law than companies, and this applies in respect of their political donations as well. The shareholders have substantial powers of control over political contributions. Directors' reports must contain a statement of all political contributions over £200, and if the shareholders disapprove they can challenge the decision at the company's annual general meeting.
By contrast, union members have less choice and receive less information. A decision to set up a political fund and to impose a political levy may have been taken, as I said earlier, as long ago as 1913—many years before any of the present members joined the union. The size of the political levy paid by trade union members is often concealed within the overall union subscription. It seemed to me that in his closing speech the noble Lord, Lord Underhill, effectively acknowledged that fact.
Then there is the issue of the scale of the funding, which some noble Lords opposite have rather conveniently overlooked. Political contributions by companies are so small as a proportion of turnover as to have no measurable effect on the prices charged to consumers or the dividends paid to shareholders. Typically, they represent less than one part in 100,000 of the company's turnover. By contrast, the political levy may be as much as 7 per cent. of the trade unionist's subscription. The largest political contribution by a company is under £75,000; the largest union contribution is more than £¼ million.

791
An idea of the scale involved can be gained from the work of a leading expert in the field. I am referring to the work of Mr. Pinto Duschinsky, British Political Finance 1830–1980, who discovered that, and I quote:
"In the 1970s, the three top unions raised more money for Labour than the top 800 companies combined for the Conservatives."
It is not my business to argue the case for the Social Democratic Party or for the Liberal Party—I remain the firm Tory I have always been—but it does seem to me that it is certainly unfair to them that this position should continue unchallenged; and the noble Baroness, Lady Seear, with her characteristic brevity and common sense, drew that point to our attention earlier.
Coming to the points made by my noble friend Lord Campbell of Alloway, I always pay great attention to what he says on these issues and welcome his support for measures to ensure that elections of union officials are properly democratic and to end the system that allows political contributions to be paid as a result of ignorance, inertia or—worst of all—obstruction. I will refer these points to my right honourable friend as well. My noble friend and I are at one in seeking reforms which will result in the power of trade unions being used more accountably and in accordance with the views of their members. He pointed to recent events in the coal industry, as other noble Lords have done, and these have vividly demonstrated the importance of union leaders reflecting the views of their members. I, of course, take the point that ballots do not always go one way.
It may well be, as my noble friend suggested, that greater accountability by union leaders will reduce the need for strike ballots—at least, the need for legislative backing for such ballots. The practical difficulties of legislating in this way, which are described in the Green Paper, are undeniable and are there, as I admitted in my opening speech. But I do not wish to write off the case for a strike ballot provision at this stage. I understand that my noble friends are concerned about the authority of union executives, but we cannot, whatever we should wish, expect our efforts to bring about greater accountability by exhortation to become fully effective overnight.
The noble Lord, Lord Gormley—and I fully accept what the noble Lord, Lord Underhill, said as to his noble friend's inability to be here—made a robust and witty speech, but the burden of it was a little thin. He said that trade unions do not need legislative attention but will do what is necessary by themselves. We regret very much the need for legislation. We have tried to restrict any legislative proposals in the past, in the light of the step by step approach, to clearly perceived anomalies or injustices. That is the way we have proceeded until now and in which we will continue to proceed. But we have been waiting at the church for an awfully long time for some of these proposals to come forward, and we are, understandably, growing a little impatient.
This point of the noble Lord, Lord Gormley—which was echoed, with his great experience, by the noble Lord, Lord Prys-Davies—was admirably answered by the noble Lord, Lord Aylestone, who, I will remind your Lordships, is a distinguished former Chief Whip
792
of the Labour Party. Speaking for his party he said—and I hope that I am quoting him aright—
"We would prefer that reforms would come from within the unions, but failing that legislation would be necessary".
The noble Lord, Lord Underhill—whose position and courage, and whose struggles for democratic procedures within the Labour Party, are well known—must recognise that many of his closest old colleagues take this view. I admire the dogged loyalty with which he refuses to take that view, but he should allow that it is not all part of a Conservative conspiracy against the trade union system; there is rather wider support for these issues than simply the support given by my own political party.
Going on from that point, the noble Lord, Lord Spens, advocated that the Secretary of State should be given the power to require trade unions to hold ballots in circumstances of special seriousness. He suggested that this might be done with the affirmation of Parliament. In this context, the noble Lord proposed that unions which fail to follow this requirement should lose their immunity against actions in the courts. Clearly there are attractions in the noble Lord's proposition—and it gives me special pleasure to say that, because the noble Lord and I were prone to tangle during the passage of the 1980 Act.
But we must bear in mind two points. First, there is the danger of turning an individual dispute into a confrontation between the Government and the union. This Government, whatever their virtues or shortcomings in other respects, have been singularly successful in avoiding direct confrontational disputes of that nature which were so damaging to the previous Conservative Government and, it must be said, to the previous Labour Government—as we know from the winter of discontent, the miners' strike, and the rest. Secondly, we have to remember that limitations on those who would have a cause for action under the law undeniably exist. Patients of the National Health Service or customers of public utilities, for example, do not have contracts on which they might sue organisers of strikes. Nevertheless, my right honourable friend is currently considering the whole question of strikes in essential services. As I said earlier, his mind is not closed to the idea of legislating on this issue and I am very grateful for the points which the noble Lord, Lord Spens, has made.
We had an interesting contribution, as we would expect, from my noble friend Lord Renton. He made the point, again in connection with the essential services, that it should be a condition of service for employees in the essential services that they could be dismissed if they strike. Of course, it is already the case that where employees go on strike they normally do so in breach of contract and thus are already liable to be dismissed. In practice, of course, it is very unusual for an employer to dismiss strikers, because that does not help to end the dispute, and indeed it could, and would be likely to, initiate fresh disputes. I am also grateful to my noble friend Lord Campbell of Alloway, who reminded me in relation to this point of Lord Renton's that under existing law any employer can dismiss provided he dismisses all on strike, but again this would not be liable to lead to any very satisfactory conclusion.

793
My Lords, the noble Lord, Lord Houghton, I was sorry to hear, was rather less rapturous about this Green Paper than he was to the initial proposals we made when we came into office, in respect of secondary picketing and the like. I very much welcomed his support at that time, and therefore I am sorry that I have not yet won him over on this occasion. He made the point in relation to the election of union officials that this could reduce much needed job security of persons who have been appointed to such offices. Again the Green Paper recognises—I refer the noble Lord to paragraph 41—that a requirement for periodic re-election of all national trade union officers, whether elected or engaged, would—and I am quoting—
"…be inconsistent with the nature of the job where a union (as is the case with a number of smaller white collar unions) has found that its needs are better served by selecting a general secretary for appointment on the basis of his expertise and experience rather than by election from within the union on the basis of popular support."
My noble friend Lord Ferrier noted that changes may come in this field, as in so many others, as a result of new technologies. When we come to the speech, which I enjoyed, of the noble Lord, Lord Milford, I thought for a moment we must be back in Northern Ireland or dealing with Northern Ireland affairs, where even the most enlightened policy document coming from the Government is often taken as being symptomatic of a dark plot to sell Unionists—the other kind in this instance—down the river. I do not think that the noble Lord, Lord Milford, sufficiently acknowledged that companies are hedged about with legislation. I agree with him on the need for balance, but I do not think he was able to convince us that the balance was a fair one.
Coming to the speech of the noble Lord, Lord Prys-Davies, he really challenged me to provide evidence of public concern about union democracy. It seems to me that the evidence has flooded in again and again, in letters, in newspaper articles by well-known union leaders, and in polls. Indeed, I see that a very recent poll, one reported in last Monday's Financial Times, of 600 trade unionists showed that 68 per cent. favoured electing union leaders by secret ballots and over half believed that union leaders were out of touch with members. Those are not my views but the views, in this poll, of trade unionists themselves. On the issue of contracting-in or contracting-out, which the noble Lord raised, in perhaps the most graphic case which occurred recently—it was reported in the press, but I believe it is far from unique—over 150 members of a particular union branch who decided that they wanted to contract out and signed the necessary exemption forms to do so back in 1980 are, I understand, still paying the political levy through their employer's check-off system, and that three years later. The union members concerned have been quite unable to obtain a refund from their union in all this time. Other cases which have been raised with my right honourable friend's department have included examples of people who had only just realised that they were paying the political levy, or who did not know that they had the right to contract out.
My Lords, I was most grateful for the contribution of my noble friend Lady Lane-Fox. It was extremely brief, but it was all the more cogent for that.It seemed
794
to me that she provided much more crisply a kind of lantern slide to some of the points which at rather greater length and with less precision I was making in my opening speech. So I could not be more pleased, and I would draw your Lordships' attention to her experience in these things. Coming to the speech of the noble Baroness, Lady Seear, I must say it did rather entrance me to hear anything emanating from my right honourable friend Mr. Tebbit described as a "modest little thing", which is how she put it. Her description will no doubt stiffen any timidity my right honourable friend may feel as he decides whether to take his next modest little step. I will refer him to what the noble Baroness has said. I think one of the reasons my right honourable friend arouses a certain amount of ire is that he is, of course, rather unique among Conservative Ministers in that he is an old hand in union affairs and knows some of the tricks of the trade. I certainly thought the noble Baroness, as we would expect, was full of common sense on the political levy, and I have already made the point that the levy is certainly unfair to her party.
I think if any real evidence of the need for further steps is required it was provided by this year's President of the TUC General Council, Mr. Frank Chapple, who in a recent court case made it clear that only 1.6 per cent. of his union members attended the branch meetings at which delegates to the union's conference were elected. That is not to criticise Mr. Chapple's union. His is one of the very few unions—and another, I fully acknowledge to the noble Lord, Lord Underhill, is the AUEW—which have introduced secret postal balloting on a wide scale in their elections, and that is thoroughly commendable. But it does go to show, and I think there is evidence from other unions, just how little we can rely on the existing structures of most of our major unions producing leaders who are genuinely representative of the views and wishes and aspirations of their members as a whole, as opposed to those of a hard core of union activists.
My Lords, if trade unions were less important to our society we could, of course, perhaps afford to shrug our shoulders at these inadequacies and at the continuing failure of the trades unions to face up to them. But that is not the case. The decisions which trade union leaders take on behalf of their members can reach, as I said earlier, into every home in the land. The way in which unions choose to exercise their power has the most far-reaching implications for the prosperity not just of their members but of the country as a whole, and of course in the word "prosperity" I include jobs and employment. That makes it essential, in our view, that those who exercise such power should reflect, and be clearly accountable to, the wishes of the majority of their members, and it is to that basic aim that our Green Paper is directed.
8.9 p.m.
Lord Boyd-Carpenter: My Lords, when, rather more than five hours ago, I had the privilege of opening this debate, I ventured to suggest that your Lordships' discussion of these issues might be a most valuable one. Whatever other noble Lords may have found in my remarks to disagree with, I think they would not disagree with that. I think we have had an extremely

