Sitting of 14 November 1983

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

  TRADE
  Resolved,
  That an humble Address be presented to Her Majesty, That she will be graciously pleased to give directions that there be laid before this House a Return of Statistics relating to Overseas Trade of the United Kingdom for the year 1984 and for each month during 1984. —[Mr. David Hunt.]

Oral Answers to Questions
  TRANSPORT

    Road Maintenance
    Mr. Fisherasked the Secretary of State for Transport if he will increase Government funding of road maintenance.
    The Minister of State, Department of Transport (Mrs. Lynda Chalker): My right hon. Friend the Chancellor of the Exchequer will shortly announce the provision for expenditure on motorways and trunk roads in 1984–85. We shall continue to give priority to the motorway repair programme as explained in "Policy for Roads in England 1983", Cmnd. 9059.
    Mr. Fisher: Does the Minister agree that expenditure on road maintenance, which has been declining in real terms over the past two years, is a disgrace to the Government? Will the Minister give particular attention to counties such as Staffordshire, which are at the bottom of the Chartered Institute of Public Finance and Accountancy statistics on roads expenditure, and give them something in any allocation of funds? In her White Paper the Minister has no new major road schemes in Staffordshire up to 1987. She cannot be proud of that.
    Mrs. Chalker: Over the past two years the total cash amount accepted for transport supplementary grant for maintenance has increased by over 22 per cent. We have been seeking to divert the money to this aspect wherever possible. The planned expenditure on the maintenance of trunk roads and motorways has more than doubled over the past four years. The cash outturn in 1978–79 was £89 million, but the provision for the current year is £200 million. With regard to new roads, the Department is busily engaged on a number of schemes in Staffordshire.
    Mr. Golding: What new proposals are there for Staffordshire? How many construction workers are unemployed? Their unemployment goes side by side with the failure to repair roads adequately.
    Mrs. Chalker: The Government have made up for the backlog of motorway repairs that was allowed to build up under the Labour Government. Last year we repaired the
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    equivalent of 80 miles of motorway for just over £80 million compared with 40 miles of motorway in 1980–81 at just under £40 million. The repairs done have more than doubled. There is a high level of road maintenance, which we intend should continue. With regard to new schemes for the hon. Gentleman's area, his county surveyor and councillors were talking to me only last week in a friendly way and not in the way that he seeks to represent.

    British Railways Board
    Mr. Flanneryasked the Secretary of State for Transport what were the respective amounts of funding to the British Railways Board in 1979, 1980, 1981 and 1982; and how much money has been allocated for the current year.
    The Secretary of State for Transport (Mr. Nicholas Ridley): As the answer contains a number of figures, I shall, with permission, arrange for them to be circulated in the Official Report.
    Mr. Flannery: Does the Minister accept that his reply does not help me in asking my supplementary question? Does he accept that we all know, because we hear by various means, that the funding in real terms is insufficient? Does the Minister further accept that on the routes to the north, particularly the line to Sheffield, which I know, fewer trains are running? Although they are faster, the interval between them is twice as long. There are fewer carriages on each train and fewer staff than there have ever been for many years. That is resulting in chaos. The queues at St. Pancras are horrific. The Minister should see for himself, especially on Fridays. Many people say that more money is needed if we are to run the railways, especially to Sheffield, properly.
    Mr. Ridley: I shall give the hon. Gentleman a fascinating insight into the figures. The total grant from the Government and local government at 1983 prices was £831 million in 1979 and £929 million in 1983, which is a considerable increase. I hope that, through increased efficiency, we shall be able to reduce that figure. If the hon. Gentleman has problems about any line, he should write to the chairman of British Rail.
    Mr. Parris: As a regular user of the St. Pancras-Sheffield line, may I ask my right hon. Friend to accept that the service on that line has improved greatly in the past couple of years? I think that all passengers acknowledge that fact.
    Mr. Ridley: I am grateful for that remark. I hope that my hon. Friend will also write to the chairman of British Rail to inform him of that fact.
    Mr. Leadbitter: Does the Secretary of State realise, following his statement about policy on 24 October, that there is considerable alarm and concern in the transport industry? Does he agree that such a policy will involve many redundancies, in addition to those already calculated, between 1983 and 1986? Does the Secretary of State accept that his policy goes further and harms the prospects for electrification of the eastern line?
    Mr. Ridley: We have tried to separate the issues of the size of the network, fares and service standard levels and concentrate on efficiency in running the railway. Let me give an example of efficiency. The hon. Member for Crewe and Nantwich (Mrs. Dunwoody) has no portfolio

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    in the Shadow Cabinet, yet she is demanding £5,000 of taxpayers' money for research assistance. It would be efficient to cut that out.
    Mr. Adley: Does my right hon. Friend accept that most of the funding for British Rail is provided to enable it to maintain services at the behest of central and local government and others? To lump together all of the funding for British Rail and use the word "subsidy" to describe it is no fairer than to use the word "subsidy" to describe the money that is used for building roads or maintaining the armed services.
    Mr. Ridley: I sympathise with my hon. Friend. The public service obligation grant for this year is £819 million, subject to possible adjustment, and an extra £110 million comes from other grants, especially from local government, to assist specific passenger services. Those extra grants are aimed at providing services that would not otherwise be provided by the specific grant. I hope that that answers my hon. Friend's point.
    Mr. Snape: Instead of making cheap jibes about some of my hon. Friends, will the Secretary of State consider examining the Appropriation Accounts of his Department, which were published on 31 October and gave a glittering example of the efficiency of his Department. It refers to road fund licensing on page 7, where the Secretary of State will see——
    Mr. Speaker: Order. The question relates to the funding of British Rail.
    Mr. Snape: I realise that, Mr. Speaker, even if the answer did not relate to it. If we are talking about efficiency for our respective modes of transport, and available funding for British Rail, we should discuss the funding that has not been made available from road fund licences because of the right hon. Gentleman's incompetence.
    Mr. Ridley: I agree, Mr. Speaker, that the supplementary question can hardly be said to arise from the question on the Order Paper. The hon. Gentleman is referring to last year, since when my hon. Friend the Minister of State has made enormous improvements in respect of compliance.
    Following are the figures:

    Central Government PSO Grant

    Total Grants From Central and Local Government

    Out-turn prices

    Constant 1983 prices

    Out-turn prices

    Constant 1983 prices

    £ million

    £ million

    £ million

    £ million

    1979

    485

    736

    547

    831

    1980

    576

    732

    653

    831

    1981

    749

    852

    833

    948

    1982

    817

    862

    913

    963

    1983

    *819

    *819

    *929

    *929

    * Subject to adjustment for certain predetermined factors.

    Commuter Services
    Mr. Formanasked the Secretary of State for Transport when he next intends to meet the chairman of British Rail to discuss the future of short-haul commuter services.
    The Under-Secretary of State for Transport (Mr. David Mitchell): My right hon. Friend frequently meets the chairman to discuss matters of mutual interest, including commuter services.
    Mr. Forman: When my right hon. Friend next meets the chairman of British Rail, will he propose a new deal for the commuters in my constituency? If the chairman of British Rail promised to ensure that the advertised trains actually run, and run on time, without cancellation at short notice, would the Department be prepared to look sympathetically at the possibility of new electrical rolling stock for the line, as some is as much as 40 years old?
    Mr. Mitchell: New electrical rolling stock is a matter for proposed investment by British Rail if there is a viable use for it. Disruption has occurred to trains on the line running through my hon. Friend's constituency, for which British Rail apologises. The inconvenience has been caused largely because of a signal disruption and two major signalling investments which are being carried out. When those works are completed, there will be substantial improvements in timekeeping and speed.
    Mr. Straw: Is the Minister aware that conditions on the north-east Lancashire line, which is heavily used by commuters, are appalling and that passengers are conveyed in rolling stock that is at least 25 years old? Thanks to cuts in Government grants, it appears that there is no prospect of the rolling stock being replaced. Is it Government policy to allow provincial railway lines, such as the north-east Lancashire line, to die through neglect?
    Mr. Mitchell: That is entirely a matter for the management of British Rail. If I receive a viable proposal from British Rail to replace the rolling stock, we shall consider it constructively.
    Mr. Tim Smith: Is my hon. Friend aware of the vital importance to my constituents of the High Wycombe to Marylebone railway line? Will he ensure that any decision about the future of the line, and especially of Marylebone station, is reached not in isolation but in the context of all the commuter services available?
    Mr. Mitchell: I assure my hon. Friend that if a proposal is put before me about the closure of Marylebone station, I shall consider seriously the needs of the commuters in his constituency.

    A59 (Lancashire)
    Mr. Robert Atkinsasked the Secretary of State for Transport when he expects to make a statement about speed restrictions on the A59 between Mellor and Samlesbury in Lancashire.
    Mrs. Chalker: Although I have already indicated to my hon. Friend the difficulty about speed on this road, I am having further discussions with the county and the Lancashire police, and I hope to write to him again shortly.
    Mr. Atkins: Is my hon. Friend aware that this matter is causing great concern both to my constituents and to those of my hon. and learned Friend the Member for Ribble Valley (Mr. Waddington), as the road passes through both constituencies? Does my hon. Friend realise that were she to decide not to impose a 50 mph speed limit on this stretch of road, where fatalities have occurred, her action might be taken amiss? I urge her to press strongly for a sensible answer to this difficult problem.
    Mrs. Chalker: I am extremely grateful to my hon. Friend. He knows that I have been concerned about the road. I was impressed by the strength of feeling shown about the problem when I met my hon. Friend and his delegation. As far as I know, the county council has accepted that the criteria for a 50 mph speed limit have not been met. That is why I wish to have further discussions with the county authorities and the police.

    Roads (West Midlands)
    Mr. Hal Millerasked the Secretary of State for Transport whether he is satisfied with the extent and state of the trunk road and motorway network in the west midlands.
    Mrs. Chalker: The extensive programme of new road building, improvements and maintenance projects now under way and planned will bring significant improvements to the motorway and trunk road network in the region.
    Mr. Miller: I congratulate my hon. Friend on her promotion. Does she realise that the state of the motorway network in the west midlands and overloading on such routes, combined with a lack of communications to the ports for our exporting industries, leads to serious anxiety about slippage in the programme that she announced and calls into question the Government's commitment to provide west midlands' industry with satisfactory means of communication for its products?
    Mrs. Chalker: I understand my hon. Friend's anxieties. I am happy to report that real progress is being made. The schemes currently under construction are costing an estimated £116 million, and contracts to the value of a further £144 million are due to start before the end of next year. I note my hon. Friend's comment about the link to the east coast ports. As he knows, the Government are considering the final version of that scheme.
    Mr. Golding: However polite and courteous the leadership of the Staffordshire county council is to the Minister, it is thoroughly dissatisfied with the provision for roads in the county.
    Mrs. Chalker: Most of the members of the Staffordshire county council whom I have had the pleasure of meeting have been extremely realistic about what can be done within sensible cash limits. We have been discussing programmes for the future on those terms. I know full well that everybody wishes to do more than he is doing, but there is a limit to the amount that any responsible Government can undertake.
    Sir Dudley Smith: Will my hon. Friend give an assurance that when the M40 is built in the midlands it will be to such a standard that my constituents and others will not be subjected in a decade's time to the horrendous diversions and stoppages that are occurring on the M1?
    Mrs. Chalker: I assure my hon. Friend that the standard of materials and the manner of building new motorways are much better than they were when motorways were being planned and built 30 years ago. When roads are built with a life of 20 years, it is not surprising that we have to put on new skid-resistant surfaces after that time, as well as doing more work to make them last another 20 years, as is happening on the M1.

    British Rail (Objectives)
    Mr. Canavanasked the Secretary of State for Transport how many representations he has received about the objectives he has set for British Rail; and if he will make a statement.
    Mr. David Mitchell: Fewer than the eight parliamentary questions that have been tabled in the House.
    Mr. Canavan: The Secretary of State said in his letter to the chairman of British Rail on 24 October that the guiding objective should be to run an efficient railway. Is it not a fact that one of the biggest stumbling blocks to the running of an efficient railway is the Secretary of State himself? The right hon. Gentleman went on in that same letter to announce further cuts in railway investment, which will put British Rail into a financial straitjacket and cause even more closures, more fare increases and the destruction of possibly thousands of jobs on the railways.
    Mr. Mitchell: The hon. Gentleman is misinformed. My right hon. Friend did not say anything about cutting investment in British Rail. He said that there was to be a reduction of about £200 million in the PSO. That is to be achieved by the more efficient operation of the railways and not by cutting investment.
    Mr. Moate: Will my hon. Friend confirm that British Rail has accepted the objectives and, in so doing, has accepted that they can be substantially achieved by greater efficiency? Is it not extraordinary that the Opposition seem so to dislike the concept of efficiency?
    Mr. Mitchell: The chairman of British Rail has broadly accepted the objectives that he has been given, but he has to wait until the 1984 plan before he is able to ascertain how he will deliver.
    Mr. Cowans: Are not the objectives issued to British Rail based on Serpell part I, which is a discredited document? The Secretary of State calls for the speeding up of redundancies and factory closures within British Rail Engineering Ltd. Will the Minister explain how that can help BREL when such actions will restrict its capacity to dealing only with British Rail? How will that help British Rail to go into the expanding export market? Is not the Secretary of State really seeking to destroy BREL''
    Mr. Mitchell: The hon. Gentleman is wrong to assume that my right hon. Friend's objectives are based on Serpell part I. They are based on British Rail's own plan for 1983—merely speeded up to be carried out over three years instead of five.
    Mr. Hanley: Is my hon. Friend aware that, as recently as 1982, "Labour's Programme" admitted that the railway network was unlikely to remain at the size it was at the time of the Railways Act 1974?
    Mr. Mitchell: My hon. Friend is well informed about the Opposition's statements. I am grateful to him for drawing the information to the attention of the House.
    Mr. Anderson: In the letter of 24 October the Secretary of State said that he was bringing forward by two years the reduction in grant, and was ruling out major route closures and what are called unreasonable fare increases. In the light of that, what will have to give? Is it not clear that, with the proposed abolition of the Railway Staffs National Tribunal, the Government and the board are

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    preparing the way for massive increases in unemployment through a massive decrease in manpower on the railways? Is it not that which will have to give as a result of the letter of 24 October?
    Mr. Mitchell: What will have to give is more efficiency and productivity. As for the suggestion that there will be massive reductions in staff, I repeat that the Secretary of State's proposal in his letter to the chairman is simply a speeding up of exactly the programme that British Rail had set into its corporate plan for 1983.
    Mr. McQuarrie: My hon. Friend may not have received more representations than parliamentary questions, but no doubt his attention will have been drawn to the many comments in the press on the Serpell report, which will have some bearing on the objectives of British Rail's activities next year. I refer particularly to the threat to the line to Aberdeen from Glasgow and Edinburgh. Will my hon. Friend try to ensure with the chairman of British Rail that the line continues to have an adequate service? Indeed, the sooner that it is electrified, the better.
    Mr. Mitchell: I assure my hon. Friend that I have not received any suggestion of a threat to the Aberdeen line and I know of no proposal that is likely to affect it in a way that would cause my hon. Friend concern.
    Mr. Prescott: The Opposition are amazed that the Secretary of State is not answering for his letter. That infamous letter, which means less rail in our times—produced within five days of his taking office—has shocked all those concerned with transport, because it recommends a reduction of £200 million, meaning higher fares, line closures, job losses and fewer services. Is the hon. Gentleman aware that the Secretary of State is seen as a Treasury mercenary implementing a Treasury policy? Will the Secretary of State catch a train to Europe to see the difference in the quality of services there, with higher quality public services? Will he admit that his statement gives the green light to the implementation of a Treasury-inspired Serpell report—a fact so often denied in the general election campaign and even now?
    Mr. Mitchell: I congratulate the hon. Gentleman on his appointment to the Opposition Front Bench. I am delighted to welcome him. However, far from my right hon. Friend's letter having shocked those involved in transport, a British Rail press notice included the following words from the chairman:
    "We have been asking Government for a long time to clarify the objectives for our industry and this statement is the first significant move in that direction."
    The hon. Gentleman compared British Rail with railway services in Europe. I say to him and the House that we should stop knocking British Rail. The fact is that British Rail runs more trains at over 100 mph than any other railway in the world.

    London Regional Transport
    Dr. Twinnasked the Secretary of State for Transport when he intends to introduce legislation to set up London Regional Transport.
    Mr. Ridley: I shall be introducing legislation shortly.
    Dr. Twinn: Will my right hon. Friend condemn the appointment of Left-wingers to the London Transport
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    board? Does he agree that it will make the sensible management of London Transport virtually impossible and work against the interests of travellers in London?
    Mr. Ridley: I entirely agree with my hon. Friend that the job of the management and board of London Transport is to manage the underground railway and the buses. Politics should be left to the GLC and it is a great mistake to seek to politicise the board.
    Mr. Dobson: Will the Secretary of State confirm that it will not be his intention in the legislation to oblige London boroughs to provide concessionary fares for pensioners and the disabled?
    Mr. Ridley: I say to the hon. Gentleman:
    "The Government does not consider that a mandatory national concessionary fares scheme would be appropriate."
    The hon. Gentleman may care to know that I am quoting from the Labour Government's 1977 White Paper on transport.
    Mr. Tracey: Pending the introduction of legislation to set up the London Regional Transport authority, will my right hon. Friend consider bringing in a short Bill to prevent any further packing of the London Transport board without proper consultation with the chairman?
    Mr. Ridley: My right hon. Friend the Prime Minister has already said that if anything untoward happens we shall not hesitate to protect the rights of Londoners, as travellers and ratepayers. I hope that it will be possible for the board of London Transport to continue to run the good services that it intends to run.
    Mr. Cohen: Will the Minister ensure, through safeguards in legislation, that no local authority provides less for pensioners in the form of free travel passes than the GLC now provides?
    Mr. Ridley: I must admit to the hon. Gentleman that some boroughs are causing me worry. They are Brent, Greenwich, Hackney, Islington, Lambeth, Lewisham and Southwark. They have said that they are not prepared even to discuss the possibility of concessionary travel arrangements reverting to the boroughs when the GLC is abolished.

    Motorways (Lane Closures)
    Mr. Warrenasked the Secretary of State for Transport how many miles of motorway were affected by lane closures during the most recent month for which statistics are available; and how these figures compare with six months and 12 months previously.
    Mrs. Chalker: We estimate that about 30 to 40 miles, out of a total of 1,500 miles of motorway are affected by lane closures at any one time during the peak March to November period for maintenance work.
    Mr. Warren: I thank my hon. Friend for that reply. Is she aware that I seem to run into those 30 to 40 miles every time I go on the motorway? Does she agree that we have many more miles of lane closures on our motorways than do other EC countries and the United States, where traffic is much heavier than in Britain? Is she aware that that is the subjective experience of many drivers? Will she try to concentrate repair gangs and resources on shorter sections so that they can be reopened more quickly?
    Mrs. Chalker: My hon. Friend has been ill-advised about what routes to take because, I am told, we do not

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    have more miles of lane closures than other countries. Our older motorways have been the victims of their own success. Last year, I noted the concern that was being expressed. Moreover, I experienced delays and still do regularly. Last year we changed to having shorter working lengths and longer gaps between sites. We are always trying to improve matters and now build roads to a stronger structural specification so that they will take the volume of traffic that is expected in the next 20 years. We are always trying to do better.
    Mr. Hardy: Will the Minister confirm that, in addition to lane closures, there have always been a considerable number of carriageway closures? Is she aware that on the M1 northbound there has been a complete carriageway closure on more than 200 occasions in the past three years? As those closures appear to be continuing, will she accept that some of us cannot choose the route that we take? Is she aware that the Government must accept that people who travel from London late at night are subjected to enormous delays and considerable frustration? When can we expect an improvement?
    Mrs. Chalker: Many hon. Members will know that the area to which the hon. Gentleman principally refers is between junctions 5 and 8. We have been widening the motorway there to three lanes. We should all have appreciated that many years ago. Entirely new bridges have had to be built and for safety reasons there have had to be lane closures. Other improvements are being made as quickly as possible. No one, whether it be the hon. Gentleman or me, likes delays. I shall do all that is within my power—as my engineers are doing—to speed up the work that is necessary to provide the motorway network that we need for the future.
    Mr. Ray Powell: Will the Minister assure the House that there will be a statement on lane closures on the Severn bridge, as such closures are affecting the Welsh economy? It is high time that we had another statement on the matter.
    Mrs. Chalker: I fully understand, and am sympathetic to, the hon. Gentleman's point. We expect to receive shortly a final report from Flint and Neill which has been agreed by Mott, Hay and Anderson. Any slight delay in its receipt has no significance for the safety of the bridge. My right hon. Friend will inform the House of the report's recommendations as soon as possible and will place a copy of it in the Library.

    British Airways
    Mr. McCrindleasked the Secretary of State for Transport if he will make a statement on the progress being made towards privatising British Airways.
    Mr. Ridley: The Government intend British Airways to become a private sector company as soon as possible. I am now considering how best to achieve this.
    Mr. McCrindle: What is the Government's reaction to recent suggestions that there might be some slimming-down of the British Airways route structure to create more fairness and competition between a privatised British Airways and the other independent British airlines? Can my right hon. Friend confirm that before there is any move to write off or write down the accumulated debts of British Airways, a Bill will have to be presented to the House?
    Mr. Ridley: I have discussed the first issue with Sir Adam Thomson. I have had to point out to him that the powers under which some routes were transferred from British Airways to British Caledonian in 1971 and 1976 have been repealed and that I now have no powers to effect a transfer of routes. As to my hon. Friend's other point, I hope that he will allow me to unfold plans for the privatisation of British Airways before I comment on what he said about a Bill to improve the capital balance.
    Mr. Stephen Ross: The Secretary of State, who has Treasury experience, may not be prepared to present a Bill to the House to privatise British Airways if that company does not do something about its £1 billion debt to the country but is not the strength of the British Caledonian scheme the fact that it suggests a way in which that debt might be met without the Government incurring a loss?
    Mr. Ridley: The hon. Gentleman has advanced a solution to those twin problems. It will be for the two airlines concerned to think along the same lines before anything of that sort could happen. I have no intention of presenting a Bill for any such purpose in the immediate future.
    Mr. Wilkinson: Does my right hon. Friend agree that the best way out of the problem is for British Airways to trade its way out of its accumulated debt? Is he aware that, in the past six months, it made a profit of £162 million after paying debt interest and all other charges and that that is twice the amount of profit that it made during the equivalent six-month period the previous year? Is that not the best way in which to safeguard the interests of the independent sector and the taxpayer?
    Mr. Ridley: I confirm what my hon. Friend says and pay tribute to Lord King and his work force in British Airways for the remarkable recovery that they have made and for the excellent profits that they are now earning. I confirm that that greatly helps the airline on its way to the private sector, where nearly all of its personnel would like it to be.
    Mr. Haselhurst: Will progress be slower or faster if, against the wishes of British Airways, a major airport is developed at Stansted?
    Mr. Ridley: I do not see how that matter arises on this question or in the context of the privatisation of British Airways.

    Passenger Services
    Mr. Dobsonasked the Secretary of State for Transport if he will list the major capital schemes to improve rail passenger services in London and the South East which he has approved in the past two years.
    Mr. David Mitchell: In the past two years we have approved the electrification of the line to Norwich, initial works on the Victoria rail-air terminal and electrification of the line between Tonbridge and Hastings. There has also been substantial investment that did not require Government approval.
    Mr. Dobson: Does the Minister agree that that Level of investment is less than half of what is necessary to finance the commuters' charter, which British Rail published more than two years ago and which, to my knowledge, has not yet been disowned by the new, craven, chairman of British Rail?
    Mr. Mitchell: I resent that type of comment. It was made against a public servant who has done a great deal to bring to British Rail a modern concept and a commercial approach to its operations.

    M1 (Improvements and Repairs)
    Mr. Madelasked the Secretary of State for Transport if he is satisfied with the time scale of improvements and repairs to the M1 between the junction with the M6 and London; and if he will make a statement.
    Mrs. Chalker: Existing works on the motorway are proceeding according to programme. We are phasing the works so that disruption to traffic is kept to a minimum.
    Mr. Madel: Can my hon. Friend confirm that widening between Hemel Hempstead and Watford will be completed by 31 December? Will she assure us that the MI from Northamptonshire to London will be fault-free for several years, after so much effort has been put into modernisation and repair? Can we now have an end to the appalling congestion that we have suffered for the past five years?
    Mrs. Chalker: I expect the M1 widening to be completed on time—not by the end of the year but by the end of this month — with the exception of some night-time closures on the northbound carriageway for a couple of weeks thereafter. I remind my hon. Friend that however much we improve the specifications to which we build roads, it will always be necessary to replenish the surface for skid resistance purposes. There will also always be a need for improvement when lighting columns and crash barriers must be replaced or repaired after they have been hit by motorists. We cannot ignore these matters. We must get on and do that work when it is necessary to do it.

    A1(M) (Upgrading)
    Mr. Holtasked the Secretary. of State for Transport if he will upgrade the A1(M) to a major motorway.
    Mrs. Chalker: Where the A1 is officially classed as a motorway, it is constructed to full motorway standards and is capable of handling the volume of traffic using it, or likely to use it for the foreseeable future. The other, non-motorway, stretches of the road are in general similarly adequate; it is dual carriageway throughout from London to Gateshead. But there are pinchpoints, and we have proposed improvements for these.
    Mr. Holt: Will my hon. Friend accept that the people of the Cleveland and north-east area will not be enamoured of her reply? It is disappointing to learn that the A1 in the northern part of the country will not be upgraded to a full motorway. What improvements does my hon. Friend intend to introduce in the Yorkshire area to make Teesside-Cleveland better for the business confidence of people in the area?
    Mrs. Chalker: The dual carriageway is, in general, adequate. It would be wrong to spend money and buy up land to make the road of a higher quality than we can justify.
    Four improvements are planned. The first is a considerable improvement of the section between Dishforth junction and Bamham. The second is the
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    proposed grade separation of junctions at Baldersby and Barnsdale Bar. Thirdly, we are studying the further needs of the section northward from Dishforth to Scotch Corner. Fourthly, we have already improved Catterick northern and southern junctions, which were opened last September.
    Mrs. Dunwoody: On a point of order, Mr. Speaker. I understand that the Secretary of State made a number of personal remarks relating to me——
    Mr. Speaker: Order. I apologise for interrupting the hon. Lady, but it is my practice to hear points of order at the end of questions. We are running rather late.

  ATTORNEY-GENERAL

    Lord Chief Justice
    Mr. Alfred Morrisasked the Attorney-General how often the Lord Chancellor meets the Lord Chief Justice.
    The Attorney-General (Sir Michael Havers): Frequently, Sir.
    Mr. Morris: Is there not now a case for the right hon. and learned Gentleman to be urgently in touch with the Lord Chief Justice, formally or informally, to express the concern of many right hon. and hon. Members about the proposal to turn the Reuters trust into a public company? Is the right hon. and learned Gentleman aware that the approval of the Lord Chief Justice is required to amend the trust deed and that he appears not even to have been consulted? Is it not the definition of a scandal that huge profits may be the reward for dishonouring the undertakings enshrined in a trust deed?
    The Attorney-General: This is a matter in which the Lord Chancellor has no responsibility. Since I have been asked about my responsibility, I can tell the right hon. Gentleman that I have looked with care at the documents. There are three options. It is a charitable trust or, if not, an ordinary trust or, if not, a shareholders' agreement. These is no evidence that I can see that makes it a charitable trust. It is only charitable trusts for which I have any responsibility.

    Legal Services
    Ms. Harmanasked the Attorney-General what representations the Lord Chancellor has received on the Government's response to the report of the Royal Commission on legal services.
    Mr. Dubs askedthe Attorney-General what representations the Lord Chancellor has received on the Government's response to the report of the Royal Commission on legal services.
    The Attorney-General: No representations have been received.
    Ms. Harman: Bearing in mind that when a tenant applies for legal aid to enforce basic rights, such as the right to repair or the right to protection from eviction, he is means-tested and often has to pay a high contribution, is it not unfair that the Government are pretending to give free, non-means-tested legal aid to anyone having a dispute about the purchase of his council house? Will the

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    Attorney-General accept that, although I am in favour of extending legal aid, it seems unjust and inconsistent that the only people to whom legal aid is to be extended by this Government are those who are doing the Government's bidding by buying their council houses?
    The Attorney-General: Even those who are in dispute about the purchase of their council houses will be subjected to the same means-testing. They will be made to contribute, if at all, according to their means.
    Mr. Dubs: Since the right hon. and learned Gentleman's own survey has shown that many defendants in magistrates' courts do not even apply for legal aid although they are charged with serious offences, why have the Government not accepted the report of the Royal Commission on legal services in order to widen the eligibility for legal aid and to make sure that all people who are charged with serious offences have legal aid?
    The Attorney-General: Since the Widgery report, it has been clear that in practically every case where there is a risk of custody, and in most cases which go for trial in the Crown court on indictment, legal aid should be granted. If that has not happened in the magistrates' court on a case sent on indictment, it is almost always the case that the court then orders that the defendant should be legally represented.
    Mr. Corbett: Can the right hon. and learned Gentleman explain why the Government have not yet been able to reach a conclusion about the future of law centres, given their importance and the increasing demands made upon them?
    The Attorney-General: The matter is still under close consideration. The views are not all one way, as the hon. Gentleman knows. We are very keen to get it right. I hope very shortly that we shall be able to make an announcement of our intentions.
    Mr. Ryman: Can the Attorney-General use his influence with the Leader of the House to enable us to have a debate on the report of the Royal Commission? Apart from a short Adjournment debate on 5 November 1979, in which the right hon. and learned Gentleman was good enough to express the initial views of the Government, there has not yet been an opportunity, after a lapse of four years, to debate this important report.
    The Attorney-General: I shall make certain that the hon. Gentleman's views are made known to my right hon. Friend the Leader of the House.
    Mr. John Morris: Will the Attorney-General explain why it took four years for the Lord Chancellor to produce such a miserable and totally inadequate response to the Royal Commission's report and why, after four years' gestation, 176 out of 369 recommendations were refused consideration by the Government? Has not the time come for a new and radical approach, with the right institutions and the right financing, including that of law centres, to ensure that the needs of ordinary people are properly met, especially in housing disputes, family problems, personal injuries and the loss of employment?
    The Attorney-General: I congratulate the right hon. and learned Member for Aberavon (Mr. Morris) on his appointment as Opposition spokesman on legal affairs. He does not seem to change his manner of questioning, whatever post he occupies.
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    There were 369 recommendations in the Royal Commission's report. It is obviously necessary in a large number of those to consult before any firm decision is taken. Some of the recommendations have already been implemented. As the right hon. and learned Gentleman knows, there are some very important ones. A large number of those recommendations were, in the Government's view, more properly dealt with by the professions themselves than by Government interference. If the professions fail to deal with the recommendations with which the Government think they should deal, the Government will have to intervene.

    Northern Ireland (Criminal Trials)
    Mr. Berminghamasked the Attorney-General on how many occasions in the last year he has met the Director of Public Prosecutions for Northern Ireland to supervise his decisions to prosecute in criminal cases where there is reliance on the evidence of accomplices and to discuss the question of immunity for such accomplices.
    The Attorney-General: The Director of Public Prosecutions for Northern Ireland and I are in frequent and regular contact in order to discuss the work of his Department and the general policies which he applies and so that he may consult me on specific problems as the need arises. It is not possible, without disproportionate cost, to identify the several occasions upon which we have discussed the matters referred to in this question.
    Mr. Bermingham: Does the Attorney-General agree that the basis of English justice has always been the proof of guilt beyond all reasonable doubt? Does he further agree that in non-jury trials such as those found in Northern Ireland, where sometimes the sole evidence is that of an informer who has been sustained during the period of his informership, if I may put it that way, such evidence must perforce be tainted, and that those non-jury trials can never reach a satisfactory and just conclusion, because it is the evidence of one person against another?
    The Attorney-General: As the hon. Gentleman will know from the written answer that I gave previously, the defence is to be informed of all provisions that have been made for witnesses before the trial. On the wider issue of whether supergrasses' evidence can be accepted by a court, I am entirely satisfied that justice is, in fact, done. However, I do not ask the hon. Gentleman to rely on my assessment alone. I refer him and others to the careful judgment given by the Lord Chief Justice of Northern Ireland, Lord Lowry, on 26 October in the case of the Queen v. Gibney, which explained and exemplified the scrupulous care taken by the courts to ensure that no one is convicted except on proof beyond reasonable doubt. I shall arrange for a transcript of the judgment, which repays reading in full, to be placed in the Library.

  OVERSEAS DEVELOPMENT

    Grenada
    Mr. Welshasked the Secretary of State for Foreign and Commonwealth Affairs what aid Her Majesty's Government are giving to Grenada.
    Mr. Spearingasked the Secretary of State for Foreign and Commonwealth Affairs if he will ask his Department to prepare a report on the priority development needs of Grenada.
    The Minister for Overseas Development (Mr. Timothy Raison): The Government have already announced their intention to make available capital assistance and technical co-operation for reconstruction and economic development in Grenada.
    A team of advisers from the British development division in the Caribbean has visited the country to assess priority development needs. Their report has only just arrived, and I shall be studying it promptly.
    Mr. Welsh: I thank the Minister for that reply. Is he aware that when this escapade is over the kiddies in Grenada will have to pick up all the pieces and put them together, and that one would therefore expect the people of Grenada to request further aid from this Government? Will the Minister assure us that, if that call for further aid comes, it will be looked at and given, and that it will come from the reserve funds and not from the small amount that is at present available under overseas aid?
    Mr. Raison: The aid, of course, will come out of our budget. As I have already said, we are prepared to consider priority needs for development. In doing so, we also have to take into account other donors and their potential contributions.
    Mr. Spearing: Although the prospect of renewed Government aid to Grenada is welcome, is the Minister aware that Sir Paul Scoon told my hon. Friend the Member for Cynon Valley (Mr. Evans) and myself the other day that, in his view, one of the most urgent needs now in Grenada is the maintenance of Government services and provision of the wherewithal for the Government to pay their servants so that services continue to be available to the people of Grenada? Will he look at the matter and see what the Government can do?
    Mr. Raison: I am aware that there is an immediate cash problem in Grenada, but I repeat that there are other major aid donors, notably the United States, who are also prepared to help. We must judge what is the most effective way of using any assistance that we can give.
    Mr. Maples: When my right hon. Friend is considering Grenada, will he also consider our aid policy in general in the Caribbean, and ensure that one of the objectives of that policy is to ensure that the Marxist takeover that took place in Grenada does not happen elsewhere?
    Mr. Raison: I have sympathy with what my hon. Friend says. We do consider carefully and regularly our aid policy in that part of the world.
    Mr. Ioan Evans: As the civilian airport at Port Salines is now 85 per cent. completed, and as British firms such as Plessey are involved in the contract, will the Minister see what can be done by the Government to ensure that the airport is completed, because it is essential for future tourism on the island?
    Mr. Raison: I accept that the airport needs to go ahead. The Department of Trade and Industry is in close touch with Plessey on the matter.
    Mr. Robert Banks: Does my right hon. Friend agree that any upward revision of aid to Grenada will not entail any cutback in aid to other islands in the Caribbean?
    Mr. Raison: Yes, Sir, in the immediate future. However, every year we have to look at our aid programme as a whole and make judgments about priorities.

    Falkland Islands
    Mr. Dalyellasked the Secretary of State for Foreign and Commonwealth Affairs when he expects to finalise the details of the activities to be supported from the Overseas Development Administration budget in the Falkland Islands.
    Mr. Raison: I do not expect to finalise the overall development programme for some time. Development is a continuing process carried out in close contact with the Falkland Islands Government. They have indicated their priorities; some projects have already been approved, others are now being prepared.
    Mr. Dalyell: In view of the millions of pounds that are poured into projects ranging from the airport to Noah's Ark, should not senior Ministers take into account the formidable leaders in both The Times and The Guardian this morning about the Falklands and persuade the Prime Minister to take this opportunity to negotiate with the new Government in Buenos Aires?
    Mr. Raison: My job is to supervise the development programme in the Falkland Islands. The case for a development programme there has been established for some time. I believe that the programme that is under way is effective and will help to provide the people there with confidence in their future.
    Mr. Stuart Holland: Is the Minister aware that the Crown Agents have been involved in the Falklands? In view of their current financial difficulties, will he make a statement to the House on the options for their future before a decision is taken by the Government? Will he further assure the House that overseas development funds are in no way involved—I stress, in no way involved—in the financing of the airport on the Falklands?
    Mr. Raison: I welcome the hon. Gentleman to the Dispatch Box—I think for the first time. The subject of the Crown Agents does not arise under this question. The airport has been financed out of defence expenditure, not out of the development budget.

    Lomé III
    Mr. Corbettasked the Secretary of State for Foreign and Commonwealth Affairs if he is satisfied with progress in the Lomé III negotiations.
    Mr. Raison: Yes, Sir. The current convention still has 16 months to run. Negotiations on a successor were formally opened in Luxembourg on 6 October. Detailed discussion in working groups is now under way.
    Mr. Corbett: Will the Minister assure the House that he will approach these renegotiations in a positive way to see what more the United Kingdom can do, bearing in mind its prosperity relative to the countries affected by the Lomé negotiations?
    Mr. Raison: I intend to approach the negotiations in a positive and constructive way. I believe that it is right to place emphasis on the effectiveness of aid and on

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    stimulating food self-reliance. Our resources are not unlimited, but I hope that the question of resources will be taken a little later in the negotiations, rather than now.
    Mr. Jim Spicer: Will my right hon. Friend bear in mind that under the Lomé II convention we tried very hard to get some security for investment, which would have been the best way to help the member states under Lomé II? Will he bear that in mind in Lomé III, remembering, too, that there is great resistance on the part of the other side in these negotiations to any possibility of guaranteeing human rights in Lomé convention countries?
    Mr. Raison: We attach great importance to security for investment, and the Government already operate a scheme that is designed to strengthen that. On the second part of my hon. Friend's question, we think that it would be desirable for the new convention to contain provisions to uphold human rights.
    Mr. Fisher: What plans does the Minister have through the Lomé negotiations to improve the working of Stabex, particularly by increasing the amount of commodities included in it?
    Mr. Raison: We feel that the money that is being provided for Stabex is not being used, as it should be, to strengthen the economies of the areas concerned. It has been used as a form of topping-up of emergency relief. In our view, the Stabex system needs to be more effective than it has been so far.
    Mr. Forman: Although I welcome the support given by my right hon. Friend to the prospect of Lomé III, can he and his colleagues ensure that British companies get a larger share of the orders that derive from aid within the European development fund?
    Mr. Raison: We can do something to ensure that, but fundamentally it is a matter for British companies themselves to make sure that they win the contracts. The position is improving, but it could be better.

    Africa (Food Crisis)
    Mr. Redmondasked the Secretary of State for Foreign and Commonwealth Affairs what response Her Majesty's Government are making to the food crisis in parts of Africa.
    Mr. Raison: We are providing food and emergency relief. Improving water resources and food production is, in any case, one of the main objectives of our aid in Africa.
    Mr. Redmond: May we have an assurance from the Minister that he will consider sympathetically any requests for any project that will help to eliminate this type of question appearing on the Order Paper?
    Mr. Raison: Yes, Sir. The British Government already provide substantial assistance, and I was able to tell the FAO biennial conference last week that I was making a new allocation of 17,000 tonnes of cereals for Ghana, as well as providing further technical assistance.
    Sir John Biggs-Davison: Will not food shortages become more acute in countries such as Zimbabwe if European farmers are not encouraged to remain there? Does not experience show that the departure of European farmers from Zambia made the food shortage worse than it need have been?
    Mr. Raison: I certainly agree that it would be a great pity from the point of view of food provision if there were a sudden flight of European farmers from Zimbabwe. In that country the great need is for stability.

    United Nations Development Programme
    Mr. Fisherasked the Secretary of State for Foreign and Commonwealth Affairs whether he will increase financial support for the United Nations development programme.
    Mr. Raison: At the United Nations pledging conference on 8 November we announced that, subject to parliamentary approval, our contribution to UNDP in 1984 would be £19 million, an increase of £500,000 over that in 1983.
    Mr. Fisher: Does the Minister agree with industrialists and bankers who see increasing our aid not only as a moral duty but as being in our commercial interest?
    Mr. Raison: I agree that the aid programme serves a moral purpose while at the same time serving British interests and commerce.
    Mr. Roy Hughes: On a point of order, Mr. Speaker. May I draw your attention to question No. 27 on the Order Paper, which is addressed to the Secretary of State for Transport, but which unfortunately was not reached? Given the concern about the Severn bridge in south Wales and its importance to the economy there, I should like your guidance on the need for the Secretary of State to make a statement within the next 24 hours on the Floor of the House, so that hon. Members may have an opportunity to question him on this vital issue.
    Mr. Speaker: That is not a point of order for me. I think that the hon. Member for Newport, East (Mr. Hughes) heard what the hon. Member for Ogmore (Mr. Powell) said earlier — [HON. MEMBERS: "The hon. Member for Newport, East was not here then."] If the hon. Member for Newport, East was not in the Chamber at the time, he will be able to read in Hansard what was said.
    Mrs. Dunwoody: On a point of order, Mr. Speaker. I understand that the Secretary of State for Transport made some personal remarks about me during Question Time. Since he was, as usual, wrong on all accounts, would you point out to him that it would be a great aid to efficiency if he learnt to read?
    Mr. Speaker: The Secretary of State is in the Chamber and will have heard the hon. Lady's remarks.

European Community Affairs
3.32 pm
The Secretary of State for Foreign and Commonwealth Affairs (Sir G. Howe): With permission, Mr. Speaker, I should like to make a statement.
I attended the Special Council in Athens on 9 to 11 November, accompanied by my right hon. Friend the Minister of Agriculture, Fisheries and Food and my hon. Friend the Economic Secretary to the Treasury.
This was the sixth meeting of the Special Council set up by the European Heads of Government to carry forward the work agreed upon in Stuttgart in June. The Special Councils have concentrated on three main topics: measures to ensure greater budgetary discipline and effective control of agricultural and other Community expenditure; measures to ensure more equitable sharing of the burden of financing the Community budget; and the establishment and implementation of new Community policies.
As hon. Members know, Community spending is now up against its revenue ceiling. A number of member states are pressing for an immediate increase in own resources. My right hon. Friend the Prime Minister made it clear at Stuttgart, and I stated again at Athens last week, that we would be prepared to consider this provided that two very important conditions were met: first, that agreement was reached on an effective control of the rate of increase of agricultural and other expenditure; and, secondly, that it was accompanied by an arrangement to ensure a fair sharing of the financial burden.
As far as the first condition is concerned, there is agreement within the Community that the present rate of growth of expenditure on the common agricultural policy cannot be allowed to continue. Early in the negotiation we put forward a proposal for a strict financial guideline which, as part of the Community's budgetary procedure, would ensure that agricultural spending was rigorously controlled. Some of our partners are not yet willing to go nearly far enough to secure effective control of such expenditure, but others are now pressing as strongly as we are for an effective mechanism across the board. Even those who have so far resisted a legally binding guideline, such as the Commission itself, have tightened up their proposals considerably in response to our ideas.
At an equally early stage we tabled a proposal for a safety net which would limit a member state's contribution to the budget in accordance with its relative prosperity and its ability to pay, and so meet our second condition. Here too, a number of other proposals have been tabled, including the ill-advised ideas put forward by the Commission last week which sought to reduce the problem by redefining it in a wholly arbitrary way. Other proposals also fail to measure adequately the true budget burden borne by the United Kingdom. But some of them represent significant movement towards our thinking about the essential elements of an agreement on the budgetary arrangements.
I again emphasised in Athens last week that if there was to be agreement at the Athens European Council in December our two conditions must be met.
Last week's Special Council also took forward discussion of the future development of the Community in other fields. Here, too, we have tabled important proposals for the Council's consideration.
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The Special Council will meet again in Brussels on 28 November. It is generally agreed that decisions will be taken only at the European Council on 4 to 6 December and that individual questions will be resolved only as part of an overall agreement.
Mr. Donald Anderson: We are bound to ask what is the real point of this interim statement. Is it not just another collection of Euro pieties and an addition to the fine word mountains that we have had since the Stuttgart summit and before? To put it bluntly, the message from Athens surely is that there is no money for us, no long-term formula for the budget and no agreement on key issues. How realistic is it to expect progress on spending on agriculture when the domestic agricultural pressures and the vested interests of our partners are so massive? Surely the only way out of the impasse is to have increased national spending.
In any discussion of the budget and Britain's contribution to it, we have become used to hearing that one swallow does not make a summer when it comes to what in happier days the Prime Minister called "getting our money back". The Foreign Secretary referred to developments in other fields and to new Community policies. Six meetings after the Stuttgart summit, surely the House is entitled to know in what other areas the right hon. and learned Gentleman is discussing progress with our partners. We need the details. For example, have the Foreign Secretary and the Government conceded the principle of extending the coverage of our domestic value added tax to non-rated areas, such as rents and funerals, and to zero-rated areas, such as children's clothes?
It is clear that neither the Prime Minister's megaphone diplomacy nor the Foreign Secretary's studied deep breathing has delivered the goods for this country. Will the right hon. and learned Gentleman recognise the real strengths of our negotiating position with our partners? Those strengths are that the Community is hitting its head against a ceiling on resources and that no further progress can be made in any direction without our agreement. Therefore, we have an effective veto over developments in the Community. Until our justified case is met we should state that clearly and wave our veto before the eyes of our partners. We believe that that is the only language that they will understand.
Sir Geoffrey Howe: The hon. Gentleman began by asking what was the point of the statement. I made the statement to bring the House up to date with the negotiations. I am certain that if I had not made a statement about this important meeting the hon. Gentleman would have been the first to complain.
The hon. Gentleman is right to state, as I did in my statement, that Community resources are running out. It is, therefore, against that background that there is recognition of the essential need to secure agreement, first, on the control of the growth of agriculture and other expenditure—which is one of our two conditions—and, secondly, on the putting in place of a budgetary mechanism that will prevent the recurrence of the repeated arguments over the burden of the budget on different countries and redress the burden that was unfairly placed on Britain by the original arrangements. Those are our two purposes.
The hon. Gentleman asked about our proposals for new policies. There has been no discussion about any increase

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in the coverage of VAT along the lines that he described. In the supplement to the October edition of the Treasury's economic progress report we have tabled a full report setting out the new policies which we have offered for discussion within the Community, all of which will improve the working of the Common Market, remove barriers to trade, liberalise trading conditions and enhance the prospects of better economic growth throughout the Community.
The hon. Gentleman was right to remind us of the strength of our negotiating position. I am glad to take this opportunity to remind others of it. We have made it quite clear that we will not lay before the House proposals for an increase in own resources unless we are satisfied that such proposals are justified and unless our two conditions are fulfilled.
My right hon. Friend the Prime Minister has made quite clear the determination with which we wall address those questions. That determination is well understood, and had better be well understood for the sake of both the Community and the United Kingdom.
Sir Hugh Fraser: I congratulate my right hon. and learned Friend on his robust statement. As this year's agricultural production in Europe has fallen by 7 per cent. beyond what was anticipated, will not the fundamental agricultural crisis increase rather than be ameliorated? Throughout the negotiations, will my right hon. and learned Friend be even more robust and ensure that there is not an increase in expenditure and that the CAP is improved? He will then carry the House with him.
Sir Geoffrey Howe: I am grateful to my right hon. Friend, who is something of an expert in robustness, for his kind tribute. His point is valid and important. A continuation of the CAP without reform, in the context of the resources being exhausted, has led to a recognition that fundamental reform must be achieved. One part of that is Britain's insistence that such a reform should produce a limitation on the growth of agricultural spending.
Mr. Russell Johnston: Although the Foreign Secretary is rightly attempting to work out a fair basis of contribution to the Community budget, will he assure us that he will not argue the case for each country contributing even approximately the same amount as it receives? The juste retour, or our own money argument, would block any possibility of economic convergence within the Community, which is one of its basic objectives.
Sir Geoffrey Howe: I am surprised that the hon. Gentleman has adopted an argument based upon juste retour. The concept embodied in that French phrase is used all too often to denounce the central case that we have made, which is that the Community must be fair and equitable in its budgetary arrangements. That does not imply that each policy should be self-financing for each country in precise mathematical terms, but the argument based on juste retour is too often advanced to reject the essential heart of our case, which is for long-standing, durable arrangements for fairness in the budgetary system.
Mr. Teddy Taylor: As the Government are rightly using every possible device to contain public spending, would it not be unthinkable to ask the House to contribute even more resources to the Common Market for expenditure which the Court of
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Auditors for the Community has recently described as showing appalling waste, extravagance and lack of direction? Will my right hon. and learned Friend explain how the Government think that agricultural spending can be reduced or constrained?
Sir Geoffrey Howe: It is quite clear that the case for the effective control of spending, not only on agriculture but throughout all areas of expenditure, must be taken seriously. It is part of the case that we are pressing.
We are adopting several different proposals on agricultural spending. First, there must be a strict and rigorous price regime. Secondly, there must be changes, sometimes by the introduction of quantitative restrictions on the regime for certain products. Thirdly, and most importantly, there must be provisions for a strict and rigorous financial guideline on the growth of agricultural expenditure as a whole.
Mr. Ron Leighton: Does the Foreign Secretary agree with Christopher Tugendhat that the Commission is trying to cook the books and cheat this country? Despite all the reassurances that the House has heard over the years, is it not clear that the Athens summit will be as much a debacle as the summits at Dublin and Stuttgart? As there will be no reform of the CAP, will the right hon. and learned Gentleman take the only sensible course open to him and stop writing the cheques for the excessive payments demanded from this country?
Sir Geoffrey Howe: I doubt that I could say anything that would satisfy the hon. Gentleman in his attitude towards the Community—an attitude that was rejected by the electorate at the last election. I agree with my right hon. Friend the Prime Minister that the proposals announced by the Commission last week are unsound, unhelpful and unacceptable. I made that plain to the Commission and others in Athens last week.
On the hon. Gentleman's last point, it is far more sensible for us to try to seek agreement than to mutter threats.
Mr. Hugh Dykes: Does my right hon. and learned Friend agree that any amount of Opposition noise and emotion does not conceal the fact that had they done something about the problem by 1976–77 the United Kingdom deficit would not have become so large chat it must be renegotiated? Is my right hon. and learned Friend optimistic that there will be concessions in other areas that will add up to a total package for the United Kingdom?
Sir Geoffrey Howe: My hon. Friend is right to make his first point. I agree about the importance of other policies. For that reason, we have laid before the House and the negotiators our proposals for policies that should be developed.
Mr. Ioan Evans: As the CAP is working to the disadvantage of consumers in Britain, and as there is a tremendous deficit in manufacturing trade with the EC, what justification is there for Britain being the major financial contributor to the EC? What will the Government do if the EC does not play fair about our contribution?
Sir Geoffrey Howe: We have made it clear that a satisfactory agreement on a fair and lasting budgetary arrangement is one of the key propositions on which we are seeking agreement in Athens. If agreement is not

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possible on that point and on our other fundamental condition, there will be no scope for agreement on other points.
Mr. Hal Miller: In the light of suggestions that our regional policy is being retained and its coverage extended largely as a means of providing an avenue for rebates from the EC, would it not be more prudent to limit our contributions rather than to rely on rebates, especially as the accession of Spain and Portugal make it probable that there will be far greater demand on the EC regional development fund?
Sir Geoffrey Howe: My hon. Friend is right to point out that the methods adopted so far for meeting our case for reform of the budgetary system have too often, and to too great an extent, consisted of reliance on spending programmes that are not correctly designed. That is why a key part of our case is that change must operate on the revenue side of the budget as well as on the expenditure side. I am glad to say that that case is being increasingly widely accepted.
Mr. Nigel Spearing: Will the Foreign Secretary confirm that one of the proposals from the Commission currently being canvassed is to increase the VAT contribution by up to 40 per cent.? Even if the agricultural price problem is solved, and, indeed, the problem of burden sharing in the budget also, would not the House and the country have to be prepared to pay up to 40 per cent. more in VAT than at present?
Sir Geoffrey Howe: The arithmetic does not follow in that simple fashion, because all the proposals for reform must be considered alongside one another. If changes to the VAT component of own resources were to be considered, that would have to be done alongside the changes for which we are pressing in the overall budgetary arrangements.
Mr. Spearing: Up to 40 per cent.
Mr. Anthony Beaumont-Dark: Does my right hon. and learned Friend accept that for the past four or five years we have been told that common agricultural policy expenditure would be reduced because the Government would stand firm but that each year it has increased inexorably? Why will it be different this year? Why does my right hon. and learned Friend think that we will be successful now, when we have not been successful before?
Sir Geoffrey Howe: The imminence of the exhaustion of the Community's own resources is now much more apparent to everyone concerned. Indeed, it is apparent from some of the decisions which the Commission has recently announced. It puts us in a much stronger position, therefore, to insist on the inclusion of sufficiently strong restraints on the growth of CAP expenditure, to meet the point that my hon. Friend has in mind.
Mr. Jack Straw: Is the Foreign Secretary aware that, despite the sabre-rattling rhetoric of the Prime Minister, so much has Britain become the soft touch of Europe that our contributions have increased by £100 million a year in real terms under this Government compared with the position under the Labour Government? In view of that, was it not a major tactical
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error for the Foreign Secretary to contemplate in any circumstances an increase in VAT contributions? Would it not be far better to make it clear to our Common Market partners that unless a fair agreement is forthcoming we will not pay any part of our contribution?
Sir Geoffrey Howe: I have already made it plain that it is far more sensible to work for an agreement that will last than to mutter threats for the sake of it. The hon. Gentleman should remember the determination of this Administration in dealing with the problem. The Government have already secured major reliefs of our budgetary burden. That outcome is to be contrasted with the disastrous failure of the Labour Government in this respect.
Mr. Tony Marlow: If the common agricultural policy were to be reformed, would not there be absolutely buckets of money around and therefore it would be unnecessary to increase own resources? Given that Opposition Members will vote against anything European, and given also that Conservative Members are reluctant to increase public expenditure and would certainly not vote for increased European expenditure at a time when we are having to cut public expenditure at home, is it not grossly misleading to allow other European nations to believe that this House would in any event vote for an increase in European resources?
Sir Geoffrey Howe: I have no doubt that it would require a considerable development of evidence to persuade my hon. Friend to vote in that direction. My hon. Friend's question must be taken seriously. It is right that an effective reform of the Community's programmes as a whole will lead to a change in the pattern, size and rate of growth of Community expenditure. That is one reason why we have gone no further than to say that we shall be prepared to consider the case for an increase in own resources provided that our two other conditions are met.
Mr. Robin Corbett: As the Foreign Secretary's predecessors have been singing the song of CAP reform for four years or more, how many more thousands of millions of pounds is the Foreign Secretary prepared to see go down the drain before he will stop signing the cheques?
Sir Geoffrey Howe: We have made plain our willingness to continue the present arrangements, and any reform of them depends on the extent to which we are able to secure the conditions that I have outlined. All those who question the implications of the common agricultural policy must recollect that every industrial society—not just those in Europe—has elaborate and often expensive arrangements for meeting the requirements of farm policy. Pressures of that type are formidable in any system. It is the fact that we now have an opportunity to correct the European arrangement that gives us our strength in the present bargaining position.
Mr. Neil Thorne: As this problem seems largely to have arisen as a result of the subsidies that some member countries are demanding to support their inefficient agricultural communities, has my right hon. and learned Friend considered whether it would be more acceptable to Britain if every country was invited to pay 50 per cent. of the subsidy being paid to its producers?
Sir Geoffrey Howe: That approach has been canvassed in some quarters, but the difficulty is that it might well lead to a competitive pattern of subsidies within the Community as well as outside, which could itself lead to even more distortion of agricultural markets around the world.

