Sitting of 10 February 1984

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

Welfare Services and Benefits
9.34 am
Sir Geoffrey Johnson Smith: I beg to move,
That this House, recognising the growing pressures of demand and demography on the provision of welfare services and benefits, calls upon the Government to encourage a wide-ranging discussion on their future provision.
This debate is about not just the welfare state but the private provision of welfare services and benefits by individuals and voluntary institutions. If we are to have a truly caring society, private and public provision must go hand in hand. For people to be solely dependent on the state would not just erode personal responsibility but would deny them their freedom and their democratic right to exercise choice and to provide for their families. However, I know that I shall carry the whole House with me when I say that to rely solely on private provision, however well motivated, would be to deny the services that collectively we rightly feel morally obliged to provide for the community.
In short, I am not here to argue for the dismantling of the welfare state. Private and public provision need not be at odds. The challenge that we face is to ensure that they develop harmoniously. We know that all Governments and parties have played their part in creating, sustaining and developing the welfare services and benefits that are, indeed, the trusted hallmark of a civilised society. We have all built on the foundations of Victorian and Edwardian philanthropy and legislation, and, in modern times, on the framework of the Beveridge report of more than 40 years ago. It is a record of which both sides of the House can be justifiably proud.
Therefore, I hope that hon. Members on both sides of the House will judge from the tone of my opening remarks that it is not my intention today to be politically contentious. I know that the welfare of our people, and especially the welfare of the needy and deprived, can rightly generate fierce arguments and excite strong passions.
However, I hope that today we can give calm, constructive, more dispassionate and less partisan, and even perhaps more philosophical consideration to the future of our welfare services and benefits. We need to do so if only because we must all admit that in the past Governments have made mistakes, and one of the serious consequences of that is that we have created anomalies and new injustices. We need to do so also because society has changed since the Beveridge report of 1942. For example, the position of women in our society has changed radically. There has been an unforeseen growth in the
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number of single-parent families, and many of us are very concerned about the implications for families of the increase in the divorce rate.
We all know too of people who, as a result of legislation, are very confused by the multiplicity of means-tested benefits. Indeed, some are so confused that they do not know what they are entitled to. The hon. Member for Oldham, West (Mr. Meacher) has often spoken most eloquently about the low take-up of some benefits. We also all know of families in which it pays not to work, where needs are not properly met, where the benefits received are not really required, and where a little bit of encouragement would do a lot to help some individuals and families to become more independent.
We must consider the changing needs of families which are smaller and more split up. People live longer—that is a fundamental change—and medical discoveries have escalated the cost of the National Health Service. It is therefore no surprise that 40 years on from Beveridge expenditure on health, welfare and education has expanded and is still expanding at an explosive rate. That is true not only of our country, but of western Europe as a whole.
In the past 20 years, as the OECD report states, the provision of social services has grown almost twice as fast as the gross domestic product. If we in western Europe do not do anything about that we will be talking not about dismantling the welfare state, but about how soon it will go into liquidation.
In the United Kingdom alone in 1963–64 expenditure by the Government on social security, health and education was 43 per cent. of total public expenditure. It has now risen to 53 per cent. The pressure of demand for these services is so great that a Government returned twice on a platform of reducing taxation and restraining public expenditure now finds that public expenditure takes a greater proportion of gross domestic product than it did even a few years ago. That proportion has risen from just over 40·5 per cent. to 43·5 per cent. The National Health Service, about which we have heard so much in recent months, is supposed to have been subjected to savage cuts, but expenditure on it has almost doubled since 1979 and it has received a real increase in resources, allowing for inflation, of about 7 per cent. Yet we hear of rising expectations and the pressure for new services and so on.
All the nations of western Europe are concerned by that trend. We are all trying to do too many things with too little money. This country, unlike others, has based itself on the Beveridge principle that everybody with a child or who is sick or old is entitled to state benefit, not because they are in need but because they have children, are sick or old. In the long term that system has proved to be unfitted to meet the modern challenge.
It is not surprising that with that principle, which has motivated successive Governments for so long, we cannot cope adequately with some categories of people whom we know to be in real and desperate need. Nor is it any wonder that in this crazy patchwork quilt of allowances and benefits our tax system is increasingly put under an even greater strain than in other countries, so that financing our social objectives is increasingly at variance with the economic objective of rebuilding our economy in the face of the new technology that threatens our older industries.
I wish to discuss two areas of special concern because it is not enough just to describe the problem in general terms. First, there is the time bomb of pensions. I welcome

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the Under-Secretary of State to the Front Bench. I appreciate his presence and I hope that he will comment in detail later. The time bomb of pensions was referred to recently by my right hon. Friend the Prime Minister. The care of the elderly goes side by side with the question of pensions.
The pensions time bomb has a long fuse. Although the number of pensioners rose by 10 per cent. in the last decade their numbers between now and the end of the century should be more or less stable. It is as well to emphasise that. However, there will be a one third increase in the number of people over 75. It is this group which understandably makes very special demands, especially on the Health Service.
As my right hon. Friend the Secretary of State for Social Services has said, we should not become too excited about that financial burden because between now and the year 2000 the ratio of people of working age to pensioners will improve. In 1978 in England and Wales there were 2·76 workers to each pensioner. By 1991 there will be 2·85 workers to each pensioner and by 2001 just over three. Those figures assume that we maintain a high employment rate. It would be a bold soul today who would forecast a return to the high levels of employment in western Europe that we enjoyed in the 1950s and 1960s.
The long fuse of the time bomb begins to burn particularly furiously about 30 years later when the ratio of working people to the elderly will fall sharply and the full burden of the state earnings-related pension scheme begins to make its mark. I am advised that that will involve a rise of over 60 per cent. to meet the cost of pensions. On top of all that we shall have to consider how to finance the index-linked pension scheme. It is no wonder that we read of suggestions about how we can avoid that horrific burden.
I should like to make two brief suggestions to the Government. Current beneficiaries are supported by current contributors. That means that fewer and fewer will be paying higher and higher contributions to more and more beneficiaries. We have no investment fund. I do not know why we have not set one up. I do not pretend to be a pensions expert, but that seems to make sense. People's contributions could earn interest. Why do we not set one up or allow more people to contract out into the private sector? Better still, as it is a complicated matter, why cannot we hear more from the Government? Let them encourage a panel of experts to give us the range of options.
It is a complicated subject, but if we are to make sensible changes we must start explaining the changes so that the public can understand. We understood well enough in the second world war and there is no reason why we should not now. Surely there must come a time when we say that there will be no newly created inflation-proof pensions. We should set a date so that at least we keep faith with those who have such pensions or have been promised them. It is interesting to read in today's papers that British Airways is reported to have said that it did not wish to continue with inflation-proof pensions for its employees, but offered to buy them out.
The most serious problem facing us is the interaction of our tax and social security systems. There is nothing new in what I am saying, nor is there anything particularly new in what I am asking for. Something should be done
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about that interaction which has serious implications for us. The problem is well known to hon. Members. It is a bureaucratic nightmare. I am almost as sorry for those who have to administer the system as I am for those who seek to benefit from it.
Many millions of our citizens benefit from our social security system. I do not want to exaggerate the difficulties, but it is far from fair and it wastes manpower and money. It cannot be right when those on very low incomes pay income tax and are also regarded as poor enough to receive state benefits. Extra taxes and withdrawn benefits mean that some of our lowest-paid workers are made worse off when their wages rise.
I should like the Government to examine ways of integrating the tax system with the provision of benefits. In the early 1970s—how well I remember it—we had a dawn full of promise and the Conservative Chancellor of the Exchequer, then Mr. Anthony Barber, had the idea of introducing a tax credit scheme under which all income would be taxable and each person given a weekly tax credit to offset against his liability. What is wrong with the idea? Is it too costly? Some people tell me that it is. What do the Government think of the negative income tax scheme whereby a person is taxed if his income exceeds a certain threshold?
Certainly the difficulties of administering an integrated tax and benefit system looked formidable in the 1970s. But those difficulties should no longer apply when the Inland Revenue is computerised in 1988. Surely it is time to consider reform so that we can take advantage of that technology, otherwise what is the point of having it?
Hon. Members will recall that when the National Health Service was formed its costs were expected to plateau out as better health care reduced the incidence of illness and disease. As we know, it has not worked out that way. One reason for that has been the undreamt miracles of medical technology and advances in diagnostic procedures. There is also a far higher turnover of patients in our hospitals, which cannot be achieved without intensive and careful nursing care. We have saved more lives—often at great expense. Therefore, we have more elderly people with special medical needs.
The National Health Service, with all its faults, has responded remarkably well in many areas, and I know that it is much valued, but I want to sound a cautionary note in case we allow our pride in the NHS to run away with us. It is interesting to note that there is no civilised country in the western world which, having studied our system of health care—where care is free at the point of demand—has opted for our system. I do not think that any of us would pretend that we have a monopoly of care or compassion. Nor could anyone say that the standards of British medicine are higher than those in other countries. In some areas, they are extraordinarily good—as good as any in the world—but there are many areas in which they are not as good.
I have had experience of health care through my family. My wife is a physician who has worked with the National Health Service. Many of her colleagues on this side of the water and in the United States know that what I am saying is true.
Most countries have opted for a mixture of state and private insurance. They have not opted for our system of the Health Service being paid for almost exclusively out of taxes. As a consequence, they have found that a larger proportion of their wealth has been spent on health. It does

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not matter which party is in office, we are not at the top of the league. On the whole, Britain spends a lower proportion of its gross national product on its Health Service than other countries of similar size and wealth and comparable values. In too many areas the NHS is underfunded. There are too many old hospitals and too few consultants.
I want to make it easier to attract more funds to health care. That will not happen while we insist that there is a deep divide between the NHS and private health care. Private health care need not be incompatible with public regulation and control. The NHS is not, of itself, a guarantee of quality, as the Black report of 1980 revealed when it documented major and disturbing inequalities between the social classes.
The allocation of resources by a state health monopoly was heavily criticised by the Royal Commission of 1979, which reported that the level and pattern of expenditure was heavily influenced by the lobbying of pressure groups, by the interest groups of the health professions and by politicians who placed the NHS alongside other public expenditure commitments.
But with all those faults, I do not—I am sure no hon. Member would—seriously suggest that we would gain by switching exclusively to a private system based solely on competition and pricing. There must be a public service dimension.
I congratulate my right hon. Friend the Secretary of State for Social Services, who is on the Front Bench, on the steps that he has taken to encourage the privatisation of certain in-house hospital activities. I hope that in the months to come he will not only spell out the advantages of some of the steps that he has taken, but suggests that the Government have plans to go further so that there is a better mix of public and private finance.
The NHS has plenty to offer the private sector, especially its capital-intensive services such as radiography, but the private sector must be prepared to make full payment. Equally, the NHS can do as local authorities do and purchase from the private sector to cope with temporary blockages, waiting lists and so on. That sort of flexibility exists in the provision of services for the elderly by local authorities, but there is little flexibility in dealing with the problems of health. I hope that such flexibility will be encouraged. I am glad that that view is supported by the health services management centre.
I also want to see an end to the outdated view that it is morally wrong to have private beds in an NHS hospital. I know that the contention is that the growth of private beds and private insurance would convert the NHS into a two-tier system—one for the rich and one for the poor.
I think that most hon. Members recieve a copy of the quarterly review of the National Westminster Bank. In its latest edition, there was an article written jointly by a Dutchman and an Englishman about health care in their respective countries. The article was called "Economic Priorities and Social Expenditure: a Comparison of Dutch and British Health Service Policies." The Dutch have private insurance as well as state provision. The article stated:
"An attempt was made to establish whether such fears"—
about the two-tier system—
"are also prevalent in the Dutch system. This has not proved to be the case and a number of reasons were given. First, both private and public patients are treated in the same hospitals. It is now realised in the United Kingdom that the Labour
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government made a fundamental mistake in 1973 in removing private hospital beds from the NHS and, thereby, losing essential controls over the scope of private medicine.
Second, more than two-thirds of all privately — insured patients in the Netherlands take out insurance policies which cover them for treatment in Class III — the standard ward. Only about one-third are prepared to pay for Class II, corresponding to our semi-private rooms and very few opt for Class I. There is, therefore, no physical separation between private and public patients who are both treated in the same hospital and often in the same wards."
I do not know why people have the feeling of great divide that exists in Britain. It may have something to do with the perennial obsession that so many people in this country still have with what they call the class system, and it spills over into our attitude to health.
The argument that the private bed infringes on the concept of equality of treatment, regardless of means, is mistaken. I believe, as does the author of the Bow group pamphlet "Beveridge and the Bow Group Generation", that the underlying concept of the NHS is adequate health care. The author is right to remind us that if Beveridge could accept voluntary provision over and above a national minimum, and if politicians could accept inequality in pensions over and above a guaranteed minimum, why should not politicians also accept the same principle in health care?
Our present system denies a fuller role for the individual and denies to the NHS the increased revenues that flow from encouraging the individual to make additional provision through insurance.
The Chancellor of the Exchequer, writing in the Sunday Express in October last year, commented:
"If the Government continues to provide all the same services, functions and benefits as it does at present, State spending is likely to rise even higher in relation to the size of our economy."
He went on to say that the prospect might be for still higher taxes. Some people ask, "Why not? A small rise in taxation is a price worth paying to maintain services that we value," and I understand that. But, as we know, in recent years the total take by the state from the citizen has increased, and my worry is that if we go on doing that year after year tax rises will get worse.
An economic miracle may save us, but I do not see one round the corner for us or for western Europe. Therefore, it would be foolish to look to higher taxes to meet rising costs, with all the effects that that would have on the economy. Therefore, the policy—which I understand to be that of my right hon. Friend — of better value for money, a fairer and more efficient benefits system and a more flexible mix of public and private finance could point us in a different and, I believe, more hopeful direction.
The time has come for us to put an end to leaks from the Government. There is nothing particularly clever in people who are trusted by the Government leaking matters to newspapers, which assume on the whole an honourable posture in our society but believe that it is not meretricious to publish confidential documents. As someone who used to be a journalist of sorts, I understand why the temptation sometimes proves too great, because on the whole we in this country are too secretive. The Government could be more candid with us. They should pose the options, give the facts, encourage discussion and commision reports on critical issues.

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More than 40 years ago the Beveridge report helped to educate the nation about what was possible and it gave us a remarkable sense of purpose and unity. We can and must achieve that again.
10.2 am
Mr. David Winnick: I apologise at the outset for having a sore throat, but I will do my best.
The hon. Member for Wealden (Sir G. Johnson Smith) has dealt with an important matter and, as was to be expected, he spoke in a courteous and amiable manner. However, that must not deter us from recognising the dangers to the welfare services that will remain so long as the present Administration are in office. We must also recognise some of the dangers that would arise if some of the hon. Gentleman's proposals were put into effect.
About 18 months ago we had a leaked report—I listened with interest to the hon. Gentleman's remarks about leaked documents; no Government have done more leaking in that respect in recent years than Tory Administrations—from the Central Policy Review Staff, the Think Tank, which set out ways for radical cuts in public spending that would have amounted to dismantling large parts of the health and welfare services.
The Think Tank observed that estimated savings of £3 billion could be made if all social security payments, from pensions to supplementary benefits, no longer rose in line with inflation. If that were ever implemented, it would indeed be a crippling blow to those living on the most limited of incomes. The uproar caused by the Think Tank report was sufficient for the Government, at least for the time being, to dissociate themselves from the suggestions then made. However, does anyone seriously doubt that if the Cabinet thought that it could get away with what was suggested those proposals would not have been implemented? The answer, I think, is obvious. The Think Tank proposals were put aside for the time being because of the public uproar, and for no other reason.
We have had a warning from the Prime Minister. In an interview with the London correspondent of the New York Times in January of this year she said that Britain faced a time bomb over social security spending. She did not intend, she told the correspondent, to sit by and do nothing about the cost of pensions and the National Health Service. Of her own philosophy in such matters, the right hon. Lady, commenting on public spending on health and pensions, said:
"You are redistributing responsibility and you are taking quite a bit of a man's independence by taking away so much of his income."
Thus spoke the Prime Minister who, by her economic policies, has undermined the independence and dignity of so many by forcing them to live for months, indeed years, on the dole.
Opinion polls and surveys show that there remains an overwhelming majority of people in favour of the existing state health and welfare services. I would argue that that is the only barrier to the Prime Minister and her Cabinet colleagues doing their worst to the welfare and social services. That overwhelming opinion in Britain—not by any means all Labour—against dismantling the National Health Service and other basic welfare services which have been built up in the past 40 years has proved a formidable barrier which many Conservative Members believe can be overcome.
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I do not deny that the lack of growth in the economy and the return of mass unemployment have meant much reduced revenue to pay for the services that we are discussing today. After all, about £15 billion annually is spent on unemployment and related benefits, and we know from the appearance before the television cameras of the hon. Member for Derbyshire, West (Mr. Parris) that it is not a particularly pleasant experience to live in such circumstances. I watched the programme "World in Action" a few weeks ago in which the hon. Gentleman explained how he tried to live on the same amount of unemployment benefit as those unfortunate enough to be on the dole. As he was frank enough to admit at the end of the programme, it was not a pleasant experience by any means.
How much worse it must be for those who must endure that week in and week out, year in and year out, rather than for just a few days in front of the television cameras. They know—this is no reflection on the hon. Member for Derbyshire, West—that when the cameras stop running and the week is over they will not have a nice secure financial background, with an income, to which to return.
Mr. Peter Bottomley: Like the hon. Gentleman's.
Mr. Winnick: A little different from mine, I think. At least I do not try to preach to the unemployed. I do not say, as the hon. Member for Derbyshire, West argued even at the end of his experience, that perhaps benefits are too high in some cases.
I sometimes think that if Conservative Members had to experience — and not just in front of the television cameras — for quite a time and without a secure financial background what so many of our constituents must endure, they might be more reluctant to preach to the unemployed and suggest that people must accept mass unemployment.
Substantial sums are lost to the Exchequer because of the numbers out of work, those who are not paying tax or who obviously pay much less tax than they would if they were in employment. Some argue—I think that the hon. Member for Wealden would — that because of mass unemployment and so on, and because of the amount of money lost to the Exchequer as a result of that, we should accept that less should be allocated by the state to public spending and the welfare services. The Labour party believes, however, that that is an argument for not spending less on public spending and for reversing the policies of inflation and economic decline. It is an argument for economic growth and the ending of mass unemployment. One of the worst things that could happen would be for us to accept, as the hon. Gentleman suggested we should, that mass unemployment is here to stay and that it is inevitable. I hope that I am not being unfair to him when I say that he gave the impression that it would be a bold politician who would argue that unemployment would be very different in the years ahead. That is not my view.
Sir Geoffrey Johnson Smith: I think I said that it would be a bold person who could expect us in the near future to have the rates of employment that we enjoyed in the 1950s and 1960s.
Mr. Winnick: I accept that that is how the hon. Gentleman put it. However, I think that he is more or less

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accepting—if I am wrong, obviously I shall retract—that mass unemployment is here to stay for a long time. I know that that is the view of the majority of Conservative Members. But that is certainly not my view nor the view of my party. I do not believe that mass unemployment can be ended quickly and I have never argued along such lines. On the other hand, I am not willing to accept that it is right, proper or inevitable that well over 3 million people should be on the dole, some for years at a time. That form of mass unemployment, which existed in pre-war days, should not be accepted as natural or inevitable now.
In some respects we are engaged, I suppose, in a philosophical argument today. There is a basic difference between the two sides of the House. That difference goes even further because there is a difference between Labour Members and the rest of the House, including Liberal and SDP Members. We have never accepted that Tory politicians, especially those on the right of their party, have ever basically accepted the post-war social reforms. I well remember the discussions and debates about the attitude of the Conservative party to the National Health Service and to other reforms which took place about 30 years ago. I was not then a Member of the House of course.
The Labour party took the view that the Conservative party merely paid lip service to the reforms that were introduced and implemented by the post-war Labour Government and that basically it did not accept them, although it had to do so from an electoral point of view. It was for electoral reasons only that it paid lip service to the reforms and maintained them during the 1950s when it formed Governments. We now have a Government, however, who are well to the right of other Tory Governments of the post-war period. We have a Tory Cabinet which has no basic sympathy for the services and reforms that were introduced by the Attlee Government and who would like to replace many of the reforms by private provision. I am sure that we shall hear Conservative Members arguing that the private sector has a large role to play, which it should play, in the provision of services which for most of the post-war years it has been believed and accepted should be provided by the state. We on the Labour Benches continue to hold that belief.
There is a danger because so much of what was built up during the early post-war years could be put at risk. As I said earlier, at the end of the day it is only public opinion that will save these services from the axe. I take an entirely different view from that of the hon. Member for Wealden. My view, like that of my right hon. and hon. Friends—a Socialist view—is that the dignity and independence of the large majority is enhanced when there is large-scale state provision in health care, pensions and welfare facilities. These services should not just be restricted to the chronically sick, the poor and the aged. Britain is a far more civilised country to the extent that these services are provided through the taxpayer, are organised in the public sector and at the end of the day, unlike so many countries, especially the United States, are made available to anyone, irrespective of whether he has provided for himself by private insurance.
The one headache in Britain that we do not have is that which is caused by paying medical bills. That is a tremendous benefit that we should not underestimate in the least. It is a fallacy to believe that the services which have been provided help only the poorest in our society. There are so many on average and above-average incomes who,
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as a result of NHS and other provision that is organised and provided by the state, are helped and who avoid the worst pitfalls of what happens in the United States.
We have heard and read much about the position in the United States. Conservative Members argue that private sector medicine can help individuals and supplement state services. Those arguments must be set against what happens in the United States. There are reports—they seem not to be exaggerated—that a person who needs hospital treatment in America will not be admitted, or his relatives will not allow him to be admitted, unless he can first provide documentary evidence that the bills will be paid. Surely that is an illustration of commercial medicine. That is not the sort of thing that I should like to see happening in Britain. It was stated in a report in The Economist last year that,
"although the United States is spending over $300 billion a year on health care, there are 34 million Americans without health insurance for all or part of the year; 11 million or more of these are workers and their dependants who have lost their coverage because of unemployment. Members of a few unions, such as the United Auto Workers, retain their health insurance for up to a year after they are laid off, but most policies expire within a month of the last day at work."
If some of the suggestions that were made by the hon. Member for Wealden in so courteous a matter were put into effect, the experiences of many United States citizens would be shared by people in this country.
It seems that Conservative Members still believe in the policies that caused them to argue and vote against the introduction of the NHS. As the hon. Gentleman said, they believe that the state should exist to provide some services. I have never argued that that is not their view. In their opinion, the state should be around to provide services, but they think that those services should be basically for the poor, the chronically sick and the aged. They believe that the rest—I am not suggesting that the hon. Gentleman said this in so many words — should be provided and organised by the private sector. That, basically, is the idea of so many Conservative but they are reluctant to come out and say as much. It is a view which formed a great deal of what the Think Tank's leaked report outlined. The Prime Minister obviously believes that providing such services from the cradle to the grave undermines people's independence. That view, which has long been held by the Conservative party, is the greatest danger with its present majority when it comes to providing services and facilities for millions of our fellow citizens. It is necessary for the Labour party, not only in Parliament but outside, to do its utmost to defend and organise the service established since the war.
The Labour party made arrangements for an ambulance to travel around the country urging people to sign a petition to defend and save the National Health Service. One day last December I went on a similar excursion to parts of the west midlands. We made a point of going into those areas represented by Conservative Members where people showed no hesitation in signing a petition. They understood that the Government presented a danger to the National Health Service. They did not say to us, "This is just Labour party propaganda. What is the point?" There was an overwhelming wish to sign the petition.
Mr. Andrew Rowe: Was the increase in expenditure on the National Health Service that the Labour party was envisaging with its ambulance project larger in real terms than the increase that the service enjoyed since 1979?
Mr. Winnick: The hon. Gentleman must have the facts and figures. If not, he can soon look them up and see that there was a cutback. There was a threat to the National Health Service, and people understand that. The hon. Gentleman may not wish to do so, but many of his constituents, including those who voted for him, understand that threat as did those people who had no hesitation in signing the petition. They may not vote Labour and agree with us on a host of issues, but they understand that the Government have no sympathy for the National Health Service, that there is a danger to the NHS and that the Labour party is right in trying to defend the NHS and similar services from further cuts and reductions in service.
The hon. Member for Wealden has done a useful service in initiating this important debate. Our views remain the same as they have always been—that the provisions created by the Labour Government's majority in 1945 should stay. They are a tremendous asset to Britain. If, as the hon. Member for Wealden said, other countries have not followed suit, that is their misfortune.
10.23 am
Mr. Peter Hordern: After hearing the hon. Member for Walsall, North (Mr. Winnick) showing his delight in the document leaks and creating bogeys about the policies of my right hon. Friend the Secretary of State, I am forced to the reluctant conclusion that he is not quite the statesman that he looks. I warmly congratulate my hon. Friend the Member for Wealden (Sir G. Johnson Smith) on initiating the debate. I do not know when we last had a debate on this subject but it is important that there should be a proper debate on the imposition of taxes and the wide range of benefits available to us to ascertain whether a more sensible system could be created. The other day, I looked at what Lord Beveridge had said in the report that came out in 1942. He said: "social insurance and the allied services, as they exist today, are conducted by a complex of disconnected administrative organs, proceeding on different principles, doing invaluable service but at a cost in money and trouble and anomalous treatment of identical problems for which there is no justification."
He was going to put that system right. Forty years later, that seems to be a fair description of today's system of welfare services and benefits. There are 57 different types of allowances against income tax, 11 against income and corporation tax, four against the petroleum revenue tax, 10 against capital gains tax, three against development land tax, 12 against capital transfer tax and six against stamp duty. As those figures are for 1982–83, they do not include the allowances introduced a year ago by my right hon. and learned Friend the then Chancellor of the Exchequer for high income earners in the business development scheme. My hon. Friends are aware of the schemes I mean—the type that allows a rich man to buy a bookshop in Battersea. I have not counted all of them, but 27 main types of benefit are available from the Government. I do not believe that any of us would believe that that is what Lord Beveridge had in mind.
Sometimes the proliferation of benefits has grown by deliberate acts of Government policy. Hon. Members who have been in this House for some time will recollect the number of private Members' Bills introduced in the House and subsequently carried into legislation which provide extra benefit. No doubt, those Bills have done a great deal of good for the recipients but they have added to the
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complexity of the total range of benefits. Since the Beveridge report, there has never been a comprehensive review of the needs of the people and how those needs might best be met.
Today I was glad to read in the Financial Times that there is to be a spending and tax Green Paper. Perhaps my hon. Friend the Under-Secretary of State who will be replying will say whether that is the case. I hope that that is true. It will be a welcome development for the House and the country to see the future pattern of expenditure and taxes. The paper does not need to be a firm document of intent, but it will be valuable for the House and the country to have some notion of what lies ahead.
Because there are so many allowances and benefits, we should not proceed on the assumption that simplicity, through unification of taxes and benefits, is all that matters. I am aware that rough justice can be very rough to the recipients, but it is likely that a proliferation of benefits will not get through to those who need help most, and my hon. Friend the Member for Wealden introduced that point in his speech. The complexity of the variety of benefits and the difficulty in understanding them accounts for the loss in take-up of many of those benefits.
I believe that our objective must be the same as that of Lord Beveridge—an attack on want. He said:
"Want is one only of five giants … The others are Disease, Ignorance, Squalor and Idleness."
We have made some progress against those giants. There are twice as many doctors and nurses as when the NHS started. Whatever the criticisms of the hon. Member for Walsall, North of the NHS and of the Government, the fact remains, as my hon. Friend the Member for Mid-Kent (Mr. Rowe) said in intervention, that successive Governments have always seen to it that expenditure on the NHS exceeds the rate of increase of inflation. I wish that the NHS had been better administered, and the House knows that I have mentioned that subject on more than one occasion. It is extraordinary that, even now, the NHS and the DHSS, which runs it, do not know how many people are employed in the service or what they do. The administration of the Health Service has caused an unacceptable degree of waste. A great deal more must be done to get that right.
Mr. Tim Renton: Will my hon. Friend elaborate on that interesting comment? My hon. Friend the Minister might like to add something as well. My hon. Friend said that the House does not know how many people are employed in the National Health Service. I was extremely interested to hear him say that. I have heard figures ranging from 800,000 to 1·2 million. That is a fantastic discrepancy. It would be interesting to know whether we could establish a more precise figure.
Mr. Hordern: I believe the truth to be that the figure of 800,000 is what is called "full-time equivalents". Part-time workers are lumped together to form a full-time equivalent. The figure of 1·25 million which I normally give is the number of people working in the National Health Service. There should be an independent decision taken by the executive in all the health regions to decide how many people should be taken on.
It will not surprise my hon. Friend to learn that when the Public Accounts Committee was recently examining the number of people employed, it had no figures beyond last summer. I do not just mean no figures in the different branches; it had no figures at all for the number of people

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employed. I believe that the breakdown as to the categories of employment will not be published for a month or so, and will refer to figures as they existed at June last year. There will be a long gap before it can be established how many people are employed in the National Health Service. That is an illustration of the way in which the sere ice has been run for many years, and it shows an intolerable degree of waste and poor management.
There are twice as many teachers as there were when Beveridge reported. Many new towns have been built. The war on squalor, although not won has, I think on the whole, been well fought. I do not believe that we can claim to have been successful in the war against the giant of idleness. There are diametrically opposed views as to why we have not succeeded. I do not believe that it lies within the power of Governments to guarantee full employment. We are Dot self-contained. We depend upon trade. It is not possible to imagine that trade was not affected by the two sharp increases in the price of oil or that unemployment was not bound to follow.
Beveridge's view was plain. He thought that employment could be helped by allowing the new national insurance fund to fall into deficit. We have been down that road. we have found that deficit financing, or printing money, leads to inflation and that inflation leads to unemployment; not that the national insurance fund itself has ever been used for deficit financing in the way that Beveridge suggested. It has always been in surplus.
We must ask ourselves whether we need a separate national insurance fund. Does it function as an insurance fund? Anyone who studies it dispassionately will reach the conclusion that it does not. While it is not run on the "pay-as-you-go" principle the actuarial calculation made is not in the funding for long-term commitments to pensions or anything like that. It is as to how much money is likely to be needed for the following year plus a margin of 20 per cent. or so. It is not a difficult actuarial calculation. Indeed, it is not really an actuarial calculation at all.
Whatever people may feel about the national insurance scheme, they are not investing in an insurance scheme in any true sense of the word. Beveridge intended that national insurance should be compulsory, and, as he said, men should
"stand together with their fellows."
However, guarantee of benefit also had its obligations. Beveridge said:
"to seek and accept all reasonable opportunites of work, to co-operate in measures designed to save him from habituation to idleness".
There was always a strong moral undertone about Beveridge. He said that a man out of work for six months had to mend a training scheme. He thought that unemployment for more than 26 weeks, continuously, would be rare in normal times. We do not live in normal times. The lesson that we have learnt since Beveridge is that the trade cycle is much sharper than it used to be and that Government attempts to boost the economy in the way that he advocated have proved to be more harmful than helpful.
Another reason for the number of people who are, in Beveridge's terms, "out of work" is the great movements of population that have taken place out of industry and into the service sector over the past 20 years. That is a great movement which is continuing. I believe that 5 million people change their jobs each year. It is a necessary process if we are to align ourselves to the change in
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circumstances, and challenges, which world trade demands. No pejorative charge can be made against those who find themselves out of work at present. It is a necessary consequence of the swiftly changing advances in technology that people must change their jobs. The unemployment figures are only a snapshot in any day of that process.
When we think of the advances in technology, the competition for our older industries from the developing countries, and all the changes that are bound to come, we can no longer say that those who have to bear the brunt of change are, in some way, morally responsible. It is not just the insurance practice of national insurance that has broken down, but the moral foundation upon which it rests. The national insurance fund should not pretend to be what it is not, and we ought not allow it to be so.
It follows that if the national insurance fund were abolished, national benefits would be provided by general taxation. There would be no need for contributions to the national insurance fund by the employed or the employer. There would be no need for the 10,000 staff, and £96 million would be saved from administrative costs. Those would not be the only consequences if national insurance were abolished. With its abolition would go any incentive to insure against hardship, which millions of people have accepted as a personal obligation for themselves and their families.
Beveridge was right about one thing—the traditional urge for people to provide their own insurance. Most people in employment were covered through friendly societies long before the national insurance scheme was introduced. If, therefore, the present scale of benefit is to be maintained by progressive taxation rather than by flat-rate contributions, it follows that those on higher incomes will pay more tax than they now do. So far from there being a flat-rate contribution, with people buying a flat-rate benefit, a high rate of progressive tax would secure only a flat-rate benefit instead of an income-related benefit. It would also yield more revenue than is now required to meet the benefits that are now given.
It is desirable from every point of view that there should be a strong element of genuine insurance properly funded by those institutions capable of doing so—the insurance companies. I should like to propose, therefore, that the insurance premiums should be fully allowable against higher rates of tax, should there be any change of the kind that I have described.
I understand that a married man not liable to tax may pay as much as £4 a week in national insurance contributions at present. I should hope that if national insurance contributions were to be amalgamated with income tax, it might be possible to exempt from tax about the first £250 contributed towards an endowment or investment scheme.
My noble Friend, Lord Barber, whom my hon. Friend the Member for Wealden mentioned, has not always received high praise from the House. In my opinion, as a tax reformer, he has had no equal. Apart from the introduction of VAT in the place of purchase tax, and the abolition of surtax, which everyone said at the time was impossible, he introduced proposals for a tax credit scheme. I still feel that the scheme—the basis of which was that if credit that was available to everybody exceeded tax, the difference was paid—was the best scheme so far proposed. He thought that 90 per cent. of the adult population would be in the scheme. It has always seemed

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to me that that form of income support, catching automatically everybody in its scope, was the best that could be provided. The snag is that, for it to be attractive to everybody, it is bound to cost extra money. Therefore, the problem lies in how to find that money.
I have no particularly fresh ideas. I am certain that if I had, they would not be fresh to the Treasury, because it would have thought of them already. When I consider investment income received by pension funds, I question, and have done for a long time, whether it is right that it should be free of tax. It seems an anomaly that it should be exempt from tax. About £100 billion is now invested in the pension funds. Of that total, nearly one third—£30 billion — is invested in property schemes. The money would not be invested in those schemes if it were not thought by the pension funds that inflation would advance fast. In themselves, those schemes do not create wealth. Since the war we have seen a proliferation of office and shop developments all over the country. I think that everyone in the House will have seen some sort of property scheme carried out locally by an insurance company or a pension fund. The result has been that the insurance companies and pension funds have invested on low yields. That is not a wise thing to do. It is not economically desirable that so much money should be tied up in non-wealth-generating schemes.
There is no better alternative than to expect those who are providing future income to invest it in generating present wealth. For that reason I do not see why investment funds should be exempt from taxation. That would make those people think hard before they invested in long-term property schemes both here and abroad. They would be inclined to make investments that gave them a higher return. They might even invest more in Government stocks. At any rate, I see no reason in principle why they should be exempt from taxation. If that were so, an extra £2,250 million would be available each year.
Those who have acted in the name of Keynes have caused great damage since the war. However, I agree with one thing, which is that in the long run we are all dead. Investment companies and pension funds are inclined to think that life can proceed without them. They are looking 20, 30 and 40 years ahead. They invest not in productive goods and services or in the exchange of goods and services, but in unproductive office buildings that they buy and sell to each other.
I have another suggestion on the nationalized industries' pension funds, which were mentioned by my hon. Friend the Member for Wealden. As the House knows, they are index-linked. I have never seen the reason why they should be if they are funded schemes of, if they are to be indexed-linked, why they should be funded schemes at all. It is interesting to note that if nationalized industries' workers were treated in the same way as civil servants that would save the revenue £1,000 million every year. We have just seen an example of that in the National Freight Corporation, which was de nationalised, rightly, a year or so ago. Some £50 million was raised from the sale. However, £48 million had to be given back to pay off the deficit in the pension fund, only because it was index-linked. The same will happen with British Airways and, on a large scale, with British Telecommunications. My hon. Friend and the Government must address themselves
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to that point. In principle, can it be right, if an index-linked pension is to be provided—I am not quarrelling with that concept—that the taxpayers should have to pay just because it is a funded scheme rather than a "pay-as-you-go" scheme? I hope that that point will be taken into account.
There seems to be no substitute for the current generation of wealth by the free exchange of goods and services. The measures that I have suggested so far are related only to pension funds—I am sure that there are many others—and between them they would raise over £3,000 million a year. There are other curious anomalies. I am talking only in the context of a tax credit scheme. My test is a simple one. Would I ask an elderly widowed pensioner in Horsham to pay for this part of Government expenditure? Some curious anomalies arise from that test. Improvement grants and the process known as enveloping are the worst examples.
My hon. Friend will recognise that improvement grants go mostly to those who are buying their own houses through a mortgage, and are, therefore, already getting mortgage tax relief. Under enveloping in Birmingham, the council recognised that not enough people were receiving those grants. Therefore, the council asked the Department whether it could have a more active policy, and it agreed. The council went down whole streets in Birmingham, knocking on people's front doors and asking those who were buying their own homes whether they would like a 90 per cent. improvement grant for a new roof. They asked, "What is the catch?", and the council replied that there was none because the Government were paying.
I do not believe that my elderly widowed pensioner in Horsham should be paying for that activity. Such expenditure must be considered carefully in the context of providing an important social advance. There are too many bitty pieces of Government expenditure trying to please too many people and failing to do so because they are inadequate in every sense.
All those matters must be looked at in the context of getting a single tax and tax credit scheme that is fair to all and provides income support for those who need it most. I hope that the Treasury Green Paper on long-term public spending and tax will lead to a revival of interest in the tax credit scheme. If such a straightforward and easily intelligible scheme could be combined with a tax incentive to save for personal insurance, we could build a new society based on transparent equity and individual freedom that comes with true independence.
10.47 am
Mr. Ted Garrett: The hon. Member for Wealden (Sir G. Johnson Smith), who unfortunately has left the Chamber, introduced the debate with a personal knowledge based on the fact that his wife is a physician. Therefore, we have seen the warts in both the public and private sectors.
I detected in the hon. Gentleman's speech faint praise for the NHS and positive praise for the private sector. I object to the private sector because a scheme has not yet been devised whereby it pays its full contribution to costs incurred by the state for services provided by the NHS and used cheaply by the private sector. I refer to training of the medicals and paramedicals, research and other facets with which most of us are familiar. It is regrettable that the hon. Gentleman underplayed that factor.