795
good and stimulating conflict of ideas and of thought on a matter which is of the most serious national importance. Although, together with my noble friend on the Front Bench, I very much regret the, I think, very shortsighted unwillingness of those who speak for the TUC to discuss this Green Paper, it was good to see influential members of the trade union movement who are Members of this House not feeling themselves in the slightest degree inhibited by that, but contributing from their very considerable experience their views on these proposals. I hope that their example—and they include some of the leading figures of the trade union movement and of the Labour Party over recent years—may be studied at Congress House.
Without wishing to press the point any further, the fact that one may dislike certain proposals and that one may sincerely think they are wrong, when they emanate as possibilities from the Government of the day, that is surely a strong argument for discussing them and not for refusing to do so. To refuse to discuss them could be construed. however unfairly, as indicating that one feels that one does not have a very effective answer to them.
I do not propose at this stage and at this hour to run over the debate. I want to say only two things. First, there was a very interesting strain running through the debate on both sides, and that was the special concern which is being felt throughout the country, and which emerged into expression in this House, about that type of strike, mainly in the public sector or public utility, which has a paralysing or damaging effect on the community as a whole and not merely on an individual company. The noble Lord, Lord Houghton of Sowerby—who, I suppose, knows more about the public sector than any Member of this House—the noble Baroness, Lady Seear, from the other side of the House, and several of my noble friends referred to this. I was very glad to hear my noble friend at the Dispatch Box say that his right honourable friend was giving some consideration to this issue. I am sure that our recent experience in this country, reinforcing as it did memories of a few years ago, suggests that we cannot leave the position in respect of industrial action of that sort where it is. Although opinions will, I am sure, differ as to the appropriate method of dealing with it, none the less I am perfectly certain that there is a growing volume of opinion in this country that before very long action must be taken in this respect.
The other matter which, as I indicated at the opening of the debate aroused natural controversy, was the contracting-in and contracting-out point. If I may say so, noble Lords opposite were extremely wise to select the noble Lord, Lord Underhill, to put the justification for the Labour Party's point of view. They were right for two reasons. First, the noble Lord, Lord Underhill, knows more about political organisation, I suppose, than anyone else in the House. Secondly, he spoke very late in the debate and it was, therefore, extremely difficult for anyone to have the opportunity of seeking to controvert his arguments. I learned when in Government that if one had a weak case to make at the Dispatch Box it was exceedingly prudent to make it as late in the debate as possible. Obviously the noble Lord, Lord Underhill, had the same thought.
I do not want to pursue our controversy much
796
further tonight because I do not flatter myself that I shall convert him, but I should like to take up his personal reply to me. I said (and I hope he was not indicating that he rejected the view) that no self-respecting party would wish to take money from people who did not willingly want to contribute. He did not answer that, but said that no self-respecting person would contribute to a party with which he did not agree. I do not believe that is true. There are circumstances in which individuals are placed where caution or prudence—one can perhaps call it cowardice—may cause them to do just that. If one is in the situation—and a number of people in this country are—of being in a closed shop industry, where the exercise of the right to contract out involves informing either a shop steward or branch secretary that one intends to contract out, that calls for a considerable degree of courage. The possibilities of unpleasantness, particularly in a closed shop industry, and of danger to one's job, are real, or one may think they are real. It is to mislead himself for the noble Lord, Lord Underhill, to think that all those who contribute to the political levy wish to do so.
It passes all belief, for example, referring again to page 25 of the Green Paper, that 98.4 per cent. of the membership of the huge Transport and General Workers Union are active supporters of the Labour Party and anxious to contribute to it. I do not believe that, and the noble Lord, Lord Underhill, does not believe it, either. If that is so—and it must be so—there is an element (how large, we can argue) of involuntary contribution in the payment of the levy. This happens very often through the "check-off" and very often, as my noble friend Lord Gowrie said, without it even being known that it is happening because of the operation of the "check-off". But there is a substantial volume of such payments which, and I think the noble Lord, Lord Underhill, agrees with me, no self-respecting party would want to accept.
It is no argument to say that one cannot deal with this unless one deals with the companies. My noble friend Lord Gowrie dealt with the companies situation. I add only this one point. If a shareholder in a company does not like making a political contribution—he will, or course, know of it because of the provisions regarding the inclusion of such payments in the annual report—apart from the right to which my noble friend referred of going to the annual general meeting and endeavouring to persuade his fellow shareholders to stop it, he has the perfectly good option of selling his shares. That is not an option open to a man whose whole asset is the skill of his hands in a closed shop occupation. I believe we shall hear more of this issue, but I do not wish to pursue it further tonight.
However, I do want to say to your Lordships that for me this debate has been made by, particularly, one thing. That was—and I am sorry that he is no longer here, but it has been explained—to hear the noble Lord, Lord Gormley, rise from the Bench opposite and without even a grin on his face say that it was news to him that trade unions and trade union leaders exercise power in this country. I thought at the time that it was a joke because the noble Lord, as chairman and president of the National Union of Mineworkers, was, as he knows perfectly well, one of the most

797
powerful men in this country before whom Governments of both political colours, if they did not tremble at any rate indicated symptoms of acute nervousness. This debate will remain memorable for me having heard that man of power disclaiming his power background, and doing so in such a characteristically charming and ingenuous way.
I shall not detain your Lordships. The Motion does not ask your Lorships to approve or to disapprove of any or all of the items in the Green Paper: it asks your Lordships just to take note of it. Your Lordships have been doing so for the last five and a quarter hours. I therefore formally move.
On Question, Motion agreed to.

Wiston House Centre
8.19 p.m.
Lord Banks Lord Banks rose to ask Her Majesty's Government why they have imposed cuts and other constraints on the Foreign and Commonwealth Office Centre at Wiston House; and whether it is not the case that these measures will endanger the quality and effectiveness of the international Wilton Park conferences.
The noble Lord said: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. The House will know of the high reputation of the Wilton Park conferences. These conferences began as long ago as 1946 and were originally held at Wilton Park, Beaconsfield. They began purely as Anglo-German conferences but soon became much wider, drawing mainly from the 25 countries of the OECD. Since 1950 they have been based at Wiston House in Sussex.
The fees charged for attendance at these conferences are calculated to cover full board and lodging, attendance at all sessions and the cost of extramural visits. The balance of the administrative expenditure is met by the British Government as a unique contribution to international understanding. Since 1946 some 15,000 people have attended conferences there. Of course many members of this House have been there either as speakers or as participants, as indeed I have myself.
These conferences have gained a considerable international reputation, reflecting much credit on this country. The original director was Sir Heinz Koeppler, and in 1977 he was succeeded by the present director, Mr. T. W. Slack. There are 36 members of staff; 14 part-time. In reviewing this whole operation in 1975 Sir Heinz Koeppler said: "Wilton Park is run on a shoestring". I think in view of what has occurred it is worth repeating that his view was that Wilton Park is run on a shoestring. So much, my Lords, for the background.
I want to move now to the matters leading to the present impasse between the Foreign and Commonwealth Office and the 21-strong academic council. In December 1981 Foreign Office Ministers initiated a drastic review of Wiston House/Wilton Park activities. The target was to secure savings in the region of 25 per cent., or £115,000. The total net costs in 1981–82 were £465,000. The review was carried out by a senior Foreign and Commonwealth Office inspector, with
798
two other members of the Foreign Office staff and with the assistance of outside catering/hotel consultants. The inspector greatly exceeded the target, a target of 25 per cent., and recommended savings of 44 per cent., or £203,000. This involved cutting the staff by eight out of 36, the elimination of the deputy director and one member of the academic staff (effectively eliminating participation recruitment), the downgrading of the director from Under-Secretary to Assistant Secretary, the shortening of all conferences to five days or less, the elimination of extramural visits and the abolition of the Wilton Park journal; and the Wiston House Centre was to be used for more outside conferences to raise revenue.
The director and the academic council under the acting chairmanship of Sir Peter Tennant have maintained from the outset that there was no consultation with the director about the workloads of the staff; not that there was no consultation, but that there was no consultation on this vitally important point of the workloads of the staff. They have also complained that the inspector, having sent the report to the director, declined to discuss it with them. It is the view of the academic council and the director that this led to an incorrect assessment of the workload of the academic staff, which previous reviews had indicated was very heavy. The academic council resisted the 44 per cent. savings proposed, claiming that the maximum possible savings without doing damage to the quality and effectiveness of the Wilton Park operation would be 25 per cent., with a reduction of four, and not eight, in the staff.
On 18th June 1982, Ministers finally decided on savings of 30 per cent. (£140,000), with a staff cut of five; the director to be downgraded; half the conferences to be shortened; half the extramural visits to be eliminated; and the Wilton Park journal to be abolished. The academic council continued to resist. They argued that conferences of less than a full working week did not capture the special Wilton Park flavour. They argued that half the conferences would no longer have the extramural visits which they considered to be essential for balance. The elimination of one of the five academic staff, they maintained, critically weakened the team responsible for planning, organising and running the conferences, recruiting speakers and participants and providing three-language interpretation.
They objected strongly to the downgrading of the director, who by general consent had carried out his duties with distinction. They felt, in fact, that the Foreign and Commonwealth Office was shamefully taking advantage of the expiry of the contract of the director, and they felt, too, that the downgrading of the director diminished the standing of the directorship and the prestige of the institution. They objected to what they saw as interference with the internal management: the shortening of conferences, the reducing of the extramural visits and the abolition of the journal. They felt that within an agreed financial budget the academic council and the director should be left to decide these matters.
In an Adjournment debate in another place on 15th November of last year, strong support was expressed for the views of the academic council by five Members of Parliament who spoke and who, as it