Cruise Missiles
3.54 pm
The Secretary of State for Defence (Mr. Michael Heseltine): With permission, Mr. Speaker, I should like to make a statement about preparations for the operational deployment of cruise missiles in the United Kingdom.
On 31 October this House reaffirmed by a majority of 144 its support for the NATO 1979 twin-track decision on intermediate range nuclear forces and its backing for the West's efforts to achieve a balanced and verifiable agreement at the Geneva negotiations, and confirmed that, in the absence of agreement on the zero option, cruise missiles must be operationally deployed in the United Kingdom at the end of 1983.
In the course of that debate I indicated that the supporting equipment for the first flight of cruise missiles had been arriving at RAF Greenham common for some time, that further equipment, including the transporter-erector-launchers, would be arriving shortly, and that I would make a further statement when the missiles themselves arrived in this country. In honouring that commitment I should inform the House that, earlier today, the first cruise missiles were delivered by air to RAF Greenham common.—[HON. MEMBERS: "Shame."]
The delivery of the missiles is wholly consistent with the Alliance decision to achieve an initial operational capability by the end of 1983 in the absence of agreement on the zero option. Much work remains to be done—including the final assembly and testing of equipments and personnel training—before the missiles are operational.
I wish to emphasise that these continuing preparations for operational deployment do not in any way lessen NATO's commitment to negotiations or reduce the desire of the Alliance to reach agreement on arms control with the Soviet Union. The NATO deployment is planned to be completed over a five-year period; it can be halted, modified or reversed at any time if results in Geneva warrant it.
But the fact remains that since the 1979 decision the Soviet Union has almost trebled—from 126 to 360—the number of SS20 missiles it has deployed. Even since the debate on 31 October we assess that another nine missiles are operationally deployed, compared with the figures I gave the House on that occasion.
In contrast, I remind the House that last month NATO Defence Ministers agreed to the most radical reduction in the number of nuclear warheads deployed in Europe that has ever taken place. The effect of this decision will be to reduce the number of NATO nuclear warheads in Europe to their lowest level in 20 years, even if full deployment of Pershing 2 and cruise missiles takes place. The number of these warheads will be reduced by one third from their December 1979 level, and the number of warheads for shorter-range systems will be reduced by one half. The Government hope that the Soviet Union will now respond positively to the radical proposals put forward by NATO for arms control.
That is our foremost hope. But let me make it clear that this Government will remain resolute in their commitment to take those steps which are essential for the defence of this country and our allies.
Mr. John Silkin: For the Secretary of State to talk of halting, modifying or

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reversing this American decision is completely unrealistic. The truth is that this American decision remains a watershed. Does the Secretary of State really know what is happening? [HON. MEMBERS: "Yes. "] He does? Then why did he have to be called back from Aldershot to make this statement? Does it not show that the Americans had not even told him the date or time that the missiles would be delivered? Secondly, what instructions have been given to British forces in the event of the United States trying to move the missiles into the British countryside without the Prime Minister's permission, as we are told that the American President must have her permission to use them? Thirdly, does not today's American decision effectively end the Geneva talks, and does this not prove that Labour's policy of a British presence at Geneva is absolutely right?
Mr. Heseltine: I hope that the right hon. Gentleman noted that in my statement I made it absolutely clear that we hope the Geneva talks will go on and produce a satisfactory result. That is what we have been trying to achieve for four years and it remains a prime objective of NATO.
The right hon. Gentleman asked about the possibility of the Americans trying to move cruise missiles out of the base without a joint decision. That will not happen. There is a categoric undertaking—[Interruption.]—which was the undertaking on which the last Labour Government relied—that there will be no use of American weapons on or off British bases witout a joint decision. That was good enough for the then Labour Government and we have accepted it as the basis of our decision.
The right hon. Gentleman suggests that I do not know what is going on and goes on to refer to an American decision, when the whole world knows that it was a NATO decision—[HON. MEMBERS: "Hear, hear."] I ask him to cast his mind back to January 1980 when the Front Bench representative of the Labour party, responding to my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym), said in respect of the decision to proceed with the twin-track decision:
"we accepted the need to move ahead on the proposed timetable. It was the view of the previous Government that theatre nuclear modernisation was essential, and that is our view today."—[Official Report, 24 January 1980; Vol. 977, c. 691.]
That was the view of the official Opposition in 1980. It is not this Government who have changed but the Labour party.
Mr. Silkin: Instead of reading from prepared speeches, the right hon. Gentleman should answer the questions that are put to him. Why did he have to be called back from Aldershot? Was it because he did not know that the missiles would be deployed earlier today? What instructions have been given to British forces should the missiles be removed without the Prime Minister's permission? The Secretary of State says that they will not be moved and that there are undertakings. But, despite that, contingency instructions must have been given to our forces, should they be moved.
Mr. Heseltine: The right hon. Gentleman must be aware that there is no possibility of the missiles being removed from Greenham common on deployment unless that is in company with a joint force of American and
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British personnel. That will not happen unless the British are—[Interruption]—as aware of what is happening in the circumstances.
I was fully aware of the arrival, date and timing of the cruise missiles at every appropriate moment. Indeed, it is fair to say that the dates and timings were in reflection of suggestions from this country rather than the other way round. My decision today was whether to abandon my Aldershot visit or cut it short. In view of the commitment that I felt to the large number of people at Aldershot who were looking forward to my visit—[Interruption]—I thought it more appropriate to honour that obligation.
Mr. Michael McNair-Wilson: Is my right hon. Friend aware of the steadfastness of the great majority of my constituents in supporting the stationing of cruise missiles at RAF Greenham common—[Interruption]—since the first announcement in 1980 and in the absence of success at the INF talks? Is he further aware that in recognising the defence necessity for deploying the missiles, both for this country and NATO, they want to be assured that the security and safety of those missiles will always receive the highest priority? Will the Government be willing to bear a larger share of the cost of any continued large police presence to maintain the absolute security of RAF Greenham common against any intrusion?
Mr. Heseltine: I am grateful to my hon. Friend for the remarkable support that he has given to the Government throughout this matter and I know that he speaks for the vast majority of his constituents in the views that he expresses. I assure him that security will continue to be given the highest priority appropriate in the circumstances. I must ask him to refer the question of cost apportionment to the Home Secretary.
Mr. David Steel: Although there were hordes of enthusiastic people waiting for the Secretary of State at Aldershot, is he aware that there is less public enthusiasm for this deployment? Does he appreciate that he has the support of only 6 per cent. of the population for the deployment of cruise missiles in the present circumstances, without dual key? Will he repudiate the report on the front page of Friday's edition of the Prime Minister's favourite newspaper, The Sun, which said that in the event of cruise missiles leaving the base without British permission, British service men will have permission to fire on the Americans?
Mr. Heseltine: I assure the right hon. Gentleman that the report in The Sun on Friday did not have the high standards of accuracy that we have come to expect from that newspaper. I am aware of the public concern surrounding the whole issue of dual key, and we debated that issue substantially in the House only two weeks ago. The experience of all previous Governments was what persuaded this Government that the arrangements were satisfactory. Public opinion would be a great deal less concerned than it is if Opposition Members had not now so diametrically abandoned the positions that they held when in Government.
Sir Anthony Buck: Is my right hon. Friend aware that perhaps the most important part of his remarks was that in which he reiterated that it has been a NATO and United Kingdom decision and not a United States decision? Will he emphasise yet again that the physical control of the bases is largely in United Kingdom

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hands, with there being a joint agreement with the United States, and that in the last resort we have control of the bases?
Mr. Heseltine: I am grateful to my hon. and learned Friend for those remarks. There is the closest relationship between the British authorities involved at Greenham common and the Americans who use that base. My hon. and learned Friend is also right to say that it is a NATO decision. It was discussed as recently as just over two weeks ago in Canada and was reaffirmed by the Governments who took the original decision.
Mr. Michael Foot: Is it not a fact that these weapons, now being deployed in this country, are under the control of the President of the United States? Is it not also a fact that the President, as Commander-in-Chief of the United States forces, cannot divest himself of that control without Congressional approval? Is it the case that no attempt has been made, either by the American or British Governments, to try to secure that Congressional approval? Does that not all add up to a shameful surrender of British sovereignty on a matter of absolutely crucial importance?
Mr. Heseltine: I heed what the right hon. Gentleman says about British sovereignty. The whole nation would be interested to know why, when he was a member of a Labour Cabinet, he did so little to change the arrangements.
Sir Peter Blaker: Is my right hon. Friend aware that there will be a general welcome for what he said about the American willingness and intention to remain at the negotiating table? Will he confirm also that the zero option is still available and that, therefore, if the Soviet Union were now to agree to dismantle its intermediate-range land-based nuclear missiles, we should be prepared to see the cruise missiles now being deployed withdrawn and any further deployment forgone?
Mr. Heseltine: My right hon. Friend, who understands these matters clearly, is absolutely right. The zero option is available. It is the option that we should welcome if it were possible to achieve it, and it is what we have been seeking for four years, as the House will be aware. During the time that we have deployed not one single weapons system of this sort, the Soviets have nearly tripled the number of systems that they have deployed.
Mr. Willie W. Hamilton: Since the Minister has not answered the important constitutional question raised by my right hon. Friend the Member for Blaenau Gwent (Mr. Foot), and as it is abundantly clear that the vast majority of our people are against the siting of these missiles in Britain, will the Government seriously consider holding a referendum on this matter, which is literally one of life and death?
Mr. Heseltine: It was extraordinary of the right hon. Member for Blaenau Gwent (Mr. Foot) to refer to the scandal of the abdication of national sovereignty, considering that he was a member of a Cabinet that was content to rest on precisely the same agreement as have this Government. It is an intolerable abuse for those responsible for these matters when in Government to say one thing and then to abdicate, that position when in Opposition.
Mr. Jim Spicer: Most responsible opinion in Britain will welcome my right hon. Friend's
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statement. Does he agree that it would be too much to hope that the irresponsible antics of the so-called peace women at Greenham Common will cease? Will he assure the House that, given the arduous and frustrating nature of the duties being undertaken by the police and members of the armed services, every thought and care will be given to their accommodation while they are protecting the base, which is vital to Britain's security?
Mr. Heseltine: I am grateful to my hon. Friend. The Government will do everything that they can to ensure that members of the armed services and the civil police are given adequate support for their difficult job. A small minority are seeking to impose their will, which is unacceptable to the vast majority of British people. 'We cannot tolerate that.
Mr. Jack Dormand: As the missiles are in Britain, will the Minister tell the House what the American argument against the dual key system is?
Mr. Heseltine: There is no American argument against it. The House will know that we have a dual key system for Lance missiles, and that we had one for Thor missiles. However, previous Labour and Conservative Governments proceeded with other arrangements that were found to be satisfactory. Had Government wished to pursue the dual key option, we could have negotiated to acquire that for the cruise missile system from the Americans at the time but, in the light of the experiences of previous Labour and Conservative Governments, we believed that that would have involved the use of relatively scarce defence funds, which the gain did not justify.
Sir Dudley Smith: Will the Minister tell the House whether, despite the NATO move that he announced today, Russia retains a marked superiority in intermediate and long-range nuclear weapons?
Mr. Heseltine: My hon. Friend will have seen the "Statement on Defence Estimates" that we published earlier this year, which shows Russian superiority in the intermediate range of four or five to one. At the higher level, the balance is much closer.
Dr. David Owen: The Minister continues to use terminological inexactitudes when describing the position of previous Governments. He is well aware that all previous precedent is on the side of those who believe that there should be a dual key for cruise missiles. He refuses to come to the Dispatch Box and admit that the Conservative Prime Minister, Harold Macmillan, decided to purchase the Thor missiles in order to have dual control, and that successive Labour and Conservative Governments have had dual contol over Lance missiles. Will he withdraw his allegation about previous Administrations and accept that there is a substantive difference between the agreement applying to submarines sailing out of Holy Loch and F111 aircraft taking off from British airfields, and that applying to cruise, Thor or Lance missiles being launched either from United Kingdom territory or from BAOR territory in the Federal Republic of Germany?
Mr. Heseltine: I shall not respond to the right hon. Gentleman's first allegation, and I do not understand how I can be expected to change what I said about Lance and Thor when only three minutes ago I told the House precisely what the right hon. Gentleman has just repeated.

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I do not accept his view that one can distinguish in principle between a missile launched from an American submarine based in British waters and an American missile launched from a cruise launcher. The right hon. Gentleman is as aware as I am that the British bought the Thor missile system. We could have bought the cruise missile system, but at a cost that we did not believe to be warranted in view of the other claims on the defence budget. I have made that clear many times. The reason why we did not purchase cruise, at a cost of about £1,000 million, is that there were American F111 bombers and American submarines based in Britain, neither of which have a dual key. When he was Foreign Secretary, the right hon. Gentleman was perfectly content with that arrangement.
Mr. Eldon Griffiths: As one who, for 20 years, has represented a constituency containing the headquarters of the United States third air force with some 27,000 American personnel, which is part of the NATO strike force, may I ask my right hon. Friend to make known in such fashion as he can the detailed arrangements made between the RAF Regiment and the United States air force, and the physical controls that exist between the British and American authorities, so that there shall be no more of the nonsense that suggests that the Americans have autonomy in Britian, when they do not?
Mr. Heseltine: My hon. Friend is corect to stress our long experience of working with the United States armed services. The deployment force that would attend an off-base deployment of cruise missiles would be made up of members of the RAF Regiment and the United States armed services. There would be a substantial presence of RAF representatives in such circumstances, and it would be a joint team. However, there is no way in which they would launch those missiles without the agreement of the British Government. The arrangements are categoric. The decision to use those weapons on or off-base, as my right hon. Friend the Prime Minister made clear to my hon. and learned Friend the Member for Colchester, North (Sir A. Buck), will be a joint one. In the absence of a decision by the British Prime Minister, the weapons could not be used.
Mr. Sydney Bidwell: What is the destructive power of one missile, and how will the House learn of a decision to launch it?
Mr. Heseltine: The hon. Gentleman will know from his long service in the House and from listening to defence debates that the essence of NATO's defence policy is that those weapons should never be used. As long as we have the weapons, their deterrent potential is such that we shall maintain the peace that we have had for nearly 40 years.
Sir Peter Emery: Now that my right hon. Friend has discharged his commitment to the House with his two statements, will he accept that the normal Ministry of Defence policy on the deployment of vital weapons and forces is secret and confidential? Will he return to that policy and not debate across the Floor of the House the deployment of such weapons?
Mr. Heseltine: My hon. Friend is more than kind in helping me in this matter. There are security issues, and one must always balance the legitimate security interests of the country with one's duty and responsibility to keep
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the House properly informed. Wherever it is possible to provide information that does not prejudice our national security arrangements, I shall do everything in my power to ensure that it is provided.
Mr. Max Madden: Does the Secretary of State acknowledge that his statement marks a tragic development? As cruise is an offensive first-strike weapon, does he further acknowledge that the deployment of cruise missiles here represents a dangerous escalation of the nuclear arms race? Will he urge the Prime Minister, who is not in the Chamber today, to redouble her efforts to persuade the American President to stop war-mongering round the world and to enter into real negotiations in Geneva aimed at ensuring that cruise, Pershing 2 and SS20s are not deployed?
Mr. Heseltine: I do not need to remind my right hon. Friend the Prime Minister that some 360 SS20s have now been deployed by the Soviet Union or to explain to her the threat that that represents. The hon. Gentleman suggested that the deployment of cruise was a sad and tragic development. In a sense, I agree. It is tragic that we need to devote such substantial resources to the defence of peace in the world. As the Archbishop of Canterbury has said, we are all concerned about the need to keep in touch with the level of deployment against us by our opponents, but that is not the question. The question is whether any responsible Government can avoid the duty to maintain the defensive capability that every British Government since the 1940s have considered necessary. What the country cannot understand is how, when successive Labour Governments supported the policies that I am now continuing, Labour Members can have so absolutely changed the fundamental assumptions on which they conducted our defence policy after the war.
Mr. Patrick Cormack: Does my right hon. Friend agree that anyone who has lingering doubts about the wisdom of this policy must have had those doubts at least challenged by the extraordinary performance of the leader of CND on a Communist platform yesterday?
Mr. Heseltine: My hon. Friend makes a valuable point. I could not halp noticing one quotation in a national newspaper today in which Monsignor Kent is reported to have said:
"We owe a debt of gratitude to the Morning Star which has given steady, honest and generous coverage of the whole disarmament case."
I should have thought that that was carrying naiveté to the point of recklessness.
Hon. Members: McCarthyite!
Mr. Tam Dalyell: In his opening statement, the Secretary of State referred to testing. Does he recollect my sending him an article published on page 1 of Electronics Times and my putting down written questions on that careful technical journal's allegations that the guidance systems in cruise were defective and had not been properly tested and that there were various other listed technical teething troubles? Has any technical team visited the United States to discover whether those allegations are true or false or are we simply relying on the technical say-so of the American authorities?
Mr. Heseltine: As the hon. Gentleman will realise, in the last resort we should be relying on the technical

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explanations of the Americans, even if we visited the United States to discuss the matter with them. I can help the hon. Gentleman, however, as the Amercians provide the Department with considerable appraisals of the test arrangements carried out. We have studied them and we consider that the Americans have taken appropriate steps to reach the decisions that they have reached to satisfy their own internal safety requirements.
Mr. Kenneth Warren: Will my right hon. Friend make it clear once and for all that the cruise missiles are second-strike weapons? Will he now advise the women of Greenham common to move their protest from the wire of that base to that of the iron curtain and to take Monsignor Bruce Kent with them?
Mr. Heseltine: My hon. Friend is absolutely right about the concept of cruise. It is essentially a retaliatory weapon. It is designed to be deployed off-base in times of tension to areas that the opponents cannot identify and thus to make it clear to them that if they indulge in first-strike tactics against us we have a retaliatory capability.
Mr. Frank Dobson: Will the British people be safer today than they were yesterday?
Mr. Heseltine: I think that they will be as safe. Through the NATO policy of combining conventional strength with nuclear deterrence we have maintained peace in this country and in the Western world for nearly 40 years. There is no equivalent period in contemporary history.
Mr. Peter Bottomley: Does my right hon. Friend agree that this country and the free world depend on the Russians understanding that we shall keep our word, whether we agree to go for balanced disarmament or whether we state that if they do not stop deploying new missiles we shall deploy some of our own?
Mr. Heseltine: I believe that it was Mr. Andropov who made it clear in an early statement that he did not look for one-sided gestures of disarmament from the Western world. He made it clear that the Russians were not a naive people. We believe that the Soviet Union is far more likely to negotiate with a Government who say what they mean and stick to it rather than with anyone in any other capacity.
Mr. Ron Leighton: Does the Secretary of State appreciate that the vast majority of our people strongly oppose the deployment of cruise and that he is flying in the face of British public opinion? In view of his inability to answer the question put to him by my right hon. Friend the Member for Lewisham, Deptford (Mr. Silkin), does he not understand that the deployment of these foreign missiles is an appalling sell-out of British independence and self-government for which the Conservatives will never be forgiven?
Mr. Heseltine: I am sure that on mature reflection the hon. Gentleman will realise that the Labour Government were perfectly prepared to accept foreign weapon systems based in this country to achieve very much the same purpose as we have in mind with the deployment of cruise. As for the question put by the right hon. Member for Lewisham, Deptford (Mr. Silkin), both President Reagan and Defence Secretary Weinberger have confirmed our understanding of the agreement on which we rely in this context.
Mr. Patrick Nicholls: Did my right hon. Friend see the article in The Sunday Times yesterday in which Jon Connell concluded that the call for a deal key was bogus and that the arrangements under which we are now protected are better than any of our allies have? Does he agree that the country and the House would be better served if the Opposition turned their minds to the proper defence of this country instead of using this and every other opportunity to give free rein to their anti-American paranoia?
Mr. Heseltine: My hon. Friend has a substantial point. Labour Members would do better to try to defend the country rather than attack one another, but that is a matter for them. I have no doubt at all that our policies carry through and forward the logic of everything that every Government since the war have believed in.
Mr. Andrew Faulds: In view of the horrendous implications of his statement, will the right hon. Gentleman answer this question? When the 24-vehicle convoys loaded with cruise missiles try to trundle around the country lanes of the area in question and when the courageous women of Greenham common and others stop them, will the American forces be empowered to shoot, or will that be left to the British?
Mr. Heseltine: The hon. Gentleman will know that I made quite clear the position in respect of the defence of the essential defence capability of this country. The rules of engagement of American and British forces are identical to all practical extents.
Mr. Faulds: The British will shoot the Americans. That is what will happen.
Mr. Speaker: Order.
Mr. Robert Atkins: Will my right hon. Friend confirm that the request for these missiles to be deployed was made by a Socialist German Chancellor, supported by a Socialist French President to a Democratic President of the United States? Will he also confirm that the last occasion on which the United Kingdom unilaterally renounced any weapons was when we renounced chemical weapons in the late 1950s and that the results of that were non-existent but, that if the Warsaw Pact forces were prepared to reduce to the point of the zero option we could take cruise back to America?
Mr. Heseltine: My hon. Friend makes a number of valuable points. Britain made a one-sided gesture on chemical weapons. The Soviet Union continued to advance and develop their offensive capability with chemical weapons. They have deployed these weapons and used them in exercises in ways that are a major threat to the Western Alliance.
Mr. Dennis Canavan: Is the Secretary of State aware of the utter contempt of many of us for his McCarthy-type smear on Monsignor Bruce Kent, especially since it comes from the lips of a man who received no mandate from the British people to locate these dangerous American missiles on British territory? Opinion polls show that the majority of British people do not want these weapons. The Secretary of State's failure to stop them from coming will encourage more people to resort to direct action to try to stop the suicidal nuclear arms race. Parliament and the Government have treated public opinion with utter contempt.
Mr. Heseltine: The Government's policies were set out clearly during the election and were accepted by a significant number of British voters, who gave us the size of our majority. I do not believe that the hon. Gentleman would disagree when I say that if there was a single issue on which the Opposition lost credibility it was defence policy. If the hon. Gentleman feels that I have in some way been excessive in my comments about Monsignor Bruce Kent, I am sorry. I tried to be as moderate as I thought the events made possible.
Mr. Robert Adley: Will my right hon. Friend again stress that there is no difference in principle between siting American missiles on launchers in Berkshire and in submarines in Holy Loch, which has occurred for years? Does he agree that a deliberate campaign to mislead, misrepresent and frighten the British people about cruise missiles has been started and sustained in Moscow and is maintained by Moscow's acolytes in Britain?
Mr. Heseltine: I agree that there is no difference in principle between missiles launched from a Poseidon submarine and those launched from a cruise trailer. The motives of the protest movements are many and varied. Some protesters are in the mainstream of pacifist thought, which existed long before nuclear weapons; others are politically motivated, often by an extreme idea. Occasionally there are elements that are totally opposed to the country's best interests.
Mr. Clive Soley: Is the Secretary of State aware that because of the difficulty of distinguishing between conventional and nuclear-armed cruise missiles, he has dramatically reduced the opportunity of any negotiated verifiable arms control agreement? What does he intend to do?
Mr. Heseltine: I do not accept the premise for one moment. If the Soviets would accept balanced and verifiable negotiations, they would have no difficulty in making progress at the Geneva talks or other centres where negotiation are proceeding. Far from trying to reach agreement with us, they have dramatically increased the deployment of their weapons system. They have continued to prepare new weapons systems which have not yet been deployed. There are no grounds for assuming that, during the discussions on the twin-track decision during the past four years, the Soviets have somehow been holding back on the deployment plans.
Mr. Harry Greenway: Bearing in mind the fact that there has been a full, continuous and open debate in this country about stationing cruise missiles, and a general election, at which this issue was dealt with, does my right hon. Friend remember any type of consultation with the ordinary people of eastern Europe about the stationing of SS20s on their soil?
Mr. Heseltine: My hon. Friend makes an essential point. We are conducting our defence policies in a democratic framework, whereas our opponents in the Warsaw pact have no accountability. I have no doubt that the British people are mature enough to make the appropriate judgment.
Mr. Robert N. Wareing: The House will have noted with interest the Secretary of State's assurance that, despite the absence of dual key, the cruise missiles will not take off from the base at Greenham
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common without British approval. Is that approval likely to be forthcoming short of an attack upon this country? Should cruise missiles be allowed to trundle through our countryside from place A to place B?
Mr. Heseltine: The Prime Minister set out clearly—this is recorded in Hansard—the precise arrangements that we have with the Americans for the use of missiles that they have based here. The deployment of the system for training purposes, which I believe is what the hon. Gentleman had in mind, can proceed in the time scales that would be appropriate to ensure that the system is properly handled by experienced people who accompany it. Nuclear warheads would not be used during those training exercises.
Mr. Edward Leigh: Will my right hon. Friend explain to a new Member like myself the somewhat surprising fact that Her Majesty's loyal Opposition are much more concerned about missiles deployed for our protection by our friends than about 360 SS20 missiles deployed against our cities and our people by our enemies?
Mr. Heseltine: It is difficult to explain the Labour party's motivations, but one important conclusion can be drawn. It is that questions, such as the one that my hon. Friend has appropriately asked, cannot be answered when the Labour party is in Opposition.
Mr. Alfred Dubs: Is the Secretary of State aware that, despite his many protestations about close communications between himself and the Americans and about that forming the basis of his justification for not having dual key, there are still lingering doubts on the subject? Will the right hon. Gentleman tell the House on what day and at what time he was definitely informed that the cruise missiles would arrive today?
Mr. Heseltine: The hon. Gentleman has the argument the wrong way round, because the initiative for the arrival of cruise missiles today came from this, and not the other, side of the Atlantic.
Mr. Paddy Ashdown: How will the Minister dismiss the views of such people as Robert McNamara, Mr. Paul Warnkey and General Carver, that the stationing of cruise missiles in Britain has no military utility?
Mr. Heseltine: While there are people who have views that the hon. Gentleman might have accurately reported to the House, the NATO Alliance members acting in concert take a diametrically opposed view.
Mr. Jerry Hayes: Since Opposition Members are clear about the need for dual key, will my right hon. Friend invite them to suggest what areas of public sector cutbacks should pay for this?
Mr. Heseltine: I have never looked for constructive support from the Opposition.
Mr. Dennis Skinner: Since it is well known that the Ministry of Defence provides facilities for Members of Parliament to go on fact-finding tours to various defence establishments, what facilities will be provided for Members of Parliament wishing to inspect this site?
Mr. Heseltine: If I were to suggest to the station commander at Greenham common that the hon. Gentleman should visit it, he would see that as the ultimate

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deterrent. The hon. Gentleman may rest assured that I shall extend the same facilities for inspection of the site as the Labour Government, of which he was so articulate a supporter, extended in equivalent nuclear conditions.
Mr. Denzil Davies: Why does the Secretary of State not now admit that he had no idea that cruise missiles were arriving today? Why did he tell the press over the weekend that he was going to Aldershot to be briefed on a force that is being set up? Why did his Department put out a two-page press release if he knew that the missiles were coming today?
Why does the Secretary of State's statement contain the inaccurate information that the missiles ale here consistent with the Alliance's decision that, in the absence of an agreement on zero option, they would be placed here? The 1979 twin-track agreement said nothing about a dual option. It was made against the background of proposed SALT II agreements, which were never reached.
Thirdly, quite apart from the military uselessness and danger of cruise, why does the right hon. Gentleman not accept that cruise will create great political instability, not just in Great Britain but in Europe? Cruise and Pershing missiles in West Germany will succeed in uniting Franz Josef Strauss on the Right and with many of the isolationists on the Left in West Germany. Cruise will creat a political instability in Europe which will outweigh its military irrelavence.
Finally, will the Secretary of State, now that he has cruise here—it is clear that he is happy about it—stop using the nuclear issue and nuclear arms race protesters as his personal punch bag and show the emotional stability and sensitivity that the House expects from the Secretary of State for Defence?
Mr. Heseltine: The right hon. Gentleman asked me a number of questions. He first wanted me to say why I did not know that cruise was coming. The best answer that I can give him is that that would not be true. I knew that it was coming. [HON. MEMBERS: "When?"] The second question was why the press were briefed over the weekend that I was going to Aldershot. The answer to that is that I was going and did go to Aldershot. The third question was about the zero option. The right hon. Gentleman, who was not a member of the Government at the time, will remember that his party was deeply involved——
Mr. Davies: I was a member.
Mr. Heseltine: In that case, the right hon. Gentleman is even more responsible. I was trying to get him off the difficult hook of being associated with the twin-track decision. He was plainly more supportive of what his then Front Bench spokesman was saying than I realised.
The twin-track decision was essentially about trying to persuade the Soviet Union that it could not introduce a class of weapon system without expecting us to deploy an equivalent modernised system.
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The right hon. Gentleman asked me whether I did not think that there was a danger from the political unification of the Left that appeared to be taking place in much of Europe. That matter is entirely for the Left, but it is interesting to note the difference in the message that comes from the parties of the Left when they leave office. This issue appears to have united the British Labour party, which is no mean achievement.
Mr. Davies rose——
Mr. Speaker: Order. I ought to protect the interests of the House. I call the right hon. Gentleman to ask his question briefly.
Mr. Davies: The right hon. Gentleman should answer the question about the zero option. There was nothing about the zero option in the 1979 twin-track decision. It was an initiative taken by President Reagan a few years after he was elected. Why does the right hon. Gentleman's statement twice link the zero option to the 1979 twin-track decision? It has nothing to do with it, and I hope that he will admit that.
Mr. Heseltine: The right hon. Gentleman has not thought through which of the twin-tracks he is referring to. There were two. The essence of the twin-track decision was——
Mr. Davies: Nothing to do with zero option.
Mr. Heseltine: —that there were two courses to be pursued. One was the modernisation of the intermediate range classification of weapons systems. The other was the pursuit of arms negotiations. The zero option was the earlier option that the American President put forward to exemplify the second of the twin-tracks.

Statutory Instruments, &c.
Mr. Speaker: By leave of the House, I shall put together the Questions on the six motions relating to statutory instruments.
Ordered,
That the Double Taxation Relief (Taxes on Income) (Trinidad and Tobago) Order 1983 be referred to a Standing Committee on Statutory Instruments, &c.
That the Double Taxation Relief (Taxes on Income) (Tunisia) Order 1983 be referred to a Standing Committee on Statutory Instruments, &c.
That the Double Taxation Relief (Taxes on Income) (Netherlands) Order 1983 be referred to a Standing Committee on Statutory Instruments, &c.
That the Legal Aid (Financial Conditions) (No. 2) Regulations 1983 be referred to a Standing Committee on Statutory Instruments, &c.
That the Legal Advice and Assistance (Financial Conditions) (No. 2) Regulations 1983 be referred to a Standing Committee on Statutory Instruments, &c.
That the Legal Advice and Assistance (Prospective Cost) (No. 2) Regulations 1983 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Lang.]

Orders of the Day

  Education (Grants and Awards) Bill
  Order for Second Reading read.
  4.44 pm
  The Secretary of State for Education and Science (Sir Keith Joseph): I beg to move, That the Bill be now read a Second time.
  Before I explain the Bill, I should like to welcome the hon. Member for Durham, North (Mr. Radice) to his new position as education spokesman for Her Majesty's Opposition. I look forward to a number of vigorous debates with him on the subject.
  Education is both a national and a local service. The national character of education is derived from the fact that all local education authorities have the same duty to secure the efficient full-time education of children within their areas. The local character of education derives from the fact that duties imposed on LEAs are in general terms which permit considerable local variation.
  The holder of my office has a national contribution to make through his statutory responsibilities such as the power to approve proposals for changes in the pattern and character of LEA-maintained schools. What the holder of my office has lacked in the past is the financial influence to reflect his statutory responsibility. I believe that it was the need more appropriately to reflect in the financial mechanisms the balance of statutory responsibilities between central and local government that was in the minds of the members of the Select Committee on Education, Science and Arts when it made the very clear recommendation that
  "The DES should have the ability, or use existing powers where is has them, to fund direct such new developments on a temporary basis as may seem to it to be desirable."
  The Bill is principally concerned with implementing that Select Committee recommendation. I look forward to hearing the way in which the hon. Member for Durham, North will seek to explain why that recommendation should not be accepted.
  In making that recommendation, the Select Committee gave very careful consideration to the argument that proposals for direct funding for certain parts of the education service might inevitably mean closer and closer control by central Government. The Select Committee stated:
  "The principle of indirect funding had been breached in practice too many times for it to remain plausible as an over-riding consideration."
  It concluded that the present funding arrangements had become distorted. Its recommendation that the holder of my office should have a specific grant power was based on the view
  "That local authorities have a duty to make the best possible provision in the light of local wishes and local circumstances; with Government and Parliament having the duty to see that the overall quality of provision matches national aspirations and that it is distributed with some degree of equity through the country".
  The idea of paying grants to local education authorities in support of particular items of education expenditure is not new. Indeed, to a limited extent it already exists. The Department currently pays grants in accordance with regulations made under the Education Act 1962 in respect of teachers undergoing in-service training in a number of subjects.
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  In addition, some of the grants paid under other Government schemes, for example the urban programme, go to support local authorities' expenditure on particular aspects of education. The grants available to assist lower-attaining pupils are a particularly good example. The MSC is also making an important contribution through the technical and vocational education initiative. Yet the scope of these existing grants is limited. They were not designed specifically to enable the Government to encourage developments and improvements in the education service, although, as I have said, in certain cases they can be used to that effect. In fact, the holder of my office and the Government are limited, if they wish to influence the deployment of local education authority resources, to using mechanisms that rely upon the money and agreement of other Departments. That is an indirect way of providing some encouragement in the LEA's deployment of resources. The Bill proposes a direct and limited method. I hope that the House agrees that it makes sense.
  The aim of the Bill is completely in line with the Select Committee's recommendation and reasoning. I hope that it will be supported by the House for that reason and because of its intrinsic merits. The purposes that I envisage would be served by the Bill include helping LEAs to respond swiftly to new demands on the education service, encouraging LEAs to redeploy their expenditure at the margin in accordance with objectives of particular national importance, promoting qualitative changes and improvements in standards of provision in areas of particular importance and assisting in the financing of pilot projects within a limited number of authorities, the results of which could be of potential benefit to all authorities. Those are the general headings under which we envisage the educational support grants proposed might fall.
  I shall say a little about the activities that might be supported by ESGs, but before I do so I shall comment on some of the concerns that have been expressed by local authority interests. I understand the reservations of those who think that the Bill represents the thin end of the wedge—the first step towards eroding the independence of LEAs. However, the journal of the local education world, Education, described the Bill as
  "bending over backwards"—
  if a Bill can bend over backwards—
  "to allay local authority sensibilities."
  I recommend that quotation to the House. It is an accurate description of what we have done. The Government are nervous of any action that appears to be excessive centralisation. The Bill's aim is not to centralise but to influence as effectively as possible expenditure by LEAs at the margins.
  In response to local authority concerns, checks and safeguards have been built into the Bill. Clause 2 places an upper limit of 0·5 per cent. on the proportion of the Government's plans for expenditure by LEAs on education that can be partly supported by ESGs. Should Parliament agree that such a limit should be included in the Bill, new primary legislation would be necessary if any future Government wished to increase the limit. Secondly, the purposes for which the grants are to be used will be determined by——
  Mr. Clement Freud: What would happen if the Government gathered more money than they spent? Could they keep what they did not

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  use, or would they have to give it back`' In other words, if the Government's 0·5 per cent. raises snore money than they have projects for, what would happen to the surplus?
  Sir Keith Joseph: I assure the hon. Gentleman that the spending of the limited money envisaged will depend in almost every case on bids from LEAs being approved by the Department of Education and Science. If there were not bids that seemed sufficiently sensible to attract approval by the holder of my office, the money concerned would remain unspent for that purpose. We would learn lessons for our next approach to the House and the policy behind the Bill. However, I do not envisage that that will happen. Judging from previous education specific grant schemes initiated in the period of office of this and the previous Government, LEAs are keen to apply for the money available.
  Mr. Martin Flannery: The right hon. Gentleman has not explained to us that the Bill is holding back moneys to which LEAs previously had access. He is now about to force them to apply for a share of what will amount to about £47 million out of about £9,000 million. Some of them will not apply for the money and others will apply for money to use, for example, on remedial education and will be refused it. Is it not a fact that no extra money is involved and that the freedom that LEAs previously had to use moneys will be taken from them and control will be centralised in a way that is alien to the spirit of decentralisation to which I know the right hon. Gentleman has always adhered?
  Sir Keith Joseph: It is true that the money concerned will be withdrawn from distribution in the rate support grant. The hon. Gentleman may mislead the House inadvertently if he puts the figure of £47 million into hon. Members' minds. Under present circumstances that would be approximately the expenditure identified by consultation for support under the Bill. The hon. Gentleman will have observed that the Government propose a maximum rate of 70 per cent. of any expenditure approved by the holder of my office, at which, and the conditions under which, grants are to be paid to any approved project. Therefore, total expenditure under the Bill is likely to be about 70 per cent. of 0·5 per cent. of the total education budget, which means about £30 million. We anticipate that it will take a little time—at least more than one year—before that amount is deployed by the bids that are attracted.
  Should Parliament agree that such a limit should be included in the Bill, new primary legislation would be necessary if any future Government wished to increase the limit.
  Mr. Gordon Oakes: Will the Secretary of State give way?
  Sir Keith Joseph: No. I must get on with my speech. I do not want to keep the House too long.
  Mr. Oakes: I want to contradict what the Secretary of State said.
  Sir Keith Joseph: In that case I must give way.
  Mr. Oakes: I refer the Secretary of State to the explanatory and financial memorandum. It says that clause 2
  "provides for the Secretary of State to determine this overall amount by regulations."
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  It is not determined by primary legislation. The Secretary of State is misleading the House.
  Sir Keith Joseph: The primary legislation refers to 0·5 per cent. of the total education budget, which is the limit to the aggregate of the cost of all the forms of expenditure to which ESGs are directed after consultation between the Government and the LEAs. That 0·5 per cent. is subject not to change by regulation but only to change by primary legislation. I can be categoric about that.
  The purposes for which the grants are to be used will be determined by regulations subject to the affirmative resolution procedure to ensure that Parliament will have an opportunity to debate each activity for which the grants might be used. The Bill ensures the right of the appropriate local authority associations to be fully consulted about the operation of the grants, including the activities to be supported. All that adds up to extensive provision for scrutiny of the use of those grants.
  The other concern of the local authority interests which may be voiced by hon. Members is whether the Government will be providing new money for education support grants. That thought has already been expressed in the questions put to me.
  Mr. Harry Greenway: The Select Committee debated this subject at great length. The local authorities must consider the Government's attitude to staffing. Do the Government consider that the staffing of schools should be curriculum-led or not?
  Sir Keith Joseph: We think that curriculum-led staffing is a desirable trend. I am not clear as to how my hon. Friend links that matter with the Bill.
  Mr. Greenway: I shall return to that matter.
  Sir Keith Joseph: I was referring to the question which may be in some hon. Member's minds of whether the money involved in the Bill might be new money. That is not the simple question it sounds, because both the expenditure to be supported by the grants, and the grants themselves, will be for determination year by year. For example, the first grants paid under the provisions of the Bill would not be paid until the 1985–86 financial year. The Government are in the process of considering their plans for expenditure by local authorities in that year and their decisions will be set out in the public expenditure White Paper which will be published early next year.
  A decision about the proportion of that expenditure to be met by aggregate exchequer grant for 1985–86 will not be made until next autumn. The Government will take a wide range of factors into account — including the expenditure to be supported by specific grants—before making a decision about the level of aggregate exchequer grant for 1985–86. Nevertheless, the grants are not in themselves intended to lead to increased overall levels of expenditure above the Government's plans for expenditure in a particular year. That fact is made very plain in the first sentence of the part of the explanatory and financial memorandum dealing with the financial effects of the Bill. The intention of the Bill is not to increase local authority expenditure on education, but to assist in the redeployment of resources. The purpose of the Bill is to influence the deployment of resources in education by local education authorities.
  Mr. Andrew F. Bennett: If we are discussing new money, will the Secretary of State

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  confirm that he would not need the proposed legislation as we could deal with the matter by giving specific allocations of money as the Department has done in the past? The fact that the Secretary of State proposes new legislation proves that new money is not involved.
  Sir Keith Joseph: It is not like that at all. The hon. Gentleman is diametrically wrong. If a windfall, be it a vast or small sum, descended suddenly into the hands of the holder of my office, there is no direct power by which that money could be focused upon any specific form of spending except to the limited extent—of which we have taken advantage, as a result of the wording of the regulations under the Education Act 1962, in respect of in-service training—of the small loophole concerning the general impotence of the holder of my office in relation to the deployment of educational resources.
  The hon. Gentleman cannot generalise from such a narrow window—given to us by the regulations under the Education Act 1962 — which was only recently discovered by the experts in the Department.
  I hope that the results of some of the activities financed by the ESGs, if Parliament approves them, will lead to the more effective use of resources and to improvements in the quality of the education service.
  The Bill provides that education support grants could be payable in respect of expenditure for, or in connection with, educational purposes. This wide provision will give maximum flexibility to the holder of my office in responding to the priorities and needs that will face the education service in the coming years. The activities to be supported will be set out in regulations subject to affirmative resolution. At the start of this debate it is important that I give some idea of the scope of activities which, in my view, are the main candidates for support by these grants in 1985–86. These are only initial possibilities which I want to consider in some detail with representatives of the local authority associations. Hon. Members will also have suggestions to make which I shall want to consider.
  In the Gracious Speech, reference was made to the use of these grants to assist in innovations and improvements in the curriculum. There are, of course, innovations and improvements which have been and are being pioneered by individual local education authorities. I do not wish to say anything that would tend to the thought that no local education authority pioneers on its own. Of course they do. I hope that the Bill will enable the Government to encourage such local education authorities to expand faster or wider than they might have done, and continue with innovations on which they have already embarked without the Bill. Subject to that recognition of the pioneering activity of some local education authorities, I wish to turn to some areas which the Government consider to be particularly useful.
  I shall shortly be issuing a consultation document about records of achievement for all school leavers. I should like to encourage a few pilot schemes in developing records of achievement — an ideal purpose to be supported by ESGs. Following the Cockcroft report, there is widespread concern about the need to improve certain aspects of mathematics teaching in schools. I should like to discuss with the local authority associations whether ESGs could be used to help in the implementation of the Cockcroft
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  recommendations. Some primary schools, including some in both rural and inner city areas, face particular problems in providing their pupils with a rich and stimulating curriculum and environment. Some, in similar circumstances, achieve more than others. I believe that ESGs could be used to promote the spread of good practice.
  I also suggest that education support grants might be used to promote desirable development in the management of the teacher force. Suggestions for the improvement of such management were discussed in chapter VI of the recent White Paper, entitled "Teaching Quality". I should be surprised if some hon. Members were not to suggest that grants might be used in a limited way to support the meeting of special educational needs, either through assisting with the establishment of resource centres or providing micro-electronic aids for handicapped children. We all rejoice in the fact that micro-electronic aids have started to be used quite widely in special schools.
  The Government have taken initiatives in encouraging developments in information technology in universities and in advanced further education. The grants might well provide a means of encouraging similar initiatives within non-advanced further education.
  Following the consultations which will canvass these and other suggestions, I envisage a limited number—possibly eight or nine — of main activities being supported by education support grants in 1985–86. My present view is that the level of expenditure supported by these grants should build up over a period of years and that the level of expenditure supported by the grants in the first year or two would thus be less than the statutory ceiling of 0·5 per cent. of the Government's plans for local authority expenditure on education. We shall have to take into account that build-up in identifying the amount to be laid down by regulations for any particular year.
  The details of the Bill will be subject to proper scrutiny in Committee, but I shall say a few words about the main clauses. Clause 1 empowers the holder of my office and the Secretary of State for Wales—I am glad to see my hon. Friend the Under-Secretary of State for Wales on the Government Front Bench — to pay education support grants to local authorities in England and Wales. The precise types of expenditure eligible for grant will be specified in regulations made under the clause, which also provides that the rate of grant paid on approved expenditure will be determined in regulations, subject to an upper limit of 70 per cent.
  Clause 2 places a maximum limit on the total amount of expenditure in support of which grants could be paid. The proposed limit is 0·5 per cent. of the Government's plans for local authority expenditure on education, which in 1983–84 is over £9 billion, so the statutory ceiling of 0·5 per cent. would have been £45 million in 1983–84.
  That is the maximum amount of expenditure in support of which education grants could be paid. The actual amount of grant paid would be significantly less than the level of expenditure supported, depending on the rate of grant. If all activities were supported at the rate of 70 per cent.—the stipulated maximum amount of support for any area of work—the maximum amount of grant that could have been paid in 1983–84 would have been just over £30 million.
  The total amount of education support grants will be deducted from the total of aggregate Exchequer grant, along with the other specified grants, before the balance is distributed as rate support grant. In 1983–84 the total of

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  specific grants paid to local authorities was about £2·4 billion. Even if education support grants had been used up to the statutory ceiling in that year, the total of Government specific grants would have been increased by less than 1·5 per cent.
  Clause 3 deals with the making of regulations under the Bill. I have already mentioned the main features; regulations defining the precise activities to be supported by the grants would be subject to affirmative resolution in this House and in another place and the Secretary of State would be obliged first to consult representatives of the local authorities.
  Clause 4 deals with a separate purpose of the Bill. The clause is a simple, technical measure which is necessary following the merger of the Business Education Council, the BEC, and the Technician Education Council, the TEC.—I apologise for the acronyms. That is the marriage of BEC and TEC into BTEC — the Business and Technician Education Council.
  Full-time courses leading to the higher diploma of the TEC and the higher national diploma of the BEC have hitherto attracted mandatory awards. To ensure that courses leading to the comparable qualifications of the new BTEC will continue to do so, it is necessary to substitute a reference to the BTEC in the primary legislation in place of the present references to the BEC and the TEC. That is what the clause does.
  Clearly it would be wrong for BTEC students to be deprived of mandatory awards in the meantime simply because of that technicality. Therefore, local education authorities have been advised that, pending the passage of the legislation, the Secretary of State for the Environment and the Secretary of State for Wales, exercising their powers under section 19(1) of the Local Government Finance Act 1982, will be prepared to sanction expenditure on awards to BTEC students. Local education authorities are, therefore, free to continue to make awards to such students in the usual way.
  The Bill represents an important change in the financing arrangements for education that is within the responsibilities of local education authorities. However, it is not a radical proposal. Local authorities will remain free to determine their priorities within education and between education and other services. The Government will continue to set out the policies and priorities underlying their plans for local authority expenditure. but the decision about priorities will rest with individual local authorities, having regard to their statutory duties and powers.
  However, the existence of education support grants will provide a limited means of encouraging, at the margin, local education authorities to deploy their expenditure in response to objectives of particular national importance. The identification of those objectives will be a joint process, involving both central and local government.
  A Select Committee of this House gave added weight to the need for the holder of my office to have a limited power of specific funding. I hope that the House will welcome the Bill as a modest but constructive initiative.
  5.14 pm
  Mr. Giles Radice: I thank the Secretary of State for his kind words of welcome. I am sure that we shall both enjoy ourselves in the next year or so.
  It is a great honour for me to address the House as shadow education spokesman. I am sure that you, Mr. Deputy Speaker, know that two of my predecessors in this
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  post are now Leader and Deputy Leader of the Opposition, which suggests that being the Opposition spokesman on education is a good launching pad for higher things. However, I reassure my right hon. Friends that I have no designs on their offices. My ambition is to join my colleagues in government and to replace the right hon. Member for Leeds, North-East (Sir K. Joseph) as Secretary of State for Education and Science.
  There are two main reasons why I believe education to be important. The first is my personal experience. My education, at Winchester and Magdalen College, Oxford, convinced me of the socially divisive effect of having such a large and prestigious private sector. It also convinced me of the need for changes to open up educational opportunities for all, not just for a few.
  The education of my children, first at a state primary school, then at state comprehensive secondary schools and now at different types of higher and further education, has taught me at first hand about the great achievements of the state education system — and about some of its problems.
  The second reason why I regard education as so important is perhaps best described in the Warnock committee's statement of what education should be for. It should aim, said the committee,
  "first to enlarge a child's knowledge, experience and imaginative understanding, and thus his (or her) awareness of moral values and capacity for enjoyment; and secondly to enable him (or her) to enter the world after formal education is over as an active participant in society and a responsible contributor to it, capable of achieving as much independence as possible."
  In short, when we talk about education, we are really discussing the future of this nation and its citizens. What could be more important?
  We shall vote against the Bill. That is not because we object to specific grants in principle. Indeed, as the Secretary of State said, there are a number of specific grants already in existence. Some directly benefit the education service, for example, the mandatory awards for higher education students, the urban programme, grants under section 11 of the Local Government Act 1966 and the new in-service training grants under the Education Act 1962.
  However, the specific grants proposed under the Bill—the so-called education support grants—are different from those other grants. Unlike those grants, education support grants do not represent additional or new money. The Secretary of State made that clear when he said that there must be no increase in overall education expenditure. Instead, the grants will be funded by the Secretary of State taking away, or hypothecating, part of the total education grant which is distributed to local authorities through the block grant. In other words, the right hon. Gentleman is taking away money which local education authorities can spend as they think fit, in the light of local circumstances, and he proposes to use it for purposes which he thinks fit.
  Both the Labour-controlled Association of Metropolitan Authorities and the Tory-controlled Association of County Councils have objected strongly to the Bill. That is hardly surprising, as it is not as though a great gush of money is flowing forth for education. On the contrary, local education authorities are having great difficulty in meeting their statutory obligations with the resources that are now being spent on education. The figures are clear. By the end of this financial year educational spending will have declined by more than 6 per cent. in cost terms since 1978–79—the most recent

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  year of Labour Government. If the Secretary of State wants to check my sources, I refer him to table 1–14 of the public expenditure White Paper and the then Chief Secretary to the Treasury's written answer of 17 March 1983.
  Sir Keith Joseph: The hon. Gentleman has not reminded the House that since that date the number of children in schools has fallen by far more than 6 per cent. Their numbers have fallen by rather more than 10 per cent.
  Mr. Radice: The right hon. Gentleman will be surprised to learn that I was coming to that point.
  The percentage of the national cake that goes to education is now lower than it was in the last year of the Labour Government. For the first time for many years, spending on defence will be greater in 1983–84 than spending on education. That reveals the Government's priorities.
  The Secretary of State likes to refer to spending per child and the pupil-teacher ratio because, in a period of falling rolls, those figures are more favourable to his case. Being an honest man—I am certain that he is—I am sure that the Secretary of State will also admit that, when rolls fall, concepts such as spending per pupil and the pupil-teacher ratio are less useful as a means of assessing the health of the system than they are in a period of expansion. If he does not believe me, he should at least believe educational experts, such as Her Majesty's inspectorate. The reason is simple. A school can lose pupils and have its teaching staff cut, but still be obliged to maintain the same number of classes and the same curriculum if it wishes to retain the same standard of service.
  There is an alternative — cut the service. Unfortunately, that is precisely what has happened, as successive inspectorate reports on the effect of expenditure policy show. The past three reports make extremely disturbing reading. The 1982 report was conveniently published in July—just after the general election. It is as disturbing as its predecessors.
  Sir Keith Joseph: I hope that the hon. Gentleman will withdraw the innuendo in that sentence. The publication of the report was authorised the moment I received it. I did not receive it in draft or any other form until after the general election.
  Mr. Radice: If the Secretary of State says that he never saw the report in any form before the general election, I accept his word for it. Nevertheless, it was convenient for the Government that the report was not published before the general election. The previous year's appeared in March.
  If we are to understand the background against which local education authorities regard the Bill, it is essential that I quote some of the report's conclusions. It examines the impact of education spending on schools, and on primary schools it says that
  "deficiencies … were quite commonly noted in respect of remedial teaching, mathematics, science, music and art and design … primary schools were frequently dependent upon parental contributions, not only for 'extras' but to buy books and basic materials".
  It says that that was an
  "important factor in widening the differences in resources available to schools".
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  On secondary schools, it says that
  "the cumulative effects of financial constraint noted in previous reports still put at risk and in some cases undermine attempts to maintain standards, particularly as the wave of falling rolls moves through the secondary sector".
  That is precisely the point that I was making. The report goes on to say that
  "shortages of specialist teachers were noted in a quarter of all returns on individual … schools … option choices for pupils in years four and six were restricted … Overall provision of books in secondary schools was judged to be satisfactory in only two-fifths of LEAs … only half the observations in respect of sixth form colleges recorded satisfactory provision for less academic pupils or for those whom a prevocational programme might be appropriate."
  The report summed up thus:
  "Last year's report pointed out that LEAs and schools were surviving financially by doing less and that they were obliged to take the less in the form it came to hand rather than shaping it to meet educational priorities. Even with evidence of much sharper management, that is the ground that is being held. It is characterised by levels and standards of resources which are sometimes inadequate to maintain the status quo (already limited in many cases); by significant disparities between and within schools; and by schools in general being less that well placed to respond constructively and enthusiastically to the many calls for educational improvement and change that come from the education service itself and from parents and society, and which often require either extra educational range or diversification or both."
  It is small wonder that local education authorities are disturbed by the news that they are now being asked to turn over what they considered to be their money to the Secretary of State. There is no sign that they are likely to get more money in real terms for education next year. On the contrary, we already know that the Government have announced that they are keeping the rate support grant to 52 per cent. of local authority expenditure.
  The Sunday Telegraph of 6 November reported the fierce reaction of the Tory-controlled Association of County Councils to the Secretary of State's £9·8 billion rate support grant settlement for education. The ACC and the AMA have costed it as a reduction of 6·2 per cent. on present policies. The expenditure steering group on education, which comprises members of local education authorities and officials from the Department of Education and Science, has produced figures which confirm that the ACC's and AMA's assessment is correct. The ACC believes that that settlement will mean 12,600 fewer teachers and a 40 per cent. reduction in spending on school meals and milk and no improvements in spending on books and maintenance of schools. That has already been condemned in HMI reports as unsatisfactory.
  It is no wonder that the Secretary of State told local authority associations that
  "the rate support grant settlement is tough."
  That is the overall expenditure figure about which the Secretary of State has told us. Local authorities are worried, not simply by the overall level of RSG, but by the tough penalties for so-called overspending authorities.
  This is not the time to question the assumptions on which assessment of GRE is based or whether it is remotely fair to authorities which have special educational needs. It is relevant, however, that it is the Tory-controlled authorities, such as Somerset, Buckinghamshire and Kent, which are hardly renowned for being over-generous—Her Majesty's inspectorate criticises Somerset — and many others like them which argue that they have been

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  given spending ceilings which can be achieved only by drastic cuts in educational provision. They have told the Secretary of State that.
  In addition to local authorities' anxiety, the alarming prospect of rate capping is on the horizon. I understand that that will arrive at the same time as the education support grants.
  Given all those threats, one can quite understand why the Prime Minister is having to call Tory local authority chiefs together to appeal to their party loyalty, and why the Secretary of State himself is facing such determined opposition to the Bill from Tory local authorities. Confronted by spending cuts, tough spending ceilings and in many cases deteriorating education services, local education authorities are extremely reluctant to give away any of their spending to the Secretary of State.
  Bearing in mind that nearly 70 per cent. of education expenditure is already accounted for nationally by teachers' salaries, 0·5 per cent. is a more significant amount than the Secretary of State has admitted, as I think he will agree. To get their money back, local education authorities will have to put up at least 30 per cent. of the expenditure on which the education support grant will be paid. In some cases this may put local education authorities over spending ceilings, thus exposing them to penalties. That is a point which has been put to the Secretary of State. In other cases it may mean local education authorities having to cut in other areas. The Secretary of State has made it clear that he wants this to happen. That is what his talk of redeployment is about. Will he tell local authorities where they should cut, in view of the inspectorate's reports?
  Local education authorities which are already spending money on activities of which the Secretary of State approves may cut back those activities where, provided they put up 30 per cent., they can get 70 per cent. back from the Secretary of State. That would be the perverse effect of what he is trying to do. Hard-pressed authorities may be reluctant to bid, while other authorities with far fewer education problems may be successful in getting awards. Thus the disparity between local, authorities and between schools may widen.
  We have to ask the Secretary of State some detailed questions — and we shall in Committee — about the mechanism for administering these awards. He has told the House very little about that. The Secretary of State quoted the Select Committee in his support. I hope that I shall be supported by those members of the right hon. Gentleman's party who served on the Select Committee when I point out that the report makes it clear that the kind of educational specific grant that they were recommending was for "pump priming", to use their phrase, or additional money. They were not considering a scheme such as that which the Secretary of State has put into the Bill.
  I warn the Secretary of State that the danger is that by using local authority money to finance his grant he will so discredit the concept of specific grants that local education authorities will become hostile to any kind of education support grant, even if it is new money.
  I come to the right hon. Gentleman's reasons for introducing education support grants now. The Bill gives very little clue. If the Bill becomes law,the Secretary of State will be able to pay grants for any kind of expenditure that he thinks would be good for education, provided that it is approved by an affirmative resolution of the House.
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  We all know that successive Secretaries of State for Education and Science have been concerned to acquire greater weight in the traditional see-saw between the Department of Education and Science and the local education authorities. This is not new. We are also told that this Secretary of State and his Department have become extremely jealous of the initiatives taken by other Departments and educational bodies, including the Department of Industry, the Department of the Environment and especially the Manpower Services Commission over the youth training and technical and vocational education initiative schemes.
  The House must ask itself what activities this Secretary of State is likely to support. We have heard from him today about that, and his Department has issued to the press certain items on his shopping list. We do not quarrel with some of those items, including action on the Cockcroft report on the provision of mathematics and mathematical teaching and the provision of micro-electronic equipment to very seriously physically handicapped children, but I have to warn the right hon. Gentleman that we are far more doubtful about some of the other initiatives which apparently he has in mind. We are especially sceptical about his attempt to enter by the back door what one of his Conservative predecessors, Lord Eccles, called "the secret garden" of the curriculum.
  I am glad that the Secretary of State has recognised the pioneering activities of a number of local authorities, and I mention the inner London authority, especially on race relations, education for disadvantaged children and education for girls. The right hon. Gentleman is right to do that, but we are somewhat sceptical because 'we see from the inspectorate's reports that great damage is being done to the curriculum in many schools by the decline in education spending against the background of falling rolls. We are also critical of the right hon. Gentleman's ad hocery. He gives a bit for mathematics, a bit for the TVEI and and a bit for
  "those pupils for whom examinations at 16 were not designed."
  It is a rag-bag of proposals.
  It is important to look at examinations and curricula together and not separately, as the Secretary of State seems to imply in his decision to close down the Schools Council and set up separate bodies for examinations and curricula. We are reminded by the Select Committee that examinations starting with universities and polytechnics down to A and O-levels and CSE still dominate and set our curriculum.
  I am delighted that the Secretary of State goes round making speeches on behalf of the so-called non-academic 40 per cent., though his definition is at the same time both too optimistic and too pesimistic. If looked at strictly from the point of view of five O-level passes, 75 per cent. do not achieve it. That must cast some doubt on the usefulness of that approach. On the other hand, as the Select Committee said, many of the so-called non-academic 40 per cent. take one subject or other at either CSE or O-level. So 40 per cent. is a somewhat arbitrary figure.
  In the right hon. Gentleman's approach, what also needs close watching is his implicit assumption that the 40 per cent. need only a narrow technical training, when most experts point out that no one knows precisely what skills will be needed in our uncertain future and that what is required is a broad education, including an awareness of technology, not just for the so-called non-academic 40 per

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  cent., but for all young people. It might have been good for both the Secretary of State and me if we had had more technical education when we were young.
  The curriculum must prepare all young people to face the world of work and to take advantage of further education. That means that we must have a broader education system.
  I hope that the Secretary of State can reassure the House that his education support grants will not be used to stimulate the setting up of selective schools. If that is not his intention, it would be helpful if he told his junior Minister, the hon. Member for Dartford (Mr. Dunn), to stop making weekend speeches exhorting local authorities to go back to grammar schools, which is what the hon. Gentleman has been doing.
  Mr. J. F. Pawsey: What is wrong with that?
  Mr. Radice: If the hon. Gentleman does not know, it is difficult to tell him.
  Mr. Pawsey: Try.
  Mr. Radice: It does not matter if the hon. Member for Dartford looks silly. What is important is that he makes the Secretary of State look silly. As the recent Solihull fiasco shows, what he says is also deeply unpopular with parents, including Conservative parents.
  In conclusion, I want to say a personal word to the Secretary of State. I hope he will not mind my saying that he is a strange mixture of contradictory ideas and notions. We see in the Bill how the Secretary of State—he is a believer, and he repeated it this afternoon, in decentralised decision-making — is trying to increase the power of central Government at the expense of local government. Then there is the problem that, as a former Fellow of All Souls—or is he still a Fellow?
  Sir Keith Joseph indicated assent.
  Mr. Radice: That makes my point all the stronger—he must believe in high standards of academic research. Nevertheless, the right hon. Gentleman cannot bring himself to reject publicly a deeply-flawed piece of research by the so-called National Council for Educational Standards. I wish that he would do that.
  The right hon. Gentleman shows great concern for the less academic 40 per cent., but much of his time and a considerable amount of money have been devoted to encouraging not only the brightest, but the most privileged of our children. He has a genuine personal compassion and tolerance of other points of view. Nevertheless, he was the Minister who told the Institute of Directors:
  "Schools should preach the moral virtues of free enterprise and the pursuit of profit."
  The right hon. Gentleman's record as a Minister, as he characteristically admitted, has not always been totally successful. In particular, I have in mind his support in previous posts for high-rise flats and his well-known reorganisation of the National Health Service, which I remember when I first came to the House. I assure the right hon. Gentleman that we want to assist him to be a successful Secretary of State for Education and Science. Anything that he does to devote more resources to the state system of education and to widen educational opportunity for all our children will get our support. On the other hand, if he continues to cut expenditure on education and to
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  diminish educational opportunities, and if he continues to encourage private education and permit selection in the state system, we shall oppose him fiercely and implacably.
  Mr. Pawsey rose——
  Mr. Radice: No, I shall not give way. I have only one more sentence.
  The Labour party is the party of state education, widening educational opportunities, and achieving a good standard of educational achievement, not just for a few but for all. I give notice that we intend to press the issue of education and the need to improve it, not only in this Chamber, but outside. We intend to join parents, teachers, local councillors and pupils in a common campaign for a better education system for all our children.
  5.42 pm
  Mr. Timothy Wood: I am pleased to have caught your eye, Mr. Deputy Speaker. For some time I have been one of that dark-suited band elected in June, witnessed by a correspondent of The Times sitting silently before him.
  It is both an honour and a pleasure to follow the precedent of describing my constituency and predecessors. The constituency of Stevenage combines urban and country areas. The borough of Stevenage was built largely under the guidance of the Stevenage development corporation. To the east and south of the town is attractive countryside with several small villages.
  Originally, Stevenage was a Hertfordshire coaching town on the Great North road, with many inns for the weary traveller. The A1(M) now bypasses the town, but much of the old high street remains to remind the visitor of its historic past.
  The growth of the new Stevenage has taken place over the past 35 years. Its industry reflects the modern age. British Aerospace, with 9,500 employees, dominates the scene. Stevenage is the headquarters of the dynamics division of this major modern firm, and there it develops missile systems and satellites. The employer with the next largest presence is but one-tenth of the size—ICL. It and numerous other firms reflect the trend towards electronics and other modern industries.
  The rural areas of the constituency consist of small parts of the north and east Hertfordshire districts. To the south of Stevenage lie the larger villages of Knebworth and Cadicote, and to the east there is undulating countryside stretching to the A10, with numerous small and charming villages. As the representative of the constituency, I have to reconcile the hopes, fears and concerns of both country and town dwellers.
  The new constituency of Stevenage comprises parts of three former constituencies. The largest part formed about half of the former Hertford and Stevenage constituency. I want to pay particular tribute to my hon. Friend the Member for Hertford and Stortford (Mr. Wells), who has combined his work for his substantially changed constituency with much good advice and help to me. It would be an omission, of course, if I failed to mention the previous incumbent of the Hertford and Stevenage constituency, Mrs. Shirley Williams. Her hard work for Stevenage is still well remembered, but her defeat in 1979 may well have contributed to the creation of the Social Democratic party.
  The villagers of Knebworth and Codicote were formerly in the Hitchin constituency, then most ably

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  represented by my hon. Friend the Member for Hertfordshire, North (Mr. Stewart). The more eastern reaches of the constituency were included in the Hertfordshire, East constituency, represented by Sir Derek Walker-Smith, who has now entered another place as Lord Broxbourne. To follow in the footsteps of my predecessors is an honour and a challenge. I can only hope to emulate them in their able representation of their constituents' interests.
  I turn now to the Bill before us, and I hope to avoid being too controversial. If I understood the hon. Member for Durham, North (Mr. Radice) aright, the Bill is not a matter of too great controversy. We all know that Opposition Members would like to spend more money and that Government Members realise that there needs to be restraint on public expenditure. That, I think, is not a matter of controversy.
  Concern has been expressed that the Bill will stimulate the centralisation of education provision. It has been suggested that local education authorities will be the losers and that, as a result, so will schools and other local education provision. However, although education authorities—like many other groups—have of necessity experienced budgetary constraints, I believe that this move can be of considerable benefit. In the provision of housing, sporting and arts facilities the responsibilities of local authorities have been supplemented by initiatives from other sources. To have only the local authority as the source of funding and initiative almost inevitably lowers the variety and originality of suggestions that might be implemented. That does not imply criticism of local authorities; it is simply an appreciation that the greater the sources of initiative, the better are the prospects.
  I have spent much time during the past few months talking to firms both large and small in my constituency, many of whom expressed worries about the degree to which our education is fitting young people to fill the jobs and opportunities there may be for them. Several major firms told me that, even with the current high unemployment, they are experiencing extreme difficulty in recruiting key people with the necessary training and skills. Some of these firms were highly critical of our education system at schools, colleges of further and higher education, and universities.
  Those firms have contrasted our education system with the systems of our international rivals, where the orientation of education is more often inspired by the need to maximise a country's industrial success and prosperity. I am, of course, aware that such comment has been made for 20 or 30 years, or more. However, the tragedy is that adverse comment has resulted in a negligible change of approach. The changes have been dismally slow. One can still find many schools and other educational institutions where the concept of working in industry is anathema and where profitable industry is regarded with suspicion and disdain.
  The case for continued innovation in our education system is overwhelming. The rate of scientific and technological development in the world today means that not only must older disciplines be re-evaluated and refined. but that new techniques must be, introduced for teaching in the classroom and elsewhere. There is no doubt that in my constituency of Stevenage various initiatives of the Department of Employment and the Department of Trade and Industry have been widely welcomed and actively pursued. Computer classrooms have been
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  introduced in various schools and a technical and vocational education initiative scheme is under way. An information technology centre has also been established.
  However, the paradox is that such initiatives emanate from Departments other than the Department of Education and Science. The powers that the Bill seeks to confer on the Secretary of State will change that. For that reason, I warmly welcome the Bill. I hope that when it is enacted the various schemes and initiatives that are pursued by the Secretary of State will act as a bridge between our education system on the one hand and industry and commerce on the other. As the nature of our industrial society alters, so must our education system be developed to meet its requirements. If we involve industry and commerce both locally and nationally in the development of new schemes, both our education system and our prosperity will be the better for it.
  5.51 pm
  Mr. Gordon Oakes: It is always a great privilege and pleasure to speak after a maiden speaker. However, it is very rare to follow, in effect, two maiden speakers: the hon. Member for Stevenage (Mr. Wood) and my hon. Friend the Member for Durham, North (Mr. Radice).
  I am sure that the whole House will agree that the speech of the hon. Member for Stevenage was in the best tradition of maiden speakers. It was a particular pleasure to listen to it, as the hon. Gentleman and l have several things in common. Both his constituency and mine are within new town areas and no doubt have similar problems. Modestly, the hon. Gentleman did not tell the House that he has had considerable experience of local government, having been for many years a member of Bracknell council and, I believe, leader of it before becoming a Member of Parliament. I had similar experience in local government before I came to the House. However, whereas I came to the House as one of dozens of lawyers—they are two a penny on both sides of the House — the hon. Gentleman's discipline is computer studies. In the modern world his expertise will be invaluable to our debates. Therefore, I warmly congratulate the hon. Gentleman on his speech, and wish him not only success but happiness here. This is a very happy place in which to work.
  Again, my hon. Friend the Member for Durham, North—it is difficult to get used to the new constituencies—and I have something in common. Like me, he was once that humble figure a Parliamentary Private Secretary, and was at the Department of Education and Science when I was a Minister there. He always worked assiduously and hard for the Secretary of State, and I am sure that the experience that he gained during those three years will be invaluable to him in his duties as a Front Bench spokesman. Indeed, that was evident in his first speech as spokesman today.
  The Bill is a viperous little measure. It is another step towards the erosion of local government by central Government, and must be seen in that context. 'The Secretary of State was at pains to stress that it involved only £30 million, but that is very significant given what the Government are doing to local government and democracy. There have already been attacks on local government in general. Education is one of the main services provided by local government. I refer hon. Members to the local government Acts of 1980 and 1981.

