Sitting of 14 March 1984

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

    Detention Centre, Glenochil
    Mr. Steelasked the Secretary of State for Scotland if he will make a statement about the number of deaths at the young offenders institution and the detention centre at Glenochil.
    The Secretary of State for Scotland (Mr. George Younger): Since it opened in July 1976 there have been four inmate deaths at Glenochil young offenders institution. There was also a death at Glenochil detention centre on 16 February 1984, the first since it opened in July 1966.
    Mr. Steel: Although the Secretary of State has rejected pleas for a public inquiry into the administration of the two institutions at Glenochil, will he accept that those of my constituents who have been in them have expressed grave disquiet to me about the regime of brutality among the inmates and some members of the staff? If the right hon. Gentleman does not want a public inquiry to take place, will he arrange for himself or his ministerial colleagues to talk privately about the character of the places to some of those who have been in the institutions?
    Mr. Younger: I note what the right hon. Gentleman says, but I cannot accept what lies behind his question. The fatal accident inquiries which have taken place in every case—except one which has still to take place—have found no connection between the causes of the various deaths or any reason to relate these tragedies to the nature of the regime in the institution. I do not accept that there is any such connection in these instances.
    Mrs. McCurley: Will my right hon. Friend define "regime"? Is this a reference to the punishment regime or to the way in which young offenders are treated by officials within the detention centre?
    Mr. Younger: I am not sure whether my hon. Friend is referring to my views or to those that are set out in the various statements that have been made. The regime which is practised at the institution is in all senses humane, and it is intended that it should remain so in all circumstances. The claim that has been made—notably by the Scottish Council for Civil Liberties—that there may have been as many as 12 suicides—what the council chooses to call para-suicides—in Glenochil is wholly irresponsible.
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    There have been four fatalities at the young offenders institution. One resulted from solvent abuse and three from suicides or accidental death. There has been only one death in the detention centre's 18-year history, during which it has received some 16,000 inmates. The accusations that have been made are irresponsible and should be denied.
    Mr. Wilson: I accept the pattern that the Secretary of State has presented, but does he not feel some disquiet in the light of the more recent incidents that have taken place? There is a question mark against this institution which I think he and his Department can dispel; but, if necessary, he may have to take some action to allay public disquiet.
    Mr. Younger: I feel considerable disquiet about every one of these incidents. No one can take lightly the fact that someone has died, for whatever reason, in one of these institutions. However, there have been fatal accident inquiries in every case and no connection has been found between the causes of the various deaths. Similarly, no connection has been found between the deaths and the nature of the regime. Therefore, there is no suggestion that the regime is responsible for these tragic events.
    Mr. O'Neill: The Opposition recognise that fatal accident inquiries have exonerated the Glenochil staff. We appreciate what the Secretary of State has done and the constructive way in which he has approached the two latest fatalities. However, considerable strain is now being imposed upon the staff by the recurrence of fatalities. That strain is such that we must give close consideration to the regimes within the two institutions at Glenochil and to the sentencing policy which requires immature young people to be incarcerated and subjected to the strains that are imposed upon them and the staff. Will the right hon. Gentleman examine sentencing policy and the adjacent penal policy and try to find a way of resolving this succession of tragedies?
    Mr. Younger: I am grateful to the hon. Gentleman for what he said at the beginning of his question. I very much support the line that he has taken. I should make it clear that the changes that were made in sentencing policy took effect only in November last year. Therefore, it is far too early to draw any conclusions. Sentencing is, of course, a matter for the courts. Having been laid down in statute, it is for the courts to find the most appropriate sentence in each case. I very much hope that the unwarranted accusations that have been made about this institution will now be laid to rest, as they have no foundation.

    Whisky
    Mr. McKelveyasked the Secretary of State for Scotland what representations he has recently received from the Scotch Whisky Association regarding impending legislation on minimum volume percentages.
    The Under-Secretary of State for Scotland (Mr. John MacKay): I have received representations in writing, and I have also met representatives of the association. They put to me the case for a minimum alcoholic concentration of Scotch whisky of 40 per cent. by volume.
    Mr. McKelvey: Does the Minister agree with the representations that have been made? Like many