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In his motion the hon. Gentleman uses the word "demography". It plays an important part in our assessment of the private sector. If one lives in the southern half of the country, or in the more affluent areas, it is clear that the private sector continues to flourish and expand, although not as rapidly as was originally envisaged. Conversely, in areas such as the north-east, one would have to look hard to find a private hospital. Indeed, as far as I am aware, there are only two major private hospitals in the whole of the north-east, and I understand that a further one is being contemplated. So it is probably the scale of affluence in regions that decides the level of private treatment.
Moreover, there are limits to the service that the private sector can provide and is providing, as I am sure no one would deny. The state side will always have to look after the people who cannot afford private medicine. Those are the people who are getting a fairly rotten deal today. I can do no setter than draw attention to the unholy row in the Northumbria ambulance service, which administers the services in Tyne and Wear and the county of Northumberland. Unfortunately, we have acquired a power-crazy bureaucrat in the form of the chief ambulance officer, who set up a scheme to reduce the ambulance service by one third. The ambulance service is already overstretched, and it is not uncommon for patients who are often frail and mentally disturbed to have to wait two or three hours after treatment for an ambulance and that is in addition to the time that they have to wait before they receive treatment. To reduce the service is crazy.
There have been public meetings throughout the area. Those meetings have been convened not by the Labour party, but by various interested parties. Protests have been made by chambers of commerce and members of the Conservative party, the Liberal party, the medical profession on and trade unions. They were unanimous in believing that the cuts should not be imposed.
Yesterday there was a meeting at which it was decided to modify the cuts. Today's Newcastle Journal says that the job losses are to be 79 instead of 116, and that the ambulances will not be reduced by the number that was announced. However, the ambulance cover is still a matter of great concern, and I urge people in the area to continue their protests and to continue to press for a better ambulance service, not a reduced one. If the right hon. and learned Member for Hexham (Mr. Rippon) were here this morning, I am sure that he would have expressed his concern about the vast areas of Northumberland—that does not include the industrial areas of Tyneside—that will be inadequately covered. I fear that something will happen that will discredit the people who are trying to force through the scheme.
I speak as a member of the committee that formed the first ambulance service when the National Health Service Act was implemented on 5 July 1948. I was also a member of a hospital management committee at that time. I well recall the enthusiasm and the desire of all concerned to make it a success and to make the dream a reality. Sadly —and I am sure that no hon. Member would disagree—the National Health Service has struck some serious problems. In my opinion, it is not the result of overmanning, but is basically due to a change of attitudes in our society. We are a less caring, less compassionate society. I remember when every hospital management committee had a good league of friends—people who gave tremendous voluntary service. There was the
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Women's Royal Voluntary Service, as well as other organisations, and they provided fringe amenities which are being cut in hospitals in many areas.
It is unfortunate that no one has mentioned preventive medicine. We must apply our minds to this aspect of medicine in our plans for the future of the Health Service. Here I believe that the medical profession could play its part by somewhat reducing the standards that it has set itself in ordinary medical examinations. For example, how many hon. Members have regular blood pressure tests? Such tests provide an important early diagnosis. It is not necessary for a medical man to carry out such tests. When people say that the Government are right to extend the area in which spectacles can be purchased, do they realise that the eyes tell the optician a lot of medical history, and that the optician refers the patient to the general practitioner if there is any cause for concern? That preventive factor will be reduced if we extend too widely the sale of spectacles without proper optical care. Preventive medicine can keep us all more healthy.
We are basically a more healthy nation than we were when I was a child before the war. We have come to accept better standards of health, and rightly so. We all realise now that there are minor illnesses which we need not get and which can be alleviated. That is why we hear the persistent grouse about lengthy waiting lists. We get in our postbags virtually every week stories of people who are waiting for not major surgery, but often minor surgery — an irritant, something that undermines normal physical fitness. We have not tackled that problem yet. Whether the private sector can meet that demand I do not know, but I do know that the National Health Service is not meeting the demand.
Therefore, to say that we are allocating additional resources is not quite correct. We are not allocating additional resources to meet ordinary demands. As a nation, we must apply ourselves to that problem, and we must reallocate our financial resources to meet the demand.
The hon. Member for Horsham (Mr. Hordern) rightly spent some time in telling us where resources can be made available. I am obliged to him for enlightening me on the matter. However, he did not say whether, if the proposals are accepted, the Government—of whatever political colour—will reallocate the financial resources that are available, or whether they will use them in other directions. It is up to us as elected Members to maintain pressure on the Government to make that change.
Hon. Members will have received, as I did, correspondence from general practitioners about the reorganisation of the deputising services. I am not a great advocate of the medical profession—I have a cynical view of it, based on my experience as a member of a management committee—because it is sometimes overprotective of its members. However, having studied its representations on the reorganisation of deputising services, I think that the profession has a case. The Minister should reconsider the matter to see whether we can secure a compromise.
I hope that my remarks will be considered by the Minister, and especially by the Minister for Health, who was in the Chamber earlier but who has now left. I hope that as the debate continues hon. Members will continue to discuss the future of the service to see how we can help the public to get a better Health Service based on sound financing.
11.1 am
Mr. Timothy Yeo: I am pleased that my hon. Friend the Member for Wealden (Sir G. Johnson Smith) has raised this matter, which is a central issue in Britain today. I congratulate my hon. Friend in his absence on the statesmanlike way in which he introduced the debate. He and my hon. Friend the Member for Horsham (Mr. Hordern) have said almost everything that I intended to say, so the House will be glad to know that my speech will be abbreviated. Their contemplative approach to the subject was correct.
Combative or party-political slanging matches are not conducive to solving the difficulties that we face. When the rhetoric is removed, there is general agreement about our aim, which is shared entirely by the Government and by the Conservative party. It is absurd to suggest, as did the hon. Member for Walsall, North (Mr. Winnick), that the Conservative party has no interest in ensuring better welfare provision. Our concern is solely to maintain that provision and to improve it for the elderly, the sick, the disabled, the very poor and the unemployed.
Mr. Winnick: The hon. Gentleman has confirmed what I said. I did not suggest that the aim of the Government or their supporters was to dismantle completely the National Health Service and the welfare services. I said that the Government believe that services should be provided for the poor, the chronically sick and the aged. I also said that, in the main, Conservative philosophy, as exemplified by the present Cabinet, is that the remainder of the population, especially those who receive the average income or more, should have their services provided by the private sector.
Mr. Yeo: I am grateful to the hon. Gentleman for confirming that the Government are concerned about the most under-privileged sections of the community.
Mr. Winnick: There is no profit in the poorest section.
Mr. Yeo: However, I entirely reject the suggestion that the Conservative party wishes to provide for the remainder of the population solely through private means. The Conservative party will not abandon its commitment to maintaining a general level of National Health Service and welfare provision to everyone who wants it, and it is ridiculous to pretend otherwise.
We must take into account two factors in planning future provisions. The first is the limitation on overall resources. As my hon. Friend the Member for Wealden said, during the next 10 or 20 years we are unlikely to achieve growth rates similar to those that we enjoyed in the 1950s and 1960s. Of course we all want more growth, and if we could achieve it by waving a magic wand, we would. I was amused by the hon. Member for Walsall, North, who said that it would be wonderful if we could achieve those rates of growth, which appear to be happening in the United States at present, but who continued, almost in the next breath, to criticise the provision of health and welfare services in America. Did it occur to him to make the connection between the free enterprise philosophy that prevails in the United States and the fact that it is achieving higher rates of growth?
The second factor that must be taken into account is that there are growing demands on the welfare services, especially, as my hon. Friend the Member for Wealden said, because of the increased numbers of elderly people.
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I shall not argue about how much of our national resources should be allocated to the provision of welfare benefits, although I welcome the publication of a Green Paper on long-term spending plans. We must recognise the fact that there are considerable restraints and competing demands on national resources. The Government must provide not only health services and welfare benefits, but housing, education, transport and defence. The increasing demand for those services and the fact that we have limited resources means that we should not raise expectations unrealistically. The idea that all services will always be protected against inflation is wholly wrong and destructive. To achieve improvements we must face the fact that some services will have to be cut.
However, I do not suggest that the overall allocation of resources to welfare services and benefits should be reduced. We must face reality, and the growing numbers of very old people and our proper desire to improve the conditions of the worst off may mean that we have to be more selective in spending available resources.
Selectivity has rather a bad name because of the old-fashioned and understandable anxiety about the way in which means tests used to be applied. However, selectivity is the only way to ensure that resources are given to those most in need. It is the only way in which we can achieve worthwhile improvements in standards. Sadly, I fear that many Opposition Members are still more anxious to fight yesterday's doctrinaire battles than to debate constructively how today's and tomorrow's needs can best be met.
When planning future provisions we must consider, first, the system to be used and the principles on which it should be based; and, secondly, how to manage that system most effectively. Present arrangements cannot be graced with the title of a system. As my hon. Friend the Member for Horsham said, it is full of the most absurd complexities. It is a piecemeal arrangement that has grown over the years, and its complexities are one reason why there is such a low take-up of benefits. Possible claimants do not understand how to claim benefits, and their confusion is shared by me, and perhaps by other hon. Members, when faced with individual cases at Saturday morning surgeries.
We have already had some discussion about the system of social security benefits, and I shall enlarge on the point, made by my hon. Friend the Member for Wealden, about the interaction of taxes and social security benefits. That now means that, according to the statistics provided by the Child Poverty Action Group and the Institute for Fiscal Studies, there are more households on low incomes that face effective marginal tax rates of 75 per cent. or more than there are households on high incomes. That is an absurdity that reached its height, as The Economist pointed out last October, with a household with an income of £110 a week which could, under certain circumstances, face an effective marginal rate of tax of 287 per cent.
In 1979 it was right for the Government to give priority to reducing the penal marginal rates of tax at the top end of the scale. That was an essential way to restore incentives, but just as it was right to deal with the top end of the scale then, now priority should be given to dealing with the absurdly high rates at the bottom of the scale. An immediate action would be the raising of child benefit in the forthcoming Budget by a larger amount than that suggested in the autumn statement. I hope that my right hon. Friend the Chancellor will resist temptations to concentrate the available resources on raising income tax

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thresholds. It is clearly proven that that is not the most efficient and sensible way to deal with the poverty trap—it is an expensive and inefficient way. That method is only a short-term palliative.
The answer to the problem has to be much more fundamental, as my hon. Friend the Member for Wealden pointed out. We need a unified tax system of tax and social security benefits. The Government have the parliamentary majority with which they could introduce such a system. I hope that we shall have a commitment on 13 March to a comprehensive overhaul of the tax and social security system.
I do not mind whether the new unified system is based on the tax credit scheme that was being examined in the early 1970s. It could be some other variant such as the basic income guarantee scheme or the negative income scheme. Whatever it is, it needs to be set in motion urgently. There would be some administrative savings from this. The abolition of the national insurance system, mentioned by my hon. Friend the Member for Horsham, would save some 10,000 jobs. It would save the absurdity of the 90 million weekly entries that are now required in book-keeping terms just to preserve that system, a system of which the original basis has been largely undermined.
We must recognise that any unified system of tax and social security benefits would have some cost, but many of the advantages of such a system would be for disabled people. I welcome some of the recent steps taken in disability benefits and particularly the abolition of the household duties test. The introduction of a severe disablement allowance could be the first step towards a comprehensive income and cost allowance for the disabled.
Social security provisions are just one part of the system. There are many other aspects, some of which are called into question from time to time. It is right for the Conservative party to reaffirm its long-term commitment to state provision of welfare benefits and services. By "provision", I mean state funding. The state finds the resources but can then choose the method of provision and we need to be more imaginative in choosing methods. It is right for us to examine the potential for privatisation in the NHS. That does not conflict with the underlying commitment to free and freely available services.
Privatisation does not have to take place through commercial organisations. It can equally well be effected by the use of voluntary organisations. For years, local authorities have been paying fees for children to go to special schools run by voluntary organisations. That form of privatisation has been accepted by local authorities. It can provide the model for other forms of privatisation that could draw on the expertise and specialised knowledge of the voluntary organisations.
Mr. Michael Meacher: Does the hon. Gentleman accept that, if privatisation proceeds and is taken further, one of the results will undoubtedly be what we have already seen, whether in the cleaning of classrooms in Merton or the testing of laundry cleaned in the Sunlight laundry in Cheltenham—that is, a lack of standard;? Would he also accept that privatisation leads not to greater efficiency but to savings through reducing what are already disgracefully low wages, down to even below £1 an hour? Do the hon. Gentleman and his party approve of such things?
Mr. Yeo: I am afraid that there are many instances within the NHS and other parts of the public sector of appalling standards. There is no monopoly of virtue in the public sector. It is easy enough to dig around the country to try to find isolated examples where standards of privatised work may not be satisfactory.
Mr. Jonathan Sayeed: Many people want to give their help voluntarily and should be able to do so. I agree with what my hon. Friend is saying, as such people would be able to assist on a voluntary basis without becoming part of the local authority machinery and being bound up with its rules and regulations.
Mr. Yeo: I agree that there are many voluntary organisations and volunteers who work for those organisations who would not find it easy to fit into a state monopoly of provision.
I shall finish dealing with the point raised by the hon. Member for Oldham, West (Mr. Meacher). If standards are thought to be falling, then it is up to the management and the authority concerned to ensure that that is put right. Just as they have a duty to put things right when the functions are being carried out by NHS employees, so they have a duty to maintain standards in the organisations to which contracting-out has taken place.
Mr. Richard Holt: Does my hon. Friend agree that, in the private sector, which is so often held up to ridicule by the Labour party, all hospital services are not condemned but envied?
Mr. Yeo: The standards in the private sector, which have attracted criticism in the House and elsewhere, are very high.
We must be concerned to see that where there are alternative methods of providing welfare services or health services, we are as imaginative as we can in choosing those options that offer the best value to the taxpayer. Encouraging such different methods is in the interest of efficiency.
This brings me on to the second part of the scheme concerned with the management of the system. Good management is absolutely essential if we are to extract the best from the limited available resources. Before coming to this place I worked in the commercial sector for a number of years, and, more recently, as the head of a large service charity. The point made by my hon. Friend the Member for Horsham about the NHS not being certain how many employees it had reminded me of the extraordinary position when I went to the Spastics Society. In 1980 it faced substantial problems, with an annual deficit of £800,000. As a result it had introduced stringent controls over the appointment of new staff. The organisation had 2,500 staff employed throughout the country, but the appointment of any additional member of staff had to be a decision taken at the highest level in London. As a result, there were a dozen people sitting around a table in London discussing whether an extra cleaner was needed in a residential centre in the Lake district, an issue of which they could have no possible knowledge. At the same time, the society did not know how many people it employed in total. That, in microcosm, parallels some of the problems in the NHS today.
My example shows the need to devolve decisions down to a local level so that unit heads can be accountable for

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their budgets. They can make the decisions, they are the people who know whether they need extra staff. At the same time, they must be held to account for their budget, and that must include medical staff as well. If we achieve that—and this is one of the issues that has been well aired after the publication of the Griffiths report—not only will management be functioning in the right place—at local level—but we shall probably find that we have far better control over the overall numbers of people employed because we know who is responsible for keeping a tally and for keeping within their budget figures.
The experience of moving from commerce into the voluntary sector made me acutely aware of the difficulties of introducing commercial attitudes and tight and efficient working practices into sectors where there is no commercial pressure. Management in areas such as the National Health Service is more difficult for that reason than it is in many sectors of business.
There are problems relating to criteria and measurement. In business, simple figures can be collected of sales, production and profit, but what methods of measurement are available in the NHS? We can measure the number of patients going through a hospital, but faster patient turnover will mean worse patient care. It is not easy to achieve sensible measurement in the NHS. For that reason, it is all the more important to strive for greater efficiency.
I am sure that people in this House and elsewhere who have looked at different areas of the NHS of which they have personal knowledge have become aware of the scope for savings if a common sense attitude is taken and if someone is allowed to be in charge and to say, "This is what we shall do to save some money."
Progress has been made but we have much further to go, and the Griffiths report points to several most welcome steps which could be taken. They include the release of assets which are tied up in functions which are not relevant to the NHS itself. Our concern with better management should be an obsession for everyone involved with the administration of the NHS if we are to sustain and improve the provision offered by the service.
There are many other issues on which I should like to touch, such as how resources should be allocated to different functions and to different regions. The subject of preventive medicine was rightly mentioned by the hon. Member for Wallsend (Mr. Garrett).
It is high time that in this House and elsewhere we escaped from the mindless assumption that increased expenditure on welfare services is always a good thing. Sometimes there appears to be a kind of virility contest in which even my right hon. Friend the Secretary of State takes part, saying how much more money we are spending in different areas. I do not believe that it can be taken for granted that that is desirable.
The way in which welfare services and benefits are delivered is important. We have to ensure that the system is humane. Recipients of services and benefits are just as often offended by the inhuman and discourteous treatment that they receive as they are by any possible inadequacy in the amount of benefit or service granted to them.
There is real danger that excessive provision of welfare services and benefits encourages a dependence on the state, which might well be welcome in Communist
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countries but which discourages the sort of individual initiative that we have been proud to promote in Britain for centuries.
One of the Government's most welcome initiatives is their policy for care in the community. It has never been suggested that this policy would be cheap or that it was introduced for reasons of cost, but we must recognise that care in the community involves care by the community. It is right and desirable from every point of view that the community should play a full part in the provision of welfare services.
I plead with the Government to ensure that as far as possible evey incentive is given to families and relatives caring for elderly and disabled people. I know that my hon. Friend the Under-Secretary of State is familiar with my views on the need to end discrimination against married women in that respect.
I welcome the debate and warmly congratulate my hon. Friend the Member for Wealden on the choice and phrasing of his motion.
11.23 am
Mr. Michael Meadowcroft: I am grateful to the hon. Member for Wealden (Sir G. Johnson Smith) for the terms of his motion and for introducing it. I apologise to him for not being able to be present at the begining of the debate, having been incarcerated in an underground tunnel for part of the time. I listened with interest to the remainder of his remarks. The hon. Gentleman's motion has given us an opportunity to develop a real debate on welfare services and benefits rather than simply to recite yet again established party policy. I do not agree entirely with the remarks about it not being a proper subject for ideology and philosophy, because there are real differences between the views of political movements on welfare services and benefits, and they are perfectly proper differences.
The subject has been bedevilled by an exaggeration of, and an overemphasis on, dogma, to the exclusion of ways and means of coping with the crisis that we face. In considering the motion, we have an opportunity to present views which may in a sense leave chinks in our armour that can be exploited later. I look forward to the contribution of the hon. Member for Oldham, West (Mr. Meacher) and hope that he will deal with the new situation that we face, rather than simply giving a recital of the old party policies.
The new situation has several components, the first of which is the failure of the state. Much as we would wish to see the state succeed and be able to cope with the myriad demands put upon it, experience of the way that the service is delivered suggests that the state does not provide, in its style and attitudes towards people, the kind of care that they should receive.
Secondly, there is the problem, already referred to, of low growth in the economy and the impossibility of spending our way out of the problem, while at the same time we have the need to reduce inequalities in society.
Thirdly, there is the huge problem of the massively increased expectations of people, which are not and cannot be matched in full by resources. We are all familiar with constituents who, with considerable anguish, mention their concern about an elderly parent or relative who has been waiting two years in pain for a hip replacement. We would all like to see such operations—for which there is an excellent prognosis—carried out without delay, but it is interesting to recall that not many years ago it was

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impossible to provide such treatment. Now, because it is possible, it is assumed that it should be immediately available to all who need it.
There is great difficulty in matching expectations against resources. This has led to our continuing to search for a system that is fair and just to people in need, not least because fairness and justice are such self-evident truths and values. The search for that system has often produced draconian ways of trying to achieve or enforce it, and has upset some of the linkages and sensitivities in society. I have come to the conclusion that to overemphasise the principle of fairness is counterproductive to some of the aims that we wish to achieve in society. Unfortunately, it has become a sort of holy grail that it is not possible to achieve.
There is debate concerning the development of considerable detail in the way that we administer social security and income support, as opposed to developing discretion in dealing with people who present themselves with obvious needs. Both the Left and the Right in politics have tended towards an increasingly detailed system in recent years, but for different reasons. On the Left, understandably, people wish the system to be challenge-able. If people are not getting their entitlements, details are needed so that they may challenge before a tribunal the lack of provision. Detail in that sense is beneficial to clients in need.
On the Right, there has been a tendency to go towards detail because it enables authorities to apply checks and balance; and to cut back on entitlements. The emphasis on the existence of so-called scroungers has tended towards the development of detail. There is a great mountain of books and schedules that endeavour to deal with every anomaly and every case that comes before the Department of Health and Social Security. I do not believe it is possible to devise a system which covers the multiplicity of human needs. Almost by definition, they are infinite. Every time one loophole is plugged, two or three more appear. Therefore, the continued search for a fair system tends to make DHSS officers who are trying to sort out the detailed provisions hostile to the needs of the individual.
The hon. Member for Horsham (Mr. Hordern) mentioned the multiplicity of benefits. They are not always understood by those behind the counter, let alone those in front of it. I was recently on a bus travelling along Whitehall, and two elderly gentlemen were discussing quite loudly the case of someone who was ill and who had become unemployed. One said "Of course, he's not on the dole now." The other said "Oh no, he's gone on to infertility benefit." Thus, there is a certain lack of understanding about the basics of the system.
I accept the point made earlier about the need to revise the idea of tax credits. If we are to move away from our obsession with numerous claimed means-tested benefits, we must work towards a tax credit system in which everybody is assessed centrally for their basic provision. No doubt the Minister will say that such a scheme would prove more expensive. However, if it is decided that that is the only way to resolve some of the problems of poverty and inequality in our society, we shall have to sell the increased cost of that system to those who have the good fortune to be in employment and who are therefore better off.
If we consider double taxation, we can see that fairness and coping with need may be mutually exclusive. Many of those who come to surgeries complain that, having
1146
provided for themselves by making superannuation and pension contributions, they find that they are taxed again on that provision when they later retire or are out of work, because their benefits are reduced. Again, that encourages the attitude that it is not worth providing for oneself. It leads to great anguish when people compare themselves with those who have not provided so prudently for themselves. Again, justice and fairness do not really enter into the equation.
Our whole system of income support is based not on fairness but on need, and the two things are therefore incompatible. Accordingly, we should look afresh at some of the things that have been found unpalatable in the past. I am convinced that it would be of great benefit to those who wish to be less dependent and to provide for themselves if there were a substantial lift in the disregards against benefit. In recent years moonlighting and the black economy have flourished not because people want to fiddle their taxes or avoid their proper responsibilities, but because they are in desperate need. People in desperate need will resort to that.
We all have double standards. Although hon. Members deplore tax avoidance, few hon. Members will refuse the offer of getting work done £100 more cheaply if they paid in cash. However, we all know what that means at the other end of the process. Therefore, we should accept the scale of the black economy and realise that, unless we lift the disregards against benefit so that people do not lose their social security payments when they are earning relatively small sums, we shall not do anything to solve the problem.
There is a precedent, because we already have the enterprise allowance scheme, which is primarily aimed at those who have capital through being made redundant. If they put £1,000 into the manufacture of some product, the state will guarantee them £40 a week for a year without any loss, no matter what they earn. The scheme has been successful and I commend the Government for it. Indeed, it has also proved valuable. However, if that is right and proper there is a precedent for not losing benefit if more than a certain amount is earned.
Our search for fairness may not be successful in the working world. Conservative Members are sometimes very facile in the way in which they deal with the problem of people wanting to work. Like the hon. Member for Suffolk, South (Mr. Yeo), I have experience of the voluntary sector, and I know that the vast majority of people desperately want to work. There is a queue outside the door even for the lowest paid jobs that are funded by the MSC. The vast majority are not idle or work-shy. However, the inflexibility of the way in which the MSC operates means that people are not encouraged to take on jobs or to make themselves independent.
It is somewhat farcical that unemployed people should be put off going on courses that might help their job prospects, their personal development, or their chances of manufacturing some product because they will lose so much of their benefits. They cannot have an education grant and the benefit at the same time. It would surely be better to say that a sum was available from the state for things that were clearly beneficial to the individual and the community. Similarly, there is no incentive for early retirement in the present system, because there is no encouragement for people to retire early by paying them at least a portion of their pension in advance. Consequently, they stay at work longer than they might

1147
otherwise do. I accept that it would be very expensive to lower the retirement age, but more flexibility would be beneficial. However, the Government have gone the opposite way, because the age for the job release scheme has gone up, although it would have been better to reduce it.
The current system is different from that envisaged by those who developed our welfare services, particularly in respect of fuel prices. The existing system cannot cope with fuel costs. We still try to contain them within social security payments, supplementary benefit and so on, although fuel prices are now much higher than was envisaged when the system was set up. In the past, pressure was put on local authorities to build all-electric properties. Now there are massive problems of insulation and of big rooms that are heated solely by electricity. Funnily enough, the Ronan Point disaster exacerbated the problem because the ensuing and quite proper decision not to have gas heating in multi-storey flats has led to huge fuel bills, with which ordinary people cannot conceivably cope. That is a new problem that must be considered on its own terms.
New thinking is also required on linkages. Many of the problems are considered in isolation. For example, we discuss the NHS as if we could cope with its financing and other problems on their own. We then discuss social security as a separate entity. The voluntary sector is left as a Cinderella, to be included in any sector as it suits the purposes of others. Even in terms of sheer finance, it is clear that there is a massive interrelation. For example, institutional care is greatly affected by attendance allowances and so on. It was known from Lloyd George's time that, when an elderly person had an income of his own through a pension, the family was less inclined to put him or her into care. Such psychological factors are important when considering the problem of expectations versus resources.
The story is similar with social services provision. Unless we consider the way in which the home help service can prevent heavy extra expenditure on placing the elderly in care, we cannot consider the costs or benefits involved, let alone the social benefit of people remaining independent in their own accommodation. Therefore, there is a considerable interrelation that has not been properly researched or considered, but which cannot be avoided when we consider such subjects.
We must endeavour, not only to provide the right service to the right people in the right way, but to come to terms with the fact that people have not responded in the way envisaged by Beveridge. The Beveridge principle was based on universal provision, free at the point of delivery. It was thought that people would respond to that by understanding what it meant and then making the appropriate demands. That has not happened. Most people have come to believe that if they leave the doctor's surgery without a piece of paper the doctor has not dealt with them properly. Prescribing and clinical freedom is out of hand. It is impossible to cope with that within the present structure.
Successive Governments have tried to vary and mix different aspects, which do not fit together. Surely it is illogical to suggest that the point at which to charge money is when a person is ill or needs glasses. We have not devised anything but the price mechanism to inhibit people
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from making excessive demands. Most Governments have faced the same problem since the war and have reacted in the same way.
We should consider ways in which people can become more involved. I hope that the hon. Member for Wealden had that in mind when he talked about the wider debate. People should realise that the general practitioner may not be the first line or port of call when someone has a need. More preventive medicine may be possible in the community, in the nursing services and community health centres, for instance.
It is difficult to accept the argument that private medicine has a role. I cannot see the logic in saying that because someone has more resources he should be able to purchase a better service. As the hon. Member for Wallsend (Mr. Garrett) said, the problem is that it is impossible to devise a way for the private sector to pay the full cost of a private service.
The hon. Member for Suffolk, South argued about the United States. It is as if a law of physics applies to social services and that every action leads to a reaction. Surely we do not want the divided society that the United States has.
We all suffer from selective vision at times. We pick out the pieces of a service that we want to encourage and diminish the services that we do not want. Encouraging private medicine will not assist the problem in the National Health Service. It will always be peripheral to that problem and be a point of tension. Encouraging private medicine will not persuade people to understand more about self-help. The women's health movement has made a tremendous contribution and is an example to men of what can be done with new insights and new attitudes.
Mr. Sayeed: Surely those who are paying for private medicine are also paying for the NHS service, which they are not using, and are therefore paying twice? They are paying towards those parts of private medicine that the hon. Member says are subsidised by the NHS.
Mr. Meadowcroft: I accept that because it is self-evident. However, if one suffers from diabetes one needs insulin. The need is the same whether one has money or not. A medical need is an absolute need and it is not dependent upon a financial power to buy in the market. I am unhappy that private medicine should be regarded as having a market equivalent to any other market. That attitude does not encourage an awareness of community needs and of the inter-dependence of people, which is at the heart of the solidarity and security that we need.
Instability is an immense problem, particularly in our cities. Unless we draw people together instead of dividing them we shall not cope with that problem. Instability in our streets could destroy much of what we are doing in other ways. We must find ways of enabling people to assist themselves. People do not want to be dependent on the state, but without the state many would have no services whatever.
Housing policies and their effects on social services and social security are linked. One of the disasters of the post-war years was the demolition of old property. People were content to live in such property because of the low expenditure involved. There was an evolutionary circle. People were able to enter the housing market and provide for themselves. In Yorkshire people said, "You look after the roof first". Even food and clothing came second to

1149
putting a roof over one's head. That attitude has been eroded by demolition. We have forced people on to the margin of living by taking away a sector of housing with which they could cope from their own resources. That has massively increased expenditure and dependence on social security, because rents have increased enormously in all areas where formerly people did not want subsidised rents or any support because they coped themselves.
The staying put scheme does not mean that elderly people are forced to make improvements, but it is a sensitive way of using volunteers to talk to people who have a small need. Perhaps they need a downstairs toilet or a stair lift to enable them to stay in their own home. By spending a little of capital resources one can save an enormous amount of revenue expenditure later. We have not picked that linkage up.
Pensions and what will happen to the bulge of elderly people in future pose a massive financial problem. I am not sure that earnings-related pensions will be beneficial. I suspect that they will produce inequalities in old age that will tend to create tension and bitterness rather than bring people together. Like my noble Friend Lord Banks, I think that we should consider the flat-rate pension again. He argues that to use the money accumulated in the state earnings-related scheme would enable us to raise the flat-rate pension now by 25 per cent. That would assist us with the problem in future.
All this is crucial to our discussion about finance and social care and how we bring the two together. It is not often realised that middle-aged and elderly people use the social services in a proportion of six to one. I am not sure that the resource allocation working party formula copes with that. I suspect that it does not.
The other aspect of demography that is not appreciated is the growth in the number of single parents and the effect that that has on the provision of services. The rate-capping proposals will harm the capacity of local authorities to provide services such as nurseries from which single parents can benefit because such services enable them to provide for themselves. That is another aspect of linkage.
We are experiencing more of a social crisis than an economic crisis. Our task is to provide a capacity for dignity within provision. That has a lot to do with style, the way that the DHSS operates, what its offices are like and how people are treated when they are there. Attention to detail and massive schedules does not assist.
The Public must have a different attitude. For instance, they should say, "The whole 'scrounger business is not really on". In every 12 streets probably one person is swinging; the lead. Everyone in the 12 streets will know that person and the problem becomes exaggerated. Compared with the number who are avoiding income tax the number involved in scrounging is tiny. The search for the scroungers harms our attitude to the vast majority who deserve and need help—help that they often do not take up.
I hope that the wider debate called for in the motion is developed. The issue should be debated more widely than in Parliament. We must convince the public that poverty must be tackled in new ways, especially with circumstances of low or nil growth. People must accept the challenge that faces them. In the end, if the price is that those privileged enough to have an income have to contribute; more, we must sell that idea to the public.
11.51 am
Mr. Tim Renton: I do not propose to follow the line taken by the hon. Member for Leeds, West (Mr. Meadowcroft) in his interesting and philosophical speech. I found it stimulating to listen to him. I wish to comment on the point made by the hon. Member for Wallsend (Mr. Garrett) that it was hard to find a private hospital in the north-east. He fairly drew a contrast between the affluence and lack of affluence of different regions.
It is no accident that I am the third Member of Parliament from Sussex to speak in the debate, following my hon. Friends the Members for Wealden (Sir G. Johnson Smith) and for Horsham (Mr. Hordern). The south-east faces the special problem of an increasing population. My part of Sussex has the second highest growth rate in the country, behind only Milton Keynes. We have, thank goodness, low unemployment—we are very lucky—but we also have low rating authorities. Traditionally, as good Conservative authorities, they have been low spenders. We have a combination of circumstances, and in many ways we are fortunate, but if this Government and the next Government intend to rely on the NHS alone, there is no way that we can meet the growing demand for health care from an increasing population. We must, therefore, look for solutions that are different from the solutions sought by the hon. Member for Wallsend.
Mid-Sussex is lucky because at long last, after 20 years of striving—10 of which I have spent campaigning as a Member of Parliament — my right hon. and learned Friend the Minister for Health has finally approved a new district general hospital in Haywards Heath. It will replace the splendid but aging hospital in Cuckfield. That hospital has provided a magnificent service over the years, but there is no room for expansion. I am especially pleased that my right hon. and learned Friend has agreed that the new hospital should be built on the "quick build" basis. That means that it will be more economical and, we hope, completed by 1988 rather than 1990. It will cost about £25 million. I am grateful to my right hon. and learned Friend for having listened to our representations, and I pay tribute to his understanding. I also pay tribute to the hard work of Martyn Long, the chairman of the Mid-Downs health authority. Although the new hospital on the St. Francis site will have room for expansion, it will have only 40 more beds than the existing hospital. With a growing population, that emphasises the problem to be faced in the future.
I thank my hon. Friend the Member for Wealdenmy—neighbour in Sussex—for raising this subject for debate. I congratulate him on his most interesting speech. I am grateful to have the opportunity to speak because, at the last general election, I was fortunate enough to inherit the town of East Grinstead from my hon. Friend. If anybody should now be called the hon. Member for East Grinstead, it should be me.
East Grinstead has the remarkable Queen Victoria hospital, which combines in the most unusual way the national eye bank from which corneal transfers are made and the superlative McIndoe wing, with its four modern operating theatres, largely funded out of private sources, and especially contributed to by American and Canadian forces. As many hon. Members know, the wing specialises in plastic surgery and the replacement of bone. Next door

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to those sophisticated facilities are ordinary general and geriatric wards. The sophisticated part of the hospital comes under the Tunbridge Wells health authority, and the ordinary wards under the Mid-Downs health authority. It is a splendid mix of general and specialised health care.
During my first lengthy visit to the hospital, a number of tributes were paid to my hon. Friend the Member for Wealden for the great attention that he paid to the hospital for many years. I hope that in the years to come I can be half as successful as he was.
Before moving to more general subjects, I declare an interest in privatisation. I am a director of a company called Advance Services, one of whose many services nationwide includes laundry. I do not mention that to get, as the BBC would say, any gratuitous advertising. I wish simply to tell hon. Members of our experience to date during the few months in which we, with many other companies, have been tendering for laundry contracts within the NHS.
Our experience is that the price at which the contracts are let is very much lower than we had originally anticipated. For those that we have won, we have tendered successfully at about 8p per piece. Such a price is necessary to win the tender. It is about 40 per cent. lower than the price for the work before tender. We have just won a tender at 8·75p per piece, whereas the previous outside price was 18p, and internal costing within the hospital was 15p per piece. On the other side of the coin, a contract was awarded to the in-house tenderer—the direct labour staff—at 7·76p per piece. That was by far the lowest tender. Yet the previous costing was about 15p per piece. That shows the magnitude of the savings available.
It was originally thought that about 10 per cent. could be saved by the privatisation of laundry contracts. Yet at this relatively early stage, it is more like 30 or 40 per cent. If that figure can be carried through the whole of the programme of privatisation, in laundry, catering and cleaning, where £900 million is spent a year, more than £300 million a year would be saved. That would build 10 new 300-bed hospitals such as that to be built in my constituency. Opposition Members who worry about privatisation should bear that in mind.
The hon. Member for Oldham, West (Mr. Meacher) referred to the standards in lower price contracts. Of course, that is a fair and crucial point. However, the contracts that we are awarded last for only one year. If we fall down on standards—which we have no intention of doing—we should soon be in difficulties. We have had to install specialist equipment to deal with the mix of garments. If we fall down on standards and lose the contract at the end of the year—as we should—we would have installed capital equipment for no lasting benefit.
Mr. Meadowcroft: Does the hon. Gentleman accept that the labour content in these contracts is inevitably and justifiably high and that savings will not necessarily accrue to the Exchequer if substantial numbers of people are thereby unemployed? The people in question are low paid — probably below the cost of keeping a person unemployed—so there must be a set-off against any assessment of saving that might be achieved.
Mr. Renton: I regret having given way to the hon. Gentleman because his intervention seems to be a continuation of the argument for encouraging inefficiency and extra spend in the NHS, when the whole of this debate is about how we are to obtain additional resources for the NHS. We all know, whatever our political persuasion, that there is a limit to the totality of resources and that the fundamental purpose of my hon. Friend the Member for Wealden in raising this issue is to emphasise that within this limit on resources are ever-increasing demands for health care.
It is a natural growth market. It is natural and normal that families should want better health care for the young and old and that they should regard that as more important perhaps than the holidays they take each year and the new motor cars they buy. The Government do not try to put limits on holidays, and we encourage the purchase of new motor cars. By concentrating exclusively on public free provision through the NHS, we are in danger of putting a severe limit on the natural growth market arising from the increased demand for health care.
How are we to meet this demand in the years to come? There was a 17·5 per cent. increase in real terms in the spend on the NHS in our first four years in office. Let us not pretend that that was a planned increase; it happened because of the growth in demand. If we add to that factor the increase in the number of over 80s as a percentage of the population — who, naturally, have a greater requirement for health care, at a greater cost—we see that we face a very difficult situation.
In answer to a parliamentary question of mine on 28 November, the Under-Secretary pointed out that the population over 80 years old per 100 of the population of working age had grown from 3·2 per cent. in 1960 to 4·9 per cent. last year and was expected to grow to 6·6 per cent. by the year 2000. Obviously the demand inbuilt into the aging profile of the population is very great indeed. If we add to that the new machinery, drugs, equipment and operations that are increasingly available, we have a third factor, all leading exponentially to increasing growth.
I was impressed when visiting the Hurstwood neurological centre in my constituency during the Christmas holidays by the new EMI brain scanner, which enables the centre, through diagnosis, to detect lesions in the brain long before was previously possible, and this leads to preventive treatment and operations that were not previously done. However, having got the brain scanner two years ago—largely with the help of local charities—the talk there is already about the new machine, working on nuclear magnetic resonance, which will be that much more efficient in diagnosis throughout the body, but it will cost nearly twice as much as the brain scanner.
All of that brings me to the fundamental point of which the hon. Member for Walsall, North (Mr. Winnick) spoke, the availability of resources. We must start to do the longterm thinking now, and that thinking must revolve round the point of how we marry the resources of the public sector to those available within the private sector. I was struck by an answer given by the Minister for Health to my hon. Friend the Member for Harrow, East (Mr. Dykes) on 14 November in which he pointed out that, by and large, not only was our expenditure on the NHS a lower percentage of GDP, at 5·4, than in any other western European country, bar Greece, but that our expenditure on the private sector as a percentage of GDP was also much lower than almost any other western European country.

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Indeed, at 0·5 per cent. of GDP in 1982, it was only about a quarter of the 1980 figure for France and Western Germany. That emphasises how far we are behind our neighbours on the Continent in bringing together the resources of the public and private sectors.
A suggestion often made is that we should make contributions to private medical insurance tax deductible, or at least allowable against the higher rates of tax, as my hon. Friend the Member for Horsham mentioned. There is an argument for that, but I fear that if we were to go exclusively along that route there would still be a great barrier between the private and public sectors. There would Ire a thought in the mind of the public that one was good, the private sector, and that the other, almost by definition, was bad—that one was efficient and the other was inefficient—and we must concentrate on breaking down that barrier.
I have a few suggestions of my own on how that might be done, and I appreciate that these suggestions might strike Labour Members as radical, perhaps even outrageous. However, unless we go along the lines of investigating long-term solutions at this stage we will get nowhere.
A consultant in my constituency suggested to me at Christmas that we should examine the thought that the NHS should publish a list of standard drugs and operations that were available effectively free throughout the NHS, and every year the list would be up-dated. But beyond that, the more exotic modern operations, such as organ transplants, and exotic new drugs should not be available free within the NHS. It would, therefore, be up to the individual and his family to take out insurance to deal with this other list, and that insurance—I repeat, for exotic organ transplants and so on—would be, when used, encashable at NHS or private hospitals. A development from that thought is that it might be necessary to have a general insurance scheme for hospitalisation, again encashable at either private or NHS hospitals.
The hon. Member for Walsall, North scoffed at the American system. I think sometimes that British television does not do anything to make us feel more friendly towards the American system.
Mr. Frank Dobson: Nor does American television.
Mr. Renton: I hope that the hon. Gentleman will listen to my argument because it is worth thinking about the way in which the Americans run their hospitals. Each hospital is a profit centre on its own basis. Each has to make its own decision; about new capital equipment — about its capital spend generally—and the administrator is like a managing director. The employees — nurses, porters, consultants and doctors — all share in the success, medically, and the profit of the hospital.
It is also worth remembering, as I was told the other day, that under that system there are modern brain scanners within a 50-mile radius of Chicago than in the whole of the United Kingdom, because they have been able to create the resources to invest in the most modern equipment.
Mr. Dobson rose—
Mr. Renton: With respect to the hon. Gentleman, I will not give way, because I am anxious to bring my remarks to a close.
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Leading on from the NHS, I come to the inter-related point to which the hon. Member for Leeds, West referred, the connection between health care and the pension scheme. It must be worth considering whether, with the aging profile of the population, everyone over 50 should be required to take out medical insurance—again, for use either in private hospitals or in the NHS—if they want free medical and hospital treatment in future years. This compulsory hospital insurance would continue after retirement for all those in receipt of earnings-related pensions. I suggest that only those on the basic state pension without any other source of income might be excluded from compulsory medical or hospital insurance.
That leads me to make a few remarks about our pension system. I was glad that my hon. Friend the Member for Horsham went into the matter in such detail. I realise what an expert he is on the subject. The growth and availability of pensions is to be greatly welcomed. It is a matter of satisfaction to us all that those who are retired and unable to increase their income by their own efforts are increasingly looked after by pension systems.
But a fact that we must also recognise is that the Crossman-Castle earnings-related pension scheme will be unlivable with in one or two generations' time. I do not believe that the state will be able to afford the scheme, especially against the profile of an aging population that I have briefly sketched. I am told that in real terms the net cost over the next generation will grow a hundredfold from £10 million now to £1 billion. It has been estimated that by the year 2030 it will require one third of average earnings to fund the required pensions. That means that our children, as they leave work, will be looking to their children to put up about 33⅓ per cent. of their incomes in national insurance contributions. In addition, they will have to pay tax at at least the standard rate.
I do not believe that that solution will be acceptable and we cannot continue to drift into it without debate. My hon. Friend the Member for Wealden was right to press for a debate on the long-term consequences. My right hon. Friend the Secretary of State for Social Services has started an inquiry into the important subject of pension portability. I agree that pensions should be portable, but I suggest that my right hon. Friend should develop a long-range inquiry into the funding of pensions in total, and that he should enlarge it further, or set up a separate inquiry, to cover the Health Service and how the nation will cope with the understandable but ever-increasing demands for health care.
I do not believe, by the way, that the answer lies in a special tax on drug companies. It is by their research that new drugs are produced. The essential purpose of new drugs is to keep us out of hospital. I am pleased that my right hon. Friend the Chancellor of the Exchequer announced yesterday that he will produce a Green Paper on tax and public spending trends up until 1990. I hope that my hon. Friend the Secretary of State will follow the Green Paper and the lines that I have sketched and will produce matching long-term forecasts on how matters are likely to develop in the NHS and state pensions if we stay on our present course; these forecasts should be accompanied by a debate on radical remedies.
Many of us are reluctant to talk about long-term consequences. As my hon. Friend the Member for Horsham said, Keynes used to ask whether the long run mattered because "in the long run we shall all be dead". At least we shall be out of office or out of Parliament and,

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therefore, not as concerned as we are now. However, this is the start of a new Parliament. We have a large majority and we must consider radical options, or even outrageous options, and debate them. If we do not do it in 1984, we never will.
12.15 pm
Mr. Andrew Rowe: It is far too easy to look backwards, especially for Members of this place who work, as we do, in one of the most ancient sites in the whole of Europe. It is especially easy for the British to look backwards because we once had a pre-eminent position in the world, which we no longer have. So it is that many of my hon. Friends look back through somewhat rose-tinted spectacles to a time when men stood on their own two feet and by working hard and risking everything built Utopia at home and an empire unparalleled abroad.
There were such men and what a great deal we owe them, but they built what they built at least in part on labour so cheap, hours so long and drains so bad that their sons and grandsons revolted. Alongside their triumphs they erected the great humanitarian institutions that have done so much to care for those who have been injured by the system and to ensure that future generations do not suffer similarly. I, like the vast majority of my right hon. and hon. Friends, have no truck with those ideologues who imagine that there should be no need for public provision of such services.
Nostalgia is not confined to the Government side of the House. The Opposition Benches are filled—at least they are filled when the subject under debate interests Labour Members—with hon. Members who are so mesmerised by the folklore of the 1930s, and so dazzled by the undoubted achievements of post-war Governments, that they seem incapable of understanding the extent to which their good intentions and ideologies, and those of their predecessors, have spun webs of bureaucratic paternalism of a density that has almost smothered an entire generation of British citizens.
I well remember a chief probation officer in Glasgow who told me of the shock with which he realised, when he became the highest paid social services officer in Scotland, that his salary rendered him someone who should, apart from could, buy his own house. For 50 years he had assumed that house purchase was for others. It is that nostalgia for state dependency, coupled with ruinous inflation that such policies demand, that invalidates so much of the criticsm and comment of Labour Members.
As my hon. Friend the Member for Wealden (Sir G. Johnson Smith) so ably contended, we must look forward to a new era with new ways of solving historic problems. The problems are complex, costly and combustible. The mix is composed of many ingredients. First, it includes millions of people who are unable to find the work that most of them so much desire. A recent study commissioned by the Department of Employment reveals that there has been an astonishingly small decline in the desire to work among people. That shows yet again the high personal standards that all our constituents maintain.
Secondly, there are 600,000 more pensioners than there were 10 years ago. Thirdly, there is the dismaying increase in the cost of the technology that is required by the NHS and other services. Fourthly, although this is perhaps more
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a symptom than a cause, it is an abusurdity by any definition of the system of support that 7 million are currently dependent on supplementary benefit.
These facts and many others have built a cage for Ministers with no obvious way out. How can more be found if no one is asked to receive less? In the short term, much can be done by increases in efficiency. I welcomed especially the speech of my hon. Friend the Member for Suffolk, South (Mr. Yeo), which revealed the tremendous efforts that are being made by health authorities, local government departments, voluntary organisations and many others to ensure that the value obtained from the money spent is sharply increased. It is clear that that alone will not be sufficient. In the longer term, we must hope that the changes in attitude from dependency to self determination, from the expectation of handouts to the belief that making prudent provision for oneself is a reasonable approach on the part of many citizens, will help to make much of the expected increase in demand. The principal anxieties exist, however, in the medium-term.
It is important that my position and that of, I suspect, many other Conservative Members, should be put as clearly as possible. Of course, I support the search for savings in a social security budget that accounts for 30 per cent. of total public expenditure, the search for efficiency in service delivery, and the proposition that there should be less disincentive for those who can work to go to work.
There is a huge difference between the importance of £1 to someone running a household on supplementary benefit and to someone with a bank account and credit facilities. That is why I did not vote in the housing benefits debate. There were too many cases in which arrears had been allowed to build up, through no fault of the recipient. It seemed clear that the full scale of the impact of the changes on some of our poorest citizens had not been fully appreciated.
Changes have now been proposed. Although I remain uneasy about their effect on some of the 10 per cent. of my constituents who will be affected, I am prepared to accept that my right hon. and hon. Friends, whose record in this field is unparalleled, have done as much as they can in the short term.
We should not think again in the short term. All of us know that we will again need to find savings next year and the year after. I hope that the Under-Secretary of State will assure the House that any changes next year will have been fully evaluated in the 12 months between now and then so that we understand the full impact on individuals throughout the system, because it is the individual who suffers when the average is misunderstood.
It is hard to sell the idea—I am sure that many hon. Members have already found this to be so in their constituencies—of making changes that are important to many and setting up an inquiry to find out the effect. It is hard for many Conservative Members to sell policies that appear to be looking for savings chiefly from the least well-off. Most people know that the present system needs a major overhaul. They, and we who represent them, will find it increasingly hard to argue that the principal impact should fall on those people on or below the average wage when so many of those earning well above the average wage enjoy a wide variety of subsidies from the same purse.
I hope that my hon. Friend the Under-Secretary of State will accept that many of us will continue to support the general policy, but will look critically at each proposal as

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it comes forward. The anxieties expressed about those proposals should not be dismissed as the unnecessary whimpering of a few remaining wets.
I wish to discuss briefly the longer-term future and raise with my hon. Friend the Under-Secretary of State one of a number of possible ways out of the cage. That is an essential ingredient in the great debate for which my hon. Friend the Member for Wealden called and must be carried out without fear of leaks or anxiety about rumour, because only those documents marked "Confidential" attract the interest of the press. If far more documents were publicly displayed and frequently discussed without fear or favour we would have a much better debate and a much better informed electorate.
There is an astonishing and all-pervading paradox: everywhere there are jobs crying out to be done, but nobody finds it worth while to do them; everywhere there are people working, but paying no national insurance contribution or tax. That activity is crucial to our current economy. As the hon. Member for Leeds, West (Mr. Meadowcroft) pointed out, many people rely on the nation Al insurance payment to recover some of the sense of dignity and involvement stripped from them by the personal disaster of their unemployment. The problem is not, as I suspect some people in Inland Revenue have been led to believe by their training, discovering how we eliminate that practice, but how we legitimate it. My hon. Friend and neighbour the Member for Maidstone (Mr. Wells) has a felicitous phrase for what I mean. He looks for "a system of honourable moonlighting." So we should.
How do we resolve the political difficulty that the people who most resent the moonlighter are those who live closest to the benefit level but pay their rates and taxes from their legitimately earned income? I do not know the answer, but I ask the Under-Secretary of State to consider whether there is scope for a device such as raising the threshold at which the national insurance contribution is demanded. If liability for national insurance were not incurred I at such a low level and were based on the amount paid out rather than the number of days worked, and if the tax threshold for the lowest paid were raised, there would be more people in work, higher family incomes and more consumer spending. We would recoup the costs of this device from the taxes on that consumer spending.
I welcome keenly the request for a wider debate on this subject. The enterprise allowance has breached the principle that would prevent us taking action. As the enterprise allowance allows people to take money from the benefit system while they raise themselves to stand on their own feet, we should be able to find some way of tempering that system to enable us to get out of this box.
12.27 pm
Mr. Michael Meacher: I congratulate the hon. Member for Wealden (Sir G. Johnson-Smith) on choosing this subject for debate. We all know him to be a fair-minded and generous man, and he introduced the debate in a fair-minded, considered and philosophical manner. In fact, he is so fair-minded that I wonder for how long he will survive in the modern Conservative party. I welcome the hon. Gentleman's remarks, which I thought were put fairly.
The debate gives us an opportunity to put into perspective and refute, which is what I want to do, some of the wilder scaremongering that has been kicked up deliberately from time to time to cast doubt on the future
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viability of the welfare state. The latest example, which the hon. Gentleman quoted, and to which other hon. Members have referred, was the Prime Minister's interview last month as reported in the New York Times, although it has been a recurrent theme under this Government.
I fully accept that this is a very proper issue for debate. I welcome the inquiry that the Government have set up into pensions, although I shall say a word about its composition and the manner in which it is being done. First, there was the notorious Think Tank report of a few years ago which was full of dark and terrible forebodings about the prohibitive level of income tax which would follow if public expenditure on social and welfare services was not reined back.
When The Economist leaked the contents of that report, it was revealed that those dire predictions were founded principally on the assumption of a persisting low growth of the British economy. That assumption may well prove valid as long as the Prime Minister's monetarist predilections prevail, but which, many hon. Members will agree, is not inevitable. The hon. Gentleman said that we may not necessarily return to the economic growth of the 1950s and 1960s. We all have different views about that. However, it is possible to achieve a faster rate of economic growth than that we have achieved in the past few years.
In May 1981, we had the Chancellor's grave warnings about the prohibitive projected cost to the national insurance fund of inflation proofing contracted-out pensions. Again, the assumption was the likelihood, even the inevitability, he seemed to take the view, of low economic growth.
On 22 January this year the Prime Minister is reported as having referred to a "social security time bomb". I have a copy of the New York Times article. She was referring to
"the prospect that, towards the end of the century, a large lump of new pension payments will come due. Employee contributions towards pensions have thus far been used to meet general government expenses, and unless some changes are made, she argued, there will not be enough money to foot the bill."
The Prime Minister gave no evidence to support those, I suggest, unsupportable allegations. Moreover, such scare tactics are all the more surprising when they had been put firmly in their place by the Secretary of State for Social Services speaking at the Financial Times conference only two months previously. He strongly rejected the view that the earnings-related state pension scheme might result in an unsupportable burden for the next generation.
As against the Prime Minister's usual megaphone demagogy, I found the Secretary of State's reasons, which he gave in detail, to be precise, clear and convincing. The. hon. Member for Wealden referred to the main one, which was that the total number of pensioners, after rising to a peak in 1985–86, will fall, gradually but steadily, over many years into the beginning of the next century. In addition, as the hon. Gentleman said — and this is crucial when considering the viability of these large payments — the number of people of working age to every pensioner will improve during the next 30 years. That is a major point that needs to be taken on board. The number of pensioners will rise markedly duing the second and third decades of the next century, but the relevant point is that the ratio of people of working age to pensioners will be only slightly less than it is now.