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  Central Government have now made proposals for the rate capping of all authorities, thus forcing local authorities into an expenditure mould set by Government by denying them their inherent centuries-old right to raise their own taxation.
  Today, a leader article in The Guardian pointed out the dangers to the inner London education authority from the Government's proposals to abolish the Greater London council and to create a new ILEA which will be rate capped. If the Government do not like the composition of local authorities, they simply abolish them, just as they are doing with the metropolitan counties and the GLC. Thus, the Bill is not so much an aid to educational research as a further attack on local democracy.
  Mr. Pawsey: Does not the right hon. Gentleman agree that the Government are urging the abolition of the metropolitan counties not because they dislike them, but because they are wasteful and inefficient? That is the basic reason for wanting to get rid of them.
  Mr. Oakes: I suppose that it is a pure chance that all those metropolitan counties happen to be firmly Labour controlled. If some of them were Conservative controlled, the Government might have a different approach to them.
  As my hon. Friend the Member for Durham, North said, the local authority associations oppose the principle of the Bill. That includes the Association of County Councils, of which I am an honorary vice president. The overwhelmingly Conservative controlled ACC regards the Bill with the greatest possible suspicion, because no new money is bring provided under it. If the amounts involved are so modest — £30 million at the maximum, and probably much less for several years—why take it out of local government money? Why not provide such money in a pump-priming exercise? That is what the Education, Science and Arts Committee was talking about. I know of nowhere in the Select Committee report where it is suggested that pump-priming should be carried out at the direction of the Secretary of State with local authority money. The Bill is robbing many Peters to pay a few Pauls who are favoured by the Secretary of State. For that reason alone, the local authority associations are very concerned about the Bill.
  Has the Secretary of State considered whether the Bill might be counterproductive? For instance, if I were the chairman of an education committee I would say that certain projects were highly favoured by the Secretary of State. Indeed, the right hon. Gentleman mentioned microcomputers to aid disabled children. As chairman of an education committee, I would say that I had intended to spend quite a lot of money on those microcomputers, but shall not do so now and will spend the money elsewhere. After all, the Secretary of State regards that issue as important and will provide 70 per cent. of the cost if we go along with his scheme. I wonder whether the Secretary of State, with all his wisdom and expertise, is not being a little naive about the reaction of local authorities to such specific grants, especially when those local authorities are strapped for money for the many schemes that they have to consider.
  Mr. Richard Tracey: What the hon. Gentleman has said about the attitude of local education authorities hardly squares with their statement at the recent
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  meeting of the Council of Local Education Authorities that they would very much welcome improved partnership arrangements with the Department of Education and Science.
  Mr. Oakes: But where is the partnership in an arrangement where the Secretary of State takes upon himself the power to decide educational needs and who shall receive the money? Partnership implies two people talking together. Although the Bill mentions consultation, we all know what that means in Government-local authority relationships.
  The Secretary of State admitted that the Bill marks a significant change — indeed, it certainly does in the relationship between central and local government in the provision of educational services. Does not the Secretary of State believe that local authorities read reports, such as the Cockcroft report? Is he not aware that local authorities are concerned about mathematics education in their areas? They want to spend money to put that right. They do not need to be led by the nose by the Secretary of State.
  The Secretary of State was vague when he described how he would use the money. He mentioned microprocessors and Cockcroft. The £30 million will go nowhere towards the few items that he mentioned. It will not even provide for pilot schemes throughout England and Wales. My hon. Friend the Member for Durham, North was right to draw attention to the tremendous powers that the Bill gives the Secretary of State. He could decide that it was educationally advantageous to reintroduce selection, and therefore aid those authorities in favour of that. Even worse, he could decide that some local authorities providing places outside the state system should be assisted from the £30 million.
  The Bill is a step in the wrong direction for both local democracy and educational provision. At the end of the day it might prove to be counterproductive to the true aims of the Secretary of State.
  6.4 pm
  Mr. David Madel: It is a pleasure to be the first Conservative Member to congratulate my hon. Friend the Member for Stevenage (Mr. Wood) on an excellent maiden speech. He mentioned his constituency, which is not far from mine. Stevenage relies on the appliance of science, successfully carried out. My hon. Friend mentioned his predecessors, but none of them had his scientific background. His contribution to debates, especially education debates, will be warmly welcomed. We are bound to have a number of debates on how science and industry tune in with education. We all welcome him to the House and look forward to hearing him in education and other debates.
  I am also the first Conservative Back Bencher to speak following the maiden speech of the hon. Member for Durham, North (Mr. Radice) from the Opposition Front Bench. In the past we frequently discussed industrial relations matters. I hope that he enjoys his education brief. I note that he intends to see the job through and is not looking for additional responsibilities.
  I welcome the Bill because, for the first time, it closely involves the Secretary of State and his Department in the curriculum. The curriculum itself is changing, and must change quickly as new technologies and industrial processes advance. The Bill should be seen in the context of the new curriculum development board and the new examinations board. It should not be seen in isolation.

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  The Bill owes a great deal to the Select Committee report on the curriculum and examinations, with special regard to 14 to 16-year-olds. It brings together recommendations 62 and 63. Recommendation 62 refers to the need for the DES to
  "use existing powers where it has them, to fund direct such important new developments on a temporary basis."
  Recommendation 63 refers to the need for more direct funding for in-service training. The Bill puts those two recommendations together and uses the same mechanism for both purposes.
  The Select Committee was opposed to the long-term involvement of the DES in curriculum developments and funding. It was in favour of a degree of pump priming. The DES has not yet accepted recommendation 63, which is that the Department should agree to 85 per cent. of direct funding for in-service training.
  There is no new money in the Bill. However, the position does not rest there—there could be new money. A press notice from the DES on 14 March, outlining forthcoming legislation, said:
  "The needs for which the grants could be applied, however, would be taken into account by the Government in arriving at their planned level of expenditure on education in a particular year."
  In other words, the curriculum and in-service demands from local education authorities, or those arising from negotiations between the DES and the LEAs, could trigger more money in the totality of education spending and grants as referred to in that press notice.
  As no new money is involved, the DES feels that there is too large a gap between high and low spenders and that there is a need to balance that. When the Bill reaches Committee we must ask whether local education authorities are spending money on the wrong things, or whether they are not spending money on DES priorities, or whether it is a combination of both.
  The advantage of some central control over education initiatives and in-service training is that at a time of financial constraints, as at present, there can be a degree of parity among local education authorities. The question is how the Bill will give the Secretary of State power to operate any attempt at equalisation of spending. Will the Department elicit proposals from local education authorities? If they are currently spending money unwisely, will they be told what not to do to follow DES priorities?
  It is also a problem to interpret parity. The Select Committee suggested that the distribution of in-service allocations should be according to some agreed formula, such as
  "the incidence of falling rolls, minority ethnic groups and London weighting."
  Will the Secretary of State hold discussions with LEAs about the appropriate way of weighting notional allocations under the Bill?
  It is early days, and the Bill is only at its Second Reading stage. What other criteria might be used by the Secretary of State when considering how the money will be distributed — for example, school population, the historic level of provision by an education authority, the academic and achievement indicators and statistical measures of the ability to hire teachers?
  How will local education authorities claim money under the Bill? Will they be able to claim funding for existing provision and/or provision that they would have made anyway? I assume that the answer to both those
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  points is in the affirmative, because it has been said that the allowance of money in the initial stages for such funding will come from the rate support grant. If the rate support grant has been reduced substantially because a local authority has got itself into the penalty zone, how will that match in with central funding as a result of the Bill? Will the Secretary of State weight grant according to the penalties imposed on local education authorities either now or previously? — [Interruption.] Opposition Members appear to be amused by that, but local education authorities can change. Only one or two by-elections in certain wards of certain authorities are needed for a change of political control. If there has been a penalty in the past, will a change of political control be taken into account when considering whether a local education authority should be entitled to central funding?
  The Bill says:
  "The increase, if any, in … manpower will be very small."
  How will the effectiveness of the programmes funded under the Bill be monitored? I assume that Her Majesty's inspectorate will be responsible and that therefore the senior chief inspector will be consulted on how he will carry out his work under the Bill and on whether he will need new staff or whether existing staff will need to be retrained as a result of the new central funding.
  In recommendation 53, which is relevant to the effectiveness and monitoring of the Bill, the Select Committee said:
  "Her Majesty's inspectorate should monitor in-service provision and initiate regular surveys of good practice in in-service training and publish the results."
  The Government's response last year was that they expected that there would be
  "a survey of the volume and cost of local authority in-service training provision in 1983."
  I imagine that when the Government wrote that they had not drafted the Bill, and therefore that recommendation 53 on the monitoring and the publishing of results will be altered somewhat following publication of the Bill.
  Another reason why the Select Committee was in favour of what is proposed is that it felt that it was time the Department of Education and Science should have power itself to fund new developments in the curriculum. If one studies the list of what other Departments do in the education world, it is obvious that there was pressure for the Department of Education and Science to take some powers to itself. It has been mentioned that the Manpower Services Commission does the technical and vocational education initiative, and that the microelectronics programme is done by the Department of Industry——
  Mr. Radice: Does the hon. Gentleman agree that the Select Committee in its first proposal was proposing pump priming or new money? Is that not a different proposal from that being put forward this afternoon?
  Mr. Madel: The hon. Gentleman has taken me back to an earlier part of my speech. At first sight that could be the case, but, bearing in mind the press statement of March 1983—I do not wish to requote it and detain the House — and depending on what local authorities come forward with, the Government have said that that will be borne in mind when considering the total amount to be spent centrally on education. At first sight the hon. Gentleman may be right, but first sight is not necessarily correct sight in this case.
  The Home Office has section 11, most of which is spent on education. The Department of Industry does the

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  microelectronics programme. The Department of the Environment has its partnership programme, the Department of Employment has the careers service, and the Home Office does the urban programme. Therefore, it is only sensible and correct that the Department of Education and Science should have some powers itself.
  We said in the Select Committee report that the sheer complexity of the education service today requires that the principal Department should carry out some funding of the curriculum. We asked the Government for their view on the complexity of the education service, and they replied:
  "The Government endorse the view of the Committee … that the 'sheer complexity of the education service requires an exceptionally high level of involvement on the part of the specialist department in the forming of expenditure plans.'"
  What might qualify for central funding? I believe that three things must be considered. First, we are told that the Secretary of State is involved in discussions with the Manpower Services Commission on new initiatives by the education service to help the unemployed. That will need central funding. Secondly, my right hon. Friend the Secretary of State mentioned rural areas and what might be done in that respect. I hope that local education authorities have heeded his words and will think twice before shutting some of the rural village schools, as some local education authorities have been far too keen to do. Thirdly, as the youth training scheme develops, there will be an extra dimension to the further education service provided in this country. I am convinced that, as young people finish YTS, many will want to go on to further education. That, too, will open the way for additional central funding from the Department of Education and Science, because in a year's time local education authorities will not necessarily be able to fund and to make provision for some of the demands on the further education service.
  The Bill is but a small step, but it is an essential step when one bears in mind what we are trying to do to improve the education service. It can lead to additional money and additional initiatives. It is very much in line with the recommendations of the Select Committee, and, as that Committee was all-party and reached unanimous agreement on this issue, I hope that the Opposition will not divide the House, but will support the Bill.
  6.16 pm
  Mr. Clement Freud: I compliment the hon. Member for Bedfordshire, South-West (Mr. Madel) on a great example of criticism in code. I should like to be the first from the Liberal Benches to congratulate the hon. Member for Stevenage (Mr. Wood) on his translation from pinstripe trappism to being a walking, talking, fully-fledged Back Bencher with a maiden speech out of the way. It was a good, careful, intelligent and uncontroversial speech, the first part of which would have made Sir Nikolaus Pevsner and the AA guide proud of him. If I did not totally agree with the end of his speech on education, I listened with interest and look forward to hearing many more speeches from him. I, too, hope that he will enjoy his sojourn in the House.
  I should also like to say how much I appreciated the speech of the hon. Member for Durham, North (Mr. Radice) who represented Chester-le-Street when I represented Isle of Ely. We have both changed but I have
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  not changed in my admiration of his intellect, and we who speak on education in the House welcome a man who puts education before taunting the enemy. I was pleased to hear the hon. Gentleman's speech.
  As the Secretary of State said, the Bill is a minor measure. We who sat on this Bench as £1 billion went through on the nod to sustain fortress Falklands, who sit helplessly as £17 billion is to be spent on Trident and who read in The Observer yesterday that £168 million was wasted in a planning blunder over a secret headquarters for the Navy must admit that £48 million, which works out at £70,000 per constituency, or the loss of five or six teachers in each constituency, is small beer. I am concerned about from where the money is coming. We object to this trend in legislation—the interference with, instead of greater support for, local education authorities.
  The Secretary of State talked about local variations. Would that we had the money to effect them. Local education authority budgets are so fully committed that there is no opportunity to have the input of local excellence that was the idea and ideal of the 1944 Act.
  The House will accept that the Association of County Councils is more Conservative than it is anything else. It said:
  "The educational service will not benefit from this"
  and I mention only that one sentence from its comments on the subject because, when so influential and unbiased an association of people comes to that conclusion, we must pay careful attention to what is happening. Its argument deals with the amount of new money. I listened with care to the Secretary of State as he argued with himself whether it was new money, and I believe that he came to the conclusion that it was not; "no" seemed to be the word for which he was searching.
  Above all, the Bill manifests a lack of faith in local government. I wonder whether the Department of Education and Science is trying to emulate the Manpower Service Commission, with its centrally-controlled budget. The MSC has recently been used by Government to take initiatives in education, a sort of vote of no confidence in the Department of Education and Science. Perhaps the Bill is an attempt on the part of the DES to get its own back. Let us remember, however, if that is what the Secretary of State has in mind, that the MSC budget for the coming year is £1,906 million.
  I asked the Secretary of State in an intervention about the possibility of less than full take-up of this award scheme. He thought that that would not happen and said that there were many schemes about and that they would be taken up. However, LEAs are already pruned so as not to have any excess; there is no slack in their budgets. The 70 per cent. rule means that local authorities must put up 30 per cent. ——
  Mr. Andrew F. Bennett: At least.
  Mr. Freud: Yes, they must put up at least 30 per cent. before they can obtain the other 70 per cent. and that is a task that they will not be capable of doing fairly, certainly not as the Secretary of State thinks. There will be some interesting ways in which people will claim the extra 70 per cent. for something that they were going to do in any case, if not for something that they have already done. I hope that in Committee we can discuss that more fully.
  My contention is that if a Minister has new ideas in Government—as, it must be granted, the Secretary of

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  State has had new ideas in many areas of government, and disastrous ideas they have been—they should be carried out with his Department's money, and one should not deprive LEAs of theirs. It seems to be a sort of new Robin Hood of Leeds concept that one gives to those of whom one approves at the expense of all the others. That is why we oppose the measure and will vote against its Second Reading.
  We do not believe much in centrist legislation, not because we disagree with many of the points that the Secretary of State instanced of what he might spend money on. We disagree with it because it is not new money. Had it been the reallocation of 0·25 per cent. of the educational money — provided that 0·25 per cent. came from the assisted places scheme—we would have been for it. I remind the House that educational expenditure comes out of the rates, which means that richer localities already spend more, to the disadvantage of underprivileged children, and to exacerbate that is wrong. We argue that the Government should redistribute on grounds of need, not on grounds of priority decided by the Secretary of State.
  6.25 pm
  Mr. Alan Haselhurst: I am not sure that Opposition Members are not manoeuvring themselves into the position on the Bill of not only opposing the principle of it but bemoaning the lack of money available to implement that principle. The views that Opposition Members have been putting forward have shown signs of that inherent muddle. By contrast, I welcome the principle and am not too worried that there is only a modest amount of money available to implement it at the beginning of this new initiative.
  The Secretary of State does not have enough power and control, and, if people are concerned about him having more power and control, then 0·5 per cent. of total educational expenditure will give him an excess of that in the development of education. At present he can only urge and cajole LEAs in directions which he believes would be beneficial. Experience shows that that ability does not always get Secretaries of State as far as they would wish to go.
  I therefore treat with some reservation the generous offer being made by the Association of County Councils that it would be happy to talk with the Secretary of State about identifying national priorities in education. Experience shows that consultation of that kind can go on almost for ever without any initiative getting off the ground. Therefore, I welcome the fact Mat the Secretary of State is prepared to take the reins in his hands, at any rate to a limited extent.
  We have already heard something of the background, in that events have been passing the Department of Education and Science by for many years. My hon. Friend the Member for Bedfordshire, South-West (Mr. Madel) referred to the initiatives that now lie with other Departments of State. That is undoubted, and I do not regard the action of the Secretary of State today in presenting this measure for Second Reading as somehow his jealous attempt—as the hon. Member for Durham, North (Mr. Radice) implied — to win power back for himself. Perhaps it is a re-establishment of balance between the Department that is charged with overall resposibility for education and what has happened in other Departments of State.
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  The Bill may not have the scope to tackle the whole of that wider question, but in part at any rate it is trying to recover some initiative for the Department of Education and Science, and a degree more central control may not go amiss. It is not control in actuality; it is influence that the Secretary of State is seeking to gain as a result of this legislation.
  It appears to some that this is the thin end of the wedge; that the power that the Secretary of State may try to adopt will be the forerunner of himself or his successors trying to grab more power for the centre, as against the designated LEAs. That is not a serious danger. Nor does it constitute any basis for opposing the Bill or being mildly worried by it.
  To move from the present ceiling of 0·5 per cent. requires further primary legislation and no Government of the future, whatever their political colour, could be denied the opportunity, if they wished, to introduce legislation which would take to the centre a larger percentage. Thus, the fact that the present Government are taking the initiative—in saying that they wish to exercise some influence over 0·5 per cent. of educational expenditure — does not seem something that could start an avalanche of power and control moving away from LEAs.
  The complaint has been made that there is no money or insufficient money. As my right hon. Friend said in a perfectly reasonable manner, we shall have to wait and see exactly what money will be available. We do not know whether we are dealing with new, old or borrowed money. Perhaps when the legislation reaches the statute book there will be an extra lever in the Secretary of State's hands to gain more money to do more good in education than was possible without that lever.
  The principle of the Bill is not whether there is sufficient money, but whether the Secretary of State should be able to exercise some influence over part of the total education expenditure. If one argues that we cannot move in that direction because there is insufficient money, there will never be a time when such an initiative can be taken. I welcome the fact that the Government have recognised that the time is right to take that initiative.
  The question then is how the Secretary of State should use the influence that Parliament may grant him. The justification for the Bill may be found in the schemes promoted under it and in the innovative qualities that the Secretary of State brings to his task. I hope that one characteristic of the schemes that will be picked by the Secretary of State and his successors is that they will deal with the educational deprivation in parts of the country to which hon. Members have referred. A prime purpose of the scheme is to have that influence coming from the Government.
  I hope that my right hon. Friend will indulge tentatively in breaking down the barrier that exists between education and training, and that, in conjunction with local education authorities the Bill will promote patterns for school curricula which may allow some pupils to move out of the confines of their classrooms. From my direct experience of talking to people and seeing educational needs in various places, I am convinced that some youngsters would gain more if some of their time were spent outside the classroom environment and if they were given a chance to develop practical skills, which would be of benefit to them when seeking a job. I hope that other legislation will

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  not prevent the Secretary of State from moving in that direction under this legislation and from increasing the vocational content of some classes.
  I hope that my right hon. Friend will not limit too narrowly the regulations that will be set before the House. I fear that the first set of regulations, when formed, may become a sort of holy grail and be difficult to expand upon thereafter, for two reasons. The first is that the consultative process, to which I have already referred, may be too cumbersome to enable him to amend them in the light of experience. The second is that there may be no parliamentary time to make changes. I hope that the first set of regulations will be cast as widely as possible.
  I hope that the consultation with other bodies can be a little wider than is implied in clause 3(5), which refers to those which represent local education authorities. There may be bodies in addition to those which represent local education authorities which could fruitfully be consulted during the working out of the regulations. The Business and Technician Education Council, which also features in the Bill, might be able to offer some useful ideas about injecting a vocational flavour into the curriculum, and other groups may be able to help the Secretary of State if he wishes to experiment with ways of improving economic awareness among pupils.
  The Bill is modest, but it is sensible and practical. I suspect that it will be welcomed more in the country than the institutionalised response suggests. I welcome it, and I hope that it will be used to good and imaginative effect.
  6.35 pm
  Mr. Sean Hughes: The Bill has been condemned by the Opposition as a further erosion of the freedom of local authorities to decide their priorities and to provide for them. Clause 1 empowers the Secretary of State to pay educational support grants to local authorities in support of expenditure
  "which it appears to him that those authorities should be encouraged to incur in the interests of education in England and Wales."
  On the face of it, such a proposal is not unreasonable, although it smacks of increased central control over local education authorities — the sort of control that the Conservative party opposed so vehemently before 1979. The reasoning behind the proposals is that the Government will take money from local authorities, ostensibly to return it in a favourable manner. In practice, however, it means that they will impose conditions on its recovery.
  Local education authorities will lose out in two ways. First, they will lose 0·5 per cent. of their education allowance, a point which the Secretary of State quaintly described as significant but not radical; and, secondly, they will lose by having to find at least 30 per cent. of the difference in the cost of the project. Since the Bill stresses that there will be no additional finance from central Government, that means that a local authority must divert funds from other projects already in operation. Thus the principle of the Bill is not redistribution. To qualify to regain some, if not all, of the 0·5 per cent. originally taken from allowances, education authorities will suffer a loss of discretion in their policy making and a forced redirection of funds from existing projects.
  The Secretary of State would claim that his purpose is to promote changes and improvements in the standards of
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  provision in areas of special importance. This begs the question whether the Secretary of State is in a better position to identify those areas than is the local authority. The Secretary of State pinpointed five areas of priority, and said today that there may be eight or nine. I do not dismiss those priorities out of hand, but I am worried by their limited scope. I refer to the limited scope of what the Secretary of State sees as priorities, not the nature of the powers to be given to him.
  I am especially worried by the lines along which the right hon. Gentleman's thinking seems to have developed. At the north of England education conference in Leeds at the beginning of last year, the Secretary of State made a speech which seems to have prompted this measure. While rightly expressing concern that so many 16-year-olds leave school unfulfilled, and while rightly declaring that our aims must include the secure possession by all of them of reading, writing, speech and number skills, the right hon. Gentleman seemed to be travelling on a dangerous road. I was encouraged to hear my hon. Friend the Member for Durham, North (Mr. Radice) refer specifically to this when he opened the debate for the Opposition.
  Speaking in Leeds, the Secretary of State claimed that much was already being done
  "to make the content of what is offered to this target group closely relevant to working life."
  While genuflecting to the need to provide a broad programme of general education, he added the words, "with a practical slant", and went on to suggest that the future development of the curriculum should develop such personal attributes as a sense of responsibility and a capacity for independent work while at the same time helping pupils to discover what kind of job they might expect to tackle with success.
  I do not question the good faith of the Secretary of State, but the words of the Bill ring hollow in a borough such as Knowsley where the total registered youth unemployment and young people on YTS programmes is estimated at 62 per cent. In October this year there were 1,719 unemployed young people, of whom 1,478 had never had a permanent job and only 425 were eligible for the YTS. That is the prospect facing young people in that borough in the final two years of compulsory education —one of the areas to which the Secretary of State referred. Teachers and education authorities have to try to combat the blight of youth unemployment and to motivate pupils to achieve higher standards of education.
  Some years ago the north-west joint planning team produced a report commenting on the future of our part of the country. It recognised that the achievement of higher standards in education was fairly easy in areas of good quality housing and a pleasant environment. The real problem lies in those parts of the north-west which are handicapped by a poor environment, in which there is little tradition of education and where a substantial number of people are socially deprived. In those parts of the north-west in which the nature of employment in the past demanded a low level of skill, the bulk of the work force has been engaged in semi-skilled and unskilled jobs and there has been little encouragement to children to do well at school. It is often in those very areas that dereliction, poor housing and inadequate school buildings are concentrated, making them less attractive to the staff whose contribution is so badly needed. That problem has been intensified by the current massive unemployment.

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  The Secretary of State warned against the lowering of expectations, but that is part of the damage done to the morale of pupils, parents and teachers in areas such as mine. Taking away resources, on however small a scale, will only exacerbate the problem. By classifying huge groups of children as what is euphemistically called "less academic" the Secretary of State contributes to the very lowering of expectations that he decries. Those who argue that certain areas of the conventional curriculum are unsuitable for the so-called "less academic" children are judging children by the fallacious IQ test that the comprehensive system was intended to abolish.
  I have what many would regard as a naively optimistic view of education. I really believe that school can make a difference. I accept, of course, that schools cannot put right all the social evils or compensate for all the deprivations and lack of opportunity, but they must be part of any move to eradicate those evils and inequalities from our society.
  The concern of the Secretary of State to improve educational standards is not borne out in the Bill. The Bill falls into the category of Government proposals characterised by short-sightedness and a total lack of understanding of what life is really like in constituencies such as mine.
  The Secretary of State has recognised that the needs of what he calls the "less academic" pupils cannot be tackled in isolation because so many issues bear on them. No Opposition Member would disagree with that. I only wish that he could convince his colleagues in the Government. Nevertheless, it is extremely dangerous to categorise pupils in that way. The Bill is therefore based on a faulty premise. The borough which my hon. Friend the Member for Knowsley, North (Mr. Kilroy-Silk) and I represent has a higher percentage than most of pupils with literacy and numeracy difficulties. Out of 103 education authorities it is third from the bottom in terms of the number of young people who go on to higher education at 18, and it recently had the lowest rate in the country for pupils staying on after turning 16.
  It is a bitter indictment of so-called progress in education that there is little difference in the percentage of working-class children who go to university today compared with the 1930s. A minuscule 1·1 per cent. of the children of unskilled workers and only 4·8 per cent. of the children of semi-skilled workers go to university. Yet there is no immutable law of nature that decrees that such children are less academically gifted than any other group in the country. There is no law of nature that decrees that we should not expect children in Knowsley to attain the same educational standards achieved by children in the more favoured parts of the country. I do not believe that academic potential is innately denied to those of us who were born and brought up in socially deprived areas, but teachers and education authorities cannot redress the imbalance on their own. The totality of deprivation must be attacked.
  One of the greatest crimes that we commit in a so-called civilised and sophisticated society is our failure to allow all our children to develop the skills and attributes by which we measure civilisation and sophistication. When I was at school in the 1960s, public debate often referred to the "brain drain" — the export of talent from this country—but the greatest brain drain is the scandalous
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  waste of talent that our education system encourages. The Bill does nothing to eradiate that. The Secretary of State should withdraw it and address himself to the real issues.
  6.47 pm
  Mr. J. F. Pawsey: I begin by congratulating my hon. Friend the Member for Stevenage (Mr. Wood) on his excellent maiden speech. He made Stevenage sound almost as attractive as Rugby and Kenilworth—a task calling for eloquence indeed. He made a helpful and useful contribution and we look forward to hearing him again on many occasions, not just on computers, but on a whole range of activities. I hope that he will have a long and happy stay in the House.
  In view of the comments of the hon. Members for Durham, North (Mr. Radice) and for Knowsley, South (Mr. Hughes), it might help if I tell the House what the Bill is not. It is not an assault on local government. It is not some form of major radical change. It is not an attempt on the collective virtue of local authorities. I believe that the Association of County Councils exaggerates its case. I give two quotations in evidence. The association has said:
  "We see the proposals, as they stand, as a further erosion of local democracy".
  In a press release it stated:
  "We cannot, however, support a Bill which proposes that money should be taken from us"—
  I emphasise the word "us"—
  "regardless of local needs and priorities. This is another step along the path of substituting central decision for local decision".
  That is a gross exaggeration of the true position.
  Mr. Radice: The ACC makes this point clear. The chairman of the association, Mr. Philip Merridale — I believe that he is chairman of the Hampshire education committee — says that he is prepared to accept the concept of specific grant, provided it is new money. This is not a Neanderthal approach by local government. He is rightly complaining that the Government propose to lake away some local government money which local authorities have used according to local circumstances. The Secretary of State will use this money for Government purposes. That is what the association is complaining about. I believe the ACC's case should be put fairly.
  Mr. Pawsey: It is fair to remind the hon. Gentleman that we are talking about Government money and that this measure in no way constitutes an attack upon the virtue of local authorities. I served as a councillor for some 21 years. I have served on parish, rural, borough and county councils, and therefore I shall not give way to anyone in my admiration for local government. I am aware of the good done by councils and I have considerable admiration for the elected members and officers who work in local government.
  Local government is not perfect, but in general local authorities discharge their duties and responsibilities fairly. I am however worried about the gulf that appears to be opening between central and local government—although not on this issue. I hope that Ministers will take note of the anxiety that has been expressed on both sides of the Chamber. Ministers should be bending their minds to healing that breach and to removing some of the distrust that is evident between central and local government.
  Councils complain about the erosion of their powers, referring to rate capping and penalties—matters which were touched on by Opposition Members. Councils regard

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  this measure as an assault on their independence, but it is wrong to see this moderate measure in those terms. Specific grants are not a new principle in local government. Prior to 1958 and the introduction of general grants, all education expenditure was on that basis.
  That was well recognised by the Select Committee on Education, Science and Arts in its 1981 report. Opposition Members have mentioned that report, and I refer to those sections dealing specifically with grants. The report stated:
  "Proposals for direct funding for certain parts of the service have been constantly resisted by the local authorities and teacher associations on the grounds that once the underlying principle of local government finance was breached, then the system would inevitably move down the path of closer and closer control by central government."
  The Select Committee made the key point:
  "In fact this so-called principle has already been breached many times".
  The Committee continued:
  "The point about principles is that they should be kept to. If they are not, then there is no point in retaining them as principles, and they should either be replaced by new principles which correspond more closely to changing circumstances, or they should be abandoned altogether. We are persuaded that the principle of indirect funding has both been breached in practice too many times for it to remain plausible as an overriding consideration, and that the attempt to keep to it has resulted in some distorting features."
  The hon. Member for Durham, North and the right hon. Member for Halton (Mr. Oakes) mentioned pump priming. The Select Committee's report stated:
  "To this end we propose two modifications to the principles which at present govern the relationship between central and local government in the educational system. The first is that the DES should have the ability, or use existing powers where it has them, to fund direct such new developments on a temporary basis as may seem to it to be desirable, and we so recommend. The intention behind this provision is that, as the government department concerned, the DES should be able to 'prime the pump', in conjunction with local authorities, such experimental or innovative schemes which it considers of potential national importance."
  This is what the Bill is about. I cannot understand why the hon. Member for Durham, North argues against it.
  Mr. Radice indicated dissent.
  Mr. Pawsey: I cannot understand why, even in the face of that quotation from the Select Committee's report, he persists in shaking his head.
  I believe that the ACC has over-reacted to the moderate proposals considered in the Bill. Educational specific grants are seen as another attempt to erode the powers and responsibilities of local government, but that is just not the case. My right hon. Friend referred to that point during his excellent opening speech. Local authorities are mistaken if they believe that they exist in some unalterable time frame. Local government is not, and cannot be, frozen in the attitudes that existed 10 or 15 years ago. Councils are living entities and must change as circumstances change or as this House directs. Parliament is sovereign. That is not a new concept; it has existed for centuries.
  I should be the first to admit that not all change is good and not all change that affects local government is good. The 1973 changes were unfortunate. They brought into being the metropolitan authorities and swept away old counties and changed old familiar names. They swept
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  away the urban districts and rural districts. That was all bad news, and, were it possible, I would put the clock back.
  I welcome the proposals before us. They will enable the Secretary of State to focus funds on specific areas that merit attention. He will be able to use funds to enable the local education authorities to adjust and to respond to changing educational circumstances. The costs are not excessive; they can be described only as moderate. I should have liked, as perhaps other hon. Members would, "new" money to be made available. Economic constraints are such that new funds cannot be found, but it is better that funds come from the global education budget than not at all.
  Clause 2 states that the total expenditure on which educational specific grants are based should not exceed 0·5 per cent. of planned spending on education by local education authorities in any one year. That would be £46 million, but since only 70 per cent. of the education support grant is funded by the Government, with the other 30 per cent. coming from local education authorities, in round terms expenditure is about £30 million. Hon. Members might agree that this is a modest sum, especially when it is compared to the £9,155 million which is relevant to education expenditure. An amount of 0·5 per cent. is scarcely an all-out attack on local government integrity.
  The Bill provides funds to finance experimental projects and to promote improvements in standards. This point was well made by my right hon. Friend when he opened the debate. It is worth recalling that the technical initiatives in our schools had to be funded by the MSC because the DES was not empowered by statute to initiate such a scheme. That alone would be justification for the Bill.
  I am not a Wykehamist. Unfortunately, I am not even a fellow of All Souls. I am the product of a technical school and technical college. That is my educational background, which is why I argue so passionately and intensely for grammar and technical schools. I know from first-hand experience exactly what those schools and that form of education can do. I speak, not from theory, but from knowledge and practice.
  I do not seek to knock or attack the MSC. It is clearly doing an excellent job, which is proved by the way in which local education authorities have grasped the opportunity presented to them by the technical initiative. However, it strikes me as odd that, although the DES has the schools and the expertise, the MSC had the money. In this instance it has proved to be a happy partnership, a coming together of minds. It could have been acrimonious or anomalous. The fact that it was not reflects enormous credit on both Departments. The technical initiative is an excellent idea and the technical schools, which I hope will spring from it, will I am sure do much good.
  It must have been a little confusing to the LEAs to discover that they have two masters, two DOEs — Employment and Education. That is one DOE too many getting in on the schools' act. It would be far more efficient if only one Department were to be involved, and I believe that the Bill will ensure that that is the case in the future.
  The Secretary of State is able to use funds to improve standards, and I would like to recommend to my right hon. Friend one such scheme. It will come as no surprise to him — an award scheme with a difference, which could, perhaps, be called the Secretary of State's award. It would

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  be designed to reward innovation, initiative and improve standards and, above all, to encourage individual schools to break new ground and use the pupils, staff and parents' collective imagination. It would both challenge and reward. It would be a simple and inexpensive scheme which would not take much of the £30 million which my right hon. Friend has been so successful in obtaining. It would provide awards for those schools which during the previous 12 months had shown a substantial improvement in standards. The scheme's object would 13e to promote an improvement in generally accepted standards of behaviour, discipline and academic work and to encourage local initiatives. It would take advantage of the rewards system operated by teachers, whereby pupils are encouraged by incentive to improve their work. The only distinction would be that the award would go to the school rather than to the individual.
  The scheme would introduce a spirit of competition, which would provide a spur for heads, staff and pupils alike. The scheme should be open to all secondary schools. Applications should be judged by a panel set up by the Secretary of State. Criteria for the awards could be, for example, examination results, inspectorate reports where applicable, community participation and above all a spirit of innovation. The number of awards should be such that a high standard is guaranteed and maintained. If they wish, local education authorities could nominate schools which they considered to be particularly deserving.
  If the principle of the award were accepted, there would be no difficulty in the early implementation of the idea, because the cost of the scheme would be small. There would merely be the cost of the scrolls to be provided to the schools. The panels could comprise those people known to be interested in education and could include magistrates, representatives of employers' organisations and those involved in higher education. The idea is not new to my right hon. Friend. He may have had prior sight of what I suggest but, nevertheless, I urge him to view the idea with a less jaundiced eye than previously.
  Mr. Greenway: Has my hon. Friend costed his scheme?
  Mr. Pawsey: It is virtually free.
  Mr. Greenway: If it is to be free, who will pay the expenses of the magistrates and others? If it is to be a serious scheme, what incentives will there be for schools to participate?
  Mr. Pawsey: I am grateful to my hon. Friend for that question, because it gives me the opportunity to elaborate further.
  Mr. Radice: Not now.
  Mr. Pawsey: It will teach the hon. Gentleman to interrupt. The scheme will be based on the principle of the Awards to Industry scheme. There will be no financial inducement. The only cost involved would be the setting up of the panels. I hope that people will be prevailed upon to give their services free for such an excellent scheme.
  Mr. Flannery: Of course he would.
  Mr. Pawsey: As the hon. Gentleman says, of course I would. I am as aware as he is of the importance of education. I believe that people would give their time to such a scheme.
  Time presses on, and I fear that I ought not to pursue my hobby-horse further. I commend the Bill to the House.
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  It is imaginative and will do enormous good. I hope that it will soon be on the statute book and that when Opposition Members talk about resistance to the Bill it will be a token resistance. I believe that the Bill will do much to improve educational standards in our schools, which is something for which all of us, irrespective of party belief, should be striving.
  7.7 pm
  Mr. Jack Thompson: I am a new Member, although I have made my maiden speech. As a new Member, I am pretty naive. My naivety lies in not recognising constituencies. I was desperately trying to recall a constituency called "filibuster". I thought that the hon. Member for Rugby and Kenilworth (Mr. Pawsey) came from there. I realise that there is no such constituency. I was astonished to learn that the hon. Gentleman had 21 years' service with local government, because I have also had experience in local government.
  I was leader of the opposition of the Northumberland county council for two years from 1979. From 1981 to 1983 I was leader of the county council, chairman of the policy and resources committee, and a member of the education committee and I have had experience of being at the receiving end of diktats from central Government, Secretaries of State in particular. I say that in the plural and not the singular because it is significant in relation to the Government's proposals. The Bill provides for central Government interference with the way in which local education authorities operate. It has been argued by Conservative Members that that interference is only slight. They called it the thin end of the wedge. In this case, it may be the thin end of the wedge, but when one adds this proposition to those which come from the Secretaries of State for Transport, the Environment, Energy and the Social Services, it rapidly approaches the thick end of the wedge.
  I am still a sitting member of my county council. Many of my colleagues and many people in other authorities are getting heart-sick of the way in which local authorities have been dealt with over the past four years. People of all political faiths are saying that they will not seek reelection at the next elections. That means that many valuable people will leave local government simply because of the pressures over the past four years.
  I suffered from those pressures for two years. I had sleepless nights because of the Government's directives. This is not my first experience of rate-capping. That has gone on for four years. It is not the first time that there has been interference with education or transport supplementary grants, and so on. It has gone on for years. All that local government wants to do is to get on with its business. As a leader of the council and a county councillor for many years, I have had the fact pushed down my throat that Parliament is supreme. I accept that. However, if Parliament wants to run the whole shooting match, let us get on with it. If the Government wish to have no local government on the democratic basis on which it operates at the moment, they should say so rather than chip away a little bit here and a little bit there so that in the end there is nothing left. We are now approaching that state of affairs.
  Three or four hon. Members said that this is a small issue, but it is part of a big issue. It is part of the destruction of local government as it is now, and as I hope it will continue to be. I used to be a member of the

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  Association of County Council's policy committee and the executive committee on education. I was astonished when it was said that the ACC over-reacted. I served for four years on the ACC and it took three and a half years to make it act at all, let alone react or over-react. I was pleased at the statement by the chairman of the ACC education committee. At last it is coming out of its shell. It took much time and encouragement for it to do so.
  I agree with the comments of the Association of Metropolitan Councils and the Association of District Councils on local government issues, and on the effect of the Government's attitude on local government. However, I take particular note of what the ACC says, because it has always been reluctant to challenge the Government on issues affecting local authorities. At last it has come out of its shell and said that this proposition is not useful for local government, will be detrimental to it and will chip away at its foundations. Such proposals, of which this is just one, could damage local government so much that it disappears.
  7.13 pm
  Mrs. Angela Rumbold: Although my hon. Friend the Member for Stevenage (Mr. Wood) is not present, I should also like to congratulate him on his maiden speech on behalf of the minority group, that most splendid but small group of women in the House of Commons. His speech was excellent. I hope that we shall hear much more from him. Apart from his expertise in speaking, my hon. Friend has other expertise to offer hon. Members.
  I welcome this measure. It is not a menace to local authorities' democratic rights, as many Opposition Members describe it, but a means of enabling one of the most important services for which local authorities have responsibility, education, to respond more swiftly to new initiatives, which hitherto it has not been able to do.
  I should like to clarify the educational world's explanation of how education is run. I listened to many hon. Members' contributions, and understood everything that was said. I have listened to education debates for the past six to seven years. All of us with a little experience in education fall into the trap of using colloquialisms when we discuss education. That mystifies the outside world. We are Members of Parliament, supposedly representing the people outside, who are desperately trying to understand exactly what is happening in education.
  Most people know that the education service is run as a partnership between the Government and local authorities, local authorities having the major responsibility for the organisation of education and the disposal of the moneys that come to them. However, many people are greatly confused about the area of public accountability and the relationship between the Government and local authorities. The Secretary of State touched on that. The outside world is confused when it tries to understand who is accountable for what in education. Is it the Secretary of State's fault that there seems to be little money for education? Is it the local authorities' fault? If so, why?
  The public understand that the Government annually go through the process of budgeting. In our colloquialism we call that the "bilaterals". The public can then discover, if they read the newspapers, what amount has been allocated to education. This year the sum is well over £9 billion. It
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  will be dispersed in part to LEAs according to the needs and criteria of local authorities that require educational moneys.
  The confusion arises from the Secretary of State saying, truthfully, that a certain sum that should be sufficient has been allocated to local authorities, and the local authorities saying, "We are sorry. We cannot allocate that sum. We shall cut back on education spending." The differences are accounted for by the weight that local authorities give to education spending, as against that given to the other services for which they have responsibility, for example, social services, planning, road maintenance and housing, to name but a few local responsibilities. It sometimes occurs to me that hon. Members are not certain about the way in which local government divides up its spending.
  Specific grant is anathema to those who uphold the sanctity of local priorities set at local level — it is a heresy. I warmly welcome the recent appointment of Mr. Bob Morris to the Association of Metropolitan Authorities, as education secretary. He once said:
  "A little bit of heresy can do a lot of good."
  I think that Mr. Morris will forgive me for quoting him in this context.
  I have often marvelled at the mild hypocrisy of the anti-specific grant lobby. What is urban aid? What is slum clearance aid? What is the police grant? What is the youth training scheme? What are all these except specific grant? I have done considerable service in local government. We in local government welcome that aid. Therefore, why are Opposition Members questioning the possibility of specific grant within education?
  Curiously, the argument reaches a crescendo if the proposal is for education. It reaches a crescendo in local government. All the old jealousies come to life. A little problem might arise and I hope that the Secretary of State will take note of it. When budgets are put together following the introduction of the Bill, events may take the following form. Let us assume that £100,000 has been budgeted by the education department for scientific equipment and that the chairman of the finance committee has reminded the chairman of the education committee that such a sum of money can be claimed under the specific grants. As a result, the allocation in the budget is reduced by £70,000. Let us also assume that a bid for the project is received but not accepted by the Secretary of State. The education committee must then return to the finance committee for more money for the scientific equipment. The finance chairman may tell the chairman of the education committee that no more money is available in the current year's budget. The victims in that story will be the children whose education may not just be impaired, but diminished. When my right hon. Friend the Secretary of State examines such projects, will he examine carefully those that may be regarded in that manner? Otherwise I foresee a danger.
  It is also worth reiterating that the modest sum available would be decided upon before the total sum available is known. That is important. That is not necessarily the case as put forward by Opposition Members. They seem to be saying that if there were no specific grant the sum available to education authorities would be greater. I am sure that my right hon. Friend will correct me if I am wrong, but I believe that the Government decide the total sum to be given to education before, and not after, determining local government expenditure. That is why I believe that the

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  concept of new money is irrelevant to the Bill. I await further information from my right hon. Friend about that important matter.
  My real reason for welcoming the measure—as no doubt will many hon. Members on both sides of the House who have worked in the education service for many years—is that it is an opportunity for the Secretary of State, when having discussions with local authorities, to identify projects requiring financial support, so that initiatives can be taken quickly. Education has suffered from the sad problem of having good ideas, of wishing to further the children's education and of responding to the Warnock and Cockcroft recommendations, hut, alas, not having the ability, through the Secretary of State's guidance, to take up such initiatives.
  The youth training scheme did not come as a blow to education. We welcome it because it enabled us to follow through the ideas proposed by many people in education for meeting the needs of 16 to 19-year-olds, especially by helping them to begin a training scheme at a vital age. The money to finance such a scheme came from another Department. Had the Secretary of State for Education and Science been able to call upon specific grant, he might have been able to take that initiative.
  I believe that the Secretary of State could re-establish himself in the eyes of local education authorities as being a friend who could further the partnership between local and central Government, in contrast to what the Opposition have suggested. Not only do I urge the House to welcome the Bill, but I urge hon. Members not to divide against it on a party political basis.
  The hon. Member for Durham, North (Mr. Radice) said that the Opposition were most devoted to the cause of the maintained sector, but not many of the great educational measures have come from the Labour party. Far more have come from the Conservative party, which has ensured that education is possible for all children irrespective of their means, but geared to their ability. I trust that the House will welcome and approve the Bill.
  7.25 pm
  Mr. Martin Flannery: The hon. Member for Mitcham and Morden (Mrs Rumbold) hoped that we could put children in the forefront of our priorities. She then warmly welcomed the initiative. I sought in vain among the hon. Lady's concluding remarks to understand how the initiative could benefit those children about whom she spoke. I believe that Opposition Members would have no right to be present if we did not divide the House against such so-called initiatives. I am sure that, although many Conservative Members realise that the Bill will harm children, they will still vote for the measure.
  The hon. Member for Rugby and Kenilworth (Mr. Pawsey) had no sooner asked how much money was to be taken from the education authorities than he was wetting his lips about how to use the loot. He referred to a wonderful plan, which no hon. Member could understand, but it brought one or two hon. Gentlemen to their feet in fear that the Secretary of State's "initiative" might take some of the money from local authorities.
  The word "moderate" always bespatters the speeches of Conservative Members. That is touching. I have listened to that word applied to the most draconian legislation. It was continually referred to when the House discussed the Industrial Relations Bill, which led to a general strike and
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  put five dockers in gaol, and was used by Lord Justice Donaldson, who is doing much the same job on behalf of the Tory party now.
  When did the Tory party even claim that its measures were not moderate? That is its password and catchword. As the sword goes into the children in the form of education cuts, it is all done in the name of moderation. I am reminded of the Victorian values, about which we have heard much from the Conservative party and about which Dickens told us so much.
  The "moderation" and the "little measure" remind me of the second housemaid's baby, who, I gather, was only little. No one who knows anything about politics could fall for that. One of my hon. Friends put the matter into context. There is a little measure here and a little measure there. It goes on all over the place, and the measures never harm the Conservative party, but, taken together, they become a massive measure against the education of our children. The Bill is another straw on the camel's back and that is precisely how we should regard this so-called moderate measure.
  Her Majesty's inspectorate is a body of good people but they have drawn in their horns in this years' report. I like to be fair and I pay tribute to the Secretary of State for publishing the first HMI report. As an educationist and ex-head teacher, I have read the report with great care. It is an indictment of the Conservative party and what has happened to education under this Government.
  This year's report bends over backwards and in every other direction in an effort to be fair to the Government, but it starts:
  "When standards in the basic curriculum and the applicability of education to earning and work are, as now, at a premium for pupils and students of all abilities, access to them has to be assured. Yet observations show that some pupils in some institutions, from primary schools to further education in some parts of the country, do not have that access."
  It is a small report this year. I wish that it were bigger and I should like to encourage inspectors, many of whom I know, to go further and expand on the indictment in that sentence. Vast sums are not being used in the education of our children and many of them are suffering even further through lack of access to education.
  Mrs. Rumbold: Does the hon. Member believe that what the report is saying relates to the fact that there is riot enough money in education, or does he agree with me that the equality of teachers is the most important aspect in getting the best for our children?
  Mr. Flannery: I agree with him to an extent, but not in the way that she poses the quality of teachers against money. That is a typical Tory tactic.
  I have served on a teachers' union executive and worked with them for many years. I know that the hon. Lady has worked hard in local government. I pay tribute to her, because her speech was one of the most reasoned contributions that I have heard from a Tory Member, although I profoundly disagreed with most of it.
  The hon. Member suggests that the quality of teachers is dominant. We have splendid teachers, but we need money to pay them. My hon. Friend the Member for Durham, North (Mr. Radice) set himself quite a task when he decided to read all the HMI reports. He has a complete picture and he knows that the main point emanating from those reports is that the education system lacks cash., the children in poorer areas do not have enough books or teachers and the fabric of their schools is in a parlous state.

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  All that is pointed out in the HMI reports, yet we still have the assisted places scheme which is taking public money for the already well-off. Parents in richer areas can donate books and equipment. Unemployed parents in poorer areas cannot possibly afford to do that. We are back to the old class set-up again. Money comes freely from wealthy parents, but the children of the poor suffer. It amazes me that anyone can square that with his conscience.
  Tories used to boast proudly, and with some justification, that they were the party of local government. In this debate, not a single Tory Member has failed to attack local government and defend further centralisation. The Secretary of State used to say that he believed in decentralisation, but he is now the arch-centraliser. The party which proudly boasted that it believed in local government is launching endless attacks against it, while trying to pretend that it is not doing so.
  If local government is to be local and to govern, it needs money. Those who are trying to take money away from it are actively conniving at centralisation. The hon. Member for Rugby and Kenilworth waxed lyrical in defence of local government. His speech could almost have been set to music, yet he is prepared to support centralisation and to take money away from local authorities.
  The hon. Member asked where the money would come from. The answer is simple and he knows it, but I will put it on the record. Cruise and Pershing missiles have been brought to this country against the wishes of 94 per cent. of the British people That fact cannot be denied. Those who wilt not listen to such facts are refusing to listen to the voice of the people who feel deeply about those missiles. The cost of the missiles is unbelievable.
  It may be said that the missiles are coming through President Reagan, the victor of Grenada, over whom we have tons of controls.
  Mr. Pawsey: Will the hon. Gentleman give way?
  Mr. Flannery: No. The hon. Gentleman went on far too long and engaged in tedious repetition. I must get on with my speech.
  Mr. Pawsey: On a point of order, Mr. Deputy Speaker. The hon. Member for Sheffield, Hillsborough (Mr. Flannery) has referred to me several times. I merely seek to intervene on a point of clarification.
  Mr. Deputy Speaker (Mr. Paul Dean): Unless the hon. Member for Sheffield, Hillsborough (Mr. Flannery) gives way, the hon. Member for Rugby and Kenilworth (Mr. Pawsey) must resume his seat.
  Mr. Flannery: No doubt we shall have more points of order if we do not let the hon. Gentleman have his way, but he is not going to get it.
  We are planning to spend £10 billion on Trident, yet the hon. Member for Rugby and Kenilworth asks me where the money in the Bill will come from. If this nasty little Bill were not so vicious, it would pale into insignificance. It will take away a few million pounds from the education service for ordinary children, while vast amounts are being spent on the machinery of slaughter and overkill. We are told that that money is being spent wisely. That is typical
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  Toryism. While weeping crocodile tears about the lack of money for education, the Government pour out money on useless armaments.
  I do not know whether he was quoting from an HMI report, but the Secretary of State said that the duty of LEAs is to secure sufficient full-time education for children in their areas. I am neither a fellow of All Souls nor a Wykehamist. If such people believe in high standards I compliment them, as I believe in them as well. I should have been interested to hear the family feud that might have developed. If such people believe in the same high standards as I have always believed in, I welcome them to the fold.
  The education support grants are not new. We have all known about them for a long time. Select Committees are not new either. I shall tell the House a little secret. The present ones have Tory majorities and the next ones will have even bigger Tory majorities. Therefore, they will come out with what are, by and large, Tory reports. The nonsense that has been peddled in the House today about what we decided in the Select Committee having led to the Bill is silly as to be unbelievable. Such suggestions will not get past me. Moreover, I was a member of the Select Committee. The case boils down to the fact that money has been withheld from LEAs. Now even Tory authorities are complaining bitterly. That has been evidenced by successive speeches. When those authorities complain bitterly about what the Government are doing, something must have gone seriously wrong.
  The Under-Secretary of State for Education and Science (Mr. Bob Dunn): The hon. Gentleman referred to the Select Committee report in regard to the education support grants. It was a unanimous report. Can he explain that?
  Mr. Flannery: No. I can only assume that I was not there. For the benefit of hon. Members who do not know, I shall explain how Select Committees work. Often, the full report is so massive that all sorts of things go through quickly. I saw my hon. Friend the Member for Durham, North indicate by motions of the head that he did not believe that the report could possibly lend itself to the interpretation that money should be withdrawn. If it is argued that we agreed with that interpretation, I should like to make it clear that that argument is completely wrong and I denounce it.
  Money that LEAs used to receive must now be applied for. A reference sheet provided by the Library says that:
  "In Britain, the principle on which the financing of education has always been based is that central government should not have too much direct control over LEA expenditure."
  Earlier, it says:
  "The Bill thus represents some extension of direct government control over the school curriculum, and, as such, raises important issues of local autonomy in education, the nature and responsiveness of the existing and future curiculum, and the finance of education."
  That is one of the fundamental reasons why the Opposition and the teachers' unions are opposing the Bill. The result will be that, when applying for money which LEAs should have had anyway, the Minister might look with favour on those LEAs that have projects that coincide with the list of priorities that the Government hold. Therefore, the Government could intrude crudely into the curriculum.
  Teachers are deeply worried that there are almost two Departments of Education and Science. The one that we know is poverty-stricken and the other, the Manpower

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  Services Commission, is swilling in money. The MSC therefore decides that it wants to reintroduce the old technical schools, but in a new form. Many hon. Members and educationists outside have striven to achieve a curriculum that provides broad general education before specialisation. It is difficult to support education for 14 to 16-year-olds. There is a danger that head teachers who want to provide a broad general education but desperately need money will reach eagerly for that offered by the MSC and the MSC will insist on a technological bias in schools, which, by definition, militates against a broad general education. Teachers are deeply worried about intrusions into the curriculum. Lack of funds will also limit education authorities that do not have curriculums that coincide with the Government's priorities. That represents an attack on local autonomy.
  The most important feature of this apparently little Bill is that it is part of a much wider and bigger attack on the education of ordinary children. It is part of the attack to get rid of comprehensive education. It springs from the mentality which tried to introduce the voucher schemes. That did not work because Tory parents of children who have had comprehensive education realised that the 11-plus was a dreadful thing, as did Socialist parents. It was the Tory parents who insisted on maintenance of comprehensive education. They opposed the voucher scheme and the resurrection of grammar and secondary modern schools. It is to those ends that this nasty little Bill points. In isolation it would not be so awful but we cannot ignore the schemes of which it is a part.
  Why do the Opposition object so strongly to a Bill that seems superficially to be of little importance? We, like Tory LEAs, now see clearly that the attack on LEAs and local government is serious. The shires and cities are beginning to voice their opposition together. The struggle for real education is one of the things that bind them. It is time that the Government had the good sense and political perspicacity to realise that the warning bells are ringing. Circumstances in the past two years have been deplorable and it is unbelievable that Conservative Members have tolerated them. Because of the excellent education that comprehensive schools give our children, more and more young people are ready to enter higher education. Because the teaching and help that they have received is so good they could flood into the universities were it not for the fact that the UGC has cut the number of university places.
  Mr. Pawsey rose——
  Mr. Flannery: The result is that young people with immensely high qualifications are not being allowed a place at university. Their educational careers are being curtailed. They are denied the chance to take a place at university either because of unemployment or because of the Government's refusal to allow them to go there.
  This Bill may seem to be a minor measure. However, its lessons are major. As it continues the developing attack on the public sector, we shall fight it every inch of the way. This is one of those inches.
  7.50 pm
  Mr. Richard Tracey: I intervene in this debate the poorer and sadder for not having been present to hear the maiden speech of my hon. Friend the Member for Stevenage (Mr. Wood). As I came into the Chamber
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  to hear the plaudits from the Labour and Liberal Benches, I felt rather like a man who had come into Wembley stadium at the end of the Cup Final only to hear the cheers. I am sure that I shall enjoy reading my hon. Friend's speech tomorrow. My hon. Friend is someone whom I have learned to recognise as a quiet, shrewd man. He has taken a little longer than some of us to dive in at the deep end with his maiden speech, but I am sure that the House has profited greatly from hearing his wisdom today.
  I must first declare an interest in the debate as a parliamentary adviser to the Independent Schools Information Service. However, I need mention that only when I say that the Bill has nothing to do with grants for independent schools. I might say in passing that I find a certain rampant hypocrisy when I hear the hon. Member for Durham, North (Mr. Radice) announce at the beginning of his attack on the Bill that he is an old boy of Winchester and of Magdalene college, Oxford. I find it very strange when I hear Labour hon. Members talking as they do about the maintained sector of education and then telling us that they profited from an independent school education. I often wonder where the great conversion took place. Was it on the road to Damascus, or was it on the way to the general management committee of their local Labour party?
  I welcome the Bill. I welcome its potential for improving the maintained schools provision by focusing on special projects and special needs in schools and by identifying weaknesses in certain schools and education authorities and being able to cope with them. That is quite simply what the Bill is about. But, perhaps not too amazingly, the Opposition have turned the debate into an overall discussion of education—and a bit more. The hon. Member for Sheffield, Hillsborough (Mr. Flannery) said a great deal about cruise missiles, and I began to wonder where he would go next.
  The debate is simply about the Secretary of State identifying needs and weaknesses and then being able to move from his position as the holder of the office of Secretary of State to cope with them.
  Mr. Pawsey: I noted that my hon. Friend was listening carefully to the hon. Member for Sheffield, Hillsborough (Mr. Flannery). I wonder whether my hon. Friend can enlighten me. Can he tell me how to reconcile two points made by the hon. Member for Hillsborough? He referred to the HMI reports and used them as some form of pretext to say how the education system was being slashed. In almost the same breath he spoke of vast numbers of qualified young people who were unable to get into universities. The hon. Gentleman says that our children are suffering and underqualified. Then he says that so many are qualified that they cannot get into universities. If my hon. Friend can square that circle I shall be grateful.
  As my hon. Friend knows, I sought to put this question to the hon. Member for Hillsborough. Sadly, he would not give way to me. Can my hon. Friend help me because, in helping me, he will help the House?
  Mr. Flannery: The hon. Member for Rugby and Kenilworth (Mr. Pawsey) needs some help.
  Mr. Pawsey: I cannot see it coming from the hon. Member for Hillsborough.
  Mr. Tracey: It would take someone with more experience than I have to divine the mind of the hon.