799
happened, were all Government supporters. The Foreign Affairs Committee in another place, reporting on 17th January this year, while not opting either for the solution of the Foreign and Commonwealth Office or for that of the academic council, concluded its report with these words:
"We repeat our view that no steps should be taken which would jeopardise Wilton Park's future. We very much hope that agreement can be reached between the Foreign and Commonwealth Office and the Wilton Park authorities to secure the future of Wilton Park conferences and their valuable contribution to understanding and co-operation between OECD countries.".
The academic council reluctantly conceded the remaining substantial difference with the Foreign and Commonwealth Office, except the downgrading of the director and certain small items, narrowing the difference to £5,000; but I think that it is important to make it clear that they did that very reluctantly. Sir Peter Tennant, in a letter to The Times in November 1982, had said that the difference at that time of 5 per cent. between the Foreign Office and the academic council, amounting to £23,000, could mean the difference between prosperity and decline. But the Foreign Office has refused to move even on the issue of the downgrading of the director. The consequence is that Sir Peter Tennant, the acting chairman, and 11 members of the academic council have resigned—that is, 12 out of 21. We shall hear in the course of our discussions from one of those, the noble Lord, Lord Beloff.
The director has declined to renew his contract under the terms being offered. Further, at a meeting held on 9th March, the remaining members of the academic council, except for two who were unable to be present, agreed that, by and large, they supported the views of their colleagues who had resigned and that they would not wish to be associated with the selection process for the appointment of a new director until the relationship between the Foreign and Commonwealth Office and Wiston Park, which in their view had been radically changed by recent events—it was their view that it had been radically changed by recent events—could be clarified.
There has been a further report since then, issued by the Select Committee in another place, and in an appendix to that report there is a letter from the Chairman of that Committee in which he says—this is a letter to the noble Lord, Lord Belstead:
"My Committee find it hard to believe that the need for economy in the Foreign and Commonwealth Office is so pressing as to necessitate the enforcement of such marginal expenditure cuts with such damaging consequences, or that the small financial savings secured by those cuts can justify the resulting and resentment, which could have been easily foreseen as the Academic Council's views became clear in the latter part of last year".
Commenting on what I have said so far, I would say the following. There is clearly an impasse, a serious rift, in the relations between the academic council and the Foreign and Commonwealth Office. Secondly, in my view the Foreign and Commonwealth Office are going too far in cuts which they are seeking, bearing in mind Sir Heinz Koeppler's view that Wilton Park is run on a shoestring. The Foreign and Commonwealth Office appear to be interfering unnecessarily in the management of Wilton Park. In the matter of the director, they seem to have behaved unbelievably badly and very stubbornly. I wonder whether the noble
800
Lord, Lord Belstead, can name anyone else who has been downgraded during his incumbency of the post, because, after all, it is generally agreed that Mr. Slack performed his duties with great success.
We have spoken of savings of 30 per cent. sought by the Foreign and Commonwealth Office and 25 per cent. agreed initially by the academic council. But 7 per cent. has already been achieved by the merger of Wilton Park and the European Discussion Centre. Indeed, 8 per cent. is the savings to be secured by means of increased revenue. So the cuts about which much of the argument has taken place, amount to 15 per cent.; 10 per cent. having been agreed by the academic council. If the noble Lord, Lord Belstead, agrees that these are the correct figures then he will be emphasising the significance of the difference between the Foreign and Commonwelath Office and the academic council, because it is 5 per cent. out of 15 per cent. one third of what is proposed and not one sixth, as might have appeared. Yet even so it is only £23,000.
It has been argued that as far as the director's grade is concerned, his predecessor served in the lower grade until 1973. But he was then up-graded and the present director was appointed in the present grade, so it seems to me that it is quite irrelevant that his predecessor at some time held a lower grade. It has been argued that the Foreign and Commonwealth Office has sought ways of ensuring that their director does not lose income. It is by no means clear to me that the financial disadvantages have been satisfactorily overcome in this way, but, even if they have, it would not seem to justify the action which is objectionable on other grounds.
It has also been argued that the Government have shown a commitment to Wilton Park by renewing on a seven-year lease instead of a five-year lease and making some welcome capital improvements. But the previous inspection had called for a 10-year lease and the improvements were long overdue. There is little value in securing the physical exterior if the conferences within it are to decline in quality. It would appear that to restore morale among the staff; to establish good relations with the academic council; and to retain the existing director or to appoint a first-class successor, it would be necessary for the Government to offer the existing director a new contract on similar terms to his existing contract and to allow the management of the Wiston House conference centre to organise, without outside dictation, conferences and related activities within an overall budget.
I hope that the noble Lord, Lord Belstead, will be able to indicate some relaxation in the Government's attitude when he comes to reply. It is in the light of all that I have said that I ask the Government this Question, and I ask them to explain why they have behaved as they have and to say whether it is not a fact that their actions will endanger the quality and effectiveness of the international Wilton Park conferences.
8.35 p.m.
Lord Beloff: My Lords, the measured, accurate account given by the noble Lord, Lord Banks, would, I think, be sufficient to explain why he and other noble

801
Lords, even at this late hour, feel that this is a matter worthy of your Lordships' attention. It is not a little local difficulty; it is a matter which reflects both on the competence and on the reputation of one of our great departments of state. Therefore, I should like, as the only member present—or ex-member as is now the case—of the Wilton Park Academic Advisory Council, not to traverse the same ground but to add some detail to make clearer why in my view the prospect of the Foreign and Commonwealth Secretary being able to fulfil his declared objective of having a prosperous Wilton Park is extremely doubtful unless there is a complete change of attitude on his part.
The noble Lord, Lord Banks, mentioned that there had been 12 resignations. I think it might be of interest to your Lordships if I said who they were because, to some extent, we are talking about differences of opinion between a great department of state and a group of private citizens. Sir Peter Tennant has been mentioned. He was the acting chairman after the lamented death of Sir Robert Birley. His reputation in the world of business and previously in public service is known to your Lordships. Then there were Mr. John Birt, who is Director of Programmes for London Weekend Television; the right honourable Edmund Dell, a former Cabinet Minister; Mr. Frank Giles, Editor of the Sunday Times; Mr. Richard Goold Adams, one of the two founders of the International Institute for Strategic Studies; Mr. Eric Heller, Labour Member of Parliament; Professor Rosalyn Higgins, Professor of International Law at the London School of Economics; Mr. Russell Johnston, Member of Parliament; Doctor Roger Morgan, Head of the European Centre for Political Studies at the Policy Studies Institute; Sir Denys Wilkinson, Fellow of the Royal Society and Vice-Chancellor of the University of Sussex; and Mr. David Watt, Director of the Royal Institute of International Affairs. It seems to me that it would be arguable, if I may misquote Oscar Wilde, to say that losing one or other of these members was a misfortune, but to lose all 12 does smack of something rather more serious.
What were their reasons? Their reasons relate—and to some extent this has already been adequately illustrated by the noble Lord, Lord Banks—and go back to the original decision as to how to implement the economies. To my knowledge, no member of the council felt that Wilton Park should be exempted from the pressure on public expenditure, just as none of us would have felt that the Foreign and Commonwealth Office as such could escape the cuts which were being demanded from other departments. The question was the extent of the cuts, the methods by which they were made and the impact of the particular cuts upon the efficiency and morale of the institution.
As the noble Lord, Lord Banks, said, what happened was the production by one of Her Majesty's inspectors in the Foreign Office staff of a report which I have here. I should like to emphasise that it is the unanimous opinion, both of those who have resigned from the academic advisory council and of those who remain, that that report was not compiled according to the normal standards by which such reports are compiled and of which many of us had experience, because Wilton Park, like other establishments under
802
the Foreign and Commonwealth Office, is naturally subject to periodic inspection. But the normal practice is that the inspector would consult with the staff of the establishment concerned, particularly, as the noble Lord, Lord Banks, said, in estimating the workload, the nature of the work and the kind of people required to make it effective.
In this particular case, where, from the very beginning, the Foreign and Commonwealth Office had provided for an academic advisory council because originally it did not regard itself as competent to run directly and without advice a quasi-academic institution, one would have thought that the inspector would also consult people like Sir Peter Tennant, or, if you like, myself, who have been associated for a quarter of a century with the operations of this establishment.
I know, because I have heard him say it before, that the noble Lord, Lord Belstead, will come to the defence of his inspector and say that none of this is correct. If I may say so, I think that the noble Lord and, indeed, alas! the Secretary of State have a very curious version of ministerial responsibility. Ministerial responsibility is usually held to mean that if a civil servant makes a mistake or performs some function inadequately, he will not personally be blamed or suffer, but the Minister himself will take responsibility because it is part of his department. The interpretation which the noble Lord, Lord Belstead, and the Secretary of State have placed on responsibility is quite different. Their view is that if a civil servant or a group of civil servants says that something has been done correctly, not merely the kind of reasonably distinguished people whom I have listed, and not even the Archangel Gabriel himself descending from Heaven, will be allowed to persuade the Minister to the contrary. All our problems go back to that report.
It is true—and, indeed, the noble Lord, Lord Banks, has given some detail—that there was a long process of bargaining, with worry about the future, no doubt, on both sides; that concessions were made; and that some of the original recommendations were, in fact, thrown overboard. There was, of course, the important debate in another place to which the noble Lord, Lord Banks, referred. I would point out that among the speakers who criticised the action of the Foreign and Commonwealth Office in that debate was Mr. Richard Luce, who until not so long ago had served as a Minister in the Foreign and Commonwealth Office and could be presumed to have something of an inside view.
The council and, indeed, the director and his staff were very conscious of the financial pressures. One of the things they suggested was that a certain amount of extra time might be given to them, because it was clear that Wilton Park's reputation stood so high in the United States, in Germany and in other European countries that it was quite likely that from the 15,000 who had passed through its doors further money could be raised to supplement what Her Majesty's Government felt they could afford. There has also been, though the details have not yet been finalised, a very generous bequest from the late Sir Heinz Koeppler, most of whose working life was spent in that establishment.