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So much for the Prime Minister's scare tactics—because that is what they are. I suggest that the so-called social security time bomb is more an artefact of her jaundiced imagination than a serious analysis of pension prospects. It is her usual stock in trade that we have seen so many times, and in other areas, to frighten the nation with the spectre that the welfare state cannot be afforded, to pave the way for the political assault on it which has always been her obsession.
The only justification for the Prime Minister's pessimism, to be fair to her, would be if the rate of unemployment were to increase steadily during the rest of this decade. It would create an unfavourable ratio between those of working age and those in receipt of retirement pension. I, therefore, challenge the Prime Minister to come clean and tell the country what are the assumptions that lie behind her Jeremiah prophesies of doom and gloom about the funding of the welfare state. If they are of continuing rising unemployment—if that is what lies at the back of her mind—that says a great deal more about the bankruptcy of her economic policies than about the lack of viability of the welfare state. I say that again: it says a great deal more about the failure of those economic policies and aspirations than about the inevitable, as she would like to say, lack of viability of the welfare state.
The Prime Minister's plaintiveness is no more credible when it is directed at the higher level of pensions, which are steadily increasing year by year under the state earnings-related pension scheme. That scheme, maturing in 1998 over a 20-year period, provides the best deal that pensioners have ever had. The Prime Minister and the Chancellor are now putting it firmly in their firing line because they say that it is unaffordable and a mounting burden on the working population. I shall examine the argument behind that thesis. That shibboleth has no more grounding in reality than the other fears that the Prime Minister has aroused.
I shall quote what I regard as a definitive source—the Government's own Social Security Advisory Committee report, paragraph 6.7:
"On the most costly of the Actuary's six central assumptions about the movement of earnings, earnings limits and benefits, the contribution to the Fund required to sustain the pension scheme would be 16·7 per cent. of earnings by 2005–06 provided that unemployment averages 6 per cent. for the 20 years from 1985 onwards. Even if one made the much more pessimistic assumption that unemployment would average 12 per cent. throughout the period and also took pessimistic views—for this purpose—about fertility and mortality, contributions on the Actuary's calculations would have risen only to a little over 20 per cent. in 2005–06."
For the sake of hon. Members, I shall put those figures, which are based almost on a worst-case analysis, in perspective. It cannot be said too strongly that the developing contribution burden is very much in line with what is already being paid to meet the costs of exceptionally high unemployment. At present employers and employees paying at the standard rate have been paying contributions of 17·6 per cent. to the national insurance fund, which is well within the 16 to 20 per cent. range that the Actuary foresees for pension contributions, on the most pessimistic assumptions. Therefore, where is the justification for the Prime Minister's panic?
Perhaps the Prime Minister has in mind the years in the second and third decades of the next century. We cannot ignore that. It is fair. At that time the earnings-related
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pension scheme will be fully mature and the number of pensioners will be reaching its peak. However, the Social Security Advisory Committee says that beyond 2005–06
"the contribution rate does become much higher, partly through adverse demographic changes and partly as the scheme moves gradually to full maturity; but at this distance of time we do not think there can be solid grounds for altering the scheme now for fear of all the worst outcomes occurring steadily for 40 years. Assuming that some improvement will take place in the economy"—
not an unreasonable assumption—
"and in present employment levels,"—
I do not think that we are stuck at 3 million unemployed for ever by a very long way—
"the Actuary's figures appear to us to show that at least for some years into the next century the contribution rates necessary for national insurance, including the pension scheme, are likely to be little greater than those being paid already."
Those are weighty words from an independent source, the Government's own advisory committee.
For those reasons, I believe that the nation would be well advised to treat the Prime Minister's ideological frenzy to a healthy degree of debunking. Perhaps the same fate should be reserved for the Secretary of State's ill-starred inquiry into portability, to which the hon. Member for Mid-Sussex (Mr. Renton) referred, and the long term costs of pensions, where such is the Government's regard for truth and balanced argument that they have seen fit to pack it with five Tory Ministers, two members of the life assurance business, and one Right-wing economist, but no other representative of other relevant interests. If ever there were a rigged jury, that must surely be it.
Like the salesman trying to sell secondhand stair-rods to the bungalow owner, the Secretary of State has yet to learn that zeal is not enough. One must have a product for sale that is generally wanted. I submit that what our pensioners want is Labour's state earnings-related pension scheme, because they know that it offers the best provision that they have ever had. It is perfectly soundly fundable. No one, least of all the Secretary of State, who has been very fair in his comments on the matter, has produced any evidence to suggest that it is not perfectly fundable, well into the next century.
I shall go further, bearing in mind the wider debate that the hon. Member for Wealden initiated. If there is a crisis in the financing of the welfare state, it is not because the level of benefits is too high, but because the tax base to support it has been persistently eroded to build up an alternative welfare state, largely concentrated on the rich. In fact, there are three welfare states in this country. Apart from the state provision for the community as a whole, there is fiscal welfare—the whole medley of tax reliefs; the hon. Member for Horsham waxed eloquent about the 27 or more different kinds of tax relief, an even wider range than I had realised — as well as occupational welfare, which is sometimes euphemistically referred to under the misnomer of "fringe benefits". Some fringe! Both the last two systems are worth far more to the well-off individuals who gain from them—and it is the well-off who gain most from them—than the state provision for the poor, who are always, in the mythology, supposed to be the main beneficiaries of welfare.
Fiscal welfare—which, because of the arrangement of our tax system, is largely focused on the rich and the well-off, and largely paid for by the poor, who course have to pay more tax to make up for the tax forgone by the Revenue — now operates on a huge scale. The latest Inland Revenue calculations that I have seen put a figure

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of £9 billion—that is £9,000 million—on the total of pension scheme reliefs—again, I am grateful to the hon. Member for Horsham, who described how these had escalated out of all proportion that could be justified— life assurance relief, mortgage interest tax relief, and investment income surcharge exemption.
Mr. Hordern: I hope that the hon. Gentleman has not misunderstood what I said. I was talking not about reliefs available to those who invest in pension schemes, but about the investment income of pension funds. That is a very different thing.
Mr. Meacher: I accept that. I was referring to a block of tax reliefs which is parallel and alongside those that he mentioned. I am referring to individual tax reliefs which, according to the figures that were quoted, I think, in the public expenditure White Paper 1983, come to £9 billion.
The effect of granting all of the income tax allowances, exemptions and reliefs that exist in Britain at present is that only 47 per cent.—less than half—of total household incomes are now liable to tax. In my opinion, that is an absurd result. Therefore, there can be no question of claiming that there is a crisis in paying for walfare benefits for the poor so long as this largesse to provide welfare for the better-off in the tax system continues to be poured out with this unfettered abundance. Instead of cutting benefits to the poor and means-testing benefits, which the hon. Member for Suffolk, South (Mr. Yeo) seemed to believe was inevitable and still accepted by the Conservative party — one in six of the population is now dependent on means-tested benefits — the very least that the Government could do would be to start cash-limiting tax relief for the rich.
Mr. Sayeed: I was about to ask the hon. Gentleman what alternative he proposes to means testing. I should be grateful if he would tell me what he means by cash-limiting.
Mr. Meacher: I refer the hon. Gentleman to a report of the Treasury and Civil Service Sub-committee, which I had the privilege to chair and to which the hon. Member for Eltham (Mr. Bottomley) gave such good evidence, entitled "The Structure of Personal Income Taxation and Income Support". On a strictly revenue-neutral basis, the Committee explored four major options for changing the tax structure and the interface with family benefits to produce a much lower rate of taxation for the low paid, a significant reduction in the poverty trap and a significant redistribution of the overall tax burden, with which the hon. Member for Bristol, East (Mr. Sayeed) might not agree. There are many permutations in making such a review of the system. The Committee has shown that it can be done on a strictly revenue-neutral basis, which means that there will be no extra cost to anyone as a result of those fundamental changes.
Occupational welfare is no less important. So-called fringe benefits, including life assurance, company cars, subsidised lunches, free medical insurance, share options, top hat pension schemes, low interest loans and subsidised housing represent yet another welfare system that is mainly concentrated on those with high incomes and that is paid for by company tax reliefs. The rest of the community must foot the bill by paying more tax to the Exchequer so that it can recoup its losses.
Let us hear no more about a crisis in welfare state funding. If all of those so-called fringe benefits were
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properly taxed, as they should be, there would be no need to hit at pensioners or low-income families by cutting £200 million from housing benefit. There would be no need to tax unemployment benefit or sickness benefit, or to abolish the earnings-related supplement to unemployment benefit, for which workers have paid. There would be no need for the other punitive measures against the poor to which the Government have resorted in the name of public expenditure savings because, they say, the nation cannot afford it. Not only can we all afford the modest welfare provision that exists, but we could afford a much better provision if we were not so unfairly burdened by the enormous cost of tax-subsidised welfare for the rich and the well-off. That must be a top priority of the next Labour Government.
12.48 pm
Mr. Peter Thurnham: My hon. Friend the Member for Wealden (Sir G. Johnson Smith) opened the debate with a non-contentious speech, and I deplore the way in which the hon. Member for Oldham, West (Mr. Meacher) chose to attack the Government, especially my right hon. Friend the Prime Minister, with smear tactics of alleged scaremongering and megaphone demagoguery. It is extraordinary that he should have based his allegations of megaphone demagoguery and ideological frenzy on a New York magazine.
This is my first speech in the House on a Friday. I am usually conscious of the pressure of parliamentary time, and I attempted to discover the cost of a parliamentary hour. My previous question to my right hon. Friend the Leader of the House was not fully answered, but it would appear that it costs more than £30,000 an hour to run the Chamber. I am not sure how much time I shall be allowed today, but I hope that I shall not be accused of inflating public expenditure if I endeavour to limit myself to no more than £10,000 worth.
I endorse the motion in the name of my hon. Friend the Member for Wealden and welcome the news that the Government are to publish a Green Paper. I start by mentioning the name of another former right hon. Member. We have heard much of Beveridge from both sides of the House, but I refer to a previous right hon. Member for Bromley, whose birthday it is today and who I am sure hon. Members of both sides of the House will be welcoming back to Westminster as a result of his being made an earl. I refer to Mr. Harold Macmillan, whose commitment to full employment was just as great as that of Beveridge and who was equally tempted by the arguments that fiscal stimulation could provide the growth so necessary to fund the welfare state.
As Beveridge pointed out in his writings, full employment would be threatened if there was an abuse of. monopoly labour market forces and, with the benefit of hindsight, we can see now that Macmillan's pursuit of full employment by fiscal measures lost sight of this danger, which was seen only too clearly by the Treasury team that resigned 26 years ago last month. As Prime Minister, Macmillan was fully committed to maintaining full employment. It is amazing to look back now and see how alarmed he was by an increase from as little as 1·6 per cent. to 2·2 per cent. in his first years as Prime Minister.
I am sure that hon. Members on both sides of the House would like to see a substantial reduction in unemployment, both to alleviate personal misery and to provide the basis for economic growth. It is the only way to fund the welfare

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benefits that we all want. I welcome the news that the Government are to publish a Green Paper showing long-term projections of spending and tax. I hope that this will show a range of various economic growth rates because it is clear that if we can achieve a substantial economic growth rate we shall have the funds that we need to pay for the welfare state.
I have seen from the latest report by the Institute for Fiscal Studies that 3 per cent. growth would provide an extra £20 billion by 1990 for either reduction in taxes or increase in welfare benefits, as compared with a 0·5 per cent. per annum growth rate. That would be more than sufficient to make up for declining North sea oil revenues and would provide for the long-term pensioners on the state's earnings-related pension scheme, about whom my hon. Friend the Member for Mid-Sussex (Mr. Renton) was so concerned.
If we look at the problems of the aged, we find that the tax system prevents the active aged helping to look after the invalid aged by penalising pensioners if they try to work too hard after they have reached pensionable age. This is one absurdity that I hope that we can remove from the picture.
The problem is how we can achieve this higher rate of economic growth. After 20 years of a policy of fiscal stimulation that has clearly failed to provide the real growth that we need I am pleased that a return to sound money policies is now bearing fruit in a 3 per cent. growth in output. I have also read that the structure of the present tax and benefit system is such that the Chancellor is limited to giving away with one hand what he is taking with the other. The trouble is that nowadays the same person is having to give to the Chancellor with one hand while hoping to get back with the other and it costs £16 billion to adminster the system.
As the Sunday Times said in a leader last month, it is
"no good tinkering with one welfare benefit at a time, the whole edifice needs scrapping in favour of a negative income tax which tops up the income of the truly needy, while minimising the disincentive to work."
I particularly welcome the call by my hon. Friend the Member for Wealden to plan now for a system of negative income tax to be introduced in 1988, when the Inland Revenue is fully computerised. I hope that the Inland Revenue staff will co-operate fully in bringing in this computerised system and that the Chancellor will take this opportunity to simplify the tax structure.
My hon. Friend the Member for Horsham (Mr. Hordern) listed over 130 different tax allowances on income but did not go on to mention some of the extraordinary allowances against various expenditure taxes, especially VAT, which gives rise to amazing anomalies such as the fact that chocolate biscuits are taxed at 15 per cent. but there is no tax on cream cakes. It is absurd that people should be encouraged to eat cream cakes instead of chocolate biscuits. A flat rate of 10 per cent. on all goods and services would affect the retail price index by less than 1 per cent. and would provide an additional £1·5 billion to fund tax credits or a negative tax system for the really needy.
The present system of exempting food only encourages the gluttononous and subsidises the fat at the expense of
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the thin. Those who cannot afford to eat as well as they should are penalised by the tax relief given to those who are eating more than they should.
The greatest gain from a simplified system of taxes and welfare benefits would be in reducing Government interference in the market economy. The provision of so many free services—which are not really free but are very expensive — distorts the market and causes problems, when we should be providing income credits for the really needy to spend in the best way that suits their individual needs. That is what we should be aiming for—or do we not trust the needy to decide for themselves how to spend their money?
I welcome my hon. Friend's motion and look forward to a Green Paper which shows the full range of different projections as the basis for future debates on this great and important subject.
12.56 pm
Mr. Jonathan Sayeed: The debate has, in the main, been good-humoured and, with one notable exception, no one has tried to score party political points.
One of the profound differences between the Conservative party and the Labour party—I accept that this is a gross over-simplification — concerns the interaction between the individual and the state. Conservatives believe that the state is there to serve the individual. Labour Members often seem to show that they believe that the individual is there to serve the state.
True compassion in action means accepting, as an individual, a group or a political party, short-term unpopularity in order to provide long-term benefit for others. It means rejecting policies that attempt to buy instant popularity, particularly when those policies are seen not to work. It takes courage to be unpopular. It takes courage to state views that do not provide instant solutions. That is the courage of conviction.
I as a Conservative — and the party I represent—deeply care what happens to the nation and its people. It is because we care that we are not prepared to squander the gains of over four years and the hard-won secure foundations for future growth.
We are not a party of fudged policies or uncosted promises. Those who read our manifesto and who have seen what has been done by us, rather than believing what has been said about us, can come to but one conclusion — that we are a party of straight talk, of honest promises, and of a belief in Britain, its people and its future. We are a positive party that trusts in the innate good sense of this nation and of its citizens and we show that by our wish to increase personal freedom.
It has been suggested that the Conservative party is interested in disbanding the NHS. Aimed as it is to frighten the least able to protect themselves, this is undoubtedly a most vicious and vile scaremongering tactic. It is totally untrue and the facts show it to be untrue.
We have increased the number of doctors, nurses and dentists by over 50,000. We make better use of the resources of the NHS, for there are more beds used and more patients treated than ever before. Capital expenditure is up by 15 per cent. Since we took office, expenditure on the NHS has doubled. Indeed, it has increased by more than 17 per cent. in real terms.
However, we have tried to use our resources more efficiently. We are slimming down the structure of administration. Two complete management tiers have

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been abolished and the number of management teams has been reduced by nearly 60. Performance indicators have been introduced which enable Health Service managers to compare their local performances with those of other health districts and with the country as a whole. They cover clinical activity, finance, manpower and estate management.
In February 1982, for the first time in the NHS, Ministers began annual reviews of the performances of regional health authorities, and parallel reviews are carried out by the regions of their district health authorities. In September 1983, Ministers asked health authorities to put out cleaning, catering and laundry services to competitive tender. Those services cost the NHS in England almost £900 million per year. If savings can be achieved by employing private contractors without reducing standards, more money can be released for direct patient care, and that is in the interests of the NHS. In July 1982, a system of manpower control was introduced, and in February 1983 my right hon. Friend the Secretary of State set up a team to review the effective use of manpower and related resources in the Health Service. Those changes are not wrong; all of them try to focus resources where they are needed and to take them away from areas in which they are used inefficiently.
I should like to cite one example of how resources can be better used, which comes from my constituency of Bristol, East. Some months ago a constituent who suffered severely from emphysema came to see me. On prescription, he used to obtain two cylinders of oxygen every week from the chemist, which cost the NHS about £20 per week, or more than £1,000 per year. However, he bought a small portable nebuliser which cost just over £100. He plugged it into the mains and it provides him with breathing assistance. Thus, there has been a considerable cost saving to the NHS and this saving can be utilised elsewhere.
I suggested the idea to my authority, and it is now starting a pilot scheme to see whether other emphysema sufferers can use the same facilities. That is just a small example, but it demonstrates that savings can be made. Small though each saving may be, in total they add up and are passed on to those in real need.
Pensioners have been led to believe that the Government are not interested in increasing pensions, yet we all know that that is not true. We recognise — particularly those who are younger—that the inheritance of this proud nation comes from pensioners. In the past five years prices have increased by 69 per cent. but pensions have outstripped prices and have increased by 74 per cent. This Government have always paid the Christmas bonus, unlike the Labour Government, who twice denied it to pensioners. There are many other areas involving, for example, the disabled, low-income earners, families on social security, in which we have shown by our action that we care and do not just give in to party polemics.
I remind hon. Members of the speech made by the Leader of the Opposition, the right hon. Member for Islwyn (Mr. Kinnock), on 27 October. I shall quote just a few of his words. He said:
"Calderdale district council authority wished to build a new laundry costing £2 million. It would save £18,000 per annum by not contracting out, but the Government insisted that it would be cheaper to contract the work out." — [Official Report, 27 October 1983; Vol. 47, c. 451.]
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One might say that those words are mild in themselves, but let us analyse them. The right hon. Gentleman castigated the Government for not making an investment of £2 million for a return of 0·9 per cent. The Government would do better to put the money in a building society, and to pay the extra £18,000. Then they would have £202,000 to use elsewhere. The alternative is economic semi-literacy.
I hope that I have shown in a few areas that this Government show by their actions that they care; that we as a party ensure that the nation lives within its means; that these are the actions of a responsible party and of a responsible Tory Government—of a party that trusts in people and trusts in this nation.
1.5 pm
The Under-Secretary of State for Health and Social Security (Mr. Tony Newton): I congratulate my hon. Friend the Member for Wealden (Sir G. Johnson Smith) on his success in the ballot which led to his initiating the debate today and on the subject that he chose. My hon. Friend is absent for the moment, but I am sure that he will be here soon.
I also congratulate my hon. Friend on the thoughtful and considered way that he introduced the debate and on the well-informed way in which he spoke about the difficult problems that we have discussed in the last two hours. He has done a genuine service to the House and to a much wider audience than has been able to listen to or take part in our proceedings in focusing attention in an orderly way on some of the longer term problems and considerations that we need to bear in mind when deciding on policies connected with the welfare state.
It is unfortunate that one or two of the speeches were not entirely in line with the spirit of some others. I do not want to dwell on that. I shall seek to respond to the debate in the spirit in which most of it has taken place. The attitude has been to ask questions rather than to pretend that we know all the answers. I shall certainly not stand at the Dispatch Box on behalf of the Government and pretend that we have immediate answers.
Mr. Garrett: On a point of order, Mr. Deputy Speaker. I draw your attention to a practice that has become prevalent in the House and seek your guidance. I refer to hon. Members participating in debates and forgetting the time-honoured courtesy of listening to other hon. Members, and above all of hearing the winding-up speeches from both sides.
Mr. Deputy Speaker (Mr. Ernest Armstrong): The hon. Gentleman refers to a convention in the House on which Mr. Speaker has commented. I am glad that the hon. Member has reminded us again.
Mr. Newton: I am grateful to the hon. Member for Wallsend (Mr. Garrett) for his courtesy, but I acquit hon. Members who are not in the Chamber at present from any intended discourtesy. I am certain that that is true of my hon. Friend the Member for Wealden and of others. I suspect that all that has happened is that I have caused a number of hon. Members, not merely to appear to be discourteous, which they did not intend, but to get indigestion through hastily bolting some modest repast or other refreshment in another part of the House. I shall certainly not feel too aggrieved if one or two hon. Members who have spoken do not want to stuff an entire sandwich in their mouths in one go.

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Perhaps the hon. Member for Wallsend thought that by raising a point of order we might gain a little time so that hon. Members could return to the Chamber. I welcome my breathless hon. Friend the Member for Wealden back to his seat. I also welcome back the equally breathless hon. Member for Oldham, West (Mr. Meacher), I hope not with indigestion. In the hon. Member's absence, and somewhat delphically, I was a little critical of the tone of his contribution to what was otherwise a remarkably calm and considered debate.
As I was saying before I was so courteously interrupted, while not pretending that I can put before the House all the answers to the questions that have been thrown up—or even, I fear, discuss all the points that have been raised—I must make one thing absolutely clear. I am not sure whether Opposition Members, including the hon. Member for Oldham, West and, perhaps even more, the hon. Member for Walsall, North (Mr. Winnick), actually believe the amount of rubbish that they talk about the views of myself and my right hon. and hon. Friends towards the welfare state.
The hon. Member for Walsall, North—and here he exceeded the sins of the hon. Member for Oldham, West — spoke as though the world had not moved an inch since about 1945—or even a number of years before. He is clearly living in a world that no longer exists anywhere other than in his own imagination. The commitment of myself and my right hon. and hon. Friends, including those who have not been able to come to the debate today, to the concept of the welfare state is clear and unequivocal. That is a matter not of rhetoric, but of record.
During the past few minutes some of my hon. Friends have touched on aspects of what has happened since the Government took office. It would be outwith the spirit of the debate to turn it into a recital of the Government's claims about what they have done during that time. However, no one who looks at the real increase in spending on the NHS, the increase in the number of patients being treated in hospitals, the increase in the number of courses for dental treatment, eye testing and the dispensing of glasses, the increase in the number of health visitors and nurses or at any other measure, could suggest that this Government are not committed to the welfare state.
That is true also of social services. Look at what we have done to promote the shift away from institutional care, to encourage and develop the process of joint finance and to develop the whole theme of care in the community. A number of points have been made about social security, but it beggars credibility for Opposition Members to suggest that a Government who have not only pledged to price-protect pensions and a number of other benefits, but have brought about a position in which, by last November, the retirement pension had risen almost 75 per cent., against an increase in the price index of less than 70 per cent., are hell-bent on demolishing the welfare state.
Who ended the invalidity trap? That was a long-running source of complaint from many thousands of long-term sick and disabled people, yet that position was created by previous Labour Governments as an offshoot of other social security policies. It was abolished by this Government in two stages last year.
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I could cite many other examples that I know hon. Members on both sides of the House would recognise. However, I hope that I have at least said enough to make my point quite clear. The Government's commitment to the concept of the welfare state is at least as great as that of the Opposition. The difference between us is that we realise that to show commitment to the welfare state is not simply to call for more spending and to demand more of the existing pattern of provision without regard to any other circumstances or requirements. It is certainly not enough to talk of the welfare state—and this, above all, is the criticism that I level at the hon. Member for Walsall, North — as though it was a static concept that had somehow been formed perfect and whole, shaped for all time, 30 or 40 years ago. It is not something that can be looked at as though it were settled for all time, with there being never any need for consideration or change relating to new and different circumstances. As with any institution or set of institutions, those which are prepared to face and adapt to change survive. Those which decline to do so crash into ruins.
What would worry me if some Opposition Members were in charge of the welfare state today is that it might soon be in the same state as the shipbuilding industry. That industry, having refused to face up to modern needs and problems and the need to change, has become more difficult to sustain. If we were to get into that sort of rigid approach to the welfare state, we should be doing no service for anybody.
As several hon. Members have pointed out, if we looked back to the days of the Beveridge report and the world in which that was formed—and most of what we take to be the key elements of the welfare state were shaped at that time—the transformation has been almost beyond belief. We note, for example, the rise in average living standards and in people's capacity to make purchases for themselves. We see the change in health standards. While we accept that a great deal needs to be done and that there are regional variations—and there are many arguments about how to tackle those problems — nevertheless, as the hon. Member for Wallsend rightly recognised, there has been a huge improvement in the general health standards of the population in the intervening period.
Although the subject of housing has not been raised in the debate — apart from some remarks by my hon. Friend the Member for Horsham (Mr. Hordern), which I do not intend to follow, about the improvement grants policy of the Department of the Environment—that too is highly relevant in this area, for we must remember the transformation in people's housing standards and, above all, the increase in home ownership that has taken place in that period. That factor must also be taken into account when looking at the future of the welfare state. It implies the need for some degree of willingness to look again at precisely the provision we make within the broad boundaries of the welfare state and to adjust priorities. As some needs, as seen by Beveridge, have diminished with the passage of time, so others—particularly the needs of carers within the community—are growing, and perhaps they need a larger share of provision so that they may become a larger part of the welfare state.
That is the first factor, the sheer pattern of social change that has occurred in health, housing and living standards. The second is demographic pressure — to which

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reference is made in the motion and which has been acknowledged in many speeches today—and the impact of that on pensions.
Mr. Winnick: I understand the Minister to be saying that the commitment of Conservative Administrations is the same as that of Labour Administrations in relation to the provision and retention of the National Health Service and large-scale public sector provision in this and other spheres. Leaving aside the remarks of the Prime Minister, as quoted by me earlier, in her interview with the New York Times—quoted also by my hon. Friend the Member for Oldham, West (Mr. Meacher) — is the Minister aware that a recent Bow group paper, which made extensive references to the views of the present Secretary of State for Foreign Affairs when he was an active member of the Bow group and who argued for privatisation, contained this comment:
"Those who are able to stand on their own feet and make provision for themselves should be allowed and encouraged to do so."
Is that the same as Labour's commitment to the NHS and state provision on a large scale?
Mr. Newton: I wonder whether the hon. Gentleman would be prepared to put the obverse of what he is asking from me and give a commitment that under a Labour Government nobody would be allowed to make provision for themselves if they wished to do so. A danger that Labour Members often fail to face is that the obverse of their criticism of the policy of choice—
Mr. Winnick: Answer my question.
Mr. Newton: —is an implication that the choices that people already make and wish to make themselves will be denied them.
Mr. Winnick: Answer my question.
Mr. Newton: The hon. Gentleman is waving a piece of paper at me. As it happens, I do not have to wave a piece of paper. I have something better, my right hon. Friend the Secretary of State for Social Services.
Mr. Winnick: That is the hon. Gentleman's misfortune.
Mr. Newton: I am not promising to wave my right hon. Friend at the hon. Gentleman. Instead of responding to the hon. Gentleman in words, it will be better to invite him to read the speech that my right hon. Friend delivered at the 1983 Conservative party conference, which I take as being a good deal more authoritative than a leaflet published by the Bow group, despite my own historic association with that body as its secretary some years ago. The point that the hon. Gentleman has just made—
Mr. Winnick: Is quite valid.
Mr. Newton: —adds nothing to the argument and confirms what I said a few minutes ago—I hope not in his abserce—that he is living in a world of his own imagination that disappeared many years ago.
Demographic pressures are the second major factor. It is important to recognise that they do not run all one way. The number of people over the age of 65 years has already risen by one third in the past 20 years and is expected now to be more or less stable until the year 2010. Within that total the number of people over 75 years, the very elderly,
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will increase rapidly during the 1980s, and is expected to rise by about 20 per cent. between 1981 and 1991 before tailing off in the 1990s.
The factors that may have a bearing on pensions are speculative, as it is necessary to look a long way ahead, and are rather different from those that bear on health and personal social services, a sector in which we face a substantial increase in the demands made by the very elderly in the near future. It is important that we should recognise that this pattern has its own implications in different parts of the welfare state and, therefore, needs to be analysed in rather more specific terms than has sometimes been done during the debate.
The third factor, the performance of the economy, is one that the hon. Member for Oldham, West emphasised strongly. Whatever the changes in living standards and demographic pressures and however the pattern of change or the pressures continue, the extent to which we shall be able to meet the needs that we all wish to meet, whatever our differences about how they should be met, will depend significantly on the extent to which the economy produces the goods, the resources that we need for meeting social needs. That introduces a much greater element of uncertainty than the mere consideration of demographic pressures, and that is a fact that is not sufficiently recognised. We can make reasonably secure forecasts—they are virtually certain—of the number of the very elderly that will be with us in the next decade. We can make fairly secure forecasts of the number of people over pension age but not necessarily of the working population because that will depend to some extent on the birth rate when we progress beyond the beginning of the next century.
The factor which is much more difficult to predict—it is just as important in assessing the overall impact—is the performance of the economy. That is something that cannot be forecast with the same precision. However, the success of our welfare policies—here there is unanimity between myself and the hon. Member for Oldham, West—is linked crucially to the other factors to which I have referred. That is why we have placed so much emphasis on the importance of economic policy over the past four or five years.
The hon. Member for Oldham, West has said that he is not willing to accept economic stagnation—at any rate, he implied that that was his position. One of the reasons that make the Government more optimistic than some is that there are clear signs of recovery within the economy as a result of the policies that we have pursued. We accept that an important part of any policy is the desire to secure, preserve and extend the effectiveness of the welfare state.
I do not intend to spend much time on one matter on which the hon. Member for Oldham, West spent a great deal of time—the remarks that the Prime Minister was reported to have made in the New York Times. Against his over-heated analysis and extravagant language about the Prime Minister, we should examine the interview. From it we gain the basic posture of the Prime Minister, my right hon. Friend the Secretary of State and the Government. The Prime Minister referred to
"ways of bringing the facts, the reasonable forecast, before the public so we can take decisions in time."
She went on to talk about discussing all those aspects openly. That is the spirit in which the Prime Minister and

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the Government are approaching these subjects, and that is exactly the spirit in which my hon. Friend the Member for Wealden brought these matters before the House.
There are many uncertainties in this matter. Some points are clear. The Government wish to emphasise several points in their approach to the welfare state. First—this point echoes the speeches of almost all my hon. Friends — planning must take account of the likely availability of resources. I appreciate that that is another way of saying what I have just said about the economy. I point out especially to the hon. Member for Walsall, North that promises made without regard to the likely availability of resources are not worth making. The hon. Gentleman, despite his obvious hang-ups about me and my right hon. and hon. Friends, should reflect on the fact that since 1945 probably the largest single shock to the welfare state was admininstered in 1976 when the IMF was brought in under a Labour Government, primarily because that Government had behaved towards the welfare state as though money grew on trees. Far from doing anyone a service, the Labour Government brought about a crunch that probably did more damage to health and hospital services and the development of social welfare than any considered policy introduced since the war by this or any other Government. We, at least, will not forget that in our approach to the planning of the welfare state.
Secondly — I pick up the point made by my hon. Friend the Member for Mid-Kent (Mr. Rowe) and which other hon. Members may have had in mind—a crucial aim of economic policy is to keep inflation under control, not only because raging inflation makes planning in health and personal social services difficult but—I feel strongly about this point which often is not fully recognised—inflation running at about 2 per cent. a month, as we saw five or six years ago, means that no system of indexation known to man will prevent the poor from suffering badly. The rise in inflation, day in day out, week in week out, will not enable those people to be fully protected by annual or even more frequent upratings. Anyone who believes that our welfare problems can be solved by a rip-roaring economic boom, accompanied by raging inflation, has not addressed himself to the real problems in social services and those dependent on social security.
Thirdly, I refer to the level of resources. Our aim is to maximise resources. Whatever the level of resources we can make available, there will never be as much as everyone would like. People will always want to meet new needs, do other things and have other increases. Whatever the prospects, it is essential that we make the best use of all the resources that we can make available. That is why my right hon. Friend the Secretary of State has rightly placed so much emphasis on efficiency and management in the Health Service and in local authority personal social services.
My fourth point is closely related to my third. It is that in seeking to meet needs we must use all the resources that can be brought to bear, and not solely those that happen to be provided at the time by the public sector. We must ensure that the capacity of the private sector to contribute is used, and not least — this echoes the speeches of several of my hon. Friends, particularly my hon. Friends the Members for Suffolk, South (Mr. Yeo) and for Mid-Kent—the resources that the voluntary sector can bring, for example, to community care.
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It is not a question of seeking to privatise the statutory sector or to nationalise the voluntary sector. It is a question of developing a partnership between all who have a part to play and who can contribute resources to the resolution of our welfare problems. That is the basis upon which we shall continue to proceed.
Fifthly, what is clear—here, I am afraid, I am less clear myself — is the need for the simplification, reflected in the debate, in social security by some form of integration of the tax and benefit systems, and, in the minds of several of my hon. Friends, the introduction of a tax credit system along the lines adumbrated by Lord Barber in the early 1970s. Many of my hon. Friends put forward the general aim, with which we would probably all readily agree — without perhaps going as far as I should like in facing some of the problems—of making progress in that direction soon. Most acknowledged that any such scheme or development in the future which would not entail heavy losses for some would be expensive to introduce.
My hon. Friend the Member for Horsham, to his considerable credit, faced up to that problem by suggesting that we might find £3 billion by altering the basis upon which pension fund investment income is taxed. Plainly, that is a matter for my right hon. Friend the Chancellor of the Exchequer and is a track down which I would not wish to go. A proposition that we should introduce a tax credit scheme financed in that way would not be wholly uncontroversial on either side of the House. To those who say, "The Government have a majority of 140. You can do what you like", I would say that we need to be more careful in formulating our policies. However, I shall ensure that my right hon. Friend is made aware of what my hon. Friend said.
Of course we would like to see some simplification, but I believe that for the time being it will, in practice, be easier to find simplification by looking at parts of the system rather than by pretending that, against the current background, we can, in one jump, go from where" we are to where we might like to be. That is a more pragmatic approach, but I shall take account of what has been said.
Unfortunately, my hon. Friend the Member for Suffolk, South has had to go. I rather differ from him in the low importance he apparently attached to the raising of tax thresholds. Those who are worried about the problems of the poverty trap and many other social problems, and about the meshing of the tax and social security system, must recognise that the raising of tax thresholds, whose present level is one of the contributory factors in people finding themselves paying tax and receiving housing and other social security benefits, is one of the least satisfactory features of our system. I know that my right hon. Friend the Secretary of State for Social Services would feel strongly — again, I would agree with him, even if I were not paid to—that one of the reasons why it is important that we in the DHSS should not run away from attempting to make at least some contribution to the curtailment of public expenditure—because of the size of our budget — is that, unless we contribute, the chances of raising tax thresholds, which is the most practical way of tackling many of the problems that have surfaced in speech after speech, will be much reduced.
If those are the factors that we have in mind, my right hon. Friend the Secretary of State, my hon. Friends and myself can show that over the past few years the Government, without pretending that they have all the

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answers to all the problems or know exactly what the welfare state will be like in 2000 or 2010, have steadily been tackling and seeking to tackle the problems of the welfare state and to develop it in a way that will benefit all our citizens on the basis of the considerations that I have described.
I have referred on many occasions to the need for making sure that we use our resources well, whatever they are. The work that my right hon. Friend has done in establishing and now considering the outcome of the Griffiths inquiry into the NHS is a tremendous credit to him. It suggests that we should impose new management techniques on the NHS, take a more systematic approach to manpower planning, develop performance indicators, introduce regular reviews of what is going on in the health authorities and—I know that this is more controversial — open up hospital catering, cleaning and laundry services to tender so that the best value can be obtained at the least possible cost. All those things are part and parcel of making sure that we get the best value from our resources in developing the services that my hon. Friends and I are determined to develop.
Mr. Meacher: Before the hon. Gentleman waxes too eloquent about the best use of resources, how does he justify the fact that pension contribution relief, life assurance relief, mortgage interest tax relief and investment income surcharge exemption now take £9 billion out of the Exchequer and go into the pockets of the well off, in most cases the rich, when the other side of the coin is, as we shall see next week, a cutback of £200 million from the pockets of pensioners and low-income families? Is not that the exact opposite of what the hon. Gentleman is saying?
Mr. Newton: I am reminded by my right hon. Friend the Secretary of State that we are talking about £200 million in relation to a total of £37,000 million spent by the Department of Health and Social Security.
The hon. Gentleman is walking straight into the fallacy that has undermined the welfare policies of one Labour Government after another for the past 20 to 30 years. He believes that by attacking investors, the sources of saving and investment and thus the sources of growth in the economy he can do something that is good for the welfare state. The truth is that the taxation policies, not least the policies for saving, investment and capital accummulation, pursued by successive Labour Governments are one of the reasons why there is now anxiety about whether the economy can provide the welfare state that all of us want. I put it no more strongly than that. Playing those things off against each other in the way that the hon. Gentleman seeks to do will get none of us anywhere.
Mr. Winnick: What justification can there be for people earning £50,000, £60,000 or more paying less in taxes to the tune of about £160 a week, which goes into their pockets, while under even the revised housing benefit 1 million pensioners on small incomes will have a reduction in their rent and rate rebates?
Mr. Newton: The hon. Gentleman is making in another way the point that his hon. Friend the Member for Oldham, West sought to make. Of course I cannot say that any individual in that position is making a major economic contribution. The steady development over the years of tax policies that made it more likely that people would go to
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the United States or Germany and build up their businesses there, or go on the golf course instead of building up their businesses, is one of the reasons why the economy has not been able to meet all the bills for social security benefits and the development of the NHS that we would like it to meet. What is more, one can see in the results that are beginning to come from the British economy that people and the economy as a whole are responding to the changes of policy and of direction that have taken place in the past four or five years.
Mr. Winnick: Does the Minister really believe that?
Mr. Newton: I hope the hon. Member for Walsall, North knows me well enough to realise that I am not in the habit of uttering statements that I believe have no validity.
The most striking feature about what has happened during the past year is how many of the forecasts made from pure doctrinare beliefs, such as those of the hon. Member for Walsall, North, are steadily being proved by the pattern of events to be the nonsense that they are. The fact that the hon. Gentleman finds if impossible to believe that one can generate a healthier economy by the policies that we have pursued does not fit the facts as they now are. It is his problem, not mine, and I am content to leave him with the problem in the rather antique world that he inhabits.
There has been a good deal of talk in this debate about leaks and open discussion. My hon. Friend the Member for Mid-Kent expressed what I think is the optimistic view that if we only published everything there would be no problem. I have a slightly warped view on the matter, having put out a document with a written answer to the House of Commons, some time in November, about the adjudication of mobility and attendance allowance. Indeed, I sent a copy to the relevant organisations so that they might comment, only to find that The Guardian, when it woke up and noticed what had happened two months later, treated the matter as though it were a leak, and said that Governments were trying to smuggle some changes through. I came to the conclusion that the only way to get The Guardian to read Hansard would be to send it in a plain brown envelope. That we have not yet done.
I have much sympathy—as do my right hon. Friend and the Government—with the fundamental thrust of argument that has gone through much of this debate, which is that discussion of these difficult issues—to which none of us can be sure about the answers — should proceed in an open public way. I go further, and say that I very much doubt whether any other Government since the war have proceeded in such an open public way in looking at, and exposing to public view, their thinking and the problems that face all Governments. There is the regular flow of information, it is a very considerable flow—through what is put into the public expenditure White Paper, for example—about spending and services, for which we are responsible. We put a huge amount of information into that White Paper about the National Health Service, about future costs of population structure change in the hospital and community health services, and the pressures that come from advances in medical technology.
In the spring of last year, my right hon. Friend published for the first time a document known as "Health Care and its Costs", which showed in full detail how these and other pressures have affected past NHS spending