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  Member for Hillsborough. Many have tried; few have succeeded. I am afraid that I must pass over the intervention of my hon. Friend the Member for Rugby and Kenilworth (Mr. Pawsey).
  During the remarks of the hon. Member for Hillsborough about the HMI reports he said that he noticed how short this year's report was. I can only assume that the inspectors found little to criticise in this Government's administration of education.
  Mr. Gerald Bermingham: Is the hon. Gentleman prepared to accept that the report is short because there is very little left to inspect?
  Mr. Pawsey: No.
  Mr. Tracey: The conclusion that I reach is probably the more accurate one.
  I was saying that the Bill seemed to be providing the ability to identify specific weaknesses in our schools and then moving to put right those weaknesses.
  We must recognise the position of the Department of Education and Science as the public perceive it. I notice in correspondence I receive from my constituents that, when they find something that they believe to be lacking in schools, they very often ask whether I as the Member of Parliament can press the Secretary of State to do something about it. More rarely do they talk of me asking the chairman of the education committee to do something about it. I believe that it is to the Department of Education and Science that the public look for deep-seated problems to be resolved.
  When my right hon. and learned Friend the Member for Warrington, South (Mr. Carlisle) was Secretary of State for Education, he said that he felt like a harlot in reverse in his office because he had all the responsibility but no power. He handed out budgets, but he could not direct them to their problems. It makes great sense where such problems as weak maths teaching have been identified in certain education authority areas for the Secretary of State to be able to move straight in and put them right. If he identifies areas where pilot projects are needed, there, too, he should be able to move in.
  We have heard a great deal about the Select Committee. I support what it talked about in its report. Its members believe that money should be applied for pump priming in education, and that makes a great deal of sense. Bearing that in mind, it is highly desirable that the Secretary of State should be able to move along the lines laid out in the Bill.
  The Bill comes as no surprise. The first mention of specific areas such as this was made in the Green Paper on alternatives to local rates. We all, including Opposition hon. Members, read that carefully, and I am sure that they made considerable comment about it. What is more, a number of Opposition hon. Members served on the Select Committee, whose chairman was one of them at the time. I cannot believe that the hon. Member for Hillsborough was taken by surprise in the way that he described when he discovered what was in the Committee's report.
  Then the Secretary of State went out to further consultation on specific grants with the Association of Metropolitan Authorities and the Association of County Councils, and I find it rather pathetic that they are now bleating about the points made in the Bill.
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  The Gracious Speech in June clearly said that the Government would move in this direction. It said:
  "Legislation will be introduced to enable grants to be paid to local education authorities in England and Wales for innovations and improvements in the curriculum."
  That is clearly set out, and that is what the public are expecting us to do.
  The complaints that we have heard are just part of a great ritual of opposition to a measure that is sound and will receive great support from the public. I was heartened by the speech by my hon. Friend the Member for Mitcham and Morden (Mrs. Rumbold), who has much experience of local government, particularly in education. Indeed, she was the chairman of the education committee of the Association of Metropolitan Authorities. I was glad to hear her support the Bill, and, having heard her assurances, I am certain that the Bill does not contain the defects that the Opposition claim.
  Recently I spoke to a distinguished member of the directors of local education authorities. He said that the complaints that are coming from local government were hypocritical and pathetic. He believed that the balance had slipped to such an extent that now the Department of Education and Science was simply handing out large amounts of money without having any control over it, and that the time had come for the balance to be redressed so that the Secretary of State could give grants in a more meaningful way to projects that he considered worthy.
  It is unbelievable, with a total education expenditure in this country of more than £9 billion, that there is such a furore on the Opposition Benches about expenditure of £46 million, as seen from one point of view, and, of course, £30 million when seen from another—that of the Bill. It is a storm in a teacup.
  I end with a word of sadness. I should like the Bill to provide much bigger grants and have greater objects in view. Many people regret — so do I, as a former grammar school pupil—the passing of the grammar and direct grant schools. Many people would like them back. I see little likelihood of grammar schools returning, but by a system of grants that come direct from the Department of Education and Science we may be able to return to a system of direct grants to a fund for specialised schools that need help. Many types of specialised schools could benefit, but in general terms the public would be happy if the Secretary of State were to put money in that direction. I hope that this Bill is a precursor of such a move. It is something that the country would welcome, and in my opinion the country would be better for it.
  8.4 pm
  Mr. Mark Fisher: The hon. Member for Surbiton (Mr. Tracey) asked why there is such a furore over a mere £46 million of education expenditure. The answer is simple. The Bill raises two central and important problems—a democratic problem about how Governments should raise money to finance expenditure, and an education problem about what curriculum development is necessary and how that should best be achieved. Unfortunately, the Secretary of State, in introducing the Bill, failed to address himself with any great vigour to either problem. Although he did refer, with some apology, to centralism, he glossed over the democratic problem in the Bill.
  It is not true to say that there are not fears about centralism. Many people will see the Bill as a direct

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  contradiction of the Education Act 1944, in which responsibility for the curriculum was placed firmly on local education authorities and, through articles of government, the governing bodies of individual schools. Indeed, it could be said that the Bill goes further back than 1944, to 1926, to the last full edition of the elementary code. The Government are keen on political nostalgia and Victorian virtues, but few people would want the reemergence of the elementary code.
  Unlike many Members on the Opposition Beches, I am not concerned solely or centrally with the problem of central Government control. In my view, there is a more positive role for the Secretary of State to play. Having heard the maiden speech of my hon. Friend the Member for Durham, North (Mr. Radice) in his new capacity, I am confident that when he becomes a Labour Secretary of State for Education and Science he will contribute much to the improvement and expansion of education by increased and additional expenditure, while this Tory Secretary of State is diminishing and debasing education by cutting expenditure and taking powers away from local education authorities, as exemplified in the Bill.
  I do not see the problem mainly as one of central Government involvement in local government, important though that is—it is one of local government taxation. The idea behind the Bill is to tax all local education authorities so as to fund a selected few. That is a new perversion in education expenditure, and it is one that I deplore. It is wrong in principle, and it is even worse in practice. Unless grants are given to the most deprived authorities, the Government will be taxing—in effect, fining — the weakest education authorities in financial terms, and giving extra funds to the less weak. It is an ill-thought-out scheme, and does no credit to the Secretary of State.
  How will the weak and taxed local eduction authorities react? There are only two ways in which they can react. They will have to cut more services and choose whether to cut teachers and books even further — if that is possible—or to cut options out of the secondary school curriculum. Alternatively, they can attempt to raise their rates to compensate for the money that is being taken away, and thus risk incurring Government penalties. The cause of their overspending—that is what it is called by the Government—will, in effect be the Government's policy. That would be ludicrous if it were not so serious.
  I suspect that the Secretary of State simply has not done his homework properly. He has not the first idea what impact this legislation will have. In Committee, he will have to produce evidence to show that he knows the details of the local needs of the education authorities that will lose money and not have it returned through grants, and what impact that will have. Unless he shows that he has considered the matter, made allowance for it, and knows how to cope with it, he will be doing his Department no credit by introducing this legislation in this ill-thought-out manner.
  Similarly on finance, the Secretary of State confused the House and gave us the distinct impression that he does not fully understand his own Bill. He said—or many of us understood it from the figure of 0·5 per cent. of total education expenditure—that this measure will potentially raise approximately £46 million. I understood the Secretary of State to say that it would raise only 70 per cent. of that. He referred to £30 million. However, if he reads his own clause 1(3)(b) he will see that the 70 per
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  cent. represents the way in which the Secretary of State will use the money, and the education authority will have to provide the 30 per cent. The 70 per cent. does not refer to the 0·5 per cent. of education expenditure. The Secretary of State was very confused about that, and I hope that the Minister will clear it up at the end of the debate.
  The Secretary of State did not convince the House with his arguments. He left many key questions unanswered and he will have to deal with them in Committee. However, he must be aware of hon. Member's concerns about certain areas that are left undecided. The right hon. Gentleman covered to some extent the most important area when he referred to the projects that the measure was likely to support. He referred to Cockcroft, the teaching of mathematics and, I am glad to say, to the problems of special schools, which we welcome. However, with the exception of a vague and generalised reference to creating a richer and more stimulating environment in primary schools, his examples concerned the organisation and administration of education and had nothing to do with curriculum development. He referred to the record of achievement and to the management of the teaching force. Both are important subjects in education, but are not central to the development of the curriculum.
  My right hon. Friend the Member for Halton (Mr. Oakes) put his finger on the point when he said that it was almost inevitable that intelligent and canny local education authorities would apply for grants for work that they were doing already or were going to do, anyway. Local education authorities throughout the country will be reading Hansard tomorrow and looking at the checklist of examples that the Secretary of State gave and that will be financed. Canny local education authorities will pm in for those projects. They will not go for the innovative and developmental projects that they might otherwise have decided on. They will inevitably apply for what they think they can get, rather than for what is needed in their area or for what is best for the development of education in their areas.
  Sadly, the Secretary of State did not outline the scale of the projects. He gave us no information about the financial size of the projects. Some of the Schools Council projects that have taken place in the past 18 or 19 years have been very expensive and long term. The Secretary of State will have to give us some idea of the length of the commitment that he is prepared to give as well as of his financial commitment. He should set upper and lower limits for the grants, so that local education authorities have some idea of the variation in the scale of projects that can be applied for.
  The Secretary of State did not tell us how his Department intends to assess or monitor the grants once they have been given. Who is to do the monitoring? Her Majesty's inspectorate is already over-pressed and understaffed. If that body is to carry out the monitoring, will he be providing additional inspectors? Similarly, will he allow local education authorities to increase their staffs to meet the responsibilities of the grants for which they are successful? Most importantly, will the Minister tonight give an absolute guarantee that no money will go to the private sector through this legislation? If the Secretary of State is taxing local education authorities he has a duty to ensure that the money is paid only to local education authorities and not to the private sector. I am grateful to the Minister for his acknowledgement. However, it would be most helpful if he could give us a categoric assurance

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  at the end of the debate instead of indicating as much to me across the Floor of the Chamber. Such matters must be explored in Committee. To date, the Secretary of State has left them very vague and open.
  Finally, what is important is not the mechanics of how the legislation will work, or the taxation or finance element, but the educational element and, more particularly, the question of curriculum innovation and development. The Secretary of State might have done better if he had looked at the record of the Schools Council in the past few years. He might have seen how unnecessary such legislation is in its present form and how much better things might have been done. The Schools Council was founded in 1964 as a result of the Lockwood report, which suggested that it should keep under review curricular teaching methods and examination in primary and secondary schools.
  By and large, the council has done that well. In the past 18 years it has initiated 180 curriculum projects. In the Bill, the grant is left to the Secretary of State's subjective edict. However, the Schools Council is representative of all sides of education. It is representative of the providers of education, of teachers and education authorities, and also of consumers, parents and employers. Regrettably, it is not representative of the students. However, its representative nature makes it an extremely knowledgeable consensus body, which understands the true needs and problems of curriculum development.
  The council's record, particularly in the late 1970s—under the chairmanship of John Tomlinson, one of the most distinguished educationists in this country and the director of education for Cheshire education authority—deserves great respect. The sort of projects that it has funded shows the scope available if we are to get the best out of the money, however unhappily it has been raised. The Secretary of State should address his mind, for example, to the development of the Nuffield Foundation's work on mathematics and science — which is still continuing through the Schools Council; to project technology, which took place in 1967; to computers in the curriculum; to language in use; to the breakthrough to literacy; and not least to the council's very valuable work in the arts, particularly the visual arts, and in its recent studies in art education, which included the role of active visual artists and the part that they can play in helping children's education.
  Those are all complex areas. I have had some experience of them as I was once the principal of an education centre that was specifically set up to develop curriculum initiatives. The one thing that I learnt from my eight years of doing that job was that planning curriculum developments, making them relevant to children's needs and capable of being put into practice, was extremely difficult. Such initiatives as those in the Bill are not the answer. The curriculum is a complex and delicate balance of initiatives, responsibilities and problems. Forcing local education authorities to make competitive bids against each other for a finite sum of money is not the best way of obtaining the most from our teachers or from our elected representatives in local education authorities who are responsible for the planning. It is not even the best way of getting the best from students in our education system. Competitive bids simply are not the answer. The problem is far too complicated and difficult for that. Answers to
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  such difficult questions can be found only through wide discussion and by achieving a consensus among all parties in education.
  The only glimmer of hope in the Bill can be found in clause 3, where the House is at least reassured that an affirmative resolution will be necessary. Clause 3 states that there must be consultation with such bodies representing the LEAs as appear to him appropriate. I hope that the Secretary of State will take that seriously. If he talks to the Tory-controlled ACC, to ILEA, to the unions, the Schools Council or to any local education authority he will find out that this Bill is not the way to go about curriculum development. As such, it is a bad Bill. We desperately need new curriculum ideas. In many ways education still lags badly behind the needs and educational ideals that we have for our children.
  Secondary schools are hampered in providing the standards of education that students could be achieving by the desperate requirement for knowledge for the sake of knowledge, and the assessment of such knowledge throughout the examination system. That, more than anything else, is hampering curriculum developments. It is smothering the imagination of both teachers and students, which could be used in the development of the true potential and greater ability, both academic and emotional, of all children. That is an enormous challenge for the Secretary of State.
  From what my hon. Friend the Member for Durham, North said in his speech, I know that when he becomes Secretary of State he will rise to that challenge. He will ensure that there is curriculum development along those lines. The Bill is educationally misconceived and democratically positively malign. It will do nothing to improve education. The Secretary of State must recognise that reducing expenditure on education in some local education authorities will damage education. For that reason I cannot commend the Bill to the House. The Opposition will vote against it tonight and oppose it in Committee.
  8.21 pm
  Mr. Gerald Bowden: I welcome the proposals in the Bill for particular and personal reasons. The particular reason is that I am interested to discover how it will apply to the ILEA—the largest spender on and provider of education in Britain. The personal interest is my long-term, indeed lifetime, relationship with the ILEA. I was a pupil in one of its schools, a teacher in one of its schools, a parent of children in its schools, I am a governor of two of its schools, I was a member of the ILEA and I am a co-opted member of the ILEA's education committee.
  I find it a charming irony that Conservative Members who have been involved and educated in the maintained sector should be hectored and lectured by the old Etonians and Wykehamists who throng the Opposition Benches.
  I understand and recognise that the ILEA has been a most innovative body, introducing education and academic initiatives that should be commended. It is the envy of many other education authorities. But during the past few years some initiatives have been developed and introduced which are at best silly and at worst sinister and subversive. That has happened against a background not of shortage of money but of ample funds. The ILEA, as a single service authority, has never been short of money. It has always been capable of providing generously for its

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  chosen projects. In recent years, however, rather sinister, silly and educationally unnecessary activities have been developed. In the present economic climate, crackpot, harebrained, half-baked ideas have been developed suggesting that there is something subversive or sexist about gender roles that are recognised throughout literature and the world at large.
  It is a great absurdity to hold inquisitions, abolish a number of recognised textbooks and introduce new material that shows granny with her Black and Decker putting up a shelf and grandad darning the socks. Not only is that absurd, but pupils recognise that it has no relevance to the world in which they are growing up.
  The preoccupation of the ILEA with political education has its sinister undertones and overtones. Under the veil of what was once seen as a proper study of constitutional aspects of our life—we could call it "civics"—a number of subversive political nostrums have been introduced. The art of protest is emerging. Much of what is essentially fundamental to education has been lost sight of in the tangle of new initiatives.
  There are two guiding principles on which the Opposition and the Government agree. First, education is about pupils and their needs—and secondary schools should be directed towards that end. Secondly, but less acceptable to the Opposition, it is about money and priorities. We must face the fact that in the years to come budgets and expenditure cannot rise uncontrolled. The balance of priorities and the needs of pupils must be taken together into account. The pupil requirement is that education should be relevant to life. That view has been accepted in 40 different sharps and flats during this debate. It should enable a person to enjoy a richer and fuller life as a result of his education. It follows that in enjoying an enriched life there should be opportunities to find employment. There is no contradiction and conflict between training and education in their broadest sense. The two go hand in hand.
  I am disturbed by what employers in London tell me—that when they interview pupils from inner London schools they are horrified by their lack of basic learning. They say that the standard of literacy and numeracy in many schools is not acceptable either for the pupil or those who may wish to employ him. We are in the ironic position that many education initiatives in London are simply a return to basics.
  The point was raised earlier in the debate of whether we have a curriculum-led staffing policy. About three years ago in London there was a shortage of teachers of mathematics. None could be found to give the basic mathematics teaching needed in the majority of schools. Advertisements both within and without the London education authority area could not find them. A deputation was sent to Canada to recruit mathematics teachers. If ever there was in indictment, an indication of direction being lost or the wrong direction being taken, that was it. Planning did not provide the opportunity to teach basic mathematics in our schools, yet every other peripheral activity was encouraged and flourished. The provision of adequate basic learning skills holds an important initiative that could apply to the education authority in the capital. It would be practical and academic; it would be relevant; it would be what employers and parents want and have a right to expect. Indeed, more to the point, it would be what pupils want and have a right to expect. I am saying obliquely and directly that ILEA. for its good intentions
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  and innovations, has not prepared itself to meet the needs of the future in inner London and the need for employment for those who go through its schools.
  When the future structure of ILEA is to be reviewed and when we put forward proposals on how it is to be controlled, we must consider seriously how a responsive and responsible authority, accountable to the public at large, can be introduced to run it. ILEA members have not a God-given right to decide the curriculum. Nor, indeed, do teachers have a divine right to decide what they should teach. The needs of the pupils and the preparation of those pupils for life should lie behind the provision of an Inner London education authority's initiative. The Bill will provide a nudge, a touch on the tiller of setting the right direction for the biggest education authority which, at the moment, has slightly lost its way.
  For the major part of the debate we have dwelt on the provision of education and the initiatives for school children. But another need is emerging. There are those who through no fault of their own find themselves unemployed in mid-career, and there are those who decide in mid-career that they want to change direction and do a different job. The education system should provide an opportunity for them to make that change, to be retrained, and to have the opportunity to set out on a different course at a later stage in life—the opportunity for the mature student in higher education. In many trades and professions there is a need for updating and mid-career training. Such initiatives should be considered in the provisions of the Bill.
  I should like to deal for a moment with adult education—as opposed to higher education—which has received very little support in the past. Indeed it might now be considered the Cinderella of education. In future people's working lives will be shorter. People will be retiring earlier and training for leisure must be a positive consideration and provided for in our education system so that lively minds and lively bodies at 60 can find fulfilment in their later years while they are still active enough to enjoy them.
  While I commend to the Secretary of State the need to consider initiatives in the secondary school area, there is a continuing need for these initiatives to be reflected throughout the whole of a person's life. Education is about people and educational initiatives are about ensuring that they live their lives to the full. In this spirit, I commend the Bill to the House.
  8.32 pm
  Mr. Michael Stern: I should like to refer to my experience with a measure that was remarkably similar to the proposal in part I of the Bill for the removal of up to 0·5 per cent. of education expenditure and its use for education specific grants. During the mid-1970s I was governor of an education body. I found to my horror that the education authority to which the education body was subject had made proposals almost identical to those contained in the Bill, except that the figure was a fixed 1 per cent. of our total spending rather than up to 0·5 per cent.
  I was charged by the chairman of the governing body with marshalling the arguments against that proposal to put to the education authority. I admit that most of the arguments that I found at the time I have heard adduced by Opposition Members today. I found myself arguing against the measure to remove 1 per cent. of our budget

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  and replace it with spending on certain initiatives. I argued that the removal of that money would make impossible our task of providing efficient education in that institution. I argued that our spending was already so stretched that to remove 1 per cent. from our provision would make impossible our task of providing education of the standard that we required.
  I argued that to remove that 1 per cent. of spending power and replace it with schemes decided on centrally would create an unacceptable loss to us as governors in controlling the education in our institution. I argued that that 1 per cent. would be no more than the thin end of the wedge; that if the authority took 1 per cent. of our spending away from us that year in favour of spending under its control, the following year it would take more than 1 per cent., and so on. I found myself arguing at that time that we were being asked to replace education of which we knew the quality with education of which we could only be suspicious, as we would have no say over the direction of new projects. I also argued that we should be forced into making competitive bids over what was previously under our control.
  I used all those arguments to the local authority at the time. All those arguments have been heard in various forms from Opposition Members today. I am delighted to tell hon. Members, and particularly the hon. Member for Durham, North (Mr. Radice), that experience showed all of them to be ill-founded. Once the scheme to remove 1 per cent. of our funding and replace it with centrally selected projects came into operation, we found that we were able to provide education of the standard that we found acceptable with the money that we had available.
  We discovered that, although we had previously thought that our spending had been stretched to the limit to provide the standard of education that we required in the institution that we governed, we were able to recast matters so as still to provide education of a standard and breadth that was acceptable to us. We found that, despite the loss of 1 per cent. of our spending, we still had sufficient power to adapt the education in our institution to the local requirements which, as governors, we identified. We discovered that the authority, having said that it would remove only 1 per cent., kept to its word that year and in future years, so that we remained reasonably certain of the level of spending that we would control. We also found that, although we had been suspicious of centrally-directed projects and initiatives, we were able to put in a bid for part of the funding which directly affected the institution we were governing, which received considerable support from the central authority and which gave rise in the long term to an improvement in education in that authority.
  When I say that the institution to which I am referring and of which I was a governor was the St. Marylebone institute of adult education and that the authority which took those measures was the Inner London education authority, hon. Members who know my background may be surprised to learn that I come here today not to bury ILEA but to praise it. I have explained that an initiative of which initially I had tremendous suspicion—I can therefore understand the suspicion and fear with which virtually the same initiative is approached by Opposition Members—was found to be beneficial, was not found to
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  be nearly as damaging as I and many of the governors had anticipated and acted to the long-term benefit of adult education in inner London.
  Mr. Andrew F. Bennett: The hon. Gentleman heard his colleague point out that ILEA was well funded. Therefore, a reduction in its expenditure would be likely to cause fewer problems than those faced by most other state education establishments, which are finding the squeeze and the cuts hard on them. Is the hon. Gentleman satisfied that in other parts of the education system it is possible to impose those cuts to release the money?
  Mr. Stern: I am thinking of the situation some years ago when, the hon. Gentleman may feel, education was well funded. Speaking from many years' experience as a governor of several education institutions while Labour Governments were in power, I know that no institution is ever well enough funded in the view of its governing body and that no education service has been created which could not find ways of using additional funds were they to become available.
  I accept that a cut of 1 per cent., whatever the sums involved, can be nothing other than potentially serious, yet at the time we coped well with such a cut. Therefore, I suggest to Opposition Members that, in the light of ILEA's experience, they should look with more favour on a smaller cut, especially as they are in the ideal position of being able to go to ILEA and seek reassurance about the lack of harm caused and positive benefit gained from the initiative that it proposed and carried out in the mid-1970s.
  Several references have been made to the statement by the Association of County Councils that it has doubts about the measure. I have great respect for the association. It does not consist entirely of education authorities, and often members who serve on it are not directly concerned with education. I have always listened to that association with respect, but in recent months I have formed the impression that, in seeking to preserve what it sees as the best form of local government, the association is in great danger of ossifying local government.
  Local government, in education and in other spheres, must undoubtedly change, and this modest measure is clearly designed to change it in favour of greater innovation and opportunity for experiment. It is unfortunate that the association attacks the measure purely because it removes initiative from one area and places it in another.
  The initiatives that are greatly needed in education will come more readily if more bodies and areas of Government are considering initiatives. We are seeking new initiatives in education. In many areas the formal structure of education can be too slow to respond.
  I wholeheartedly support the Bill because I believe that it will speed up the response to changing demands on the education services and enable greater discussion and experiment within the service, with initiatives designed to adapt to today's conditions rather than to those of five years ago.
  8.44 pm
  Mr. Gerald Bermingham: I understand that the hon. Member for Bristol, North-West (Mr. Stern) is an accountant by profession, but his mathematics were not entirely correct. His speech reminded me of Caligula trying to justify the election of

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  his horse. It appears that the Association of County Councils, because it is Conservative-controlled, must be lauded and praised when it is on one's side, but when it shows some sense and realism it must be castigated and questioned. The hon. Gentleman may not know it, but the ACC has an education section with various committees, which have prompted the opposition to the Bill. Those committees have understood what is plain to anyone who has any sense or knowledge of education. It is that if we take £46 million out of the general education pool, there will be £46 million less in the general education pool for the education of our children. I know that the £46 million will be returned in specialised grants, but let us consider what remains for education in Britain.
  I intervened in the speech of the hon. Member for Dulwich (Mr. Bowden) to ask him whether he believed that the HMI report was a little smaller this year because there was a little less to investigate. There is less education available in Britain today, and perhaps two examples from the report will make the case for me. The first is that the overall provision of books in secondary schools was judged to be satisfactory in only two thirds of local education areas. That means that there are insufficient books in one third of education areas. The hon. Member for Dulwich referred to standards, but it helps children to learn if they have books. We are not giving them books, and in some areas the local parent-teacher associations are raising money to buy books. We are supposed to have an education system, yet parents must buy books. How far backwards can we go?
  The report also states:
  "In most secondary schools, existing levels of resources could not now be stretched to meet the demands legitimately placed on them by the community at large, nor could they in all cases maintain the existing basic provision."
  That is the present position, yet £46 million is to be taken away.
  If one examines the schedules of the areas that must reduce their educational provision, especially in the shire counties, it is no wonder that the ACC has woken up and has suddenly realised that £46 million will be taken away and then given back for the special projects. It will hit the fabric of the system. It is all very well for employers to complain that children do not have the right levels of numeracy and literacy, but we should provide adequately staffed remedial departments in schools.
  Mr. Flannery: The hon. Member for Bristol, North-West (Mr. Stern) equated the awakening of the ACC to the great danger that lack of money is causing to the education of our children with ossification, as though the association were dead and gone. Does my hon. Friend agree that the proof that the association is not ossifying is that it has awakened to the realities of the problems facing our children?
  Mr. Bermingham: I agree entirely with my hon. Friend the Member for Sheffield, Hillsborough (Mr. Flannery). It is, indeed, an awakening.
  Unless resources are available for special education in schools, it will not take place. Some children need special help and I do not deny that such help is expensive. Many other developments are needed, but they will not take place if the resources are not available. To take just one example, there have been adverse comments from the European Court of Human Rights. As the Minister knows, I have been asking questions about special schools,
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  punishment, and so on in relation to the new regulations. The probable outcome of the European Court procedures will be a ruling that corporal punishment in schools is degrading and should be abolished in accordance with the charter. If it is abolished the schools will need resources. Where is the money to come from if the paltry amount now available is further diminished by the withdrawal of £46 million?
  It has been said that the proposals will encourage innovation and that we should see what can be done. With great respect, that is rubbish. It is the thin end of the wedge of centralised control for the education sector. I offer a simple scenario. The education authorities will be £46 million poorer, but they may then bid for a share in the pot of gold. Let us suppose that in year 1 authority A makes a bid for some special project. We do not yet know the qualifications, the qualities or the nature of such projects, but let us suppose that the bid succeeds. Is there any guarantee that the project will be allowed to continue in years 2, 3, 4 and 5? Will a lucky few in certain areas be the main beneficiaries of the Bill?
  I believe that education is for all. That was the concept behind the 1944 Act. In reality, however, education is steadily becoming something for the rich few. Soon it will be for the selected few and the rich few. If the education system is to serve all the people, it should do just that. the priorities must be determined locally. The facilities and resources should be available for local authorities to do that. After all, their ears are closer to the ground than those of the Department.
  Without wishing to be rude, I must say that some of the Department's decisions have left one a little puzzled. Politically, one may not always like the decisions made by education authorities in the shire counties or the metropolitan districts, but by and large they tend to reflect the views of the people in the area. In the metropolitan districts, at least, local councillors test their popularity and their judgment with the electorate not once in four or five years but every year. Moreover, local councillors tend to be governors of district schools and to listen to what the teachers, the pupils and the parents have to say.
  As has been rightly said, this is a bad Bill. It is a mean Bill. It takes away from all to give to the few. I cannot see that there is ever any justification in our society for depriving the many to satisfy the whims of the lucky few.
  8.54 pm
  Mr. Harry Greenway: I am pleased to speak after the hon. Member for St. Helens, South (Mr. Bermingham). As a noted solicitor, he speaks of the theory rather than the practice of education. If I may say so without meanness, that was clear from his contribution.
  Mr. Bermingham: Will the hon. Gentleman give way?
  Mr. Greenway: No, I shall not give way.
  The maiden speech of my hon. Friend the Member for Stevenage (Mr. Wood) was a notable first effort, and we look forward to hearing much more from him.
  We have heard eloquent and striking lectures from a Wykehamist and an Etonian. Having run a school of over 2,000 pupils for seven years, I found it extraordinary to hear what an Etonian said about what will happen to comprehensive schooling. With respect, the hon. Member for Stoke-on-Trent, Central (Mr. Fisher) did not seem to

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  have a feeling for what happens in comprehensive schools. He referred to the valuable work of the Schools Council and said that it was essential that its work should continue. The Select Committee has recommended the abolition of the Schools Council. As one who was on the receiving end of the Schools Council's work, I can say that that body has made no impact on the classrooms. It has cost a great deal of money. To say that people who are assembled on the Schools Council are drawn from all walks of life and have, therefore, a great contribution to make is to speak without knowledge of the position. Opposition Members have been hectoring my colleagues who have a long experience of education.
  Mr. Radice: Most of us learn not just from running schools but from having children in the types of schools about which we have been talking. I have learnt about state education by having my children go through it. I can pick out the achievements and the problems of education. The hon. Gentleman should not decry those Opposition Members who have been fortunate enough to have a privileged education and who have learnt about the state system by sending their children to those schools. I should like to know how many Conservative Members who have been so eloquent about maintaining this system send their children to those schools.
  Mr. Greenway: The answer is most. I respect anyone who learns from secondhand experience. That is a form of learning, and it should be respected.
  I look forward to hearing the reply by the hon. Member for Denton and Reddish (Mr. Bennett). I extend a warm welcome to him in his new role. He has battled hard and long for education, although I have not always agreed with him. He has been a doughty fighter for his part, and it is good to see his efforts recognised.
  I have been pleased to have been associated with the original impetus behind the Bill. As a member of the Select Committee on Education, Science and Arts during the last Parliament, I was party to recommendation No. 62 in the report on the secondary school curriculum. The recommendation states:
  "the DES should have the ability … to fund direct such new developments on a temporary basis as may seem to it to be desirable".
  It is easy to jump to the conclusion that the Bill is a sad move towards centralism because the explanatory and financial memorandum states,
  "Clause 1 empowers the Secretary of State to pay education support grants to local education authorities … in support of expenditure which it appears to him those authorities should be encouraged to incur".
  If one comes to that conclusion, one misses the thrust of the Bill.
  During the last Parliament, the Select Committee visited a large number of schools and other institutions, including non-advanced further education institutions and advanced further education institutions. We have no doubt that it was necessary to give a central thrust of the type that the Bill contains.
  The Select Committee report includes the following important statement about these roles—the quotation has not been mentioned previously:
  "Local authorities have a duty to make the best possible provision in the light of local wishes and circumstances; with
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  Government and Parliament having the duty to see that the overall quality of provision matches national aspirations and that it is distributed with some degree of equity through the country."
  I am sure that my right hon. Friend the Secretary of State and my hon. Friend who will reply will bear that quotation in mind. A fair distribution will be of central importance. The hon. Member for Sheffield, Hillsborough (Mr. Flannery) mentioned that point.
  Given the delineation of roles, many of us would like to know what system of ensuring fairness will be adopted when allocating money to local education authorities after receiving their bids. I hope that my hon. Friend will answer that question.
  The measure introduces greater flexibility as the Secretary of State can implement suddenly needed new schemes. They might include more software for micros in schools, as has been mentioned, and the training of more computer teachers equipped to handle computer education. New initiatives are needed to put more maths and RE teachers, home economists and craft teachers into schools. More educational psychologists are required to help implement Warnock. The recommendations contained in the 1981 Act pushed that point, and it seems to be an area of great need, as Mary Warnock pointed out in The Times Educational Supplement of 11 November when she said:
  "I heard some educational psychologists complaining that just when their contribution was beginning to be better understood by schools and by parents, they found that they had no time to carry out their proper tasks because they were so busy completing statements for children with better needs. Far more children were the subject of those statements than we had envisaged."
  I should like to say many things about the Bill, but time is pressing. I offer a few suggestions where I believe new initiatives would be valuable once the Bill is passed. The education of 16 to 19-year-old children and young people with special needs requires research and new initiatives. Parents of such children and young people need to know what is available to their children and need to be enthused about it. They need the support of education at that level. The Act could result in useful experimentation.
  I should also like to see holiday courses provided for bright children approaching examinations. We forget about the hundreds of thousands of bright children who are not achieving what they should. Under-achievement poses massive problems for schools. There is no way in which that can be glossed over by society.
  There should be weekend courses for children of every level of ability and aptitude. I introduced some in my last school and found them successful. I managed to obtain some money from private sources to take children to the sea and to the country and put on special courses for them. Speakers were invited to talk and stimulate them. Bright children in our comprehensive schools do not receive that sort of stimulation otherwise. They do not have the good fortune of children at Winchester and Eton. I know that top generals and politicians visit and talk at those schools. We could set up courses which would enrich the lives of those children and stimulate their wish to learn more to become better motivated citizens. That is a possible option.
  There should be more adventure courses for all. Children from all sorts of backgrounds are stimulated by them. The courses have suffered in recent years because they have not changed as they should. They have remained under the Outward Bound concept, which was notable and valuable, but there is room for change and new initiatives. Perhaps the Bill offers a way forward.

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  My hon. Friend the Member for Dulwich (Mr. Bowden) said that new initiatives in adult education could do nothing but good. There is no question about that. Unemployed and elderly people would greatly benefit. I have seen 18-year-olds and centenarians alike enjoying adult education. There should be an initiative for them. I would not rule it out, particularly as it would keep the elderly people active in mind and therefore in body. They would be happy, and the scheme would benefit society.
  I warmly welcome and support the Bill.
  9.6 pm
  Mr. Andrew F. Bennett: I thank the hon. Member for Ealing, North (Mr. Greenway) for his kind words and congratulate him on being one of those who brought to the end of the debate a little enthusiasm for education. I also congratulate the hon. Member for Stevenage (Mr. Wood) on his maiden speech. I hope that we hear him speak on education many more times.
  The Secretary of State, in opening the debate, did his Prince of Denmark piece of self-doubt and soul-searching; sadly it is no longer his tragedy. Increasingly, his failure to stand up for education has become a tragedy for education and the nation. For the past 30 years there was a political consensus that education was a good and desirable commodity. The only political arguments were about how quickly extra resources could be made available. There was a little argument about where they should go. In the past few years there seems to have been a complete change. The Government appear no longer to believe in the value or virtue of education. They certainly no longer believe in educational expansion. The Secretary of State seems happy to see much that has been achieved in education destroyed.
  The Opposition believe that the Treasury's demands for cuts in Government spending for the next year and future years are unnecessary and wrong. Even in the Conservative party, the Secretary of State for Social Services and the Secretary of State for Defence strongly objected, even if it did not have much effect, to the idea that the budget of their Departments could be cut. The Secretary of State for Education and Science did not seem to realise that his share of the budget had been drastically cut. If he did realise, it appears that he did not want to do anything about it. Education has been and is being savagely cut in real terms. It is against that background that we have to consider the Bill. It is a viper of a Bill, as my right hon. Friend the Member for Halton (Mr. Oakes) described it.
  Our education system is extremely hard-pressed, yet the Secretary of State insists in the Bill that local education authorities can find extra cuts of half per cent., which is roughly £46 million, so that he can encourage experiments in education. Not only is it wrong to ask the LEAs to find the money, but it makes serious inroads into the principle of local democracy. He is insisting that LEAs should cut essential services so that he can carry out experiments that he considers desirable. He then asks the LEAs to bid for the money for them.
  The hon. Member for Rugby and Kenilworth (Mr. Pawsey) asked, "What is half per cent., or £46 million?" He had his answer from the hon. Member for Cambridgeshire, North-East (Mr. Freud), who said that £46 million worked out at five or six teachers' salaries in each of our constituencies. It is not half per cent. anyway,
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  because local authorities have virtually no control over 70 per cent. or more of their expenditure. It is fixed. The Government fix the interest rates and more or less fix the teachers' salaries. It is not half per cent. that the Government are asking to have control over. They want control over 1·5 per cent. to 2 per cent. of the budget, where local authorities can choose how much they spend or where they can make cuts.
  If it was new money, there would be a different reaction. The Secretary of State claimed that he had to have the measure if he was to carry out educational experiments. The Secretary of State does not need the Bill if he wishes to have new money. He can amend the Education Act 1962.
  Mrs. Rumbold: I do not understand why new money, as opposed to the money that the local authorities already receive, would make any difference, since the local authorities have an enormous amount of discretion as to how they expend the money that they receive. I hope that the hon. Gentleman will agree with me that many authorities fall into the trap of thinking that they have duties that do not exist. Can the hon. Gentleman explain why new money would make any difference?
  Mr. Bennett: Local authorities do not have sufficient money to carry out their existing duties. Much as they would like to carry out experiments, and many do, if insufficient money is available, it is difficult to justify carrying out experiments when the authority is not carry out its basic duties. The hon. Member for Mitcham and Morden (Mrs. Rumbold) may be able to tell local authorities to cut this, that and the other. Having visited schools, my evidence is that further cuts cannot be made. If we were dealing with new money, we would be putting more resources into education. New money could be used to foster and encourage experiments. If the Secretary of State wished to do that, he could have introduced a simple amendment to the Education Act 1962. However, he has not. He is introducing a measure that enables aim to control the expenditure of local authorities. Several Conservative Members who were on the Select Committee developed that argument, though perhaps in code. The hon. Members for Ealing, North and for Bedfordshire, South-West (Mr. Madel) said that the Select Committee had favoured experimentation, but its underlying message was that extra resources had to be available. That is the key issue. If extra money is available such things are possible. Bearing in mind the hard-pressed position of most local authorities, providing extra money is more difficult.
  I wish to cover four areas in my wind-up for the Opposition. First, I wish to show how hard pressed local authorities are and how the half per cent. cut will add to the existing cuts and cause damage to our children's education.
  Secondly, I wish to show that local authorities are trying to do much of the experimental work to which the Secretary of State referred. Thirdly, I wish to ask some questions about the areas to which the right hon. Gentleman wishes to extend the initiative. Fourthly, I wish to point to the many areas in local education where experiments are not needed, but where we need cash to translate what has been done experimentally into something that is generally available.
  Few Conservative Members seem to realise how hard-pressed education is, especially the schools. They seem to

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  have taken no notice of the warnings or reports by Her Majesty's inspectors or even to have gone into schools. They seem to believe that because rolls are falling spending can be cut on a 1:1 ratio.
  Education cannot work in that way. Most education costs are fixed. If pupil numbers fall, the costs remain the same. The principal cost of school buildings is the loan charge. It does not make much difference how many children are in the building. Unless the buildings can be closed and sold, the loan charges remain. Building maintenance does not vary because of the number of children using the building. The cost of maintenance is caused by the elements. The cost of heating schools rises if there are fewer children, because there is less body heat in the building. Savings cannot be made because of falling rolls in areas such as visual aids. We may save a little on materials and paper.
  The cost of running the office, telephone, rates, and the caretakers and most of the services provided by the local authority in the form of advisers and others have little effect on economies of scale.
  The Government claim that savings can be made on teachers. Even that does not work. The primary school of a few years ago with 252 pupils on its roll was staffed by, for example, a head, seven teachers and, if it was lucky, a part-time teacher who could probably carry the remedial class.
  If the number of pupils is reduced to 196—the sort of fall facing most primary schools—and staff numbers are reduced pro rata, the school will be left with a head, six teachers and no part-timers. It may be said that the school will have to get rid of the remedial class and then face a choice: either the head teacher will have to take a class and each teacher take one year or there will have to be six bigger classes—36 in each; still not unreasonable — and mixed-age teaching. That would be a very difficult choice for a head teacher. If a head teaches, every time someone wants to see him and every time another member of the staff is absent two classes will have to be put together. On the other hand, mixed-age teaching leads to considerable problems. It is distressing for a child never to get into the top or oldest class in a school.
  I know of some village schools where mixed-age teaching was very successful, but there are some where it was very unsuccessful. Many schools are having to cope either with a head teaching a class or with mixed-age teaching, which is causing considerable difficulties. In most instances, the schools are making manful efforts to overcome the problems, but some children are suffering.
  Falling rolls have caused acute problems in primary schools, and the same thing is happening in secondary schools. We should remember that comprehensive education was supposed to be comprehensive in two ways — children should be drawn from a wide range of abilities and social composition, and schools should be comprehensive in the range of subjects that they offered.
  Large comprehensive schools can often cope with falling rolls and still offer a variety of subjects. However, we have many small comprehensive schools. There are good reasons for that; we did not want schools to be too large. Many comprehensive schools have sixth form entry, and some are even smaller. Such schools cannot maintain their range of subjects if, with falling rolls, they are expected to suffer a pro rata reduction in teaching
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  numbers. There may be schools where the person who teaches O-level craft subjects can also teach O-level Latin or where the PE teacher can also take German, but that does not happen often. Falling rolls do not offer automatic savings in staff numbers without major reductions in standards.
  We got through the bulge in the school population because we benefited from economies of scale. Having enjoyed the benefits of those savings for 15 years, it is ridiculous for the Government to expect to get major economies from contraction. They want to have it both ways. It is like the schoolboy who plays hookey all week and expects to be in the school football team on Saturday.
  Many education authorities have not been able to bring their teaching numbers down to the Government's target. The result is that they do not have enough money this year to meet their full costs. The Government are asking local authorities to reduce teaching numbers even further next year. There is a problem in making up the money in the teachers' superannuation fund, partly because of the Government's enthusiasm for retiring teachers early, and teachers will expect a pay rise next year. When all that is taken into account, it can be seen that local authorities will have great difficulty in making ends meet, without themselves imposing cuts. It is against that background that the Government are asking for a further half per cent. cut.
  Have the Government looked at the figures involved in making teachers redundant? Local authorities may save money, but by the time the teachers are paid redundancy money, enhanced pensions and sometimes even unemployment money, the bill to the ratepayer and the taxpayer may be as much as the cost of keeping a teacher in work.
  My hon. Friend the Member for Knowsley, South (Mr. Hughes), in a powerful speech, said that a lot of experimental work is already going on in schools and that in his area the Government's scheme would divert resources from existing experimentation into areas that the Secretary of State might regard as useful.
  Which of the experiments that local authorities are now trying does the Secretary of State want to stop and which does he want to encourage? I am amazed by the amount of work that has been done on the introduction of computers into schools. I have come across many schools that have done smashing work with computers but which suffer from a break-in or some other problem. Because the equipment is missing, the programme of teaching is broken. It is probably not good to go back to the traditional chalk but it was much easier to get replacement chalk than it is to get replacement computers if they are vandalised or damaged.
  One of the problems with such innovation is that it is necessary to provide a back-up. It is vital that damaged equipment can be replaced, particularly in special schools, which have done excellent work teaching children how to use computers. The Government must make sure that they provide money so that schools can install not just new equipment but replacements if the original is damaged as a result of fair wear and tear or a break-in.
  Much good work is being done by integrating traditional crafts into practical design courses. In some areas much experimental work is under way as a result of the Government persuading authorities to do so. The danger is that that will stop as a result of the Bill and local authorities will have to bid for money.

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  Some schools have developed links between primary and secondary levels for the teaching of science and French. That is an important development which breaks down the division between the two levels and ensures continuity. There has been some good experimental work in the north-west with girls who under-achieve in maths and science. Schools are seeing whether they can achieve better results by separating the girls from the boys to encourage greater expectations and intentions of excellence.
  All the experimental work that I have described has been embarked upon as a result of careful study by LEAs. The Government are putting that at risk with their half per cent. Local authorities will either abandon such experiments or they will bid for the Secretary of State's money. If LEAs get the money back, the Government will have simply created a bureaucracy through which LEAs bid for the money that they want to do something that they used to do. If they do not get the money much valuable work will be lost.
  The Secretary of State listed some of the subjects on which he wanted experimentation. The Opposition have considerable reservations about it. The Minister has been asked whether the Bill is a back door for the Government initiating experiments in grammar schools. The Under-Secretary of State for Education and Science has been travelling recently and making speeches in which he says that he wants to reintroduce grammar schools. He has done that at Conservative party meetings and not in his ministerial role. The Opposition would like a clear statement that the Government will not use the money to carry through that backward step. Having failed to persuade Conservative local authorities to go against the wishes of parents, it would be unfortunate if they dangled carrots of money to encourage them to embark on such experiments. I hope that the Minister will make it absolutely clear that the Government do not intend to use the money in that way.
  We now have a long list showing what the Minister wants to be developed with the money. They are all being done. Curriculum development is already being pursued. Moreover, who have been pioneering records of achievement—education authorities. The Minister also talks of the Cockcroft report about maths. Many authorities are pursuing it. All that is stopping them doing more is lack of money. If there were some new money we would get somewhere, but without it progress is difficult. The nice bit is about primary schools in rural and inner urban areas being encouraged to adopt good practice. What does the Minister mean by that? It is rather like designing an advert—trying to bring everyone in so that there are some goodies for everyone. We have to remember that we are talking about only £46 million. If he tries to put out a generous prospectus, the Minister ought to fill in a little more of the detail.
  Perhaps the Under-Secretary of State will talk of teacher management, but what are the problems of that? The biggest problem in teacher management at present is that the career prospects for many teachers have disappeared with falling rolls. One of the easiest ways of encouraging teachers to take part in and improve the service is to offer a better career structure. The prospects for promotion motivate people, perhaps sadly, very effectively. How is the Minister to deal with that unless there is to be a very great deal more money for the education service?
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  Several of my hon. Friends argued for equal allocation. The trouble is that some of the poorest areas have the most problems in keeping up with present services and may not be in a position to bid for this money because of their lack of facilities. I ask the Minister to make it clear that there will be a fair distribution of the money over the whole country and that it will not go to a few selected local authorities, either because of the political party which controls them or because of the number of advisers that they may have who are in a position to put together and prepare bids. We all want to know what will be the mechanism for the allocation of this money.
  It was suggested by the Secretary of State that it would be up to the local authorities to make their bids and that, if they did not make bids, less money would be spent. My advice from the Association of County Councils and the Association of Metropolitan Authorities is that they do not want to participate in this scheme. Is the right hon. Gentleman, in a sense, giving them a veto? If none of them makes any bid for this money, presumably he will not take money off them. It may be that in the end they will not be able to hold ranks. If they hold ranks, will the Secretary of State force them to take some of this money?
  I suggest that if the Secretary of State really wants to do some innovating in education there are some really simple measures that he can take. Almost every primary school has empty classroom spaces. Large parts of the country have very few nursery classes. It would be easy to establish nursery classes in those schools. It would not cost the Government very much. Nursery classes can often be part-time, mornings or afternoons only. That means paying a teacher half salary. Comparing the pay of a teacher on half salary with paying that same teacher unemployment and other benefits produces only a marginal difference. The Government could usefully employ people in the community to teach in nursery school classes without adding to public expenditure. That would ensure that far more children got off on the right foot when they arrived at ordinary schools. They would at least have the language to be able to communicate and start to take advantage of the rest of the money that we spent on education.
  I put to the Minister what has happened in most primary schools. His enthusiasm for falling rolls and wanting teacher numbers to be cut has meant that remedial department after remedial department has disappeared from our primary schools. Everyone knows the benefit of taking out those children who have learning difficulties, whether in reading or in numeracy, and teaching them in small groups. That was being done extremely well five, six or seven years ago. It has now disappeared from school after school. If the Government have any money, they could put back that provision. Many of the teachers who ran those remedial groups are now taking mainstream classes in the same schools. The skills are still there. It merely means giving the education authority the number of staff to re-establish that sort of teaching.
  I also believe that much more has to be done to develop the curriculum. In my view, the best way of helping curriculum development is to put in teachers and make it possible for them to move from area to area. To do it, again the Government should be putting up new money.
  The comprehensive system has not been completed. There are a great many schools that did not get their final bits of building. In this connection I make one constituency point. I have Audenshaw high school in my

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  constituency. It was built originally as a grammar school. There was an HMI report in 1938 stating that it needed a gymnasium. It still needs it all these years afterwards, even though today it is a successful comprehensive school. Nevertheless, three quarters of the children have to spend their time outside, whatever the weather, because there is no gymnasium. There are also the questions of community schools and education for life. These are all issues on which the Government could spend money.
  This is a disappointing Bill. It offers teachers, children, students, lecturers, educationists, local authority councillors and administrators no new money and no relief from the present critical problems in education. There is the danger that existing resources will be diverted to the periphery, while essentials will be neglected. The evidence is that the Government do not trust local democracy and want to weaken the whole concept of democracy. If the Government continue to attack democracy in the way they have done, how can they expect people to stand up for national democracy? It is important that we, of all people, say that we have faith in elections, whether for local democracy or national democracy.
  I ask the Government to abandon the Bill, even at this late stage, and turn their energy and resources to campaigning for decent education for all, from the cradle to the grave. They should remember that commercial advertising is only too willing to extol the virtues of consumer goods. The Government should be demanding and extolling the virtues of education and asking their colleagues to spend more in that direction. They should speak out loud and clear about the value and virtue of education. They should campaign for more and more resources to be spent on education, and not meekly lie down in the face of Treasury plans to cut education spending in real terms.
  The trouble with this Bill is that it is a little cosmetic measure when the whole fabric of education is at stake. I hope that the Bill will be defeated, and that Ministers will turn their attention to saving education from the cuts and apathy that this Government are producing.
  9.31 pm
  The Under-Secretary of State for Education and Science (Mr. Bob Dunn): I begin by congratulating my hon. Friend the Member for Stevenage (Mr. Wood) on an excellent maiden speech. It was confidently delivered and showed the great expertise that he will bring to bear in our debates in this Chamber. I look forward to hearing him speak on many occasions.
  This has been a stimulating debate, despite the fact that most Opposition Members to whom I have had the dubious pleasure of listening hardly referred to the Bill. About nine of them have spoken. I was delighted to see in the Chamber my old friend the hon. Member for Sheffield, Hillsborough (Mr. Flannery). If the share of votes that he achieved at the last election is any indication, this will be his last Parliament. In the formerly safe Labour seat of Hillsborough, only 37 per cent. of those who voted supported him, while 63 per cent. voted against him.
  I wish to say two other things about the hon. Gentleman. It has been my general opinion that if the hon. Gentleman is against something, one is normally doing the right thing if one is for it. Secondly, he used great words
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  to condemn the recommendation of the Select Committee on which the Bill is based. The Select Committee said that the Department of Education and Science
  "should have the ability, or use existing powers where it has them, to fund direct such new developments on a temporary basis as may seem to it to be desirable".
  The hon. Member for Hillsborough condemned that. He said that it was bad, awful, malign—and other such words. The quotation is from the minutes of the proceedings of the Select Committee, paper 116, part I, dated December 1981. That recommendation, which is in paragraph 9.35 of the report, was agreed without a Division. I understand from reading the report that the hon. Gentleman was present. If he was, why did he not precipitate a Division to show his opposition? If I have read the report incorrectly, as I might have done, and the hon. Gentleman was not there, why was he not present to prevent such an alleged enormity from being enacted? We must understand the basis of that opposition.
  The hon. Member for Stoke-on-Trent, Central (Mr. Fisher) raised several points. Of all the speeches that I have heard from the Opposition tonight, including those from the Opposition Front Bench, his was perhaps the best, both in its content and in its questions. I hope that my remarks will not be considered the kiss of death to what might be a promising career.
  The hon. Gentleman asked about money going to the private sector. I assure him that the grants will be paid only to local education authorities. Clause 1(2) clearly states:
  "Education support grants shall be payable to local education authorities in England and Wales".
  The grants will be paid in support of expenditure by local education authorities. However, I should be misleading all concerned if I failed to add that the local authority expenditure supported by grant could take the form of payments to third parties. By that I mean voluntary organisations, youth clubs and other such youth service interests. However, I understand the hon. Gentleman's concern and will attempt to allay it in Committee. I can do no more than that at this stage.
  I congratulate the hon. Member for Durham, North (Mr. Radice) on his maiden speech from the Front Bench, and I congratulate also his colleague the hon. Member for Denton and Reddish (Mr. Bennett). I have always liked the hon. Member for Denton and Reddish, because in Committee on the Education Bill he was always a strong advocate of his case. He always managed to introduce a touch of humour to our proceedings which his fierce appearance wrongly suggests he lacks.
  I listened to the comments about my advocating a return to selection. I might have been acting in a political or ministerial context, but my remarks have always been linked to the powers that the Government created under the Education Act 1980. In other words, local education authorities have the power to make proposals about the reorganisation of secondary education in their communities, subject to approval by the Secretary of State for Education and Science under section 12 of the Act. The hon. Member for Durham, North castigated me for doing just that. As the Minister responsible for schools, my role is to remind local education authorities of their precise powers under the law. If I did not do that, I should be failing in my duty.
  Compared with the legislation that was passed by the Labour Government, our behaviour is as different as chalk from cheese. I remember circular 10/65, which requested