803
But the main point, apart from the question of the director, to which I shall come, is that it became increasingly evident that the methods by which the objectives of the conference centre were sought were no longer to be decided by the directing staff or the academic staff advised by the advisory council, but were to be dictated to them from outside by civil servants who could not be expected to have the same experience or, indeed, any relevant experience of such an operation. It is this point—the feeling that not merely was the director being down-graded in a very particular way but that the academic council, its experience and its views were being pushed aside in favour of the views of civil servants—that partially explains the impasse.
With regard to the down-grading of the director, perhaps the noble Lord, Lord Banks, having a long story to tell, did not sufficiently explain the technicality which enabled the Office to do this. For reasons relating to the Civil Service Commission approval of appointments made not at the beginning of a public service career, when the present director was appointed, it was pointed out to the Foreign and Commonwealth Office that it could only be for a five-year contract, that it could not be until retiring age. But it was pointed out to him when he accepted the offer of the post—and the selection of the director was made in consultation with the new academic advisory council—that, although the Foreign and Commonwealth Office was prepared to go along with the position of the Civil Service Commission, he would at the end of his five years, if there was mutual satisfaction, be entitled simply to apply for a renewal of his contract on the same terms.
To take advantage of what was represented to him and represented to the academic advisory council as a mere technicality, to suggest downgrading his post in both status and financial terms seemed to us to be the one thing which it would be quite impossible for us to accept. Indeed, at one point the council suggested to the FCO that this particular issue, which is an issue of personnel management and does not have a great deal to do with economies or with the running of the conference centre, could be put to third-party arbitration. It was the refusal to accept arbitration on this single question of justice to an individual which precipitated what we must regard as a crisis, because the director has understandably refused to re-apply on the new terms and, as I have said, and as, indeed, the noble Lord, Lord Banks, has said, 12 members—a majority of the council—have resigned.
What about the present position? The Foreign and Commonwealth Office has asked the remaining members of the academic council to co-operate in the selection of a new director. But, as the noble Lord, Lord Banks, has pointed out, seven of them have informed the Minister that as, by and large, they share the views of their colleagues, they are not prepared to co-operate in the selection of a new director until there has been, with them, a radical re-examination of the role of the academic advisory council and the whole arrangement by which Wilton Park is maintained. They doubt whether they can usefully remain as members of the council unless this point is granted to them.
804
One could say, "Let them go, too; let the whole lot resign and the Secretary of State will appoint a new advisory council to take part in this procedure". I believe this to be wholly improbable, because, having read the letters of resignation of some of my colleagues, I cannot believe that anyone would consent to step into their shoes unless there was a change in the situation. For instance, both the Vice-Chancellor of the University of Sussex and Mr. Edmund Dell, an ex-cabinet Minister, have made it perfectly clear that, although they wish Wilton Park well and although they have valued their association with it, they cannot possibly be associated with what they regard as a piece of personnel practice which is itself dishonourable. If one vice-chancellor says that something with which he is connected has turned out to be dishonourable, knowing some vice-chancellors. I very much doubt that any of them would be willing to take over from him. Therefore, at the moment there is an impasse.
Of course, the Foreign and Commonwealth Office can go ahead and find someone—perhaps an ex-ambassador looking for some addition to his pension—to take over. But if that is done—if it is done as an internal appointment, with no assent from the wider business, academic and media community which has been associated with Wilton Park—it cannot possibly be kept a secret from the kind of people who come there (and Wilton Park has members of its conferences from this country, and not merely from abroad) and the reputation which the late Sir Heinz Koeppler built up and which Mr. Slack has continued—the reputation of a unique institution admired all over the world—will come to an end; and, rather than that, I suggest it be wound up altogether.
8.51 p.m.
Lord Greenhill of Harrow: My Lords, I have hesitated to intervene in this debate because I am no longer in any way involved with Wilton Park and my close connection with the institution ended nearly 10 years ago. But I was attracted by the controversy in the press and I have done my best to ascertain the situation. The conclusions to which I have come are not the same as those which have been expressed by the noble Lords, Lord Banks and Lord Beloff, and Lord Beloff has the advantage of being a member of the advisory committee.
When I last dealt with Wilton Park, in 1973, consideration was being given to how its usefulness could best be maintained and extended in the changed circumstances of that time. It had built up a great reputation for its work immediately after the war and a new role had to be found for it if it was to continue. It seems from all reports that a new role was successfully found and that Mr. Slack and his team built up a great reputation for themselves; and tributes have been paid to them which I do not for one moment question.
However, it is always difficult to judge the value of this type of so-called information work, which is what it is; it is a part of the Foreign and Commonwealth Office's information work. I have no reason to question the tributes which have been paid to Wilton Park. I know that the noble Lord. Lord Beloff, rates the information value of Wilton Park highly, because he wrote in The Times about that some months ago.

805
But it is difficult to prove the value of such an organisation. It is very easy to exaggerate its influence, and it is debatable whether money spent at Wilton Park—and it is by no means shoestring money—might better be applied to the BBC external services, the British Council or overseas students, and I should be interested to hear the noble Lord's views on the competing priorities of those organisations.
At the same time, I wonder whether some of the public tributes which have been paid to Wilton Park hark back to the regime of Sir Heinz Koeppler and the reputation it built up in the special circumstances of the postwar world. In my official experience, the centre has always been a target for economies under Governments of both parties. There was always a fundamental question whether the activities of Wilton Park were an appropriate function of the Foreign and Commonwealth Office. It is a reasonable question to ask, but the Foreign Office have always successfully defended Wilton Park against its critics.
But—and this point has been glossed over, I suggest—pressure has been built up recently to make economies there, and this pressure has come from the Public Accounts Committee as well as from the Financial Secretary to the Treasury. There was no way that the Foreign and Commonwealth Office or the Foreign Secretary could brush aside the pressures and ignore them, and it was right that the effectiveness of Wilton Park's organisation should be closely examined. Once again, I understand that the Foreign Office did their best to defend the worthwhile activities of Wilton Park in spite of the greatest pressure that was being put at the same time on the central functions of the Foreign and Commonwealth Office.
As we know, Ministers eventually agree that a radical review of the centre should be undertaken. That was done by a senior Foreign Office inspector and a team of outside consultants. Members of this House, including the noble Lord, Lord Gladwyn, have full experience of what these inspections are like; they are intense and one must expect controversy to follow from them. However, I think it must be admitted that the review revealed some shortcomings in management and plenty of scope for savings. As was to be expected, the Wilton Park Advisory Council and the director opposed many of the review's findings. It was perhaps natural that they should do so, and they should congratulate themselves that they succeeded in persuading Foreign Office Ministers to overrule many of the recommendations of the inspector's review.
In the end, I am led to believe, there remained only two sharp differences of substance. The first was the proposal that the academic staff should be cut from five to four. The second was that the grading of the director should be changed. They are very serious matters and the academic staff have an understandable pride in their independence and qualifications. It would be easy to imagine that the review was very distasteful to them, and they might well have thought that the composition of the review body was not entirely appropriate to a critique of their work. Nevertheless, I understand that in the end the advisory council now accepts that a reduction of one in the academic staff is acceptable.
The position of the director is less happy. He is a man of distinction and achievement and he is being
806
asked to accept a lower grade in the hierarchy. If I understand the position correctly, this will not mean a cut in his salary but will put a lower ceiling on it than he had expected. Such an arrangement would be distasteful to anyone, but it is the natural and inevitable consequence of the pressure which is being brought to bear on the senior ranks of the Civil Service, whose expectations have been curtailed in the same way as and even more drastically than, the director's. It is difficult for me to judge from outside—and I know I am a prejudiced witness—whether it is more equitable to penalise the director or let the cut fall on someone in the mainstream of diplomatic work. I would be inclined to believe that it is, both in terms of workload and in terms of the responsibility that is put on the diplomatic staff.
In my view it is an overstatement to argue that the question of the director's grading will diminish him in the eyes of visitors to Wilton Park. He will still be the director of the organisation, whose value visitors can judge for themselves, and the fact that in salary he will receive less than he might at one time have expected will surely not lead him to be treated with less respect by the participants in the conferences. He has chosen, regrettably, not to accept the new contract, and one must sympathise with his decision. But, if I may express a view, I have somewhat less sympathy with the tactics that have been pursued in the press and in another place. I am sorry that a public quarrel has been allowed to develop over this matter, and I am sure that the noble Lord, Lord Belstead, will offer some detailed explanation as to how the impasse has been reached.
The total sum in economies which the centre is being asked to make is, I understand, £23,000, in a budget of nearly half a million pounds. This seems to me a manageable target, which, with ingenuity, could be met. Moreover, as has been stated, £50,000 has been spent on redecoration of the centre, an administrative bursar has been appointed (which will take a load off the academic staff), and the lease of the centre has been renewed for seven years, surely giving very clear evidence of a determination by the Foreign and Commonwealth Office to continue the work of the centre. Therefore, I believe that it is quite wrong to represent that the Foreign and Commonwealth Office is hostile to the centre, or wishes unduly to constrain its activities. In my opinion the cuts proposed are such as not to limit the effectiveness of the conferences, and surely it is the public airing of these differences—which should be amicably settled—that will do the most damage to Wilton Park.
9.2 p.m.
Lord Walston: My Lords, I intervene in the debate for two reasons. One reason is that many years ago I had the privilege of being a member of the academic council of the centre for a few years. I then formed—as indeed I had already formed before becoming a member—a very high opinion of the centre's work, and, as other noble Lords have said, that was due very largely to its first director, Sir Heinz Koeppler. Judging from what I have heard, its work since then has continued, and has altered to some extent with changing circumstances; but it still performs a very valuable service. I certainly would not argue with the