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patterns. Any comprehensive debate on these and other matters goes beyond public spending and welfare spending into wider issues of taxation.
My hon. Friends and, I think, Opposition Members have welcomed the announcement by the Chancellor of the Exchequer yesterday that the Government will publish a Green Paper to discuss these issues in the medium-term future. My hon. Friend the Member for Mid-Sussex (Mr. Renton) urged the Secretary of State for Social Services to do the same in his sphere. Were he here, I should have to tell him that there is no way in which future trends of taxation in public expenditure can be discussed without a good deal of input from the Secretary of State for Social Services and the DHSS—the Department that spends so much of those resources on the welfare state.
In this theme of open government, there is—perhaps most notably—the inquiry that my right hon. Friend set up, and is now presiding over, into provision for retirement. There was an implication in one speech today that the purpose of that group was only to look at proposals for portable pensions. It is important to make it clear that portable pensions is in fact just a sub-group, and that the general terms of reference embrace the implications for pension provision of a larger and older retired population and the scope for changing the age at which people draw their pensions in the light of recommendations from the Social Services Committee. My right hon. Friend's pensions inquiry will hold several open sessions and will welcome evidence from any quarter. There has been a good response to the request for evidence, and I have no doubt that the Committee will wish to consider much of what has been said in today's debate, not least the comments of my hon. Friends the Members for Wealden and for Horsham.
The open and public conduct of the inquiry is a new venture in open government, and it will deal with the central issue of today's debate and with the points made by the hon. Member for Oldham, West. It has been followed by the announcement of a review of housing benefits, not, I must tell my hon. Friend the Member for Mid-Kent, as a means of analysing the effects of the changes that we have made, but simply because we recognise that much longer-term questions must be asked about the housing benefits policy. We wish to ensure that it is considered in as open and public a way as is reasonable, and the review will be independently chaired.
My right hon. Friend the Secretary of State might wish to pursue in other ways the theme of an open and thoroughgoing examination of social security. He has shown his willingness and, through him, the Government's willingness to consider the Health Service, social services and social security policy in the way that has been called for today. I assure those hon. Members on both sides of the House who called for such an examination that that is how we shall proceed.
I have not able to respond to every detailed suggestion made in the debate, nor have I tried to do so. I shall ensure that my colleagues consider all the points made, including the comments of the hon. Member for Wallsend about ambulance services in Northumberland. However, my hon. Friend the Member for Wealden called for a discussion. I hope that I have shown that the Government welcome that call and will continue to do so. By
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stimulating this debate and by introducing it in the way that he did, my hon. Friend has played a notable part in furthering that discussion.
1.47 pm
Mr. Richard Holt: It is not often that a Back-Bench Member has an opportunity to speak in a debate after a Minister has replied.
One matter that has not been mentioned in the debate, which I believe should be considered more carefully, is the problem of loneliness among the elderly and the house-bound. Today 98 per cent. of households have a television set, and each of them is obliged to pay a tax of £46 for it. Although it is called a licensing fee, it is essentially a tax. Surely, in this modern society, we cannot expect the house-bound or the lonely not to have a television set. All hon. Members will be aware from correspondence that they have received of the number of people who are afraid to go out at night.
I was especially interested to hear my hon. Friend the Minister talk about the permanent interface of tax and benefits between his Department and the Treasury. I hope that this small point will be taken on board by my right hon. Friend the Chancellor of the Exchequer. The amount involved is quite small, but the benefit that could be derived by the population at large is great. We should not try to limit the abolition of the television licensing fee to certain categories, because in doing so we would have to set up yet another army of bureaucrats to control it.
Many people may find it strange that, of the total amount they pay for television licensing, the percentage that goes to the Post Office for administering the system goes up year after year. Last year, the last recorded figures, £56·5 million of the money collected was handed over to the Post Office. That money could have been used to stimulate the arts and for better programmes for the people in their homes.
I shall speak of two ladies, one of whom I spoke to about 20 years ago when she was 95 years of age. I asked her what, in her long years, had impressed her most and remained in her mind. Was it the motor car, television, communications, the telephone or anything else that had been discovered during her long lifetime? She told me that in the main it was the eradication of poverty as she had known it. We have always been, since then, a caring society.
I come more up to date with another lady who is elderly. She sits every day in her wheelchair, and she knows far more about Jocky Wilson, Steve Davis and the other people who play snooker or darts—to our benefit—than any old lady of 85 would have done in the past. She could not have done that without her colour television set, or if she did not have the money to pay the licence fee. If the Government do not get rid of this iniquitous tax, we may deny those old people, in the wefare benefit world about which we are talking, this little bit of pleasure in their twilight years.
The sum of £46 is a small amount to some but a fortune to others. To an old person on his own, £46 is an awful lot of money. To the householder with eight incomes and five television sets it is nothing, and that is unfair and biased because, irrespective of the number of sets or incomes, one household pays only the £46, of which the Post Office gets its share.
My right hon. Friend the Minister said that the quality of life has always to be improved. I agree with him. I hear

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people talk about the unemployed. I represent a constituency that has the highest unemployment in England, although that is not a thing of pride. If one makes men and women who would like to work and cannot into criminals because they cannot afford a licence for the television, one does no good to society as a whole.
Why do we not recognise the problem? Why do not the Government grasp this nettle? They had to grasp the nettle of radio licensing, because the matter got out of hand. In 1971, radio licensing had to be abandoned because it could no longer be controlled. I do not want to see television licensing abandoned as uncontrollable because large numbers of people are not paying. The number is escalating, and only a few are caught and brought to trial.
We recently had a debate on the effects that shoplifting has on many old, slightly mentally deranged people who are unable to control themselves.
Do we want to see many old people, on their own in a modern society, becoming criminally minded simply because they cannot afford the £46 licence fee? Indeed, the figure may be increased. Do we want to see them, as has happened in the past when they have been lonely, feeding their cats at the expense of their own stomachs until they die of starvation?
Are we not now at a stage where television is no longer the luxury of the few, but the need of the mass of the people? Would it not be a great stimulus to the technology and the job prospects of Britain if we were to end the arbitrary system of making every household pay £46 per annum, irrespective of the ability to pay? All sorts of reliefs are given to many people who perhaps do not need them as much as they are needed by the millions of people in the category to which I refer.
My hon. Friend the Minister said many wise things about the use of resources. He also said that it is necessary to maximise the social benefit from money spent. I wrote down his words. I can think of no measure that would give greater social benefit value for money than the elimination of the £46 tax on every household, which impinges so heavily on the elderly, the infirm, the unemployed and the disadvantaged.
I am fortunate to enjoy good health and I am grateful to be here. Many people, who do not enjoy good health but are not desperately ill are lonely and they suffer
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psychologically in a sort of mental twilight brought about by the pressures of modern society. In many ways it is assisted by the very medium, television, that I am seeking to support, because it raises expectations in many people. I hope that I have not unnecessarily raised expectations further by my speech, but I believe that I have fired the first salvo in this Parliament — certainly not the first salvo fired in this House—towards the achievement of an objective that must ultimately come to pass.
My hon. Friend the Member for Bristol, East (Mr. Sayeed) said that we should not always do things to seek popularity; we should do things which are right. I see nothing wrong in doing something that is both right and popular. I believe that it would be a very popular move in the country as a whole if the Government were to look deeply at the vexed question of a tax — the television licence—which affects everyone.
1.58 pm
Sir Geoffrey Johnson Smith: The debate has ended on an unexpectedly controversial note. I disagree profoundly with the suggestion made by my hon. Friend the Member for Langbaurgh (Mr. Holt), although, as he said, it might be a popular move.
I express my warm thanks to all hon. Members who, after a busy week, have stayed to take part in the debate. It has been one of the better Friday debates, thanks to the efforts of my hon. Friends. I am most grateful to my hon. Friends from Sussex — perhaps there is something significant in their presence—and to all hon. Members who have helped to make the debate informative and constructive. That is what I had hoped it would be when I tabled the motion.
I warmly thank my hon. Friend the Under-Secretary of State for his spirited and most reassuring speech. I noticed that throughout his speech, as at other times in the debate, my right hon. Friend the Secretary of State for Social Services was present, giving — if it were needed — further indication of his strong interest in the subject. Apart from the path of duty, I am sure that he has a very strong personal interest in the subject.
I beg to ask leave to withdraw the motion.
Motion, by leave, withdrawn.

Youth Training Scheme
2 pm
Mr. David Amess: I beg to move,
That this House congratulates Her Majesty's Government for taking the initiative of introducing the youth training scheme; welcomes its success in the United Kingdom and in Basildon in particular; further welcomes the recent publication of Cmnd. 9135 'Training for Jobs'; and looks forward to its early implementation.
I move the motion in a constructive spirit as it is a vital ingredient in increasing job opportunities. All hon. Members accept that the level of unemployment is tragically high. Indeed, that is certainly the case in Basildon. But anyone who pretends that there is an instant magic formula is deceiving himself. We must all work together to try to create more job opportunities and to ensure that when they arise people are properly trained for them.
So it is that I am greatly saddened by those who have sought to denigrate the Government's genuine attempts to help. The value of training should be obvious and I for one welcome the youth training scheme. As we know, since the scheme became fully operational in September 1983 it has sought to offer an integrated programme of training and planned work experience lasting up to a year, including a minimum of 13 weeks off-the-job training or further education. It seeks to give school leavers a range of practical transferable skills to enable them to compete more effectively in the labour market.
There is no doubt that the YTS represents a considerable improvement on and progression from the youth opportunities programme. Three hundred thousand young people now benefit from the scheme, and £457 million has been invested in it. During the general election campaign my right hon. Friend, now the Minister of State, Foreign and Commonwealth Office in the other place, was extremely impressed with what she saw of the nucleus of the scheme in Basildon. I have spent a great deal of time studying the operation of the YTS in my constituency, and talking to the young people engaged in the scheme at their places of work and in their training centres. I have spoken to those involved in the project.
It is a great pity that those who have sought to denigrate the scheme have not taken the same trouble as I have to understand its workings and to appreciate the good that is being done. My real appreciation of the scheme comes from my experience as a teacher and as the owner of an employment agency. In certain areas I have first-hand experience of the practical aspects of job seeking. I believe that the scheme gives young people the vital practical experience that is essential in today's real world. I have often heard the cry from an employer that he would take on someone if only he had some practical experience. In many respects the YTS is a bridge to fill that gap.
The YOPs attracted a great deal of criticism—some of it justified—and the YTS has suffered greatly from that adverse publicity. Indeed, when I visited the various centres in Basildon before Christmas the take-up rate was about 55 per cent. Much of the shortfall can be attributed to the deleterious effects of some unions taking a very negative view—indeed, to their outright hostility. I well remember unions preventing my county council in Essex and Kent from taking on YTS people. In addition, some teachers took an unwarranted stance against publicising
1180
the opportunities available. Their reaction ranged from dismissing the aims to merely not mentioning the possibilities.
I pay tribute to those teachers who saw the possibilities and brought the scheme to the attention of those whom it most closely concerned. The attitude of some Opposition Members has been far from helpful. Despite that, I am happy to report to the House that the take-up rate is now 75 per cent. in Basildon and I trust that that is mirrored nationally. In Metcon, a national federation of engineering companies which has a training unit in Basildon, the take-up rate is, I am delighted to say, 87 per cent. This, in spite of scepticism by the uninformed, is based on the fact that Metcon has excellent relations with firms in a position to supply jobs to well trained youngsters. The late surge in interest is a result of several of my hon. Friends taking an interest and publicising the scheme locally. More needs to be done. I make that plea to the Minister. He will agree that much of the publicity was initially aimed at employees and not enough at the youngsters themselves.
Some problems are, of course, emerging from YTS. That is not surprising since it is so young. Two obvious shortcomings have emerged which I fear may undermine the basic approach to the problem. They both concern the drop-out rate. In Basildon the drop-out rate is about 20 per cent.
My first point concerns the attitude of some of the participating firms. I realise that many businesses are morally, socially and economically committed to making the youth training scheme work, but some do not fully understand the role of YTS in national training policy.
Many firms take trainees on to their payroll but are unwilling to see their work force disappear for one or two days a week for job training. Naturally, I am delighted that youngsters have found jobs, but the purpose of YTS is to provide basic skills and, more importantly, portable skills. When firms take on youngsters, off-the-job training ceases and, to a large extent, so does on-the-job training. All that remains is to bring the newcomer to peak skill in a particular process.
I have every sympathy with the school leaver who is offered much more money, secure employment and the benefit of full time working, but I should like to make two points. The first relates to the implementation of training. Many trainees are not being given the benefits of wider, major and long term training that those who stay on the course to the end receive.
The youth initiative report states:
"We have until now assumed that training given in a person's first job is all he will need for the rest of his working life."
The report made it plain that that was not good enough and that there was a need for action. As a result we have the YTS. In the interests of the future the scheme must provide a basically trained work force capable of moving into any industry. The scheme must be national or it will undermine its own declared aims.
My second point relates to the kind of industry operating the conversion to full-time work. Many have high staff turnovers. That is one of the reasons why they can offer so many places. Although ex-YTS trainees may be happy for a short time in their business, normal recruitment conditions may eventually prevail and those youngsters may eventually come on to the job market with less training than those who stay on the course. I urge the

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Minister, through the Manpower Services Commission, to take action to ensure that firms realise the aim and objectives of the scheme.
Another issue concerns termination, whether company or trainee induced. Terminations are often caused by locking the more venturesome or less motivated trainees into a monotonous round of work. At school they may already have formed a violent dislike of that. It is the equivalent of making a career choice for someone and getting it wrong.
I realise that mode B and the modular approach can overcome some of the problems in places such as the Chowdlany centre in Basildon, but I suggest for consideration the concept of work tasting. That could include opportunities to sample different skills or jobs "to establish aptitudes." The Minister will recognise that that phrase comes from his paper, "The New Youth Inititative". By adding or incorporating two to three months to the scheme trainees could sample different environments, skills and management aptitudes. The scheme could be made significantly wider in scope. I realise that that would be feasible only in places of high density industry — where industry is concentrated on estates of one sort or another. With that change, the trainees would be less prone to terminate halfway through the scheme, and would be better motivated to learn. I know that that sort of project has been tried, to a limited extent, in some areas. I urge my hon. Friend the Minister to give the matter serious consideration for national use.
I, together with many others, warmly welcome Cmnd. 9135 "Training for Jobs", which sets forth the aim of developing a system of certification that links the YTS with vocational courses in schools and colleges of further education. I look forward to my hon. Friend's report on that matter. I am glad that my right hon. and hon. Friends in the Department are thinking of education, work start and training as a continuous process, despite much of the rhetoric being directed at bridging the gap between school and work.
Such a gap exists, and it is right to give it some thought. However, attempts to close the gap should not interfere with efforts to improve the ends of the spectrum—basic education and vastly expanded vocational education. My hon. Friend has spoken about the possibility of craft schools, which would be a combination of education and training. That option is certainly worthy of consideration.
The Government, who are pledged to improving the lot of the forgotten 14 to 18-year-olds, are the first this decade to bring in education for training — a coherent and cohesive national policy that will produce youngsters fully capable of taking their place in the real world. Many youngsters do so already, but they are, by and large, among the more committed section. It is the lowest 40 per cent. of schoolchildren and the lowest 20 per cent. of school leavers who slip through the education network. I am determined that our policy will not be abandoned under YTS. A caring and compassionate Government like ours must give a higher priority to finding useful contributory places in society for those citizens than for those able enough, bright enough and willing enough to carve out their own niche.
That is what we are trying to do with the series of recent documents. That is what we will have done by the end of our present term in office.
2.12 pm
Mr. Dave Nellist: I am grateful to the hon. Member for Basildon (Mr. Amess) and the Minister for allowing me a few minutes to speak in the debate.
The White Paper "Training for Jobs", especially the section dealing with technical and vocational education initiatives, implies that the authors wish to lay the blame for unemployment on young people themselves. It suggest that the education that they receive, or their general level of technical ability, is the cause of so many youngsters being on the dole.
I argue that that is not the problem. The problem is not youngsters with insufficient technical skills, but that there are not enough jobs available for all school leavers. About 62 per cent. of those completing the Government's previous training initiative — the youth opportunities programme — returned to the dole at the end of their training. It is estimated that three fifths of those currently on YTS will return to the dole queue.
In my region of the west midlands, almost 100,000 people under the age of 25 are on the dole, more than one third of them having been unemployed for over a year. In the west midlands, nearly 10,000 youngsters under the age of 19 have been unemployed for more than one year. Many of those who have gained skills from previous training schemes initiated by the Government now realise that there has been no increase in the number of jobs for which they are competing.
For what are the Government training youngsters? Unless the Minister and his right hon. Friends come forward with plans to increase the number of jobs for school leavers, they will create the best trained dole queue in Europe — a large dole queue of unemployed youngsters.
If the YTS were so attractive, youngsters would be rushing to get on it. But in Dudley, in the west midlands, and in other Conservative areas, careers officers are under instructions to tell youngsters, "You have a choice. Either go on the YTS or your dole benefit of £15·80 will be reduced for six weeks to £9·48." Hanging over them like a sword of Damocles is the reimposition of that cut in unemployemnt benefit in future if they refuse to go on the scheme.
On 1 February, 200 youngsters from many parts of the country came here to lobby their Members of Parliament about the youth training scheme. The most common points they raised were the £25 allowance and the compulsion aspect of the scheme. My private Member's Bill — which, coincidentally, was published on the same day as the White Paper "Training for Jobs"—includes a clause —which, if parliamentary time were available, ought to be discussed and passed by this House — to prevent youngsters from having their benefit cut through being unwilling to go on a YTS.
I have referred to paragraph 25 of "Training for Jobs". That refers to the allowance of £25 and the sum paid to managing agents by way of fees. It is fair to say that had the allowance of £25 been increased in line with the value of money—remembering that it was first introduced as a Government training allowance in April 1978—it would now be £38. In other words, the Government are robbing each youngster on the scheme of £13 a week. No wonder the YTS — apart from some of the suggestions that I

1183
have made for the initials, such as "youth training swindle" —has been nicknamed by the youngsters "the great training robbery."
The hon. Member for Basildon spoke of a caring and compassionate Government. Speeches such as he made are deigned to rationalise a carefully constructed plan to reduce the wages of youngsters by covering, in a cosmetic way by the use of platitudes about training, a plan that has been in the Prime Minister's office for two or three years.
In February 1981, Mr. John Hoskyns, then head of the Prime Minister's policy unit, produced a paper which said than the Government's intention should be to introduce measures to increase the differential between the wages of young people and adults. That advice, put forward in that research paper, was strongly supported by the Prime Minister's adviser. That is what has happened with the YOP and the YTS.
In recent years the difference between the wages of young people and adults has fallen. According to the new earrings survey, it has dropped for males from 40 per cent. in 1975 to 38 per cent. in 1982; and for girls it has fallen from 36 per cent. to 34 per cent. I have been given figures by the Department which show even worse falls. The maintenance of the £25 allowance continues that process. It lowers the expectations of youth and gives employers the opportunity to tell yougsters who apply for unskilled jobs, "You are not getting much more than £25 because that is the general level of allowance paid nowadays."
I am happy to tell the House — in contrast to the speech of the hon. Member for Basildon — that trade unions are beginning to take up the cudgel in a positive way on behalf of young workers. For example, in Coventry, the National Society of Metal Mechanics and the Transport and General Workers Union have negotiated with Massey-Ferguson an arrangement by which the YTS trainees in that factory receive £74 a week — the full apprenticeship rate for their age—and a guaranteed job if they successfully complete the scheme. That is what I am promoting in my private Member's Bill. I want the unions to challenge the use of the YTS as a form of cheap labour and to regain the apprenticeship rate for youngsters.
Paragraph 29 of "Training for Jobs" tells us that attention is being given to the health and safety aspects of the yrs. That may be so, but the response has come only after pressure from the trade unions, from the families of youngsters who have suffered fatal accidents while taking part in this scheme, from campaign groups, such as Youth Trades Union Rights Campaign, and from the general pressure that has been put on the Government over the past six to 12 months. The changes in health and safety at work, sex discrimination and race relations legislation have come only from the pressure that has been exerted in exposing the loopholes in the YTS.
I received a telephone call, literally minutes before I entered the Chamber, in which I was told of the tragic death of a 16-year-old in Aston, Birmingham, on Wednesday at 1 am. He was found dead at the bottom of a degreasing bath which contained an aluminium cleansing solution of caustic soda. That youngster died from the fumes. The factory concerned risks prosecution, quite correctly under one of the Factories Acts, because it was employing someone under 16 years of age and getting him to work after 8 o'clock in the evening. Apparently the supervisor was only 21 years of age and had been
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employed at the factory for only one month. The youngster who died was not on YTS. But a pattern is emerging that shows that youngsters are being treated in a cavalier fashion because of the inadequacies of Government training schemes. Employers who wish to get away with objectionable practices are taking a lead from the inadequacies of the various schemes.
I received a letter this morning from the Department of Employment which told me that a study is being set up at Aston university, Birmingham, on health and safety within the YTS. The House can only be grateful for that. The more information that we have on the causes of accidents involving youngsters engaged in Government schemes, the better.
As I propose in my private Member's Bill, we must insist on changes being made to the YTS. There should be a contract of employment, so that employers are clear that they are dealing with employees who come within industrial legislation. There should be a clear definition of the jobs that youngsters are doing and no variation should be allowed without trade union or MSC health and safety supervision. There should be an increase in the allowance to £52 a week at least and the allowance should be tied to the trade union rate for apprenticeships.
One third of a million youngsters are part of the YTS. Hundreds of thousands of school leavers this summer face nothing but the YTS. For what are we training these youngsters? The Government have destroyed 20 per cent. of manufacturing industry, and investment has fallen by one third. Money flows out of Britain to the non-trade union, low-wage economies of Asia, Africa and Latin America. Jobs have disappeared. About 5 million people are on the dole. Unless the Government can create a massive number of jobs for our youngsters, they will always be cynical about the YTS. There is no point in being trained within the YTS if at the end of the scheme, in September, the trainee is thrown back on the dole. That has happened to many 17-year-olds. During the election campaign last summer I found that the most oft paint-sprayed slogan in the subways of Coventry—this is not something that I condone, lest anyone has a go at me for it—was:
"Vote Tory: Retire at 16."
The YTS does nothing to change that.
2.24 pm
The Under-Secretary of State for Employment (Mr. Alan Clark): I am grateful to my hon. Friend the Member for Basildon (Mr. Amess) for giving the House a further opportunity to discuss the youth training scheme. I am grateful to him also for the thoughtful and constructive manner in which he approached the subject. His contribution was in marked contrast to the intemperate and lurid manner in which the hon. Member for Coventry, South-East (Mr. Nellist) dealt with the subject. None the less, the House appreciates the assiduity that he has shown by attending so late on a Friday afternoon, in marked contrast to his colleagues. This is a fundamentally important subject that concerns the training of youth and there might have been a slightly better attendance than one Opposition Member—
Mr. Dick Douglas: There are two Labour Members in the Chamber.
Mr. Clark: But there has not been all the time. The hon. Member for Dunfermline, West (Mr. Douglas) is also here.
The hon. Member for Coventry, South-East raised a number of points. I may not reach them all. I appreciate the hon. Gentleman's sincerity, and he will receive a letter from me, as soon as I can manage it, in which I shall endeavour to answer his points. The hon. Gentleman spoke of the low take-up of the youth training scheme in his constituency, but that is contrasted most markedly with the experience of my hon. Friend the Member for Basildon who took a personal interest in the scheme in Basildon. I have no doubt that his interest and attention were responsible for the increase in take-up from the initial figure of 55 per cent. to the present level of 75 per cent.
Mr. Nellist: I did not refer to the low take-up in my constituency. I referred to the high level of long-term youth unemployment in the west midlands. I gave no figures on the take-up in Coventry, South-East.
Mr. Clark: I misunderstood the hon. Gentleman. I thought that that was exactly what he said. Hon. Members of standing in society, who ought to know better, are culpable when they deliberately go out of their way to talk down the merits of one of the most constructive and important schemes ever offered to our youth. We all understand the pressures on the hon. Gentleman in his constituency and the obligations that he feels to posture as one in the vanguard of those who wish to destroy capitalistic society and so on, but his performance was a remarkably moderate one for him. I do not wish to get him into trouble by drawing attention to that.
In many aspects the speech of the hon. Member for Coventry, South-East was reasonably statesmanlike. He gave the game away when he referred to the "youth training swindle." If people of the standing of the hon. Gentleman, teachers, educationists, members of trade councils, and so on deliberately try to talk this scheme down, there is no need to wonder why, in certain cases, young people show a certain diffidence about going on to the scheme. The House will note carefully the marked contrast between the hon. Gentleman's attitude and that of my hon. Friend the Member for Basildon, in whose constituency there was a record increase in take-up of places of almost a third.
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Since its inception the youth training scheme, more than any other training measure for many years, has provoked discussion, and rightly so. It is the most ambitious and far-reaching training measure introduced by any Government. Of course, there have been a few initial problems, and I shall deal with them. We are correcting them and doing our best to adapt the scheme as it evolves. The scheme has got off to an encouraging start. Employers and other sponsors have responded extremely well in providing training places. If the numbers taking up those places have been fewer than originally expected, it is because—despite what the hon. Member for Coventry, South-East contends—the job market for school leavers has improved. Nevertheless, thousands of young people are taking advantage of what the scheme offers. By the end of January, more than 300,000 school leavers had entered the scheme.
I understand that the argument of the hon. Member for Coventry, South-East is that young people may be reluctant to go on to the scheme because at the end there will not be a job for them. It is impossible and impracticable—if the hon. Gentleman had listened to my hon. Friend the Under-Secretary of State for Health and Social Security in the earlier debate he would have understood the verity of this—to guarantee a job for every school leaver, which is effectively what the hon. Gentleman wants. We have guaranteed that they will have a place on a training scheme. When they have completed their course, they will be better placed to obtain a job. The type of job that they will be well placed to get will generate wealth and prosperity.
The hon. Member for Coventry, South-East, who argues against the scheme because there will not be a job at the end, is advancing the most short-sighted and negative argument that it is possible to conceive, and also one that is immensely depressing for people who approach the scheme full of hope. He tries to talk them down before they have even started. My hon. Friend the Member for Basildon made a good point. He said that it is possible that at that age trainees will make the wrong choice and may find that the particular scheme—
It being half-past Two o'clock, the debate stood adjourned.

Orders of the Day

  CHRONICALLY SICK AND DISABLED PERSONS (AMENDMENT) BILL
  Order read for resuming adjourned debate on Question —[18 November]—That the Bill be now read a Second time.
  Hon. Members: Object.
  Mr. Deputy Speaker (Mr. Paul Dean): Objection taken. Second Reading what day?
  Second Reading deferred until! Friday 24 February.

Air Travel Reserve Fund Agency
Motion made, and Question proposed, That this House do now adjourn. —[Mr. Garel-Jones.]
2.30 pm
Mr. Dick Douglas: I raise the subject of the future of the Air Travel Reserve Fund Agency. It will not go amiss if, in my introductory remarks, I say a little about the agency's formation. One of the reasons for raising the matter is that I was a founder member when the agency was formed in 1975. I was not in the House. I pay tribute to Sir Kenneth Selby, Vera de Palma, and Reg Pycroft who have been members of the agency since its inception, and to Mr. Dickinson the agency's secretary. The agency was founded by Act of Parliament in the wake of the collapse of Court Line and the attendant tour operators, Clarksons and Halcyon Holidays, among others.
The fund's concept was to make payments to or for customers of air travel organisers in respect of losses or liabilities incurred by them. In support of that concept is the licence administered by the Civil Aviation Authority, given to air travel organisers after having been assessed as being financially able to meet their commitments. Part of the licence assessment relates to the ability to meet a bond laid down by the CAA. There is also another bond for members of the Association of British Travel Agents, which costs about one third less than the average 10 per cent. bond administered by the CAA.
Parliament initially voted the fund a £15 million loan. In addition, there was a 2 per cent. levy on licence holders. The loan has been repaid, and currently the fund has a balance of £16·6 million. The agency's first reserve is the bond and its second is the fund.
If we did not have Adjournment debates it is highly unlikely that the Air Travel Reserve Fund Agency's report would be discussed in the House. The fund's latest report and the chairman's remarks give rise to the debate. Sir Kenneth Selby says in that report that he is surprised at
"the risk that so many … holidaymakers take in paying for their holidays so far in advance … thereby leaving vast sums of money at the disposal of the air travel organisers without security of any form."
That is a fairly stringent stricture on the organisers. Holidaymakers should take it on board. What is the magnitude of the fund? What might we expect to be available at the peak, in 1984? I am reliably told that about 8 million holidaymakers will book holidays from tour operators for the coming season. We are talking about a sum of about £2 billion. Therefore, by any standard, such a sum is of considerable magnitude and import.
I am a great believer in not looking at the crystal ball if one can read the book. The promotion of the fund goes back to 1975, when we saw what the failure of Clarksons, the Halcyon group and others did to a vast number of people who lost their holidays. We can see from the agency's report that hundreds of thousands of individuals put their money at risk and were considerably inconvenienced by the failure of those companies.
Within recent memory we have seen the failure of organisations associated with the Laker enterprise. The failure of Laker and Arrowsmith resulted in 52,000 claims on the bonds. The number of claims on the fund amounted to more than the bonds. According to the report, if one

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includes administration, the calls on the fund were likely to exceed £6 million. At that time the amount of bond money available was £5·2 million.
I have had discussions with represenatives of ABTA. It claimed that the reason why its bonds were less than those of the CAA was that collectively the agents can provide services that are of considerable benefit. I do not dispute that. When a company crashes, ABTA members give assistance. The argument was that in the case of Laker the value of the rescue operation was about £75,000. The Air Travel Reserve Fund Agency felt that the bond would have been £2·5 million larger if the CAA rate had been used rather than the ABTA rate. The fund had to bear more than would have been the case if the CAA rate had prevailed rather than the ABTA rate. Some £2.5 million was given by customers to Laker. It was used by that enterprise, through the network of its organisation, to finance operations such as Skytrain rather than for holiday purposes.
That leads me to the area of agreement between ABTA and the Air Travel Reserve Fund Agency. I hope that the Minister will tell me the Government's thinking on the matter. There should be complete segregation between the financial affairs of any licensed organiser and any other group of companies. The practice that I referred to earlier involving holiday companies such as Court Line and the practices of the Laker holiday organisation going back to Skytrain should be prohibited. I want an assurance that money given for holiday purposes, because of the interlocking nature of the concerns, will not go to finance engineering or other enterprises. In my opinion, that money should be devoted exclusively to holiday purposes.
There is disagreement between ABTA, CAA and the agency about the adequacy or otherwise of protection offered by the bonds and the agency's fund in relation to the level of turnover. I wrote to the Secretary of State for Transport on the matter on 19 January. Perhaps I shall get an answer today. It has taken a long time for him to answer a Member's query. Perhaps the Minister was himself on a tour and could not answer. In my letter I gave the view expressed in the report by the chairman:
"In 1978 tour operator turnover was £548 million. The Fund stood at just over £14 million, representing 2·6 per cent. of that turnover. In 1983, however, turnover for the industry had risen to £1,800 million —the fund, at £16·6 million, has fallen to less than 1 per cent. Had it been kept to its original level of turnover it should now stand at £52 million."
The chairman's assertion is that the fund is not keeping abreast of developments.
It could be argued, of course, that if a company were to crash or fail, we could embark on another levy and start the cycle again. I suggest that that is not a good way to tackle the problem, because it means that future holidaymakers are paying, in their bills, for the misadventures of present holidaymakers and the misdemeanours of the holiday organisers.
On Monday this week, in answer to a question, not from me but from a Conservative Member, the hon. Member for Brentwood and Ongar (Mr. McCrindle), the Minister said that
"it would be altogether better if individuals insured themselves rather than have the matter organised centrally." — [Official Report, 6 February 1984; Vol. 53, c. 595.]
I dispute that. In my opinion, the matter should be organised centrally.
If we are to assess the adequacy of the bond and the fund, it is the responsibility of the tour operators—and
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of the CAA, for that matter—to organise the insurance cover centrally, and to make sure that the companies have insurance to cover all expectation of losses that might be incurred by their customers. We cannot leave it to the individuals who are going on holiday. This is not on all fours with the business man who is travelling, perhaps on his own account or perhaps on his company's account, to the United States or elsewhere. We are talking about people who have saved up for some time. For them it is a large expenditure, and if they give their money to companies, they expect to be almost completely sure that the companies will deliver.
I expect that the CAA and other organisations will say that if we impose additional charges we shall force marginal companies out of the business or inhibit new companies. However, companies operate on small margins, sometimes much less than 2 per cent., so both companies and holidaymakers are at risk. Unfortunately, the holidaymaker does not always understand the risk.
The report also mentions the use of credit cards when paying for holidays, and at page 8 it states:
"There is some inconsistency between the Consumer Credit Act, 1974 which controls the use of credit cards and the Air Travel Reserve Fund Act, 1975 under which the Agency was established. The Agency has no power under the 1975 Act to reimburse a customer of a failed air travel organiser unless the customer has suffered a loss. If a credit card has been used to pay for a holiday and at the time of the failure the customer has not paid the credit card company, he has suffered no loss. In such cases, therefore, the Agency is precluded by statute from making any payment from the Fund."
That is a serious matter that requires clarification by the Government. If the agency is statutorily banned from making payments, holidaymakers might believe wrongly that they could recover their losses.
I have tried to be moderate and careful in my remarks, because I do not wish to be a scaremonger, telling all holidaymakers that they face an enormous risk. However, there is a risk, and it is the Government's responsibility to respond to the views expressed by the chairman and, through him, the agency about how it approaches consumer protection. I know that many leaflets are issued by ABTA and the CAA in an attempt to educate the public about such matters, but we must know what the Government believe so that the cycle does not begin again.
I have mentioned the segregation of funds, the adequacy of the bond and the need to emphasise to companies that they must have full insurance cover. I could also have mentioned the adequate monitoring of the cost of administration, but I hope that the Minister will respond positively to what I have said.
2.48 pm
The Under-Secretary of State for Transport (Mr. David Mitchell): I am grateful to the hon. Member for Dunfermline, West (Mr. Douglas) for providing us with an opportunity to discuss the air travel reserve fund. As he said, foreign holidays are one of the most expensive purchases that a family makes, next to buying a house or a car, yet, unlike other goods and services, those holidays must be paid for in advance. The failure of a tour operator is a time of great worry for those who have booked holidays with it and for those who are already abroad at the time of the failure.
Since 1975, when the fund was set up, holidaymakers buying packages have had the reassurance that, harrowing though the failure might be, ultimately their money will

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be safe. Thanks to the system of bonds required by the CAA as a condition for gaining an air travel organiser's licence, coupled with the fund, package holidaymakers have been certain of recompense no matter how big a failure.
Since its inception, the fund has paid out over £10 million to holidaymakers. I pay tribute to the chairman of the Air Travel Reserve Fund Agency, Sir Kenneth Selby, and to the agency's members past and present — including the hon. Member — for the work that they have done in bringing financial peace of mind to so many holidaymakers.
However, the agency's recent annual report has perhaps cast something of a cloud over the travel trade. I am concerned that in some quarters there may be a fear that holidaymakers are once again threatened with financial loss because of the collapse of an air tour operator. Those fears were clearly in the mind of the hon. Member in this Adjournment debate. I hope now to set those fears at rest.
As its name implies, the fund is a reserve mechanism against the financial failure of a tour operator. The very first line of defence for the holidaymaker is the Civil Aviation Authority's licensing system. Any applicant for an ATOL who is financially unsound or simply unfit to hold a licence will be refused one by the authority. Those who aspire to a licence are expected by the CAA to have sufficient financial resources to withstand one year's adverse trading conditions. Should a company's finances cease to be sufficient, its licence will be revoked.
No system can be 100 per cent. watertight—at least not without also threatening to strangle to death the industry it regulates — so there is a second line of defence. These are the bonds which must be posted by holders. Only when a holder fails and the bond proves insufficient does the fund come into play as the final line of defence for the holidaymaker's money.
Mr. Douglas: The Minister is being good about this, but how does he answer the stricture in the body of the report, on page 6, where a failure is clearly identified? It says:
"In one of these failures, claims amounting to £75,000 are being processed although the company was bonded for no more than £2,000."
That does not protect the individual.
Mr. Mitchell: If the hon. Gentleman will allow me to continue, I may be able to reassure him, if I can get the thin to do so.
In its annual report, the agency suggests that—partly because of the effects of the Laker failure—the fund may no longer be large enough to withstand another major failure, particularly if one were to occur at the wrong time of the year, when customer pre-payments are at their maximum. The chairman has therefore made a number of recommendations in his report designed to protect the fund. It must be a matter of judgment whether the fund is potentially inadequate in terms of the task it faces. I respect the views of the agency's chairman in this matter, but I see no immediate cause for alarm.
Tie fund stood at over £16 million at the end of the last financial year. This is over twice as big as the largest sum it has ever had to pay out as a result of a failure. Indeed,
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since the fund was set up there has only been one major failure. The impact of all others since 1975 on the fund has been relatively slight.
It has been suggested that, compared with the 1970s, the fund has fallen dangerously low in relation to the turnover of ATOL holders. The ratio of the fund to licensed turnover has certainly fallen, but we cannot be sure that the ratio established in the 1970s was the correct one or that because it has fallen the adequacy of the fund has been undermined. What is more certain is that the travel industry itself is more mature and stable than it was 10 years ago. In the last three years, 30 ATOL holders out of nearly 700 have failed financially. In 1974 alone, when we last had a significant recession in the travel business 26 holders failed out of less than 400. The proportion is substantially different, and one cannot necessarily apply the ratios of 10 years ago to the situation today.
I believe, too, that the industry may now be coming out of recession. It is true that margins have slipped in recent years, as the hon. Member said. There have been fears, echoed in the agency's report, that, with many package holidays being offered at lower prices than last year, the industry is in for another bad summer. In fact, the signs suggest the opposite. Many of this year's price cuts simply reflect lower fuel costs and sterling's appreciation against European currencies. Price cuts may often be costing the tour operators little or nothing. Furthermore, bookings so far this year appear to be running at higher levels than for two or three years.
I am cautiously optimistic about the prospects for the industry and there is certainly no reason to fear a significant failure this year. Nevertheless, a return to healthier levels of bookings and profitability cannot guarantee that we shall never again see a major tour operator fail. I accept that in that eventuality the fund could, at least in theory, be faced with very substantial claims.
For that reason, I am grateful to the agency's chairman for the recommendations he has made. I cannot this afternoon comment in detail on all of them. They deserve close and careful study. But I think it is fair to say—as I am sure the hon. Member recognises—that many of the recommendations carry a cost of one kind or another. Nor are they a panacea which will guarantee that claims are never again made on the fund.
It may be difficult for the authority to insist on the complete segregation of an air travel organiser's finances from the finances of others in the same group of companies, as requested by the hon. Member. Segregation could have serious effects on the borrowing capacity of the company concerned, and might even threaten the existence of the sort of integrated airline and tour operator companies which are such a successful feature of the British holiday industry.
However, as I have said, Sir Kenneth's recommendations merit the very closest attention, as does his suggestion that the insurance market might take up some of the strain. As my right hon. Friend indicated on Monday, insurance may have its attractions. We are, therefore, setting in hand a special review which will consider the level of the fund, its future, whether changes should be made to the present system of licences and bonds, and whether insurance has a part to play. The present arrangements form an integrated system, and it would not be sensible to review the fund without also asking how it is affected by the licensing requirements and

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by bonding levels. I hope that the hon. Gentleman will feel that the specific points he put to me will be well catered for in this significant review.
We are now considering who might be suitably qualified to undertake the review, and we hope to approach someone shortly. I expect the review to be completed speedily.
As a Government, we hope wherever possible to lift the burden of regulation on industry. There is no doubt that the present system for protecting air package holidaymakers is one such burden. Nevertheless, it has to date worked well from the holidaymaker's point of view. In view of the doubts which the agency has expressed about whether the fund is adequate in size, we want the review to consider whether the fund needs to be increased; whether it is adequate as it stands but in need of added protection—perhaps by way of tighter licensing and bonding requirements — and, indeed, whether some entirely different set of arrangements might serve the holidaymaker just as well.
We would also like the review to consider whether—if the fund is to continue—it should apply to scheduled air services. That is something which from time to time has been pressed upon us by hon. Members, although I have to gay that it is not an idea to which we instinctively warm, given that the private sector seems already capable of affording protection to such travellers. Indeed, the Department of Trade announced in December 1982 that, having looked at the matter, it had concluded that there was no justification for introducing mandatory levies or
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insurance schemes to protect the scheduled airline passenger. Nevertheless, there is no logical reason why those who buy air package holidays should he in a more privileged position than others who travel in other ways by air.
I obviously cannot predict what conclusions will emerge from the review, but I can say that the Government recognise the special position of those who pay in advance for expensive overseas holidays. Whatever changes might be made to the present system, we must be sure that some arrangements exist whereby holidaymakers can be certain that their deposits are safe. Therefore, it has been very fruitful that the hon. Member should have raised the matter this afternoon and given me the opportunity of telling the House the way that we propose to proceed.
The air travel reserve fund was born out of the Court Line collapse because of the financial suffering it threatened to cause holidaymakers. I am sure that the hon. Member and I are at one in agreeing that, whatever the future may hold for the fund, we do not want to see holidaymakers left with no means by which they can be protected.
The hon. Member mentioned credit cards. That is a complex matter. Both Access and Barclaycard have said that they will reimburse people who lost through Laker. We are giving that question very careful study and I shall write to the hon. Member.
Question put and agreed to.
Adjourned accordingly at one minute to Three o'clock.

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Preamble
The House met at eleven of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Chelmsford.
Lord Bolton—Took the Oath.

Museums and Galleries: Funding
Lord Strabolgi: 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 provide some grant-in-aid, possibly through the Museums and Galleries Commission, to help the Ashmolean Museum Oxford, the Fitzwilliam Museum Cambridge, the Whitworth Art Gallery Manchester and the Dulwich Picture Gallery, all of which are in financial difficulties, in view of the national importance of these collections.
The Minister of State, Privy Council Office, and Minister for the Arts (The Earl of Gowrie): My Lords, I am aware of the problems facing these particular museums and galleries, like others, at a time of necessary financial constraint. In general, university museums and galleries are integral parts of their parent universities and must look to them for support. I will, however, be considering the position of those institutions directly affected by the abolition of the GMC and metropolitan county councils, in the light of the consultations just completed.
Lord Strabolgi: My Lords, while thanking the noble Earl for that reply, may I ask him whether he is aware that, in consequence of the GMC grant being removed, the Whitworth Art Gallery will have to close down its conservation department; that at the Fitzwilliam, the whole museum cannot be opened at the same time during the week; that at Dulwich an important Rembrandt painting was stolen last year and the governors have said that they can no longer be responsible for the collections and that many paintings have had to be removed from the public? Will he please treat this matter with some urgency and importance?
The Earl of Gowrie: My Lords, as I said in my original Answer, I am aware of the severity of these problems. In the case of the Whitworth Art Gallery, the gallery receives, I think, 21 per cent. of its funding from the metropolitan county council and therefore that funding will be part of our consultative process in terms of local government reorganisation. With respect to the Fitzwilliam, I have to stand by my original Answer and say that that is, of course, a matter for the university, although the noble Lord will be well aware that the university is helped by the Government through the University Grants Committee. In respect of Dulwich, I have visited it
1370
discussed some of their problems with them, and I am glad to say that they are developing most impressive self-help initiatives which I will try to help in any way that I can.
Lord Strabolgi: My Lords, is the noble Earl aware that at Dulwich they require only about £40,000 a year for warding and security services—which is about the equivalent of the extra amount that he awarded to the Soane Museum recently?
The Earl of Gowrie: My Lords, my recollection is that the Soane Museum award was in respect of pensions of employees there where an anomaly needed to be corrected; but I will take on board what the noble Lord says about Dulwich.
Baroness Faithfull: My Lords, with regard to the Ashmolean in Oxford, may I ask my noble friend whether he is aware that, even though he says that the university should be responsible, it seems to me and to those of us who live in Oxford that the Ashmolean is visited by half Europe who come to Oxford during the summer and therefore it is a tourist attraction of great interest? Would it not be possible to give it help other than that which comes from the university?
The Earl of Gowrie: My Lords, I am sure that the benefits of the Ashmolean to the university and to the town of Oxford will be registered by the university that funds the museum.
Lord Taylor of Blackburn: My Lords, may I ask the noble Earl the Minister whether, when he considers this, he will give the same consideration to the Whitworth Art Gallery?—because it is for the benefit not just of the people who live in Greater Manchester but of a lot of people throughout Lancashire who visit that gallery.
The Earl of Gowrie: My Lords, I have already mentioned the Whitworth, but it seems to me to be a central truth that it is enormously in the interests of modern cities and metropolitan centres that they should attract people in to use their arts and leisure services. I am sure that Manchester will be aware of the attractions of the Whitworth to the rest of Lancashire.
Lord Edmund-Davies: My Lords, does the noble Earl the Minister really consider that it is a reply in relation, for example, to Cambridge, to say that they look to the University Grants Committee, having regard to the severe restraints and financial restrictions placed upon that body, however willing it may be disposed to help?
The Earl of Gowrie: My Lords, the University Grants Committee is, of course, subject to financial constraints; but so, my Lords, am I.
Baroness David: My Lords, is the Minister aware of how very frustrating it is for visitors to Cambridge (as I know is the case), knowing that the museum is open from 10 o'clock to 5 o'clock on Tuesdays and Saturdays and half day on Sundays, to arrive there in the morning wanting to see the pictures and finding that the picture galleries are not open until 2 o'clock?