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  local education authorities to reorganise along comprehensive lines. Then 11 years later, Mrs. Williams, the former right hon. Member for Hertford and Stevenage, who sadly—or, on reflection, not sadly—is no longer a Member of Parliament, enacted the Education Act 1976 requiring local education authorities to go comprehensive regardless of whether they wanted to. Therefore, I do not need any Opposition Member to tell me what speeches to make or to tell the Government what legislation to pass. The charge of centralism and interference must be directed to the Labour party.
  I missed a number of speeches, including that of the hon. Member for Cambridgeshire, North-East (Mr. Freud)——
  Mr. Andrew F. Bennett: Will the experimental money be used to encourage grammar schools?
  Mr. Dunn: The hon. Gentleman must not behave as though he were as dim as a Toc-H lamp. Local education authorities have the power to reorganise. That is the law. We are not changing that.
  I was sorry to miss the remarks of the hon. Member for Cambridgeshire North-East and the right hon. Member for Halton (Mr. Oakes). I shall read their speeches in Hansard tomorrow and write to them on any points that need clarification. That applies also to my hon. Friends the Members for Saffron Walden (Mr. Haselhurst) and for Bedfordshire, South-West (Mr. Madel). I was sorry to miss their valuable contributions.
  Contrary to popular belief, this has been a good debate. I listened with great interest to Members from both sides of the House, and especially to the hon. Member for Stoke-on-Trent, Central. I am delighted to see him in the House. He is a worthy successor to a worthy father. However, he should be on the Conservative Benches, and one day we may see him there—[Interruption.] The hon. Gentleman can look after himself. He had years and years of playing that ball game at Eton.
  I appreciate the concern that has been expressed and will attempt to cover as many of the points raised as time permits. However, I wish first to stress some of the important points made by my right hon. Friend the Secretary of State when he opened the debate. The House will know that the idea of a limited power for the Secretary of State to pay grants to local education authorities is not new. It crops up almost every time a Government perceive a national priority which they wish to encourage. The Government have decided that the idea should be turned into statute law, in response to the Select Committee's unanimous recommendation. I dare say that we shall hear more from Opposition Members about that.
  Mr. Bermingham: Rubbish.
  Mr. Dunn: There is no show without Punch.
  I listened sympathetically to the anxieties expressed by some hon. Members about the scope of the Bill. I appreciate the fear about excessive centralisation, but that is far from the point of the Bill. I shall give the House figures to put the matter in perspective. The hon. Member for Stoke-on-Trent, Central misunderstood my right hon. Friend. The amount of expenditure that the grant could support will he limited by the Bill—and would require primary legislation to change it—to 0·5 per cent. of the Government's plan for local authorities' total expenditure on education. In 1983–84 this was £9·15 billion, and the
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  upper limit on grant-aided expenditure would have been less than £50 million. The primary legislation requirement to change the 0·5 per cent. upwards or downwards is a real safeguard for local authorities. The amount of grant paid will depend on the level of grant awarded for each activity. But even if expenditure were supported to its limits and grant was paid at 70 per cent., the amount of grant paid through ESGs would have been only about £32 million in 1983–4.
  In 1983–84, specific grants paid to local authorities for various purposes totalled approximately £2·4 billion. Education accounts for less than £100 million of that total, although it is the largest local authority service. The proposed education support grants, even if they were used up to the statutory limit, would have increased that figure of £2·4 billion by less than 1·5 per cent. Those figures show that the Bill is designed to apply to expenditure only at the margin. Its purpose is to enable the Secretary of State to encourage local authorities in the direction of national priorities and initiatives. The House will readily accept that this could be enormously helpful. It would give a new financial dimension to the regular discussions which my right hon. Friend holds with his partners in the education service and would stimulate local education authorities into action, brought about by the need to bid for an item on the list of activities.
  My hon. Friend the Member for Mitcham and Morden (Mrs. Rumbold), in an excellent speech, referred to funding in support of the youth service. I am pleased to tell her that under the Bill it would be possible for youth service activities to be supported by education support grants. I was delighted to hear my hon. Friend's speech. She is far too modest to state the full credentials that enable her to speak with such authority, but, as a former chairman of the education committee of the Association of Metropolitan Authorities, she can speak with more authority than virtually any other hon. Member. My hon. Friend told us some home truths, which Opposition Members did not like, about the mild hypocrisy of those who oppose specific grants and the way in which this proposal would react——
  Mr. Bermingham: Not new money.
  Mr. Dunn: My hon. Friend raised an important point about the timing of decisions as to which authorities would receive education support grants. I hope my hon. Friend will be reassured when I say that our aim is that bids will be invited and decisions taken prior to local authority budgets being settled in January or February of each year.
  My hon. Friend stressed the importance of the partnership between central and local government. I should not expect most chief executives of local authorities to be immediate and violent supporters of our proposals, but the chief executive of Harrow, writing in the Local Government Chronicle about partnerships in the education service, said that the partners
  "should support the DES attempt to stimulate development by retaining a small proportion of block grant for pump priming."
  Some Members, in connection with the activities to be supported, have suggested other areas where the grants could be used and some Members, such as the hon. Member for Knowsley, South (Mr. Hughes), have criticised the scope of the activities. My right hon. Friend the Secretary of State referred to eight possible areas of activity, but I must remind the House that no decisions will

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  be taken until there have been full consultations with local authority associations, and of course any proposals that we make will be subject to the approval of Parliament.
  In welcoming the Bill, I gather that my hon. Friend the Member for Saffron Walden asked whether bodies other than local authority associations would be consulted. The interest of local education authorities is obviously more direct than that of any other group because it is expenditure by them that will be supported by the education support grants. That is why it seemed fair to us for their right to consultation to be included in the Bill. However, I am pleased to assure my hon. Friend that the views expressed by any other bodies with an interest will be taken carefully into account. However, I should like to add a cautionary word. Clearly the amount of grant available will be strictly limited and it would be wasteful to spread it far too thinly to be effective.
  As my right hon. Friend said in introducing the Bill, it is our intention that the expenditure supported by ESGs should build up over a period of years, hence the level of expenditure supported in the first year or so would be lower than the ceiling of 0·5 per cent. of the Government's plans for local authorities' education expenditure. I welcome our commitment to include pilot schemes on records of achievement, matters to do with village schools and the special needs of special schools. Indeed, the hon. Member for Stoke-on-Trent, Central and my hon. Friend the Member for Ealing, North (Mr. Greenway) referred to the needs of special schools.
  My right hon. Friend mentioned the use of education support grants to encourage initiatives in meeting special educational needs. Although the Government cannot promise that extra money will be available for special education in the near future, we are always keen to look for ways in which LEAs can be encouraged to develop their provision. One way in which education support grants might be used is to assist LEAs which want to put resources into ordinary schools to provide for children with special educational needs by, for example, furnishing and equipping special resource centres—perhaps making use of space made free by falling rolls.
  The House will be pleased to know that the Department will shortly be publishing guidance on designing and adapting spaces for special educational needs in ordinary schools, and support for some individual projects will enable that advice to be tested and evaluated in practice. The assistance might extend to the provision of suitable microelectronic aids for teaching. Other applications could include the provision of interface devices for individual children with severe handicaps to enable them to benefit from microelectronic aids to learning and communications.
  My hon. Friend the Member for Rugby and Kenilworth (Mr. Pawsey) and others raised the question of money. Several hon. Members suggested that the Bill would enable the Secretary of State to take away local authorities' money. "Robbing Peter to pay Paul" were, I gather, words used by the right hon. Member for Halton. In fact, the Bill is concerned with Government grants and money voted by this House. The Bill would enable the Secretary of State to influence at the margin the distribution of grants in accordance with educational priorities. I shall repeat that message as often as I can. To hear the remarks of Opposition Members, one would think that this was a
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  radical and novel proposal. It is nothing of the sort. The Secretary of State mentioned several grants already in existence. Some of those — for example, the urban programme — were introduced while Labour was in power.
  Several hon. Members questioned whether the Government's expenditure plans for local authorities were large enough to justify new initiatives. As the House knows, the grants will not be paid until the 1985–86 financial year. As my right hon. Friend said, the Government are in the process of considering their plans for expenditure by local authorities for that year. Their decisions will be set out in the public expenditure White Paper to be published early next year. A decision about the level of aggregate Exchequer grant for 1985–86 will not be made until next autumn. The Government will be taking a wide range of factors into account, including likely expenditure arising from specific grants, before making that decision.
  As for 1984–85, I accept that the rate support grant settlement for that year is tough and will require LEAs to take difficult decisions about priorities. For those local authorities with responsibilities for education, the targets allow in aggregate for just short of a 1 per cent. cash increase in 1984–85 over 1983–84 budgets. The impact of our proposals on the level and quality of the service provided will depend on the authority's ability to contain its costs and upon its success in making savings in other areas. Pupil numbers are continuing to fall by about 2 per cent. a year, and many authorities have made, and are malting, considerable efforts to remove surplus school places and to make other savings in response to this fall in pupil numbers.
  The relationship between 1983–84 budgets and 1984–85 targets differs markedly between authorities depending on their level of spending relative to target and grant-related expenditure in 1983–84. More than a quarter of education authorities will be able to increase their budgets by 3 per cent. in 1984–85 compared with 1983–84 without exceeding their targets.
  I welcome the speech of my hon. Friend the Member for Bedfordshire, South-West (Mr. Madel), who expressed the view that the proposal was in line with the Select Committee's recommendation. He raised a number of detailed points which must be examined carefully in Committee. He was especially worried about how allocations would be divided between authorities and wondered whether a formula would be used to decide how much an authority would receive. It is important to maintain flexibility on that matter. The appropriate method for dividing allocations between authorities will vary according to activities and, therefore, the House will accept that we wish to consider the matter in some detail with representatives of the local authority associations.
  The Bill should not be taken to imply a desire to impose central Government's views on local government. That is not its purpose. Many important developments in the education service originated in the policies of enlightened and imaginative local education authorities, and I am sure that that will continue. Other developments may owe their origins to the report of a group with wide experience in the education service, for example, the Warnock committee report on special educational needs, or the Cockcroft committee's report on maths. The purpose of the Bill is to

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  give financial encouragement to the implementation of important new policies and developments, whatever their origins.
  The hon. Member for Durham, North quoted the recent HMI report. Contrary to the impression that he gave, the main messages of that report, which was published in July, are that overall provision for education has not deteriorated since 1981, and that most aspects of education in schools and colleges are satisfactorily provided for. Her Majesty's inspectors identified certain deficiencies in some areas. That also applied to some institutions, especially concerning the use made of existing resources. The Government are not complacent about those findings and we look to local education authorities to join us in our efforts to bring about necessary improvements. As the 1983 HMI report made clear, there is no simple relationship between expenditure on the one hand and the quality of education and achievements of pupils on the other. The ability and dedication of teachers is clearly important. The hon. Member for Durham, North said that he was in favour of state schools, but against private schools, the assisted places scheme and choice in all areas. We will mark him for that while he is the shadow spokesman on education. I commend the Bill to the House.
  Question put, That the Bill be now read a Second time:—
  The House divided: Ayes 197, Noes 115.

  Division No. 67]

  [10 pm

  AYES

  Adley, Robert

  Dorrell, Stephen

  Amess, David

  Douglas-Hamilton, Lord J.

  Ashby, David

  Dover, Denshore

  Aspinwall, Jack

  Dunn, Robert

  Atkins, Robert (South Ribble)

  Durant, Tony

  Atkinson, David (B'm'th E)

  Dykes, Hugh

  Baker, Nicholas (N Dorset)

  Eggar, Tim

  Baldry, Anthony

  Evennett, David

  Beaumont-Dark, Anthony

  Favell, Anthony

  Bellingham, Henry

  Fenner, Mrs Peggy

  Benyon, William

  Fookes, Miss Janet

  Berry, Sir Anthony

  Forman, Nigel

  Biggs-Davison, Sir John

  Forsyth, Michael (Stirling)

  Blaker, Rt Hon Sir Peter

  Fox, Marcus

  Body, Richard

  Franks, Cecil

  Boscawen, Hon Robert

  Fraser, Peter (Angus East)

  Bottomley, Peter

  Freeman, Roger

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

  Fry, Peter

  Bowden, Gerald (Dulwich)

  Gale, Roger

  Brandon-Bravo, Martin

  Galley, Roy

  Bright, Graham

  Goodhart, Sir Philip

  Brinton, Tim

  Goodlad, Alastair

  Brown, M. (Brigg & Cl'thpes)

  Gow, Ian

  Bruinvels, Peter

  Gower, Sir Raymond

  Bryan, Sir Paul

  Greenway, Harry

  Buchanan-Smith, Rt Hon A.

  Gregory, Conal

  Buck, Sir Antony

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

  Budgen, Nick

  Griffiths, Peter (Portsm'th N)

  Bulmer. Esmond

  Ground, Patrick

  Burt, Alistair

  Hamilton, Neil (Tatton)

  Butterfill, John

  Hampson, Dr Keith

  Carttiss, Michael

  Hanley, Jeremy

  Chalker, Mrs Lynda

  Hargreaves, Kenneth

  Channon, Rt Hon Paul

  Haselhurst, Alan

  Chapman, Sydney

  Hawkins, C. (High Peak)

  Chope, Christopher

  Hawkins, Sir Paul (SW N'folk)

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

  Hawksley, Warren

  Clark, Dr Michael (Rochford)

  Hayes, J.

  Clarke Kenneth (Rushcliffe)

  Hayward, Robert

  Cockeram, Eric

  Heathcoat-Amory, David

  Coombs, Simon

  Heddle, John

  Cope, John

  Hickmet, Richard

  Couchman, James

  Hirst, Michael

  Currie, Mrs Edwina

  Hogg, Hon Douglas (Gr'th'm)

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  Holland, Sir Philip (Gedling)

  Morrison, Hon C. (Devizes)

  Holt, Richard

  Morrison, Hon P. (Chester)

  Hooson, Tom

  Moynihan, Hon C.

  Hordern, Peter

  Mudd, David

  Howard, Michael

  Murphy, Christopher

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

  Needham, Richard

  Howarth, Gerald (Cannock)

  Neubert, Michael

  Hubbard-Miles, Peter

  Newton, Tony

  Hunt, David (Wirral)

  Nicholls, Patrick

  Hunt, John (Ravensbourne)

  Norris, Steven

  Hunter, Andrew

  Onslow, Cranley

  Hurd, Rt Hon Douglas

  Oppenheim, Philip

  Johnson-Smith, Sir Geoffrey

  Ottaway, Richard

  Jones, Robert (W Herts)

  Page, John (Harrow W)

  Joseph, Rt Hon Sir Keith

  Page, Richard (Herts SW)

  Key, Robert

  Patten, Christopher (Bath)

  King, Roger (B'ham N'field)

  Pawsey, James

  Knight, Gregory (Derby N)

  Peacock, Mrs Elizabeth

  Knowles, Michael

  Pink, R. Bonner

  Latham, Michael

  Powell, William (Corby)

  Lawler, Geoffrey

  Powley, John

  Lee, John (Pendle)

  Prentice, Rt Hon Reg

  Leigh, Edward (Gainsbor'gh)

  Proctor, K. Harvey

  Lennox-Boyd, Hon Mark

  Raffan, Keith

  Lewis, Sir Kenneth (Stamf'd)

  Raison, Rt Hon Timothy

  Lightbown, David

  Rathbone, Tim

  Lilley, Peter

  Rhodes James, Robert

  Lord, Michael

  Ridley, Rt Hon Nicholas

  Luce, Richard

  Ridsdale, Sir Julian

  McCrindle, Robert

  Roe, Mrs Marion

  McCurley, Mrs Anna

  Rumbold, Mrs Angela

  Macfarlane, Neil

  Sainsbury, Hon Timothy

  MacKay, Andrew (Berkshire)

  St. John-Stevas, Rt Hon N.

  MacKay, John (Argyll & Bute)

  Sims, Roger

  Maclean, David John.

  Skeet, T. H. H.

  McNair-Wilson, M. (N'bury)

  Spicer, Michael (S Worcs)

  McQuarrie, Albert

  Stern, Michael

  Madel, David

  Stevens, Lewis (Nuneaton)

  Major, John

  Stewart, Allan (Eastwood)

  Malins, Humfrey

  Stradling Thomas, J.

  Malone, Gerald

  Taylor, Teddy (S'end E)

  Maples, John

  Thompson, Donald (Calder V)

  Marland, Paul

  Thurnham, Peter

  Marlow, Antony

  Tracey, Richard

  Mates, Michael

  Wakeham, Rt Hon John

  Mather, Carol

  Warren, Kenneth

  Maude, Francis

  Watts, John

  Maxwell-Hyslop, Robin

  Wells, Bowen (Hertford)

  Mellor, David

  Wells, John (Maidstone)

  Merchant, Piers

  Wilkinson, John

  Miller, Hal (B'grove)

  Wood, Timothy

  Mills, Iain (Meriden)

  Yeo, Tim

  Mills, Sir Peter (West Devon)

  Miscampbell, Norman

  Tellers for the Ayes:

  Mitchell, David (NW Hants)

  Mr. Tristan Garel-Jones and Mr. Ian Lang.

  Moate, Roger

  Moore, John

  NOES

  Alton, David

  Crowther, Stan

  Archer, Rt Hon Peter

  Cunningham, Dr John

  Ashdown, Paddy

  Dalyell, Tarn

  Atkinson, N. (Tottenham)

  Davies, Rt Hon Denzil (L'lli)

  Banks, Tony (Newham NW)

  Davies, Ronald (Caerphilly)

  Barnett, Guy

  Dixon, Donald

  Barron, Kevin

  Dormand, Jack

  Beith, A. J.

  Dubs, Alfred

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

  Dunwoody, Hon Mrs G.

  Bermingham, Gerald

  Eastham, Ken

  Blair, Anthony

  Evans, John (St. Helens N)

  Boyes, Roland

  Ewing, Harry

  Bray, Dr Jeremy

  Fatchett, Derek

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

  Faulds, Andrew

  Bruce, Malcolm

  Field, Frank (Birkenhead)

  Cocks, Rt Hon M. (Bristol S.)

  Fields, T. (L'pool Broad Gn)

  Cohen, Harry

  Fisher, Mark

  Corbett, Robin

  Flannery, Martin

  Corbyn, Jeremy

  Foot, Rt Hon Michael

  Cowans, Harry

  Freud, Clement

  Craigen, J. M.

  Gilbert, Rt Hon Dr John

  697

  Gould, Bryan

  Parry, Robert

  Gourlay, Harry

  Patchett, Terry

  Hamilton, W. W. (Central Fife)

  Pavitt, Laurie

  Hardy, Peter

  Penhaligon, David

  Harman, Ms Harriet

  Pike, Peter

  Harrison, Rt Hon Walter

  Powell, Raymond (Ogmore)

  Hattersley, Rt Hon Roy

  Prescott, John

  Heffer, Eric S.

  Radice, Giles

  Hogg, N. (C'nauld & Kilsyth)

  Redmond, M.

  Holland, Stuart (Vauxhall)

  Rees, Rt Hon M. (Leeds S)

  Hughes, Mark (Durham)

  Roberts, Allan (Bootle)

  Hughes, Robert (Aberdeen N)

  Robinson, G. (Coventry NW)

  Hughes, Roy (Newport East)

  Rooker, J. W.

  Hughes, Sean (Knowsley S)

  Ross, Ernest (Dundee W)

  Janner, Hon Greville

  Ross, Stephen (Isle of Wight)

  Jones, Barry (Alyn & Deeside)

  Rowlands, Ted

  Kinnock, Rt Hon Neil

  Silkin, Rt Hon J.

  Lewis, Terence (Worsley)

  Skinner, Dennis

  Lloyd, Tony (Stretford)

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

  Loyden, Edward

  Snape, Peter

  McCartney, Hugh

  Soley, Clive

  McGuire, Michael

  Spearing, Nigel

  McKay, Allen (Penistone)

  Steel, Rt Hon David

  McKelvey, William

  Stott, Roger

  Mackenzie, Rt Hon Gregor

  Thomas, Dr R. (Carmarthen)

  McWilliam, John

  Thompson, J. (Wansbeck)

  Madden, Max

  Tinn, James

  Marek, Dr John

  Wainwright, R.

  Marshall, David (Shettleston)

  Wallace, James

  Mason, Rt Hon Roy

  Warden, Gareth (Gower)

  Maxton, John

  Wareing, Robert

  Meadowcroft, Michael

  Welsh, Michael

  Michie, William

  Winnick, David

  Millan, Rt Hon Bruce

  Woodall, Alec

  Miller, Dr M. S. (E Kilbride)

  Nellist, David

  Tellers for the Noes:

  Oakes, Rt Hon Gordon

  Mr. Frank Haynes and Mr. Ron Leighton.

  O'Neill, Martin

  Park, George

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

  Education (Grants and Awards) Bill

    EDUCATION (GRANTS AND AWARDS) BILL [MONEY]
    Queen's Recommendation having been signified—
    Resolved,
    That, for the purpose of any Act resulting from the Education (Grants and Awards) Bill, it is expedient to authorise the payment out of money provided by Parliament of any expenses incurred by the Secretary of State in consequence of that Act.—[Mr. Neubert.]

    PETITION

      Contraception (Under-age Girls)
      10.12 pm
      Mr. Gerald Bowden: I beg leave to present a petition on behalf of my constituents of Dulwich which prays that parents should have the statutory right to be consulted before any contraceptives are given to their daughters under the age of 16.
      I wholeheartedly support the petitioners in their plea.
      To lie upon the Table.

  West Midlands (Road Network)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Neubert.]
  10.13 pm
  Mr. Hal Miller: I welcome the opportunity of adding to the congratulations that I was able to offer to my hon. Friend the Minister of State this afternoon on her appointment and thanking her for the care and interest she takes in road users and people affected by roads. Roads are important to people, as has been recognised in the package introduced in response to representations about the Armitage report. This has lead to a commitment for the construction of bypasses. Roads are important also to firms whose costs and distribution are most closely affected by the state and extent of the road network.
  I claim that in my constituency, with a motorway under construction, with bypasses sorely needed and my home being shaken to bits by the rumble of heavy lorries, I have considerable experience of the road network, and I welcome the opportunity of bringing the points to the attention of the House and the Minister. To put this matter into perspective, my reason for raising this matter is primarily as part of the fight back by the west midlands.
  We are the main manufacturing area and the road network is needed to enable our firms to compete equally with firms in other regions that have better road access and to give them access to the east and south coast ports which are industries' main export outlets.
  It is important to put into context the fact that the west midlands has the lowest GDP per head in the country and that our wages are the second lowest, reflecting that performance. It is vital that we take every opportunity to put our industry on a competitive footing.
  I make no apology for dealing first with the subject of motorways. The importance of access for the location of industrial investment and the suitability of the west midlands for investment has been emphasised recently in discussion by Belgian and American specialists in industrial location. With the Government spending money on industrial estates and derelict land clearance in the black country, and with the location of the enterprise zone in Dudley—whatever one may think about that initiative—it is important to ensure adequate access to secure the development of those areas and the swift and cheap transit of materials in and products out. Otherwise, there is a grave fear that the hoped for investment will not take place, thus nullifying the money that the Government will have spent on infrastructure.
  Great importance is attached to the so-called black country motorway. I do not know whether my hon. Friend will be able to respond about the progress that is being made on the proposals for private investment and construction of that access. The more important industrial routes and access are the A1-M1 link and the M40. There has been considerable public anxiety in the west midlands about the slippage of that programme.
  We were promised a motorway-standard route to the east coast ports to be completed by 1977. The line of that route has not yet been settled. I gather that discussions are still taking place about the standard to which it is to be built. Any length of single carriageway on that route would negate the purposes for which the road is being built. It would lead to unimaginable tailbacks and make it difficult

  699
  for heavy lorries and their drivers to complete a round trip to the coast within the eight hours permitted under the regulations.
  The road will need to be at least dual carriageway throughout its length if it is to be of assistance. I urge that the line be taken through the Kettering area rather than accept the proposal to make use of the A45 via Northampton in view of the heavy overloading on the M1 south of the M6 junction. That overloading is a potent reason for pressing ahead with the construction of the M40, the main purpose of which is to provide our firms with access to south coast ports for interocean trade.
  My hon. Friend the Member for Banbury (Mr. Baldry) has played a prominent part in the M42 support campaign. As he has urged, the construction of that motorway would bring much-needed relief to countless older market towns, small towns and villages that are oppressed by heavy traffic that is entirely unsuitable for the road network. Those roads are part of the production line of British Leyland, taking engines from the midlands down to Oxford for assembly. It is an important lifeline for the midlands. I hope that we shall hear something about the Government's intentions for the construction programme.
  Inside the region, the motorway network is still defective. There is still a shortfall in the proposals for the M42 between the north of Tamworth and Nottingham. However, more important is the need to provide some relief for the M6, which is already heavily overloaded north of the M5 junction. There is grave doubt, reinforced by reports in the press today, about the safety and stability of the viaducts and parapets on that route. The consequences would be almost impossible to comprehend if traffic had to be restricted for reasons of safety on that section of the route. The provisions of a relief route should be urgently examined. It could run from the junction of the M54 with the M6 through to Curdworth and thence to Coleshill.
  I shall leave the subject of the motorway network and refer to the people's need for roads, particularly bypasses. Local authorities are facing difficulties in constructing bypasses that many people believe they were promised under the Armitage package of proposals. I quote examples from my constituency only because they are within my personal knowledge. The M42 is due to be constructed as far as the A441 by September 1985, but no finance is yet available for the bypass of Alvechurch, which is to be constructed by the local authority.
  Similarly, the A456 through Hagley is the heaviest used principal road in the whole region. During my time as an hon. Member, there have been many accidents on the Hagley mile and at the bottom of the hill by the traffic lights, which have caused justifiable alarm to the inhabitants. At present there is no prospect of the construction of that much-needed bypass. The general public naturally assumed that both bypasses were to be constructed as part of the Armitage proposals.
  Mr. Esmond Bulmer: Does my hon. Friend agree that the Treasury method of accounting is anachronistic and makes it extremely difficult for the forward planning of many bypasses?
  Mr. Miller: I am grateful to my hon. Friend, whose difficulties in Kidderminster I recall. I am coming to local authority financing of roads and the constrictions placed on it by the Government's implementation of the
  700
  programme under the transport supplementary grant and the rate support grant, with the accompanying penalties. The British Road Federation has done considerable research into the effect of the Government's implementation of that method of financing. It has shown that since the imposition of penalties there has been a severe fall-off in capital expenditure on roads by local authorities although there has been some increase in support of public transport expenditure. The reason appears to be that put forward in the publication entitled:
  "Local authority roads and their financing".
  This matter is confirmed in conversations that I have had in the past 10 days with my county surveyor and bridgemaster. Local authorities are afraid of the revenue consequences of their capital spend as the interest paid is not an acceptable charge for purposes of the TSG, but also renders local authorities liable to rate support grant penalties if their GRE is exceeded.
  Maintenance requirements of the newly constructed road fall to be met out of recurrent expenditure which makes county treasurers doubly careful of their GRE and the penalty to which they might be liable. The position is difficult. The truth of what I am saying can be illustrated by the dramatic fall in net local authority borrowing which from 1980–81 fell by more than £2 billion from £2·287 billion to a mere £7 million in the following year.
  In those two years, there has been a shortfall on Government planned expenditure. Although Government planned expenditure increased by 40 per cent. and 60 per cent. the actual expenditure fell. I am trying to explain the reasons for that shortfall as they appear to my local authority and to the British Road Federation. This is a serious matter. People will not see the bypasses constructed which they felt they had a right to expect.
  We must remember the preponderant role played by such principal and de-trunked routes when dealing with traffic movement. The position has been made worse in my county by the de-trunking of the A38 where that road has been bypassed. The question of when trunk roads should be de-trunked is the subject of a theological argument. The Ministry appear to take the view that this should happen when it has constructed an alternative route as in the case of the M5. This has meant that the A38 has been subject to de-trunking. A widening programme of the M5 is in hand, but that means that the present A38 must still function as a trunk route whereas the local authority has lost a great deal of capital fund because of the de-trunking of the Droitwich and Bromsgrove bypasses.
  I see that my hon. Friend the Minister is shaking her head, but I have been informed by the county surveyor this afternoon that the de-trunking cost is represented by the difference between 70 per cent. TSG payable for a principal route and 100 per cent. payable for a trunk route. The local authority envisages a cost arising as a result of the de-trunking.
  To put this matter into context, traffic increase in the last 20 years of the century is expected to be 23 per cent. on the lowest figures of GDP forecast and as much as 50 per cent. on the higher figures.
  I have raised this subject because of my concern about the competitive position of west midlands industry, the credibility of the Governments bypass programme and the need to restore capital spend, rather than favouring recurrent expenditure, which seems to have been the effect of Government policies to date.
  10.29 pm
  The Minister of State, Department of Transport (Mrs. Lynda Chalker): I thank my hon. Friend the Member for Bromsgrove (Mr. Miller) for his kind remarks and apologise if, inadvertently, I omitted to thank him during Question Time.
  I am glad that we have the opportunity to discuss the important topic of roads in the west midlands. I listened with great interest and much sympathy to the arguments put forward on behalf of the region. Of course, our industry throughout the country needs more and better roads to enable it to improve its competitiveness.
  My hon. Friend referred to the BRF report "West Midland Road Needs", in which it is claimed that the missing links in the west midlands motorway and road networks are delaying the region's economic revival. We all know that economics are a complex issue and I do not discount the belief that good roads are one of the important factors, but I hope that our policy is well-known and I remind the House of the opening paragraph of the 1980 roads White Paper:
  "The first priority of the Government is national economic recovery. The road programme has to be judged in that context. We have to strike a balance. New road schemes can bring undoubted economic advantages. Exports can reach their markets more quickly; goods can be distributed more efficiently; traffic can flow more easily and fuel can be saved. At the same time, substantial environmental benefits can be gained. Heavy lorries can be taken round cities, towns and villages. People can be freed from the noise, the disturbance and the danger of traffic confined to inadequate roads."
  Those priorities have been reviewed and reinforced in our 1983 roads White Paper, issued only in September.
  I have found somewhat disconcerting the view that there has been lengthy, positive discrimination against the west midlands over the rate of investment in roads. That is not shown by the detailed records. In recent years, our highest priority has been the M25, but we needed the orbital route round London so that transport from the west midlands could get to the south coast ports. By linking up all the major routes radiating from the capital, we assist all the other regions and we are, therefore, surely doing part of what the west midlands needs.
  I understand why the anxieties exist. We have given priority to the M25, but that has not meant that schemes elsewhere, which have shown good value for money, have been left unattended. Preparation work for a considerable programme is coming to fruition. I mentioned at Question time the fact that new roads in the west midlands, to a total value of £260 million, are either being built, or will be started, before the end of next year. That is a considerable proportion of our planned expenditure over the next few years.
  My hon. Friend started by talking about motorways. He knows that the M54 linking Telford to the M6 and, therefore, generally improving communications between the midlands and central and north Wales, as well as supporting the new town itself, will be opened by my right hon. Friend the Secretary of State later this month. We have started work on the M42 Bromsgrove section and will soon start on the M42 Tamworth section. The first two lengths of widening the M5 to three lanes from Lydiate Ash to Warndon on the edge of Worcester are also in hand.
  My hon. Friend referred to the Ml-Al link. He knows how concerned I am about that route. The fact that the original proposals provided only for single carriageway east of Kettering attracted a considerable number of
  702
  objections and representations. I am considering whether dual carriageways on that length can be justified. I hope that even if the decision is taken to amend the scheme to give dual carriageway throughout, the start of construction, planned for 1986, will not be delayed.
  The programme does not stop there, but it would be impossible in the time available to reply to all the points raised by my hon. Friend. I shall write to him about the matters that I cannot cover tonight. He mentioned the A42—the northward extension of the M42. It is just outside his constituency boundary, but I think that he knows that I published last week revised proposals for the A42 Castle Donington section to complete the new Birmingham-Nottingham route between the end of the M42 and the M1 at Kegworth.
  I think that my hon. Friend knows that whatever we say about a route programme it is subject to the usual caveat about the completion of statutory procedures. Often, however much Ministers want to help hon. Members, there is nothing that we can do about the sometimes prolonged statutory procedures. They are long and complex, but they are an essential part of our democratic system. My right hon. Friends the Secretary of State for the Environment and for Transport would not want to reach their decisions without the benefit of an independent assessment and a public inquiry when there were representations and objections to be heard.
  We have and must continue to have constraints. We cannot spend without having a policy of how much should be spent in a year. We have tried to tighten up the management preparation of road schemes. I am shortly to receive from the National Economic Development Office a copy of the report on road preparation procedure which it has commissioned from Lord Vaizey. It might enable us to be even more expert in our planning of schemes for the future.
  I have so far mentioned only the biggest schemes in the trunk road programme. Perhaps I should also mention other schemes within the £114 million-worth of work that is now going on. There are essential bypasses on the A41 for Hinstock and Newport, others on the A564 from Blythe Bridge to Uttoxeter to avoid bottlenecks on the A50 and the grade separation junction on the A38 at Alrewas in Staffordshire, which will contribute to the Birmingham-Derby route. Those developments are vitally important for different parts of the west midlands. Many more schemes are in preparation. They include bypasses of Stratford-on-Avon and Evesham, the Alcester bypass which is to come later and the other A435 proposals which will give better access from the Coventry, Warwick and Leamington area to the south-west. They are most important to my hon. Friend.
  A public inquiry is now going on into draft orders for the Coventry eastern bypass to extend the A46 high standard route to link with the M69 and the M6. Many other recently published orders show how much emphasis we put on the economic recovery that my hon. Friend and other colleagues want for the west midlands. Other schemes are in the early stages of preparation. Arterial routes such as the M42 and the M40 will receive priority consideration by my Department. The public inquiry on the M40 is closed, but the inspector has not yet reported to Ministers.
  Nobody who has been responsible for the road network in the past 18 months, as I have, underestimates the important role of bypasses. We are trying, in so far as

  703
  funds allow, to get as many bypasses as possible built, whether it be through the trunk road network or through the TSG and county councils.
  For the economic good of the country, we must not spend more than we can afford. It would be crazy to do so as we should cut short the economic recovery in the west midlands. In 1983–84, for the five county councils in the west midlands, the accepted transport programme will cost £171 million, including capital programmes of £51 million. The five councils will receive a total of £27 million of grant to support those programmes. It is being used to build new roads in Birmingham, Wolverhampton, Walsall and Oldbury in the conurbation, and in Worcester, Tamworth, Bridgnorth and Nuneaton in the shires.
  It has been suggested that local authorities cannot fulfil their capital programmes because of the constraints on their revenue expenditure implied in the targets and in the rate support grant hold-back arrangements. On a national level, of course, the provision for local authorities' revenue expenditure is compatible with the expenditure targets set by the Department of the Environment. The provision recognises that capital expenditure has revenue consequences. The levels of TSG capital accepted expenditure are consistent with the Government's overall expenditure plans, and the amounts accepted for individual councils are based on councils'own bids in their TPPs. We sometimes forget that. Inevitably, individual councils have to budget and plan carefully but with careful budgeting and planning it is possible to finance the accepted transport capital programmes and, indeed, other capital programmes, within the revenue expenditure targets. My hon. Friend may have put his finger on the point when he alluded to the expenditure on some public transport facility which might have been spent on improving the road network, about which he and my hon. Friend the Member for Wyre Forest (Mr. Bulmer) spoke.
  Mr. Bulmer: There are two problems. The first is how councils can carry their money forward at the end of the financial year and not have to spend it if the weather is bad. The second is the sheer difficulty of budgeting forward on what may be a very expensive scheme, riot knowing for how many years it will be necessary to do it.
  Mrs. Chalker: I understand the problem. We have sought to help in a number of ways by allowing a small roll-over at the end of the year, which will happen in the
  704
  coming spring for the first time. That is well known. The difficulty is that very often, because we do not specify exactly how the grant is spent, the money put into TSG does not always go to the projects to which the Government have given the highest priority.
  There is no way in which I can deal with all the matters raised by my hon. Friends. I well understand the problems of the A38 in the constituency of my hon. Friend the Member for Bromsgrove. The fact that the full length of the road has not been detrunked is more a reflection of the local highway authority's reluctance, which we understand, to assume responsibility than of any wish of my Department to retain it. There are exceptions to detrunking, which my hon. Friend himself mentioned. Where there is a better road that takes the heavy traffic, we always believe that it is right for the Department to take the trunking responsibility for that new stretch. That is usually the reason for the detrunking of old and less used stretches of road.
  However quickly I may have had to rush through the matters raised by my hon. Friend, my speech would not be complete without a reference to slippage.
  My hon. Friend mentioned especially the M1-A1 link, which is so important. It is very often findings about the ground surface, as happened in this case, which can set back the route of a line. But we are well organised to proceed on that.
  The Government are concerned to ensure that the motorway and trunk road network is designed to serve the country's economic needs. That means the locally planned roads, too. That our road programme matches that concern is borne out by further figures. The total value of the schemes in our main programme to March 1985 is £717 million. Of that figure, schemes in the west midlands total £151 million, or 21 per cent.
  I shall continue to press on hard with the preparation of the schemes that are necessary, but I must make sure that we plan within achievable limits, that we do not give false expectations and that we are able to achieve the programme dates in our programme to get the roads finished to serve west midlands industry. We then all know where we are, and that is the way to plan sensibly for the future.
  Question put and agreed to.
  Adjourned accordingly at eighteen minutes to Eleven o'clock.

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Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR On the Woolsack.
Prayers—Read by the Lord Bishop of Gloucester.
Lord Lever of Manchester—Took the Oath.

Hong Kong: Sino-British Talks
Lord Brockway Lord Brockway: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will make a statement on the progress of talks with China on the future of Hong Kong.
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne): My Lords, as my right honourable friend the Minister of State for Overseas Development said in another place on 2nd November, a second, more detailed phase of the Sino-British talks on Hong Kong's future began in July and is continuing through diplomatic channels in Peking. The fifth session of this phase was held on 19th and 20th October. Both sides agreed it was useful and constructive. A further session is taking place today and on 15th November.
Lord Brockway: My Lords, while recognising the difficulty of Communist control of a capitalist economy, is not an agreement urgently necessary in view of the deterioration of the Hong Kong dollar, already causing higher prices and unemployment? Also, have not the Chinese said that they would impose their own plan if an agreement is not reached by September?
Lord Trefgarne: My Lords, we and the Chinese are agreed that the common aim must be to maintain Hong Kong's stability and prosperity, and both parties are therefore proceeding with that in mind. I think it would be unhelpful if I were to make additional comments, because we think that the negotiations are best conducted in confidence.
Lord Brockway: My Lords, can something be done to relieve the frustration among the people in Hong Kong—98 per cent. Chinese—because the talks are conducted by a non-elected Governor of a non-elected Legislative Council? Could not consultants be appointed to the talks to represent the Chinese community?
Lord Trefgarne: My Lords, I can assure the noble Lord that those who are representing the United Kingdom in these discussions are taking very fully into account the views of the people of Hong Kong.
Lord Geddes: My Lords, in view of the immediacy of the talks in Peking. would not my noble friend agree that this Question is somewhat inopportune?
Lord Trefgarne: My Lords, the tabling of Questions in your Lordships' House is not a matter for me.
Lord Oram: My Lords, is it not important to recognise that to the Chinese sovereignty over Hong Kong is at least as vital and as undoubted as sovereignty over the Falklands is to Britain? Can the Minister say whether, on the British side, the negotiations are being conducted with that in mind and with that conceded?
Lord Trefgarne: My Lords, the principal aim, as I said just now, is for the negotiations to have regard to the prosperity and stability of Hong Kong. It would be unhelpful, I think, if either party went into these negotiations with any preconceived notions.
Lord Morris: My Lords, is my noble friend entirely satisfied with the vigour with which the negotiators on behalf of Her Majesty's Government have put to the Chinese the point that the making of unilateral statements while negotiations are going on is generally extremely counter-productive?
Lord Trefgarne: My Lords. I can assure my noble friend that the Chinese are well aware of all our views in these matters.
Lord Brockway: My Lords, would the Minister not agree that it is ironic that democracy should be withheld in Hong Kong for fear of Chinese opposition, when the Chinese themselves are now suggesting that the administration should be selected in consultation with community organisations?
Lord Trefgarne: My Lords, as I said just now to the noble Lord, we fully take into account the views of the Hong Kong people in these matters. There is a certain parliamentary system in Hong Kong, but, of course, I recognise it is not of the same kind as ours.

British Nationality Act: Honours
2.40 p.m.
Lord Beaumont of Whitley: My Lords. I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will amend the British Nationality Act to grant British nationality to Members of the Most Excellent Order of the British Empire.
Baroness Trumpington: No. my Lords. it would not be appropriate to amend the British Nationality Act in the way suggested.
Lord Beaumont of Whitley: My Lords, while of course many recipients of the order would not wish to live in this country, is it not very anomalous that those whom Her Majesty has delighted to honour in this particular way do not necessarily have the right to enter or to live in this country which has honoured them?
Baroness Trumpington: My Lords, membership of the order would not be an acceptable criterion for the automatic grant of citizenship because that would be contrary to the scheme provided by the British Nationality Act 1981.
Baroness Birk: My Lords, will the noble Baroness not agree that it really is high time that there was a general review of the British Nationality Act as so many important amendments are needed to correct situations which have arisen, and since the Act has resulted in so much doubt, injustice and hardship to so many people?
A noble Lord: Nonsense!
Baroness Trumpington: No, my Lords, I do not think this would be appropriate. Neither do I think that one should give thistles to Members of the Order of the Thistle nor baths to Members of the Order of the Bath.
Lord Renton: My Lords, is not membership of the Order of the British Empire a compliment which Her Majesty pays to some people who have no real connection with this country but who have performed services which the people of this country have admired?
Baroness Trumpington: My Lords, my noble friend is absolutely right.
Baroness Gardner of Parkes: My Lords, may I ask my noble friend to comment, following her reply to the noble Baroness, Lady Birk, with regard to a review of the British Nationality Act, whether in due course she would have the Government look at the matter of charges—which I understand are now amounting to a large profit—for those people applying for nationality? While I would not be asking her to abolish those charges, may I ask her to look at this matter with a view to not increasing them in the years ahead until they have become uneconomic?
Baroness Trumpington: My Lords, while I have listened to my noble friend with interest, I submit that that is another question.
Lord Somers: My Lords, will the noble Baroness agree—I am sure she will not—that the whole of the British Nationality Act is very misconceived indeed, in that it refuses British nationality to those who are obviously of British descent simply on the grounds that they happen not to have been born on British soil?
Baroness Trumpington: My Lords, that also is another question.
Lord Beaumont of Whitley: My Lords, since the noble Baroness agrees that the people of this country have admired those who have received this order, would it not be fitting that the people of this country should also offer them hospitality when they need it?
Baroness Trumpington: My Lords, hospitality is in the eye of the beholder.

Soviet Airspace Limits
2.44 p.m.
Lord Kennet: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in the light of the shooting-down by Soviet border forces of a Korean airliner on the grounds that it had entered Soviet airspace, Her Majesty's Government will now obtain from the Soviet Government information about the outer limits of Soviet airspace off its northern coast (facing the Kara, Laptev, East Siberian and Chukchi Seas), which information the Soviet Government has hitherto been unwilling to disclose.
Lord Trefgarne: My Lords, we understand that the Soviet state border for their airspace is the line established by the Soviet Law on the Border of the USSR of 24th November 1982.
However, the Soviet authorities are still engaged in defining their claims in the sea area to the north of the Soviet Union and, in answer to recent inquiries, were able to tell us only that they would publish the results of this work when it has been completed. We shall continue to seek this information.
Lord Kennet: My Lords, are the Government aware that since I tabled this Question, which was itself a follow-up to an earlier Question in May, I have had a helpful letter from the noble Lord's colleague, Mr. Whitney, saying that whereas earlier the Soviet Government refused to disclose anything about these maritime zones to us or to any other Government, they have now formally told our embassy in Moscow that they are working out base lines around their territorial waters, which would of course generate airspace zones above? Will the Government inform the Soviet Union that we expect these base lines to be fully in accordance with international law—that is to say, that they will not enclose bays of more than 24 nautical miles across; and also will they inform them that we will not recognise any so-called historic seas on their Arctic coast, except the White Sea?
Lord Trefgarne: My Lords, I think we would prefer to comment on these proposals when we see them, rather than some way in advance. But I can assure the noble Lord that we shall have his concerns very much in mind when we do receive them.
Lord Bishopston: My Lords, will the Minister accept the importance of this Question in respect of having internationally agreed definitions of airspace and also procedures? Will he also accept that it is essential to have agreed procedures to deal with violations in a safe manner? Will he recall the horror that gripped the world in respect of the incident referred to in the Question, lest in future such incidents have nuclear dimensions?
Lord Trefgarne: My Lords, I certainly accept the general importance of this matter, although it is perhaps worth saying that the number of flights that operate in the region which is of concern to the noble Lord is very few indeed.

The Crown Agents
2.46 p.m.
Lord Ennals: My Lords. I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they have yet taken a decision on the future of the Crown Agents.
Lord Trefgarne: My Lords, the Board of Crown Agents have submitted proposals for substantial reorganisation following their loss of the investment management of the Government of Brunei's funds. These proposals are under urgent consideration and I hope that a decision will be reached shortly.
Lord Ennals: My Lords, I thank the noble Lord for his reply. Will he hear in mind that the Crown Agents not only provide a greatly appreciated service for many countries in the third world, but provide invaluable orders for British exporters to the tune of well over £100 million a year? Secondly, and in particular, is he aware of the special services which the Crown Agents offer to small firms in Britain which cannot themselves undertake the promotional task, especially in distant and smaller markets?
Lord Trefgarne: My Lords, I can certainly confirm that these are just the sort of factors that the Government will wish to take into account in reaching a decision on this matter. But, of course, some of the arguments apply the other way as well.
Lord Gridley: My Lords, is my noble friend aware that the Crown Agents are trustees for the payment of pensions from the Central African pension fund? Is he further aware that they administer the payment of pensions to 50,000 colonial pensioners and that they carry this out with great efficiency, in spite of the tremendous difficulties which they have encountered?
Lord Trefgarne: My Lords, my noble friend is quite right in saying that the Crown Agents administer payment of a large number of overseas pensions of various kinds on behalf both of the ODA and, indeed, of certain overseas authorities. I can assure my noble friend that satisfactory arrangements will be made for handling these pensions if the Crown Agents cease to exist.
Lord Elwyn-Jones: My Lords, is it not the case that the House has not yet debated or discussed the report of the inquiry which was presided over by Mr. Justice Croom-Johnson into the various problems that arose in regard to the Crown Agents? If we have not yet debated it, is it not about time that we did so?
Lord Trefgarne: My Lords, the noble and learned Lord is right to say that we have not yet debated that report. No doubt an arrangement can be made through the usual channels, if that is thought appropriate.
Lord Oram: My Lords, is the noble Lord aware that the last sentence that he used in answer to the question
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before last seems to be a very sombre warning that the Crown Agents may cease to exist? Is he aware that many of the projects undertaken by the Crown Agents provide opportunities for British firms and personnel to undertake consultancies, which are paid for not out of British funds but from funds from the World Bank. the European Development Fund and similar international agencies? Is there not a danger that, unless the Crown Agents are maintained at their present level, those consultancies bringing rewards to British firms may be lost?
Lord Trefgarne: My Lords, as I said in answer to an earlier question, that is just the sort of consideration that the Government will wish to take into account in reaching a decision on this matter. No final decision has yet been taken and I am certain that the House will want to take an opportunity to hear it when it is made.
Lord Ennals: My Lords, in the noble Lord's answer to my noble and learned friend, did I understand him to say—or, if he did not, would he now say—that no decision will finally be taken without there being an opportunity for the House to discuss this extremely important question?
Lord Trefgarne: My Lords. I do not believe I gave any assurance of that kind. In any event, it would not be a matter for me. I was referring, in answer to the noble and learned Lord, to his question as to whether we had had a discussion on an earlier report.
Lord Campbell of Alloway: My Lords, is my noble friend the Minister aware that until a Question was tabled in your Lordships' House for answer no attention appears to have been paid by any body to Mr. Justice Croom-Johnson's report?
Lord Trefgarne: My Lords. I can assure my noble friend that although your Lordships have not yet seen fit to discuss it the Government have been considering it.

Business
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Trefgarne will, with the leave of the House, repeat Statements which are to be made in another place on the European Community Special Council of Ministers 9th to 11th November, and intermediate-range nuclear forces.

British Shipbuilders (Borrowing Powers) Bill
2.52 p.m.
The Chancellor of the Duchy of Lancaster (Lord Cockfield): My Lords, I beg to move that this Bill be now read a second time. This is a very short Bill—it contains one operative clause only—but it is an important Bill, all the same. Its purpose is to increase British Shipbuilders' statutory borrowing limit to £1,000 million, with provision to increase the limit further to £1,200 million. The limit was originally set at £200 million in the Aircraft and Shipbuilding

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Industries Act 1977. It has since been raised by two Acts of Parliament and by statutory instrument, with the approval of another place, to £800 million. This Bill makes provision for a new limit of £ 1.000 million and for the limit to be raised further to a maximum of £ 1,200 million, in steps of up to £100 million each, subject to affirmative resolution in another place.
The finance affected by these limits is almost entirely public dividend capital provided by the Government. but finance for the modernisation of the submarine facilities at Vickers yard at Barrow will be partly in the form of loans from the National Loans Fund. Other finance provided to British Shipbuilders in the form of intervention fund support for ship prices is not covered by these limits, nor is expenditure on the shipbuilding redundancy payments scheme.
The Bill reflects the extent of this Government's support for the industry, In the form of the kind of finance covered by this Bill and other elements of direct support—the intervention fund and the shipbuilding redundancy payments scheme—British Shipbuilders has received £851 million since we came into office in 1979. Most of this has gone to merchant shipbuilding. Raising limits indicates our current commitment to the industry, but that commitment is neither unconditional nor open-ended. It must depend on the industry's performance.
British Shipbuilders have had an unfortunate history in recent years. They now have a new chairman, Mr. Graham Day, who took up office on 1st September. One of his most urgent tasks was to produce a new corporate plan. This he has done, and the plan is now being considered by my right honourable friend the Secretary of State for Trade and Industry. We shall need to look at future policy for the industry in the light of that plan. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Lord Cockfield.)
2.56 p.m.
Lord Bruce of Donington: My Lords, the House will be grateful to the noble Lord for having introduced this Bill, to which of course we on this side of the House would like to give our support. The problem of financing the shipbuilding industry is not, as one might sometimes be driven to think, one which is peculiar to the United Kingdom. Just to give an example, during the last three weeks one has observed that the French Government have loaned some £89.2 million to the French shipbuilding yards for a like purpose.
The House will be familiar, but perhaps ought to recall, that the shipbuilding industry not only in this country but in other Western shipbuilding nations has been in the doldrums since the mid-1970s. Indeed, the noble Lord was kind enough to point out that the original powers of lending were given under the Act of 1977, which was a nationalisation as distinct from a privatisation Act that was introduced at that time to secure the future of the shipbuilding industry.
We are common ground—I do not believe the noble Lord would dispute it—that had not those yards been brought into national ownership at that time (I speak completely aside from the warship building side) the British shipbuilding industry would have been in a
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very parlous position indeed. In fact, as everybody knew at that time and as I am quite sure the noble Lord knows, had the Government had not done so, most of the companies concerned would have had to apply for massive Government aid on an individual company level as distinct from taking a view of the industry as a whole. It is perhaps interesting to note that at this time it is not only the shipbuilding industry which requires further aid. I see that Rolls-Royce, whose nationalisation was carried out under the auspices of the party opposite, has applied this week for a £113 million loan in order to further its activities.
The noble Lord was kind enough to say that the new advance which has been given was not unconditional—that there were certain stipulations attached to it in regard to productivity and a whole series of questions, although he did not mention them specifically, relating to the improvement of efficiency in the industry as a whole and possibly as regards many firms in particular. I do not believe any of your Lordships would dispute the necessity for that. There is no point at this time—nor, do I think, has there been any point at any time—in providing completely open-ended aid without some degree of commitment from both the management and operatives concerned in any particular industry. Therefore. I regard that not—on the face of it, at any rate—as being any kind of threat but as a normal requirement which it is prudent for any Government to make.
However, there can be no doubt, although not particularly in the context of the noble Lord's short speech this afternoon, that the Government really expect the British shipbuilding industry—aside from the warship section to which I shall return—to be competitive at all levels; not merely with Europe but also with the Far East, with Japan, with Korea, and with some of the newly-industrialised countries.
Your Lordships will be aware that I have taken issue with the Government on this point. I indicated that at the time when the shipbuilding contract on behalf of the Central Electricity Generating Board went to a Korean firm, and I now return to it because the industry is not merely entitled to the support of the Government, subject to all prudent safeguards, in order to ensure that we have a continuing shipbuilding interest in this country and continued shipbuilding potential—but also the shipbuilding industry is entitled to all legitimate (and I use the term advisedly) protection against dumping.
This is not only the problem of the United Kingdom. If your Lordships will bear with me, I should like to give some examples. There was a feature article in the Financial Times of 17th October, written by its Asia editor, in which he discussed this problem in regard to Korea. He wrote:
"Industries, such as shipbuilding, car manufacturing and heavy machinery, which had become inefficient and, in many cases, would have been virtually insolvent without indiscriminate financial support from successive governments whose only objective was growth at any cost".
He was referring specifically to the industries of South Korea. Nor was he alone, because the Germans themselves have already made identical complaints in precisely the same direction. For example, Herr Henner Meckel, who is managing director of Bremer Vulcan in West Germany said that other companies

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involved in the shipbuilding supply and equipment chain would suffer if the industry collapsed. The Koreans were not expanding their shipbuilding activities just for commercial reasons, he said, but for a strategic industrial purpose and also at a depressed time for the industry.
I should just like to observe that the complaints I made at the time about unfair competition—dumping competition—from Korea were also shared in other countries—notably Germany. We find exactly the same situation in respect of the firm of Burmeister and Wain of Copenhagen—a very well known shipbuilder who, as recently as 12th October this year, were reported as saying, in referring to Korean yards that hourly wage costs are at least twice as high in Denmark as they are in Korea:
"If we are going to be able to sell our ships, we have to be able to show that we have got a better product".
So it is not only myself—and not only Britain—who is making this complaint about dumping by Korea.
Since the question of the CEGB order going to Korea was raised—and if I may remind the House, the Prime Minister refused to intervene in that matter—the first question that I have to ask the noble Lord is this: when Her Majesty's Government are talking about competitiveness, do they still mean that the shipbuilding industry of this country is required to compete against dumping of the kind that I have mentioned? The second question I have to ask the Government is: what plans have they for the future of the industry? After all, some 62,000 people are still employed in the industry; most of the sites are located in either development areas or special development areas; and there are managers also who have bound up their lives in the shipbuilding industry in connection with the shipbuilding and ship repairing industry. Those people ought to have some future to which they may look forward, and I would have thought it reasonable for them to be given some perspective.
The noble Lord has said already that he has received the corporate plan of British Shipbuilders and we should like to know from him when he proposes to let us have the Government's views on that corporate plan, as and when they have assimilated it. To what extent is it to be properly financed? What further finance will be required? How much of that finance will be required for investment, and so on? It is very important that we know the answers to these questions so that there can be some kind of perspective in an industry which has been—and will continue to be—so vital to the interests of the country as a whole.
The noble Lord has not touched upon the matter this afternoon; but in another place the Minister there seemed rather to indicate that the future of the shipbuilding industry in this country was all up to the workers. We know perfectly well that over the past 18 months or so there has been considerable unrest in the shipbuilding yards. This has to some extent been due to the quite massive reduction in the labour force that has taken place. It has declined by something like 31 per cent. I believe that nobody would wish to absolve the workers in the industry of a certain degree of responsibility—in fact, a considerable degree of responsibility—for the way in which the industry develops. But it is very often necessary—particularly
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when disputes arise in this extremely vulnerable industry—to bear in mind that the ship workers, who are by no means overpaid, have had a wages freeze effectively for the past 18 months.
There are very few industries in the United Kingdom, none of the professions, and certainly very few of what one might call the directoral grade of people, where there has been a wages freeze for the past 18 months, even at a time when the rate of inflation has been slightly declining. Therefore, it is up to everyone connected with the industry and to the politicians—including ourselves—who make observations on the general conduct of industry to bear that point in mind. They should take into consideration also that despite the very real fears which the operative has in the shipbuilding industry, there have been very significant advances in the period over the past 18 months to two years in terms of productivity and in terms of breaking down some of the old demarcation lines within the industry which were themselves the product of fear. I do not think that they should be denied that.
One of the most interesting experiments that has been carried out in the shipbuilding industry recently has been the arrangement that Swan Hunter have recently concluded with a Japanese firm to advise them on management. This is the last quotation with which I will weary your Lordships, but I think it is rather salutary to take into account what they have found. It will perhaps make us a little less censorious of some of the workforce in British Shipbuilders, most of whom live in distressed areas and most of whom, even with overtime, earn only a fraction of what many of us are able to earn or to receive by way of our weekly, monthly or annual remuneration. This is what they said—and your Lordships will recall that it was reported in the Sunday Times on 6th November—comparing our practices here with the practices in Japan:
"But above all the Japanese, who have observed that senior management are rarely visible in the yard, have noticed a lack of communication at all levels. 'There are many tall fences, barriers between departments'.".
Then the writer goes on to offer the observation:
"The roots of Japan's success lie in better management, more efficient use of employees' time and the refining of production systems like heat line bending of steel plates—a technique which Swan Hunter abandoned in the complacent days of full order books in favour of less accurate quicker means of pushing work forward to the next stage".
The summation of the opinion is:
"Poor control, created by inadequate organisation and leadership, reflects the failure of shipyard management, which has recently been reshuffled at Swan Hunter".
It is not my purpose to knock management, just as I hope it is not your Lordships' wish, on whatever side of the House, to knock the workers. The problem is both sides. If the loan facilities granted under this Bill are to be used properly, are to be used to aid the shipbuilding industry to what I hope is a recovery of some success, it will be the function of management not to lead by inculcating fear into the operatives, not to try and rule by brandishing the fear of unemployment, but simply to bring the best out in people. This, indeed, of course, is the function of all true leadership, as anyone who has had any experience in manufacturing or service industry knows full well.