807
noble Lord, Lord Greenhill of Harrow, nor indeed with any other people who hold that in these times of financial stringency cuts are necessary. If people were to say, "It is better to abandon Wilton Park altogether, the need for it has disappeared. There are other bodies which can do the work equally well, and the money which is spent on it can better be used elsewhere", I should approach that argument with a completely open mind. I do not feel that Wilton Park must continue, come what may, though, as I say, I am fully aware of its value, and I have a somewhat personal, sentimental attachment to it.
The other, more important, reason why I am intervening this evening is that I believe that this question raises a matter of wide-reaching principle. In his admirable speech opening the preceding debate today the noble Lord, Lord Boyd-Carpenter, made the very telling point that members of unions—specifically he was talking about the water workers—collectively did certain things which harmed innocent individuals, which as individuals they (the members) would never do. The noble Lord was absolutely right. We see that happening with the trade unions. We also see it happening with Government, with Ministers, and with civil servants. They are admirable individuals—generous, high-minded, honest—but they are prepared to do things which as individuals they would turn away from with abhorrence. I am not saying that this is one of those cases from which the noble Lord, Lord Belstead, as an individual would turn away with abhorrence. But I am quite certain that if he personally, or his right honourable friend the Secretary of State personally, had had dealings with an organisation such as Wilton Park—with the academic council—they would not have allowed it to arrive at the situation that it has now reached.
I do not know whether the cuts of 40 per cent., 30 per cent. 25 per cent. are the right cuts, and I certainly do not know whether the proposals of the inspector—aided by an outside consultant, the noble Lord, Lord Greenhill, told us—are the correct ones. But I believe that if there is an academic council which is appointed to advise on all the strategic matters concerning an organisation—in this case Wilton Park—that academic council must be trusted. We have heard a list of its highly distinguished members; but even if they were not so distinguished, the fact that they have been appointed by the Secretary of State implies that he has trust in their judgment; otherwise he would not have appointed them.
Therefore when there is disagreement between the director of Wilton Park and the inspector from the Foreign Office, surely there must be long, serious, detailed consultations with the academic council. Given the fact, as I think all noble Lords will agree, that they are reasonable and experienced men, if it reaches such a stage that they feel impelled to resign-1 2 of them—and the remainder to be on the verge of resignation, the only conclusion that I, as an outsider, can draw is that there has been gross mismanagement on the part of the Foreign and Commonwealth Office. I believe that this is one of the cases, a minor case admittedly, where bureaucracy has dug its toes in and where the individual judgments of reasonable people such as the noble Lord, Lord
808
Belstead, have not been allowed to have their sway until it is too late—and then the die has been cast and the decision has been made.
Specifically, in the case of the director—I am sure an admirable person; I do not know him personally—from what we have heard from all three noble Lords who have so far spoken, I do not think that his treatment is something about which any of us as individual employers would feel proud to talk. If you employ somebody on a five-year contract with the implied undertaking that if he is satisfactory he will continue at that level, at that grade and (given the circumstances) at the appropriate salary, and then you come along at the end of the contract and say, "We will not renew your contract—not because you are not satisfactory"—for he obviously is satisfactory because he was asked to apply for the job at a lower level—"but we will give you another contract at a lower level", that is not something which I believe any individual employer would do to a good, faithful employee and servant who has done good work for five years.
I am quite certain that the noble Lord, Lord Belstead, and his right honourable friend would not themselves contemplate doing such a thing to people employed by them. That is why I believe it is right that the noble Lord, Lord Banks, supported by the noble Lord, Lord Beloff, has raised this matter, because it has far wider implications than the future of Wilton Park itself. It has implications affecting the trust placed by Ministers in a body of people, the academic council, that they have appointed to advise them—and that trust seems to be singularly lacking—and the relationship between the academic council (which has been appointed to oversee the whole running of Wilton Park) which is quite prepared for cuts, and very substantial cuts. There is, too, the matter of the anonymous people who were sent by the Foreign Office, and the fact that their recommendation has been accepted and that it has been impossible to reach any agreement over the very small but significant differences between them and the academic council.
9.11 p.m.
Lord Gladwyn: My Lords, I, too, would like to start with a declaration of interest because, like the noble Lord, Lord Walston, I was myself a member of the academic council at Wilton Park for a number of years, and when I was there I spoke quite often at meetings at that centre. I was also, I hasten to say, a great friend of that magnificent man Heinz Koeppler, who transformed Wilton Park from its original function as a body, I understand, for re-educating Nazis, into one of the most influential political conference centres which exist at the present time. Nobody did more than did Koeppler to re-create some form of understanding between the British and the Germans after the war. More than that, the late warden was a splendid advocate of his adopted country—more particularly, perhaps, in the United States where the Friends of Wilton Park, as they are called, is an organisation which he personally created and is still an important element in the fabric of Anglo-American relations.
Poor Heinz must be turning in his grave, I feel, as a result of the recent misunderstandings involving the resignations of Sir Peter Tennant, the acting chairman,