1371
One disabled visitor I knew was left at the museum hoping to see the pictures—she is an artist—and had to spend two hours, until she was picked up, with the armour—which was not what she wanted at all. Can the Minister not do something by some special grant to help these particular museums? I understand that it will cost only £300,000 for the Fitzwilliam to be open every day of the week, including Mondays. That is not a very large sum.
The Earl of Gowrie: My Lords, I am sure that the noble Baroness and the House will be aware that, as a Minister, I am something of a way station for funding. I have a number of client bodies. I argue and negotiate the money for them in each financial year and then hand it straight over. Unfortunately, I do not have a nice little contingency reserve all of my own for these admirable purposes.
Lord Jenkins of Putney: My Lords, is the noble Earl the Minister aware that if the Government persist in their plans to abolish the metropolitan counties many more museums other than those which are mentioned in the Question will be in difficulty? Will he suggest to his noble friends here and his right honourable and honourable friends in other places that they should not persist in these proposals?
The Earl of Gowrie: My Lords, the noble Lord is well aware that the Government's proposals to abolish the upper tier of local government has nothing to do with arts and museum funding, as will soon be apparent.

Orton and Vera Chirwa: Death Sentences
Lord Hatch of Lusby: My Lords, I beg leave to ask the Question standing in my name on the Order paper.
The Question was as follows:
To ask Her Majesty's Government what action they have taken in conjunction with their EEC partners to save the lives of Orton and Vera Chirwa, under sentence of death in Malawi, and what response has been received.
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne): My Lords, this is an internal matter in which we have no standing. Nevertheless, we and our partners are very aware of the humanitarian aspect of this case and are in close consultation.
Lord Hatch of Lusby: My Lords, I thank the noble Lord the Minister for that reply. May I ask him whether he is aware that in this Question there is no implication whatever of any criticism of the course of justice in Malawi? May I ask him further whether he is aware that life President Hastings Kamuzu Banda is held in great esteem in the country and that it would be a great act of clemency, which would give him considerable standing and reputation in this country, if
1372
he were to use his clemency to commute the death sentence which has been passed on Orton and Vera Chirwa, who are also held in great respect in Britain?
Lord Trefgarne: My Lords, I certainly agree about the respect in which President Banda is held in this country. The judicial process in this particular case is, of course, now complete, but there is a procedure for consideration of clemency. We understand that under this procedure this case would be referred to the Capital Sentences Review Committee, who would submit their recommendation to the President.
Lord Elwyn-Jones: My Lords, in considering this matter, would not President Banda and his colleagues be well advised to heed the wise and somber words of Winston Churchill: "The grass grows quickly over the battlefield: over the scaffold, never"?
Lord Trefgarne: My Lords, I think we shall take every opportunity to express our views to the Malawian Government in this matter, and we certainly think that the humanitarian aspects of this case ought to be paramount.
Baroness Llewelyn-Davies of Hastoe: My Lords, is the noble Lord aware that the very many friends of this distinguished lawyer and his wife will warmly welcome his statement that Her Majesty's Government are in contact with other governments in the EEC about this, and that we fervently hope that the President, who is known for his humanitarian views, will commute these tragic death sentences?
Lord Trefgarne: Yes, my Lords. I agree with the noble Baroness and, as I say, the British Government and our European partners are considering what the next step might be.
Lord Hatch of Lusby: My Lords, will the noble Lord consider whether he could advise his right honourable friend the Prime Minister that she might take an initiative, perhaps an all-party initiative, before the time is too late, to press, along with other European countries, the claims for clemency in this case and assure President Banda that his reputation would be greatly enhanced if he were to listen to such a plea?
Lord Trefgarne: My Lords, it seems to me that on this rare occasion the noble Lord and I are in no disagreement.

Political Donations and Honours
11.16 a.m.
Lord Jenkins of Putney: 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 can confirm that the average contribution made in the years 1979–82 to the Conservative Party by the companies of eight directors of private companies recently granted peerages exceeds £100,000 each and if so what they infer from this.
The Lord President of the Council (Viscount Whitelaw): My Lords, it is not a ministerial responsibility to answer questions about donations to the Conservative Party, but, whether or not the figure quoted by the noble Lord were confirmed, Her Majesty's Government would draw no inference relevant to the award of life peerages.
Lord Jenkins of Putney: My Lords, will the noble Viscount consider that, since 1979, the top 18 contributors to the Conservative Party have received five peerages and nine knighthoods, whereas the top 18 industrial companies have done very much worse than that? Ought not the Political Honours Scrutiny Committee to take a look into this problem, especially having regard to the fact that, while the Conservative Party is filling its coffers in this manner, it is at the same time seeking to diminish the slender resources of the Labour Party?
Viscount Whitelaw: My Lords, the noble Lord asked me whether I will consider all these matters. The short answer to him is that I will not. The reason I will not is that the Political Honours Scrutiny Committee, composed of three very prominent Members of this House, does so.
Lord Boyd-Carpenter: My Lords, does my noble friend recall the wise saying which he might suggest to the noble Lord opposite: pursi omnia pura—to the pure all things are pure?
Viscount Whitelaw: My Lords, I am grateful to my noble friend for translating it for me. It always helps in my case. I am sure that I agree with him.
Lord Paget of Northampton: My Lords, would the noble Viscount agree that you would have to be very pure indeed not to draw the inference made by this Question?
Viscount Whitelaw: My Lords, that is exactly why I have not sought to draw any inference one way or the other.
Lord Elwyn-Jones: My Lords, is this not an appropriate occasion to wish many happy returns of the day to Mr. Harold Macmillan?
Viscount Whitelaw: My Lords, I am extremely grateful to the noble and learned Lord for his very kind remark. I always forget what you call somebody who is in limbo to the extent that Mr. Macmillan now is. But I think that he is Mr. Macmillan and I am sure that there will come a time when this House will greatly welcome him here.
Lord Jenkins of Putney: My Lords, while joining with great pleasure in wishing many happy returns to Mr. Harold Macmillan, will the noble Viscount the Leader of the House suggest to his noble friend that he should not confuse purity with naïvety?
Viscount Whitelaw: My Lords, I am very anxious never to make any suggestions to my noble friend.
Lord Nugent of Guildford: My Lords, is my noble friend aware that the arrival of many Life Peers in this House is a source of astonishment to their friends, and even more to their acquaintances? In those circumstances, would it not be more becoming to the noble Lord, Lord Jenkins of Putney, if he extended the same good faith to other noble Lords as they so regularly and frequently do to him?
Lord Jenkins of Putney: My Lords, I am not questioning anyone's good faith. I am questioning the system.
Viscount Whitelaw: My Lords, perhaps it would be appropriate to leave it there. I am grateful to the noble Lord for saying that he is not impugning anyone's good faith.

Orkney Islands Council Order Confirmation Bill
Brought from the Commons; read a first time, and (pursuant to the Private Legislation Procedure (Scotland) Act 1936) deemed to have been read a second time and reported from the Committee.
Travel Concessions for the Unemployed Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Research and Development: ACARD/ABRC Report
11.21.am.
Lord Sherfield Lord Sherfield rose to call attention to the First Joint Report by the Chairman of the Advisory Council for Applied Research and Development (ACARD) and the Advisory Board for the Research Councils (ABRC) (Cmnd. 8957); and to move for Papers.
The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. Most of your Lordships present here today will recall the publication of the Report on Science and Government by the Select Committee on Science and Technology in December 1982. In this report a number of recommendations were made concerning the way in which Ministers receive advice on questions of scientific policy, and various changes were proposed. In their reply, the Government rejected many of the specific proposals put forward by the committee but accepted in great part the thrust and substance of the report and proceeded to implement it in their own way.
For example, the committee recommended the appointment of a Government Chief Scientist at Second Permanent Secretary level. In the event, the Government raised the rank of the Chief Scientist in the Think Tank, the CPRS, and agreed to reinforce his staff. Then, as it happened, the CPRS was abolished and the Chief Scientist was able to emerge from his cocoon and stand on his own feet.
Similarly, the committee recommended the appointment of a Council on Science and Technology, presided over by the Chief Scientist, which would, among other things, issue an annual "State of the Nation" report on science and technology to Parliament. In the event, the Government proposed a closer working relationship between the Advisory Board of the Research Councils and the Advisory Council for Applied Research and Development and asked the chairmen of these two bodies to prepare joint periodic reports on the state of science and technology in the United Kingdom and selectively to review scientific opportunities and their implications.
Although this is a rather different kettle of fish from that cooked up by your committee and although this first report which we have before us today may not be quite what the committee ordered, I nevertheless wholeheartedly welcome its publication. It gives this House and, indeed, the other place an opportunity to review the working of the machinery for scientific advice to the government and to discuss questions of scientific policy over a wide field. It should also help to promote public debate and interest in the development of scientific policy.
I shall here draw your Lordships' attention to the hope expressed by the authors of the report that some parliamentary time could be found for these matters, so crucial to the future well-being of the nation. I am aware that a long—indeed, an overlong—period of time has elapsed since the report was published and the Motion standing in my name was placed on the Order Paper, and that things may have moved on in the interim. Indeed, I hope that they have moved on.
In their report on science and government your Select Committee also recommended a more constructive use than hitherto of the general machinery for interdepartmental co-ordination so as to meet the need for a more effective review of the broad deployment of effort in the field of science and technology. The Government took this point and decided to introduce a system of annual reviews of research. The first of these reviews, Government Funded Research and Development for 1983, was published last month. This is another welcome development.
I do not propose to try to summarise what is succinctly stated in the introduction to the report. It is admittedly the first attempt to marshal the statistical information into a data-base which will be the essential foundation for future reviews and which, in addition to Government funded research, will next time include the expenditures for the rest of the public sector—in particular the nationalised industries—and will set public sector expenditure against information on the research and development activities of the private sector.
This report takes the definitions of basic, applied and other categories of research from the so-called Frascati Manual drawn up by the OECD in Paris. This manual seems to be very involved. If generally adopted, it will, I suppose, enable accurate comparisons to be made with expenditures on the various categories of research and development with that in other OECD countries, but for the present I
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hope we can keep to the more familiar categories of basic, strategic and applied research.
Thirdly, I want to draw your Lordships' attention to another recently published document, of considerable relevance to this debate. It is the Study of Commissioned Research by Sir Ronald Mason, until recently the Chief Scientist of the Ministry of Defence, undertaken at the request of the chairman of the ABRC and published by the council last November.
This study was set up essentially to inquire into the application of the Rothschild customer-contractor principle, primarily by Government departments in commissions to the research councils and to universities and polytechnics, and within this framework to examine how provision should best be made for strategic research. Sir Ronald Mason marshalled a distinguished group of witnesses. Again, I shall not try to summarise the conclusions of the report but will merely observe that it reinforces some of the anxieties voiced in the Report of the Select Committee on Science and Technology as regards the application of the Rothschild principle, as regards the system for providing scientific advice to departmental ministers, and the role of the ABRC itself. These were matters which your Select Committee thought should be considered by the scientific council which they proposed should be set up. The Government did not accept this recommendation and were inclined to play down the Select Committee's anxieties on these particular matters. Nevertheless, the Mason study, and to some extent the joint report itself, indicates that the system may require further modification.
So at this point I should like to ask the Minister to comment on the progress of the measures which the Government agreed to take following on the Select Committee's report. Is the Chief Scientist now adequately supported and staffed, and what are the channels through which he can report to ministers other than the Prime Minister? What action is proposed to meet the criticisms and proposals in Professor Mason's study on commissioned research? Thirdly, has the Minister anything to say about the unhappiness which apparently still exists in certain quarters about the arrangements for advice on scientific policy in some departments, which is reflected in the Mason study? I find this continuing worry rather surprising, especially now that a Committee of Departmental Chief Scientists, chaired by the Chief Scientist, has. I think, been set up.
A few words now about the joint report itself. The Review of Research 1983, with its statistical information, to which I have just referred, was not ready when this joint report was written. It is therefore of a general nature and sets policy for science and technology in the context of the changes occurring in our society and in our industrial performance. The report provides a framework against which future reports may be read. It stresses at the outset the interaction and the interdependence of fundamental science and the day-to-day application of technology. It describes the pattern of our recent industrial performance, emphasising the decline of our manufacturing industry and the need to recover our position as a leading manufacturing nation.
The report sets out the present level of government support for basic and applied science and notes the

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pressures upon that level of support. It emphasizes and expresses anxiety about government cutbacks in finance for universities and the effect of those cutbacks on university research. In this connection, it draws particular attention, in paragraph 4.7, to the report of the recent joint working party between the ABRC and the University Grants Committee under the chairmanship of Sir Alec Merrison, published as Command Paper 8567 in 1982.
This leads the authors to stress the importance of selectivity and precision about priorities in recommending research projects, and laments the lack of collaborative research as practiced in Japan. In the authors' view, it is essential that the selection of areas on which to concentrate should be sharpened up with a view to improving the industrial exploitation of the research available. We have been inclined—and I paraphrase—to fluff the hard decisions and to spread our resources too thinly. The report goes on to emphasise the need for international collaboration, both in basic and applied science and technology, recognising that this involves long-term commitments which will have an effect on the United Kingdom's domestic science programme by reducing flexibility and limiting the choices available.
More attention should be given to the import of technology and to collaborative international programmes. The report welcomes the extra staff support, which it describes as modest, which will enable the Chief Scientist to give greater attention to international links and a better coherence in policies towards international research and development programmes.
The report then makes some pertinent comments on the relationship between Government and industry in the field of science and technology, stressing the need for longer views to be taken and for more effort—for example, by public purchasing—to encourage the development of new products and their marketability. Reference is made to a number of reports by ACARD on aspects of this question and to your Select Committee's report on Engineering and Research and Development.
There follow sections on the right climate for innovation, on the importance of design, and on the need for more research and development in the burgeoning service industries. Given the increasing importance of those industries (I quote),
"the case for devoting more intellectual effort to their long-term development appears strong, but both the areas for investigation and the mechanism for funding are yet obscure".
Finally, the report stresses the well-worn theme of the need for a responsive educational system—responsive to the rapid changes in science and technology, especially information technology; responsive to the needs of employers; and responsive to the requirements of a population familiar with scientific concepts and open to technological developments.
This is a wide field and I have no doubt that subsequent speakers will seek to enlarge upon one or other of the principal themes. For my part, I will refer to just two aspects on which I should like the Minister to comment, and I will then venture two or three observations.
My first point concerns the serious effects of the Government's approach to the dual support system. While the science budget has remained more or less constant in real terms (although I understand that a declining proportion of it goes to universities) the system's second leg—the general support for universities—has been cut substantially, thus unbalancing the system.
Anxiety about the effects of this run like thread through the joint report. The factual position is stated in paragraphs 3, 12 and 13. The subject comes up again in paragraph 3.16, and a note of alarm is sounded in paragraph 4.6. The recommendation of the working party in Command Paper 8567, to which I have referred, that universities should channel proportionately more of their funds into research and concentrate research funds into selected areas is called a development of "major importance". In paragraph 4.20, the report states:
"The sharp decline in UGC funding…will undoubtedly affect the development of some promising scientific and technological areas within universities".
What do the Government have to say about those anxieties?
The second main concern which runs through the report is really a reflection of the first; it is about the adequacy of support for basic and strategic research. There is a key sentence early in the report:
"the part played by fundamental research is crucial in underpinning the nation's long-term ability to produce new technological concepts".
The authors revert to that theme in their conclusion. Your Select Committee's report of 1982 expressed the view that certain areas of research were being neglected. The Government referred that observation to ACARD and the ABRC, and one outcome was Professor Mason's Study of Commissioned Research. The conclusion of his study was that strategic research, which has never been integral to commissions as Rothschild recommended, is not adequately covered. It is increasingly being supported from the Science Vote, with a consequent reduction of funds available for basic studies, and,
"The links between basic strategic and applied science are not being properly reviewed".
In more than one of its inquiries—for example, that on forestry research and development, and on research and development in the water industry—your Select Committee observed that some government departments have cut down on their support for strategic research. Where contractors' funds run short, it is applied research which tends to be supported and the element of strategic research squeezed out. This is obviously a matter of great concern in the scientific community, and I wonder whether the Government have anything to say about it today.
Speaking more generally, it seems that there may be a belief that shuffling the pack and redistributing some of the cards, without any increase in resources, will help to resolve some of these difficult problems; in other words, that it can be done by mirrors. I have no doubt that, given time, there is scope for reorganisation and rationalisation in the university system and, for all I know, in the fields covered by the research councils. But take the recommendations that the universities themselves should channel more of

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their reduced resources into research: that can only be done at the expense of something else—and is that something else to be teaching? As the saying goes, "something's got to give". I have an uneasy feeling that there are some false economies in the offing.
The second general observation is that in this report we have a clear message that we have been trying to cover too wide a field and that in order to arrest and reverse our economic decline we need to concentrate much more than we have done in the past on the selective industrial exploitation of research, drawing on what is available both at home and abroad. For only thus shall we penetrate successfully the market-places of the world.
My third observation relates to the importance of developing further international collaboration on major scientific projects. It is no doubt unfortunate that the pound sterling's relative decline has made our participation in some international projects more expensive and placed an increased claim on the available resources. But we should recognise the need to stay in these international bodies and projects, and we can here welcome the recent new arrangements with some of our European partners in fast reactor technology.
Let me conclude by repeating that I welcome this report and its companion piece from the Cabinet Office. In your Lordships' Select Committee's report on Science in Government we said in conclusion:
"What, above all, is needed is a strengthening of the scientific dimension in Government as a whole".
The contents of these recent reports raise hopes that this may be happening. Both reports admittedly have a preliminary character, and fuller reports are promised for the future. We shall look forward to receiving these in about one year's time, but meanwhile we are glad of the opportunity to debate what we have before us. My Lords, I beg to move for Papers.
11.43 a.m.
Lord Lucas of Chihtorth: My Lords, may I start by saying that both I and my noble friend Lord Whitelaw will listen to this debate with the greatest of interest. At the same time, may I say how grateful we are to the noble Lord, Lord Sherfield, for giving the House the opportunity of considering the report. He and his colleagues on the Select Committee for Science and Technology (of which I was once a member: a most useful period in what I might perhaps call my higher education) have brought major issues in science and technology to our attention in recent years, their latest report, on remote sensing, being published only this week. Today we have an impressive list of speakers, including the noble Lord, Lord Todd, chairman of the Select Committee. Indeed, as the noble Lord, Lord Sherfield, has reminded us, the paper we have to consider this morning stems directly from one of the Select Committee's reports.
In their response to Science and Government (Cmnd. Paper 8591, para. 10) the Government said that they would invite the chairmen of ACARD and ABRC to present periodic reports on the state of science and technology and current opportunities.
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May I now record the Government's appreciation of the work of the authors of this report and of the bodies that they lead. Both ACARD and ABRC have contributed much to our understanding of scientific and technological developments over the past years. Their various and individual reports have illuminated areas of scientific and technological advance, and have assisted government in creating conditions in which such advance may take place. Sir Henry Chilver and Sir Alec Merrison will be well known to many in this House. We acknowledge their leadership—now, in the case of ABRC, carried on by Sir David Phillips.
The chairman's report ranges over a broad canvas, and indeed the noble Lord, Lord Sherfield, has touched on what he sees as some of the most crucial areas. If I may, I should like to say something about the Government's approach to some of the principal themes, and in doing so I hope I shall be able to answer some of the questions which the noble Lord addressed to the Government in his opening remarks.
I turn first to the Government's support of universities and research councils. My right honourable friend the Secretary of State for Education and Science is responsible for the Science Vote and for the general grant to the University Grants Committee. The Vote covers grants to the five research councils as well as smaller grants to the British Museum and the Royal Society, and I am particularly pleased that for the year 1984–85 there is a small grant (unhappily it is small, but there it is) to the newly-founded Fellowship of Engineering. The size of the Science Vote in 1984–85 will be £550 million in cash terms, and that has been maintained. The research element in the UGC grant of £1,200 million, although not identified, is frankly estimated at about the same order of magnitude. If I may, I should like to return to say something further about the funding of university research in a moment.
Taken together, the Science Vote and the UGC grant constitute what is sometimes described in shorthand as government support for basic research. Just as Sir Alec Merrison and Sir Henry Chilver have stressed in their reports the interaction and interdependence of science and technology, so we need to be careful about talking of clear dividing lines between basic, strategic and applied research. My point is that few scientists, even when engaged on the most basic research, do not have at the back of their minds some possible application, however far into the future. On the other hand, research undertaken to solve a very particular problem can bring to light a lack of basic understanding of the underlying science, which can then become the subject of basic research.
At the Seminar on Science and Technology in Industry, chaired by my right honourable friend the Prime Minister last September, all speakers stressed the fundamental importance of basic research carried out in our universities, polytechnics and research institutes. This is the essential base for technological growth. In the last resort, of course, everything depends on the quality of the individual scientists working in universities, research institutes and laboratories, and indeed in industry. The quality of the research they produce depends increasingly not only on their intellectual calibre but on access to the essential tools of research. If we are to retain our best

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scientists we have to provide them with the surroundings and the resources they require to undertake this first-rate research.
This takes us straight to the problem which is engaging scientists and government: how to ensure that first-rate research is undertaken within the financial limits, which have become tighter. The Government have responded to the 1982 report of the Advisory Board for the Research Councils by broadly protecting the science budget from the general reductions in expenditure which it has been felt necessary to make. But if I accept that this is a period of remarkable growth in scientific understanding, with the potential for application in many fields, then I have to acknowledge that not all of these potential developments will lead to immediate, or even early, applications. Some may never have any commercial application at all; but one can never really tell.
Here I would like to say a word or two about university and industry links. This is important because both sides benefit. Industry has access to the knowledge and expertise in the universities and polytechnics, while they in turn benefit by participation in the application of their ideas and in the enrichment of their teaching. We can all think of universities which have actively developed strong links with industry, but I think we would equally agree on the great need to strengthen those links and to develop new ones. This will require a change of attitude on behalf of some universities and a positive response from industry.
The ACARD/ABRC report on Improving Research Links between Higher Education Institutions and Industry estimated that in 1981–82 industry spent about £35–£40 million in higher education institutions. As I said, this compares with a UGC grant of £1,200 million and about £200 million spent in universities by the research councils. I must not anticipate the Government response to the ACARD/ABRC report, but I would certainly think that there seems to be considerable scope for more investment by industry. It would be wrong of me to give the impression that either I or the Government think that future problems will be solved by the provision of extra funds. The Government have to consider any increases in public expenditure within the context of their financial and economic policies.
This work of ABRC and the research councils is entirely in line with the annual review of research which the Government announced in their observations on the First Report of this House's Select Committee on Science and Technology (Cmnd. 8591). The Government then spoke of the need to distinguish between vital and dormant areas of research, to identify gaps, disparities and duplications and to consider the opportunity cost of relinquishing certain areas of research. The noble Lord, Lord Sherfield, particularly referred to this; to determine which is the best way to go.
I said earlier that I wanted to say something further about university research and perhaps I ought to turn to that now. A number of recent reports, not least the report of the Joint ABRC/UGC Working Party chaired by Sir Alec Merrison, have expressed concern about the erosion to the research base. Many of the
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Merrison recommendations were addressed to the universities themselves—in particular, that universities should, as a longer-term objective, channel proportionately more of their funds into research and that they should set up research committees to decide research areas on which universities should concentrate.
The Government, in the light of the Merrison report and in response to the 1982 ABRC report, announced in 1982 its "new blood" initiative. Under this scheme nearly 700 extra staff in the natural sciences and technology are to be appointed in United Kingdom universities. The extra funds for "new blood" posts were provided through the UGC. However, the science budget was also augmented by some £2½ million in each of two years to enable support staff—technicians and others—and also equipment, to be provided in support of that new initiative. Because of the concern expressed in the Merrison and other reports my right honourable friend the Secretary of State for Education and Science wrote to the Chairman of the UGC asking the committee to consider what measures might be undertaken to increase the resources devoted to both fundamental and applied research. He went on to suggest that greater selectivity in the funding of research activity both within and between institutions might be necessary. Indeed, one possibility might be the allocation of some UGC funds only after consideration with the research councils of individual universities' research plans. The UGC is now consulting the universities and following the replies from them the UGC will be replying to my right honourable friend later in the year, who will then be considering the recommendations.
Secondly, I turn to the relative roles of government and industry. The Government's role in basic research is clear. It is rightly the principal source of funds; a position accepted in all the major industrial countries. But in applied research and development—and particularly where that research and development is related to the needs of industry—the Government's role is, as the report notes, more complex. It cannot be, and should not be, the main source of funds. Industry is the best judge of where new markets will appear and what new products will be needed to satisfy those markets. Industry will back those judgments with its own investment in research and development.
There are still calls for the Government to take the lead in devising a national strategic industrial plan. Indeed, it was the noble Lord, Lord Gregson, who made this point so abundantly clear not only in his own report but in the debate we had on that report. However, I have to say that it is not for government to devise that kind of plan for industry and technology. Only firms can take the necessary decisions. Firms have access to the detailed and day-to-day information about the market-place. It is their future survival that depends on their getting the decisions right. Where government can help is in their support of the key technologies on which future industry will be based. And here mechanisms do exist for consultation between government and industry; through NEDO, through the various advisory bodies that serve the departments, and of course through ACARD, and perhaps a little more energetically with the

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professional institutes, which, I believe, could play a very much greater role here.
My right honourable friend the Secretary of State for Trade and Industry recently published the strategic aims of his department. It will be seen that the stimulation of innovation is one of three key objectives. Your Lordships will already be familiar with what that department has done to encourage better understanding of the importance of new technology, in industry, through schemes for micro-electronics, information technology and so on. But the main role for government must be to maintain a climate that stimulates and encourages enterprise, and rewards it.
Some of the research and development needed to support industrial technology is carried out in the Government's own laboratories. It is, of course, important that industry should be closely involved in this work. Noble Lords will be familiar with the role of the Department of Trade and Industry's requirements boards, with their strong industrial membership. But the boards are also keen to ensure that the results of the research in the department's laboratories are passed to industry and used. An effective way to make that happen is to involve industry in the programmes by setting up "club" arrangements; sharing with government the cost of programmes and sharing with government the rewards of those results.
Sometimes more formal machinery is needed to ensure the results of public sector R & D are fully exploited. As my right honourable friend the Prime Minister said at the seminar to which I have already referred, a new role was announced for the British technology group. It will in the future concentrate its efforts on fostering an improved flow of technology from the research laboratories into new products and processes in industry.
The dissemination and application of research and information are vital steps in creating wealth from science and technology. Indeed, if I refer again to the noble Lord, Lord Gregson, noble Lords will understand, as I served under him, that I was perhaps a little more involved with that committee's report than with others. It was that Select Committee that called for a review of this process to which I have just referred. The Department of Trade and Industry is undertaking such a study for ACARD. The report specifically requested that the Department of Trade and Industry—the Department of Industry as it then was—carry out this study.
In another area the Government can exercise an important influence on the development of new technologies through their role as a purchaser, and the Government remain fully committed to that. The message has been emphasised not only within central departments but also to the nationalised industries, local authorities, and, indeed, to the suppliers.
However, I think that the point to bear in mind is that both nationalised industries and local authorities are completely responsible for their own purchases. This is, of course, right. The Government advise, but that is really all they can do. However, we have been very pleased with the response that has been forthcoming in recent months.
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Thirdly, I should like to say something about science education. The noble Lord, Lord Sherfield, in his final remarks said that he would like to hear what we felt. The Government have made it clear that they wish to see a shift in the balance of provision in higher education towards subjects of more direct relevance to industrial and commercial development. Over three years the programme to enhance teaching and research in subjects related to information technology will provide about 5,000 extra student places at higher diploma, first degree, post-graduate and post-experience levels.
The planning exercise for 1984–85 undertaken by the National Advisory Body for Local Authority Higher Education, and endorsed in its entirety by my right honourable friend in December last, provides for a substantial further shift of the provision towards engineering, science, technology and business-related subjects. Those plans envisage and provide for the intake of first-year students to full-time and sandwich courses in engineering subjects this year to rise by 15 per cent. relative to 1982; in science and applied science by 7 per cent.; and in mathematics and computing by about 50 per cent. In 1986 the total full-time graduate output from higher education in science and engineering is likely to be about 38,000 men and women compared with 27,000 in 1979.
Several noble Lords very courteously said to me a few days ago that they may wish to say something about the use of the so-called Frascati definition. Indeed, the noble Lord, Lord Sherfield, mentioned this. It may be appropriate if I say something about that now. First, there is nothing new in the Government's use of the Frascati definition. It has been regularly employed in the annual statistics of Government R & D expenditure compiled by the then Department of Trade and Industry and published in Economic Trends. It has also been used for that department's triennial surveys, of which the most recent, for 1981, was published late last year. Secondly, the Frascati definition is, as the noble Lord acknowledged, widely recognised internationally, and so its use enables one to make proper and valid comparisons of R & D expenditures in different countries. In a subject quite bedevilled by different definitions, this must be of great benefit. Thirdly, the Frascati definitions of basic and applied research, set out in the appendix to the annual review, do not make any reference to timescales. I know that there has been some concern about so-called strategic research, which is neither directly applicable nor yet wholly for the sake of knowledge. This may not feature explicitly in this definition, but applied R & D under that definition may have a very long time to application, but I can assure your Lordships that such research is indeed included in the annual review.
I think that perhaps some of the surprise about the use of the Frascati definition stems from the fact that departments have not previously been particularly rigorous in their definitions of R & D when issuing, for example, annual reports. As a result, they have included activities which, although relevant to scientific and technological advance, are not strictly R & D. One of the early achievements of the annual

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review has been that it has revealed such inconsistencies, and as a result we shall have a truer picture of the Government's R & D activities in the future.
I apologise to noble Lords if I am taking an inordinate amount of time, but it is a very wide subject. May I briefly refer to one or two of the more specific points that the noble Lord, Lord Sherfield, made. He referred to a certain amount of unhappiness which apparently exists over arrangements for advice on scientific policy. As your Lordships will know, this subject was studied by his sub-committee in the course of preparing the Science and Government report. The arrangements were then most thoroughly reviewed by the Government, whose conclusions were set out in Cmnd. 8591 only 18 months ago. We do not think that anything has happened since which should cause the Government to revise those conclusions.
Sir Ronald Mason, in his report on arrangements for commissioned research, made comments on that position and on the position of departmental chief scientists and other matters. The noble Lord, Lord Sherfield, asked what the Government would be doing about his recommendations. In Cmnd. 8591 the Government asked ABRC and ACARD to review the links between basic and applied research and in particular to look at the arrangements for long-term but directed research—which is sometimes called strategic research. It was partly because of this, and partly because of concern about the fall in commissions experienced by the Natural Environment Research Council that the chairman of ABRC asked Sir Ronald Mason to carry out this report. Although the conclusions to which the noble Lord, Lord Sherfield, has drawn our attention are as he says, I understand that both ABRC and ACARD are at present considering the report. It will then be for the Ministers concerned to consider any recommendations which affect their departments as a result of the recommendations that may come from the two bodies.
I have trespassed very long on the time of noble Lords who are very much more expert in these matters than I am. As I said earlier, my noble friend and I are anxious to hear them. Let me perhaps reiterate what I said earlier. I have no doubt that other Lords throughout today's debate may well argue, as did the noble Lord, Lord Sherfield, for increased funds for the universities, research councils and other worthwhile research institutions and projects. The Government are always ready to listen to persuasive arguments. We have heard many in your Lordships' House and I have no doubt that we shall hear others. Equally, we have to consider such arguments within the context of our policies on public expenditure.
The Government have protected the science budget, and I underline that fact. They have responded to particular needs and problems, and I think that I have responded to some of those today also. But I certainly could not give an undertaking that some of the problems currently facing scientific research and development will automatically be solved by the provision of more public funds. The noble Lord, Lord Sherfield, spoke about false economies. When I was a younger man I spent many years working for a very large company in this country. I was once asked exactly what I had to do for it. I was a commercial
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business man and my job was to ensure that that company's assets were fully and totally utilised. I think that sometimes in terms of research and development we should look again to see whether that which we already have is being fully utilised to the benefit of society.
That takes me to my very last words. In the report before us nobody can quarrel with paragraph 2. I was delighted to see that it is headed, "Science, technology and society". All three have an inextricable joining. Society needs technology and it needs science. I do not think that I can add further to what are the Government's views at this time. Certainly my noble friend and I shall listen most attentively, and if further advice or assistance can be given to your Lordships, I am sure that my noble friend will give it when he winds up the debate.
12.10 p.m.
Lord Gregson: My Lords, first, I wish to thank the noble Lord, Lord Lucas, for his kind remarks regarding the time that we spent together on the subcommittee. They were very interesting sessions, and I am sure that we both learned a great deal during that period of time. I also wish to thank the noble Lord for his announcement of the study on technology transfer which is at present taking place, and I look forward with great interest to its outcome.
I am grateful to the noble Lord, Lord Sherfield, for introducing this debate on the joint report by the chairmen of the research boards. In my opinion it is an important subject at this time. I also wish to congratulate the chairmen of the council and the board on an excellent and most useful report. I wish, too, to congratulate the chief scientist of the Cabinet Office on the related annual review of government-funded R & D. This is an excellent start, and I know what difficulty he must have had in drawing the information from the many government departments on a comparative basis. Like the noble Lord, Lord Sherfield, I hope that the annual reviews will continue and we shall have many more debates in your Lordships' House.
The general report was published in July last year, and the situation has developed since then. Therefore, first I wish to comment on the situation that the report presents in Section 3. The report clearly recognises the importance of manufacturing industry to the future economic well-being of this country, and it recognises, too, the decline in recent years of this sector of British industry. It also clearly recognises the need to improve the performance and reverse the decline. Furthermore, the report stresses the importance of research and development as one of the key issues without which the improvement is not possible. It seems to me that what the report does not do is to recognise the enormity of the task, nor the urgency with which we must address the problem.
In paragraph 3.4 the report quite rightly predicts the possibility that some time in the future for the first time in history the United Kingdom will have a deficit in manufactured goods. This has now happened, and much sooner than was aniticipated. From the uncorrected figures issued by the Department of Trade and Industry a few weeks ago, it appears that in 1983

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our deficit in manufactured goods was about £3 billion. What I think is of more concern—and which is not commented upon in the report—is the rate of the decline. We were £5 billion in credit in 1981, £2 billion in credit in 1982, and £3 billion in debit in 1983.
Those are very worrying figures indeed. Where does it stop? The report quite rightly points out that there are now whole sectors of products based on high technology which are wholly, or substantially, met by imports. In parallel with this miserable prospect, paragraph 3.6 points out that the overseas earnings from North Sea oil have in a large measure compensated for the decline in our overseas earnings from manufactured goods.
The positive balance of oil trade to the United Kingdom in 1983 from the same source that I have just quoted was nearly £7 billion and this has completely masked the importance of the decline in our overseas earnings in manufactured goods. The report goes on to warn us that it would be unwise to regard this relief as giving us more than a temporary respite and in the end we must re-establish our position as one of the world's great manufacturers.
Here again I do not think that we are fully aware of the urgency of the situation. Perhaps I may quote the second leader in the Financial Times of Wednesday of this week entitled, "The last act of the North Sea Drama". The leader starts:
"Britain's career as a major oil producer is in the process of entering a new and slightly confusing phase".
It later continues:
"Everyone knows, however, that the hand of the clock is almost at midnight. Then the glass coach will turn back into a pumpkin and Britain will, once more, struggle to balance its books. It will suffer a decade of decline in an industry which currently accounts for about a quarter of UK industrial investment, supplies 13 per cent. of the UK tax revenue and which, one way and another, employs about 100,000 people. Barring a major series of discoveries, which no oil company believes to be likely, oil production will peak in 1985 or 1986, and shortly thereafter oil tax revenues will commence a precipitous decline".
In other words, we are but two short years away from the peak out of the maximum flow of North Sea oil. The Financial Times was commenting on the drastic effect that this will have on the Government's revenue, but I would suggest that the effect on the trade balance could be even more serious for, as the output starts to fall, the effect on our trade balance will be immediate, and though the decline beyond self-sufficiency might be much slower, we shall at least lose the £7 billion credit—or whatever the figure might be at the time—and retreat into the trade deficit crisis of the 'sixties and 'seventies. If we add together the steep decline in the manufacturing sector performance with the potential wiping out of the positive oil balance in perhaps three short years from now, I would suggest that the situation is very worrying indeed.
Having said that, I now wish to turn to the annual funding report of R & D and see what the Government have done to support research and development in this vital area of manufacturing industry which will be so crucial to the economic well-being of the country. Under tables 13a and 13b, relating to the expenditure by the Department of Industry in 1981–82, we see that out of a total Government expenditure approaching £3 billion, we spent only £280 million supporting
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manufacturing industry, which provides some £75 billion of our GDP and 43 per cent. of our overseas earnings. We spent about 8 per cent. of the total R & D support.
In fact, the position is even worse than that because if we take out from the Department of Industry figures the support given to the narrow sector of Aerospace we see that the amount spent on supporting the broad spectrum of manufacturing industry is only a little over £100 million—3 per cent. Not for one instance do I think that we are over-spending in the other areas, such as defence, which supports one of the most viable sectors of our industry and provides very considerable overseas earnings, nor in what we spend on basic research through our universities, though it is in itself many times the figure that we spend supporting industry. Where I think we are wrong in absolute terms, and in comparison with our major competitors, is that we are spending far too little in this vital area. Further on, in paragraph 4.18, the report recognises that because of the low profitability of this sector of industry, there is no way that industry can increase its own spending to attempt to reverse the decline.
The last sentence of paragraph 4.18, which suggests that between 30 per cent. and 40 per cent. of the R & D carried out in the private sector is funded by Government, is very misleading. The figure includes the very large defence spending for specialised reasons, and it completely masks the low rate of spending by both Government and industry for the bulk of the manufacturing sector. I would ask the Government to consider seriously the question of further support in this area.
Elsewhere in the report, in Section 4 and subsequent paragraphs, the need for selection is outlined. There is no way, within the resources of the United Kingdom, that the universities doing basic research, or industry in applied research, can cover all the areas of the rapidly developing fields of science and technology. I therefore wholeheartedly agree with the report that selection is essential. What I do not understand, and I shall never understand, is how you can possibly have selection on any logical basis without a predetermined strategy. That I believe to be the logic of Alice in Wonderland. I should be perfectly happy for such a strategy to be industry-led. To attempt to have selection without a strategy seems to me to lead to anarchy. The last thing we need at this time, with the serious situation that we face, is any form of anarchy.
I should like to conclude by referring to another fact of selectivity—that which relates to the universities. Because of the way that R & D in universities is funded, research activity in nearly all fields is spread too thinly. Each university in itself is all things to all men. I know that the University Grants Committee, with the encouragement of the DES, is attempting a change. I do not believe, however, that it is doing enough. The timescale is far too slow. Again, if we are to compete with the other major nations of the Western world, we must return to having centres of excellence where universities specialise in particular areas of activity. We simply do not have the resources to spread the effort thinly across all of them. We shall fail badly if we do not concentrate.
With regard to one particular area—advanced manufacturing technology—this point was well stated

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by a recent report of ACARD. I believe that the Government have done the nation a considerable service by preparing and publishing these reports. I look forward sincerely to the annual occurrence of their publication. They undoubtedly underline the importance of science and technology in government, but I wonder whether this is yet readily accepted in the Civil Service. There is still a continuing need, in my opinion, to support and strengthen the position of chief scientists and chief engineers within the departmental structures. This will not happen unless Parliament and Government keep constant vigilance on the position. Overall, in science and technology, this nation has no room to be complacent.
12.23 p.m.
Lord Flowers: My Lords, I must apologise to your Lordships for not being in my place for some of the opening speech of the noble Lord, Lord Sherfield. I was a little slow off the mark and then got stuck with the Changing of the Guard. I apologise to the noble Lord most sincerely.
The report that we are debating arises from the proposals of your Lordships' Select Committee on Science and Technology whose own report, Science and Government, was produced under the inspiring leadership of the noble Lord, Lord Sherfield. As the noble Lord will have told you, a further report, the first annual review of government-funded R & D, prepared by the Cabinet Office, has also appeared in response to those proposals. We on these Benches are grateful to the noble Lord for his many contributions to the development of R & D policies, and he himself can feel well satisfied that these particular recommendations have been heeded by the Government. I should also like to say to the noble Lord, Lord Lucas of Chilworth, that the science and technology community was grateful to the Prime Minister for her December seminar, which demonstrated her personal interest in such matters.
I welcome the first joint report by the chairman of the Advisory Council for Applied Research and Development and of the Advisory Board for the Research Councils. It is a sign of closer partnership between two very important bodies in their formulation of advice to government. Their work certainly overlaps, but it should not be forgotten that their major responsibilities are nevertheless distinct, the one concerned with applied R & D and the other with the supervision of the work of the research councils and their support of basic university research. They come together especially in regard to strategic research; in the words of the joint report:
"research in areas where basic principles are known but the final products have not yet been identified".
One contemporary example is information technology.
The membership of ACARD is rightly strong in people from industry with a sprinkling of academics. In ABRC, it is the other way round, equally rightly. As long as the two bodies collaborate—I trust that they will—I hope that the difference can be maintained, for there are tendencies to play down the significance of basic research in this country as compared with the
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United States, for example, where, even in an economic recession, industry itself chooses to fund a much higher proportion of university research than is the case here.
It is in this connection that I should like to draw attention to the recent announcement by the committee of vice-chancellors and principals, of which I am at present chairman, of a new standing committee involving universities, industry and commerce, including small businesses, to encourage further collaborative ventures in the transfer of technology from basic research into industry. We are very pleased that many senior business people have agreed to join us in this new initiative. We have had many additional spontaneous offers of help, for which we are grateful.
The joint report is a bit ambiguous about the relative roles of basic and applied research. Perhaps the two secretariats have not yet settled down in bed together. It identifies the key issue as being the selectivity to be applied to particular areas of basic research where,
"excellence by world standards must be the aim but the underlying emphasis should be the benefit to the nation and especially the development of new products and industries".
It is, of course, in the nature of basic research that one does not know the innovations to which it may eventually give rise. In reading that, one should therefore perhaps bear in mind the emphasis placed earlier in the report upon the way in which science and technology advance through mutual interaction, the one sometimes drawing from, sometimes contributing to, the other. Basic research in solid-state physics, for example, contributed essentially to the development of computer technology while computing has contributed massively to the later advances of molecular biology. However, the report certainly recalls a number of areas of long term strategic significance, such as bio-technology, remote sensing, information technology and marine sciences, where, in most cases, special measures have been taken to stimulate additional activity in response to perceived need.
As the noble Lord, Lord Sherfield, has said, on a number of occasions your Lordships' Select Committee has drawn attention to the relative lack of attention to strategic research, or, rather, to the universal tendency to try to avoid responsibility for funding it. It has proved to be the fundamental flaw in the customer-contractor theory enunciated with such devastating force by Lord Rothschild in 1971. That theory sounded very plausible. The customer asks for the research to be done; the contractor does it, if he can, and the customer pays for it. It is all very well for meeting immediate and obvious needs. For the longer term, however, it assumes that the customer knows what he wants and that, even if he does, he is willing to pay, by way of overheads or otherwise, for strategic research that may be of no use to him until the second or third time round. All too often in this country he is simply not willing, whether he is an industrial firm or a government department. Lord Rothschild did not intend it that way, and should not be blamed for the parsimony and myopia of others. But by recommending an arbitrary transfer of research council funds to government departments to enable them to fund

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longer-term applied research, a climate was created—which exists to this day—in which strategic research was effectively to be squeezed disproportionately as the economic recession began to bite.
The Alvey programme for information technology is a recent and very welcome reversal of that trend which, we must all hope, may become the pattern for the future. Even there, however, I had to draw the attention of this House on 18th January this year to the unsatisfactory funding of the information engineering committee of the Science and Engineering Research Council, which is supposed to fund the majority of the projects which are complementary to the Alvey programme for information technology. The current forward look for that committee shows a downward squeeze over the next five years which is not at all, I imagine, what was intended.
The Study of Commissioned Research by Sir Ronald Mason, published for the ABRC last November, provides some very welcome insights into what has happened to strategic research during the last decade, and I hope its recommendations will be taken very seriously indeed by the Government. His remarks about the essential role of the chief scientists are particularly well-taken by members of the Select Committee. I have particular concern for strategic areas of the earth sciences bordering on the responsibilities of the Natural Environment Research Council: for materials science and technology, where per capita spending in this country is only a tenth of what it is in the United States; and for research into land use, including the conservation technology of natural habitats.
Your Lordships will be aware that a great deal is happening nowadays to bring universities, industry and commerce into closer partnership. The noble Lord, Lord Lucas, has already acknowledged that. I have mentioned the CVCP initiative already, but we have the integrated chairs at Salford; the science parks at Aston, Cambridge, Heriot-Watt and Warwick; visiting professors from industry who take part in teaching as well as research at Imperial College and elsewhere; and a growing volume of contract research and consultancies at many universities.
In yet another report—this one produced for ACARD under the chairmanship of Sir Alan Muir-Wood, to which reference has already been made—a most helpful and enlightened suggestion has been made; namely, that the Government should establish an "industrial seed-corn fund", whose initial value would be £10 million per annum, to support the infrastructure and basic research that will complement effective, industrially-financed applied research. From this fund a higher education institution would be able to earn £1 for every £4 of research contract and consultancy income arising from the private and public trading sector. Muir-Wood proposes to reward successful partnership between higher education and industry by introducing an element of gearing into university finance.
It is possible to criticise the scheme in detail: that it would be an open-ended commitment on government (but that could easily be limited); that it would reward established success rather than encourage new efforts
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elsewhere (but it could be related to the growth in earned income rather than to the absolute amount of that income); and that it might remove the incentive to charge a full economic price for contract research (but that could be monitored). A more fundamental objection, perhaps, is that its rewards are one-sided—it rewards only the universities—and perhaps there should also be some form of reward to the industry that has mounted successful collaboration with a university. This could be particularly helpful to small firms setting out on this path for the first time. I do not think it has been seriously studied by anybody as yet, but it does seem to me to be consistent with the Government's policy of supporting industry directly rather than through subsidies to its customers. I should like to know whether the Government are prepared to listen to suggestions along these lines when the Minister replies.
Modifications to the Muir-Wood proposals are certainly possible, but I hope that full consideration will be given by government to the essential idea of a seed-corn fund for applied university research. It would then be seen as the missing element of the so-called "dual support system" for the funding of university research. This is the arrangement whereby part of the block grant from the University Grants Committee that each university receives is intended to supplement the monies derived from the research councils. In this way it is possible for university staff to conduct exploratory research that is not yet ready to attract more selective funding.
The reduction in UGC support that has occurred in recent years has fallen particularly heavily, we suspect, upon research. In the ABRC it is believed that this element has diminished by more than 10 per cent. since 1981. Certainly the research councils are having to provide for items of expenditure that would have been found from general budget only a few years ago, which is why they are under such great pressure, at the moment, and why the Science Vote has not really been protected.
We in the universities are being urged on all sides—most recently by the noble Lord, Lord Gregson—to apply selectivity in the distribution of block grant, as the joint report itself makes clear. It is even being suggested that the UGC should earmark the proportion of its grant to each university that is intended to be spent on research. We shall of course be considering that, but it must not be forgotten that the purpose of dual funding is precisely to allow for the development of research that has not yet emerged. To chop off that sort of discretionary funding is to starve the seed-corn, and is likely in the end to destroy the most innovative research in the universities.
I am grateful to the noble Lord, Lord Lucas, for his acknowledgement of the importance of university research. But it is right that more attention should be given to whether the universities, and the whole research system of the country, are providing value for public money. We must certainly try to reach agreement with government and with business about whether we are producing the research results and the trained personnel that are needed to create wealth and influence for the country. But since we can none of us be perfect, it is as well to make some international comparisons as well.