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Those who try to rule by fear and by threats ultimately end up by being the recipients of hate.
The Government have a similar responsibility. I hope that they will take this Bill as a first step in doing exactly the same themselves—trying to lead (and it is a very difficult task) not by fear but by bringing the best out in people. One of the ways in which they can do this is to show the industry, both management and operatives, that when the shipbuilding industry is in need of legitimate protection against dumping then our Government, like the Governments of other countries, will not hesitate to protect them. This need not be a pillow on which they can cushion themselves: but it gives them a feeling of oneness, a feeling that they are not alone in their battle against adversity. They do not need to have, and will resent having, their noses continuously rubbed in it. With these sentiments in mind I commend this Bill to the House, and I hope that at any rate some of the considerations I have ventured to lay before your Lordships will receive at any rate sympathetic consideration.
3.16 p.m.
Lord Lloyd of Kilgerran: My Lords, I should like to thank the noble Lord the Minister on two counts. The first is for allowing me to intervene, albeit very briefly, although my name is not on the list in accordance with the usual practice. Secondly, I should also like to join with the noble Lord, Lord Bruce of Donington, in thanking the Minister for his concise and short speech in introducing this Bill.
I should like to follow the noble Lord, Lord Bruce of Donington, on two points. First of all, would it be appropriate for the Minister at this stage to give the House any indication about the future plans that the department or the Government have in regard to the future of the industry? It is known, of course, that these loans are conditional, and in connection with the word "conditional" the word "efficiency" is introduced—a rather general term. I wondered whether the noble Lord would find it appropriate at this stage to say something about the kind of efficiency that the Government require under these conditions. Would it be that the workforce is to be maintained or increased, and will there be any incentives given to the workforce in regard to innovation?
My second point—and I fully realise that this is a somewhat technical point of which I should have given notice, so may I again apologise to the Minister—is that it has been brought to my notice that one of the difficulties which shipbuilders in this country, and indeed in many countries of the EEC, are experiencing at the present time arises from the competition laws of the EEC under Articles 85 and 86 of the Rome Treaty, in particular. The noble Lord, Lord Bruce of Donington, raised the question of difficulties in regard to competition arising from dumping, but I am referring to another aspect of the effect upon shipbuilders when they enter into contracts which may not conform, or in respect of which, at any rate, it takes a long time to find out whether they conform, with the competition laws of the EEC.
May I also, in conclusion, join with the noble Lord, Lord Bruce of Donington, in saying that I hope this is
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a first step that the Government are taking in regard to the recovery of the British shipbuilding industry.
3.18 p.m.
Lord Cockfield: My Lords, I an grateful to the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Lloyd of Kilgerran, for their general support of the Bill. The purpose of the Bill is limited, of course, to providing the money necessary (if I may be forgiven for using the phrase) to keep British Shipbuilders afloat. Perhaps the most appropriate time to be discussing the future of the industry and its future shape will be when Mr. Graham Day has completed work on the corporate plan and my right honourable friend the Secretary of State for Trade and Industry has considered it and come to a conclusion as to the future policy to be followed.
There are one or two points raised by both noble Lords that I should like to follow up very briefly. I entirely agree, of course, that the problem is not confined to the United Kingdom, that the whole of the shipbuilding industry throughout the world, and in Europe in particular, is going through a very difficult period indeed. But none of this ought to blind us to what are our own deficiencies. The simple truth is that in many of the yards operated by British Shipbuilders productivity is actually lower than it was before nationalisation, despite the very heavy investment that there has been; and in many other yards it is no better than it was at the time of nationalisation. It also compares unfavourably with productivity in many European yards. That point is important because the tendency is for people to talk in terms of competition from Korea or Japan. Competition from the European yards is just as important and I suggest to the noble Lord, Lord Bruce of Donington, who specifically raised the question of Burmeister and Wain, that he should look at its productivity because despite its complaints about Korea he will find that it is significantly higher than that of British Shipbuilders.
I realise that wage levels in Korea are lower than in the United Kingdom, although they are not as low as most people suggest; but it is relevant to refer your Lordships to what Mr. Day himself said about competition from Korea. He said that if farm boys in Korea can learn the modern techniques of making ships competitively, why cannot our people, with decades of shipbuilding experience behind them? That is the sort of challenge we need to face.
I do not want to go through a long list of unfortunate events which have occurred in British shipbuilding during the past few years because I prefer, as indeed do both noble Lords, to look to the future rather than the past, but we have lost a lot of orders through circumstances which, frankly, were entirely within our own control. It is no good blaming the Koreans if we have strikes in this country or if orders are running very late indeed. The question of the oil rig for Britoil has been raised on a good many occasions. I hope in the end that that contract can he salvaged. It is not a very happy story from the point of view of performance of our own shipbuilding industry. However, I prefer at present to leave it on that basis.
There is, in fact, considerable subsidisation of shipbuilding prices throughout the whole of the European Community. There is an intervention fund

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which at present provides a subsidy of 15 per cent. on price and we told the Commission that we regard the current rules governing shipbuilding aid as unrealistic in the present market. We accept that there is a need for our industry and that of Europe to restructure, but that the restructuring must be planned and orders must be obtained to keep our best yards going and to provide the breathing space they need to improve their competitiveness. We have, therefore, proposed that the intensity of the intervention fund—that is, the percentage by which we subsidise virtually all merchant shipping orders—should be increased from its present level of 15 per cent. We have argued that the amount of money available must also be increased. It would be wrong to hold out hopes of instant solution and instant agreement in Brussels, but we are pressing very hard on this point.
If your Lordships agree, I will leave matters there and as soon as my right honourable friend has completed his review of the future of the industry we shall clearly be in a position to discuss the situation against a background of knowledge of the specific plans that British Shipbuilders itself and the Government have in mind. Meantime, I am sure that all of us wish Mr. Graham Day every success in his efforts to improve the efficiency and performance of British Shipbuilders.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Travel Concessions for the Unemployed Bill [H.L.]
3.25 p.m.
Lord Molloy: My Lords, I beg to move that the Travel Concessions for the Unemployed Bill, to permit an extension to be made in assisting the unemployed when seeking gainful work, be now read a second time. It would be inconsiderate of me if I took up a great deal of your Lordships' time, particularly as this Bill was debated eight months ago and then delayed. However, I believe I have a responsibility to adumbrate some of the fundamentals in the Bill and also to lament, I hope on behalf of us all, that unfortunately there has not been any sizeable reduction in the number of our fellow Britons who are out of work since the last time I sought to have the approval of the House in moving that the Bill be read a second time.
I thought of this yesterday when, as vice-president of the Greenford branch of the Royal British Legion, I was laying my wreath, and then afterwards talking to many of the chaps from different regiments in the Army, or who had been in the Navy or the Royal Air Force, and were regretting the fact that they had now been out of work for six or seven months and sometimes as much as a year. They had never believed that the time would come when, just as they are getting to the awkward age of 60, they would be flung onto the scrap heap. While no one argued that they had been deliberately flung onto the scrap heap, naturally they had become a little impatient.
We must understand that it is not simply a question
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of being without a job; it is also the economic factors that play on the nerves and the emotions of the man who is out of work and his family. What hurt me was to hear some of the things said yesterday, on that great day, and to wonder whether they were said at Westminster, at the Cenotaph, or in the thousands of other remembrance services held throughout the country. There is the other extreme of seeing young cadets, marching proudly to honour those who gave their lives in two world wars for this nation, some of whom are unemployed. That cannot be a good thing.
I want the House to realise just a few important features. First, the cost of looking for work has become more expensive since the last time this Bill was debated, but there has been no corresponding increase in unemployment benefit. The unemployed are naturally asking, "Are we now in the new army?" At one time it was said that the Burma army was the forgotten army, but is the forgotten army of the British nation now the army of the unemployed? This afternoon we have a wonderful opportunity to say, "You are not forgotten". Are the Government going to tell me, as they did eight months ago, that if this Bill is enacted it will cost the country another £90 million a year? That is roughly £20 per unemployed per person a month, and one is not going to travel very far in Great Britain in a month for that amount. That is how the men and women of this awkward age, and the young people, look at it. This matter is viewed by both the CBI and the TUC with grave concern.
I must once more point out that the whole idea of these travel concessions for the unemployed was the result of concern expressed by Manchester City Council, which instructed its transport executive to see whether it could work out a scheme whereby the unemployed could be assisted. That, roughly, is the essential reason why the Bill was introduced, although it can affect so many.
I have to make this point. I have taken legal advice and I am told that in no way does the Bill say this. This relates to the same thing as the Transport Act. It may be that we shall not get the full co-operation immediately of all local authorities. We can make very certain of this at the Committee stage. It was submitted in argument against this Bill that there exist among the unemployed a number of cheats who will use the Bill, for example, to travel from Scotland to London to see an international football or rugby match or to see relatives in different parts of the country. That argument is in the previous Second Reading debate. It is suggested that they would abuse the concession. That would be impossible.
The quintessential point of the Manchester City scheme was this, and I endorse it thoroughly. If the Bill became law no unemployed person would get a concession of one halfpenny until he had sought employment. He would have to take a pro forma with him. The CBI pointed out that there is support for this. The prospective employer would have to sign to say, for example, that the person had come from Hammersmith in West London to the London docks in East London and that it had cost £4. He would have to certify that the person had done that. The person could then make application to recover some if not all of that fare. What is wrong with that?
There are attitudes to this Bill similar to those

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propounded by the massive ignoramuses inside and outside Parliament when the legislation on the National Health Service was introduced. It was argued that there would be floods of all sorts of medicaments. As we all know, a person cannot get one aspirin on the National Health Service unless a doctor signs for it on the prescription record. Will all the employers cheat and connive with the unemployed? That argument is not worthy of being entertained. The prospective employer will be a witness that the job was advertised and that a number of people came to be interviewed. He might even regret that he could not give them all work. He might say that he had difficulty in making the ultimate selection but that these people did apply. Let us not make it an offence to seek gainful employment. Let us not prohibit it by making it too expensive to seek gainful employment.
This Bill is particularly relevant in our great connurbations. Lots of former dockers live in Fulham, Hammersmith and even Greenford. Many of them know only that great trade and skill. There might from time to time be pro tem employment. There may be a rush to the dock. It may interest your Lordships to know that to travel on public transport from Hammersmith, Fulham or Greenford to our great dock areas will make a big dent in £6. To do that two or three times a week would make a massive hole in a man's unemployment benefit, unless he happened to be on special supplementary benefit—and I do not think that we intend that should happen.
The former Secretary of State for Employment, Mr. Tebbit, asked everyone to get on their bikes to look for a job. That may be a very good idea, but I do not believe for one moment that his father cycled 40 miles there and 40 miles back looking for a job every day of the week. The idea is to get out to look for work. I do not suppose a person would mind looking round most parts of Manchester or of many other big cities, but to look for work in Glasgow or Clydeside a man could walk nearly 100 miles in a day. To look for work in our capital city—in Greater London—he could walk or bicycle 100 miles a day if he could not afford the Underground or the bus. That applies to Glasgow, Sunderland, Swansea, London and even in Manchester. I hope that that point will be seriously considered.
From reading the previous debate and from conversations, I can readily understand that there are genuine apprehensions in the breasts of many who would like to support the measure. I am equally convinced that they can be overcome in Committee. This happens in practically every Bill. From my not inconsiderable experience long before I came into the other place of examining in detail parliamentary Bills, particularly if I thought that they affected Fulham Borough Council or any other council, I know that is so. Later in the other place I examined Bills and watched the changes in Committee. Many of them were for the good. I believe that that argument still applies. Many of the apprehensions could be overcome in Committee.
I also acknowledge that there might be genuine criticisms of the unemployed. I do not think that they are meant in a mean manner. There are arguments in local newspapers. There are about 20 to 25 local newspapers in London alone; and the same may be
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argued about Glasgow, South Wales or the Midlands. There are a number of job vacancies. But there may be a chap living at one extreme point of London and looking for a job that might suit him. He might like to try for it but he cannot afford the expense of travelling. He might have been out twice that week and already spent £15. This Bill would assist him. The employers argue that it would be an additional aid to make the unemployed more mobile. The employers and the unions say that we cannot tell people that they have no right to look for work beyond the immediate vicinity of their home.
I commend the Bill to the House. I hope that the House will support the Bill on behalf of the unemployed to show them that we acknowledge their endeavours to find employment. Despite the large number of unemployed, the case is advanced by employers that there are a number of vacancies which people do not want, perhaps because they cannot afford to travel or wonder whether it is worth it. The cost of the Bill is trivial when one considers what mass unemployment is costing this country. It is not unlikely that we could recoup the cost of this little Bill in 12 months with all the extra jobs being filled. The measure is supported by the unemployed, by the professions and by the trade union movement. It has the wholehearted support of the CBI and the chambers of commerce. Everyone who has anything to do with commerce and industry thinks that it is a good idea. All I ask, my Lords, is that, given that all those sectors of British commerce and industry believe it is a good thing, I hope that your Lordships will as well and will give this little Bill a Second Reading.
Moved, That the Bill be now read a second time.—(Lord Molloy.)

EC Special Council of Ministers: Athens
3.40 p.m.
Lord Trefgarne: My Lords, with your Lordships' permission, I should now like to intervene to repeat a Statement that is being made by my right honourable friend the Foreign and Commonwealth Secretary in the other place. The Statement is as follows:
"I attended the Special Council in Athens on 9th to 11th November, accompanied by my right honourable friend the Minister of Agriculture and my honourable friend the Economic Secretary to the Treasury.
"This was the sixth meeting of the Special Council set up by the European Heads of Government to carry forward the work agreed upon in Stuttgart in June. The Special Councils have concentrated on three main topics: measures to ensure greater budgetary discipline and effective control of agricultural and other Community expenditure; measures to ensure more equitable sharing of the burden of financing the Community budget: and the establishment and implementation of new Community policies.
"As honourable members know, Community spending is now up against its revenue ceiling. A number of member states are pressing for an immediate increase in own resources. My right honourable friend the Prime Minister made clear at

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Stuttgart, and I stated again at Athens last week, that we would be prepared to consider this provided that two very important conditions are met: first, that agreement is reached on an effective control of the rate of increase of agricultural and other expenditure; and second, that it is accompanied by an arrangement to ensure a fair sharing of the financial burden.
"As far as the first condition is concerned, there is agreement within the Community that the present rate of growth of expenditure on the common agricultural policy cannot be allowed to continue. Early in the negotiation we put forward a proposal for a strict financial guideline which, as part of the Community's budgetary procedure, would ensure that agricultural spending was rigorously controlled. Some of our partners are not yet willing to go nearly far enough to secure effective control of such expenditure, but others are now pressing as strongly as we are for an effective mechanism across the board. Even those who have so far resisted a legally binding guideline, such as the Commission themselves, have tightened up their proposals considerably in response to our ideas.
"At an equally early stage we tabled a proposal for a safety net which would limit a member state's contribution to the budget in accordance with its relative prosperity and its ability to pay, and so meet our second condition. Here, too, a number of other proposals have been tabled, including the ill-advised ideas put forward by the Commission last week, which sought to reduce the problem by redefining it in a wholly arbitrary way. Other proposals also fail to measure adequately the true budget burden borne by the United Kingdom. But some of them represent significant movement towards our thinking about the essential elements of an agreement on the budgetary arrangements.
"I again emphasised in Athens last week that, if there is to be agreement at the Athens European Council in December, our two conditions must be met.
"Last week's Special Council also took forward discussion of the future development of the Community in other fields. Here, too, we have tabled important proposals for the council's consideration.
"The Special Council will meet again in Brussels on 28th November. It is generally agreed that decisions will only be taken at the European Council on 4th to 6th December and that individual questions will only be resolved as part of an overall agreement."
My Lords, that concludes the Statement.
Lord Bruce of Donington: My Lords, the House will be grateful to the noble Lord for having repeated the Statement made in another place. We should like to assure the Government of our complete support of the rejection of what the Government politely describe as a "wholly arbitrary" method of determining the United Kingdom contribution to the European budget. It is quite clear, as Commissioner Tugendhat has made out, that there is not even the remotest
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justification for the Commission's plan to whittle away in mathematical terms the financial deficit which this country still incurs by virtue of its membership of the Community; and we hope that the Government will not in any way waver in their complete rejection of the plan that has been put forward by the Commission.
I was a little worried by the conditions contained in the Statement for the Government agreeing to the raise in the Community's own resources. Among others, I have warned Her Majesty's Government over the last four years of the undoubted fact that the 1 per cent. VAT limit on the Community budget would soon be passed due to the yearly increase in agricultural expenditure. The Government have been warned about this repeatedly.
I gather from the Statement that the Government are prepared to consider an extension of the Community's own resources on the basis of the rate of growth of agriculture expenditure being brought under control, or under stricter control. That is not the position of the Government that they have put forward to the country every time there has been an annual price review. I remember the Government having stated on at least three occasions that they would resist any price increase on items of agriculture in structural surplus. Every year there has been the brave statement that they are going to resist increases. Yet every year the Minister of Agriculture has come back with a new triumph—that the rate of increase has been contained within 4 or 7 per cent. I should much prefer it, and we on this side of the House should much prefer it, if the Government stuck to their guns and said that agricultural expenditure must be contained within its present levels. Many methods are available for this to be done. The Government can transfer expenditure from the guarantee section of the fund to another section of the fund which is concerned with providing more direct aid to farmers; and I hope that we may have an assurance from the Government on that point.
As regards the other matters that are to be raised at the next summit, I should like to express the hope that after a period of eight years and five separate assurances given by the Government on the subject, some positive decision may at last emerge on the proposal that British insurance companies, other than those dealing with life assurance, should be allowed to function on the Continent. This question has now been under discussion for some time, and it would be refreshing if at last the insurance community received some redress in this matter, which is fundamental to the free provision of services in the EEC.
Lord Kennet: My Lords, this is an interim report and we are very glad to see that it does in fact report signs of movement towards our point of view in these important matters—and about time too, given that it is the report of the sixth of only seven meetings that are to be held by the Special Council before the Athens summit itself. Now that the Prime Minister and the British Government have begun to treat the United States Administration as one group of friendly adults in charge of a modern nation state should treat another, would it not be very fitting to make use of the Athens summit to begin to use a corresponding (if I may say so) change of tone there? The only favourable

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result which can emerge from the Athens summit will be the highest common denominator of what is insisted upon by all the member states. It cannot be anything else, and we cannot forever conceal this fact from ourselves by using the language of exasperated crusaders. Will the Government agree that the Athens summit provides an opportunity for the other half of the beneficial change in emphasis in foreign affairs which was inaugurated by the Government a couple of weeks ago?
Lord Trefgarne: My Lords, I am grateful to both noble Lords for their response to the Statement. The noble Lord, Lord Bruce of Donington, thought that he apprehended some change in our approach to the revision of the budgetary arrangements generally. I can assure the noble Lord that that is not so. We have consistently argued, as the noble Lord knows, for thoroughgoing reform of the common agricultural policy which we are certain will bring in its train at least a containment and perhaps a reduction of the amount of money spent in that particular area.
The essence of the problem of the common agricultural policy—is it not?—is the difficulty in its continuing to subsidise the production of various things which are already in surplus and of which we subsequently have great difficulty in disposing. But there are certain other spending policies within the Community that perhaps do not deserve the same critical scrutiny as the common agricultural policy. We would certainly be willing to contemplate an appropriate growth in those areas. That was the meaning of the words repeated in the Statement.
The noble Lord, Lord Bruce, also asked me about the progress of various directives relating to the operation of insurance companies. I am sorry to tell him that I do not have immediate information about them. It was not, I think, one of the subjects discussed at the recent meeting. I shall find out what I can and write to the noble Lord.
The noble Lord, Lord Kennet, asked me about the prospects for the Athens summit. Of course, this Statement only foreshadows certain items at the Brussels summit. I would not want to be dragged, at this stage, into discussion of what other matters might be raised at the Athens summit but the matter of political co-operation within Europe, which has given us so much more of an effective voice in the councils of the world, will doubtless be discussed at Athens in December.

Travel Concessions for the Unemployed Bill [H.L.]
3.52 p.m.
Second Reading debate resumed.
Lord Campbell of Alloway: My Lords, I share, of course, the moving and eloquent concern of the noble Lord, Lord Molloy, for the unemployed, and the mounting cost of the search for work. But this Bill is ill-fated. It is open to objection in principle. It is unworkable in practice. This is not only because it imposes an unreasonable burden of administration on
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local authorities generally, even if acceptable in Manchester, but also because it is fraught with confusion. For the tacking process to Section 138 of the Act confuses the concept of grant with that of concession; the status of unemployment with that of the elderly, blind and disabled; and the limited purposes of a grant to travel in search of a job with the general purpose of unlimited travel.
Surely, it is difficult to envisage how such objections in principle could dissolve at Committee stage. There is an MSC grant available to those unemployed in receipt of supplementary benefit to enable them to travel in search of a job. If this was to be extended to those in receipt of ordinary benefit, surely the point of principle which the noble Lord, Lord Molloy, contends, could be met, because, adverting carefully to his speech at the point where he dealt with the "hole in the pocket" observations, it seemed to me that that might have been the main gravamen of his complaint arid, if not. that this might go some way to meet his sincere and genuine concern.
One would assume that since 11th March my noble friend the Minister may have considered this suggestion and has no doubt received some advice as to the extra cost involved both in terms of the extended grant and in terms of the extra costs of administration. It would surely be most interesting to hear, when my noble friend the Minister replies, if he has any proposals in this regard—proposals that, in the event, might well tend to render, in due course, further consideration of this Bill unnecessary. In conclusion, I am grateful to the noble Lord, Lord Molloy, for affording your Lordships' House yet another occasion when this important question of this MSC grant may be raised and discussed.

Intermediate-Range Nuclear Forces
3.56 p.m.
Lord Trefgarne: My Lords, I hope that you will forgive me if I intervene again to repeat a Statement made by my right honourable friend the Secretary of State for Defence in the other place about cruise missile deliveries. The Statement is as follows:
"With permission, Mr. Speaker, I should like to make a Statement about preparation for the operational deployment of cruise missiles in the United Kingdom.
"On 31st October, this House reaffirmed by a majority of 144 its support for the NATO 1979 twin track decision on intermediate range nuclear forces, its backing for the West's efforts to achieve a balanced and verifiable agreement at the Geneva negotiations, and confirmed that in the absence of agreement on the zero option, cruise missiles must be operationally deployed in the United Kingdom at the end of 1983.
"In the course of that debate, I indicated that the initial supporting equipment for the first flight of cruise missiles had been arriving at RAF Greenham Common for some time, that further equipment, including the transporter-erector-launchers, would be arriving shortly, and that I would make a further Statement when the missiles arrived in this country. In honouring that commitment, I should inform the

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House that, earlier today, the first cruise missiles were delivered by air to RAF Greenham Common.
"The delivery of the missiles is wholly consistent with the Alliance decision to achieve an initial operational capability by the end of 1983 in the absence of agreement on the zero option. Much work remains to be done, including the final assembly and testing of equipments and personnel training, before the missiles are operational.
"I wish to emphasise that these continuing preparations for operational deployment do not in any way lessen NATO's commitment to negotiations or reduce the desire of the Alliance to reach agreement on arms control with the Soviet Union. The NATO deployment is planned to be completed over a five-year period; it can be halted, modified or revised at any time if results in Geneva warrant it.
"But the fact remains that since the 1979 decision the Soviet Union has almost trebled—from 126 to 360—the number of SS.20 missiles it has deployed. Even since the debate on 31st October we assess that another nine missiles are operationally deployed, compared with the figures I gave the House on that occasion.
"In contrast. I would remind the House that last month NATO Defence Ministers agreed to the most radical reduction in the number of nuclear warheads deployed in Europe that has ever taken place. The effect of this decision will be to reduce the number of NATO nuclear warheads in Europe to their lowest level in 20 years, even if full deployment of Pershing II and cruise missiles takes place. The number of these warheads will be reduced by one third from their December 1979 level, and the number of warheads for shorter-range systems will be reduced by one half.
"The Government hope that the Soviet Union will now respond positively to the radical proposals put forward by NATO for arms control. That is our foremost hope. But let me make it clear that this Government will remain resolute in their commitment to take those steps which are essential for the defence of this country and our allies."
My Lords, that is the Statement.
Lord Bishopston: My Lords, the House will be grateful to the Minister for reading this very important Statement to the House. We are grateful also to the Secretary of State. I understand that he has travelled some distance in order to come to Parliament to make this Statement at rather short notice. Perhaps the Minister would comment on that. In view of the fact that the Secretary of State is keeping his promise to inform Parliament of the deployment of missiles, does this not suggest that he had very little knowledge of when the missiles were actually coming to this country? If that is so, then surely the state of consultation between the United States and ourselves is something which could be vastly improved? Does the Minister not agree that, even when a Minister is acting possibly as a type of messenger from the United States, he should have good notice before he delivers such messages to Parliament?
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As the missiles are mobile, will Parliament be informed of any proposals to move them to other sites throughout Britain? Will the Minister say what those sites are? Is he aware that over 90 per cent. of people of all parties want dual control? Will he heed such overwhelming views even at this late stage? The Minister says that the preparations for operational deployment do not in any way lessen NATO's commitment to negotiation. Does he really expect the Soviets to continue negotiations when such action is already being taken by Her Majesty's Government in consultation with the United States well before the end of the year which we understood was the deadline if the Geneva talks failed? While reductions of warheads are welcomed, is it not the fact that the nuclear capability will be all the greater in view of the very advanced technical superiority of the weapons with which we are now concerned?
In the light of the Korean airliner incident, to which reference was made in Question Time today, can the Minister say what safeguards there are as regards adequate consultation between allies and between NATO and the Soviets? Finally, the House will be looking forward to tomorrow when we may debate these matters so vital to our future in greater detail.
Lord Mayhew: My Lords. I thank the noble Lord for repeating the Statement. Is he aware that his Statement quotes as a reason for deployment the failure of the Soviet Union to accept the zero option? But was this not the original demand of the United States when the negotiations began two years ago? Is that not proof that any changing of the offer by the United States since has been purely cosmetic? Can the noble Lord give any precedent in international negotiations for a country stating its requirements and its first negotiating position, and negotiating or pretending to negotiate for two years, then restating the original demand at the end of the negotiations?
Is the Minister aware that many of those who, unlike the Labour Party, supported the twin-track decision, deplore the passive acceptance by the British Government of this hard-line American negotiating position? Now that the Soviet Union has scaled down to 140 the number of SS20s which it would deploy against Europe, is the Minister aware that the gap between the two sides, in terms of warheads, is less than 3 per cent. of the total warhead stockpile of the two sides? Will the Government therefore now inform the United States that before actual deployment takes place they will be looking for a decisive shift in the American negotiating position at Geneva and also that they will, in any case, under no circumstances support the deployment without agreement that Britain shall share the physical control of the missiles?
Lord Trefgarne: My Lords, I am grateful to both noble Lords for their response. The noble Lord, Lord Bishopston, asked me first of all about consultation. I can assure the noble Lord that the British Government have been in the closest consultation with the United States over all the matters referred to in the Statement, and the type of insinuation that was contained in the noble Lord's supplementary question was quite without foundation. As for the question of training deployments, these have yet to be decided upon in detail. I am afraid that I cannot give the noble Lord the

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assurance that each and every one will be notified to your Lordships or to the other place beforehand, but the plans, as I say, are presently in formulation.
The question of dual control or dual key is a matter which your Lordships will be debating tomorrow evening, and I hope therefore that your Lordships will forgive me if I am not dragged into that discussion at this time. The question of arms control negotiation was raised by both the noble Lord, Lord Bishopston, and the noble Lord, Lord Mayhew. Your Lordships may have temporarily forgotten quite what proposals the West has been making in recent months in these particular areas. In the INF talks, for example, the West, in the form of the United States, made the zero option proposal which would of course eliminate the whole of this class of nuclear weapon. That offer is still on the table but, if that is too radical for the Soviet Union, then we are certainly prepared to agree a genuine balance at as low a level as the Soviet Union will accept. Indeed, President Reagan recently announced further flexibility in the United States' negotiating position specifically geared to take account of expressed Soviet concerns. There have been other Western proposals in some of the other disarmament fora recently, generally all with an equally dismal response from the Soviet Union.
The noble Lord, Lord Mayhew, also referred to the balance of nuclear forces in Europe and he said that he thought that the balance was about 3 per cent. or so. But the noble Lord seems to have forgotten, if I may say so, that we are now facing some 360 SS20 missiles, as was said in the Statement, while we on the Western side have none of these intermediate range weapons at all. That is the cause of the present deployment.
Lord Jenkins of Putney: My Lords, is the noble Lord aware that, while it is the policy of the Labour Party that cruise missiles should not come here at all, it would, since they are apparently arriving, be appropriate for us to concentrate on the question of operational deployment? In those circumstances will he bear in mind, before he comes to consider this question—and I gather that it will he some time before the question is finally decided—the view expressed in national opinion polls by the British people, including apparently 96 per cent. of Conservative Party voters, that physical operational control at the point of delivery should rest in British hands or at least in shared hands? In those circumstances, is the noble Minister in a position to give us a particular assurance on this point, recognising the strength of opinion, on an all-party basis, on this question?
Lord Trefgarne: My Lords, I certainly recognise that there is more than one view about the point that the noble Lord is making to me. The Government have made their position very clear on this matter and I have no doubt that the noble Lord will make his position equally clear when we come to discuss this matter tomorrow evening.
Lord Orr-Ewing: My Lords, is my noble friend aware that from both Front Benches opposite there has been no request, no demand and no coercion as regards the USSR to make any gesture at all in
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reducing the threat from 360 three-headed SS20s which have been deployed over the last five years? Is it not sad that in this House we have reached a state of affairs which one would doubt existed in the Liberal/SDP Alliance? Will we not get a more robust attitude from David Owen in another place and not have this abject surrender, which means that all efforts must be made by this country and by their NATO allies to reduce our armaments, rather than putting the pressure on the USSR, where the pressure should be put?
Lord Trefgarne: My Lords, the noble Lord is quite right. Of course it is the policy of this Government to pursue multilateral balanced and verifiable disarmament proposals, and that is what is happening in the various fora.
Lord Molloy: My Lords, the noble Lord talks about the dismal responses of the Soviet Union. Would he not agree that there have been endeavours (as we understand from the reading of what one might describe as "the more responsible press") by the Soviet Union to try to get together to talk about these matters? Will he bear that in mind? We cannot, on the one hand, as we have heard a moment ago, ignore the massive advantage that the Soviet Union has in nuclear weapons, in tanks and all types of weapons—they have this massive advantage and they are being recalcitrant. On the other hand, many of us think that they want to talk about it. If they were being really logical, they would start now before the Americans and the United Kingdom can catch up. So let us be sensible in trying to initiate talks with them.
Lord Trefgarne: My Lords, as I have said, we are having talks with the Soviet Union in the various disarmament fora that are presently in being. There are the INF talks, the START talks, and the MBFR talks in Vienna concerned with conventional weapons; there are the general disarmament talks taking place in Geneva, which at the present time are particularly concerned with chemical weapons. The United Kingdom is playing an important role in the forthcoming conference on disarmament in Europe. Therefore, talks are going on. We are now looking for a positive response from the USSR.
Lord Kennet: My Lords, will the Government and noble Lords opposite accept that the Alliance is, indeed, most anxious and insistent for Soviet reductions in intermediate range missiles, but that the Alliance has also noticed that the Soviet Union has offered to make such reductions and that the United States has also offered to make reductions in its deployments? Will the Government not agree that the time to discuss the operational deployment of the cruise missiles is not yet, but when we know the final position of the two sides at the Geneva negotiations, which is not yet known and may not be known for weeks? Will the Government also note that we here agree with what the noble Lord has just said, that the time to discuss dual key is tomorrow night? In the meantime can the noble Lord the Minister of State comment on a recent report in an American magazine—a normally reliable one—to the effect that there exists a joint Anglo-American operational plan

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to lay down the conditions under which both British and United States troops at Greenham Common would open fire upon people who might approach the perimeter fence? I hope it is as obvious to the Government as it is to me that this cannot possibly be true. Can the Government please set the mind of the House at rest on that?
Lord Trefgarne: My Lords, I have not seen the report to which the noble Lord refers, and I know of no such plan.
Lord Gladwyn: My Lords, I know that this is a hypothetical question, but let us suppose that the negotiations on intermediate weapons continue in Geneva—and we all hope that they will—and let us suppose that during these negotiations the Russians come forward with a further offer (apparently they have already offered to reduce their weapons to 130 or 140) to reduce them to, say, 100. In order to facilitate these negotiations, would the Government contemplate halting the importation of cruise missiles, reserving their right, however, to resume the importation if, after all, the negotiations fail?
Lord Trefgarne: My Lords, the West will certainly be willing to consider any proposals put forward by the Soviets at the INF talks at Geneva which could lead to a settlement on this matter. However, the difficulty which faces us at the present time is that the Soviets have an overwhelming superiority in this type of weapon. Indeed, as I mentioned earlier, they have 360 rockets, which, as my noble friend Lord Orr-Ewing reminded us, each have three warheads, while at the same time we have absolutely none of these land-based intermediate range weapons. So any proposal which the Soviets may make by way of a reduction in the numbers which they are prepared to contemplate will have to be considered by us in that context.
Lord Bishopston: My Lords, in view of the comments by the noble Lord, Lord Orr-Ewing, which allege that Members on these Benches are not anxious that the Soviets should also proceed towards disarmament, may I ask whether the Minister recalls that I asked him whether he expects the Soviet Union to continue negotiations when the Government have taken the action that they have? The promise earlier in the year was that if the talks fail after Christmas, then deployment will take place. Apparently talks are still taking place, and deployment is proceeding. That surely will torpedo the possibility of success of these important talks, which are vital to both sides.
Lord Trefgarne: My Lords, I very much hope that the Soviets will not withdraw from the present talks in the light of today's events or of any other news. After all, the United States has remained at the table in Geneva despite the continued deployment of SS20s by the Soviet Union throughout that time.
Lord Beswick: My Lords, the noble Lord talks about the overwhelming superiority of the Soviet forces. Will the noble Lord tell us what is the difference to a recipient whether he is hit by a land-launched or a sea-launched missile?
Lord Trefgarne: My Lords, I agree that if you are sitting underneath it the difference is not very great, if any. But the distinction is the question of deployment. These SS20 missiles are a wholly new element in the nuclear equation, and that is why we had to make the response that we did.
Lord Diamond: My Lords, in order that there should be an accurate record in Hansard—and I do not wish to appear niggling—could the noble Lord confirm what he originally said in repeating the Statement, or perhaps he could revise it? I have reason to believe that in another place his right honourable friend said that the NATO deployment can be "halted, modified or reversed". The noble Lord the Minister said that it could be "revised". There is a considerable difference between "reversed" and "revised", and I wonder whether he would be good enough to confirm which is the correct version?
Lord Trefgarne: My Lords, I am grateful to the noble Lord for asking that question. If I said "revised" I was mistaken; the correct words are, of course, "halted, modified or reversed".
Lord Bishopston: My Lords, is there no chance of the United Kingdom being represented at these talks instead of being represented by the United States, allies though they may be, in view of the fact that the Labour Party has sent its former leader, Mr. Foot, and also Mr. Healey and Mr. Callaghan to the Soviet Union to talk on these matters? We are often told that if we have these weapons, we have a right to put our legs under the table, but in this case Britain is not represented.
Lord Trefgarne: My Lords, it is indeed the case that we are not represented at the INF talks; but then, of course, we were not the progenitor of these weapons so it would not he appropriate.

Travel Concessions for the Unemployed Bill [H.L.]
4.17 p.m.
Second Reading debate resumed.
Lord Tordoff: My Lords, after that interesting excursion perhaps I can draw you back to the subject of travel concessions for the unemployed. First, I should like to apologise to the noble Lord, Lord Campbell of Alloway, for being absent from the Chamber during the first few minutes of his speech. I made the mistake of thinking that the two Statements would run one after the other.
Let me start by thanking the noble Lord, Lord Molloy, for his persistence in this matter. This is the third occasion in the last eight months on which this area has come before your Lordships for debate—first, on an amendment by the noble Lord, Lord Underhill, and the last occasion when a Bill in the name of the noble Lord, Lord Molloy, was before us. Therefore, it will come as no surprise to your Lordships to realise that we on these Benches are prepared to give general support to this Bill. I gave that support to the noble Lord, Lord Underhill, on his amendment; and, in an

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interesting and I thought moving speech, my noble friend Lord Lloyd of Kilgerran gave support to the Bill when it was last before your Lordships' House. In view of that I do not propose to detain your Lordships for more than a few minutes.
Basically there is a problem here. I think we all recognise that there is a problem, and support for that view comes from all sides of the House. The question is how we should tackle it. In my view, the problem comes in two parts: first, the question of people seeking work, where the present arrangements are not satisfactory. I think that the noble Lord, Lord Campbell of Alloway, hinted that he would like to see some modifications, though not necessarily in this form. I do not think that they are satisfactory because it is very difficult to be fast enough off the ball, if you like, when various bureaucratic processes have got to be gone through.
There is no doubt that people trying to get work have to do a great deal of scouring through the market before they find a job. It is not just a question of going for one interview or making one train or bus journey. The people who get the jobs are those who are up early in the morning and moving about the whole area as fast as they can to try to find work wherever it exists. It is for that reason that a more general system of allowing people travel concessions than is allowed under the present arrangements is necessary.
I would not want to underrate the need for social mobility. Again the noble Lord, Lord Underhill, referred to this in his speech on the Transport Bill amendment. The feeling of being isolated from the community because you simply have not got the money to be able to use the local buses, however low fares may be in certain parts of the country, is a serious problem. It is a deep, psychological problem which adds to the burdens which the unemployed already have.
It may be that the Government will feel that this Bill is too open-ended in that general direction. I am sure that the noble Lord, Lord Campbell of Alloway, would feel that. However, again, something must be done to try to assist the unemployed in what is a serious area of feeling locked into their own front rooms, not able to go out, not able to take advantage of those services, recreational or otherwise, which may be free once you can get to them. It is for that reason that I feel that this Bill moves in the right direction.
It may well have need of modification. For instance, the reference to the YOP people should probably be extended now to the YTS, because the proportion of people on the YTS compared with that on the YOP is now much higher. It may be that the Government may be able to come up with some sort of constraints which do not undermine the principle that we are all trying to achieve but which at the same time make it perhaps less expensive to the Exchequer while achieving the same objective.
On the question of the £90 million, it is a substantial sum of money. I question whether that figure is absolutely accurate, although I do not in any way doubt that the noble Lord, Lord Lucas, is being absolutely sincere when he puts it forward. I wonder how that costing has been made. Is it the total cost of the travel, or is it a contribution to the fixed cost, or is
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it some variable cost of the travel which is involved'? If the Government could come up with some other mechanism for achieving this necessary principle to help the lot of the unemployed, both in their social life and, much more particularly, in their ability to rove about the areas in which they live in order to seek those rare moments when a job is available to them in which their skills fit a particular specification, then the Government should this afternoon come forward with some alternative proposal if they are not prepared to accept the Bill as it stands.
4.23 p.m.
Lord Underhill: My Lords, I am delighted that my noble friend Lord Molloy has again brought this proposal forward. As the noble Lord, Lord Tordoff, said, we have had this before your Lordships on three occasions. When I proposed amendments dealing with this principle at the Committee and Report stages of the Transport Bill, emphasis was laid on the fact that the Transport Bill was not the correct vehicle for such a proposal, even though we went on to discuss certain aspects of it. My noble friend's Bill for the same purpose was not thrown out on principle in March this year. The amendment that it be read six months hence was carried, if I remember correctly, by a majority of 15 votes on a Friday afternoon. I hope that we may have a different result today, and I am delighted to learn from the noble Lord, Lord Tordoff, that he and his colleagues will give the Bill their support.
When we debated the Bill on the last occasion emphasis was laid by Ministers—and the noble Lord, Lord Campbell of Alloway, has repeated this today—on the DHSS and the MSC schemes of assistance to persons to travel to obtain work. There are conditions attached to those two schemes. I am not going to go into them again today except to say that included in the conditions is that a person has to be unemployed and in receipt of supplementary benefit, and there are large numbers of unemployed who are not in receipt of supplementary benefit. They are debarred. Emphasis was laid on the fact that there is assistance for travelling for training schemes. Again—and here the point made by the noble Lord, Lord Tordoff, arises, that we may have to ensure that the new scheme will be covered—it was emphasised that reimbursement is after the first £4 per week. Therefore, under the schemes referred to in March the unemployed have to bear the first £4 each week themselves for training. Anybody who has been out of work and on the benefit scheme will realise what a burden that can be. Many will find it hard to meet that sum.
I want to emphasise, as I did on the previous occasions, what the noble Lord. Lord Tordoff, has said: that while assistance to travel to work, and assistance for training schemes are important, the question of help for unemployed persons to live a proper social life is equally important when we are considering my noble friend's Bill. Some of the arguments put forward the last time were that it was not appropriate to link such a scheme with the elderly, the blind and the disabled. Why not? We were told that it was not appropriate; we were not told why.
We were told that other sections of the community are also in need. This is a time-honoured procedure to

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stop doing one thing by saying that many other people are in as equally bad a situation. We were told that not all local authorities had made use of the provisions of the 1968 Act. So what? If some authorities are progressive and humane enough to want to apply Section 138 of the 1968 Act, good. We want to give local authorities provision to go a bit further.
Then we were asked whether subsidy was the best way of helping those out of work. We were never told another way of helping them so that they could lead a full and proper social life. This is one way in which the fortunate members of the community who are in work can give assistance. Then the noble Lord, Lord Lucas, speaking for the Government, said on 11th March, at col. 452:
"The principal objection to this Bill"—
note that—
"is that it would have very considerable consequences for public expenditure".
"The principal objection", my Lords. If we can get over that one, then we can possibly get the Bill approved.
First, we are not talking about assistance from the Government. If there has to be any revenue support, it will be the local authority deciding to raise this from its rates in order to ensure that the majority of its people help the minority who are out of work. My noble friend referred to the Greater Manchester scheme. I understand that they wanted to have the scheme used in off-peak hours, and the cost to the Passenger Transport Executive would have been very low indeed. What Manchester wanted to ensure was that if they went ahead with such a scheme they could not be challenged on the grounds of illegality. My noble friend's Bill would put that right.
The social needs of the unemployed are vital. Help for them to visit friends and relatives is vital. We all know of cases in conurbations where the parents are situated near the town centre and the younger families have moved out, and we know the cost of travel. If anybody does not believe that, come to where I live, Buckhurst Hill, the first district over the Greater London boundary, and work out what it costs you to visit friends in Southwark. It is not far off £3. When that is multiplied to provide for husband and wife, and so on, it is a big burden to meet.
The social aspect is very important. There are various establishments, boating and leisure, which are arranging special facilities for the unemployed so that they can get admission at a low figure. You can even come to my GLC public golf course and, as an unemployed man, play there Monday to Friday for 55p; but you have to get there. If you look at the map and see where Hainault Forest is, you will realise the problem of getting there. The cost of travelling is very important.
We have to avoid the tendency today of there being two nations. We have heard about this before. That is, those who are in work and those who are out of work. The number of those who have been out of work for 12 months or more is round about the half million mark, and these are the people finding it difficult to meet travelling costs to lead a normal, decent life. I hope that we shall not have a repeat—and I do not think the
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noble Lord the Minister will repeat it—of the reference made last time about the unemployed travelling on long journeys. My noble friend referred to this. Under Section 138 of the 1968 Act, to which we refer, any concessionary fares apply only in the area of the local authority which makes the decision. Therefore, that point is absolutely clear. The other point is that it is not mandatory, any more than the present Section 138 provisions are mandatory. It is permissive, depending upon whether a local authority wishes to apply it.
Thirdly, a local authority may lay down its own conditions if it wishes. My noble friend's Bill proposes to extend the facilities for the elderly, the blind and the disabled to the unemployed. I can see no reason whatever why the Government should not give this support. If the Government do not give support and my noble friend decides to press the matter to a vote, I hope that not only my noble friends on these Benches but noble Lords throughout the House will support this measure as one way whereby those of us who are in a better situation can help the unemployed, not only to travel to work and training schemes but to travel also to live a decent life, which all of us want.
Every noble Lord knows the considerable benefits that attract great appreciation from the elderly—many noble Lords in this House use the concession to the elderly. Not only the concessions to the elderly, but the concessions to the blind and the disabled also are well appreciated. I assure your Lordships that, whatever one says about the Greater London scheme, the fact that the elderly in the Greater London area can move and travel around has transformed many of their lives. We want to ensure that it also covers the unemployed as well.
4.32 p.m.
Lord Lucas of Chilworth: My Lords, it is clear again this afternoon in this debate that there is one thing that unites all sides of the House and that is our real concern for the problems which are created by unemployment. The Government are concerned with these problems also, but particularly with the problem of unemployment itself. We now seriously consider that there are grounds for believing that the underlying unemployment trend has been reversed. If I say that, I hope that no Member of your Lordships' House will accuse me of complacency about the difficulties facing those who are unemployed.
The noble Lord, Lord Molloy, has argued that this Bill represents a way of easing life for those who continue to be without work. We are familiar with the issues that he and other noble Lords have raised. As has been mentioned we have discussed these on three previous occasions this year—on 3rd March. 11th March and on 21st March. Indeed, the noble Lord, Lord Underhill, was quite right when he said that on the last occasion the Bill then before your Lordships' House was defeated by 15 votes.
The proposal we are considering this afternoon is important and I do not complain at all because we are considering it again.
Lord Tordoff: My Lords, if the noble Lord will forgive me, he is not quite accurate in saying that the Bill was defeated. It was put back this day six months

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on an amendment by the noble Lord, Lord Nugent of Guildford. That is for the record, my Lords.
Lord Lucas of Chilworth: My Lords, I am obliged to the noble Lord, Lord Tordoff. He is quite right. It was an amendment to defer the Bill that was carried which set the Bill back. That was carried by 15 votes.
I mean no disrespect at all to the noble Lord, Lord Molloy, nor to others who have spoken this afternoon when I say that I do not think that any of the arguments we have heard today are radically different from those put forward on the three previous occasions. Indeed, it would be fair at the outset to say to your Lordships that I do not expect to make any radically different arguments myself in response. I should merely like to do what other noble Lords have done; to remind your Lordships why the Government's views have not changed.
It is the Government's firm conviction that the only basis for improved long-term prospects in employment lie in a soundly-based economy. I shall not dwell long on the larger questions of economic policy, which I was accused of doing once before, but I want to remind your Lordships that one of the central features of the Government's policy is the crucial importance of first containing and reversing the steady growth in the size of the public sector and public expenditure. We believe strongly in the need to consider the impact on the ratepayer and the taxpayer of financing public expenditure. From that perspective we could not accept that there is sufficient justification on transport grounds to increase expenditure in the way this Bill would provide.
The effect of the Bill would be to add registered unemployed persons and people working under the youth training scheme to the groups for whom local authorities have power to provide concessionary fares under Section 138 of the Transport Act 1968. These powers, as we have been reminded, are at present very strictly limited to people over pensionable age, to the blind, and to people suffering from any disability or injury which in the view of the local authority seriously impairs their ability to walk. It seems clear that these categories were intended to relate at least as much to physical handicap and frailty as to social disadvantage.
If these categories were now to be extended, then the question would immediately arise as to why one group should be covered but not another. It would be unrealistic if I did not suppose that immediately the mentally handicapped or single-parent families, for example, might have a valid claim. Might not low wage earners have grounds for complaint if the unemployed enjoyed concessions while they had no similar assistance with the cost of regular travel to work? I invite your Lordships to ponder this question: are we not at risk of contributing to a financial unemployment trap? I do not think it is an easy question. It was proposed during the passage of the 1983 Act in another place that the powers should be extended to cover people in receipt of family income supplement, children, students, people without access to cars and their dependants. At that time, as now, we would find it very difficult to know where to draw the line.
Even if concessions were to be limited to the unemployed, as the noble Lord, Lord Molloy,
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proposes, the consequences for public expenditure would be considerable, and I believe quite unacceptable, since that expenditure would fall upon the ratepayer and the taxpayer.
Lord Molloy: My Lords, if the noble Lord will allow me, will he give me one example of where there is another source, other than ratepayers and taxpayers, for Her Majesty's Treasury to get its finance from?
Lord Lucas of Chilworth: My Lords, the other source to which I am referring is the fare box. I am talking about transport costs. Already £800 million is spent in ratepayer-taxpayer money to support subsidy in local authority transport. The amount which the noble Lord suggests might be trivial, we estimate, with not too great an area of accuracy, within Greater London and the metropolitan counties, to be at least one-third of £100 million in lost fare revenue if this scheme were brought into use.
Lord Underhill: My Lords, is that figure based on assuming that all the unemployed travel at the moment and therefore pay fares, when with a concessionary scheme they would not be paying fares, or is it merely a hunch? Because many of the unemployed do not travel at the moment.
Lord Lucas of Chilworth: My Lords, it is certainly not a hunch. It is an estimate based on certain figures that are available to us. But if the noble Lord's implied question is, "Have we carried out a survey?", the answer is, No.
I was going on to say that I cannot believe that such an expenditure directed to one particular group of the population could be justified. I do not think that the present extravagant use by the metropolitan authorities of their subsidy powers does very much to encourage us to move further in that direction. Perhaps I might just remind the noble Lords, Lord Molloy and Lord Underhill, that Manchester already spends some £50 million a year on subsidising public transport. They could, if they wished, under provisions of the 1968 Act, embark upon a discount scheme, if they could prove it would not be loss-making and attract further support or if they were totally satisfied that they would not he challenged on this.
It might help my noble friend Lord Campbell if I said just a few words about the Manpower Services Commission's job search scheme, because in 1982–83 the Manpower Services Commission spent £115,000 on this scheme, eligibility for which is that the claimant must be unemployed or threatened with redundancy; he must be attending a definite job interview beyond his normal daily travelling distance; the prospective employer must confirm a good chance of success in the job application and there must be no expenses contribution available from the prospective employer. So there is an area in which help is given in terms of job search.
Lord Campbell of Alloway: My Lords, will my noble friend forgive me? If my noble friend is leaving this subject, will he perhaps write to me on the two questions that I asked him? First, what would it cost to

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extend this scheme to the ordinary benefit? I think that would be sufficient.
Lord Lucas of Chilworth: My Lords, I was just about to leave that subject but I will give my noble friend the assurance that I will look very carefully at what he asked earlier and I will see that he gets a proper response.
The Bill also refers to people working under the youth opportunities programme. This has in fact now largely been superseded by the youth training scheme as the noble Lord, Lord Tordoff, mentioned. Trainees on all courses sponsored by the MSC already qualify for repayment of any costs in excess of £4 a week incurred in travelling to work. My noble friend Lord Campbell and the noble Lord, Lord Underhill, will want to know that the chairman of the MSC has now put proposals to my right honourable friend the Secretary of State for Employment for a reduction of up to £1.50 in the initial amount which trainees are expected to find from their own pockets before qualifying for the refund. I understand that these proposals are receiving careful consideration. So I think it would be unfair were any noble Lord to suggest that that which we have discussed, as I say, on three previous occasions goes completely unnoticed by honourable and right honourable friends in another place.
Like other noble Lords, I do not wish to repeat all that has been said previously. Let me say finally that the Government fully understand the sympathy felt for this Bill by many noble Lords on all sides of the House. I have tried to set out the main reasons why the Government have not changed their own view. May I remind your Lordships that views consistent with those I have put forward this afternoon were endorsed by the House in March this year, after three separate debates. I would not think it necessary to demonstrate these again in the Division Lobby.
4.45 p.m.
Lord Molloy: My Lords, I think there might be something indicative in the fact that, while this House was discussing one aspect of grave concern, worry and irritation to millions—not tens of thousands, not hundreds of thousands, but millions—of British families who know what it is to have to endure months and months of' the breadwinner being on the dole, the debate was interrupted because of our concern that we are paying much too much money to the EC and particularly to the agricultural fund. If we could get a tenth of that back next week I am sure the Government would accept this Bill. Then there was that other massive, great big issue of a foreign country having the right to install massive missiles which will destroy in one strike millions of human beings.
I do not know whether there is a message there, but I believe it ought to give us some concern. I should like to say, if I may, to the noble Lord, Lord Campbell of Alloway, that I always listen very carefully to what he says because he has the capacity sometimes to make me amend my previous thinking. Therefore, I always listen very carefully to him. However, I regret that in this instance he called to his aid, as did the Minister, to defeat the unemployed, the sick and the old. There is a massive piece of courage if ever there was one!
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With regard to the MSC, of course, it is very helpful to those who are not merely unemployed but even worse off than the average unemployed, and that is why they have to be helped a little more—not out of any generosity, not out of any Christian kindness, but because it could possibly be a terrible embarrassment for other people to witness what is going on in this country. I do beg your Lordships—I do not want to see that situation and I do not believe for one moment that the massive funds we have spoken about are going to be the cost of this endeavour.
It is perfectly true, as was said so explicitly by the noble Lord, Lord Tordoff, that there are problems. I am not suggesting for one moment that this Bill is perfect in every respect. As the noble Lord, Lord Tordoff, has said, there are problems and, if I may paraphrase what he said, I believe we may have to hack our way through the bureaucratic objections which are raised by clever civil servants, aiding Ministers. Perhaps we might give them the sack, put them on the dole for a couple of weeks and let them see what it is like to realise: "My God, we can't pay the mortgage".
I believe we have to realise that when the unemployed get their dole money they immediately give it away for food, for clothes, for rent and rates; and may I say to the noble Minister that before they were unemployed a majority were taxpayers as well. What this Government have done is to lose millions of taxpayers and then they have the audacity to say that we cannot help the unemployed that we have created and from whom we get no more taxes. We are not going to help them any more because it would hurt the taxpayers. If they were all in work there would not be so much for the taxpayers to pay out. That should be taken into consideration.
I should like to express my appreciation and thanks to the noble Lord, Lord Tordoff, and to the noble Lord, Lord Campbell of Alloway, for their contributions. I think that in particular Lord Tordoff's contribution was realistic as well as sympathetic. He said what I was trying to say; I cannot prove beyond all peradventure that this is a perfect scheme but at least it is worthy of some experiment. My noble friend Lord Underhill quite rightly pointed out that all the unemployed are not on supplementary benefit. I am grateful to him for his contribution and for so realistically supporting me as to the distances that people have got to travel and, as I said in opening, as to what it costs for people simply to go and look for a job.
There are some people who say that among the unemployed are folk who will not even travel to look for work. But all that this Bill says is that they must do the travelling first and they must have the interview. If they are successful, they will not want to claim anything. If they are unsuccessful, they will be able to ask for something to help them in trying to get a job. If they fail, they cannot afford to lose what it has cost them to try to get off the unemployment register. Will this House say tonight, "We are not prepared to say that you should try to get yourself employed"?—because a vote against the Bill is as good as saying that, and I shall take it to the country. That is fair warning.