809
and the bulk of the members of the academic council—to say nothing of the impending resignation, I understand, of the director, Mr. Slack. Not having myself been concerned with the affairs of Wilton Park for a number of years, I shall not attempt to go into great details or to take sides in the recent row, beyond saying that I can hardly imagine that Sir Peter Tennant would have resigned without good reason. I have known him for a very long time and have always regarded him as a sensible and fair-minded person. Moreover, since he is, after all, a most distinguished ex-member of the Foreign Service, I find it difficult to understand how it came about that he fell foul of his old department, and in such a spectacular way.
I venture to ask the Government one preliminary question. Why should not the Foreign and Commonwealth Office, in view of the, admittedly important, general economy campaign which is affecting them quite severely, merely have demanded a reduction of, say, £x in the general budget of the institution, and then left it to the director, assisted of course by the academic council, to work out a plan or plans showing how the necessary economies could best be carried out? That seems a simple way of proceeding; I do not understand why it was not followed. I know that the Public Accounts Committee have in the past severely criticised Wilton Park, and that the Permanent Under-Secretary of State for the Foreign and Commonwealth Office is directly responsible to that committee.
However, was it really necessary for one of the Foreign Service inspectors to be sent down to conduct a special inquiry of his own without, it would seem—and from what has been said it is probably true—too much regard at least for the feelings of those concerned? After all, Wilton Park is hardly the equivalent of a diplomatic mission. Surely it is more in the nature of an academic institution and deserves to be treated as such. Why not, in other words, leave the administration in a general way to large extent to the organisation itself? I merely ask the question, and no doubt the noble Lord the Minister will deal with it in his reply.
Be that as it may, I believe that I am right in saying—and it certainly emerges from what has already been said—that whereas there was, after great argument, eventual agreement on the extent and nature of the economies, the negotiations finally broke down on one point only; namely, the insistence by the Foreign and Commonwealth Office on a reduction in the status of the director, the Foreign Office insisting—as I understand the reason—that since a number of under-secretarial posts in the Foreign Service were going to be phased out as a result of the economy campaign over the coming years, the director of Wilton Park should not be allowed, as it were, to escape the axe. That was really what they said.
I understand that the academic council felt that Mr. Slack was after all an unsalaried officer who had taken on the job, as I think the noble Lord, Lord Walston, said, on the understanding that if the contract was renewed he would enjoy his status as an Under-Secretary. That was a definite understanding. So it is, I imagine, at least possible to accept the fact that he feels to be under a considerable grievance, more especially since, as I understand it, Foreign Service officials of under-secretarial rank whose jobs
810
may disappear, and will disappear as a result of the coming economy campaign over the years, will either be employed elsewhere or given the opportunity to retire on very favourable terms, which is not exactly the position in which Mr. Slack finds himself at Wiston House.
The decision to degrade the director has in any case—and here I simply draw attention to a fact—been very strongly criticised in the latest report of the Foreign Affairs Committee of the House of Commons whose chairman, I note—I say I merely "note"—has now declared that the indirect result may be,
"a weakening … of the British Government's commitment to the aims of international co-operation espoused by Wilton Park over the years",
this being,
"an unsatisfactory outcome to an unnecessary dispute".
The committee goes on to question the necessity of,
"the enforcement of such marginal expenditure cuts with such damaging consequences",
and doubts whether,
"the small financial saving can justify the resulting ill-will and resentment".
The committee's general conclusion is,
"an institution which appears to be a section of the Foreign Office is less likely to command respect than one which is plainly independent in direction and motivation from the Government machine".
Those are strong words, and I shall be most interested to note how they are countered—if they are—by the noble Lord who is going to reply. The committee also believes that the future of Wilton Park would be more likely to be secured if it were to be freed from direct control from Whitehall and supported instead by contributions from the British Government, the other OECD Governments and appropriate private organisations.
I said at the beginning of my brief remarks that it was not my intention to take sides in this unhappy affair. But as regards the possible future of Wilton Park, I entirely concur in the final recommendation of the House of Commons Committee which I have just read out. In order to achieve the sensible end, as it seems to me, I suppose it may be necessary to legislate. If so, I can only say that the sooner a suitable Bill is prepared and presented, the better for everybody concerned. Perhaps the Minister who is to reply will tell us that this is indeed the Government's eventual intention. I sincerely trust that he will.
9.20 p.m.
Lord Hooson: My Lords, I suggest that the Foreign Office's intransigence in this matter is deplorable. It is deplorable from the public point of view. I have no interest to declare. I was a participant in a Wilton Park conference many years ago when the powers-that-be considered that I needed a bit of brain-washing on my attitude towards Europe. I knew Mr. Slack when he was a distinguished headmaster of a famous school. But the point at issue in this matter is surely one of principle. We are not dealing, as it were, simply with an economy measure by the Foreign Office. We are discussing a relationship which could have happened in any Ministry or with any employer between a very distinguished man and his employers.

811
As I understood the noble Lord, Lord Beloff, he said that when Mr. Slack was apointed there was not an implied understanding; there was an expressed understanding. And when the noble Lord, Lord Walston, referred to an implied understanding he was understating the case. There was an expressed understanding between Mr. Slack and those who appointed him that if mutual satisfaction was given on both sides the contract would be renewed. I take it there was no suggestion then that it would be at a different grade—a downgrading. Let us reduce this to the basic principle that we should need to consider if this were to occur in any other relationship. It is a dishonourable act to go back on that matter.
I think there are certain Machiavellian aspects to this matter. The noble Lord, Lord Belstead, is going to wind up this debate: could he tell us whether any single Under-Secretary, an in-house Under-Secretary at the Foreign Office, has been downgraded in this way? It is of some importance that Mr. Slack was appointed from outside and therefore had to be appointed in this particular kind of way, with a contract offered, because of the attitude of the Civil Service Commissioners. But is there a single example within the Foreign Office of an Under-Secretary being actually downgraded or offered a post at a lower grading? I do not think there is.
I am bound to say that I found the attempted justification put forward today by the noble Lord, Lord Greenhill, completely unconvincing. For example, he doubted the efficacy of such institutions as Wilton Park and he said (which indeed is quite right) that it is impossible to gauge their effectiveness—just as in this House when we had a debate on the proposed curtailment of our foreign broadcasts it was argued by many people on behalf of the Government that it was very difficult to gauge their effectiveness. In fact, one has to make a political judgment in these matters; but I am content to rely on the Foreign Office's own judgment in the matter.
The Minister of State is going to reply and I do not know what he will say, but I am relying on the letter that he wrote to The Times, which was printed on 15th November, 1982. In the second paragraph of his letter he said this:
"There is no question of damaging, much less abolishing, this excellent institution.".
My Lords, note the words "this excellent institution". The letter goes on to say in the same paragraph what steps have been taken to strengthen it:
"We are also improving the facilities there and strengthening the administration."
So this is in no way suggesting, as did the noble Lord, Lord Greenhill, that perhaps its value had been overestimated before and that at the present time the Foreign Office were of the opinion that its value was less than it had been in the past.
Then, in the third paragraph, the noble Lord, Lord Belstead, went on to say that it was essential to ensure full cost-effectiveness. He continued:
"We therefore conducted a comprehensive review with the assistance of management consultants. This confirmed our conclusion that the conferences run at Wilton Park are a unique and successful information activity".
812
Was that the judgment of the Foreign Office, to which the Minister of State was putting his pen? If it was, then it belies any suggestion made by the noble Lord, Lord Greenhill, today that Wilton Park might no longer, as it were, have its former effectiveness and be the unique institution that it was in the past.
The same paragraph went on to say:
"The review also suggested certain improvements and economies".
That is all that is mentioned about improvements and economies. The next paragraph went on to speak of,
"savings …taking into account the suggestions of the Academic Council";
and he concluded by saying:
"These measures will not, in any way, affect Wilton Park's academic freedom, which we are determined to safeguard. They are designed to strengthen Wilton Park's long-term future and I am confident that, with the co-operation of all concerned, its high reputation will be fully preserved."
So we have here the attitude of the Foreign Office, expressed through the Minister of State, confirming the value of this institution and that there is no intention of downgrading it in any way.
How does that square with the totally dishonourable behaviour of the Foreign Office in this matter? I should have thought it was of the greatest importance that out of, I think, 21 members of the Wilton Park academic council, no less than 12 resigned and 7 of the remaining 9 published the fact that, on all the basic issues, they agreed with the 12 who resigned. It is Machiavellian of the Foreign Office to argue, for example, that the academic council virtually agreed everything in the end except the director's grading.
I have been in the legal profession all my life, and I negotiate settlements every week. I so often have negotiated settlements when my opponent has said, "I will give you that point and that point, provided that I get point A. If I can have point A, I will grant you points B, C, D and E as a matter of negotiation". But to say afterwards, when the negotiation breaks down and when point A has been conceded, "Oh, you gave up all the other points", is entirely Machiavellian. We know perfectly well that what the academic council did was done in order to try to achieve a compromise, without this terrible public row which has since ensued. They gave way, as it were, on points to which they attached considerable importance, simply in order to preserve their major point, which was that there should be no down-grading of the director.
When the Foreign Minister wrote to Sir Anthony Kershaw in March this year and said that the only real point of difference with the academic council was the director's grading, that was wrong. There were many differences, but the academic council were willing to give way on them, provided that the Foreign Office gave way on the director's grading.
Therefore, I conclude, as I am bound to do, that this intransigent position which has been taken up by the Foreign Office does this country no good at all. It also does the Foreign Office no good, and if any department of state needs a few friends these days it is the Foreign Office. The Foreign Office has allowed this row to develop publicly. These very distinguished academicians have resigned. I know a number of the members of that academic council and they would not