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It is often said that we produce more Nobel Prizes per head of population than any other country, so that there can be little the matter with the level of support that we give for science. I am sad to have to say that I doubt whether that is any longer the case. Our research facilities in general no longer bear fair comparison with those of similar countries such as Germany, France and the United States. It seems to me that our research is no longer held in quite the same high esteem internationally as it once was, although of course there are some honourable exceptions. Much of the blame must fall on the decline of the dual support system and the resulting stifling of initiative. The trouble with making a statement like that is that it is very hard to be sure, because it will be several years before we can expect to see the full effect, and by then it may be too late for us to contribute all that we could to the recovery from recession that we all seek.
12.39 p.m.
Lord Todd: My Lords, I propose to be very brief in my remarks, largely because of the admirable way in which the noble Lord, Lord Sherfield, introduced this Motion. The noble Lord covered a wide range of points, some of which I personally would otherwise have made, and therefore I can be brief. I very much welcome the fact that the noble Lord has drawn our attention to this report because it is an important report and we should do well to pay attention to some of the flatters raised in it. As the noble Lord, Lord Sherfield, himself remarked, it is, we hope, only the first in a series of reports of this type which will perhaps be issued annually. The report itself, and these future ones which I expect, stem largely from the report of the sub-committee of your Lordships' Select Committee on Science and Technology on the theme of science and government, which was chaired by the noble Lord, Lord Sherfield. That report was published almost three years ago.
The report that we are considering today does not contain anything very new; it contains very little in the way of new subjects. However, it certainly underlines, once again—just as did the report of the committee of the noble Lord, Lord Sherfield—our continued failure adequately to take care, not only of the scale of the nation's research and development effort, but also of our failure to integrate adequately the very great potential of Government, industry and the academic world, with the result that over the years we have seen a gradual decline in our manufacturing industry—a decline which still continues, and which bodes ill for our national future.
I do not propose to rehearse all the points made in the report. Many of them are familiar to those who, like myself, have been concerned about such matters and have sought over many years, without a great deal of success, to alert the nation to the danger ahead. History provides us with many examples of the fate of nations which fail to keep pace with technological advances. I hope that we shall not provide another, but the hour is late! The manufacturing sector remains of crucial importance to the economy of this country, and well directed research and development is vital if its competitive position is to be even maintained, let alone improved.
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Of the many important issues raised in the report would mention only one: the intelligent use of public purchasing in the promotion of manufacturing industry. In this country the Government and the nationalised industries are major purchasers of products incorporating advanced technology; indeed, in some fields they are the only purchasers. This can have advantages if such public purchasers liaise closely with potential suppliers over future requirements and are willing to be among the first customers for new technology as it is developed. But there is a danger, which has by no means always been avoided in the past, that a monopoly purchaser may adopt rigid and, indeed, idiosyncratic policies which, in effect, cause United Kingdom suppliers to conform to the extent of making them unable adequately to compete in export markets where other advanced products or systems may be required.
To some extent I think that this is emphasised in our case by too high a proportion of the research and development being done by the public purchasers rather than by the suppliers. I agree with the authors of the report that this ought to be remedied if we are to remain competitive in world markets. The stimulus of competition is essential to applied research and development and this tends to be lacking in our public purchasers, although it need not be. I have always been an opponent of government research establishments which lack (as most of them outside the defence sector do) the spur of competition and changing economic objectives. It is my hope that all concerned with public purchasing will read—and will heed—the appropriate sections of the report which we are discussing today.
Although not formally included in the Motion of the noble Lord, Lord Sherfield, there is, as has been mentioned several times today, another recently published report from the Advisory Board of the Research Councils which is relevant to our discussion today and which I feel I should mention. This is the Study of Commissioned Research by Sir Ronald Mason. Briefly put, Sir Ronald looks at the progress made in the matter of commissioned research by government departments—a subject very relevant indeed to the implementation of the so-called customer-contractor principle, which was adumbrated by Lord Rothschild and put into operation following his report in 1972. Sir Ronald, in effect, finds that the commissioning arrangements have not proved satisfactory in practice and that the customer-contractor management technique will not provide real benefit until the scientific advice available to customer departments is enhanced. How true that is!
As long ago as 1948 the old Advisory Council on Scientific Policy, of which at the time I was a member and later had the honour to be chairman, recommended that government departments should have adequate scientific staff and advice available to them to enable them to use research councils and other organisations to carry out, by contract, research which was immediately relevant to their needs. In effect, that was suggesting that a customer-contractor principle should be introduced.
What happened? After an initial flurry the level of scientific staff and advice was gradually downgraded in one department after another, and 22 years afterwards

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Lord Rothschild had to try to grasp the same nettle. If we are to believe Sir Ronald Mason, it would seem that history is repeating itself. Indeed, one might put it this way: we live—but apparently in this field at least we do not learn.
12.48 p.m.
Lord Nelson of Stafford: My Lords, I should like to add my tribute to those of others to the noble Lord, Lord Sherfield, for introducing this debate today, which I think is extremely timely. I should also like to pay tribute to the two authors of this report, who have done an excellent job. The Government are to be congratulated on initiating this regular review for three reasons. First, I think that it is extremely good to look from time to time at what progress has been made on the recommendations of the excellent reports which are published by these bodies.
Secondly, it is extremely encouraging to those who spend a great deal of time on these bodies studying these particular subjects to know that the reports will be reviewed by your Lordships on occasions such as this. Thirdly, it is extremely good that this brings together the ACARD group, which is essentially directing its attention to industry, and the ABRC group, which is essentially directing its attention to the academic and research sides. This helps to bring together these two important functions of research and development—or, if you like, science and technology. In my opinion, this has been the core of the difficulty of trying to bring them sufficiently close together. The report itself does to my mind a great deal of good and, like the noble Lord, Lord Sherfield, I think we can all look forward to future reports. I hope he is right when he says that this will be an annual report. It should be an annual report. This is a fast-moving field and we should look at it at regular intervals.
The report contains a great deal of valuable information and stresses, as has been emphasised by previous speakers: the problem which industry faces in maintaining and improving its competitive position in world markets. I shall touch on one or two points which are particularly important. The report calls for the extension of collaborative research. This is tremendously important and can make a big contribution to a point already made by previous speakers: that we have limited resources and we must be selective. Let us ensure that we use those resources to the maximum effectiveness: this is where collaborative research can play its part.
However, let us not underestimate the difficulty. It is not all that popular. It is not all that easy, and it should be given every encouragement. The Alvey programme is a good start in that direction and is already demonstrating what can be achieved in this area.
The second point which I think is important and which is emphasised is the long-term nature of research and development. This cannot be said too often. You cannot turn research and development on and off like a tap. There has to be a consistent programme. There has to be a steady programme, and only in that way do you build up the expertise, the degree of stability in the team, and the maturity which leads to a competitive product at the end of the
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exercise. I emphasise particularly that point of stability, and I hope that the Government in their thinking on these matters will bear that very much in mind.
Mention has already been made of the contribution that can be made by public purchasing. That is so important that I shall touch on it again. It dictates the product development programme for a large sector of British industry, and I welcome the confirmation from my noble friend Lord Lucas that this policy of the intelligent use of public purchasing to assist our export industries has full government support.
Finally, there is reference to the importance of design. This cannot be over-emphasised and is where we shall succeed or fail in the competitive markets of the world. More has to be done in this field, and greater emphasis has to be given to this subject in the educational courses in the higher technological fields. We are chronically short in British industry of really good designers, and this is something which special steps must be taken to rectify.
There is one matter on which I was going to ask the Government for consideration, but I am not sure whether my noble friend Lord Lucas in his opening remarks answered it or not, so I shall ask it again. One of the big problems we have is to convert the excellent research work done in this country in so many different establishments, in so many areas, into effective product development and finally effective marketing.
In the report of Sub-Committee 2, on which I had the pleasure of sitting under the chairmanship of the noble Lord, Lord Gregson, the problem of transferring research knowledge and information through and into an end product meeting a market need was emphasised. There seems to be a lack of flow here. This is something which the Government should look at. I am not sure whether or not it came within the range of this study on technology transfer to which my noble friend Lord Lucas referred. There is a great deal lost somewhere en route. Work is repeated, time is lost, money is lost and resources are lost. One of the factors may well be the difficulty of transferring personnel, and it is only personnel who can transfer knowledge, information and experience smoothly from one area to the other. I urge on the Government the necessity to have a good look at this. Perhaps it is something which ACARD and ABRC themselves can contribute towards.
My noble friend Lord Lucas referred to relationships between government and industry in this particular field. I have no quarrel with what he said. It is a job for industry to decide what should be done. It should be market-led and only industry can lead it with its knowledge of the market place. However, I do not agree with his rejection of the idea of a national strategy in selected fields of industry, as recommended by Sub-Committee 2 on Engineering Research and Development.
There is a bit of a misconception here. The suggestion was not that this should be a matter for decision by government. It was a matter for all the parties concerned, essentially led by industry. But, if we are going to harness together all the resources which are available and which have been referred to by

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previous speakers, they must know what the objective is. Many of them are not in touch with the market place. Many of them are not even in industry. They are in universities; they are in Government establishments. If it does not exist, how do they know what the strategy is or to what their efforts should be directed? Therefore, I feel there is a need for a means of determining in key industries exactly where this national effort, wherever it may be, should be directed.
I would draw your Lordships' attention to the fact that the Alvey programme is exactly this. It is exactly what it has done, It has taken a section of industry and it has gathered together all the relevant people in government, in industry, and in public bodies and they have produced a programme and everybody is working to it, and that really got things moving in that particular area. This could well be done in other areas, and I would urge the Government to think again on this.
Maybe they do not like the title of a "strategy". Why not let us have "A Programme for Industrial Advancement", or something like that? The Alvey programme is another programme and we can have this in other sections of industry, and thus ensure—and this was referred to by my noble friend Lord Lucas—the utilisation of resources, which he rightly said he had experience of in his own industrial background. Here we would have a means of doing this on a national scale.
In conclusion, may I sound one other warning? It is easy to talk about new technology; it is easy to dwell on the research side of it; and it is easy to think of new technology as being new products and new industries. One of the most important things we have to do is to see that this new technology is in fact brought forward and applied to many of our older industries. It is not just new products and new industries with which we should be concerning ourselves. It is updating and making our existing products and industries as competitive as they can be in world markets: our attention must also be directed to this important task.
12.59 p.m.
Lord Richardson: My Lords, there is little that is specific in this report, and in our discussions up to this point, about the position of medical research. It is for this reason that I am particularly grateful to the noble Lord, Lord Sherfield, for giving me the opportunity of making some points to your Lordships: points that in a way may be quite unnecessary, in that no one can doubt the importance of medical research to the individual, but there are signs of the importance of medical research to the economy of the country.
Sir Alan Hodgkin, past President of the Royal Society and eminent Master of Trinity, has recently spoken of Sir Francis Bacon's understanding of the importance of science in—to quote Bacon—
"the endowment of human life with new inventions and riches".
And medical research, I believe, can do both. Bacon, four hundred years ago, clearly recognised the value of applied and basic research; and the noble Lord, Lord Flowers, has referred to this most eloquently. It is a happy thing that the DHSS and the Medical Research Council have come to a good working understanding and arrangement over these two aspects of research.
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The department now relinquishes commissioning funds to the science budget and the council, for its part, recognises very clearly the department's vital service interests in biomedical work of a research nature.
There is close day-to-day contact between these bodies through their officials and by cross-representation of their members. Both appreciate that the contractor-customer principle, while of prime importance in some definable projects, is not suitable in some areas of medical research. An illustration given to me by Sir Douglas Black, himself a previous Chief Scientist at the Department of Health and Social Security, is that of ex-President Nixon's much-publicised attempt to promote the discovery of a cure for cancer. Of course we still await a cure.
Basic research, like commissioned research, requires adequate and stable funding. The two chairmen whose report we are debating make the importance of stability perfectly clear, and they have in the report a sub-heading entitled "Stable co-operation between Government and industry". The Alvey Report, recently debated in your Lordships' House, makes the point that strategic research may be long term and require consistent support with, again, stability of funding. The Government's appreciation of the importance of research to our national life is shown by the priority that they have given to maintaining the Science Vote in real terms, or thereabouts. This is quite admirable, but there is, I am afraid, a paradox: the UGC's monies have been cut, and thus the one hand has given and the other has taken. The result is reduction in the money available for research for medical purposes as well as for all others in the universities.
Why is this so very important? The answer for commissioned research is self-evident, but for basic research it is difficult for those without scientific training or research experience to understand its paramount importance. In fact, their lack of understanding can lead to the suggestion that basic research has not much to show. This is totally untrue. In the last 30 years, biophysics and molecular biology have led to an extraordinary stride in genetics, in cell transport and in monoclonal antibodies, to mention but a few of the molecular biological advances. Indeed, molecular biology itself was largely created by the basic scientific work of the two Nobel Prize winners, the Braggs, father and son, on X-ray analysis and crystallography.
Such researches in the biomedical field in the last 20 years or so have resulted in the opening up of areas that are extraordinarily wide. They affect the improvement of insulin, the production of vaccines, the treatment of leukaemia, the management of transplants, and renal transplants in particular, and, very important, the delivery of anti-cancer drugs to the target cells. The benefit of these advances to the nation as well as to the individual could be enormous.
Your Lordships may perhaps have seen an article in the Financial Times on 20th December last year. In it was told a story which is now a success story due to an alliance between the Medical Research Council and a commercial firm. The article gave an account of the arrangements between Professor Sir James Gowans,

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secretary of the MRC, and a manufacturing biotechnological company, Celltech, for the transfer of material from academic research to technologically efficient industry geared for commercial development. The arrangements to date largely concern the exploitation in this country—and I emphasise "in this country"—of the University of Cambridge MRC Laboratory's discoveries about monoclonal antibodies. This will be to the advantage of our own industry and the economy, and at the same time will bring new research money to the MRC itself, for this sort of research and for other projects, and will enable them to pursue subjects that would otherwise, perhaps, not be approached.
The developments that have already been achieved are now largely confined to rapid diagnostic methods, the rapidity of the methods themselves being of great importance. Such things as the detection of spina bifida in the unborn and the giving of early warning of cancer of the liver are already showing some progress. This is all very exciting, of course, and it underlines the value to be gained from biophysical research; but it leads me back to my main point, and that is the difficulties and troubles in the universities due to the cut in grants. The effects are serious, and they are multiple.
As the noble Lord, Lord Flowers, has pointed out, new research may not be done at all, it may be delayed, and it may go to other people than ourselves to do it. Furthermore, in the universities pilot studies in research are largely done to decide whether projects are worth pursuing. If this is not done, some real winners may never reach the starting gate, or will be left for others to do. Yet again, much of the MRC work which is done in the universities is done in their units. Professor Sir David Phillips, who (we have already been told) is the new chairman of ABRC and head of the Molecular Biological Department at Oxford, has made the point to me: the units in the university financed by the MRC are nevertheless much affected by what goes on around them by way of the research by the universities themselves that is heavily affected by grant reductions. The two differently funded units are, indeed, interactive, and a disadvantaged state in one affects the other.
It seems difficult to understand why a Government who recognise so clearly the need for the maintenance of the Science Vote should not find it in their capacity—and the noble Lord, Lord Lucas, has made it clear that there will be great resistance to new money—to find more money on a selective basis (and the word "selectivity" has been mentioned frequently in this debate) for this all-important branch of research which affects ourselves and our future as human beings, and indeed, I believe, has a powerful potential effect on our economy.
1.11 p.m.
Lord Zuckerman: My Lords, may I begin by adding my word of appreciation to those that have already been offered to my noble friend Lord Sherfield for having introduced this debate—a debate which, as previous speakers have made perfectly clear, concerns matters which are critical to the well-being of our country, not just in the long term but in the short term,
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too. Successive Governments, ever since the end of the Second World War and even earlier, have recognised the need to narrow what has been a traditional gap between the universities and industry, to eradicate an attitude that a career in industry is not as respectable as one in the professions. Yet we have always known that the science and engineering departments of our universities are the fount of the knowledge which, sooner or later, becomes exploited by manufacturing industries, which transforms public demand and which revolutionises our way of life.
As the paper to which this debate is addressed points out, we also know that the manufacturing sector of our economy continues to be of crucial importance to the United Kingdom's economy. Despite the considerable fall in Britain's share of world trade over recent decades, to which previous speakers have made reference, manufacturing industry still provides a quarter of our GDP. It is responsible for three-quarters of our visible trade exports, and in a period of high unemployment do not let us forget that it is still responsible for a quarter of the nation's jobs. A healthy manufacturing industry remains as vital a factor as it has always been in assuring the national well-being.
No industry today is not science-based, to a greater or lesser extent. Our so-called "high tech" companies—for example, those that are involved in what is becoming known as the information technology explosion—cannot hope to survive if they are not as well informed as our competitors about the new knowledge that emerges from the basic research carried out in universities. The more traditional industries, such as our primary producers, whether of food, coal or steel, need every advantage which scientific knowledge can bring to bear if they are to hold a place in highly competitive markets where they have to contend not only with the industrial and commercial skills of our competitors but also with the distortions due to inequalities in the costs of production and the price of the ultimate product. To keep up to date, our industries cannot do without the universities, and the latter are, happily, far more aware now than they were 15 to 20 years ago, in the days to which the noble Lord, Lord Todd, referred earlier, of the value of the intellectual property which they have to sell.
The central issue which we are debating today has been with us endlessly since the end of the Second World War and has been adumbrated in several reports. Successive Governments have done a great deal to build up our universities, as we all know. When one remembers that the full-time university population of this country in 1939 was estimated to be no more than 40,000, and today it has to be measured in well over 200,000, one realises what has been done. Successive Governments have seen to it that our stock of scientific manpower has been built up, and considerably.
But it is all too clear now that an adequate supply of scientific manpower is not enough. It is a necessary, but certainly not the sole, condition for industrial success. I would say that the general efforts that have been made by successive Governments to build up the scientific and technological power of our country have therefore not been enough. Throughout this period, our status as a pre-eminent manufacturing nation has

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continued to decline and the present state of affairs is set out only too clearly in this report which we are debating today.
I was never one who was much impressed by the late Lord Snow's designation of two cultures, and I am not now. But the message of the part that science and its applications matter to our national well-being has clearly not got across in an effective way. It would seem as though we built up our scientific and technological power on one side of a fence, without those on the other being much affected. Yet what happens on the other side of that fence is even more important in the competitive technological world where other nations, somehow or other, seem to succeed as we fail and where there appears to be no fence.
I recalled that governmental paper on technological innovation, published in 1968, focused entirely on the competition which we then faced from the United States. I re-read that report and there was no mention then, only 15 years ago—and I had something to do with that report—of what was happening either in Western Germany or in Japan. A recent report by the National Academy of Sciences in the United States has now warned that American dominance in electronics, certainly in the consumer field, is dangerously threatened by what is happening in Japan, and if the Americans feel threatened, how much more should we? Things move very fast in the technological world.
It has been said, time and time again, that we in Britain are pre-eminent in the basic sciences and in the generation of fundamentally new ideas. This was stated again earlier in the debate. There are certainly some areas where we have made the basic discoveries that in due course have transformed the scene. I need not take up your Lordships' time in giving any illustrations—a few have already been referred to. But it is no use patting ourselves on the hack because some of our scientists—and I say this with due respect to my very old friend Lord Todd—have won Nobel Prizes. Today, what matters is the fact that there are tens of thousands of other scientists in other countries and that the prizes are mostly now being won by men with American passports. Although they have not yet got into the field, I imagine it will not be long before they are won by men with Japanese passports.
What matters to us in this country is that basic science and applied science are part of one single process separated only by the dimension of time. No greater prestige attaches to the qualities that are called for in the search for knowledge for its own sake, and for knowledge that can be put to use. The differences are essentially terminological. They relate mainly to the time scale in which new ideas, great or small, affect our lives. Applied science, which is only one part of the process of innovation that leads on to market research and then sales, is what counts from the point of view of the realities of day-to-day politics and our national wellbeing.
The report before us, like many before it, paints a sad picture, but it also calls for more direct action than has been the rule so far. So let me turn to a practical scheme that was designed specifically to help to narrow the gap between the universities and industry, and which was commended in another report, issued a month before by ACARD and ABRC, entitled
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Improving Research Links Between Higher Education and Industry. This scheme was launched by the Wolfson Foundation in 1968. I happen to be a trustee of that foundation. Universities were informed directly, by correspondence, that money would be made available to help groups of scientists and engineers to carry out what work was necessary to bring ideas they might have to the point where they could be marketed either as new products or processes. Before applying, the men concerned had to have the promise of industrial co-operation if they were successful technically. That was 16 years ago. Another acceptable objective was the formation of consulting service units. In short, the scheme was an invitation to take part in a competition in the exploitation of practical ideas.
Over the years that the programme has now been in operation, 176 projects were selected for support out of more than 1,000 applications, at a cost of some £17 million. A book will shortly be published giving a record of the scheme up to the year 1981, a record of some 150 projects. The success which has been achieved has far exceeded anything that was hoped for by the trustees when the scheme was launched. The universities have benefited not only from the establishment of what are now more than 100 self-sustaining industrial units.
In the 15 years since the scheme began these units have cumulatively generated for their respective universities far more money than was ever put into the scheme. Jobs have been created for university teachers and specialised staff. Students and academic research workers have been helped to realise that research can be not only intellectually stimulating but also financially rewarding. Industry, and particularly small companies, have been made aware that the new knowledge, of which universities are the fount, can be turned to practical ends and profit. Companies have been formed to manufacture and market new products, one or two as part of the universities, with sales in a few places now mounting to well over £1 million a year. These are small groups starting with two or three men. One of the projects which we support is referred to in the report which we are debating; namely, the magnetic levitation monorail at Birmingham Airport. Others were referred to in the seminar held a few months ago at Lancaster House, to which reference was made earlier in the debate and which was chaired by the Prime Minister.
When this scheme was launched I warned my fellow trustees that we should be lucky if more than one project in 20 of those which we supported succeeded. We were providing only once-for-all support for any single project. But the fact that more than 100 projects have succeeded in transforming themselves into permanent consulting units or university manufacturing companies is remarkable in the light of the modest expectations I entertained at the time and which my fellow trustees were prepared to accept. Those concerned in the universities have had to fight to win, but what they have shown, which is so important, is that there is no dearth of practical ideas, of commercial value, waiting to be tapped in our universities and, I am sure, in our polytechnics, too.
But obviously risk is involved in fostering new ideas. Risk is involved at every stage in the innovative

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process, starting with applied research, moving on to marketing and then to sales. The foundation has helped in dealing with only one, but a critical early band in the spectrum of risk. Financially, the risks become greater the closer the process of innovation approaches the market. That is where the problem of the availability of venture capital becomes so critical, a topic to which no reference has yet been made in this debate. It is a problem which still needs to be solved.
We all know that the big companies—the ICIs the Unilvers, the pharmaceutical companies—know this well. They have their own priorities in development. It costs millions to get a new agrochemical or drug to the market. It costs tens and tens of millions, as many of us know, to succeed in an aviation project. "God spare us from our inventors! I have heard that cry and it has its justifications. There are always very costly failures, but unless the risks, and the risks of failure, are taken there will be no successes.
I have reservations about the sentence in the report that research and development undertaken with an end product in mind is best financed and carried out by the firm that will apply the knowledge gained. That is true, probably, of the big companies, but I doubt whether it is true of the smaller companies, and here help from government, as well as from charitable foundations, is wanted. I recognise that there are constraints on the kind of help which can be given by government. Reference was made earlier in the debate to this problem. But there are many things that can be done.
It is worthy of note that the fiscal measures which are in operation in this country to encourage research and development in companies are not so generous as those which apply in the United States. And we know, of course, that the whole system of support is totally different in Japan. However, if Government help is to be given I would agree with the report that:
"A blinkered approach from the guardians of the public purse will in the long run harm the United Kingdom's economic interests far more than any losses from the risks inherent in adopting new technology".
The same warning should of course be understood by the boards of the new venture capital companies that are springing up.
We must remember that very early in the 19th century the Royal Navy did not want anything better than the semaphore and that, much later in the 19th century, whoever was in charge of the Post Office did not believe that the telephone was required in this country because the Post Office had enough messengers at its disposal. I do not doubt that all of us have worn blinkers from time to time in these matters, but let us remember that the big technological ideas come from the minds of individuals. They are the ones who appreciate best the potential economic value of new knowledge. It is the entrepreneurs in universities who realise the potential industrial value of what they are doing. Dr. Land, a Harvard undergraduate at the time, who invented the polaroid camera, saw what was missing in the market and fought until he transformed the whole photographic industry. The laser was not conceived either in the boardroom of a company or in a committee of the Pentagon. It was the brainchild of a couple of men who failed to persuade their masters
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in industry of the value of what they had done. They had to leave the company, only to be brought hack later. Genetic engineering, to which my noble friend Lord Richardson referred, derived from pure academic research. None of these came out of a committee.
I say that because there is a danger that, if more Government support is given, it will be constrained in a way which does not give the freedom necessary for carrying through a big idea to completion. There was an Englishman named Mees who for many years was vice-president for research with the Eastman Kodak Company. He put the matter this way:
"The best person to decide what research work shall be done"—
and he was talking about applied research in industry—
"is the man who is doing the research, and the next best person is the head of the department, who know s all about the subject and the work. After that you leave the field of the best people and start on increasingly worse groups; the first being the research director, who is probably wrong more than half the time; and then a committee, which is wrong most of the time; and finally, a committee of vice-presidents of the company, which is wrong all the time".
We cannot imagine that the United Kingdom has the resources to compete in all parts of the high-tech. field. President Reagan's 1985 budget for R & D—that is, the federal budget—has just been published and it amounts to 53 billion dollars. Our budget is one-tenth of that figure; our investment in the up and coming bio-technology field is only a fraction of the American investment. We must not be blinded by the high-tech. industries alone. The noble Lord, Lord Gregson, suggested that there was too little Government support in other sectors of technological industry. The Wolfson scheme has demonstrated that there is any number of other ideas of economic value in our universities waiting to be exploited, given the right entrepreneurial spirit of those who command the venture capital that is available, and given that they are ready to listen to the people who really do know the facts.
1.33 p.m.
The Earl of Selborne: My Lords, I should first explain to your Lordships that I am the chairman of the Agricultural and Food Research Council and therefore have a particular interest in the debate initiated today by the noble Lord, Lord Sherfield. From all the speeches made in the House today, it is clearly the case that there is recognition of the need to be selective—be it basic research programmes, strategic research programmes or applied research programmes. The question which concerns many of us is: do we have the machinery to be selective? Shall we be able to sharpen up our priorities? Can we avoid fluffing the hard decisions?—as the noble Lord, Lord Sherfield, asked earlier.
The quick answer is that as a result, perhaps, of the proddings and promptings of the Select Committee we are slowly accumulating at least some of the machinery for these hard decisions. We have the annual review of Government-funded research and development, which has been referred to as the first such document with perhaps more and fuller information to come. But it is a start, and it is a helpful start. The very fact that the Cabinet Office itself has now

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acquired a chief scientist—as the noble Lord, Lord Sherfield, explained—with increased resources, again gives one some confidence that the infrastructure within Government to make these hard decisions will in part be provided for. The report we are considering today from the chairmen of ACARD and the ABRC does give some indications, in general terms, as to the considerations which will have to be borne in mind by those in Government and elsewhere when they come to make these hard decisions.
My noble friend Lord Lucas of Chilworth made it fairly clear in his speech that there is not much hope of extra money from the Government for research. He pointed out that the science Vote has been protected from the worst of the Government cuts, but I have to say that in many ways that is illusory—and the noble Lord, Lord Gregson, made that point with some considerable force. What we have seen—and reference has been made to Sir Ronald Mason's report from all sides of the House—is that just as soon as Government departments' budgets became tight, as was widely anticipated at the time of the debate the Lord Rothschild's proposals way back in 1971 and 1972, there was pressure on those departments which funded research to move away from strategic research and to concentrate on applied research. That is spelt out quite clearly and incontrovertibly by Sir Ronald Mason.
The implication has been that the research councils have had to pick up that strategic research, which otherwise would have been missing. If that has to be picked up without the funding which is required to assume that extra burden, then basic research has to lose out. We know that basic research has already lost out because of the crippling cuts in funding from the UGC. There has been nothing like level funding for science, and there must be recognition of that from all present today.
It is not much good my saying that therefore we should expect increased funding. Perhaps your Lordships would then expect me to put in a plea for the increased funding of biological sciences; after all, we have heard a case for increased funding of medical research. But I am not going to do that because I believe that we must address ourselves clearly to the very real issues which have been posed by the most stimulating speech made by the noble Lord, Lord Sherfield, and in the report.
We have to face the fact that research is getting more expensive, that funds are finite, and that we have to be selective. I believe that is common ground for every side of the House. I therefore ask my noble friend who will be replying on behalf of the Government to consider more carefully the proposal of the noble Lord, Lord Gregson, for a strategy for research in industry.
My noble friend Lord Lucas of Chilworth anticipated that plea; after all, he had every right to as it was a recommendation of the Select Committee. He rejected it because he said that it was not the Government's role to plan industry, but I have to point out that that is not what is being asked. Again, my noble friend Lord Todd made that point. What is being said is that if finite resources are to be deployed with any degree of success, without expensive mistakes and an inability to pick up promising lines of research,
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then there must be an assessment of the resources available, the centres of excellence, the strength of the research, and the strength of industry itself. I entirely agree with those noble Lords who said earlier in this debate that such a strategy—or programme, as my noble friend Lord Todd called it—can be led by industry.
I suspect that the Government somehow shy away from the concept of planning. If they can remind themselves of the great success of the Alvey programme and of the benefits we have already recognised as deriving from that programme, then they will not see this as a sinister move towards a planning of the economy in a way that would be contrary to present philosophy.
In the world of agricultural and food research, we desperately need such a long-term strategic plan to which we can work within our industry. The AFRC has written its own corporate plan, and that seems to be an essential tool if one is trying to deploy resources which, in our case, are diminishing quite fast. The response, however, of the Permanent Secretary to the Select Committee of another place, when looking at the organisation of agricultural research and development was to be most unhelpful and dismissive, I think I would almost say, of the prospect of a strategic plan for that sector of research being of any assistance. I detect that now there is a slight change of heart and that the need for strategic planning within our industry is more widely recognised, and I am absolutely certain that the application of such a strategic plan for other industries is equally apparent.
My second plea—and again it is a point which has already been made a number of times—is that once you have written your strategic plan or, once you have got industry to help you write your strategic plan, you must assume a degree of commitment. The degree of commitment for that research programme will alter according to the nature of the research. Basic research implies very long-term funding; you simply cannot chop and change it, and I do not think anyone has yet accused the Government of so doing. On strategic research, this report refers to a period of a decade as a rough guide, and I certainly would not quarrel with that. A decade in government is obviously a very long period, and it may be asking a lot to expect that commitment once these strategic research programmes have been selected and protected from other cuts and have been fostered at the expense, presumably, of competing programmes. I do say nevertheless that the Government have to get into a frame of mind such that, if they are to assume responsibility for publicly funded research—as they must—there must be a degree of commitment to strategic research for up to that length of time.
Even in applied research, where again, particularly through departmental research budgets, the Government have assumed and will be assuming a degree of responsibility, the length of period for underwriting and commitment will obviously alter according to the nature of the applied research, but it is most unlikely that it will ever be less than one to two years. My own experience is that, as a result of the cuts announced in November by the Chancellor of the Exchequer, the Ministry of Agriculture gave us three months' notice on the funding of the commissioned

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research in the Agricultural and Food Research Council starting in April 1984.
There is simply no way you can run a coherent research programme with that degree of expediency. Publicly funded research implies a degree of commitment, and it must be separated from the vagaries of departmental funding at least to a certain extent. I know that Ministers, when they are faced with Treasury cuts, have to work quickly, and the choice can never be easy. But, if the concept which was undertaken at the time of Rothschild and has been underwritten and continued by successive Governments since is to succeed, then industry and the scientist must know where they stand. I accept that this is asking on behalf of research for something which is not usually granted to other areas of government funding, but I do believe it is a reasonable request.
1.44 p.m.
Lord Swann: My Lords, I, like earlier speakers, think this is an admirable joint report. It covers a whole series of problems and decisions that have to be made in the world of research and development, and all against a very welcome background of concern for our industrial decline—something which has in fact been going on for 100 years or more but which accelerated very much indeed in recent years, and which is all the more puzzling because of the high status of British research.
There seemed to me to be one curious omission from the report, and it occurred to me as I read paragraph 4.29, where it says:
"establishing the right fiscal, financial and regulatory climate for innovation, and ensuring that effective links exist between the originators and exploiters of ideas, will assist greatly, and new ways of achieving such a climate will continue to feature on the agendas of both ACARD and ABRC."
I am very glad that that is going to continue to feature on their agendas, but in fact, of course, it is not just fiscal, financial and regulatory matters that ought to be there.
We have had a brief mention from Lord Zuckerman about investment in venture industries. That seems to be a problem that has defeated us in spite of endless attempts for a long time past. It is undoubtedly a very complicated problem. The problems of union reactions to innovation and new technologies, management reactions, the differential reactions of production departments and marketing departments—there are a vast range of extremely complicated problems. Whereas implicit in the entire report is a recognition of the enormous strength of scientific method for increasing knowledge and, as a result, finding proper solutions to problems, nowhere as far as I can see is there any recognition, or even suggestion, that perhaps our industrial decline itself—what has caused it, the innumerable problems that coalesce to give us a highly intractable system—is a problem crying out for the scientific method.
It occurred to me therefore that I would try and look at the annual review of government-funded R & D and see if I could form any opinion at all of how much government funding went into research on the malaise of industry. The categories are not nearly specific enough for one to be able to do that with even the
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remotest certainty, but it occurred to me that it would be difficult to see that it could be much more than 1 or at the most 2 per cent., and probably a great deal less. Ironically, the one bit of government funding where it is quite specific—but it is not spent in Britain, or not aimed at Britain even if spent in Britain—is the ODA, where it has a category, promotion of industrial productivity and technology, on which we spent £1.5 million last year, which represents some 7 per cent. of the ODA budget. I would hope that sooner or later there will be some figures sufficiently specific for one to have some idea of how much money we are spending on research on Britain's industrial malaise, but I fully recognise it would be very difficult to find out.
I then read once again through the report, and it occurred to me that although one of the bodies of the joint report, ABRC, the Advisory Board for Research Councils, actually is responsible for the Social Science Research Council, now known as the Economic and Social Research Council, it was curious that there is not a single mention of that body in the report, or what it does or what it might do for this problem. Indeed, as far as I can see, the only mention in the entire report of the Social Science Research Council comes in an appendix where the name of the chairman, as being a member of ABRC, is written down.
Of course, the moment you get on to the social sciences, gloom and despondency or cynicism, or even merriment, tends to invade the scene. Your Lordships will realise that I speak against a background of the recent commission given at the very highest level to the Permanent Secretary of the Department of Administrative Affairs, Sir Humphrey Appleby, and his long-suffering Minister in another place, that they should abolish economists! Now that a new scriptwriter has joined the team of, "Yes, Minister", we may, I imagine, expect further instructions of a similar sort applying to other social sciences.
If I may be more serious, natural scientists, of whom I am one, are actually rather more sympathetic to the social sciences than one would expect perhaps, and I think I know why. It is because they, perhaps better than the public, or indeed politicians, realise how difficult the social sciences are. After all, the advances that we now take for granted in the physical sciences that have given rise to all the technologies that we have been talking about took a very long time—centuries—to get off the ground. Even at the accelerated rates that have applied in the last century or more, it took quite a long time.
The biological sciences which are of course inherently more complicated—I would not say more difficult—and more intangible, came a good deal later. It is perhaps significant that it is only in the last century or so that medical science could seriously be described as having been effective when it came to curing human disease. It has only become really effective in this century. A mere 150 years ago the average expectation of life in Britain was under 30 years, and a body with the longevity of this one would have been quite inconceivable. The expectation of life at the end of the century was about 50 years, and it is now well over 70. So it comes as no great surprise to natural scientists that when one wants to cure the ills of human society it is a very long-term operation. It is difficult and one cannot expect rapid solutions and easy success.