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I say to the noble Lord, Lord Lucas, that there is nothing that brings more merriment to the Government Front Bench than saying that you are going to do something dramatic on behalf of Great Britain's unemployed. I say this again to the Front Bench opposite. If any noble Lords want, at any time or at any place outside, to debate this with me, just let me know. All I ask them to do is to supply the chairman. They need to give themselves a boost. That is fair enough.
Let that go on the record loud and clear and I hope that we shall get some response, because I am getting a little tired of hearing how concerned everybody is. We are all concerned. The Chamber is full of the blood of people who are cut to ribbons, because of what is happening to the unemployed. But if I want to give them a hand over the stile, I am told, "Nothing doing: it is too expensive".
I say to Members on the Benches opposite, as well as on the Cross-Benches and elsewhere, that if what I am proposing is a failure it will be demonstrated as a failure within months and it can be stopped. I am asking noble Lords for support not for myself, but on behalf of the unemployed. If we can get the Bill to Committee, we can then see the real nitty gritty of the objections and how they may be overcome. That might take some time, but at least the unemployed would know that so far as this Chamber was concerned they were not forgotten. The very fact that the Bill has gone into Committee and can be changed radically will tell them that they are not forgotten. It may well have economic advantages for the nation. I believe that this attempt to do something and sending the Bill into Committee will give encouragement, and will lift up the hearts of those of our fellow countrymen who are unemployed and improve their morale. That is the least we can do, and we ought to do it tonight.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

The Polluter Pays Principle: ECC Report
4.53 p.m.
Lord Ashby Lord Ashby rose to move, That this House takes note of the report of the European Communities Committee on The Polluter Pays Principle (10th Report, 1982–83, H.L. 131).
The noble Lord said: My Lords, this report was prepared by Sub-Committee G of your Lordships' Select Committee and I should like to begin by thanking the chairman for inviting me to open this debate. On behalf of the committee, I should first like to thank the expert adviser who served the committee over a very intricate and difficult problem; and, secondly, I should like to pay tribute to the quality of the evidence, which your Lordships will find contains a very valuable record of what is an extremely complicated subject and one which will become very important.
The background is this. Just about 10 years ago, the Council of the European Communities approved an Action Programme on the Environment, which stated:
"the cost of preventing and eliminating nuisances must in principle be borne by the polluter."
That was the beginning of the so-called polluter pays principle. In the third action programme of the
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Community, published only last December, this polluter pays principle has been re-emphasised. A number of memoranda have been issued about it, and there is no doubt that member states are already expected to harmonise their practice in accordance with the polluter pays principle.
That is why your Lordships' committee decided to examine this principle and to see how it is being operated in member states. It has been brought to the House for debate because it is an issue of very wide importance. It affects every discharge of wastes into the environment, from power stations to water closets. It is not merely a matter for industry. It is a matter for every citizen who uses the environment.
At first sight, the polluter pays principle seems so simple and obvious that everybody agrees about it, but it was soon found by the committee that it was anything but simple. We could not even get the witnesses to agree on how to define a polluter pays principle. To abate pollution is a good thing—nobody doubted that. But when is a river, or when is the air over a city, clean enough—that was a problem which had not been faced—and how are the costs to be met?
There are two criteria for what is clean enough. One, which is favoured by industry, is that the environment should be in what they call "an acceptable state". If I may quote the evidence given by the Chemical Industries Association, a polluting industry should be prepared to pay to abate its pollution,
"to the level that society…is prepared to tolerate".
The other criterion, the one formally accepted by the Community, is that pollution should be abated to a level at which it causes no harm to health, or to living resources or ecological systems, or damage to amenity. On this criterion, somebody has to decide what is this level that causes no harm, and there is very rarely sufficient scientific evidence for making such a decision. In England and Wales, the goals for the quality of a river are set by the regional water authority, and for the quality of the air they are set indirectly, through controlling emissions of smoke and gases, either by local authorities or by the industrial air pollution inspectorate. But these goals are not set by deduction from scientific evidence; they are set by a mixture of expediency and hunch.
The goals vary from place to place, even within member states, but the committee found a general agreement throughout the Community that some authority or other must set limits to the exploitation of the environment. Indeed, the Community has been busy for the last 10 years doing just that. The controversies that we have had have been about how the limits are to be set. Is it the quality of the air and the water that has to be acceptable, or is it the concentrations of wastes being put into them that have to be acceptable? And how are the costs to be met and who is to meet them? It is here that the issues become controversial.
Let me give your Lordships one example from evidence given by the Chemical Industries Association and the Confederation of British Industry over the discharge of wastes into rivers. Industry is willing to pay for wastes put into a public sewer to be purified by the water authority. This, of course, is payment for a service. Industry is also willing to pay to purify its own

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wastes before putting them into a river to meet the consent conditions imposed by the water authority. That is to comply with the law. But industry insists that any pollutant discharged within the consent conditions—it is called residual pollution—should not be paid for. The fact that consent has been given is regarded as a statement that that degree of pollution is socially acceptable.
Some of the member states do not take this view. In France, Germany and the Netherlands, industry is made to pay for all discharges into rivers. In addition, limits are set to the total pollution load that the river can receive. The charges collected in this way are used to improve the quality of the river, sometimes by way of subsidies or grants in aid. The main issue before the committee was whether the British style and method of control, through consents to discharge into water and presumptive emission standards for discharges into air, should be supplemented or perhaps even replaced by a direct tax on residual pollution.
Some economists believe that a direct tax on pollution is all that is needed—that the most efficient way to control pollution is just to leave it to market forces alone—for example, to sell or auction pollution rights. The committee could find no evidence to support this belief from the practice in other member states. The charge system in these member states does no more than supplement control by regulation, not unlike the regulation we have here. So, faced with a principle—and it is a principle—whether to control by regulation or to leave it to market forces alone, the committee rejected any move to replace regulation totally by taxation or by selling pollution rights.
The committee then considered whether Britain should adopt a supplementary system of charging for the use of the environment. The first question they asked the witnesses was whether the difference between the British system and those on the Continent was causing distortion of trade. On this one point the committee did receive a clear answer: there is no convincing evidence of distortion of trade. This seems rather surprising, in view of the fact that industry in some member states is paying for all its discharges and sometimes is even getting subsidies and tax allowances for abating pollution. We do not know what the explanation for that apparent inconsistency is. It may be just that abatement costs are small compared with total costs. Or it may be an interesting and more subtle reason; namely, that Britain has gone much further than have other states in dealing in the public sector with the back log of pollution.
To give your Lordships an example, 95 per cent. of our population in the United Kingdom is served by sewers, compared with only 50 per cent. in France, and in Britain sewage treatment removes 77 per cent. of the sewer load compared with only 32 per cent. in France. Industries discharging into sewers belonging to the water authorities are already paying for that service, and these payments may match the payments being made elsewhere for direct discharges. But the point your committee want to make is that we just do not know. We just have not got the necessary information.
If there is no evidence of distortion of trade, are
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there any other arguments for introducing supplementary charges into the United Kingdom for polluting air, water and land? Your committee did set out one argument in paragraph 48 of their report:
"The criterion of what is a socially unacceptable level of pollution has changed dramatically over the last 50 years and is likely to continue to change".
Therefore, there is a need for a mechanism to improve the quality of the environment beyond what is acceptable today so that it can be made to meet the expectations of what will be acceptable tomorrow. This could be done in three ways: either by levying charges as an inducement to pollute less, or by offering subsidies, or simply by stiffening the standards required by regulation. All three of these mechanisms have been used on the Continent but the committee could get no convincing evidence as to how effective they are. But, even without hard evidence of the value of charges for pollution, they may be one way to remind the public that air and water can no longer be regarded as free goods. Your committee in paragraph 50 make one statement which they hope the Government will take very seriously:
"It should no longer be assumed by industry"—
and, for that matter, by householders—
"that free use of the environment as a sink should be permitted as a right".
On this ground there is a case for considering charges in some circumstances in a supplementary way in order to hasten the improvement of conditions in the environment.
The committee asked the National Water Council whether this would he feasible. They are not enthusiastic about charging systems but they did tell the committee that it would be feasible to levy charges based on the consent conditions negotiated with each industrial plant. In any case, it would seem reasonable to expect those who discharge directly into air and water to be prepared to pay something to cover the costs of monitoring pollution levels, which has to be done by public authorities financed by the taxpayer.
Then, over subsidies offered to industry to abate pollution, the committee know that they have not been used in Britain to improve the quality of air or water, although they are offered as incentives for abating noise pollution, to recover derelict land and to help individual householders to convert to smokeless fuel. The Department of the Environment, in evidence, implied that they would not be against subsidies if the need for them could be demonstrated, but this is what they added:
"no environmental problems have (as yet) been perceived where the need for action to secure compliance with standards has been so acute that industry would not reasonably be expected to bear the cost"
Your committee were not impressed by this statement, and they recommend in paragraph 46, which I personally think is an understatement on behalf of the committee, that a somewhat less rigorous attitude to subsidies for pollution control purposes might be adopted.
Although much has been done, the committee would like to dispel any impression of complacency about the application of the polluter pays principle in the United Kingdom. Industry does indeed pay for the

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costs of compliance with standards set by regulation, but this is no guarantee that the polluter pays principle is being followed if the standards are then relaxed. The Environmental Data Services in their evidence to us gave examples where polluters were damaging the environment without paying for the damage. For instance, chronic pollution from intensive livestock units has, according to the 1980 River Qualities Survey:
"led to the downgrading of stretches of hitherto unpolluted water courses by five regional water authorities".
Also, there are some serious kinds of pollution where the costs are certainly not being met. For instance, the Association of County Councils told the committee, over marine pollution, that:
"The proportion of the costs of clearing the mess made by pollution on sea coasts recovered for polluters was … less than 8 per cent."
The main impression left with the committee over the polluter pays principle in other member states was that there is no harmonisation between their practices—and certainly they offer no model to be adopted in the United Kingdom. What is urgently needed—and this was put in the admirably lucid statement the committee received from the National Water Council—is something which that council called "transparency"; a clear understanding by each member state of the way in which other member states operate a polluter pays principle so that valid comparisons can be made. At present, the committee find that even the Commission itself in Brussels does not fully understand how the member states are operating the polluter pays principle. Your committee suspect that the Department of the Environment is in a somewhat similar condition.
We could begin by being more transparent about the way in which we operate the principle in Britain, for there are at present two incompatible policies for setting standards. On the one hand, there is the system of consents based on that which is regarded as socially acceptable for the rivers. On the other hand, there is the approval made by the Government in their response to the Fifth Report of the Royal Commission on Environmental Pollution of the "best practicable environmental option" as the basis of environmental policy. An extension of the policy of "best practicable environmental option" to discharges into rivers would be likely to lead to a great stiffening of consents by water authorities. If that policy were followed, it might be an even more effective way to improve enviromental quality than charges would be.
It is because there are so many unresolved questions, and so much plain ignorance, about he application of the polluter pays principle that the committee have no crisp recommendation to make to the House. They hope that the House is now persuaded that the polluter pays principle is not simple. The committee have only one recommendation: it is, that the Department of the Environment should give much more serious attention than it has been giving to four issues.
They are, first, the need to base environmental policy on the principle that air and water are not free goods and that no one—householder or industrialist—has a right to discharge wastes into the environment and not expect to pay. Secondly, that the
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use of subsidies in some special cases where it is important to improve the quality of the environment should be given further consideration. The great cleanup proposed by the North West Water Authority is a possible case in point. Thirdly, firm action should be taken where the costs of pollution are certainly not being met by the polluters—I have quoted the livestock industry discharging into some rivers and polluted beaches. Finally, that there should be a much more thorough understanding of the ways in which member states interpret the polluter pays principle than your committee were able to discover, even after taking evidence for some months.
If we can do that, and if the Department of the Environment can clarify the issues much more than it was able to do when it gave its evidence to the committee, then, if practices are efficient, we can stick to them. If they are not efficient, then we shall know how to adapt in a way that will harmonise with the rest of the Community. I beg to move.
Moved, That this House takes note of the report of the European Communities Committee on The Polluter Pays Principle. … (Lord Ashby.)
5.15 p.m.
Baroness Birk: My Lords, I should first like to thank the noble Lord, Lord Ashby, for initiating this debate on the report of the European Communities Committee on The Polluter Pays Principle, and for his lucid explanation. It is an excellent report—something the noble Lord was too modest to say, being himself a member of the committee. The committee obviously encountered a great many difficulties, to which the noble Lord has pointed, in getting answers to some very difficult questions. One of the great values of this report is that it is the only report, and the first report in the Community, to study the subject so thoroughly. I am quite sure that the report will be considered as a source of guidance to the Community and will be very much welcomed by the Commission in Brussels.
The report draws our attention to some very important issues, as the noble Lord has pointed out, which concern not only our present quality of life but also that of future generations. We have a collective responsibility to ensure that the environment in which we live is both preserved and improved for those who will have to bear the consequences of our present decisions on environmental policy. That is an integral part of our own quality of life. We can no longer treat the environment as though it were capable of infinitely absorbing waste materials and other unwanted substances. The report concludes:
"It should no longer be assumed by industry that free use of the environment as a sink should be permitted as a right".
I was delighted that the noble Lord, Lord Ashby, underlined that point in his own speech. It is to the problem of how to encourage industry to "internalise" the social costs of production that we are addressing ourselves today.
There is a choice between what Professor Dasgupta describes in the report as "two polar modes of regulating industry": on the one hand,
"regulations limiting the amount that firms can emit into the environment'",

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and, on the other,
"a taxation system per unit emitted".
In fact, I do not see the choice as being a stark one but one of carefully selecting the optimum balance between regulations, on the one hand, and charging, on the other. According to the report,
"The evidence indicated that, in practical application, a charging system must be accompanied by controls establishing levels of discharge, irrespective of payment"—
so what sorts of measures should we be seeking to implement?
Almost exactly two years ago the House debated a report produced by the Select Committee on Science and Technology on Hazardous Waste Disposal. I intervened from this Front Bench in the debate on that report. A recommendation of that report, which was reiterated during the course of the debate, was that the burden for ensuring against damage to the environment should be firmly shouldered by waste disposal site operators and not by local authorities. Your Lordships will not be surprised to hear that nothing has been done about that; no action whatsoever has been taken. We find ourselves in the same position in respect of the subject we are discussing today, where local authorities again find themselves responsible for so much of the clearing up of pollution, as was so in the case of hazardous waste disposal. Today, local authorities are even harder pressed to find funds to provide essential services due to the severe financial cuts which have been imposed upon them. So it seems to me valid to ask the question: how on earth are they going to find the money to deal with pollution in a way that is satisfactory and which serves the community?
It is totally unjustifiable that the ratepayer should be expected to meet the cost of neutralising environmental harm if it has been caused by another agent. The polluter pays principle is one which seeks, first, to control the level of pollution; and, second, to distribute more fairly the burden of payment for repairing environmental damage. I am not suggesting that this is an easy subject with which to deal.
The Department of the Environment argues in favour of the principle on two distinct grounds, political and economic: first, that it promotes a form of justice within the economy; secondly, that it promotes a more efficient pattern of trade by the harmonisation of costs being borne by producers. It is a principle that appears to be self-evidently right. It is widely supported, and I am pleased that in its perception of the principle the Department of the Environment, which was my old department when I was a Minister, sees it primarily as a means not of raising money or of ensuring a just distribution of the burden of costs, but of ensuring the health and safety of our community. It is right that our social well-being should take precedence over everything else.
I welcome the report's conclusion, which was mentioned and stressed by the noble Lord, Lord Ashby, that the department should undertake a careful study of the polluter pays principle and of subsidies for pollution control equipment and for cleaner technology as they operate in European countries. I would only say that, if a study is going to be undertaken, for goodness sake let the department see
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that the study is undertaken quickly and action is then taken on it. So many of the facts are there, and it is a case of gathering them together and coming forward with some hard recommendations. Also, it should investigate the possibility of incorporating these policies into the United Kingdom's overall approach to environmental issues. However, I believe that the polluter pays principle, while right in principle in itself, is highly complex in practice. Therefore, while it is part of environmental policy, it must also be viewed as an important element in the Government's entire social and economic, as well as environmental, policy.
I am concerned that if we adopt a radical policy of forcing all manufacturers to bear the costs of pollution abatement without state aid—that is, applying the PPP with rigid inflexibility—then in the climate of economic recession many firms will suffer: they will reduce the size of their workforce and some may close down altogether. The industries most vulnerable are those which have the greater propensity to pollute, and will tend to be the older industries, such as those cited by the CBI in their evidence to the committee—leather manufacturers, the textile industry, including wool scouring and carpet industries. Unemployment is already dangerously high in areas dominated by the traditional industries. I say "dangerously" because these areas are not blighted solely by unemployment, which is bad enough, but also by the the social disintegration and the social consequences which are a result of that unemployment.
I am not arguing in favour of accepting the social cost of pollution for the sake of preventing unemployment. What I am advocating is that the Government should show flexibility in their application of what is an essentially sound concept and take the responsibility which a Government should take in this area. The costs of pollution abatement will not necessarily be borne by the producers; they will surely be passed on to the consumer by way of higher prices. So, again, the individual will suffer, unless the free operation of the market ensures there is sufficient competition to allow consumers to buy from producers who incur less pollution abatement costs. But this is not likely to be widespread; in fact, it will be only patchy, and is not something on which one can base a long-term and viable policy. Therefore, inflexible adoption of the polluter pays principle may generate unacceptable levels of hardship in terms of unemployment or of price rises.
I believe, therefore, that we cannot advocate pollution control through market forces alone. The market is a cold and uncaring system, blind to special cases and the hardships incurred by those less able to cope with its rigorous demands. The policy of the present Government is supposedly one of a "free market economy", but in fact it is highly interventionist. This is probably one of the most interventionist Governments we have ever had. Although the EEC Commission permits state aids of up to 15 per cent., this Government have not taken advantage of the allowance, unlike what is happening in other European countries. According to the Department of the Environment, there has been sufficient co-operation in securing compliance with standards set to make it reasonable to expect industry

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to meet the costs. I agree with the noble Lord, Lord Ashby, when he says that the committee was not impressed by this argument put forward by the department, and neither am I. The report rightly criticises the Government for this approach, which is too insensitive and too short-sighted to special needs.
It seems to me that the complexity of the polluter pays principle can be regarded in two ways: the complexity arising from the practical difficulties which I have tried to illustrate, and the complexity arising from the elusiveness of the definition of the polluter pays principle, which was expressed by the noble Lord, Lord Ashby. In the submission of the Chemical Industries Association, it is asserted that:
"every industrial (indeed human) activity in some way contaminates the environment."
This is, unfortunately, probably true. Also unfortunately, it would be impossible to seek compensation for all pollution, and for this reason the definition of PPP involves the concept of a "socially acceptable" level. This is a dangerously subjective element, open to abuse and misconstruction. Indeed, as the report points out in paragraph 14, it is a "moving target". Who is to decide what is "socially acceptable"? Who is to decide what sorts of pollution should be included in the category to which the polluter pays principle should be applied?
I am sorry that the committee did not consider the question of noise, which is a tremendous polluter of our environment. Noise is a growing source of complaint and of real human damage, both physical and mental, to many people, both working and travelling. Yet it is an area where solutions are readily available, given the will and the financial means. It would seem an ideal target for consideration under PPP controls. Already the cost of maintaining, monitoring and enforcing are almost entirely carried by the local authorities, and are therefore met by the ratepayers. This is something I should like the Minister to comment on. Perhaps, also, Lord Ashby may say a few words at the end, or perhaps one of the other members of the committee, who I am delighted to see are speaking, might comment on why noise was not considered.
Another problem is that of "residual pollution" and who is to pay for it. The question is the central theme of the submission by the CBI, which argue that the "residual pollution"—that is, the pollution that falls below the maximum level that is "socially acceptable" in a regulatory system of pollution control—should not be the subject of charges. But it is absolutely true (the noble Lord, Lord Ashby, has already mentioned it) that certainly in 10 years' time the "residual pollution" of today which is considered acceptable will be quite rightly unacceptable. So we must have a built-in mechanism to improve standards all the time, in the same way as the alkaline inspectors are continuously doing now. It shows it can be done, and if it can be done in one area there is no reason why it should not be done in other areas.
The use of a financial mechanism as the only instrument of pollution control is not adequate, although the report asserts that it is the most cost-effective means of reducing pollution. The European Commission has concluded in favour of a balanced system operating both a financial incentive scheme and regulations. If
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there were only a financial incentive scheme, there is the fear that firms would prefer to pay the charges instead of investing in pollution abatement equipment, and I would agree that charging alone has the intrinsic philosophy of the "right to pollute". This is why we need a combination of charges and regulations. Charges can provide money to use as subsidies for getting industries to do more by way of moving towards a "clean technology".
This action programme will try to get environment policy concentrating less on the cleaning up of pollution after it has occurred and more on preventing it in the first place. But as the report points out, such subsidies are being allowed by the Commission only until 1986; so the importance of this report is, I hope, that it will encourage the Commission to make up its mind that such subsidies towards getting a "clean technology" should become a permanent and regulated feature of environmental policy, and not cease in 1986.
Society has a crucial responsibility to treat our environment with great care. I repeat, the environment is not the property of the present generation, but of all generations. Therefore, I ask the Government: how are they to ensure that that duty is fulfilled, and how will they improve on the present inadequate pollution abatement? There is one specific question that I put to the Minister for an answer. In future, who will take the place of the National Water Council on inquiries such as this? What immediate plans do the Government have for acting on this valuable and vital report? We do not want to see a series of studies, sub-studies, multicoloured papers, of green or white, and consultation. The committee has studied and consulted, and it has issued a first-class report. The time has now come for the Government to act.
5.31 p.m.
The Earl of Cranbrook: My Lords, I have listened with great interest to the wide-ranging and thoughtful speech of the noble Baroness, Lady Birk. She raised many points which, if time allowed—and it would take a long time—I would dearly love to follow to their conclusion. In particular, she asked members of the committee who were present why they ignored noise. I think I can quickly reply that the committee has not ignored noise as a pollutant. In fact, not long ago it investigated the whole issue of noise pollution control within the Community and issued a report. I am absolutely certain that I can speak for other members of the committee in saying that we regard noise as a serious pollutant which must be subjected to the same general rules as other forms of pollution.
I also listened with great interest to the introductory speech of the noble Lord, Lord Ashby. I join in the thanks he expressed to our specialist adviser and to the witnesses who appeared before us. I also thank him personally for taking on a chore that was, in fact, mine in taking the chair on a couple of occasions when I was unable to be present and then himself doing a very great deal with the draft and to form the structure of the report which is now before your Lordships. On both those counts I am extremely grateful to him. I am also grateful to the noble Lord for taking on the duty of introducing this report to your Lordships which frees me from the chairmanly role, as it were, and allows me to concentrate on a couple of issues on

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which I feel free to give vent to my personal views.
As your Lordships will see, on page ix of the report the committee reviews alternative definitions of "pollution". I do not think there was any dispute over these; nor that any witnesses would have had difficulty in accepting the version given in paragraph 8 of the report, which is a very widely accepted definition. In this it is important to take note of the phrase "liable to". Pollutants as a class are characterised by their harmful effects. In practice, the control of pollution can either be remedial, if damage is currently being caused, orpreventative if it seems that damage is liable to be caused. As was drawn to our attention by the noble Baroness, Lady Birk, many of the most severe problems faced by the United Kingdom and by other member states of the European Community fall into the first class.
We all have serious cases of pollution which have been inherited from the past. But, again as stressed by the noble Baroness, Lady Birk, anti-pollution measures must also look to the future if we are to avoid handing on to subsequent generations a worse legacy than we ourselves receive. My noble friend on the Front Bench will recall that it is the declared policy of European Community legislation on pollution to take a preventative role. The preventative approach was stressed in the Third Environmental Action Programme. This has been accepted by Council and I therefore assume it is fully agreed by the United Kingdom Government.
In taking evidence we found, as the noble Lord, Lord Ashby, pointed out, that all witnesses declared support for the polluter pays principle. Indeed, who could not? But there were differences in interpretation. In particular, as has already been said, witnesses representing industry accepted that the costs of pollution control should be internalised, but only to the extent that emissions are reduced to levels prescribed by the relevant authorities. The balance of the contaminant load is called residual pollution. Contrasting views on the problems of residual pollution are discussed in the report in paragraphs 36 to 38 and 56.I intend to confine my remarks mainly to this issue. However, I also want to take this opportunity to draw attention to a difference in approach to the problem of black list substances in residual pollution that is creating serious divisions between the United Kingdom and our partners in the Community.
In discussions on residual pollution Dr. Konrad von Moltke (whose answer is No. 146 on page 78) viewed all effluent discharges to water as a demand on a common resource for which no individual or organisationcan claim exclusive use. Professor Partha Dasgupta (Answer No. 162 on page 82) refined this notion in terms of property rights. Whatever is the most appropriate analogy, no one in my hearing has disputed the fact that a discharge to the environment of substances liable to cause harm at the very least restricts the options available to other members of society and to this extent does them an injury. The Select Committee accepted these arguments in paragraph 56.
As the noble Lord, Lord Ashby, pointed out, at present in the United Kingdom, after any treatment
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that may be required, the free use of the environment is permitted for final discharges. It is therefore important to ask, first, who pays for the residual pollution and, secondly, what monetary value should be attached to it? I shall deal rather quickly with the second of those questions and return to the first, linking it with my discussion on inter-Community relations. As can be seen in the report, witnesses from industry emphasised to the Select Committee the high marginal costs of removing pollutants from discharges when they occur at low dilutions. But it can be even more expensive to restore or to retain environmental quality.
As a quick example, of late around the country a number of calculations have been made of the conservation-related compensations that are liable to be paid under the terms of the Wildlife and Countryside Act. These calculations, in my experience, are bringing home to local authorities and, I hope, to Government, some idea of the very high cost involved in environmental protection at the level of marginal effect. I am not convinced that the financial aspects of residual pollution loads are adequately taken into account under our existing system of granting discharge consents or in development control. If it is accepted that all economic penalties should be clearly evaluated, I believe that more strictly formalised procedures for the assessment of environmental impact are needed in these instances. Until this is done there can be no firm basis for the financial costing of effects.
My main point concerns relations with our fellow members of the Community as much as with the commission. The situation is serious because it has led to mistrust and mutual reproaches. I believe that the issue has to be resolved. I am also of the opinion that the way forward is through a reappraisal of the United Kingdom position. It is clear enough that pollution of the air or of the water is not limited by national boundaries. In these cases those who are forced to pay for residual pollution can be geographically far removed from the source. What is worse, if the pollution is persistent and accumulates. those who ultimately pay may also be removed in time. The preventive policy of the European Community emphasises that the responsibility for safeguarding the environment of future generations rests in our hands today. This responsibility must be kept in mind when we review the dispute between the United Kingdom and the commission over discharges of residual pollution to the marine environment.
For the United Kingdom the seas around our islands form our national boundaries. At the same time these seas are a resource shared with neighbouring states. While respecting legitimate United Kingdom territorial and economic rights, other states of the Community have an undeniable interest in these waters. It is in this area of sensitivity that there are divergent views on the matter of residual discharges.
In evidence submitted to Sub-Committee G in the course of this inquiry, and in other contexts, representatives of British industry have presented the dispute in terms of conflict between a commission approach involving fixed emission standards and a particularly British policy based on environmental quality

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objectives. In truth, as Mr Grainger noted quite correctly (answer 6 on page 19), the disagreement arises only over the black list substances. British industry wishes to apply variable emission levels, reflecting the nature of the receiving waters, to black list substances as is done in the case of other pollutants. In particular it is argued that limit levels on emissions to the marine environment should be less stringent than those to fresh waters. Industry's arguments in support of this position are mainly economic. The opposing view is based on the conviction that the potential hazards to man and the environment posed by black list substances are so serious that the best available technology must be applied to minimise discharges in all circumstances.
I remind my noble friend the Minister that the black list substances are defined on the basis of, first, their high toxicity; secondly, their indestructibility; and, thirdly, their capacity to accumulate in living organisms. In simple words these are the real nasties among pollutants. All parties in all the member states agree that pollutants with these characteristics must be removed as far as is technically possible from discharges to fresh water. Can more concentrated discharges to the sea be justified?
In the past decade much scientific work has been done to elucidate the patterns of circulation of water and the loading and distribution of pollutants within the seas of the north east Atlantic area. For the North Sea itself a particularly comprehensive and authoritative study was made by the Council of Environmental Advisers of the Federal Republic of Germany. That corresponds to our Royal Commission on Environmental Pollution, with some differences. I shall call it the RSU after the initials of its German name. This report was published in 1980. The RSU found no serious present disfunction in the environment of the open sea, but in its report nonetheless strongly urged the adoption of policies that would preclude future environmental deterioration. In this same report it severely criticised the British for refusing to accept minimum emission standards for black list substances.
The strength of feeling on this issue was brought home to me a few weeks ago when I took part in the International Water Tribunal at Rotterdam. This body chose to take a quasi-judicial stance, deliberately evoking the Russell tribunals, but of course it had no official standing. In evaluating its conclusions I invite my noble friend the Minister to take note of the status and qualifications of the professionals, politicians and administrators who consented to take part, in all cases for no fee or other personal reward. I consider that the tribunal's decision in the case of British Nuclear Fuels Limited is illuminating. The words used exactly reflected the views of the combined group of self-styled jurors and expert advisers. They were these:
"The jury is perplexed at the long enduring discharge …and condemns its continuation".
I believe that there are many other professionals, academics and politicians in Germany, Belgium, the Netherlands and Denmark who are thoroughly perplexed at the apparently entrenched and, in their opinion, narrowly shortsighted attitude of the United Kingdom in negotiations over the emission of black list substances to the marine environment.
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I think that it can be argued that there is room for review of the composition of the black list. Many substances have been proposed for inclusion. It may be the case that in fact not all share the characteristics that I have mentioned: being poisonous, persistent and accumulating. This possible change can be the subject of further investigation and negotiation based on scientific facts. But if any substance definitely meets the horrific criteria for inclusion in the black list, I strongly question how there can be justification for local relaxation at any European coastal site in the most stringent emission limits that are technically possible.
The issue is not confined to our care for the quality of the present environment but extends to a justifiable fear of irreversible deterioration in the future. I believe that United Kingdom industry and the Department of the Environment must look at the matter again and reappraise their attitudes. The importance of an anticipatory, preventive environmental policy must be emphasised, especially where black list substances are involved. The justifiable concern of other North Sea states deserves to be recognised. The reputation of the British as a nation caring for the environmentis in jeopardy. I accept that it is likely that some industrial plants in coastal sites in the United Kingdom may be forced to incur substantial costs in eliminating black list pollutants from discharges. Here the approach advocated by your Lordships' Select Committee offers a partial solution.
I do not expect my noble friend to make any specific responses here and now, but I wish to join both previous speakers in re-emphasising the recommendation of the Select Committee in paragraph 57 that:
"the Department of the Environment should undertake a careful study of the operation of … subsidies"—
in this case I am concerned only with subsidies—
"for pollution control equipment and for clean technology in other Member States, and evaluate the extent to which such systems should be incorporated in present United Kingdom environmental policy."
5.48 p.m.
Lord Nathan: My Lords, it has been a rare privilege to sit in the committee under the noble Earl, Lord Cranbrook, and the noble Lord, Lord Ashby, who are two of the most distinguished scientists and specialists in this field that we have in this county. I thought that in speaking this afternoon I should not trespass upon the ground which they have so admirably covered (together with the ground which the noble Baroness, Lady Birk, has also covered) but confine myself to a rather different field. I thought that I would confine myself to the title of the debate, and indeed of the report; that is, The Polluter Pays Principle.
One of the reasons for my concern to do so is that we have heard much—and rightly so—about internalising costs of pollution. This is in fact technical jargon of an economic kind. I think that those of us who are concerned in the environmental field are very inclined to internalise our discussions and to use technical terms between ourselves in the belief that they have some clear meaning to the public at large, who are so greatly concerned with matters concerning the environment and pollution in particular. Those who are active in environmental matters are a small proportion of those in the country who are concerned.

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Evidence indicates that the vast majority of the people in this country are greatly concerned, and therefore it is with those in mind that I thought that I would speak on this subject.
I believe that it is timely to consider whether there is such a principle, and, if so, what it is. Words which have become so hallowed generate modes of thought and courses of action; they do not just reflect ideas and policies which have been adopted. The fact that a slogan or catch phrase of this kind has this character results in its being important in itself, for if it is treated as the basis of policy or action but is interpreted differently by different people, it will lead to confusion rather than conformity and certainty. This is what has happened.
I am myself suspicious of a slogan or catch phrase with moral overtones. The findings of the committee in this report reinforce my concern. To the ordinary man in the street, if indeed he has heard of the slogan, it must surely imply that he who pollutes must pay the penalty; and this point has frequently been made to me by those on the periphery of environmental matters. The slogan has moral overtones which make the polluter analogous to a criminal. That may indeed have been the thought behind those who first evolved the slogan, but those days are long past. Now the object is to integrate environmental policy into industrial policy; not to oppose one against the other.
An alternative interpretation is that the polluter must pay for the privilege of polluting—payment for a licence to pollute. But the object of environmental policy is to eliminate or reduce pollution, not to make money.
Neither of those interpretations is adopted among those who are daily concerned with the prevention or abatement of pollution, and yet, as I have said, they are a very small minority of those who are concerned about pollution. The first point I would make, therefore, is that the polluter pays principle is a bad foundation on which to base policy. A phrase which has contradictory overtones of retribution and permissiveness—he who pollutes shall pay the penalty, and he who pays may pollute—cannot be a good starting point. I emphasise this because it has been a foundation of environmental policy, a cornerstone of the environmental action programmes promulgated by the Commission. I believe that we are on false ground there.
One is left then with the interpretation of these words as denoting a principle upon which economic policy should be formulated with a view to controlling pollution. It is this which is adopted by those who are day-to-day concerned and is the basis of the report under debate. Even here, as the report shows, there are many different ways in which the so-called principle is thought to be applicable. There is the idea that the elimination or abatement of pollution, for instance, caused by discharges shall be effected by appropriate equipment in the production plant and that the cost of this equipment and its operation shall be to the charge of the producer, the polluter. There is nothing exceptionable about such a proposition, and in fact it has been in force for many years.
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For instance, long before public sewerage became as commonplace as it now is, a household was not permitted to discharge raw sewage and was bound to install, at its own expense, appropriate sewage treatment such as cesspits or septic tanks. Regulations of certain gaseous emissions has long been the subject of control. The cost of compliance lies with the polluter; it always has. So there is nothing novel in this idea. What is novel is the increasing extent and stringency of the controls and their enforcement, made necessary by the ever-increasing damage caused by pollution and public recognition of the need to eliminate or control it.
An extension of this idea is that under which the polluter pays somebody else to eliminate or abate the pollution created by him. This is really a form of sub-contracting, and is not different in principle from the first category. Instances of this are of course sewage works where a notional cost is applied to each household in the collection of water rates or charges, and the specific charges made by water authorities to industries whose effluent flows into the sewers.
There are, however, two further interpretations which have been advocated. First, it is thought that in the operation of market forces the imposition of charges on an escalating scale will result in industry finding it more economic to install appropriate abatement processes than to play these charges. This proposition has been much debated and, as the conclusions of the report indicate, there is not sufficient experience upon which a judgment can be based.
It would seem to me, however, that while market forces may have some part to play, in particular where the conditions of free and equal competition really exist and where the goods produced are price-sensitive, they are unlikely to have any major impact such as those who advocate this idea envisage. This interpretation implies acceptance that an option should be given to pollute at a price, if it pays to do so. I do not find that at all attractive.
There is a further view that it is wrong, as has been said, that the environment shall be defiled by pollution even if any regulations have been complied with. This "residual" pollution may vary in importance from that which causes no identifiable harm to the case where even though the regulations have been fully complied with, there is still pollution which creates harm, but which it is thought it would be too expensive to reduce further by more stringent regulations with regard to emission. Some have suggested that a charge or tax should be imposed in relation to this residual pollution to compensate the community for damage to its right to a clean environment; and that has already been referred to in particular by the noble Earl, Lord Cranbrook.
To take a specific example, there is no doubt that generation of electricity by use of fossil fuels in compliance with all regulations produces pollution by gaseous emissions. The effect of this interpretation would be to impose a charge for doing so, and thus increase the cost to the consumer. Increased cost accruing from additional abatement might be sensible and acceptable. Increased cost arising from paying a sub-contracting charge to clean up rivers suffering

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residual pollution may be acceptable. A supplementary charge relating to monitoring pollution might indeed be acceptable. What I should find unacceptable is a charge for emissions which is purely a penalty or tax going to the general revenue fund. This is not I believe the way to go forward.
There is no doubt that one of the means to achieve environmental improvement is economic pressure. This can undoubtedly play a part, but how that pressure should be applied is not resolved by the adoption of the slogan, the polluter pays principle, which is capable of so many interpretations and which, as the report says, is interpreted in so many different ways in the Community. The best course, therefore, I suggest, is for us to recognise the importance of economic pressures and to utilise them where appropriate, but to dispense with the slogan, the polluter pays principle, which has promoted such a prodigious literature on its interpretation. This itself must surely demonstrate that it is defective, or indeed that it does not exist.
6 p.m.
Lord Mottistone: My Lords, I, too, should like to congratulate Sub-Committee G on producing a splendid report on a difficult subject. I should like also to congratulate my noble friend Lord Cranbrook, as chairman, for having taken on this task; and also the noble Lord, Lord Ashby, for taking it on at a later stage and for his own clear introductory speech. I am advised by the CBI in what I have to say to your Lordships. The CBI is concerned about the overall balance of opinions in Section IV of the report. Some of the points that I shall want to make try to bring out where there is a difference of opinion. I was particularly impressed by the speech of the noble Lord, Lord Nathan, which I considered most thoughtful. I strongly support his objection to the rather flamboyant title, the polluter pays principle, as not being a good guideline for studying what is a very difficult subject. It is a subject, as many noble Lords have said, that is confused by a plethora of differing definitions, interpretations and policy lines. I shall have something to say on each of these points.
On definition, British industry would not concede that pollution exists when a concentration of a substance in the environment causes no harm or cannot reasonably be expected, from scientific information, to cause harm. It is not a case of wishing to use the environment as a sink, as I think was suggested by the noble Baroness, Lady Birk. It is a case of using a valuable resource properly. The environment has a natural capacity for absorbing the inevitable by-products of human activity and rendering them innocuous. Pollution only occurs——
Baroness Birk: My Lords, will the noble Lord allow me?
Lord Mottistone: One moment, please. I should like to finish this sentence. Pollution only occurs when this natural physical capacity is abused.
Baroness Birk: My Lords, I wish to put the noble Lord right on a point of fact. My notes have been whipped away to Hansard but if I used that phrase I
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was quoting something in the Committee report. It was not something that I stated.
Lord Mottistone: My Lords, I think that the Baroness said it. She may have been quoting from the report. But that does not mean to say that she did not say it. I take issue with the report on that point, if that is what it intended. However, it is not clear from the report whether it is accusing all industry of treating the environment as a sink. It is not clear, but it is a sort of emotive thought, rather like the title of the subject we are discussing. It makes a matter emotive when it is perhaps rather too serious for that purpose.
Turning to interpretation, I must point out that in England and Wales industry dischargers already pay the full cost of reducing discharge levels and quantities to the standards set by the control authorities. Sometimes, the discharger pays an authority for carrying out purification at a sewage works. Alternatively, a discharger may install his own treatment facilities in which case he bears the cost himself. It is a system geared to ensure that individual companies meet individual control authority demands and that the environment is properly safeguarded. The system is fair, avoiding cross-subsidisation of one industry by another. It is certain, avoiding elements of speculation, aid and taxation. It is uniformly enforced, avoiding hidden subsidies from different enforcement practices. In short, the United Kingdom interpretation is a very reasonable way of interpreting the polluter pays principle and one that we should preserve.
Turning now to policy, our Government do not give aid specifically for pollution prevention purposes. Pollution abatement is an integral part of the production cycle and is rightly costed as such. There are a multitude of reasons which can be put forward in support of the Government providing aid. However, the inevitable effect is to cause something different to happen than would occur if normal commercial factors were paramount. Individually and cumulatively, the general direction of aid is towards distortion of treating conditions. It is therefore sensible, and industry fully supports the United Kingdom policy of avoiding aid for environmental purposes rather than encouraging a greater proliferation of such financial encouragements.
It is important also to point out that industry is not the only discharger. In listening to various speeches by noble Lords, I was perhaps being extremely sensitive on the part of industry, but it came through to me, although it does not come through nearly so clearly in the report—which is in favour of the report—that most noble Lords took it for granted that industry was the main polluter. It will be found, I think, on the one hand, that industry, if it is thought of as manufacturing industry, is no more a polluter than the general public. It is no more a polluter than agriculture. Looked at another way, industry under Government control, that is nationalised industry and the Government themselves, is probably a greater polluter than private industry. So those noble Lords who feel, "Aha, we have a stick to beat industry with" are perhaps treating this subject a little emotively. Here again, I thank the noble Lord, Lord Nathan, for his wise remarks.
Industry sees no need for significant changes in

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United Kingdom policy in this area nor for further detailed studies into particular aspects. We should instead seek a greater commitment in Europe and elsewhere towards the line that we already practice.
6.8 p.m.
Lord Skelmersdale: My Lords, I am well aware that what I am about to say might sound patronising. It is not intended to be, but taking risks is, by virtue of it, part of my job. To say that the report that we are discussing is the most thorough and understandable report to come from your Lordships' Select Committee for a long time is no overstatement. I am encouraged in this belief by the remarks of noble Lords during the debate.
At the beginning, I should like to associate myself with the introductory remarks of the noble Baroness, Lady Birk. I am sure that we can all agree that this has been a most informative debate. In no small measure this is due to the admirable way in which your Lordships, whether members of the Select Committee or not, have set out the issues. They are clear even to me. I am particularly grateful to the noble Lord, Lord Ashby, for initiating the debate and, like another noble Lord, allowing me sight of the guidelines for his speech. This has of course provided a quality objective for my own. I am confident that my noble friend Lord Cranbrook, who chaired the sub-committee which produced this report, will be as gratified as the Government are that the debate has been both constructive and useful.
The noble Lord, Lord Nathan, spoke interestingly I thought of the problems of definition and the logical corollaries of the theory of the polluter pays principle. I agree with him that at first sight the concept of polluters paying for their pollution is an extremely dangerous one. Fortunately, the principle is designed to operate along with regulations. There is no question either of the polluter polluting as he wishes, and then simply paying, rather like the all too familiar story of the motorist getting parking tickets and continuing to park illegally while not paying until summonsed or, perhaps worse, regarding fines as a part of the general cost of keeping a car on the road. It is not like that at all. In this country the system of pollution control acts to prevent dischargers from polluting whether or not any charges are involved. The polluter pays principle comes in mainly by requiring that the polluter should meet the costs of complying with the standards laid down. In other words, that those who cause pollution should pay the costs of averting it or, in the last resort, of cleaning it up. This does not give them the absolute right to pollute.
As the Committee made clear, pollution can be defined in various ways; but the accepted working definition in this country, which is accepted in the OECD and by the European Community, is that pollution results where discharges cause hazards to health or damage to the environment. The essential point is that there have to be harmful effects—discharges in themselves are not pollution.
It needs to be understood that the PPP is a guide to be applied in dealing with the control of pollution and
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legislation in this field. It is one of a large number of similar principles, for example, that an Englishman's home is his castle: or that barriers to trade should be dismantled. Such principles cannot be absolute; and there can be good or even necessary reasons for making exceptions to them.
I should also like to draw a distinction between the setting of standards and paying the costs of meeting them. Although the two are related. PPP is mainly about the second. Thus views on existing rules and regulations ought to be separated from the question of who pays the cost of meeting such rules and regulations. I am afraid that this difference was not always made clear by witnesses in their evidence to the Committee.
This debate is about the way in which we should consider and implement PPP in the face of practical and economic considerations, and in an international setting in which other countries may do differently from us.
I should now like to turn to the report itself. There can be no doubt that the subject is a complicated one. I noticed with interest that paragraph 1 began:
"The evolution of the Pollution Pays Principle".
I am sure that your Lordships would all agree that this is just the principle that should not be adopted! Despite this unfortunate misprint, the Government welcome the report and agree that the principle is a useful guideline limiting the exploitation of the environment by polluters.
Although the recommendations are not listed separately by the Committee—perhaps to encourage the reader to take account of the detailed argument and not merely to cheat by turning to the end of the book to the solution—the main recommendation is that the Department of the Environment should undertake:
"a careful study of the operation of charging systems and of subsidies for pollution control and for clean technology in other Member States".
I should say straightaway that the department agrees that more work should be done in this area. It must be accepted that an improved understanding of the situation is not possible on the basis of presently available information. I am therefore pleased to announce that my department has already put in hand a small scale research study on the subsidies question and intends to follow this up next year with a further look at evidence on charging in other member states.
Paragraph 46 of the report suggested—and this was emphasised by the noble Lord, Lord Ashby—that the United Kingdom should adopt a less rigorous approach to the question of subsidies. It will not surprise the House to learn that I disagree with the noble Baroness, Lady Birk, on this subject. The Government have not seen the need in the past to subsidise industry directly for pollution control purposes from public sector funds. In certain circumstances, as was mentioned by the noble Baroness, this can be done without breaching the Community rules and a capital grant of up to 15 per cent. can be paid by the national authority. The point is that we must distinguish between direct subsidies and help given as part of other aid where grants, for example, are made for industrial developments. Pollution control expenditure would of course in this case not be

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excluded. Thus some help is given in this country indirectly. However, neither the Government nor the CBI have seen the need for direct subsidy.
Some witnesses have suggested that financial aid should be given to plant in declining industry in order to help meet pollution control costs. However, for most firms the cost of complying with environmental standards is not a major proportion of total costs although there will of course be exceptions. If a particular plant cannot raise the necessary funds for pollution control through the normal channels, its viability must be very much in doubt. The granting of direct aid for pollution control in circumstances of this kind usually makes little commercial sense and is certainly against the spirit of the polluter pays principle. Once we started to give subsidies, polluters could begin to think that the Government would always be there to hale them out. Comparisions between other member states on this issue are hampered by the lack of relevant data—as the Committee found—but we hope that our study on subsidies will reduce this.
Reference has been made by several noble Lords to the agricultural sector and specificially to intensive livestock operation. The Government do, of course, recognise that the PPP should apply to agriculture as it does to the rest of British industry. Like all sectors, it has its special problems which call for careful consideration. The departments concerned—that is, the Department of the Environment and the Department of Agriculture, Fisheries and Food—are willing to undertake an examination of any specific claim of non-compliance with the principle, consulting where appropriate with other organisations; but I must make it clear that, if pollution problems occur because of agricultural practice, the pollution control authorities concerned (especially the Ministry of Agriculture) would take action without delay.
The evidence presented to the Committee was again more concerned with standards rather than just the PPP, and many of the points raised were in fact considered in the seventh report of the Royal Commission on Environmental Pollution, and we expect to respond to that report shortly.
In any event, we will he debating the Motion of my noble friend Lord Cranbrook on the report of the European Communities Committee on Sewage Sludge in Agriculture quite soon, and perhaps I may be allowed to respond more fully then.
The question of trans-boundary pollution has of course been mentioned this afternoon. It is worth noting that the Community recommendation of the polluter pays principle does enjoin countries to take account of the effect of discharges of pollution on other countries. This is particularly important where industry is located on or near the common boundary of two countries. Until recently, this has not affected the United Kingdom in its island position, but concern over trans-boundary air pollution is now drawing us into this area, although I must say that the scientific evidence is as yet somewhat equivocal.
Before I leave the question of air, I should like to tell the noble Baroness, Lady Birk, that, so far as noise —which is an air transmitted pollutant—is concerned, it is very difficult to allocate the costs at the local level.
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But I would agree with the noble Baroness that it is a problem and an increasingly disturbing one. Much work has been done to reduce noise on, for example, aeroplane engines and, as I am sure she knows, mowing machines. Incidentally, that has been done at the Commission's instigation.
The noble Baroness, Lady Birk, also highlighted the fact that witnesses to the committee raised the question of polluters paying the costs of administering site licences for waste disposal and of monitoring during the operational life of land fill sites, together with post-closure monitoring remedial work. It is worth noting here that, in response to the report of the Select Committee on the Disposal of Hazardous Wastes, under the chairmanship of the noble Lord, Lord Gregson, the Government gave a commitment to introduce charges for applications for site licences. This would be in line with the Government's general philosophy of charging for planning applications. The timetable for implementing the necessary legislation has not yet been agreed upon. Although the charges proposed might include a charge to cover monitoring costs, no decision on this aspect has been taken.
On monitoring costs themselves, the committee suggested—and this was highlighted by the noble Lord, Lord Ashby—that all pollution monitoring costs should he borne by the polluter. This, of course, is dealt with in paragraph 55 of the report. However, that is not required by the EC recommendation on the PPP, which says that:
"the cost to the public authorities of construction, buying and operating pollution monitoring and supervision installations may be borne by those authorities".
In this country, some monitoring costs are borne by public authorities and some by dischargers; the monitoring done in connection with water authority consents is often a combined effort. It is clear that, given the line taken in the Commission recommendation, this question should take account of what goes on in other countries and might usefully be included in the studies recommended by the committee.
However, underlying the committee's suggestion is the thought that the free use of the environment as a sink should no longer be permitted as a right. They bracket these two thoughts together in paragraph 56 of the report. Like my noble friend Lord Mottistone, I find this latter point to be much more difficult. Taken to its logical conclusion, it implies that there should be a general charge on the use of the environment, and this raises fundamental, practical and conceptual questions that are not answered in other parts of the report.
Industry in this country, in particular, has always opposed the concept of a general charging system whereby charges are imposed both on polluting and non-polluting discharges. Wastes discharged into the environment which do not have any harmful effects are by definition not polluting it. Therefore, it would he difficult to justify making dischargers pay in every case. No other country operates an overall charging system on the use of the environment, and, where such systems exist for discharges to one environmental sector, they cannot be said to he completely satisfactory. The administrative costs involved in introducing a generalised charging scheme are likely to be very high and might well outweigh any possible

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gains in economic efficiency that might accrue.
The Government endorse the committee's suggestion that greater harmonisation of implementation of PPP in the Community is desirable. But, first, we must have our EC partners on our side—a point made by the noble Lord, Lord Nathan, and my noble friend Lord Mottistone. We have taken a strong line internationally on the question of applying PPP, and have urged and will continue to urge others to do the same.
We need to distinguish, however, between harmonisation of implementation of PPP in the Community and harmonisation of actual regulations across the Community, which is rather a different point. There is little support for the latter. As is well known, the Government's pollution control policy is firmly based on the idea of environmental quality objectives and the belief that the measures taken to achieve such objectives should be in general, tailored to meet the needs of particular environmental conditions. There is no comparison between the North Sea and the Mediterranean—a point made regularly and quite fairly by the Select Committee.
My noble friend Lord Cranbrook has mentioned the activities of the International Water Tribunal. The Government are very much aware of the useful contribution to the environmental debate made by responsible non-governmental organisations pulling together. However, where they do not, it is rather a different story and chaos very often ensues. In this case it is for industry to decide on the extent to which they wish to co-operate. I will be interested to see how this relatively new project develops. Of course, the United Kingdom system of water pollution control is well established. It is based on an environmental quality objective approach operated by the regional water authorities, and we believe that this is the best practical way to deal with the question of water quality.
While I am on the subject of water. in answer to a question by the noble Baroness, Lady Birk, perhaps I should remind the House that, with the demise of the National Water Council, it will be the Water Authorities Association which will take over some of its functions and it will be that association which, of course, will be giving evidence to a committee of inquiry such as the committee which produced the report we are debating today.
I cannot pretend to have been able to do full justice to the committee's report in my reply. Many points have been raised in the debate which I am sure we shall want to ponder over, and I am certain that we shall find that what has been said here today has been of great value, and will be of great value, in pursuing studies that your committee recommended.
However, before I conclude, I should like to add a thought of my own. It is useful in a debate such as this to remind ourselves of the rationale behind our policy on pollution control. It is based on a three-part premise of practicability, confirmed expert advice, and pragmatism. We must make absolutely certain that we do not compromise on these objectives by favouring the next popular theory that comes along. Such horror stories—whether or not, to use the phrase mentioned
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by the noble Lord, Lord Ashby, they are compounded of expediency and hunch—might sell newspapers but do not make sustainable Government policy.
It is encouraging to note that the committee has endorsed PPP, as do the Government and, as we have heard, industry. There is a paucity of information on certain aspects of PPP, and the committee was right to draw attention to this and suggest ways to improve the situation. The Government are grateful to the committee for its suggestions, which will be followed up in due course. It only remains for me to thank the committee for its work and the noble Lord, Lord Ashby, for initiating this debate.
6.27 p.m.
Lord Ashby: My Lords, noble Lords have a long and important debate to follow. I simply wish, first, to thank the noble Lord, Lord Skelmersdale, for his careful and encouraging reply to this debate and to thank other noble Lords who took part in it. In particular, I should like to thank the noble Baroness, Lady Birk, who drew attention to the importance of noise and the noble Earl, Lord Cranbrook, who put it more securely into its European perspective than I did in my introduction.
I should also like to thank the noble Lord, Lord Nathan, who drew attention to its jurisprudence and its historical elements in a way that will be an enormous help to the committee in the future. I should like, too, to thank the noble Lord, Lord Mottistone, although I assure him that there is nothing pejorative about the word "sink". It has two meanings. One is a technical, scientific one meaning that it is where chemicals go at the end of a reaction; the other is an implement that I frequently have to use to wash dishes, and I regard it with very great respect.
On Question, Motion agreed to.

European Monetary System: ECC Report
6.29 p.m.
Lord O'Brien of Lothbury Lord O'Brien of Lothbury rose to move, That this House takes note of the report of the European Communities Committee on The European Monetary System (5th Report, 1983–84, H.L. 39.).
The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. This report is the result of seven months' work by Sub-Committee A, most ably supported by its staff and specialist advisers.
This sub-committee reported briefly on the European Monetary System in 1979 and said then that a more detailed examination would be appropriate after the system had been in operation a few years. This second report fulfils that intention. When it was published last September it aroused considerable interest in the press and broadcasting media. That does not mean that the European Monetary System arouses widespread popular interest, still less controversy. It is too technical for that. Nevertheless, the subject is important to us all. The primary aim of the

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committee, therefore, was to divest it of its mystery. I hope your Lordships will have found the committee's description of the system straightforward and clear. Without this, what follows would inevitably be less helpful than it is intended to be.
The committee's second aim was to ascertain how successful the system had been over the first four years of its life. Any judgment about that must largely depend on one's understanding of the objectives of those who created the system. From evidence given to the committee we found that there were widely differing views of this subject.
Your Lordships will remember the Werner Report of 1970, with its ambitious plan for achieving economic and monetary union in the Community, involving the creation of a common gold and currency reserve fund leading to the formation of a European central bank and eventually to a common European currency. It will also be recalled that Mr. Heathand President Pompidou made a joint declaration in Paris supporting these aims and pledging themselves to their realisation by 1980. These aspirations were, I fear, never very realistic, and they were brought to nought by the recurrent oil crises and the high rates of inflation brought about by these and other causes.
The Brussels European Council resolution of December 1978 (which did not, however, mention economic and monetary union) could be described as the first step towards rebuilding this edifice. This was the view taken by representatives of the Community institutions and by most of the academics we saw, notably by Professor Niels Thygesen of Copenhagen University, a most impressive witness.
Most of our banking and trading witnesses took a more limited view. We were told that the creation of the EMS was nothing more than a device for breathing some life into a Community which was in the doldrums, its aim being to produce a zone of relative monetary stability to help bring the European economies a bitcloser together. There are thus two views against which to judge the degree of success achieved by the EMS in the past four years.
No-one can say that the Community is much nearer economic and monetary union today than it was four years ago. So, at best, any success of the EMS has been modest. But some success it clearly has had. It has at least survived intact during a period of exceptional worldwide economic difficulty. Our inquiries also satisfied us that greater currency stability had been maintained among the participants than has been evident in the rest of the world, the behaviour of sterling not excluded. It is true that there have been numerous parity changes in Community currencies, but they have not been large and have been arrived at after consultation and agreement between the Community countries, involving in the process some convergence of economic policies.
Looking to the future, it is to be hoped that we shall not come to a world brought to turmoil by an international banking crisis. At the moment it could be said that we are edging carefully along a narrow path above the precipice. Assuming that in due course we reach safer ground, your committee are persuaded that the EMS is likely to endure and modestly progress, with the European currency unit (the ECU)
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coming into wider use as a unit of account and even as a currency. There has already been some unpredicted expansion of its use in private markets.
The achievement of any larger aims by the EMS still seems far distant, with little sign yet that any country concerned is prepared for the necessary surrender of national autonomy. Meanwhile, greater exchange rate stability is worth having for its own sake. Bankers may find that they can prosper without it, but traders and manufacturers, particularly exporters, need it more. Glib talk about the availability of forward cover is not the full answer to all their problems.
Greater exchange rate stability within the Community, apart from contributing to its wider and more distant objectives, helps to promote trade within it in both goods and services. It also provides an important nucleus of stability in a world context, and may thus contribute in the end to the return of worldwide stability in the exchanges. Any such return, it need hardly be said, must include the US dollar and the yen. Despite the many calls, particularly from some European and Commonwealth countries, for the creation of a successor to the Bretton Woods system, there seems to be little prospect of early action, mainly because the USA shows little interest in the proposal. Nevertheless, I believe that if the Community system can endure and progress it will increasingly influence world opinion.
That brings me to the United Kingdom's membership of the EMS, or, rather, of the exchange rate mechanism. We have been members of the system itself from the beginning, having deposited 20 per cent. of our gold and dollar reserves with the European Monetary Co-operation Fund and having participated fully in all consultations and negotiations about exchange rate changes. What we have not done yet is peg our currency to the other currencies of the Community in accordance with the rules of the exchange rate mechanism. Your Committee are of the opinion that further delay in taking this step is no longer justified, although we do not venture to suggest any precise timetable, realising that other aspects of policy and of EEC negotiations are relevant.
Her Majesty's Government have said that they are ready to join the exchange rate mechanism when the time is ripe. From this one must assume that the Government have no fundamental and permanently valid objection to joining. There was a time when sterling was clearly overvalued and this was an acknowledged impediment. I doubt whether that argument holds good today.
Sterling still is a petro-currency with its rate, therefore, more dependent on the US dollar that that of other Community currencies. But this is less important now that a reasonable degree of stability pertains in the oil market. Nor does it seem likely that joining the other Community currencies in the exchange rate mechanism would unduly hamper Her Majesty's Government's ability to fulfil their internal policy objectives, in particular in the field of monetary policy. The other Community countries apparently do not find that a stumbling block. Why should we?
It seems not unreasonable, therefore, to ask Her Majesty's Government what they mean by "when the time is ripe". Are not present conditions acceptable? Your Lordships' committee believe that they are. And

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does it make sense to wait for the perfect moment, which may never arrive? How can Her Majesty's Government's present stance retain credibility if even more years are allowed to pass while they shiver on the brink? Her Majesty's Government's full commitment to Europe has recently been re-affirmed. Becoming a full member of the EMS would give substance to this affirmation. It would also add weight to British influence in the Community at what looks like being an important time in its development.
I realise that I have, perforce, dealt only somewhat sketchily with a number of the considerations involved in this important matter. They are of course dealt with at greater length in the report. Members of the sub-committee taking part in this debate will naturally have their own points to make, and no doubt more cogently than I. So also will other participants from whom the House will look forward to hearing, especially the noble Lord, Lord Barnett, who is making his maiden speech in your Lordships' House. I am sure that we all look forward to hearing the noble Lord, Lord Barnett, many times in the future. The noble Lord the Minister's own contribution will be listened to with special attention in the hope that in his usual forthright manner he will be able to give us a positive lead. My Lords, I beg to move.
Moved, That this House takes note of the report of the European Communities Committee on The European Monetary System.—(Lord O'Brien of Lothbury.)
6.40 p.m.
Lord Barnett: My Lords, I am most grateful for the kind reception that I have had since my introduction last week. I am grateful to the noble Lord, Lord O'Brien of Lothbury, who has just said such kind things about me. I am very grateful for the early opportunity of making my maiden speech in what is an important debate. I understand that I am supposed to be non-controversial. That is difficult at any time, but in a debate like this one either comes down in favour of full membership of the European Monetary System, against it or does not bother coming down at all. Either way is bound to be controversial to some extent. I will promise your Lordships that I will try to make this brief controversial contribution as non-controversial as possible.
I said that this is an important debate for although the European Monetary System sounds complex to some—not, I hasten to say, to your Lordships—it is comparatively simple. It is about whether we in Britain can improve the living standards of our people by this form of international co-operation or whether full membership would be damaging to our interests.
Although exchange rate mechanisms can be complex, I do not believe the issue is complex. Strong supporters of the EEC have in the past—and indeed now—tended to be equally strong supporters of our full membership of the EMS. As one of those who voted for entry to the EEC, with some problems in various places for so doing, I have always wanted the EEC to succeed and I have every sympathy with the view that it can better succeed by our full co-operation within it. But the arguments are often massively
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overstated, although not by the noble Lord, Lord O'Brien, in opening this debate. But sadly at the moment one is bound to say that there is little or no political or economic will to move towards the essential economic convergence.
I congratulate the committee generally on the way it presented its report; but I am bound to say—I will try not to be too controversial—that it will not be surprised if I do not agree with every dot and comma in it. In paragraph 58, it said on the subject of convergence,
"Convergence has been less than complete."
I hope the committee will not mind my saying that that must be one of the understatements of the century. But if strong supporters of the EEC have tended to favour our full membership of the EMS, opponents have tended to oppose as they see it as one more step towards a single currency and a full economic and monetary union. They also occasionally try to have it both ways saying that, as there is no economic convergence and no transfer of resources, we should not join.
But the main political and economic argument against is usually that it is an absolute limit on our freedom of action. Whether noble Lords or anyone else are either monetarists of Keynesians, they would no doubt call in aid a speech in this House by Lord Keynes on 23rd May 1944 when he was referring to his pre-war experiences. He concluded:
"We are determined that in future the external value of sterling shall conform to its internal value, as set by our own domestic policies."
That was in 1944, and I find it hard to believe that a man of such powerful intellect would have stuck with so rigid a view nearly 40 years later when there is so obvious a need for greater international economic co-operation. As it happens even if he had not changed, he would have had no problem with EMS because, as paragraph 40 of the committee's report points out, we do not have a quick exchange rate. Indeed, in the four years between 1979 and 1983 that paragraph tells us that there were 21 changes as the member states felt it necessary, as Keynes might have said, to adjust the external values of their currencies to conform to the internal values as set by their own domestic policies. So we have little economic convergence. The committee clearly tried hard to find evidence that there had been some. The best they could do was perhaps summed up in paragraph 59 where we are told:
"It is not easy to assess whether, or how far, the EMS has encouraged policy convergence. However, the Committee accepted the evidence by Professor Thygesen on the effects of EMS on such convergence. He argued that the most positive thing that can be said about convergence within the EMS is that:

(i) without the system it would clearly have been weaker still and

(ii) governments, at least outside Germany and the Netherlands, continue to consider adherence to the EMS and hence better convergence a high priority and hence an important constraint on their domestic policies. The Commission witness offered a somewhat similar view".

That is the view of the committee. I must say I remain rather more sceptical than the committee. My own ministerial experience at EEC Council meetings taught me that one needed to hold tight to one's own pro-EEC views in face of strong nationalistic positions invariably taken up—and certainly by the major members.