813
have resigned easily. They would have considered their positions very carefully, before tendering their resignations as they did. At the moment it is simply stubbornness and intransigence on the part of the Foreign Office which allows this public and unseemly row to continue when all they need to do to achieve compromise is to behave honourably.
9.30 p.m.
Lord Ezra: My Lords, the debate so far has shown that although this apparently relatively small matter could have been settled quite easily, by being allowed to drag on in this way it has raised a number of much more fundamental issues. At this late hour I should like to confine my few remarks to one such issue. I contend that at the present time—more, perhaps, than at most times in our history—it is necessary for this country to be able to project itself effectively abroad. A proper understanding of our affairs, our thinking and our approach to life can bring tangible benefits in providing a better climate for our exports. It can bring intangible benefits by enabling us more effectively to participate with other nations in dealing with some of the very difficult issues which face us all. At the very time, therefore, when we should be expanding the means that we use to project ourselves abroad it is sad to note that repeated proposals appear to be made to move in the opposite direction.
Reference has already been made to the repeated efforts to limit the operations of the overseas service of the BBC. This provoked a very strong outcry, in which I have no doubt many of your Lordships participated. Subsequently, second thoughts fortunately prevailed. There was a similar outcry when severe limitations were placed on the grants given to overseas students. Very quickly after those grants were removed, serious limits upon our expert prospects in certain countries ensued. In that instance as well, wiser thoughts eventually prevailed and certain modifications were introduced.
Therefore we come to the third issue about which we are concerned in this debate; namely, in spite of protestations to the contrary, the diminishing of the impact which Wiston House has so successfully created over the years. Many of us have attended functions there. We knew Heinz Koeppler and admired him. The last time I saw him was in the heart of Texas at Baylor University, spreading in that distant land what he had been spreading here in Britain. Judging by the reaction of the young Texans who were listening to this from him, they liked it and respected him for it. This was achieving what we ought to be doing at the moment. We should not be doing the reverse.
Therefore I should like to add my voice to those of other noble Lords who have expressed their doubts and concern, because I spent very many years trying to project our image abroad in the interests of the industry which I served and of promoting our exports. I am saddened indeed at these repeated attempts, in the interests of what appear to be very small economies indeed, to diminish the ways in which we can serve our wider interests. I hope, with others, that when the noble Lord, Lord Belstead, responds to the debate he will indicate that in this case also the Government will have second and more constructive thoughts.
9.34 p.m.
Lord Stewart of Fulham: My Lords, like others who have spoken, I am one of those who visited Wilton Park, was acquantied with its work and knew and admired the late Dr. Koeppler. It has been a very sad, unhappy story to which we have been listening. I am not going to go in detail over the facts, because that has been well done by previous speakers. What I want to do is to draw the attention of the noble Lord the Minister to this point. A great deal of damage has now been done by the publicity that has arisen. The publicity was bound to arise in view of what had been done; this was not something about which people could keep silent. The noble Lord the Minister has to ask himself whether there is at this stage any way in which he can mitigate and reduce the damage that has been done to Wilton Park and to the whole conception of Britain's presentation of herself abroad.
There are one or two matters which are quite clear and indisputable. One is the value of Wilton Park itself, which was set out in many other contexts and in the letter from the noble Lord, Lord Belstead, in The Times. Nobody would seriously dispute its first-class value. Secondly, it is not disputed that when Governments are, of necessity, in a mood to go around looking for economies they are entitled to look everywhere. But how did they view the matter in this case? In the first instance, it was done by sending down an inspector's assistants, who appear to have behaved in a remarkably inconsiderate manner. There is in the report of the Foreign Affairs Committee in another place a letter from the Foreign and Commonwealth Office, at the end of which they try to defend the activities of that inspection. Noble Lords who read that letter will find that it is remarkably unconvincing. This body found that they would make economies totalling 44 per cent. This was not a serious proposal of economy; this was a proposal of butchery. It is significant that it was not very long before the Foreign Office itself resiled from that extreme position—but a great deal of harm must have been done by showing that degree of lack of consideration in coming up with a figure of that kind.
The Foreign Office resiled to a figure of 30 per cent. Wilton Park itself put forward a figure of 25 per cent., so nobody can criticise Wilton Park for having been obdurate, failing to recognise the national need, or being guilty of all the other reproaches of the people who criticise economies in public expenditure. That left a gap of 5 per cent., or £23,000. By this time by comparison with other forms of negotiation, surely one ought to have been within sight of a settlement without all the bitterness that subsequently ensued. But the Government would not budge to bridge that gap of £23,000. We now learn that the position taken up by Wilton Park is that they are prepared to see that gap narrowed still further to about £5,000. All that remains in dispute is the position of the director and one or two other matters, and certain matters affecting the degree of the independence and autonomy of the institute.
I fully agree with the description of the noble Lord, Lord Hooson, in respect of the bargaining: that it is not open to the Government to say that all they are arguing about now is the position of the director. That situation has been reached by the willingness of Wilton

815
Park to concede other points and the unwillingness of the Government to concede anything other than its first retreat to the position of 30 per cent.
This means that it is possible for the Government now to do something to get this right. They could concede the point about the position of the director. If the noble Lord, Lord Belsted, and his colleagues feel that that would be a sacrifice of prestige on their part, let us remember—as has been pointed out—that in two other matters affecting the field of information the Foreign Office has given way from the position it first took up: over broadcasts and over overseas students. And nobody has reproached the Foreign Office for doing so; it has won nothing but good opinion by its change of attitude on those two points. Surely it is not too much to ask that they could change on this point as well.
Consider what is at stake: if they persist in the present position, the members of the academic council are not going to change their minds. Those resignations will stand; the opposition of those members of the council who have not resigned will still stand; Mr. Slack will not be prepared to take a new position in the unsatisfactory circumstances laid down by the Government; the Government will be put to the task of trying to find somebody who will accept that position, a position which by now has been degraded by the attitude of the Government towards it and by the very clear indication by the academic council of what they feel is involved in the Government's behaviour. To allow that to happen might be to inflict irreparable damage upon Wilton Park. When one weighs that and all the loss that that would mean, after the years of valuable work that Wilton Park has done, against what is involved now in the Government's coming forward and being able to bridge the not very large remaining gap, surely there can be no doubt as to what decision the Government ought to take. I hope the noble Lord will be able to tell us tonight that they will be prepared to take it.
9.41 p.m.
The Minister of State, Foreign and Commonwealth Office (Lord Belstead): My Lords, I welcome the opportunity to reply to this Question by the noble Lord, Lord Banks, for two particular reasons. First, I can assure your Lordships that my right honourable friend the Foreign and Commonwealth Secretary attaches great importance to Wilton Park and values it as a unique British contribution to international understanding. Secondly, our aim has not been to impose cuts, as the Question of the noble Lord says, but to do our best to improve cost-effectiveness. It was the noble Lord, Lord Greenhill of Harrow, who referred in his speech to the financial pressures which are upon all Government departments, and that does not except a valuable institution like Wilton Park. I really do assure your Lordships this evening that, far from endangering the quality of the conferences, our aim has been to provide them with an assured future.
In his report on the Foreign and Commonwealth Office Appropriation Accounts for 1980–81 the Comptroller and Auditor General commented on one subject only and that was Wiston House, the house in which the Wilton Park conferences are held. He asked
816
some searching questions, such as why the premises were under-used, and why there was such a large annual deficit; and he pointed out that no other Government finances a conference centre of this sort. The Committee of Public Accounts of another place then pursued the matter with more questions to the Permanent Under-Secretary at the Foreign and Commonwealth Office, who, of course, as accounting officer is directly responsible for Wilton Park's finances, and must answer questions put by the Public Accounts Committee, which, as the noble Lord, Lord Gladwyn, correctly divined, is the reason why it is not possible to give the director of Wilton Park complete freedom to dispose of all resources within the budget for the establishment.
My Lords, at the same time the Foreign Office, like all Government departments, has been contributing towards public expenditure reductions. Between 1979 and 1984 there will have been a 12 per cent. reduction in real terms in the Foreign Office Votes, excluding the ODA. Over the same period Foreign Office manpower is being reduced by 11 per cent. as a contribution towards the Government's policy of reducing the size of the Civil Service. Thus, knowing that the lease was due for renewal early in this year, it was clearly necessary, back in 1981, to consider seriously the future of Wilton Park.
One option would have been to end it completely and thus save nearly £500,000 every year of taxpayers' money. Instead, Foreign Office Ministers took the firm decision to preserve Wilton Park but to explore all avenues for improving efficiency. Therefore, it was at the end of 1981 that they called for a radical review to achieve savings of at least 25 per cent. They insisted on full consultation both with the director and with the Wilton Park academic council—an advisory body whose support has been greatly valued over the years. They also set a deadline at the end of January 1982 for receiving the reviewers' report, but this was extended, partly to allow the director a further five days to comment on the draft.
The report was prepared by a three-man team, including a chartered accountant, with the aid of an independent firm of management consultants. The report fulfilled its remit of making radical proposals, and undoubtedly the proposals for improving the conditions at Wilton Park, and the capacity of it, will increase the appeal of Wiston House as a conference centre. Incidentally, I would just say in answer to the noble Lord, Lord Banks, that the inspecting officer carrying out the review examined the academic staff workload most carefully, and I hope that your Lordships will accept that the review was carried out with complete propriety.
There then began a year of consultation, and between them the academic council and the director submitted four memoranda to Ministers, attended three full council meetings with Foreign Office participation and took part in several meetings and exchanges of letters with myself. I must at this point make it crystal clear to your Lordships that I am the junior Minister who has been responsible for the affairs of Wilton Park, and the decisions which have been taken throughout have been taken on my recommendations to the Secretary of State and must not be laid at the door of those who work officially in