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That is not to say that social scientists do not criticise social scientists. They do. I suppose the most general criticism is that social scientists, at least in some areas, are rather prone to getting hold of vast amounts of Government data which have been collected for another purpose, and which are of uncertain accuracy, and subjecting them to extremely elaborate statistical procedures. It might be appropriate sometimes to place rather more regard for the grubby business of collecting one's own data in the way one wants them, however difficult and confusing it may be, because that is how the biological sciences themselves came to reach the position they are now in.
However, that is not an issue I want to go into now. Nor do I want to suggest, the noble Lord, Lord Lucas of Chilworth, will be relieved to hear, that a lot more money needs to be spent. I do not believe that it does. Perhaps there should be a certain amount of redeploying of money, but I think there is a case for a much more earnest attempt to treat the industrial malaise as a scientific problem which deserves to be looked at in its own right. Of course, it is looked at to some extent already. I am chairman of a body—the Technical Change Centre—which was recently set up with money from a variety of sources and which is starting to look into some of these problems. There is the Science Policy Research Unit at Sussex University. There are departments of business studies in universities and there are grants from Government departments, and so on. But those are on a small scale. I believe that they could do with an injection of what happened in wartime; namely, the drafting of many other people into solving desperate national problems. One of the father figures of that sort of scientific revolution in the war—operational research—is the noble Lord, Lord Zuckerman, who spoke earlier.
Above all, I hope that the problem will be looked at as a problem which is itself worthy of the scientific method on a bigger scale than so far achieved, and that that thought will continue to appear on ACARD and ABRC agendas, and perhaps on other agendas elsewhere in Whitehall.
1.55 p.m.
Baroness White: My Lords, I have been induced to intervene in this debate among so many noble Lords who are much more directly concerned with and have a far more profound knowledge of the matter than I can claim; partly because in preparing a brief contribution to the debate last Monday on the fate of the Welsh Plant Breeding station at Aberystwyth I became fascinated—indeed, almost mesmerized—by a brief study of the really bizarre story of certain agricultural relationships in the past two or three years. I spoke of the relationship between the Ministry of Agriculture (MAFF), the Agricultural and Food Research Council (AFRC), the Joint Consultative Organisation for Agriculture and Food (familiarly known, I understand, as the JCO), ACARD, the UGC, and the Advisory Board for the Research Councils. One can add to them the Scottish Office, thrown in for good measure, and I suppose an occasional bleat from the Welsh Office—although that was publicly inaudible.
Even a brief study of this cat's cradle of relationships in agriculture, food and research led me to accept as
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valid the reported comment by one of the AFRC senior scientific advisers that,
"the Agricultural Research Council is one of those very British institutions which, when one tries to explain its organisation to a visitor, emerges as marvellously illogical and more or less incomprehensible".
I mean no disrespect to the noble Earl, Lord Selborne in quoting that. It is reinforced by another quotation from an honourable member of the House of Commons Select Committee on agriculture which reported last summer. He commented that the Agricultural Research Council,
"had grown up like Topsy with no overall plan or strategy".
He continued:
"Professors get bees in their bonnets and if they know how to work the Ministry of Agriculture and AFRC systems they get the money".
That seems to me to be an illuminating lay person's view of the matter.
It would be unkind to proceed further after the truly traumatic experiences being suffered by certain sections of the AFRC with whom, on personal and humanitarian grounds, one must have great sympathy, but these comments even if casually uttered surely serve to explain why a 5-year corporate plan was deemed necessary for agricultural and food research and why this may have to be linked to some further fairly drastic restructuring.
I was much interested to hear today the rather more general comments made by the noble Earl, Lord Selborne, and I congratulate him and his colleagues most warmly on having taken the initiative in recognizing that strategies are needed for the various sections of research with which we are concerned today. That does not mean that I would have sufficient expertise in the matter to know whether the five-year corporate plan is as good or as bad as it is said to be in certain quarters, but the mere fact that this recommendation has come from one of our research councils shows that something of this nature is required. It is perhaps one of the most promising developments in this area in recent times.
Our short debate on Monday was, of course, primarily concerned with a particular problem of national identity rather than with agriculture or science. Needless to say I have no intention of retracing the ground so eloquently described then by my Welsh compatriots. The noble Earl, Lord Swinton, who had the task of replying, was later heard to say that he felt like a fox chased up hill and down dale by a pack of relentless Welsh foxhounds. I do not favour blood sports myself, but it must have been clear that in certain circumstances factors other than over-strict cost benefit analysis or very narrow scientific priorities do have to be given some weight. While the appropriate departments in our university colleges in Wales are on the whole reasonably well treated by the research councils, and sometimes very generously, we suffer from a very small share indeed in institutional research, which to our Welsh eyes seems to be unduly concentrated either within 60 miles of London or north of the Scottish border.
This brings me to an apprehension which is I think growing among a number of the smaller or more remote universities and some of the research institutes. If one considers the now famous, or perhaps notorious, 28 questions emanating from the UGC, it becomes

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plain that among the many pre-suppositions underlying this unique questionnaire is a strong tendency to support the biblical principle of giving to him that hath. I am well aware that many references have been made during our debate today to the need for selectivity. I am not for one moment denying the validity of those arguments. They are of course contained in the report on which my noble friend Lord Sherfield—if I may so call him—has decided to hang the debate.
In paragraph 4.2, for instance, the report also stresses the need to concentrate at any rate basic research facilities on centres of excellence, and states that this trend which is already visible will be continued. The report adds:
"Decisions therefore have to be taken, not only on areas of support"—
subject areas—
"but also on the locations at which basic research in any subject will take place".
Up to a point, this must be so. One must concentrate the use of very high cost and complex equipment and make the most of it. The two chairmen in their report, admit that other considerations apply in the field of applied research, and more especially when dealing with relations with particular industries or firms in those industries. But what the smaller or less prosperous institutions are beginning to be seriously concerned about is that they may be categorised publicly as second-rate or third-rate, or even as "teaching only" institutions. Should that occur, the divisions will inevitably tend to become intensified and perpetuated. The whole structure could then be more or less permanently stratified.
Apart from certain disciplines which are conditioned by the need for especially sophisticated equipment or services, excellence may flourish even in relatively small or remote institutions. If I may give another Welsh example, only a year or two ago the University College at Aberystwyth could boast that in proportion to its numbers it had as many Fellows of the Royal Society as Oxbridge or a prestigious London college. It is true that in the last year or two there have been a couple of retirements, but even now its half a dozen Fellows of the Royal Society is still a very fair proportion compared with some other establishments.
While excellence attracts excellence, I would contend that it is also true that someone of outstanding quality may emerge even in unpromising surroundings to set new standards of achievement. I might even suggest that wisdom can be found outside Imperial College. But with or without our over-elaborate advisory/consultative/administrative/executive structure, as I have described it for the agricultural and food industries, I think it is still true that the spirit floweth where it listeth. I should be much disturbed if we had so close a structure of carefully selected centres of excellence that there was little opportunity for people who did not fit into that pattern to make what could be an extremely valuable contribution in their own areas of endeavour.
We shall have to come to consider the restructuring of much of the edifice of our basic and applied science research funding—which is what we are really talking
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about today. It seems to me that it is a pity that in a sense this debate is both a little early and a little late. It is a little late in the sense that, as the noble Lord, Lord Sherfield, acknowledged, the report on which our discussion is based came out last July. It was, in effect, the swan song as far as ABRC is concerned of Sir Alec Merrison. The current chairman, Sir David Phillips, has now been in post for rather more than 12 months. There may well be certain changes of emphasis which will shortly have to be taken into account.
I am also sorry that we do not have available to us today the forthcoming science budget Forward Look, last published by ABRC in 1982, which I understand is about to emerge on the world any moment now. I have re-read the 1982 report on the prompting of the noble Earl, Lord Selborne, in our debate earlier this week, and I must say that I find it extremely interesting and helpful. I am eager to see the latest edition emerge. I also welcome the recently published booklet from the Cabinet Office which has some extremely valuable statistics, no doubt, which will form a data base for the future. But it does not give one quite such a lively picture of what the immediate pattern of research funding may be.
It seems to me that in many ways one of the most important contributions to this debate is the report which has been referred to several times already—that by Sir Ronald Mason on commissioned research. Just before I came into the House this morning I was interested to see in today's edition of The Times Higher Educational Supplement that this week Sir Ronald had commented:
"The present structure of the research council system makes it unfit to move into the 1990s".
At the seminar at Imperial College he made a very strong hid for a wide inquiry which he indicated is already well overdue.
I should have thought, at any rate for lay people listening to this debate this is a line of thought which deserves following up. The published report by Sir Ronald is, of course, an attempt to answer the question, "Whatever happened to Rothschild?". Other noble Lords who preceded me in the debate, and who know a great deal more about the matter in detail than I do, have indicated that the Rothschild innovation has been perhaps less significant than it was supposed it would be some 10 or more years ago, when it started.
There is great power in a name. I think that as far as the general public is concerned, as opposed to the inner circle of those who are directly connected with high level research, they have imagined that since 1972 most government-financed R & D has been based on the customer-contractor principle. But of course that is not so. As I understand it, no funds were transferred on a Rothschild basis from the Science Research Council, nor from the SSRC as it then was, and it was not very long before the Department of Health and Social Security decided that it would be better to let the Medical Research Council get on with things. And the department pulled out of the scheme.
So effectively the Rothschild reform has been confined, at any rate in recent times, to the Agriculture and Food Research Council and to the Natural Environment Research Council. I was glad that the

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noble Lord, Lord Flowers, referred to that because these are the research councils whose organisation and possible restructuring seem to be causing the most concern. This is particularly so in regard to the Natural Environment Research Council, which has depended considerably on departmental commissioned work. I understand that the resources for that work on commissions from the various Government departments concerned with the NERC has dropped by no less than 33 per cent. over three years. That is a fairly dislocating experience by any standards, and I think that it accounts for much of the unease which has been felt in that particular area of research.
As has already been mentioned, in all this field the role of the UGC is vital, but obscure. It is one of the most essential, but the least open, parts of the dual-support system—a system which is not really a true dual-support system in the sense that there is also the income from public or private commissioned work which provides the third leg of this uneven and unstable tripod.
We can only hope that the Government will really think again about the position of the dual-support system where, as we have been told, the apparent safeguarding of the science budget is largely illusory. I shall not labour the point, but I hope that the noble Viscount who is to reply to the debate will make it clear that he has fully understood what has been said in all quarters of the House about the fact that, if there is a dual-support system, both sides of it must be sustained, and that when, in addition, there is the commissioned research from departments which has also been diminishing in many directions, this adds to the instability of the total structure.
Other speakers also have queried the position of the Chief Scientists and what has been the effect of the demotion of some of them. Even when there has been no demotion, for example, in the Department of the Environment, where there is a distinguished Chief Scientist at deputy secretary level, as I understand it, he does not exercise fully effective budgetary control because most of that has been passed to the individual directorates within the department.
I hope that from what has been said today from all quarters of the House the Government will realise that there is most serious concern about the state of the future organisation of our university and research council activity. In last Wednesday's Guardian there was a leading article castigating academics, in particular the vice-chancellors, who were upbraided—I thought perhaps a little brashly—for their sheep-like behaviour in the face of the stresses imposed on our higher education and research system by comparison with the more combative attitude of the doctors who make sure that the whole world knows what the medical services are suffering. I pass no comment on that, except to emphasise that it is not only the professional scientists and academics who are now becoming seriously concerned about the organisation and outlook of our research programme.
I shall conclude by quoting the words which appear in the final recommendation of The Science Budget—A Forward Look publication of 1982. The report is addressed to the Secretary of State for
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Education and Science from the Advisory Board for the Research Councils. Its final recommendation is:
"Let there be no mistake, this is a time of new scientific opportunities, of great promise, which need to be supported now if our country is to prosper in the future".
The italics are mine, but they have been running right through this debate.
"We appeal to you to secure an increase in the science budget which will enable those opportunities to be exploited and will help to mitigate the damage already done to the university research base".
Those words are now nearly two years old. I would submit that they are still valid today.
2.14 p.m.
Lord Adrian: My Lords, we are grateful to the noble Lord, Lord Sherfield for the opportunity to discuss this First Joint Report by the Chairmen of ACARD and ABRC. We are grateful also to the two chairmen for their report which, if it does not always make very cheerful reading, is a clear statement of where we stand today. Among many important points, it comments upon the dependence of technology on fundamental science and the reverse dependence, that of fundamental science on technology. Again, it mentions the long times, the often very long times, between basic discoveries and consequent shifts in technological advance. These points are well worth making. They are too often forgotten by "high tech" enthusiasts and even by scientists themselves, especially when they search for support.
The report makes a strong case for basic research. The fourth conclusion reads:
"We have also pointed out the vital importance of basic research to the long-term scientific health of the nation. The UK must maintain its strength and capacity in basic research which has as its prime motive extending human knowledge and understanding; in such research, excellence by world standards must be the aim but the underlying emphasis should be the benefit to the nation and especially the development of new products and industries".
Despite the rather subtle distinction that has been identified by the noble Lord, Lord Flowers, in aims, motives and underlying emphasis, it is extremely reassuring to have this clear statement from ACARD and ABRC, even if I believe, as a number of noble Lords have done, that one needs to temper one's assurance by thinking about what is actually happening to basic scientific effort in this country. The 8 per cent. reduction in funds to the University Grants Committee for universities has made the Government's support of the science Vote look somewhat half-hearted. I listened with interest to the noble Lord, Lord Lucas of Chilworth, as he described the present consultations with the universities. I hope that the outcome will be useful and speedy, but from where I sit in the university, I am inclined to agree with what the noble Lord, Lord Flowers, has said about the dual support system.
The present state of universities has been touched upon by several speakers. I should like to look at perhaps the longer term consequences of diminished support for the science base at universities. It may be true that too many of our bright young people have remained in universities, or that they did so in the 1960s and 1970s when universities were expanding in response to Government policy; but the opposite can happen as well. If a university career in science is made

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too unattractive by poor facilities or if too high a proportion of graduate students goes into university, there may be no one left to do the fundamental research or to train those who will do the more immediate applied research or development in industry. In case that seems fantastic, I would point out that the United States is faced with just this prospect. A commission, appointed jointly by Congress and President Reagan has concluded that graduate departments in United States universities face severe shortages of talented doctoral candidates in areas such as engineering and computer science. The commission is recommending, and seems, indeed, to have achieved, substantially increased Federal funding on equipment and instrumentation in American universities, and an increase in Federal support for fellowships there.
New blood appointments in British universities are very welcome but they will need up-to-date laboratory equipment if they are to make much of a mark. There is another way in which support for basic science is being eroded. It has been mentioned by Sir John Mason in a study of research commissioned by Government departments. In his report Sir John says:
"Strategic research which should be integral to commissions is not adequately covered; it is being increasingly supported from the Science Vote, with a consequent reduction in funds available for basic studies".
I believe that we are in real difficulties over the definitions of the various categories of research. The report of the Select Committee on Science and Government referred to "long term but directed research". The Select Committee called it strategic research and expressed the worry that support for it was inadequate. The noble Lord, Lord Sherfield, has referred to the new classification used in the recent annual review of Government-funded research. This Frascati system classifies research and development into three categories. First, basic research, which is experimental or theoretical work undertaken primarily to acquire new knowledge. Secondly, applied research, which is also original investigation undertaken to acquire new knowledge. It is, however, directed towards a specific practical aim or objective. Thirdly, experimental development, which is systematic work drawing on existing knowledge derived from research that is directed to producing new materials, products, processes and services.
It seems to me that this classification means that much that is presently thought of as "applied research" in departmental commissions should be called "experimental development", and that would be a better description of what is in fact involved. Perhaps more importantly, much of the strategic research which now falls either between the research councils and the commissioning Ministries and is not done, or is supported from the Science Vote at the expense of basic research, should be seen to be applied research and, therefore, under the Rothschild principle, unavoidably the concern of commissioning Ministers. If this indeed is the result, the new classification has much to be said for it, however confusing it may seem at first sight.
The report of the Chairmen of ABRC and ACARD contains two interesting sections which have already
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been mentioned. I am referring to the sections dealing with "A Receptive Market" and "The Right Climate for Innovation". The importance to all of us of a successful industry cannot be exaggerated and it is plain that we must do what we can to improve our ability to compete in world markets with the most successful innovators.
It is a constantly repeated complaint that scientists should be more conscious of the exploitable aspects of their work and make greater efforts to ensure exploitation or at least the protection of exploitable ideas, by taking out patents. Scientists are accused of unseemly haste to publish, and of taking no thought of the loss thereby of exploitation rights. Indeed one hears, at the highest level, of indignation that Britain's discoveries are being exploited by America and Japan. But if Japan and America can profit by work published in this country so can we, or rather so could we if we had industry capable and willing to innovate and an economic climate favourable to innovators. I believe that we are in fact learning, even if slowly, and gradually we are beginning to encourage enterprise and innovation, and especially the innovation and enterprise of small firms whose competition may be the most effective way of stirring up established industries.
For the truth is that until recently it has not been easy to raise capital for starting a business, and the processes for establishing a patent were often expensive, complex and slow. There is, however, encouraging evidence of new thinking about the effect of patenting on innovation and the Government's Green Paper on Intellectual Property Rights and Innovation is undoubtedly an important step in the right direction towards easier and faster patenting. But I should like to sound a note of caution on the issue of patenting because I believe that, based on a faulty analysis, too much emphasis is placed on confidentiality and patenting; or perhaps it is better to say that this is an area of misunderstanding between academe and industry. The tradition in science is open publication; and verification by repetition is very much part of the scientific method. We should not lightly give up an idea which has served us so well. I believe that, so far as much basic science is concerned—and I mean the kind that is not initially seen to have any identifiable purpose other than increasing knowledge—it is normally better that it be published and subject to scientific scrutiny, and let he who will, exploit it.
I am aware that this is perhaps an over-simple view and that it is an old-fashioned view, but it is one that I am moved to express here because the contrary position is so often put without question. Last July the Agricultural Genetics Company was founded to exploit bio-technological discoveries in five institutes of the Agricultural and Food Research Council. They are very promising areas of research indeed. But the chief executive of the AGC is reported to have explained (and I quote from Nature):
"that a confidentiality committee had been set up to make rapid decisions on the commercial potentials of discoveries reported in papers that AFRC scientists hoped to publish. Any papers that had to be suppressed to protect commercial interest would still be accredited to the authors' files".
To someone brought up in the more open tradition of science and medicine, such a statement has a very

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chilling sound. In parenthisis, as I have mentioned medicine, may I say how much I enjoyed listening to the wise words of the noble Lord, Lord Richardson, on that topic?
Scientific skills and innovator's flair are only very rarely combined in the same person, though when they are the results can be very startling. The noble Lord, Lord Zuckerman, has already mentioned the remarkable achievements of Dr. Land. So it is extremely important that scientists and innovators should, as far as possible, be brought together. The report that we are considering has much to say on this score. But it is encouraging to see that economic factors are given so much, and such substantial, weight. They are probably the overwhelming factor in achieving successful innovative industry.
Again, I believe that the climate is already beginning to change, and we must thank the Government for that. In a recent number of the Economist an analysis of sunrise industries in the United States of America, Europe and the United Kingdom gives some grounds for hope, and the Economist emphasises the importance of capital availability, a good market in unlisted securities and low taxation of capital gains. I think that there are many encouraging signs that innovation and enterprise are being developed, and in Cambridge especially there is enthusiasm for science parks and for new small "high-tech" firms.
I have spoken for long enough, but before I sit down I should like to echo what the noble Lord, Lord Sherfield, has said. I, too, very much welcome the joint report which we are discussing and the many and various other reports which have been mentioned. I am pleased to think that the efforts of the Select Committee on Science and Technology, of which I had the honour to be a member, had some part in bringing these about. As science and technology play a bigger and bigger part in our lives, so informed discussions of how science is to be organised and how it bears on Government decisions become more and more important. These reports are immensely important—indeed, they are essential ingredients of that discussion—and they whet our appetite for more. I, too, hope that they will become annual events.
2.28 p.m.
The Earl of Bessborough: My Lords, I so much agree with the noble Lord, Lord Adrian, that we should thank the noble Lord, Lord Sherfield, for drawing our attention to this report, which was called for by the sub-committee over which he presided so effectively. For certain reasons I did not particularly want to take part in this debate today; but, having told the noble Lord, Lord Sherfield, what I might say, he said very positively that I must say it. I am not a chancellor or a vice-chancellor of a university, nor even an ex-chancellor or an ex-vice-chancellor and, therefore, I did not feel as well-qualified as most of the speakers this morning and this afternoon. However, I was a member of the sub-committee of the noble Lord, Lord Sherfield, so here goes.
The joint report certainly sets out very clearly how, in 1981–82, the Government spent their £3.4 billion—some half being on defence, from which I hope there has also been some civil spin-off, as there
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has been in the United States. This is not exactly a new subject for me, since I have been involved with the whole problem of what some of us used to call "the science of science" ever since, in the early 1960s, I was Parlimentry Secretary and later Under-Secretary of State with my noble and learned friend Lord Hailsham, who was then President of the Council and Minister for Science, both basic and applied. Then in the 1960s as a Conservative spokesman in opposition I moved two Motions. One was on the administration of government science and technology and the division of responsibility between the Department of Education and Science and the then Ministry of Technology, as well as on liaison between the universities, government research establishments, and industry. That was in 1967, as the noble Lord, Lord Todd, remembers. Then in 1968 I moved another Motion on science policy and manpower.
I am glad to see so many noble Lords in the Chamber this afternoon—and especially, as I say, the noble Lord, Lord Todd—most of whom are on the Cross-Benches and speaking today, and who also spoke in those debates. Some of us may be saying much the same thing today. Plus ça change.
I think present arrangements under the ABRC and ACARD can be said to be working reasonably well in so far as I am able to judge these matters. I also feel that the arrangements 20 years ago under my noble and learned friend Lord Hailsham, and me as his underling, also worked well, since, ministerially that arrangement did bring close together the work of all the bodies involved in basic as well as applied science and technology. It worked especially well with the noble Lord, Lord Todd, as chairman of the Advisory Council on Science Policy, and the noble Lord, Lord Kings Norton—who is soon to speak—as chairman of the council of the Department of Scientific and Industrial Research, the DSIR, and of course the noble Lord, Lord Sherfield, as chairman of the Atomic Energy Authority, so far as high energy nuclear physics research was concerned. In that way, there was truly co-ordinated ministerial responsibility for the research councils, the Government research establishments, the co-operative industrial research associations, the Atomic Energy Authority, and indeed the University Grants Committee and higher education generally.
That was, I thought, an effective arrangement. Of course, my noble and learned friend, now the Lord Chancellor, was uniquely qualified—as he is uniquely qualified in almost any post—to be the Minister for Science at that time, and that arrangement worked well. The only slight friction then was over ministerial responsibility for the National Research and Development Corporation, which is now incorporated in the British Technology Group, in that the NRDC was the responsibility of the President of the Board of Trade, my right honourable friend Mr. Edward Heath. There was then of course no Department of Industry.
Then, while we were still in opposition in the late 1960s, the ACSP became the Council for Scientific Policy, and an advisory council on technology was also set up. It was set up by the Labour Government under the Administration of Mr. Harold Wilson—now Lord Wilson of Rievaulx—and Mr. Tony Benn, in what was part of their dramatic "white hot technological

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revolution". As now, with the ABRC and ACARD, there was, appropriately I think, some overlapping in the membership of those two bodies.
I still wonder on reflection, however, whether there may not have been some merit in the creation of the Central Advisory Council on Science and Technology of which the noble Lord, Lord Zuckerman, was chairman. I listened to his speech with great interest but he did not mention it. But, for some reason which I have not altogether fathomed, that central council met only once or twice. I suppose it was thought that there had to be a limit to the number of advisory bodies; yet I continue to believe, pace whatever the noble Lords, Lord Todd and Lord Zuckerman, may think, that there was a good reason for its formation, which co-ordinated both basic and applied research and development although not necessarily its exploitation.
On exploitation, my Lords, I agree with what the noble Lord, Lord Sherfield, said (as did others, particularly my noble friend Lord Nelson) that we should be selective. Seeing now the noble Lord, Lord Zuckerman, in the Chamber, I remember very well his report on technological innovation. Much of what was said in that report is in my view, highly applicable today. However, as I say, I think that present arrangements may well be appropriate, and Sir Henry Chilver as chairman of ACARD and Sir Alec Merrison (and now Sir David Phillips) as chairman of ABRC, together with Dr. Robin Nicholson, Chief Scientist in the Cabinet Office (formerly in the CPRS) have made, and do make, admirable advisers to my right honourable friend the Prime Minister who, as I rather understand it, is herself, in effect, Minister for Science and Technology. Certainly, never before has this country enjoyed a Prime Minister so admirably qualified as such, being herself a scientist and a former Secretary of State for Education and Science. My only fear is that, highly qualified as my right honourable friend undoubtedly is—and she is now a Fellow of the Royal Society—it must be extremely difficult for her, with all her vast other pre-occupations, to give time and attention to these highly complex questions.
I would join with the noble Lord, Lord Sherfield, in asking whether my noble friend Lord Whitelaw, Lord President of the Council, considers the Chief Scientist in the Cabinet Offices to have sufficient staff support and back-up to fulfil his role, although I know how very able he is himself. I also know that he has some able representatives from industry in his office, as well. At all events, I am very glad that Dr. Nicholson was retained in the Cabinet Offices when the Central Policy Review Staff was dissolved. Also, like the noble Lord, Lord Sherfield, I shall be interested to hear what my noble friend the Lord President has to say about the criticisms of Sir Ronald Mason on commissioned research as well as the criticisms of Mr. Bryan Silcock in that rather formidable article somewhat emotively entitled The Stangling of Science in the Sunday Times of 5th February. He referred specifically to the more than 100 bio-technologists who, in the past five years, have left the country to work abroad. I wonder whether that statistic is in fact correct.
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My Lords, towards the end of my remarks, I should like very strongly to stress, as did other noble Lords, the importance of exploiting the research and development work done by the various government research establishments as well as by industry itself when it is funded by government.
When we had our debate on 18th January on advanced information technology, the fifth generation of computers and the Alvey report, it was a very happy occasion and there seemed virtually, and in principle, unanimous approval on all sides of the House of what the Government had done, and also among the principal industrial firms involved which I mentioned in that debate. There seemed agreement that the implementation of the Alvey programme appeared to be proceeding satisfactorily and on the right lines, even if it is perhaps early days to make any kind of mature judgment. For this, we must certainly congratulate my honourable friend the Minister of State Mr. Kenneth Baker and Mr. Brian Oakley, the director of the Alvey programme.
When I say that there was unanimity, I am not forgetting that the noble Lord, Lord Flowers, and the noble Earl, Lord Shannon, who was in the House just now, made some minor criticisms as well as some very useful suggestions, of which I hope the Government have taken due note, in a very interesting debate covering what is undoubtedly a booming industrial sector. In connection with Alvey, I hope we shall not forget the European dimension, not only the European strategic programme into research in information technology, but co-operation in other forms of R & D between member states; and, as the noble Lord, Lord Sherfield, stressed, the importance of international co-operation generally is something that must continually be borne in mind.
I thank the noble Lord, Lord Sherfield, for initiating this debate and also the ABRC and ACARD, and especially Sir Henry Chilver, that great authority on robotics, for having agreed to provide annual reviews of this kind. I hope, in conclusion, that if we have no specific Minister for science and technology in the Cabinet, apart from my right honourable friend the Prime Minister, an existing Secretary of State—either, perhaps, my right honourable friend the Secretary of State for Education and Science or my right honourable friend the Secretary of State for Industry—will take on the task of speaking up for both in Cabinet. This is something that came out of the Select Committee's report. They would speak up for both as my noble and learned friend Lord Hailsham did over 20 years ago, when he used to speak of the seamless robe in education, science and industry.
I am grateful to my noble friend Lord Sherfield for giving us the opportunity to air our views on this vast subject today and, most especially, to my noble friend Lord Whitelaw for agreeing to wind up the debate. We must all await his speech with great interest.
2.43 p.m.
Lord Kings Norton: My Lords, we are now in the last stages of what I think we shall all agree is proving to be a most interesting and valuable debate—a debate in which we have to thank the noble Lord, Lord Sherfield, not only for his Motion and his speech today, but for the extremely valuable spadework

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which he did as the chairman of the Committee on Science and Government, which is at the root of what we have been talking about this afternoon. I could not help but be deeply interested in what the noble Earl, Lord Bessborough, had to say about the way in which we organised these things in the distant past. In the days of the DSIR and the advisory council, two decades ago, I felt that we were more or less developing along the right lines, and was naturally sad when it all came to an end. Nevertheless, we have to develop our methods again, and I think we are making a certain amount of progress, albeit rather slowly.
In the debate today I was most interested in what the noble Lord, Lord Gregson, had to say about the support for R & D in the manufacturing sector. I was looking at the figures in a rather different way. I agree with what the noble Lord, Lord Gregson, said. Nevertheless, I had developed a sort of mild optimism because of what seemed to me to be a change in the right direction in the attitude of the Government.
This change I deduced in a way that I should like to mention to your Lordships. Particularly in view of what I have heard this afternoon about the cuts which have been made in a number of areas, my optimism is perhaps unjustified and the figures may need further analysis. However, in the joint report which we are discussing the total amount of government spending for 1978 is given as £1,650 million: £1,060 million on defence research and development and £590 million on civil research and development. The corresponding 1982 figures in the recent Annual Review of Government-Funded Research and Development, which has been referred to several times today, are as follows: £3,381 million, divided into £1,688 million on defence research and development and £1,680 million on civil research and development. Those two figures are nearly equal.
I am not asking noble Lords to do mental arithmetic this afternoon, but when they read Hansard on Monday, making allowances for inflation in the intervening years, I hope that they will agree with me that the figures mean, in real terms, that the Government have kept their defence research expenditure roughly constant while increasing their civil research expenditure by about 80 per cent. That, to me, was encouraging. I admit that my optimism has been a little diminished by what I have heard today, but I hope that we can regard the tendency I have discovered as encouraging.
Still looking at the figures, I feel that the table on page 7 of the report may be misleading. The figures for the United Kingdom do not correspond with the figures to which I referred in the preceding paragraph. Clearly they come from different sources, and presumably are based on different assumptions. One of the difficulties in presenting statistics of this kind is to determine reliable figures for expenditure on civil research and development by companies, few of whom isolate research and development expenditure in their published accounts. I wish more would do so. I cannot help querying also the astonishingly low defence figure that is given for West Germany. The table is based on the latest figures which were available at the time this report was drafted—almost a year ago. But new information is now available, and as that table makes most interesting and valuable
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comparisons it would be worthwhile looking at it again and then publishing an up-to-date version.
In this most interesting and valuable review it is tempting to comment upon and discuss many of the sections. Many of them have already been discussed today. I shall resist that temptation except in the case of the section on page 17—the importance of design, to which the noble Lord, Lord Nelson of Stafford, has referred. The point is well made that advanced technology by itself will not command market success. It is necessary, says the review, to meet customers' functional needs, satisfy aesthetic requirements and diminish manufacturing and maintenance problems.
The other vital component to which the review draws attention is standards, to which I referred in the debate, on 4th July 1983, on engineering research and development. In my view, it is of such importance that I want to refer to it again, particularly as it has not been referred to at all this afternoon. As the report says on page 17, the importance of standards in encouraging good design has been recognised by the Government. Nevertheless, there is an important respect in which I believe that more Government support is needed.
I am not sure that the distinction is always understood between, on the one hand, the quantitative requirement demanded in a British Standards Institution specification which the Government clearly wish shall define high quality in our manufactures, and, on the other hand, the means of measurement available in industry to check that the specified quantitative requirement has been met. Uniformity and accuracy in the latter are achieved by relating them to national standards—and the refinement, maintenance and application in industry of national standards, the creation of new standards, and new methods of measurement of standards are all highly sophisticated activities requiring research and development.
This is the major work of the National Physical Laboratory, where the national standards of measurement are located. I still believe that more resources should be available at the National Physical Laboratory in support of this work—the importance of which, in relation to the quality of British manufactures, can scarcely be exaggerated. I ask the Government to look again at this matter, to see whether the financial allocation made to that work, which is not a large one by current standards of expenditure, can be increased.
Like other noble Lords who have spoken this afternoon, I feel that we can congratulate the authors of this first joint ACARD/ABRC review on the way they have outlined the basic framework on which our scientific and technological policies should rest. In their conclusions they have admirably summarised their views, which I hope they will develop in their later reports. In their penultimate sentence they express the hope, as the noble Lord, Lord Sherfield, pointed out, that parliamentary time can be found for the matters they have reviewed. We are finding time this afternoon, and I hope that when their later reports are published we can discuss them as well. There are few matters more important than the scientific and technological advance on which our economy and our prosperity depend.
2.52 p.m.
Lord McIntosh of Haringey: My Lords, the debate today has ranged widely from the wellsprings of scientific discovery to the day to day problems of the applications of science and technology in industry. My lack of either scientific or technical qualifications makes it essential that any contribution I can make shall be at the latter end of the spectrum. I am going to talk almost entirely about the exploitation of science and technology, with some wary forays into issues of technological and scientific policy which have been discussed today.
The issue before us today—which is always the issue before private industry—is one of choices and of priorities. The recommendation of the joint report that we should be more conscious of our selectivity of the areas for expenditure in scientific and technological research very much confirms that. My noble friend Lord Gregson has pointed out that the very necessity of making choices and of deciding which areas are worth going for means that we must have some general strategy on scientific policy. Otherwise, as my noble friend said, we will simply land up with anarchy. I suspect that there is an element of anarchy, and that despite the satisfaction which some noble Lords have expressed at the present way in which we conduct the Government's reponse to the problems of science and technology, there is something wrong.
Many noble Lords have referred to the lack of collaborative research. In a debate last month, the noble Lord, Lord Nelson of Stafford, referred to the collaborative research which his company is undertaking with other companies and with academic institutions. The noble Lord, Lord Zuckerman, referred to an experiment going on for a period of more than 15 years in a collaboration between industry and the academic world. The noble Lord, Lord Flowers, very rightly recommended to your Lordships and to the Government the Muir-Wood proposals for industrial seed-corn funding. None of these add up to a real widespread collaboration either between industrial firms or between industrial firms and the academic community. The fact of the matter is that industry is unwilling to commit itself to projects of longer-scale research and development, and it is unwilling in particular to allow outside bodies—whether they be research institutes or university research departments—to be involved in its own research and development priorities.
The second piece of evidence that I adduce in saying that something is wrong is in the Mason report on commissioned research. Sir Robert Mason says quite bluntly that the Rothschild principle has not worked; not, he says, because it could not work but because there has not been any serious attempt to apply it. I am going in a moment or two to suggest that there are some reasons concerned with the instability of decision-making in Government departments why that should be so.
Something is wrong, too, in the supply of candidates for places in higher education in science and technology. If I may be personal for a moment, my stepson is, at the age of 25, applying for a mature studentship in teacher training. He has the good fortune to have a degree in physics and chemistry. He
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is told that there are many vacancies in all teacher training colleges and departments in those subjects, whereas all the social science courses have already been filled up for September and October 1984.
Something is also wrong in the use by the public sector itself of the advances of science and technology. It is, after all, the ability of scientists and technologists to have some sort of captive market in the public sector which provides the starting point for the practical application of their discoveries. Your Lordships may have seen in the press in the last few weeks the example of a body-scanner developed in a medical research institute, or I think it may have been a company, in this country. It was offered to area health authorities in the National Health Service and the take-up was so poor that the cost at the level of production indicated would have been something around £50,000 for each unit. The press report says that the manufacturer of that body-scanner has gone to the United States where the demand in hospitals for that product is such that the unit cost is more like £15,000. We have lost the advantage of that technology for our health service, and we have lost the employment that would have gone with it.
We have to ask: is that a question of resources? The first answer must be that, if indeed it is true that our research and development expenditure is of the order of 10 per cent. of that of the United States—and I am referring now to government research and development expenditure, because we have no way of knowing what research and development expenditure there is in private industry—if it is true that we are talking about £3½ million in the United Kingdom and 50 million dollars in the United States, that must at least cause us to think whether there is something wrong in that relationship, and whether there is a possible source of future trouble for us.
Then we must look at the issue of high defence expenditure. I hesitate to cross swords with the noble Lord, Lord Kings Norton, but, if he will look at page 6 of the annual review of Government funded R & D, he will see that the proportion of the total R & D expenditure taken up by the Ministry of Defence in 1973–74 was 45 per cent. and that the figure in 1981–82 is 51·5 per cent. That indicates to me that defence R & D expenditure, as a proportion of the total, is actually increasing and not decreasing. I shall be interested to compare our two figures when we read Hansard tomorrow morning.
This is not just a matter of the amount of defence expenditure. Defence R & D expenditure does not contribute to the workings of the universities or the research institutes in the way that other kinds of R & D expenditure do. If we again look at that annual review we see that over 60 per cent. of defence R & D expenditure is placed with private industry and nearly 30 per cent. is carried out within the department itself. So that is not making a contribution to the broadly based research and development capability which I think would be the wish of your Lordships. Indeed, Sir Ronald Mason himself, in giving evidence to the Select Committee in this House, admitted that there was no proper organisation within the Ministry of Defence to see that the advances made in defence R & D were in fact available to private industry for other purposes.

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Is it a question of organisation? We are so swamped with acronyms—advisory councils and departments of this and committees of that—that I confess I find I have not anywhere near got my head above water. The common theme that I see is the problem of Government departments—of what Mason calls the "proxy customers". My own experience of contracting with Government departments is that one must set a very short period to complete a contract. It must be in months rather than years if one is not to have at least one change in the customer with whom one is working. That was the problem I found in other areas in applying the customer-contractor principle to working with Government departments. It is a fact that there is a high degree of instability in the individuals—I do not mean in their personalities, but in the changeover of posts—with whom researchers have to work. I fear that, again, Sir Ronald Mason does not actually make it easier in his recommendation that chief scientists should be recruited on a two-year or three-year contract basis. I cannot see how that will contribute to the stability which is required for Government departments to play a conscious and coherent rôle in the commissioning of research and development.
Is it an issue as between the universities and the research institutes? We have had powerful pleading from the noble Lord, Lord Flowers, that research should be concentrated in the universities. I must say that I tend to agree with him on the grounds of the interaction between teaching and research, but not in any way in terms of the inadequacy of the research institutes to carry out effective research work.
Instead of asking a question, let me now put forward a proposal. I suspect that the heart of the problem is that in all of this a three-way collaboration between Government departments, researchers and the ultimate users is needed. I suspect that behind this lies a fragmentation in Government policy-making which has made it virtually impossible for that three-way collaboration to work smoothly. The Government are, I suspect, issuing conflicting signals to the research community. On the one hand they are lauding the necessity for expenditure on advance information technology, and your Lordships' House has rightly welcomed the progress made in that area. However, at virtually the same time, in March 1981, drastic and unilateral cuts were made in the UGC budget without any apparent understanding that making cuts of that kind cannot be done without cutting the research capability of the universities, and therefore cutting the confidence of government departments and the users of research and development in the ability of the universities to continue in a stable collaborative pattern.
None of this gives me any great confidence that there is any conscious scientific policy, despite, or perhaps because of, the large number of bodies which have been set up to discuss scientific policy. In my business it is a commonplace that the less you understand the phenomenon the more variables you need to analyse in order to describe it. I suspect that that is the position we find ourselves in today.
3.5 p.m.
The Earl of Halsbury: My Lords, I joined your Lordships' House over 41 years ago, and ever since my maiden speech I have been banging away on this particular subject. At that time I was the only scientist in your Lordships' House who was actually working at the laboratory bench. The noble Lord, Lord Rothschild, was, of course, a scientist but he was most gallantly working on bomb disposal. I have been at it for a long time. I do not know how much longer I shall get at it. I shall confine my remarks to paragraphs 3.14 and 3.15 of the report, where the trend to place more contracts with industry and less with in-house Government laboratories is notified.
I think that here the figures could be—I do not say that they are—misleading, owing to confusion of research and development on the one hand with design and development on the other. If you can, broadly speaking, design something off the drawing board, you can be pretty sure that it will work, but you do not know how well. If you want a new armoured fighting vehicle, you probably have to make something like 10 of them and submit them to processes of destructive testing. You fire armour piercing shot at them and you race them across the desert to see how the tracks last, and so on. By the time you have done that, you have spent an awful lot of money, but none of it is development resulting from research, although some of the equipment on the tank might indeed be developed from the results of research.
Another good example to take would be the Brabazon aircraft, which was the largest aircraft in the world in its day. It was so large that a special hangar had to be built to keep the weather off and a special runway had to be built because the aircraft could not take off on any of the runways then existing in England. All the structural engineering on the hangar and all the civil engineering on the runway went down as the development of the Brabazon. The figure looked very big at one time. But if one is going to use these figures to determine the results of policy-making, one must subtract out the development of designs on the one hand and the provision of capital facilities on the other.
May I return to the subject of placing contracts with industries? I believe that you get better value for your money if you do it the American way and contract with industry rather than running in-house laboratories. The computer industry of this country was built entirely on orders that I placed with the future computer manufacturers while I was managing director of the National Research Development Corporation. I had a long talk with Sir Vincent de Ferranti, who built the first Manchester University machine, which was designed by Williams and Kilburn on a contract which Sir Ben Lockspeiser had placed when he was at the Ministry of Supply and which he took with him to the Department of Scientific and Industrial Research.
Ferranti were perfectly prepared to develop that themselves into a commercial computer, but Sir Vincent de Ferranti said to me, in the course of a long conversation, "I do not want a development contract. I want orders. If I have the orders, I will do the development". After consultation with my colleagues I placed an order with him for 10 Mark One Stars at

1427
£100,000 each, estimated cost. He was to take 7½ per cent. as a manufacturing commission, and after deducting a 2½ per cent. selling commission as our selling agents, I was to pocket the mark-up, which in fact came to 20 per cent. on costs; and I made £200,000 on that £1 million contract. I did exactly the same with its successor, the Pegasus. I started the Emidec 2400 series on that basis. The whole of the computer industries in this country were started in those days in industry by industry.
The other university which built a computer was Cambridge, where Professor Wilkes built the Edsac, which was re-engineered by Leo Computers, a subsidiary of J. Lyons and Company, and English Electric developed the original Ace on a contract with the National Physical Laboratory and then re-engineered it themselves—known as the Deuce—and followed it up with the KDF 9. Then came all the mergers between the various different companies, and we now have ICT as the result. It was done without any development contracts. It was done by placing orders and taking the risk; and the risk-taking propensity praised by the noble Lord, Lord Zuckerman, is of course the most important factor in this matter.
The noble Lord referred to the growth of the Japanese electronics industry. Why did that happen? It happened not through any outstanding merit of the Japanese but because the whole American electronics industry was overladen by space research and the Korean war, and they subcontracted out to Japanese manufacturers a very great part of the consumer electronics—radios, transistor sets, the manufacture of semi-conductors, and so on. The Japanese had the benefit of the whole of the American know-how and took off there.
I should like to end with a little, sad story with which I was connected, and again I refer to the noble Lord, Lord Zuckerman. I am sorry that he is not in his place——
Noble Lords: He is.
The Earl of Halsbury: Oh, he is behind me. I did not notice that he had secreted himself. The first laser lased in the hands of a chap called Maiman in August 1960. By March 1961 I had got an engineering team manufacturing lasers for sale to universities at a small electronics company in this country—the subsidiary of a big company of which I was a main board director—and I was chairman of that company. I knew that the laser was going to have a future. I did not know what the future was going to be. I knew that a new scientific discovery always leads to an industry, and I thought that selling the lasers to the universities which would use them as tools on research grants from the research councils was a good enough market to start with.
I did quite well for about two years. Then I found that I could not make a profit on lasers against American competition. Why? Because the American Government were placing orders with industry on research contracts to design lasers of which industry got the benefit; it got the benefit of the design, and the costs were paid for. I could not compete on that basis
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because I was paying for my own development costs. So I went to the Ministry of Technology, which had come into being by that stage, and said, "Can't you help me keep my head above water?" They said, "No, we are sorry, we can't do that". I never got any help at all.
During that period when I was struggling to keep my head above water more money was being spent in Government laboratories in laser research and development than would have been necessary to keep me afloat, and they never produced a single saleable laser during all that period. I told the Ministry that what I had started on my own authority I should terminate on my own authority, and that was that; I did. As your Lordships know, the laser is now a tremendous research tool. It may even turn into a weapon; we do not know.
The first two instances to which I have referred are examples of what one can do by contracting with industry, by placing orders for a product. The other instance is an example of what one does not accomplish if industry is not given research contracts. I believe that the way to do it is by placing orders. If I had the power to do so, I would close down some of our in-house Government laboratories and contract with industry to do the work that they are doing—give the chaps their notice, and say. "There are jobs waiting for you in industry". I believe that one could slim down the whole Government side of it a great deal and that there would be more value for the money if it was spent in industry. Moreover, one would get the know-how where one wants it for future industrial developments. What is the sense of having the know-how in an in-house Government laboratory and the manufacturing facility in industry, and the two cannot get together because they have different kinds of orientation? Do it in industry and one has the know-how where one wants it right from the very start.
I am not going to say any more (it is almost the end of the debate) but there are two noble Lords whom I should like to thank for their contributions—one is my old friend the noble Lord, Lord Todd, and the other is another old friend the noble Lord, Lord Kings Norton—because they both resumed their seats before the clock reached 10 minutes, and that is exactly what I am going to do now.
3.15 p.m.
Lord Kaldor: My Lords, I had not intended to speak. I had thought that the debate would be concerned with the administration and organisation of research which is outside my sphere of competence. However, as the debate has broadened out into a much wider field—it is one of the best debates I have had the privilege of hearing in this House—I should like to take up a few minutes of your Lordships' time to fill out some of the statements already made concerning the ominous prospect of the decline of our manufacturing industry. This was emphasised in the speech of my noble friends Lord Gregson and Lord McIntosh and received even stronger emphasis in the admirable speech of the noble Lord, Lord Zuckerman, not to speak of others.
I wonder whether it is known how unique and how big has been the decline on our manufacturing output. It is now 20 per cent. below what is was 10 years ago.