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However limited the progress, whether pro- or anti-EEC, there must surely be agreement on the vital need for greater economic co-operation in the world, and the vital need for a zone of monetary stability, if this can be achieved. Such co-operation and such stability would, as I am sure your Lordships will appreciate, be enormously helpful to trade and with it industrial expansion and also the hope that it will have some impact on the appallingly high level of unemployment throughout the whole EEC.
Pro- and anti-EEC members can surely agree on that. Indeed I see that my good friend, the noble Lord, Lord Kaldor, said in a debate in this place on 28th November 1978 that what the world needs is greater economic co-operation and greater monetary stability to deal with the problem of worldwide inflation. I am sure that my noble friend and no doubt others who would agree with that statement would not accept the EMS would provide that co-operation.
I confess to not being madly optimistic. The nationalistic pressures to which I have referred will, in the short term, I fear prevail. EMS will move slowly, if at all, towards the co-operation and stability which I certainly want to see.
I am not confident that inside we will do a great deal to achieve that essential economic co-operation. I am only sure that outside we can play no part. I therefore hope that we can join fully, including the exchange rate mechanism, and join as soon as possible—and do so, genuinely determined to work towards achieving the greater co-operation that is so vital if we are to provide a real and lasting improvement in living standards in this country and in the EEC generally. I am grateful to your Lordships for listening to me in my brief maiden speech.
6.48 p.m.
Lord Taylor of Gryfe: My Lords, this House is fortunate to be able to welcome the noble Lord, Lord Barnett, and for me it is an honour to be the first speaker to congratulate him on a splendid maiden speech. Over the years I am sure all of us have admired his contributions in another place, particularly in the field of financial strategy and fiscal policy. He brings to this House an immense knowledge and experience as a Treasury Minister. He confessed in his excellent book, Inside the Treasury, that he had two regrets. He said:
"After five years in the Treasury, I finished a pessimist".
He also regretted that his responsibilities prevented him from speaking freely. I hope the noble Lord, Lord Barnett, will be encouraged by tonight's proceedings to be more of an optimist and to recognise that, if this House has one virtue, it is that it encourages people to speak freely. I hope he will do so frequently and give us all the benefit of his great wisdom and experience.
My second duty is to congratulate the noble Lord, Lord O'Brien, not simply for his balanced and excellent speech this evening but also for his considerable contribution as chairman of our committee. He led us quietly but efficiently through the great maze of argument and he was supported by an excellent staff and, if I may say so, a good committee. We weighed up the evidence after questioning the expert witnesses and I hope that we arrived at reasonable conclusions.
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This report may not be a best seller but we on these Benches, together with our Liberal allies, welcome its publication, since I think we were the only party in the last election which included reference to the EMS and supported British membership. I am glad, therefore, that our distinguished all-party committee unanimously endorsed that view. This report, in my opinion, is the best and most objective presentation of the complex issues involved and it should help to secure a greater understanding of these issues. As the committee has stated,
"We hope to provide the information on which Parliament and the public can reach an informed conclusion".
Nowhere is that more important than in British industry. Fourteen days ago I attended the CBI conference in my favourite city, where there was a debate on the subject of trade and the effects on trade of currency fluctuation. Mr. Kenneth Dunham of Unilever, speaking on behalf of the General Council, stated:
"There was no evidence that the EMS had brought about any long-term financial stability and joining now could have a very great cost to us."
He was followed by Mr. Jeremy Leigh-Pemberton—incidentally, this is not the Governor of the Bank—who asked indignantly:
"How can we ask the British Government to join the EMS? It is a closely-knit club which relies on intervention."
There is a certain obsession on the part of the CBI these days regarding Government intervention, but how they will ever be able to achieve the desirable object of currency exchange stability without intervention of Governments or central banks I fail to understand.
Both those speakers and many members of the general public are apparently unaware that we are already members of the EMS, having deposited 20 per cent. of our gold and foreign currency reserves into the European Monetary Co-operation Fund, as the noble Lord, Lord O'Brien, has reminded us. We take part in all discussions on the realignment of currencies. The CBI, in my view, would do well to read the wise words of our chairman, the noble Lord, Lord O'Brien, when he says:
"Any success of the EMS has been modest, but some success it has already had".
Significantly, he goes on to say this:
"Greater currency stability has been achieved by the participants than has been evidenced in the rest of the world."
In a world which must surely seek some system to replace Bretton Woods, the experience of this European nucleus could be important.
Other speakers will no doubt enlarge on the history of the EMS and the Snake which preceded it. It is sufficient to say that the Snake had no mechanism for indicating which currency was moving out of line and which central bank had an obligation to intervene. Secondly, there was a lack of provision for reserves for the purposes of intervention. The EMS sought to remedy some of those deficiencies and indeed it has four advantages over its predecessor. First, central rates are expressed in terms of the European currency unit, so that a member currency's position is determined in relation to the average of all participant countries; secondly, when a member currency approaches one of the limits to its divergence from the

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central rate, all participant countries are obliged to intervene to keep that currency within its prescribed limits. Thirdly, divergence indicators set at 75 per cent. of maximum permitted limits of divergence mean that intervention is triggered before the limit is reached, and it is hoped that fluctuations are thereby diminished. Fourthly, member states are permitted to intervene before the trigger levels are reached, which helps to avoid an air of crisis management and reduces fluctuations induced by speculation. I suggest that these four reasons are basic, fundamental and desirable in order to avoid the violent fluctuations which seriously affect smooth trading relationships.
There is one concern which will be expressed in this debate tonight—indeed it has already been raised by the noble Lord, Lord Barnett—and that is the fear that membership implies a loss of sovereignty and is a constraint upon our ability to pursue our own domestic economy strategy. It is true that membership would encourage convergence in economic policies, but since we are members of a community this could be a good thing. The EMS is not a regional bloc: it is an EEC institution and it has shown a flexibility which has not inhibited the French or Italian socialist governments. The effect of the ERM on the exchange rate targeting is well argued on page xx, paragraphs 67 and 68.
The other major concern is that the EMS has no policy in relation to the US dollar, and, while our trade with the EEC is growing, the relationship of sterling to the US dollar is of greater significance in our trading pattern. The report expresses the hope (which I share) that United Kingdom entry, together with the importance of the deutschmark in relation to the dollar, could help the ERM to develop a common policy in relation to the US dollar.
It is a complex subject, and there are many speakers. Short speeches will not do justice to its importance, but the report itself deserves to be widely studied. I commend its contents and its conclusions.
6.59 p.m.
The Earl of Bessborough: My Lords, may I join the noble Lord, Lord Taylor, in congratulating the noble Lord, Lord Barnett, on his very wise and notable maiden speech. I remember him very well from when I had the honour to lead the European Parliament delegation to a Council of Ministers, when he was the United Kingdom Minister concerned in respect of the budgetary conciliation procedures between the Council and the Parliament. That was in the early days, before, I think, the noble Lord, Lord Bruce, and the noble Lord, Lord Brimelow, became Members of the Parliament. I have a great admiration for him; and I was always so pleased because although we did not exactly agree he always smiled back at me, and I hope that I smiled back at him.
May I also congratulate the noble Lord, Lord O'Brien, on his admirable report and on his able chairmanship of the sub-committee, of which I was not actually a member but whose meetings he very kindly allowed me to attend from time to time. His report is very able and wise, and, from the European point of view, encouraging. I enjoyed attending the few
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meetings to which I went, and, of course, I followed as closely as possible the transcripts of other meetings.
I agree very much with the report's conclusions and, in particular, that the balance of advantage lies in early entry to the system. Personally, I could go a little further than this in advocating that, with present sterling exchange rates, now may well be a good time. As your Lordships know, as a former member of the Budgets Committee of the old European Parliament I have always been one of those who, like, I think, a majority of members of the present European Democratic (that is, Conservative) group in the Parliament, believe that full entry into the system should be thought of as a step towards European monetary union.
I know that this is a controversial subject, but I do not hesitate to state what has always been my view. I know that not all will agree with me, and I speak personally. But there is a great deal to be said for the original, if very ambitious, Werner Report of 1970, to which the noble Lord, Lord O'Brien, referred. Personally, I stand by virtually all I said in the debate on my Unstarred Question on 26th June 1978, over five years ago, on the need for monetary union within the Community. Indeed, I could almost repeat that speech verbatim today—which your Lordships will be relieved to know I shall not do—with the addendum, that I think the time for our entry into the exchange rate mechanism, followed by further study of the feasibility of full monetary union and the creation of a common reserve fund and a European Central Bank, would be even more appropriate now than it was then.
I have gained the impression that that view is also held not only by those Members of the European Parliament who gave evidence to the sub-committee—that is, Sir Fred Catherwood and Sir Fred Warner (the two Freds, as they are well known), and Mr. John Purvis, whose admirable memorandum can be read at pages 33 to 38—but also, I think, by Mr. Robert Jackson and Lord Douro, who appeared before the sub-committee last week on the future financing of the Community, which, in my view, is not an unrelated subject.
Already, five years ago I strongly supported Mr. Roy Jenkins, the then president of the Commission, in his argument that monetary union, as a successor to entry into the EMS, would favour, as I think the noble Lord, Lord Taylor, has said, a more efficient expansion of industry and commerce in Europe. It was clear then, as I think it is now, that many businessmen believe that the removal of exchange risks and inflation uncertainties between member states would have a major confidence effect, and that trade can be fostered with greater confidence if British firms can make quotations for business in other member states, so that the currency risk is removed from any given transaction.
Ultimately, monetary union would also bring all the advantages to Europe of a major international currency, and I found five years ago, as I now know from personal discussions with members of OPEC, that that organisation might well welcome an alternative currency for quoting oil prices, even if they would continue using the dollar as well.

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I regret that the Bremen summit in 1978 did not make greater progress and that the subsequent discussions between Mr. Pompidou and Mr. Heath did not produce the hoped-for results. However, as the noble Lord, Lord O'Brien, has said, and as the noble Lord, Lord Taylor, has repeated, the system has had some modest success in recent years, and I was glad to hear the noble Lord, Lord O'Brien, say that greater currency stability has been maintained among the participants than has been evident in the rest of the world, the behaviour of sterling not excluded.
As the noble Lord has said, the committee were clearly persuaded that the EMS is likely to endure and modestly progress (I liked his words) adding, as he did, with the European currency unit coming into wider use as a unit of account, and I was glad to hear him say even as a currency. In the banking sector, as we know, there has already been an expansion of the use of the ECU in private markets, and I understand that even the City of Quebec has been borrowing in these units, as well as others. Therefore, do let the United Kingdom get within the exchange rate mechanism itself.
It does not seem to me to be enough merely to deposit 20 per cent, of our gold and dollar reserves with the European Monetary Co-operation Fund. That has undoubtedly been a step in the right direction, I agree. But should we not also peg our currency to others in the Community? I am glad that the committee are of the opinion that further delay in taking this step is no longer justified.
It is very good to hear this from the noble Lord, Lord O'Brien, so distinguished a Governor of the Bank of England; and also, I imagine, his other colleagues on the committee, another Governor of the Bank of England and the noble Lord, Lord Bancroft, who I think is to speak tonight, probably agree with this. I was glad to hear the noble Lord, Lord O'Brien, ask how Her Majesty's Government can retain credibility if even more years are allowed to pass while we shiver on the brink. Do let us now take the plunge. This would not only add weight to British influence in the Community, but, above all, would demonstrate to other member states that we are true Europeans and determined to help make the EEC work. I am sure that our entry into the system would create a much more favourable climate in our difficult discussions over the British budget contribution and on the future financing of the Community. It would assure our partners that we were in fact full members of the club.
I know that we are not the only member state that has caused difficulties. I should like to make that clear. Other members should be persuaded—one other member, certainly—to free up exchange controls; and another should allow the ECU to circulate freely, which it does not do at present in that particular member state.
With the coming next June of the European Elections, I have been interested to find that all the MEPs to whom I have spoken—and they are quite numerous—say that their supporters in their constituencies are very much in favour of our joining. Therefore, whatever qualms the CBI may have about full EMS membership imposing constraints on the United Kingdom following the best fiscal and
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monetary policies for domestic management, I believe that now there is an overwhelming political, diplomatic and economic case for full membership. Therefore, I look forward to my noble friend Lord Cockfield, the Chancellor of the Duchy of Lancaster, giving us some encouragement that we shall in due course join the system. Again I congratulate the noble Lord, Lord O'Brien of Lothbury, and the members of his sub-committee on their encouraging conclusions.
7.11 p.m.
Lord Seebohm: My Lords, I believe that all the members of the Select Committee should consider themselves extremely lucky that the noble Lord, Lord Barnett, was introduced into your Lordships' House in time to join this debate. We are most grateful for his wise remarks and we shall look forward to hearing him on many occasions in the future.
I should also like to offer my thanks to the noble Lord, Lord O'Brien of Lothbury, who steered us quite brilliantly through the straits of Scylla and Charybdis. Although he came through satisfactorily, it was not into entirely still waters on the other side, but it was not only his tact but his experience and wisdom that got us through so satisfactorily. From the start, it was absolutely clear to me and to most members of the committee that we should hear two contrary views about the rights and wrongs of entry into the European Monetary System. First, there were the politicians, who were entirely in favour of us going in, for reasons which I shall mention in a minute. Then there were the bankers, who took the contrary view. I agee with the noble Lord, Lord Barnett, who said that both sides probably overstated their case. I found the whole exercise one of the most interesting experiences I have had since joining the Select Committe.
To take first the arguments of the politicians, they said—I believe the noble Earl, Lord Bessborough, also mentioned it—that we give the impression that we are not wholeheartedly members of the Community. This not only damages our own image but reduces our influence in the Community, which is detrimental not only to ourselves but to the development of the EEC as a whole. They further argue that the EMS, unlike its predecessor, the Snake, has shown that it has sufficient flexibility to meet quite serious strains and has succeeded in preventing exaggerated short-term movements in rates and, furthermore, has had an appreciable influence on individual members' convergence of monetary policy towards the control of inflation and sound monetary policies. Finally, they argue that it has helped to bring about a welcome use of the ECU not only as a unit of reference but as a unit of account, with a secondary market which is not only of benefit to traders but is a move towards the long-term objective of European currency union. That is an objective to which I still adhere, although it may well be a long way ahead.
The bankers, on the other hand, while not disregarding these arguments, put strong emphasis on the special nature of sterling. It is a petro-currency and still to a considerable extent, whether we like it or not, a reserve currency. It is therefore a home for public and private liquid funds which are extremely volatile and could amount at any one time, I am told, to a figure of about £50 billion.

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This situation, the bankers say, is likely to persist because of the sophisticated capital market and forward exchange facilities in London, particularly in relation to the dollar, and the fact that the large national debt offers a form of investment in readily marketable secondary securities which does not exist in any other member state, since most of their public debt was wiped out in the war. They argue further that by going fully into the EMS and the ERM we could actually be an embarrassment and not a help or, as one banker put it:
"I suspect it is quite possible if we join we would be regarded as a cuckoo in the nest".
My own views are that on balance the advantages of being a full-time member of the system outweigh the disadvantages, with the following provisos. First, that we are satisfied that we are going in at the right rate (I shall say something about that in a minute)—that is, one that can be sustained for a reasonable length of time and has a reasonable relationship to the real as opposed to the nominal rate of exchange. I should explain that the nominal rate of exchange is the actual rate of exchange at any one moment of time, and that the real rate of exchange is a notional figure based on a common level of prices and an equal rate of inflation. At the moment I believe, as is shown by the "Macdonald index", sterling is overvalued in European terms, but not so much as the dollar.
Perhaps I should explain, to those who have not had the advantage of being educated in America, what the Macdonald index is. The Macdonald Corporation is an international corporation of food shops and hamburger shops around the world. The Macdonald index is quite simple. It takes the cost of a delicious meal of a bottle of Coca-Cola, a hamburger and a plate of chips in one country, A, and compares it with what it costs in another country, B. The difference between the two shows what should be the real rate of exchange. For example, if you go into Macdonald's in the Brompton Road and have that delicious meal, it will cost you about £3. If, on the other hand, you go to Macdonald's on the corner of 96th Street and Third Avenue in New York, it would probably cost you over five dollars. This shows that the real rate of exchange according to the Macdonald index is something like 170, not 150. This sounds rather a fatuous statement. On the other hand, it is quoted in the financial press in America and is not far off the real truth. If we take the Macdonald index, it shows that at the moment the dollar is heavily overvalued, that the yen is heavily undervalued and that sterling is slightly overvalued.
Secondly, we must accept the fact that, by opting for a stable exchange rate policy, we are to some extent sacrificing our ability to have an interest rate policy. You cannot have both strictly under control at the same time. With our very high—I believe damagingly high—rates, this must be a serious consideration. With fluctuating exchange rates, it is easier to compromise between the two requirements. In oral evidence we asked representatives of Her Majesty's Treasury whether they were now in favour of joining the ERM. Their reply was, predictably:
"When the circumstances are right, that is the right time to join".
With that I heartily agree, but it was not really helpful.
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My final proviso is this. If we join, owing to the special nature of sterling, both we and our fellow members must be prepared to use massive support for sterling if large, short-term fluctuations are to be avoided. If these factors are taken fully into account and all are acceptable to the Government, then I am of the opinion that this could be the right moment to join. In my view, it is better to join when sterling is somewhat overvalued than the other way round.
7.19 p.m.
Lord Lever of Manchester: My Lords, I would very happily spend the brief minutes of my comments upon expressing my pleasure, in the first instance, at the chairmanship of the noble Lord, Lord O'Brien, of the committee of which I was a member but from which I was continuously absent, though following closely and admiringly the labours of my colleagues which have been brought to fruition to some extent this evening. The noble Lord, Lord O'Brien, and I have had dealings with each other over a long period of years. I know him as a calm minded man of great experience, of world reputation and of good judgment and good temper—good temper strained with his colleagues in the central banking world only, I believe, on those occasions when he played tennis with the chairman of the Federal Reserve Bank in Washington.
I could spend the rest of the few minutes I have expressing deep pleasure at an old colleague in Government and in the House—my noble friend Lord Barnett—having joined us, especially in the light of the very valuable contribution he has made to our debate from his own vast experience from his years at the Treasury—vast experience which must be enormously valuable to him but which should be overcome at the earliest possible moment if we are to have the advantage of his keen and logical brain in the years ahead.
I will however offer a few observations on the substance of the debate tonight. I was strongly in favour of entering the EMS when I was in the Labour Cabinet when this matter came up. I do not wish to engage in the delicious improprieties of betraying other people's reasons for opposing it. I will merely say that my reasons for strongly wishing to enter the EMS remain my reasons today. The central reason when I then wished it, and why I now wish it, is that in my opinion, world prosperity at a reasonable level will only be maintained, and grave and damaging crises in our affairs only avoided, if we achieve a certain level of minimum international co-operative discipline which will make the interdependence that we have achieved work.
It was because we achieved those minimum levels of international co-operation that we prospered in the dangerous years following the war. And it is because we have abdicated from those levels of co-operation that we are now suffering the dangerous world crises which beset us. It becomes urgent that we restore in the world at any rate the minimum levels of co-operation in economic matters.
One of the many institutions which I regard as being involved in that minimum level of co-operation is the institution of the international management of money for the achievement of fixed but adjustable rates instead of the floating rates from which we have suffered in recent years. Those of your Lordships who

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recall the debates which led us away from the management principles of Bretton woods, which could well have done with adjustment, will recall that we were told that fixed rates were restricting freedom of economic policy. In fact, fixed but adjustable rates do not restrict freedom of economic policy. They do however place some restrictions on the delusions or mirages of economic New Jerusalems which one is entitled to peddle to one's fellow citizens. I personally find that restriction rather welcome, and the release from that restriction which was brought by floating rates has not been advantageous to us.
I do not wish to recall the promises which were made in the floating rate prospectus. Distinguished and learned friends of mine whom I am apt to name in moments of impatience—but will not tonight—told us that balance of payments was an old-fashioned notion that need not trouble any Government any longer; that a simple floating rate—and leaning back and adjusting to it—would enable us to abandon any of those absurd restrictions and restraints of monetary disciplines which we were inflicting upon ourselves for no good reason.
We have had some practical experience in the past few years of that prospectus and its fraudulent character. Our currency is floating downwards. Have we really emancipated ourselves from our problems by still further perhaps halving the rate of our parity against the dollar or other currencies? Have we in fact dealt with any of the fundamental economic problems by that attempt to reach a short-cut solution of devaluation? I hope that the noble Lord, Lord Cockfield, will not this time have the misunderstanding he once did of supposing me to be a champion of the solution of strength through devaluation. I am not, as your Lordships will gather.
Incidentally, I was interested to hear the noble Lord, Lord Seebohm, offer the House the argument that of course if one has some responsibility in the management of one's rates, this restricts one's interest rate freedom. Again, I have to point to the triumphs of the floating rate merchants in the way of interest rates. Are the American people spared the rigours of fantastically high real and nominal rates because they have a stricter policy of non-intervention than anything in Europe? Of course not. They have higher rates than any among the leading currencies. Our own interest rate experience under floating rates does not encourage me to believe that my noble friend Lord Bruce of Donington's hearty endorsement of the dangerous risk of high interest rates that will come from entry is not in fact justified by our experience.
I go along very strongly with my noble friend Lord Barnett and with the quotation he gave of my noble friend Lord Kaldor, who is not a friend of the European community principle, in recognising that world co-operation must be enhanced if the world is to deal effectively with the kind of crises we now have. I find it difficult to believe that those who passionately demand world co-operation can be serious if they demand large co-operation on the one hand but refuse to co-operate with their next door neighbours on the other. I find it unconvincing as a posture.
I must say, however, that when the EMS was formed there was clear evidence from the private discussions and some of the public pronouncements of somewhat
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naïve delusion from which both Giscard d'Estaing and Helmut Schmidt were suffering; namely, that in some way the EMS could achieve stability and success for the monetary situation of the Europeans without really recognising the need for that co-operation in Europe to be linked to world co-operation with the United States and Japan. I myself regard that view as an illusion. I believe that the EMS is just like the Community itself in its proper understanding. It is a regional piece of monetary co-operation which enables us to link arms with our trade partners in the United States and in Asia to achieve that minimum level of co-operation required for common prosperity.
It is because of our special interests and our special experiences that I press strongly upon my colleagues—but in vain—that we should enter the EMS precisely so that all our weight can be thrown on the need for the EMS to recognise itself as being fundamentally part of a world system; a regional piece in a triangle of crucial world co-operation.
I must confess that the argument that our special needs should keep us out of the EMS is a very flimsy one. Every country has special needs, and to plead special needs as a reason for not joining in a vital piece of international co-operation—which one has recognised as a valuable piece of co-operation—is really a simple plea of unilateralism. It is not compatible with the spirit of co-operative disciplines to say, "It is a splendid idea but my needs are rather special. My feet are bigger than yours. My problems are different from yours".
Of course the problems are different. Belgium's problems are different from those of the French; and Dutch problems are different from those of the Germans, and so on. But that is not a reason for staying out. The whole point of international cooperation is that a number of people with special needs co-operate so that those needs should be met in a co-operative manner without damaging each other.
I will say two words in conclusion upon two points. I know that the Government will be inclined to say, "It is all very well talking of world co-operation. Are the Americans prepared to co-operate?". Of course it will not be difficult to quote statements from the Americans that they do not believe in it, that it is against some fundamental religious or economic convictions of their leaders. But I have to say that underneath those statements is a deep uncertainty inside the American leadership, and that goes for the Federal Reserve, the American Treasury, the American State Department. I can speak from personal knowledge, but also from public statements, from all those sources of American policy-making to show that there is no unanimous hardline opinion that prevents them moving towards that world cooperation for which I have argued. Indeed, there is deep disquiet in the United States, and while they preach this laissez-faire they are practising every day a greater co-operation in the face of the immense world dangers which face us all.
7.32 p.m.
Lord Benson: My Lords, I should like to add my congratulations to the noble Lord, Lord Barnett, for his contribution to this debate. The report before the House proposes that we should join the European

1127
Monetary System as full members. At the moment, we do not share in the mechanism. Apart from the smaller companies, which are not greatly affected, the almost unanimous view of industry is that one of the factors which is inhibiting growth and recovery is widely fluctuating exchange rates. So long as that persists, it is impossible for industry to plan investment appropriately or to settle buying and selling policies. Anything, therefore, that we can do which will smooth those fluctuations should be done for the benefit of the industry in this country.
There is another reason which proposes very strongly that we should join the system and which is political: so long as we are members of the Common Market, we should observe its main policies. We cannot allow ourselves to be put in the position of appearing to pick and choose only those policies which happen to be agreeable to us. In respect of both those factors, I think we should bear in mind that 45 per cent. of our visible exports and 45 per cent. of our visible imports are now effected with Common Market countries.
Those two reasons are compelling, but they are not conclusive. The joining of the EMS will not ensure that there will not be exchange rate fluctuations. There have been various realignments in recent years, some of them quite large. What ultimately determines the rate of exchange is not adherence to a system; it depends on the strength and the weakness of a country's economic policies. Exchange rates, like water, must eventually find their own level. If a participant country strays from economic probity, it has three courses open to it. The first is to spend its reserves in supporting a weak currency. This is a costly and expensive process, as France found to her cost a year or two back. Belgium is suffering from exactly that problem at this time. The second course open is to ask for frequent realignments of the currencies, but that destroys credibility and may in fact destroy the system altogether. The third is to leave the system altogether.
It follows from this that the EMS is not a panacea which will ensure stability of exchange rates. The system has survived but not without difficulty. Nevertheless, we had evidence before us which was spoken with conviction that fluctuations in exchange rates were materially less in the last few years since the system has been in operation than would have been the case if there had been no system at all. Moreover, the system imposes a physical obligation and a very strong moral obligation on its members to adhere to sound economic policies.
There are two factors which affect this country particularly. Partly because we are a producer of oil, the price of which fluctuates considerably, and partly because by tradition we are one of the bankers to the world, we engage in very large capital flows which take place quickly and without notice. These big capital movements place a great strain upon our exchange rate when they occur. It is one of the factors which may make it difficult for us at times in the future, if we join the system, to adhere to the limitations which will be imposed upon us.
The other factor which affects this country is that in 1981 and 1982 the pound sterling was grossly over
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valued. If we had joined at that time it would have been disastrous. We should have had to adopt one of the three courses I described just now. At the present time—whether we can rely upon the revolting evidence of Coca Cola and hamburgers I do not know—it seems possible that the exchange rate has reached a more realistic level, and, if that be so, that particular barrier to our joining has been removed.
After weighing all these factors, the committee came to the conclusion that the balance of advantages lay in joining the system and that we should do so earlier and not later. I hope the report will commend itself to this House.
7.37 p.m.
Lord Vaizey: My Lords, while not being a member of Sub-Committee A, I have had the privilege of sitting in on its meetings and, in particular, the opportunity of listening to the witnesses and reading the evidence submitted. It has been an especial privilege to watch Lord O'Brien's chairmanship. I regret that 30–odd years ago, when I was offered a job with the Bank of England—I chiefly knew of him because he was signing the bank notes at that time—they offered only £350 a year, so I took my services elsewhere, to my Cambridge college. I only hope they have improved the pay since then; perhaps the noble Lord will tell us.
My Lords, the period of exchange instability we have been living through in the last 15 years really dates, I think, from the British devaluation of 1967, and the subsequent movement of the dollar led pretty directly to the first major oil price rise, as the Arabs thought, plausibly enough, that their oil was being paid for in cash that was losing its value. As the turmoil led to the depression, and as further depression led to more turmoil, so the world entered its present period of floating exchange rates—a direct antithesis to Bretton Woods and something from which we all now wish to escape.
I agree strongly with the noble Lord, Lord Lever, that Bretton Woods played a major part in the great boom of the postwar years. Underlying its effective working were two major considerations. Most economies kept their working pretty much in line with international standards; and, of course, behind those international standards was the strength of the leading economy, the United States, the dollar. The basic cause of exchange rate instability was, of course, the wildly different economic experience of the different economies during the turbulent 1970s. In this context I see the EMS as some attempt to achieve, at least in this corner of the world, some exchange rate stability.
Things are now calming down. In particular, the era of major inflation is almost over. Germany. Japan and America are down to 1 per cent. or 2 per cent., and the United Kingdom is within sight of 4 per cent. in the next year or 18 months. The OECD weighted average, therefore, is now low and falling. I speak of inflation rates. That means that ultimately the ratio of exchange values will be related to purchasing power parity—the Macdonald index, as the noble Lord, Lord Seebohm, so vividly and perhaps nauseatingly, described it to us.
In this context I have three or four things to say which I hope will not take very long. I think I am right in saying that the EMS was more a reaction to turmoil than a step along the road to the Werner system of

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European monetary union. This was rather reminiscent of the 1930s, when the free world economic system collapsed into a series of monetary blocs—the sterling zone, the franc zone and, of course, the Schachtian zone. Fortunately, of course, the reaction of the world to the current depression has not been as autarchic as the reaction 50 years ago. In fact, the EMS is relatively outward looking, and I agree very strongly with the noble Lord, Lord Lever of Manchester—I always agree with practically everything that he says—that the purpose of currency stability is to promote trade and not to limit it, as it was in the 1930s.
Next, the search for exchange rate stability seems, however, to have become of diminishing significance because the period of major currency turmoil, if I am right, is now virtually over, if only because the great world inflation is over. Of course, one speaks subject as always to the proviso that there might be an explosion in one of the oil countries or the closing of the Straits of Hormuz. Given those exceptions there are reasonable expectations of world inflation being over. This means that the period of tremendous exchange rate volatility through which we have been living is also over, except as a result of adjustments to long-term changes in productive relationships. I agree, for example, with the noble Lord, Lord Seebohm, that the dollar is in that context over-valued and the yen is under-valued. I doubt myself whether the EMS exchange rate mechanism has contributed greatly to currency stability during this period in which it has, generally speaking, come about.
I therefore find myself slightly more cautious than Sub-Committee A in its conclusions. It said in the evidence and in the report that currencies within the EMS have fluctuated less than they would have had the EMS not existed. I do not think that the statistical evidence fully supports that. So much depends on the measuring rod that is adopted. Of course, Ireland apart, the economies have tended to harmonise around the dominant European currency—the deutschmark. I speak now of members of the exchange rate mechanism rather than of the EMS itself, which includes the United Kingdom.
I am not sure, either, how sterling will move in the world context. So much depends on the oil price, which I expect to fall, possibly significantly. But if that is at all the case it might be a little premature to join the exchange rate mechanism as a full member yet because (although I say this in fear and trembling of bringing down upon me the wrath of the noble Lord, Lord Lever of Manchester) to some extent it might limit our freedom of action and substitute a series of step-jumps instead of day-by-day fluctuations. Speculation about step-jumps is far more dangerous than speculation about day-by-day fluctuations.
On the whole, the report is an absolutely first-class piece of work, and very compelling reading. But I am not yet fully convinced that the time is quite right, although I must say that when the next step towards fuller political union comes then obviously this will be part of it. But looking realistically at what is about to take place in Athens and elsewhere at the moment, I think that is a little further off than optimistic colleagues might think.
7.45 p.m.
Lord Bancroft: My Lords, under the guidance of the noble Lord, Lord O'Brien of Lothbury, the sub-committee chose its words with consummate care. The recommendation for early, though not necessarily immediate, entry into full membership has a resonance about it which will live.
Others have commented, and others will comment, on the technical arguments raised by the report. I have only two very brief points to make. The first relates to time. Even the opponents or the sceptics about our joining agree that the arguments are very finely balanced and that it is really a question of the time not being quite right. The noble Lord, Lord O'Brien of Lothbury, and others have pointed this out. We are in danger of becoming the high priests of the doctrine of unripe time. We are just not as good as we used to be at reaching decisions and carrying them out. Over the past 25 years and more it is within our recollection that our attitude towards the European Community and its policies has provided several examples. We have hesitated. When at last we have jumped in, we have sometimes found that the tide has been on the ebb and that the level of the water has been too low for comfortable, let alone elegant, swimming. Super-powers have time to spend, but for smaller powers time is a currency that they do not have. I do not believe that we can afford to hang hack any longer, however finely balanced the arguments. Time takes more spin than some spectators realise.
My second point is about decisions. As a country, we have been tending to dodge hard policy issues. This applies to most, although not all, Governments of all colours. We have tended to go for the infinitely softer option of organisational or structural change. Consider local government, consider central Government and consider the National Health Service. But now we have to decide whether to stay out or to join in. This time there is no easy organisational substitute. It is a policy decision which we must make and if we do not we are left, as has been pointed out by the noble Lord, Lord Barnett, and others, in an ecstasy of indecision. This, too, is neither comfortable nor elegant.
Those who agree with the analysis of the sub-committee will want this country to join early. There are those who feel that the issues are very finely balanced indeed. I believe that history and the future point in the direction of a rejection of the doctrine of unripe time and to a decision to join earlier. How splendid indeed that the noble Lord, Lord Barnett, shows himself to be a joiner, even though a sceptical one. It would be a pity if we showed ourselves to be more afraid of failure than we are fond of success.
7.50 p.m.
Lord Sherfield: My Lords, I rise to support the Motion moved by the noble Lord, Lord O'Brien of Lothbury, introducing the Select Committee's report on the European monetary system. It is the latest of the reports on this subject which the committee has produced. I also support its recommendations.
I should like to thank the noble Lord, Lord Barnett, for his speech. The noble Lord, Lord Taylor of Gryfe, quoted from his book. He said that five years in the Treasury had left the noble Lord a pessimist. I left the Treasury remaining an optimist after three years,

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which I suppose shows that I was not there long enough.
The EMS has become to the Select Committee a familiar topic: but this report is nevertheless timely if only since it may help to dispel the widely held misconception among the public that the United Kingdom has still to join the EMS. It is a misconception which kept creeping in even during the drafting of the report. As has now been made abundantly clear, we have of course been members from the outset, though we have so far declined to take the admittedly important step of joining the operating unit—namely, the exchange rate mechanism. The committee has come in this report to a firm recommendation that the United Kingdom should at an early date become a full member of the system. This certainly represents an evolution in its thought.
The committee had the advantage of hearing, apart from what one might call the official witnesses, evidence from two individuals who were well placed to take a personal and objective view. They were Professor Thygesen and Mr. Padoa-Schioppa. It is true that the latter has been a director in the European Commission, but he was on the point of returning to the Bank of Italy, and his evidence does not give the impression of "adhering somewhat strictly to a full brief"—as I once heard a Minister say that he was doing in your Lordships' House. I found the views of these two individuals of special interest and importance. One of the questions that they were asked was what they thought would have happened had the United Kingdom been a full member of the EMS from 1979. Their answers, with some difference of emphasis, were the same. Using shorthand, they were that the rise in sterling would have been smoothed out, the inflation rate would have come down more slowly and our progress would have been surer and steadier. Both witnesses were sharply cross-examined on this thesis in the committee without, in my view, being seriously shaken. It is a matter of opinion as to whether this would have been better or worse for us than what actually occurred. The point is that it would have been a situation—although different—which we could quite easily have lived with.
The position today has certainly improved over what it was in the years from 1979 to 1981. The concern expressed this evening is that sterling, having some of the attributes of a petro-currency, is sensitive to movements in the price of oil. But I believe that the consensus in the oil industry at the present time is that the price is less likely to fall and more likely to firm up slowly in the next few years. Moreover the sterling rate against those of other countries has not moved much in recent months. But on this subject I can only bow to the expert opinion of the noble Lord, Lord Seebohm.
However, we seem to be in a state of greater stability. Of course there will always be some reason against taking the plunge. All I am underlining is that on the basis of the evidence that the committee received the risk is now less than it was. Incidentally this well-balanced evidence is in some contrast to the views of two economists which were printed in the appendices to our report. One was firmly against full membership by the United Kingdom on the grounds that the EMS is redundant; the other maintained that
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the United Kingdom had been wrong not to join as a full member on the grounds that the system has been a great success and that full membership would help to stimulate economic recovery. These two economists' views neatly cancel each other out.
It seems that a great many of the reasons which have been advanced in opposition to our joining the ERM have disappeared and lost their force, while the Government have maintained their stance that they are in principle willing to join the ERM when the time is ripe. The Government have been saying this now for some years.
Those of your Lordships—and I am sure that there are many, and certainly the noble Lord, Lord Bancroft, is one—who are familiar with F. M. Cornford's Cambridge classic Microcosmographia Academica will know about the principle of unripe time. As it is being applied by the Treasury in the case of the EMS, I venture to remind your Lordships of the text of this principle. It is that:
"People should not do at the present moment what they think right at that moment because the moment at which they think it right has not yet arrived".
Cornford adds as a wry comment:
"Time by the way is like the medlar: it has a trick of going rotten before it is ripe".
I fancy that this quotation is quite topical in relation to the official attitude to the ERM. In a way it is a pity that this debate comes when it does, because not even the most enthusiastic supporter of a move to become a full member of the EMS would expect an announcement to be made at a time of such turbulence in the Community over the budget and the CAP. Unfortunately, the Minister has too easy a task in saying again this evening that the time is not ripe.
One must assume that the hassle over the budget and the CAP will soon find a solution. Otherwise the Community is unlikely to advance and develop and could tear itself apart. What I would urge is that when the eventual compromise is found and the members of the Community can again think more calmly of the future, the Government should, so to speak, seal the bargain by the United Kingdom becoming a full member of the EMS. In my opinion, this move is now justified in itself, but it would also have the political effect of reassuring our partners that we really do mean to join with them in strengthening and guiding the Community into a more harmonious future. It is my hope that this report and the evidence on which it is based will help the Government to take the fence.
7.58 p.m.
Lord Ardwick: My Lords, it would be presumptuous of me to congratulate such an experienced parliamentarian and distinguished ex-Minister as my noble friend Lord Barnett on his maiden speech, but I can congratulate him on getting exactly the wavelength of this Chamber. It is something which not everybody is capable of doing. I also ask him to note that we gave him a solid Mancunian second row, going back to Lord Rhodes, and including himself, with Lord Diamond beyond, and also my noble friend Lord Lever of Manchester.
I intend to speak on one single aspect of this report: the tenuous relationship between the European monetary system, as it has evolved, and European

1133
union which is still a dream of a Utopia which may never be attained and perhaps never even universally desired. The subject is of some importance for one reason. A minority—a small minority—even across the Channel give their support to the European Monetary System because they believe that it is the first stage on the road to the Holy Grail of monetary union, the first stage on the road to the millennium, when the lira will lie down with the deutschmark and the pound sterling with the French franc. These relationships between the currencies will be both fixed and eternal; or, better still, they will acknowledge their irrevocable union by taking the same name: the ECU, the Europa, or some other title as historical and romantic.
We could be indulgent towards this hope, which the noble Earl, Lord Bessborough, shares, but for one reason: its effect on the majority of people in Britain who do not share the dream of monetary union, and who do not wish to set out on that pilgrimage. They say that if the monetary system is intended to serve mainly as a precursor of monetary union, then it is a dangerous instrument, and the less that we have to do with it the better for Britain.
The noble Lord. Lord O'Brien, discussed the objectives of those who created the system, and he pointed out that representatives of the Community institutions and most academic witnesses regarded the monetary system as the first step towards building the edifice of monetary union. That was in contrast to the banking and trade witnesses, who saw it as a means of producing a zone of monetary stability to help to bring the European economies closer together. Indeed, I may add, the EMS has recently been described as the backbone of the Community. And surely it is significant that no mention of monetary union was made in the resolution of the Council of Ministers which set it all up.
As the noble Lord said, the Werner Report of 1970, with its aspiration to achieve monetary union by 1980, was never realistic. And the aspiration was killed in the early 'seventies by the recurrent oil crises and the development of widely different rates of inflation among the member nations. Monetary union, in the eloquent phrase of Mr. Roy Jenkins, became immobilised in scepticism; and there it remains.
These distressing phenomena of the oil crises and high inflation also destroyed the European euphoria created, as it had been, by the economic miracles of the original member nations. When the monetary system was formed in 1978, it was legitimate in Britain to have pragmatic doubts about our full participation. But these doubts were magnified and distorted by the cries of the anti-Marketeers that this was the primrose path to federal Europe and the final abdication of British sovereignty. My answer then was that a journey to Dover could be an end in itself; it was not essential to travel all the way to Paris. What filled many people in Britain with alarm probably made it easier for some Governments in Europe to join the EMS, because a belief had grown that monetary union would mean an economic and political nirvana.
I am dwelling on this point, my Lords, not for historical reasons, but because the federal phobia still exists and may yet create a climate of opinion and deter a British Government from taking what our
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committee believes to be a useful step. I was not present at the birth of the EMS, but I was in the antechamber and indeed had been a close observer during the period of gestation. I was rapporteur of the subject in the European Parliament and my greatest difficulty was to convince both the monetary unionists and their opponents how far the proposed new system would he from the hopeful dream of one side and the nightmare of the other.
There was an excess of both hope and fear and an absence of realism. M. Robert Marjolin was a former secretary of the OEEC and vice-president of the Commission, and in 1975 he produced a report which pointed out that Europe was no nearer to monetary union than it had been in 1969. I quote:
"National economic and monetary policies have never been more discordant, more divergent, than they are today".
He added that there were other causes of failure, such as,
"lack of political will and of understanding of what monetary union really meant. At Government level there was no analysis of the conditions to be fulfilled…as if it was sufficient to decree the formation of monetary union for this to come about at the end of a few years without great effort or difficult and painful economic and political transformation".
Monetary union demanded that the instruments of economic and monetary policy should no longer be in the hands of national Governments, but should be required to be put at the disposal of Community institutions. These institutions would have to include a European political power, an integrated system of central banks, and a Community budget of some weight. One can see how hopelessly far away from that is the Community today in practice and in concept, as the member states are locked in battle over the principles of their relatively small budget.
M. Marjolin had the perspicacity to say eight years ago that member states working in co-operation with North America and Japan must face the problems of inflation, massive payments deficits, and unemployment without asking too many questions about the future. We arc still contemplating these dangers today. We are still longing for the day when the European Community, Japan, and the United States together create a more stable monetary world.
As the noble Lord, Lord O'Brien, pointed out, there are many calls for a successor to Bretton Woods, but the United States seems to have lost the interest that it once showed. I was very relieved to hear my noble friend the noble Lord, Lord Lever of Manchester, express a slightly different and more optimistic view about the opinions in the United States on this subject.
I believe that we should regard the EMS not as a precursor to monetary union, but as a nucleus of stability in a world context, and thus the precursor of a new Bretton Woods and a return to stability in the exchanges of the world. We must hope that the next stage in the evolution of the Community will be reached shortly at Athens, with a budgetary system acceptable to all and an agricultural policy no bigger and no more costly than it need be.
For five or six years British Governments have been fighting for a fair budget, and sometimes in that struggle rhetoric has had a certain acerbity and there have even been threats and counter-threats. This has been created in Europe an impression that Britain is

1135
the reluctant partner in the Community. If all goes well at Athens, then surely the time will have come when we should make a gesture towards our partners by becoming full members of the monetary system and proving that we share the faith of the founder nations of the Community that the further development of that Community is in the interests of each and all of us.
8.9 p.m.
Lord Brimelow: My Lords, I thank the noble Lord, Lord Barnett, for the pleasure he gave me by his maiden speech. I look forward to many more such pleasures. My own remarks this evening will be narrower in scope than those of previous contributions to the debate, and entirely devoid of rhetoric. The Select Committee is of the opinion that membership of the exchange rate mechanism is desirable, and that early, but not necessarily immediate, membership is desirable.
The Government have not yet seen fit to accept the full obligations that would flow from membership of the exchange rate mechanism. It seems to follow that the criteria of the Select Committee for accepting those obligations have been met but the criteria of the Government have not been met. That gives rise to the question: what are the Government criteria? A Treasury witness said:
"It is Government policy that when the circumstances are ripe, that is the right time to join".
That seems to imply that the criteria of substance for joining have been met and that the only criteria that remain to be met are those of timing, of circumstance, of conjuncture and of expediency. But what are those criteria? Are they such that perhaps the acceptance of the full obligations of joining the exchange rate mechanism will be postponed indefinitely?
I should perhaps say why I raise the question of indefinite postponement. In the evidence appended to the report there are scattered references to past events and recent trends that give rise to doubts—doubts that found expression in the reserved attitude of witnesses from the Confederation of British Industry and from the British Bankers' Association. They are doubts which, in my opinion, were not fully reflected in Part 7 of the Select Committee's report. Thus, Professor Thygesen, on page 147, referred to periods of tension in September 1979, in May-June 1981 following the French presidential election, and in the weeks preceding the realignment of March 1983. He thought that:
"The EMS may … be stoking up more severe speculative forces for the future by permitting realignments in the 8–10 per cent. range, as observed since October 1981. Realignments of this order of magnitude make it almost unavoidable that speculators gain at the expense of the authorities, hence encouraging speculation on future occasions … once the adjustments of central rates is allowed to move well beyond the limit of 4½ per cent., the authorities of the devaluing country may be forced to raise short-term rates to very high levels—well into triple figures, as was the case in France in the week prior to the March 1983 realignment".
Given the special vulnerability of sterling to speculative pressures, until this trend has been durably reversed, can the Government deem it prudent to enter the exchange rate mechanism? Then, again, Sir Fred Warner, on page 43, at paragraph 134, spoke of the negotiation of realignment as getting "really
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nasty". Difficulty and slowness in the negotiation of a realignment can be very expensive. During the brief period of our participation in the so-called Snake, we spent £1 billion in support operations in the foreign exchange markets, as shown on page 10, paragraph 28. Future costs might be greater. I have said enough to indicate that, in my opinion, for the Government a decision to accept the obligations of full participation in the exchange rate mechanism cannot be free of misgivings about the potential costs. It is for that reason that I wish to elicit the Government criteria for joining or not joining the mechanism.
8.15 p.m.
Lord Bruce of Donington: My Lords, the House will be grateful to the noble Lord, Lord O'Brien, for introducing this Motion and for having so successfully presided over the deliberations of the Select Committee formed especially to consider the European Monetary System. I have said it many times before, but the reports from the Select Committee on the European Communities have attained an international reputation because of their comprehensiveness, their thoroughness and their lucidity. We are most grateful to the noble Lord, Lord O'Brien, and his committee members for having lived up to that standard.
The House will also have listened with pleasure to the maiden speech of my noble friend Lord Barnett, who did his best to be non-controversial by departing completely from his party's policy in connection with the European Monetary System. This is completely acceptable. We in the Labour Party are a broad church. We believe that democracy is essentially government by discussion. As is well known, although happily not by personal experience, the only place where there is unanimity is in the graveyard. Your Lordships' House can never be accused, I trust, of suffering from that defect.
I find myself in my customary position of dissenting from most of what your Lordships have said. I find myself in the strange company of the noble Lord, Lord Vaizey, and I anticipate, although I dare not say so with confidence, that I may possibly to be in some significant agreement with the noble Lord, Lord Cockfield—an unusual event for me, and one to which I look forward with eager anticipation. The Treasury, on balance—one has to use the term "on balance"—came out against joining the full European mechanism. I assume that the noble Lord, Lord Cockfield, will in all probability, although one is never certain, follow the same lines as the Treasury, the National Institute of Economic and Social Research, the CBI, the British Bankers' Association, the Ford Motor Company and myself, whereas we have for joining the European Monetary System, in its full sense, through, the acceptance of the automatic mechanism, the representative of the European Commission, Mr. John Purvis MEP, and his two associates, and the Deutsche Bundesbank. I am a little baffled because, despite the eloquent words of the noble Lord, Lord O'Brien, the Bank of England, so far as I can read its evidence, remains profoundly neutral. It is difficult to interpret the evidence of the Bank of England in any other sense.
I am not a banker; I am not skilled in matters of banking. I hold the rather plebeian standpoint which

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may or may not find itself acceptable to your Lordships—namely, experts should be on tap, never on top. Therefore, I tend to take a view in regard to this report based on rather broader lines.
We in the free world live in a world in which there are vast unused resources and plenty of people willing to work in order to obtain benefit from the use of those resources. This of course is so commonplace that it may perhaps be accepted as part of the scenery. But to people like myself it remains still profoundly illogical. At the same time it is reflected in our own country. We have vast need of people being satisfied and yet we have an army of unemployed people that would be quite prepared to work in order to satisfy those requirements. That may be trite, but it is inescapable. That sometimes means that I look a little askance at the most distinguished individuals, including many of your Lordships, who move in these very high monetary and banking circles and who seem to be completely oblivious of this fact, which must remain a reproach to civilised society.
I am not at all reassured by the statement, amounting to conviction, by the noble Lord, Lord O'Brien, that the world banking system is still in imminent danger of crisis. That hardly adds up to complete self-confidence among that band of experts—most reputable people and, indeed, most charming people—who presume to know how the affairs of the world should be conducted. Indeed, we know full well that the whole of the banking system—in so far as its policy of unrestricted advances, particularly in South America, was concerned—pursued a most asinine policy which is still due to haunt it for many years and will give rise, I suspect, to the anxieties voiced by the noble Lord, Lord O'Brien, about the stability of the system.
I have read through the report carefully and I have come to the conclusion that, although the members of the committee come down all fair and square in favour of its conclusions, by and large the conclusions run contrary to most of the logically argued evidence that was put before the committee. I ask myself the reason why. Indeed, it is revealed in the report itself. There seems to be the impression that it is a political necessity. The most compelling part of the report and the report's recommendations lies in the political desirability of joining the system. That bothers me a little because it is based on the assumption that the European Economic Community is all that it is advertised to be.
I was amused to listen—and I say this not in any terms of disrespect—to the noble Lord, Lord Bancroft, who said that we cannot afford to hold back; and then to the noble Lord, Lord Seebohm, who said that we present an unforunate impression in the Community; and then to the noble Lord, Lord Sherfield, who said that he thought it was necessary that we should reassure our partners. Why, my Lords? Have we in this country reached the stage when we find it necessary in our expressions of national policy and the determination of national resolve to pursue decisions which are made purely with the aim of reassuring people that are associated with us? Those comments do not echo the Churchillian terms in which the Prime Minister herself has become accustomed to addressing the United States.
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It seems to become an end in itself that somehow, for some reason, this nation has to make itself agreeable to people. I am certainly not in favour of our being disagreeable; I am certainly not in favour of our declining or pursuing objectives that are disruptive to other people. But when the chips are down the ordinary people of our country—who cannot travel out of the country at the speed at which capital is transported from one corner of the earth to another by key-tested telex from bank to bank—are invited to be patriotic. It seems a little odd that one of the prime purposes of our joining the EMS should be to ingratiate ourselves with other people, as distinct from co-operating with them on a friendly and, I trust, co-operative basis.
By now we know in our hearts—even the most perfervid supporters of the European Economic Community—that the European Economic Community is the common agricultural policy with a few peripherals, and that as a community it is desperately trying to furbish that image by taking on extra political objectives of co-operation that were not envisaged originally in the Treaty of Rome. I am all for co-operation. I believe that we should co-operate everywhere in the world with our European colleagues. But let us talk straightforwardly, let us talk with a degree of confidence and resolve, rather than doing things because we have to reassure people.
The evidence in the report suggests to most people—including, if I may say so, the Institute of Bankers, with whom I must say I rarely disagree—that it would not be in the interests of the United Kingdom to join the mechanism at this stage at all. They give a variety of reasons with which I shall not weary the House. However, it is quite certain that the existing system is under strain and according to most distinguished economists who have had an opportunity of looking at the situation since the report was published, the existing system and the existing currency alignments are already under strain and will probably have to be altered in the spring anyway. Perhaps the noble Lord, Lord Cockfield, will confirm that.
I admire the thoroughness of the report. I admire the sincerity and the wisdom of the people who have spoken in this debate, including not least my noble friend Lord Barnett. I am sorry to have to dissent but, along with the noble Lord, Lord Vaizey, oddly enough—with whom I very rarely agree—I find that the case is not proven. In my opinion, we should not at this stage subject ourselves to this mechanism; rather, we should pursue our own objectives as cogently and as courageously as we can. We have never been found failing in the past when we have been a little more self-reliant, and perhaps a little less supine.
8.30 p.m.
Lord Cockfield: My Lords, may I, first of all, congratulate the noble Lord, Lord Barnett, on a distinguished and elegant maiden speech. He has of course great experience in these matters. His appointment as Treasury spokesman for the Opposition will add lustre and illumination to the Benches opposite. I do not know whether that means that the speech this evening of the noble Lord, Lord

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Bruce of Donington, was his swan song on Treasury matters; but if indeed it was, may I be permitted to say that I have greatly appreciated the forthright way in which he has always put the points on matters about which he feels deeply and sincerely.
May I also, very briefly, take up the point made by the noble Lord, Lord Lever of Manchester, who suggested that on one occasion I had misunderstood what he said. In the early days when I crossed swords with the noble Lord I had not realised that his attacks were not directed at me at all but at the record of the Government of which he had been so distinguished a member. Once one realises that, everything drops into place! I am also glad that we have been forewarned about the likely approach of the noble Lord, Lord Barnett.
Since this matter was last debated in your Lordships' House on 27th January last year we have had the benefit of the very detailed analysis of the European Monetary System by the Select Committee of your Lordships' House. The sub-committee was under the distinguished and expert chairmanship of the noble Lord, Lord O'Brien of Lothbury, who also introduced this evening's debate.
Rarely has a debate so short in time been marked by contributions from so long a list of distinguished experts in the field. We have had two former Governors of the Bank of England, two former Chief Secretaries to the Treasury and many other prominent bankers and leading experts in the field. The debate has also transcended party lines, a matter which I think is a great tribute to your Lordships' House, because it means that we can bring our collective wisdom to bear on these matters without necessarily expressing a purely party point of view.
Although the report is guarded in its conclusions—and wisely so—the careful analysis, the wealth of factual information and the opinions elicited from distinguished experts are a valuable contribution to our stock of knowledge and will enable decisions to be taken—when that time should come—on a more informed basis.
The conclusion reached in the report that:
"United Kingdom participation in the ERM [Exchange Rate Mechanism] is desirable",
is one which would be endorsed by the Government as an ultimate objective. Indeed, we have said so on many occasions. On the question of timing, I could not be so forthcoming. The committee itself accepts that the:
"exact timing must depend on general Government policy".
But it suggests that:
"the balance of advantage lies in early … entry".
But it qualified this by saying:
"though not necessarily immediate entry".
I felt that perhaps the noble Lord, Lord O'Brien, as well as my noble friend Lord Bessborough, went perhaps somewhat further than the report itself went in advocating immediate entry.
The problem as we see it in Government is that it is not possible to be specific about when conditions for entry will be right, and quite simply the reason for this is that the problems which remain cannot themselves
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be solved within a specified timescale. Perhaps I might touch briefly on some of these problems.
The Government recognise the concern felt by many in industry on the question of exchange rate volatility, and expression of these concerns was given in the debate this evening. It is not surprising that the ERM should be viewed as a kind of haven in which to shelter from the storms which periodically sweep through the exchange markets of the world. But it is important to recognise the source of the problem. It is to be found in high and variable rates of inflation. This was one of the factors which led to the breakdown of the Bretton Woods system and has been responsible for much of the subsequent instability in exchange rates.
The Williamsburg Summit recognised the critical role that co-ordinated and prudent policies must play in bringing about a lasting reduction in exchange rate volatility. Your Lordships' committee recognises the overriding need for a greater degree of policy convergence. The noble Lord, Lord Barnett, argued that there was little or no political or economic will towards the greater convergence needed. I would not perhaps go quite so far as the noble Lord in saying that there was no political will in this direction. But I agree that the progress made is simply not sufficient. There are indeed encouraging signs that convergence is taking place and at a significantly lower rate of inflation. The Government's own record here has been an exemplary one.
But despite this progress, much more progress needs to be made. Many countries are still going through periods of significant financial adjustment; market expectations still show a frequent lack of confidence. The general climate is still one which falls well short of the stable conditions which we are seeking.
This is the background to the concern recognised in the report that in certain circumstances sterling's membership of the ERM could entail more instability against the dollar. This in turn would impose strains within the ERM itself. True, such strains can be accommodated to some extent by currency realignments. This has happened with some frequency in the past and one cannot rule out further realignments in the future. Indeed one would not want to do so. But these step-changes in exchange rates can be as disruptive to industry as small day-to-day fluctuations.
Broadly therefore, our view remains that greater convergence of policies needs to come first, and it is very much a second best to argue that failures of convergence can be compensated by currency realignments.
It is important also to avoid—or at least to minimise—conflict with domestic policy. If there is a failure of convergence or if more generally conditions for membership are wrong, then the pressures on member states' financial systems are not eliminated. Instead, the pressures are reflected in domestic rather than external factors. Countries cannot rely on exchange market intervention by itself to withstand pressures of anything more than modest and temporary force. This is particularly true of the United Kingdom, whose currency is widely held and traded. In these circumstances domestic policy changes are required. Were sterling to become a member in the

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wrong circumstances, this would simply substitute interest rate volatility for exchange rate volatility. This could be just as damaging to trade and investment as the CBI in particular have argued.
The noble Lord, Lord Taylor, rather dismissed the reservations expressed by the CBI as ill-founded, but the CBI after all represent the people actually responsible for conducting our trade, and their views are based upon hard, practical experience. They represent, therefore, important evidence which needs to be taken very much into account.
Apart from these general considerations, sterling, as the report itself recognises, has two special characteristics which differentiate it from many other EMS currencies and complicate the decision as to timing. I hope the noble Lord will forgive me if I say that the report perhaps assumes too readily that the difficulties to which these characteristics give rise have eased sufficiently. First, the United Kingdom stands on its own in the European Community by being self-sufficient in oil. Sterling therefore tends to rise and fall with oil prices while other Community currencies do the opposite. Oil markets have been relatively quiet recently. But considerable fluctuations in supply and demand do occur and there are political factors which affect this market. While one would hope that the violent movements which characterised the 1970s will not be repeated, it still remains the case that political tensions in the Middle East tend quickly to be reflected in the exchange rate between sterling and other EMS currencies. The caution suggested by my noble friend Lord Vaizey is very relevant in this connection.
Secondly, both sterling and the deutschmark are widely used in international finance and so are particularly vulnerable to large speculative flows. Experience suggests that any large and sudden movement of the dollar, for example, tends to lead to strains between the existing members of the ERM and often to quite sharp movements between sterling and the deutschmark as well.
Perhaps I may comment briefly on the claim that the EMS has contributed to exchange rate stability. There is some evidence that nominal exchange rates of ERM members have been more stable than those of the United States, the United Kingdom and Japan over periods since 1979. But this is not conclusive evidence that it was the ERM itself which contributed to this greater stability. Sterling and dollar rates have fluctuated over that period for rather special reasons, and the narrowness of Japanese capital markets may well be behind the volatility of the yen. It is also unclear whether real exchange rates have been made any more stable.
I do not propose following the noble Lord, Lord Seebohm, on the question of the Macdonald index. All I can say is that I wonder whether it might leave us with more indigestion than enlightenment. As the noble Lord, Lord O'Brien, has reminded us, Britain is already a member of the EMS as such. We contributed to the European Monetary Co-operation Fund, and 20 per cent. of our gold and dollar reserves are in fact deposited in the fund. We welcome the modest but growing private use of the ECU, with London playing its full role as a centre for the market in ECU denominated assets. My noble friend Lord Bessborough referred with approval to this development.
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We participate also in the negotiations on EMS modifications and in realignment conferences. Indeed, when my right honourable friend the Foreign Secretary was Chancellor of the Exchequer, he chaired a number of these conferences. We already play, therefore, a responsible and indeed substantial role in the EMS.
My Lords, the Government have always accepted that sterling's eventual membership of the ERM would be an important step forward. But it would be essential that our membership should be successful and continuing. This means that it needs to be achieved in the right circumstances and when the time is right. Joining in the wrong conditions would neither strengthen the system nor be helpful to British industry. Nor would it be sensible in terms of domestic policy.
While, therefore, we are united on the ultimate objective, we need to be particularly cautious on timing. We have in the circumstances I have described no immediate plans for entry. This is not a matter of indecision as the noble Lord, Lord Bancroft, has suggested, but a conscious decision taken on the facts as they exist at present. But I can assure the House that we will continue to keep the matter under close review and the views expressed by your Lordships will be fully taken into account in that review.
8.46 p.m.
Lord O'Brien of Lothbury: My Lords, my first very pleasant duty is to thank all those noble Lords who have taken part in this debate, which I think it will be agreed has been an interesting one. I am particularly grateful to the noble Lord, Lord Barnett, for having done so. He made what one would expect him to make: a most thoughtful and helpful contribution. Until we came to the end of this debate we had almost reached unanimity. It became almost dull, but one or two rescued us from that unhappy fate. The noble Lord, Lord Vaizey, I was sad to hear, did not think it worthwhile going to the Bank of England at £350 a year. I should tell him that I went in 1927 at £150 a year, and 46 years later, on the whole, I thought that it had not been a bad deal for me.
More important, the noble Lord referred to what happened in the 1930s—something which I lived through as a young man as a central banker. The currency blocs, the clearing systems, the barter, the restriction of trade which went on at that time—they were things which those who went through that period as working people will never forget. That is one of the situations we are now trying to avoid through the co-operation of the world today, and particularly co-operation in Europe.
I believe that, as the noble Lord, Lord Barnett, said, the ultimate aims of the European Community are no doubt far distant and show little sign at the present time of being realised. Nationalistic attitudes have prevailed in many countries of the Community; but we have all joined the Community, and if our hearts are in it we hope that eventually it will achieve those aims. If it takes 50 years it is better than not happening at all. One step forward is better than one step back, and I fear that the attitude of the British Government represents a step back rather than a step forward.

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It seems to me that the arguments which have been put forward by the noble Lord the Minister could be put forward as arguments against ever joining the exchange rate mechanism rather than choosing the right time to join. Therefore, they leave me somewhat depressed. However, we have had the debate. We have our report. The Government will no doubt consider it, and we shall be interested to hear how things develop in the future.
On Question, Motion agreed to.
House adjourned at ten minutes before nine o'clock.

  CNEWR ESTATE, BRECON: ACCESS ROUTES
  CNEWR ESTATE, BRECON: ACCESS ROUTES
  LIFE SENTENCE PRISONERS, VIOLENT OFFENDERS AND DRUG TRAFFICKERS: RELEASE
  LIFE SENTENCE PRISONERS, VIOLENT OFFENDERS AND DRUG TRAFFICKERS: RELEASE
  BRACKEN AS A SOURCE OF ENERGY
  BRACKEN AS A SOURCE OF ENERGY
  RADIO INTERFERENCE BY INDUSTRIAL AND MEDICAL EQUIPMENT: EC DIRECTIVE
  RADIO INTERFERENCE BY INDUSTRIAL AND MEDICAL EQUIPMENT: EC DIRECTIVE