817
the Foreign Office, in whom I have every possible confidence.
On behalf of the Secretary of State I accepted the majority of the proposals which came from the academic council and the director; for instance, the retention of two staff posts which would otherwise have been relinquished and half the extra-mural visits, although my noble friend, with his characteristic generosity, wanted all of them to be retained. That was a particular point put by my noble friend Lord Beloff at a meeting last year. A modification to the proposed increase in fees was another point where I hope I went a good way towards meeting the points which were put. Also, of course, staying at Wiston House when a move to a commercial conference would have been feasible, and exploring the uses to which outside finance could be put were, again, points where I made it clear that we could go a very long way, if not the whole way, towards meeting the points that were being put to us.
For its part, in a letter dated 14th January this year, the academic council said that it would accept substantially the proposed reductions in expenditure. It believed there would need to be a radical reassessment of how Wilton Park could operate with one fewer member on the academic staff—a belief, I have to point out, that was not shared by the review report—but the council said it felt very strongly about the position of the director. Thus, at the end of a long period of discussion it was essentially the question of the grading of the director's post about which there was disagreement.
I must make it clear that there is no question of regrading the post until the present director's fixed contract expires this May. Nor is this a question of financial economy. The annual saving in itself is only some £3,000. But one aspect of the Government's manpower policies is to reduce the number of under-secretaries in the Civil Service. The contribution of the Foreign Office towards this policy is to reduce the number of under-secretaries serving in London from 31 to 25, or by nearly 20 per cent.
I do not complain that this evening criticism has come from the noble Lord, Lord Stewart of Fulham, on the Opposition Front Bench, from several noble Lords on the Liberal Benches and from the noble Lord, Lord Walston, on the SDP Bench about the regrading of this post, because the political parties of those noble Lords have not taken the view that it was necessary to reduce the size of the public service in this country. But I have to make it clear to the House that I serve a Government which do have that policy. At the beginning of this Administration Government departments were all asked to undertake a rigorous assessment of their senior Civil Service posts. This was done in the context of the more general target of a 14 per cent. reduction in the Civil Service, so that by 1st April of next year the Government aim to have reduced the total size of the Civil Service from 732,000 to 630,000.
In that context, my right honourable friend and I considered very carefully indeed whether it was right to include the directorship of Wiston House among these posts. Taking into account all the criteria, including an objective assessment of the workload and
818
the responsibilities of the Wilton Park job compared to others in the diplomatic service, we believe it was right to do so. I will certainly draw my right honourable friend's attention to the view of my noble friend Lord Beloff of my right honourable friend's and my interpretation of our ministerial responsibility in this matter, but I hope that I have said enough to show that we took account of all possible considerations in reaching our decision.
It is worth pointing out that Sir Heinz Koeppler, the distinguished founder and the only other director of Wilton Park, had held for 27 years, until 1973, the DS4 rank to which we are reverting. I am sure that no one then thought that Wilton Park's status depended on the grading of the director. I was interested that, with his experience as Permanent Under-Secretary in previous days at the department, this was a point which was made by the noble Lord, Lord Greenhill of Harrow. I really do think that for the overseas participants the grading of the director and the status of Wilton Park rest on the prestige and reputation of the conferences and the high quality of the staff, to whom, of course, I pay tribute.
Nor is our decision in any way a reflection on the present director, for whose work we have a high regard. Last June, nearly a year before his present five-year contract expires, I asked Mr. Slack to serve for a further five years. I must make it clear to the noble Lord, Lord Hooson, that no promises were made when the original contract was agreed about the grading of the post in the longer term. We also made special arrangements whereby, instead of assuming the lower DS4 salary, under a new contract the director would have retained his present salary, including any increase which would be due for the public service this April, until the DS4 salary scale caught up with it. This was an exceptional offer and in a way amounted to the creation of a separate status for the present director. We also made special arrangements to enable Mr. Slack to buy additional years of pension and, at his request, to undertake outside consultancy work to supplement his income.
Lord Hooson: My Lords, I am most grateful to the noble Lord for giving way. He said that no promise was given to Mr. Slack as to the grading of the post. But was anything suggested to him—not a legally binding promise? Was there an undertaking given, expressly, as Lord Beloff said, that if satisfaction was obtained on both sides, as it were, the contract would be renewed? Was any suggestion then made that the post would be downgraded?
Lord Belstead: My Lords, the answer remains exactly the one which I have already given to the House. No undertaking was given about the grading of the post in the future. The letters are in Mr. Slack's possession and they are also in the possession of the department. There is nothing secret about this. The noble Lord, Lord Hooson, by talking to Mr. Slack, would be able easily to see what was put in print.
Lord Hooson: My Lords, I am grateful to the noble Lord for giving way. This is a very important matter of principle. If one appoints a man to a job in a certain grade and it is said, "If you give satisfaction for five

819
years and both sides are satisfied, then you are very likely to continue in that position", and nothing is said about grade, it is implied surely that he will be in at least the same grade?
Lord Belstead: My Lords, the noble Lord is giving legal advice to the House and that is certainly something which I have no intention of doing this evening. I have given the House the position quite openly and honestly. I have told the noble Lord, Lord Hooson, that the letters would be there for him to see if he wished to ask Mr. Slack, and it would be for the noble Lord to make up his own mind as to whether he accepts his own legal advice or not.
The noble Lord, Lord Gladwyn, quoted the words of the Foreign Affairs Committee of another place. Indeed, they considered this issue very carefully in a report dated December 1982 to which were attached three Foreign Office papers and three from the academic council. The Foreign Affairs Committee concluded that they did not feel able to recommend in favour either of the Foreign Office solution or that of the academic council. However, this month the committee wrote to me—indeed, the noble Lord, Lord Banks, quoted from the letter—expressing concern at the various resignations, and suggesting that we were disputing unnecessarily over a small financial saving. My right honourable friend the Foreign and Commonwealth Secretary has himself replied explaining that the only real point of dispute, the director's grading, concerned manpower policy rather than financial economy. For the future, I am glad that Mr. Slack has agreed to help us find a successor. He has already offered his advice on the wording of a suitable advertisement and other particulars for candidates. I have told the remaining members of the academic council that I would welcome their participation in the selection process and that I hope to meet them in a formal session soon.
Since the noble Lord, Lord Walston, has made charges of mismanagement, I must point out that it is perhaps regrettable that several times since last June the council have chosen to meet privately without Foreign Office participation, when I believe that participation might have done much to clear away misunderstandings. But for now, I am confident that there will be many good candidates for the position of director, bearing in mind the nature of the job.
Lord Beloff: My Lords, will the noble Lord give way? He said, quite correctly, that he had invited the surviving members of the academic advisory council to assist in the selection of a new director. But is it not also the case, as I have already indicated, that they have in fact declined to assist him until their wishes are met on other matters?
Lord Belstead: My Lords, that is an extraordinary assertion considering that I have not yet met the remaining members of the academic council—of whom the noble Lord, Lord Beloff, is no longer, sadly, one. Until I do meet them I cannot find out what their feelings are. However, I must not be disingenuous. It is perfectly true that I have written to them and that they have replied. But I hope that the noble Lord will not
820
pre-empt what I hope will be a useful meeting when that meeting takes place.
Lord Banks: My Lords, I wonder whether the noble Lord would like to indicate to the House the nature of the reply which he had from the academic council?
Lord Belstead: My Lords, they have reservations exactly along the lines which the noble Lord, Lord Beloff, has put to the House. But I would say to the noble Lord, Lord Banks, that I hope that the trouble that there has been up to the time of this debate is not going to be allowed to affect a meeting at which neither the noble Lord, Lord Banks, nor my noble friend Lord Beloff will be present.
I should like to revert now to how I see the future. First, I believe that Wilton Park will find a good new director because of the nature of the job. Secondly, I believe that a new director will find that Wilton Park is fortunate in having many good friends; that it is located in a lovely place; and that the post enjoys genuine autonomy. On that last point, because so much has been said about it this evening, I would quote Heinz Koeppler. He once said:
So far as administration and finance are concerned, the warden, (as he was then called) is just like any other head of a Foreign Office department…on the academic side, however, the warden enjoys independence and freedom".
That remains the case today. I have also made clear to the academic council that within the Foreign and Commonwealth Office's responsibility for the finances of Wiston House, a large degree of management discretion most certainly is possible.
As a demonstration of our faith in Wilton Park's future, we are renewing the lease for seven years as compared with the previous five-year lease. We are injecting a good deal of capital to improve the accommodation and modernise the office equipment. A new post of assistant bursar has been created to strengthen the administration, and we are arranging for the bursar to have special training in conference centre administration. We are also encouraging our posts abroad to do all they can to help recruit participants for the conferences. We shall shortly be holding a meeting with the International Advisory Council, Wilton Park's second advisory body, which consists of OECD countries' ambassadors in London, at which we shall discuss the present management's aim of widening participation on suitable occasions to include third world countries. Last December there was a successful conference on Latin America and, indeed, another is to be held in September.
Wilton Park is a significant element of our overseas information effort, along with the British Council, the BBC External Services and the Foreign Office's information officers abroad. In listening to the speech of the noble Lord, Lord Greenhill, I was interested that he wondered whether these other information arms of Government—and, indeed, the noble Lord also included the desirability of spending money on overseas students—might not have prior claims on resources. I shall not follow the noble Lord down that path now except to say that of the elements that I have mentioned—in other words, the BBC, the British Council and the FCO information officers—it is only the latter which have suffered a significant reduction in

821
expenditure recently, with a 20 per cent. reduction in information posts at our Embassies since 1979.
In Wilton Park's case we are aiming for a 15 per cent. reduction in current resources, with further savings to come from increased revenue from outside conferences, and we can also count savings achieved when the European Discussion Centre was merged with Wilton Park at the end of 1981. It is that which makes up the total package of around 30 per cent. This gives us a solid base to face the future. Wilton Park's success in projecting Britain owes a great deal to its impartiality and objectivity. Speakers and participants from all shades of the political spectrum are welcome, Wilton Park brings many influential people to this country, like the Central Office of Information's Sponsored Visits programme, with which Wilton Park co-operates closely. I say these things because I think it is most important to get across the message that I believe the taxpayer gets good value from the interchange of ideas and the winning of friends for Britain, which this forum provides.
I have no doubt that Wilton Park, therefore, can continue to prosper, but it will be no easy task. In a time of world recession, it will be hard work to continue to attract overseas participants, and a great deal remains to be done to build up the planned number of 16 outside conferences. Therefore, I particularly regret that Wilton Park will not have the advantage of my noble friend Lord Beloff and others serving on the academic council. But I am sure that the Government have been right to put Wilton Park on a secure and defensible basis for the years ahead. If we cannot agree on all things, I hope at least this evening we can agree in wishing it continued success for the future.
House adjourned at five minutes past ten o'clock.

  COMPUTERS: USE IN IMMIGRATION CONTROL
  COMPUTERS: USE IN IMMIGRATION CONTROL
  COMPUTERS: INFORMATION ON PRISONERS
  COMPUTERS: INFORMATION ON PRISONERS
  EUROPEAN PARLIAMENT ELECTIONS: UK NATIONALS ABROAD
  EUROPEAN PARLIAMENT ELECTIONS: UK NATIONALS ABROAD
  EUROPEAN COMMUNITIES INSTITUTIONS: RECRUITMENT
  EUROPEAN COMMUNITIES INSTITUTIONS: RECRUITMENT