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There is no other industrial country in the world to which this has happened. I have not been able to check the figures, but I do not believe that there is any other country whose manufacturing output in 1983 was less than in 1973, let alone 20 per cent lower. In our case this was due to the fact that manufacturing imports rose so much faster than manufacturing exports, and this divergence has accelerated in the last five years. Our imports increased in volume by 10 per cent. a year at compound interest. Our exports increased by only 4 per cent. a year. This made it inevitable that sooner or later the lines should cross and, as my noble friend Lord Gregson has pointed out, we became a net importer of manufactured goods for the first time, in a full year, for 200 or perhaps 300 years.
The lines are still diverging. We can expect to become a net importer of manufactures on an ever larger scale. For a moment, this does not seem to matter. If we earn so much on oil, we do not need manufactured exports for our balance of payments. But, as has already been pointed out, it would be foolish to reckon on this. Oil is only a temporary source of wealth. It is not a renewable or permanent source of wealth like manufacturing production.
Many people (including the Chancellor of the Exchequer, according to something that he is reported to have said recently) regard the shrinkage of manufactures as the consequence of North Sea oil. That is not correct. The decline would have happened even if we had never had North Sea oil. All that North Sea oil did was to allow it to happen without immediately disastrous consequences. It is true that North Sea oil accelerated the process of decline, but it did so for reasons that were not inherent or necessary but due to short-sighted Government policies, or rather the lack of advice received by Ministers about what the situation required.
Oil is a peculiar industry in that only 2 per cent. of the value added goes into wages and salaries. This is in contrast to the coal industry which was also a source of net exports before the First World War where 80 per cent. of value added—not 2 per cent.—goes into wages and salaries. This means that oil does not generate consumption demand. It does not generate the type of incomes that increases the demand for goods or services. Hence, in order to derive any real benefit from oil, from this additional source of income, we should have increased our aggregate demand correspondingly—we should have increased our investment by at least as much as the value of our oil output, or, rather, the net improvement in our balance of payments as a result of oil. Had we done that, other countries, such as Germany, could have paid for our oil in terms of investment goods or manufactured goods, machinery et cetera, without detriment to our manufacturing industry. If the effects were detrimental it was only because they occurred at a time when the Government's anti-inflationary policy dictated a very cautious attitude to demand, and not an expansionary attitude. It was unfortunate that the two things happened to coincide.
The International Monetary Fund, in one of its——
The Earl of Halsbury: My Lords, will the noble Lord give way? I should like to ask the noble Lord what his doubtless very well-informed remarks have to
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do with the topic which we are debating, which is the first joint report by the chairmen of ACARD and so on?
Lord Kaldor: My Lords, I began my remarks by saying that I did not wish to speak to this Motion precisely because I do not feel competent to speak to the subject set out in it. But in fact the debate was broadened by many noble Lords, including the noble Earl who preceded me, far beyond the terms of the Motion, to the general economic consequences relating to the lack of development of new products and the lack of expansion of science-based industries. It is the latter factor to which the International Monetary Fund has attributed our comparatively very poor performance since the war.
In the first instance, industry is primarily responsible for that situation. As Sir Kenneth Corfield said in a speech which I quoted on an earlier occasion, product development and a choice of products to be developed is entirely a managerial responsibility and of no one else. Therefore, our industrial management should be held responsible if there were not enough contact between the scientists who invent things and the industrialists who develop them.
In the second place, I think that the Government also are to blame in that they gave no guidance or direction to industry—and I am referring here not only to the present Government, because this is equally true of earlier Governments. There is a very old tradition in this country going well hack into the 19th century that the Government should not meddle in the affairs of industry; that any such "meddling" means that they go into matters about which they know nothing; and that industrialists alone are the best judges of how to invest and of the products they should develop. That is in contrast to the attitude of Japan where the whole post-war development was closely directed by what the Japanese call the "administrative guidance" of the Government. To a lesser extent it is also true of France and a number of other countries.
I do not know what one can do about this, except that I believe that in future the Government ought to take a more positive role in ensuring that industry does exploit the potentialities which arise out of new knowledge and new ideas.
3.25 p.m.
Lord Shackleton: My Lords, I shall not follow my noble friend Lord Kaldor, though I am bound to say that his remarks were relevant to the ACARD-ABRC Report, which discusses these very issues. I am glad that my noble friend was able to speak to them. Furthermore, I am rather glad that someone else, who is not a scientist, even though he is a very distinguished economist, has taken part in the debate besides the noble Lord, Lord Sherfield, and one or two of the rest of us.
First, I want to say to my noble friend Lord Sherfield that he can be very well pleased with this debate, with his own contribution and, indeed, with his handling of this joint report. I rather hope that this is an eye-opener to the noble Viscount, whom I managed to persuade to take part, and I am very grateful to him for doing so. I told him that this would be an important debate. I doubt whether he will have heard a debate of

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such high quality in the whole of his parliamentary career. Not only did a number of distinguished scientists take part, but six, maybe seven, Fellows of the Royal Society and several leaders of industry also took part, including the noble Lords, Lord Nelson of Stafford and Lord Kings Norton, and my noble friend Lord Gregson. Tucked away among this galaxy were one or two of us who are not scientists at all.
The noble Lord, Lord Richardson, raised an important point—and I shall not attempt to comment on the whole of the debate—when he said that it is difficult for the layman to appreciate the importance of basic research. I do not agree with him. It is important that the layman should be prepared to listen. In his very interesting speech he gave a number of examples of the results of basic research, all of which I knew about because I take the trouble to read at least the first 10 pages of Nature and then I look at the headings of the rest of the articles because I do not understand them. The important thing is that the layman can listen if the layman is prepared to do so. This applies particularly to politicians, and I shall have to say something about that.
The noble Lord, Lord Todd, may feel inclined to think that this is rather a déjà vu occasion. After all, most of the remarks we have made today he refrained from saying he said 10, 20 years ago, when we had the Advisory Council on Scientific Policy, to which I shall refer in a moment.
I want to make just two or three main points and then comment on machinery, rather than seek to answer or comment on all the detailed issues which have been so very fully deployed. I am grateful to the noble Lord, Lord Lucas, for his contribution, but it is no use saying that the science Vote has been protected, because it has not. That has come out clearly in this debate. It may have been technically protected in certain ways, but the situation as regards the dual-support system and the position of the UGC shows that real damage is being done. I do not seek to make a party point; I am merely making a statement. This is a subject on which we can be pretty frank with one another.
The science Vote is not protected. The Government may think that in the present situation. When their attempts to curb public expenditure are not as successful as they would like, there are limitations on what they can do. They can think more intelligently about it than they have done and acknowledge some of the facts.
That brings me to the very point raised by my noble friend Lord Gregson and other noble Lords of the importance of getting some strategy into Government. The noble Lord, Lord Gregson, was a very good chairman of the Committee on Engineering Research and Development. These committees are not partisan, they are all-party committees, and when good and sensible men get together they sometimes come to views which may not always commend themselves to the Government's particular party philosophy or other policies. The report says:
"The Committee recommended that the Government should devise a national strategy for industry and technology, which would designate those sectors and technologies on which industry should concentrate".
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The Government replied—and this was Sir Humphrey Appleby at work again and interpreting what he thought was best for his Minister—
"While accepting that this country cannot expect to be preeminent in all sectors of manufacturing, the Government cannot agree with this approach".
The answer is that they do not totally disagree because there are areas where they are taking initiatives. They have focused very much on information technology. I have no doubt that they will respond to our new report on remote sensing and digital mapping, and indeed have already anticipated some of our recommendations. The message that has come out—and the noble Earl, Lord Selborne, and others have said this—is that it is necessary for the Government to be rather more positive as to their activities.
We do not want to have an essentially planned economy just at a moment when countries like Hungary are dismantling their central planning machinery, as I am sure the Prime Minister will have noted when she was there. In the light of the urgency that has come into this debate there is a need for a more positive approach from the Government. This again is a message that has come through strongly.
There is a wealth of advice available. I should like to pay tribute in particular to the scientific bodies and to the Royal Society, which has been so helpful to the Select Committee. Before I sit down—and do not let me make noble Lords too hopeful—I should like to refer to some of the recommendations in the report of the Select Committee on Science and Technology and Science and Government which the noble Lord. Lord Sherfield, was too modest—or too determined to keep his speech short—to refer to.
We very much appreciate, as he said, the action that the Government have taken on a number of the recommendations. They have gone quite a long way. In particular they accepted the importance of upgrading the role of the Chief Scientist in the Central Policy Review Staff—although not quite as highly as we should like. The result is that he was not actually left high and dry when the policy review staff disappeared, because the Government have also given him some extra support which meant extra machinery, and it is extremely valuable.
No one will ever be able to replace that polymath Lord Zuckerman as Chief Scientist. This was the great difficulty we had with Lord Zuckerman: he was unique, so it was impossible to think of a successor, and they have had to devise something else, which is going rather well. This is satisfactory. On the other hand, the Government did not accept all our arguments. We recommended something equivalent to the old ACSP, the establishment of a Council on Science and Technology. I still believe that the present arrangement, although a good deal better, is an untidy one.
Admirable though the report of the two chairmen of the ABRC and ACARD is, and their preliminary reports were, they did not—as the noble Lord, Lord Sherfield, made clear—quite in the long run meet what we wanted, but then the statistics were not available. May I say in passing on the statistics that Frascati has confused me more than any of the other definition of science? Indeed. I wonder whether one could not play

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a good game based on the Government having applied or not applied the Frascati definition accurately. I remember that the noble Lord, Lord Rothschild, at one time produced 32 definitions of different kinds of science and research.
However that may be, we have these two reports and they add considerably to our knowledge. But what we were looking for was a body of sufficient authority really to take an across-the-board look at the whole of science and technology. One may say that that is too broad, that it is better to do it in penny packages: but the Canadians and others have such a council, I see their reports and they tend to bring things together. I do not think that as yet we have gone quite far enough.
There were some other very strange arguments. There was, for instance, the argument against having a Chief Scientist, which we proposed for the Scottish Office. It was said that it was impracticable to require a single scientist to deal with the whole range of scientific advice; that it may need five separate departments within the Scottish Office. I have no doubt that the noble Lord, Lord Zuckerman, could deal with 10 different departments. Indeed, a chief scientist like Sir Ronald Mason at the Ministry of Defence covers an enormously wide area. Sometimes, as I say, Sir Humphrey Appleby comes up with what appears to be a useful way of getting off a political hook which does not entirely succeed. Nor did they meet our arguments on the fact that demoting a Chief Scientist in status, removing him, and then having two more junior scientists in the Ministry of Agriculture and Fisheries means that they have the benefit of two Chief Scientists instead of one—because it is assumption that there are some people who really do not understand how the hierarchy in Whitehall works. Nonetheless, we were pretty grateful at the way that Government reacted on this point.
I wonder, again, whether the Chief Scientists are making use of some of the modern technologies for change—and this is why I am very grateful for the contribution from the noble Lord, Lord Swann, and for the intervention of my noble friend Lord Kaldor. The ordinary, generally-identified scientists, the physical and biological scientists, are not the only people to contribute effectively to change. It is interesting that not only do we have the Centre for Technical Change but that in industry now some of the big companies, when trying to introduce new policy, employ psychologists to help the managers to think of what they are trying to do, and why they are trying to do it and, later, to bring it about.
I do not want to make too much of it, but I want to make a plea that, although the pure sciences and applied sciences are important, I would not wish emphasis on them to be to the disadvantage of the humanities. As a classicist myself and therefore privileged to speak in this company, nonetheless I would not wish to see a steady erosion of the position of the historians, the philosophers and the others.
I should like to turn now to the rôle of the noble Viscount, Lord Whitelaw. Some years ago, before the Government moved on it, I said that an important rôle for him would be to go and rule Northern Ireland. About a year later, he found himself doing so. I think that if he had gone there a year earlier things might have been rather different. I have got another job for
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him now. To begin with, I should like to ask him to ask the Prime Minister to read this debate. It is the sort of thing that (if I may say so without being patronising) she is good at, is interested in and is very prone to take up as an interesting development.
Furthermore, the report of the committee of the noble Lord, Lord Sherfield—and I shall stop referring to all the other areas that we mentioned—mentioned the importance of having a Minister who would be concerned in this matter. We chose our words very carefully, and the comment on this was an interesting one:
"The Government believe that the stronger machinery at official level outlined above, together with this role of the Prime Minister, means that scientific or technological issues are unlikely to be lost or forgotten. They do not believe that there is—within the British system of Cabinet Government—at present an identifiable and viable role for a co-ordinating minister, and accordingly, do not agree with the Committee's recommendation.".
I make two comments on that. We know that the Prime Minister is interested and was put out when the House of Commons abolished their Select Committee on Science and Technology. That gave us our opportunity. The noble Lord, Lord Sherfield, and I put together memoranda as a result of which we had this committee and this debate today. But, interested though the Prime Minister is and much as we are grateful for the initiative which she developed when she had the great conference, it is really not practicable for the Prime Minister to fulfil the role that we sought. The role that we sought was not that of a co-ordinating Minister. We made it very clear that we were not seeking even something as modest as the Minister of Science, about whom the noble and learned Lord who sits on the Woolsack said that he could get the whole of his department into a bus in those days.
We are wanting somebody, for reasons that we set out very clearly, to be concerned. The reason is:
"Their experience of many Committees, including those of Cabinet, persuades them"—
that is, us—
"that a case without an advocate is liable to be lost or forgotten, It is in the nature of Government that the decisions which have to be taken at Cabinet or Cabinet Committee level are difficult and always subject to several conflicting arguments…the scientific issues may come to the fore through the Departmental brief or a Cabinet Office brief, but they depend on the willingness of someone present to advocate them, when Departmental or tactical interests"—
in other words, Sir Humphrey Appleby—
"might dictate otherwise, and they are almost bound to be subordinate to the economic issues which have one or more certain advocates."
The noble Viscount has had as much experience of Cabinet Government as anyone and, although we are not supposed to refer to certain Cabinet Committees, I do not know whether the Government have a Cabinet Committee on science or technology or who chairs it. But what we are saying was that some existing member of the Cabinet should have the responsibility of thinking about, and speaking for, science and technology and should be recognized as such. It is something less than co-ordination. It is, in fact, somebody in Cabinet who would have the advantage of the Chief Scientist and who would have somebody to go to. I was going to say that they could resurrect the noble Lord, Lord Zuckerman, but he does not need resurrecting.

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It has to be somebody in authority without departmental responsibility, and the obvious person for this is the noble Viscount, Lord Whitelaw. I would ask him to take some of these arguments seriously, because it struck our committee at that time that there was a difficulty in thinking across the board. Today we have had many ideas and suggestions put forward which need to be married up and thought about. I shall not go into the details of the official machinery and the role of the Chief Scientist, but I happen to believe that a senior Minister has a role to play.
I think that the noble Lord, Lord Sherfield, can be extremely pleased with the way in which this debate has gone and it will now be a matter of the Select Committee going on to other activities. The great advantage of your Lordships' House is that we are able to find the time one way or another, even if it is a Friday, to pursue this kind of subject and not just accept the first thoughts of the Government in reply to our ideas.
3.45 p.m.
Viscount Whitelaw: My Lords, I am grateful to the noble Lord, Lord Shackleton, who did, indeed, ask me whether I would reply to this very important debate. I said that my noble friend Lord Lucas of Chilworth would present the Government's case in full—which he most certainly did, and I am sure that the House is extremely grateful to him for doing so. I said also that I would consider whether it would be possible for me to wind up the debate. If the noble Lord hoped that in doing so I should receive an eye-opener he was perfectly correct. I have learned more in one day than I have learned on a great many other days in my ministerial career. However, as I started by knowing nothing, perhaps it is only an example of what I should have know before. As, however, the noble Lord has used the occasion to advocate a further job for me, I would say to him that recently I seem to have been attracting jobs, though not always, apparently, carrying them out very successfully. Therefore I doubt whether I should take on any more. However, I note what the noble Lord, Lord Shackleton, has said. I assure him that I shall speak to my right honourable friend the Prime Minister about it on Monday and will ask her to read the report of what I regard as having been an extremely important debate in this House today.
I felt that it was right to respond to the debate because of the eminence of so many of the speakers who have taken part in it. It has been a humbling experience for me to take part in a debate with so many people whom I have greatly admired for their eminence in their different fields, though always previously from afar. To hear them speak was very instructive for me. It will be difficult for me adequately to respond to them. However, I shall do my best.
This debate arises from the work of the Select Committee on Science and Technology of this House, a highly respected body. In their observations on the Select Committee's report, the Government requested this joint report from the chairmen of ACARD and ABRC, a request specifically welcomed by the
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chairmen in their report. It is significant also that they say:
"We would like to think that, in addition, some parliamentary time could be found for these matters, so crucial to the future wellbeing of the nation".
They have certainly had that parliamentary time today. Some noble Lords feel that it has been too long in coming, while others believe that it has come too soon, before other developments have taken place. But nobody can say that we have not found a considerable amount of time for this debate, and I am grateful to all noble Lords who have taken part in it. In particular I am grateful to the noble Lord, Lord Sherfield, who initiated the debate, who has done so much work in this field and who has encouraged us all by it.
I thought it would be right to say something, first, about the machinery, in response to the noble Lord, Lord Sherfield, following on Lord Bessborough's account of the responsibilities he had, with my noble and learned friend the Lord Chancellor, at one time. Realising how important his work was then, I am grateful to my noble friend for taking part in the debate, and I want to respond to one of the points he made. It relates to the position of the Government Chief Scientist in the Cabinet Office. The noble Lord, Lord Shackleton, was correct when he said that now he has about 10 people working for him, compared with four previously. The Cabinet Office is able, through him, to maintain a closer network of links with other departments—another factor which many noble Lords have requested in today's debate. I can assure your Lordships that it will indeed happen.
The noble Lord, Lord Sherfield, asked about the channels through which Dr. Nicholson would advise ministers other than the Prime Minister, a subject to which the noble Lord, Lord Shackleton, returned. In Cmnd. 8591, Dr. Nicholson became one of the very few civil servants to have his job set out for him in a White Paper. It says that his advice is available not just to the Prime Minister but to the Cabinet Office generally and, hence, to the committees serviced by the Cabinet Office.
The question then arises (and the noble Lord, Lord Shackleton, would put it to me if I did not seek to answer it at once): is any use made of him by other Cabinet Ministers? First, I should say that my right honourable friend the Prime Minister is exceptionally jealous of her knowledge in science and of her position in dealing with these problems in the country as a whole. At the same time, whether or not she is always the first to appreciate it—although I think she does appreciate it—the fact is that she has a good many other things to do as well, and therefore it is important that other Ministers do inform themselves and have contact with the Chief Scientist. I will report that feeling to her as well.
I can go slightly further for the benefit of noble Lords who have expressed their worries today. I have the absolute right, as one of the Cabinet Ministers concerned, and as one with considerable close association with the Cabinet Office, to avail myself of the Chief Scientist's views. I will most certainly seek to discuss with him what has been said in the debate today; I will take his advice and learn from him. I have not done so before; I believe that I should have done so, and if this debate has done some good to me it is

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that I have learnt of something that I ought to do. I can assure noble Lords that I will do that, and I hope it will help. I will also discuss with my right honourable friend the Prime Minister the other matters put by the noble Lord, Lord Shackleton.
I accept the point that has been made by many noble Lords that there is a need for co-ordination. The noble Lord, Lord Shackleton, said that he did not want a centrally planned economy. He gave some very cogent reasons, and I would agree entirely with what he said. At the same time, it is possible for a Government to take a positive role in many issues. I have been in Government long enough to know that Government sometimes do not take a positive role because varying Government departments quite understandably feel that they like to keep people with positive ideas off their own particular grass. That will always be the case, but I believe that a positive, combined role is important and we will certainly seek to develop one.
That is to some extent the answer I should like to give to my noble friend Lord Selborne, whose work in the Agricultural and Food Research Council is so extremely important. Not only in the council but in the industry as a whole—of which I have some knowledge and experience—this is perhaps a time when new thoughts and ideas will have to come forward, because the problems facing the farming industry not only in this country but all over the world are very considerable today.
It is in the same role that I would answer the noble Baroness, Lady White. She sought to continue her knowledge of the subject following the debate on the Welsh Plant Breeding Station, about which I have already heard, needless to say, from the noble Lord the Leader of the Opposition, Lord Cledwyn of Penrhos, who sought, as your Lordships would expect, to keep me well informed of his views on the subject. I know exactly how Welsh Members feel. I equally well understand why the noble Baroness felt that there was some lack of co-ordination. I am not sure if that is true, and, whether he was a hunted fox or not, she received a very good reply—as this House always does—from my noble friend, Lord Swinton,
The noble Lord, Lord McIntosh of Haringey, referred to the need for priorities. That point was made by many other noble Lords, and it follows on from the comments of the noble Lord, Lord Adrian, who viewed this from the point of view of the universities. He stated that he was glad there were to be consultations between the Secretary of State for Education and the universities as to how best they should order their priorities. He thought that was right. At the same time, he said he was worried by the somewhat diminished support for science in the universities. He made a very important point about fundamental research and the American experience. All of this we will certainly take on board.
In reply to those noble Lords who asked about the Government's response to Sir Ronald Mason's report, I think it is fair to point out that both ACARD and the ABRC are looking into the report. They are considering it and will report to my colleagues as to what they have found. I will undertake again to suggest to the Chief Scientist that I should discuss with him
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what he feels about the observations made on the Mason report and how we should carry them forward. I will make certain that this particularly important part as far as the Government are concerned is conveyed directly to my right honourable friend the Prime Minister.
I should now like to turn to one other point, before coming to what was perhaps another main feature of the debate. Naturally, I heard with the greatest respect what the noble Lord, Lord Richardson, said about medical research—something I think we appreciate only too well, and perhaps the older we get the more we appreciate the importance attached to it. So I take very careful note of what he said about the Science Vote in real terms. But that has been disputed by Lord Shackleton, and I am not going to enter into a statistical argument except to say that, when looking at the universities' priorities, clearly what Lord Richardson had in mind is extremely important and must be accepted. I think perhaps it should also be said that universities need not only to get their priorities right. I am coming to the noble Lord, Lord Zuckerman, and he made clear how money from outside, and from charitable sources, can also sometimes help as well in universities. I think that is something that should not be neglected, and I am sure Lord Richardson, in his particular field, would not seek to neglect that, either.
I turn now to what was a major feature of the debate, raised in the first instance by the noble Lord, Lord Gregson. He pointed to what the annual review had to say about our desperately worrying situation as far as our manufacturing industry is concerned, the position of our industry today, and said that that was emphasised by the problem that North Sea oil revenues are going to decline and that anyone who tried to deny that or tried to pretend that it will not create problems in the future would be very unwise indeed. The noble Lord, Lord Kaldor, made this point, as indeed did many other noble Lords. It is something which comes out in this report, and is very important; and, of course, it clearly brings together the position of industry and research in industry generally, on which much of our success in getting hack these markets must depend in the long run. So that is an enormously important point.
The noble Lord, Lord Gregson, said that lack of profitability was one of the reasons why manufacturing industry could not produce more of its own research and development. I think that if one took that over the last few years it would be true. I quite accept that this is only so in different fields today, but I think there are signs that in some fields there is a considerable rise in profitability. Where that is true, is there not then a case where an opportunity should be taken for industry to spend more on its own R & D in order to recapture some of the position which Lord Gregson outlined?
I have to apologise very much to the noble Lord, Lord Flowers. I had to go out for a prearranged engagement at one moment, which I could not avoid. I do apologise to him, as indeed to Lord Todd, whose speech I also missed. I was extremely sorry to do that in his case, of all people. I did hear just the end of his speech. The noble Lord, Lord Flowers, hoped that the Mason Committee's recommendations would be taken on board by the Government. I think I have

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made clear that they will be, and that we will respond to them. He also raised the point about the seed-corn fund, and asked would we be prepared to listen to this. The answer to that, again, must be, yes, we will do so.
The noble Lord, Lord Todd, hoped that the reports would be annual. I think it is important to say yes, provided the two chairmen believe they have something worthwhile to say. At the present time they would undoubtedly say that they had something worthwhile to say, and I think it was Lord Gregson who said this was a quickly developing situation. But there might come a time in the future when in some years they did not think they had something worthwhile to say, and no one, least of all the two chairmen, would bless me if, today, I commit them always to produce annual reports in the future. Subject to that, I think we should expect them to produce views whenever they feel it important to do so from their standpoint, and that I can undertake they will most certainly do.
The noble Lord, Lord Todd, talked about the very important need for closer links between customers and suppliers. That was something which many noble Lords will agree with and clearly, with his knowledge, it is an important point. My noble friend, Lord Nelson of Stafford, Who has considerable experience in an important field, talked about the need for collaborative research. I hope we have shown, through our support for the Alvey programme, which he welcomed, that we also agree with him on that. He also asked for a clear answer about information technology transfer. My noble friend Lord Lucas of Chilworth believes that he said "Yes" to my noble friend. If he did not, I am saying "Yes" in my answer now.
I turn now with great trepidation to the noble Lord, Lord Zuckerman, whose contribution in this field is of such outstanding importance to our nation. I do not suppose anyone will ever be able to repay him for how much he has done in this field for the nation. He made the point, to which I have already referred, concerning the Wolfson Foundation, the private money coming into this, and how many projects had succeeded because of it. Obviously that is extremely welcome. He also paid considerable attention to the links between the universities and industry. I believe other noble Lords referred to that and clearly it is very important. He pointed out some of the things which have happened in Japan and how we still have so much to learn and, probably, so much to fear in those fields. His contribution was therefore extremely helpful to us all, as one would expect.
The noble Lord, Lord Kings Norton, referred to good designs and standards. Again, that is of such enormous importance for the quality of our British manufacturers. His great experience in this field is also very important and he made a point which I am sure everyone accepts.
I come towards the end of what I have to say and to the very robust and, as he pointed out himself, very brief contribution from the noble Earl, Lord Halsbury. He gave me a lesson and, although I have not been as brief as I should have liked, I have tried to keep my
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remarks within a reasonable time and at the same time reply to the debate. The noble Earl also spoke from his very great experience. He came back to design and he came back to the Alvey programme. Again, we all took very careful note of what he said.
The noble Lord, Lord Swann, produced an interesting and, as one would expect from him, important and novel thought; that we ought to give thanks for all the other reviews we are having and that we should be having some research into what is the malaise in British industry—how has it arisen and how many factors, both human and sociological, come into it? Many noble Lords will have considered that to be an extremely important point.
I have done my best, very briefly, to refer to many of the very important speeches which have been made in this debate. I should like to say once again that they will be most carefully studied by my colleagues and by myself. I can only add that my time today in this House has inspired me with a new interest and a new determination to follow it up. If I can do any good by that perhaps I will have done something in response to the great efforts put into the House today.
Lord Sherfield: My Lords, we have had an interesting and wide-ranging debate and many important points have been raised in the course of it. The noble Baroness, Lady White, said that she thought the debate had come rather late in the day. Perhaps she overlooks the difficulty which someone from these Benches has in getting time for a debate. I hope that noble Lords will agree that, late though it has been, it has been well worthwhile.
I should like to thank all those noble Lords who have given up their Friday pursuits to take part in the debate. I am particularly glad that the voice of medicine was heard in the person of the noble Lord, Lord Richardson, and of agriculture in the person of the noble Earl, Lord Selborne. In the United States the Academy of Sciences has a scientific, engineering and medical component. I am sure that in any general debate about scientific policy the role of the Medical Research Council and other medical research institutes should be included. As for the noble Earl, Lord Selborne, I have some knowledge of the extensive programme of reorganisation of research in the agricultural sector which is taking place under his auspices.
I thank also the Ministers for their opening and closing statements. I was especially glad that the noble Viscount, the Leader of the House, wound up the debate. Historically the Lord President of the Council has had a great responsibility for the work of the Research Councils and for the formulation of scientific policy generally. That responsibility was removed in the course of successive reorganisations of the system. I am encouraged to hope, from what the noble Viscount has just said, that the present Lord President, now that he has replied to this debate, will continue to keep a keen eye on the development of scientific policy and will maintain his interest in it. My Lords, I beg to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

Reuters: Proposed Flotation
4.6 p.m.
Lord Grimond Lord Grimond rose to ask Her Majesty's Government whether they are satisfied that the interests of the public will be properly safeguarded by the proposed flotation of Reuters.
The noble Lord said: My Lords, I understand that it is unusual for your Lordships to sit so late in the afternoon. I shall do my best to curtail my remarks. They will be delivered in more telegraphic style instead of in my usual rotund oratory. But there is a very important matter before us which is no less than the future of Reuters. No one doubts that Reuters is a most important institution. It is one of only four international news agencies in the world and is one of only two genuinely independent news agencies. Further, it has always been so regarded, and its impartiality, freedom and wide coverage have been something of which Britain has been very proud.
A week ago in another place it was said again and again both by the Minister, by a very distinguished ex-Labour Prime Minister and by others that this was a matter of great public importance. I particularly want to draw your Lordships' attention to the debate in 1941 which was raised by my late friend and colleague Clement Davies, in which the then chairman of Reuters, Samuel Storey, as he then was—somebody who was known to us—explicitly said that Reuters was not to be treated simply as a commercial asset and that its future was of great public importance. He insisted that, if possible, its control should rest with independent trustees.
At the moment the theory is that Reuters has suddenly become a very valuable property, not owing to its news gathering but to its excellent exploitation of Monitor, and the proposal is to sell off the shares in the market. I do not suffer from the general paranoia about press barons. There are no doubt good and bad press barons. Nevertheless, there is considerable anxiety in this country about the treatment of the press as simply a commercial property.
Some people feel that the assurances of some press barons have not always been carried out and, candidly, there is some suspicion of them. But equally I do not understand how they suffer from agoraphobia. They are Members of this House, and I should have thought that their Lordships could have come here to explain to the public through this House what they stand for. They are an important element in our affairs. They believe in investigative journalism. They are keen to examine other people's affairs but they show less enthusiasm in coming into the open about their own. However, they are engaged in deciding what future set-up will be instituted in Reuters, and we can only hope that they take note of the public anxiety and of the general view that Reuters cannot be dealt with purely on commercial grounds.
It is absoluely right that the Government and your Lordships should express their view about this. Again and again the Government have said that they would agree with that, though they do not want to interfere. It is one thing for a government to interfere and try to control Reuters. It is a far different thing for a government to interfere with a view to guaranteeing the freedom of Reuters. After all, the Government
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interfered, or promoted interference, with the Royal Bank of Scotland when it was threatened with takeover and also, for instance, with Sotheby's; and in my view, important as those institutions are, they are much less important than Reuters.
Of course, the danger is that once Reuters is put on the market no one knows where it will end. It could, for instance, end in the ownership passing to other people who have not the same interest as the present owners in news gathering, and then sources of information would be closed down because they were troublesome or uneconomic. It could end in the news being slanted, or in Reuters falling into the hands of people who have a definite interest in actually controlling and distorting the news.
Therefore, to my mind, there must be some safeguards if Reuters is to be sold off in the market. I appreciate the reasons for doing so; the press needs money and some newspapers do not want to have so many of their assets locked up in Reuters. As I have said, the press owners at present no doubt have an interest in impartial information, and therefore so long as Reuters remains in their hands, people may argue, we should not be too concerned.
However, I must point out that in 1941 when this kind of matter last arose a document which calls itself a trust agreement was drawn up explicitly to ensure the future of Reuters. Under the document so-called trustees are appointed by the Lord Chief Justice and it is stated in the document that the trustees are not to be dismissed other than by the authority of the Lord Chief Justice. Again I refer to Sir Samuel Storey, who as I have said, insisted that Reuters should be controlled by a proper trust. I refer to his view that the trust was not in fact a proper trust, and that has turned out to be the case. Legally it is merely an agreement between different parties, and the theory is that it can be abolished by them. That was certainly not the spirit in which it was drawn up. Sir Christopher Chancellor, the chairman of Reuters, again and again reassured people all over the world about the independence and impartiality of Reuters by pointing to the trust and saying that Reuters was bound by it.
The first point I want to make is that I believe that this House and the Government should make it absolutely clear that they think it desirable that the spirit, at least, of the trust should still prevail and that the Lord Chief Justice should set up an inquiry into the proposals now before Reuters, but if he is not himself prepared to do that (which one could understand) he should get some other of the numerous authorities to do it—for instance, the Press Council. The Press Council has been strangely muted over Reuters, and I am told that the reason is that it hopes to obtain a very considerable amount of money as a result of the sale. But whoever does it, I think that there should be an inquiry into the present proposals, and I should have thought that the Press Council should show an active interest in the whole matter.
Secondly, I should have thought that the package which we are told will emerge very soon from the press owners themselves about the future of Reuters should contain an absolutely clear determination to set up a proper trust; that is, a legally enforceable trust, with trustees who will represent no doubt the newspaper

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industry and also the public, and who will be independently appointed. I also think it vital that these trustees should have some sanction. For many years I was myself a trustee of the Guardian newspapers and the great asset which we had as trustees was that we owned the paper and therefore, unlike the members of numerous other trusts which have been set up to guide newspapers, we had some power of sanction; and that trustees must have. In the case of Reuters the position could be guaranteed by having a certain class of share which holds the ultimate control, or even one share, as has been done by the Government when they have denationalised or semi-denationalised certain industries. I know that some of the institutions in the City do not like two classes of shares, but this is not a normal commercial undertaking. As I say, it involves the handling of a great national asset, and I believe that in this case two classes of shares would be amply justified. There have been other proposals to split the Monitor and the news gathering. That would no doubt deprive the news gathering side of the finance that it may want.
Reuters may not be unique, it may not be the only source of news by any means, but if it should fall into hands that either polluted it or curtailed it, this would undoubtedly be very serious for all sorts of other institutions. If, for instance, it was proposed to privatise the BBC—perhaps that will happen—then, certainly, some safeguards would be insisted upon. But the BBC depends a great deal upon Reuters. Therefore, if we interfere with the Royal Bank of Scotland and Sotheby's we should not be afraid if necessary, to interfere. I hope that it will not be necessary. I hope that the proposals, when they come out, will be satisfactory. Will safeguard the interests of Reuters, and will ensure that it is free from control or domination by any interest, whether Government or otherwise, that could be to the detriment of the free gathering of news and the independence and impartiality of this great national asset.
I should like the Government once again to reiterate their belief that this is a matter of public interest in which they would be prepared, in the last resort, to intervene to safeguard the public interest and the freedom of Reuters. I hope that your Lordships will express to the newspaper proprietors and those now considering the matter that this Hose will return to it if necessary, that it believes and hopes that the proposals soon to come forward may be satisfactory but that if not it will not scruple to take up the matter again, standing as we do for the public interest, to ensure that a vital part of the running of our affairs and the gathering of news upon which all our deliberations are ultimately dependent will not be put into a position where it might fall into tainted or prejudiced hands.
4.17 p.m.
Lord Bruce of Donington: My Lords, the House will be most grateful to the noble Lord, Lord Grimond, for having provided an opportunity to discuss such an important matter. Unfortunately, owing to the arrangements that have already been made, I understand, for the termination of our proceedings this afternoon, there will not be sufficient time for Her Majesty's Opposition to express any definitive views in
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so short a period. Four-and three-quarter hours were occupied in another place in debating this most important subject on 27th January. While the importance of a debate is not necessarily measured by the length of speeches, there has to be some minimum time in which an argument can be deployed on behalf of Her Majesty's Opposition. That time is not available to us this afternoon if our debate is to stop at the scheduled time.
I shall therefore content myself with endorsing 99 per cent., or nearly 100 per cent., of the remarks of the noble Lord, Lord Grimond. There is little need for me to underline the various factors that he considers to be important. What is more important in the time available is that the Government spokesman, the noble Lord. Lord Lyell, should give explicit answers to the important and definite questions posed to the Government by the noble Lord, Lord Grimond. In order that the noble Lord, Lord Lyell, may not be able to call in aid lack of time to give definitive answers, I propose to terminate my observations here and now and to give notice to the House that. At the earliest convenient opportunity when it is possible to secure adequate time, I shall seek to give voice to the views of Her Majesty's Opposition on this very important topic.
4.19 p.m.
Viscount Barrington: My Lords, may I put on record, as one of the seven people present, that I hope everyone will read this very important debate tomorrow as they have not had the opportunity, through no fault of their own, of listening to it today. I thought that someone should say that, in view of the fact that the House is so thinly attended.
4.20 p.m.
Lord Lyell: My Lords, in spite of the late hour I am sure that your Lordships would agree that the House is immensely grateful to the noble Lord, Lord Grimond, for raising this fascinating and extremely important subject in his Unstarred Question this afternoon. The noble Lord has given your Lordships the opportunity to discuss—albeit somewhat briefly—a matter of national and considerable interest. In doing so, as the noble Lord has mentioned, he has followed the Liberal tradition, for it was his late right honourable colleague Mr. Clement Davies, the then Member for Montgomery, who initiated the first debate on Reuters which was held in 1941 and from which the noble Lord quoted.
Of course the noble Lord is quite right in pointing out that, following the debate in another place two weeks ago, your Lordships' House should have the opportunity to demonstrate that concern about the independence and integrity of our news supplies is of great importance to your Lordships. Naturally enough, there has been comment on the proposed flotation in the media and, indeed, elsewhere recently, but we believe that some of that comment has been rather premature. We also believe that it should be noted that the company has yet to determine all the details of the proposals which it is considering.
The noble Lord, Lord Grimond, referred to the 1941 document, which he is quite right in saying is

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labeled "an agreement of trust". After the debate in 1941 in another place, a document—the so-called agreement of trust—was concluded between the shareholders of Reuters. This document set out the principles by which Reuters was to operate. In spite of the constraints of time, I shall very briefly recite those principles. They are as follows. First, that Reuters shall at no time pass into the hands of any one interest, group or faction. Secondly, that integrity, independence and freedom from bias shall at all times be fully preserved. Thirdly, that its business shall be so administered that it shall supply an unbiased and reliable news service to British, Dominion, colonial, foreign and other overseas newspapers and agencies with which it has or may hereafter have contracts. Fourthly, that it shall pay due regard to the many interests which it serves in addition to those of the press. Fifthly—and we believe that this is equally important—that no effort shall be spared to expand, develop and adapt the business of Reuters in order to maintain in every event its position as the world's leading news agency.
It is clear that the arrangements were made to ensure that, in the national interest, Reuters' independence and integrity continued—to ensure that the hands into which it fell were not unsuitable ones. So it was written down that its:
"integrity, independence and freedom from bias shall at all times be fully preserved".
That concludes a fairly important declaration.
With the benefit of 43 years of hindsight, we now know that the various anxieties which were expressed at that time were not well-founded. Despite the fears, whatever the legal status of the so-described "agreement of trust"—or "trust agreement"—there have been 43 years of integrity. I should like to pay tribute to the way in which the directors and the trustees of Reuters have run the company in accordance with the principles set out in 1941—principles which naturally remained intact when in 1953 the ownership of Reuters was widened to embrace Commonwealth press interests as well.
The noble Lord, Lord Grimond, has just touched on the position of Reuters today. I should like to stress on behalf of the Government our belief that Reuters is much more than just a news agency. It has a long history of providing financial and, indeed, other information to private subscribers. Of course it is only in the last decade that the company's long-nurtured ambitions to market its intelligence services electronically have been able to come to fruition. Reuters' own accounts are a testimony to its forethought and, above all, to the success that it has achieved. Its turnover rose from £17 million in 1973, to £53 million in 1977, and to £179 million in 1982. In the light of its results in 1981, it felt able to pay its first dividend, a dividend of £1.9 million, and 1982 of course brought better results and a dividend of £5.6 million. That may cover some of the interest in the financial results of Reuters.
I turn now to the people who work for Reuters. The company now employs over 3,200 people, nearly 40 per cent. of whom work in the United Kingdom. Its employment has increased by 70 per cent. over the last 10 years. We wish that other companies could show similarly successful track records.
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However, much of Reuters' national importance lies in the fact that it is such a highly successful purveyor of financial information as well as being an international news agency of the highest repute. Given its record and, indeed, its prospects for further expansion, its management has had to consider its future financing needs. The new technologies, although rewarding, are expensive businesses in which to invest. The noble Lord, Lord Grimond, will appreciate that fact, as he has been concerned in the press, as we heard from his excellent comments. No one is supposing that the proceeds of the flotation that is currently under consideration will be wholly for reinvestment in the operations of the company as opposed to helping the businesses associated with its shareholders. However, the Reuters board has indicated that a proportion will be. The board's statement of July 1983 specifically referred to:
"a study of the future financial structure of the company and methods of financing further growth".
That was after the Reuters' management had proposed that Reuters should consider issuing stock to raise cash for future investment.
Both the noble Lord, Lord Grimond, and the noble Lord, Lord Bruce, expressed their worries about the role of the Government. Indeed, they believe that there is great public concern as to the role of the Government. We note the comments of the two noble Lords, and we understand that there have been suggestions from elsewhere that the Government should intervene in some way to preclude the possibility that, after a flotation, Reuters will pass into the control of persons who might discontinue the news agency side or, indeed, operate it in a way other than in accordance with its long-established principles.
Given the statement of objectives of the board and the trustees, we think that that does not seem to be a likely outcome: but we understand that there is public concern that the independence and integrity of Reuters should not be jeopardised. This is so even with the growth in the number of sources of news, including the news-gathering capabilities of television. These have taken place over the years and mean that Reuters is no longer in precisely the same position as it was in 1941.
However, Reuters remains the only British and Commonwealth international news agency—a news agency with a reputation second to none in the world. The safeguard for this reputation does not lie in Government intervention, because that would jeopardise the very reputation for integrity and independence which it was sought to protect. Rather, the safeguards lie in the professionalism of Reuters itself and in the professionalism of its staff and their concern for Reuters' reputation and reliability. These are matters which no Government can guarantee. Naturally, the Government acknowledge the significance of Reuters' past standards of integrity and independence being maintained. But the Reuters board is proposing neither a merger nor a take-over. In this light there are no Government powers to intervene; nor, indeed, would it be in the interest of press freedom for the Government to seek to intervene.

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Your Lordships will be aware that Reuters operates all over the world. It operates from countries governed by very different political regimes and standards of behaviour from our own. We believe that it is vital for Reuters' reputation for independence that it is not seen to be under the influence of anyone. Reuters' independence is the main and, indeed, the entire source of its strength. That is true for independence from the British Government along with others, and it is very important that Reuters is independent of the British Government, for its position in other parts of the world would be weakened were it to be seen yielding to any sort of pressure from the Government of the United Kingdom.
I accept that the calls for Government intervention have sprung from the very best of motives. But I am sure your Lordships will appreciate that actions from the best of motives would be the self-justifying cloak for outside interference in Reuters, which we would certainly be loath to see. We believe it is better not to start down that path.
A good many Governments have the capacity to convince themselves that the interventions they might contemplate would truly be with the best of motives. Some of them might even believe this, and that is one of the dangers. The noble Lord, Lord Grimond, gave two examples of Government interference, Sotheby's and the Royal Bank of Scotland. I think he will accept, and I am sure the noble Lord, Lord Bruce, would accept that these were situations of mergers. There might have been other factors, but primarily the reason the Government became in any way involved was that they were merger situations.
There is no indication that the Government are concerned with a merger situation here. We do not believe that this is the situation at all. I would stress to the noble Lord, Lord Grimond, that the company's own declared intentions make this particular issue hypothetical. If particular changes of control were in contemplation, the position would need to be considered in the light of any circumstances that arose then. There are powers in relation to changes in control of companies which are set out in, among other places, the Fair Trading Act 1973. Were such a situation to arise my right honourable friend in another place would need to consider the position in the usual way, including taking into account the advice of the Director General of Fair Trading.
The noble Lord, Lord Grimond, also raised the functions of the Lord Chief Justice. I am given to understand that the Lord Chief Justice was unaware of any functions ascribed to him according to any of these documents until November 1983 when the matter appeared in the national press. The Government and the office of the Lord Chief Justice have no record at all whether the Lord Chief Justice of the day in 1941 agreed to be empowered to appoint the chairman of the Reuters' trustees. There is no record whether he was consulted at all about this. These records do not show that any Lord Chief Justice has been consulted at all on these matters since 1953. Some minor reference may be implied at about that date, but that is the only expressed or implied
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reference known since 1941. Whether the Lord Chief Justice has any function is not, and has never been, a matter for the Government. The incumbent for the time being of the office of Lord Chief Justice has no function in this matter in terms of duties of that office.
As a completely separate point, I am advised that the arrangements entered into appear to be a matter between private individuals contained in a private deed. Such an agreement could not ordinarily impose any obligation in law on any third party, whether holding public office or otherwise. They certainly appear to impose none on the Lord Chief Justice. What the Lord Chief Justice might intend to do is entirely a matter for him, but any request for him to act in his capacity as Lord Chief Justice would fall entirely outside his duties as such.
The Question asks if the Government are satisfied that the interests of the public will be properly safeguarded by the proposed flotation of Reuters. I have reminded your Lordships that the board and trustees of Reuters have had some things to say on this—the board and the trustees of Reuters who are all responsible people. With the record of Reuters behind them they are entitled to be believed when they say that their purpose is to conserve the objectives which were set down in 1941.
Of course, the future can never be certain, but the history of Reuters endorses the view that the company does best when its independence from Government is not compromised. Government interference is not the way to preserve the integrity of Reuters, and at best this would be liable to embalm the company rather than preserve it. But the dangers, we believe, are greater than that. All too easily, albeit unwittingly, Government interference could endanger the very independence and integrity it is sought to preserve. It is better by far that the board and the trustees of the company should, as they have said they will, safeguard the continuing integrity and independence of Reuters.
House adjourned at twenty-six minutes before five o'clock.

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