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    Opposition Members, does he not feel that any dilution of the standard of Scotch whisky would be as unpalatable as the adulteration attempts by some of his hon. Friends to dilute the contents of the latest report of the Select Committee on Scottish Affairs?
    Mr. MacKay: I do not know what the latter has to do with the former. Perhaps one needs some of the former before one can stand being a member of the latter.
    I and my right hon. and hon. Friends in the Ministry of Agriculture, Fisheries and Food have had a considerable number of representations from hon. Members and bodies outwith the House. We shall take all those representations into account, and we hope to make a decision on this difficult matter as soon as possible.
    Mr. Fairbairn: As one who represents consumers and producers of this substance, may I encourage the Minister to look more closely at the representations that he has had from those who wish the diluted percentage to be allowed? If this afternoon he cares to go into any shop or supermarket in Scotland and buy one of these brands of diluted whisky at its cheap price, he will discover that he is paying far more per percentage volume than is charged for brands at full strength.
    Mr. MacKay: Those representations were indeed made to me. That is one of the aspects of the matter that I shall have to take into consideration. However, I have to say that anything below 40 per cent. has to be marked as being under strength and to have the alcoholic strength declared on the label.
    Mr. Foulkes: Does the Minister accept that he is able to take action against weak continental whisky if the minimum is set at 37 per cent., not 40 per cent.? Does he further accept that if the minimum is set at 40 per cent. that will harm some United Kingdom producers, such as Glen Catrine in my constituency, and reduce the choice available to the consumer? How does he reconcile that with the Government's so-called principles?
    Mr. MacKay: The hon. Gentleman has outlined to the House the representations that he and those in the under strength trade have made to me and to my right hon. and hon. Friends. These are matters that we will have to take into account, with the representations of the Scotch Whisky Association.
    Mr. McQuarrie: Does my hon. Friend accept that if the volume content of whisky is reduced that will create considerable problems in the rural areas of Scotland, which are totally dependent upon the manufacture of good whisky, not that referred to by the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes)? The rubbish that is manufactured there is not acceptable, and the small print is not looked at by the people who purchase the whisky.
    Mr. MacKay: As the Member of Parliament for the constituency which produces splendid Islay malts, I am all for the production and consumption of good whisky—[Interruption.] I must say to my hon. Friend, as I have said to other hon. Members, that all these matters will be weighed by my right hon. and hon. Friends in the Ministry of Agriculture, Fisheries and Food and myself before we come to a final decision.
    Mr. Dewar: I should first declare that I have no intention of entering the bad pun of the month competition.
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    Despite the levity, does the Minister accept that there is great anxiety about the growth in the sale of under-strength whiskies and that the labelling requirements afford the customer very little protection? In addition, such whiskies are often a bad buy. Will the Minister urgently consider the need to maintain a minimum standard alcohol content to protect consumer confidence in the product? Can we look for a very early announcement of the Government's intentions?
    Mr. MacKay: I am well aware of the serious arguments involved. There has been a little levity this afternoon. However, hon. Members have made their representations and I am sure that they appreciate the seriousness of the issue. I assure the hon. Gentleman that I am taking the problem very seriously.

    Employment Prospects
    Mr. MacKenzieasked the Secretary of State for Scotland if he will make a statement on employment prospects in Scotland.
    Mr. Younger: The growth now evident in the national economy and the measures—particularly the abolition of the national insurance surcharge—announced yesterday by my right hon. Friend the Chancellor of the Exchequer will enhance employment prospects in Scotland.
    Mr. MacKenzie: Did the Secretary of State listen last night to the president elect of the CBI, who, whilst welcoming the abolition of the national insurance surcharge, was unable to give any specific figure as to how it would affect employment? Although some of us do not expect the Secretary of State to give specific figures, we do not see in the Budget, which taxed fish suppers, petrol and the rest of it, any stimulation for growth and for jobs. We do not see the Budget as the means of getting more than 300,000 people in Scotland off the dole queue.
    Mr. Younger: I appreciate the right hon. Gentleman's remarks. I agree that it is probably difficult to make a precise estimate of the number of jobs affected by the abolition of the national insurance surcharge, but one does not need to be very brilliant to realise that a Government who put a tax on jobs are likely to discourage employment, while a Government who abolish such a tax are likely greatly to encourage it.
    Mr. Malone: Does my right hon. Friend agree that one of the most heartening aspects of yesterday's Budget for the North sea oil industry was the Chancellor of the Exchequer's undertaking to look at a change of tax regime on incremental oilfield development? Does my right hon. Friend further agree that within the next few years that should provide substantial additional employment in Scotland, particularly in the north east?
    Mr. Younger: I appreciate that point and very much hope that a change would have that effect. One of the most encouraging factors in many parts of Scotland is the new activity in the oil-related development sector and the extra jobs that that is beginning to create.
    Mr. Donald Stewart: Is the Secretary of State aware that the Fraser of Allander Institute has found that there is less reason for optimism about the future of Scotland than about that of other parts of the United Kingdom? Why does the right hon. Gentleman not fight against Scotland's percentage of the national cake being reduced year by year?
    Mr. Younger: I do not agree with the right hon. Gentleman's latter point. The Scottish share of national expenditure has increased from 9·8 per cent. in 1979 to 10·4 per cent. The right hon. Gentleman may find, as no doubt others will, that a Budget that generally concentrates on helping industry is bound to help to create jobs, particularly in Scotland.
    Sir Hector Monro: Will my right hon. Friend take this opportunity to read out to the doom and gloom brigade opposite some of the recent announcements that add up to such good job prospects in Scotland? I think of electronics and Imperial Chemical Industries, which my right hon. Friend is to see on Friday.
    Mr. Younger: The past few weeks have certainly been remarkable for inward investment in Scotland. In the past four weeks we have had the big new development Hewlett Packard, the Shin-Etsu Handotai development at Livingston and the giant National Semi-Conductor at Greenock. Only today a small but nevertheless important addition has been made to the electronics industry in Scotland with the announcement of yet another new development in Cumbernauld by a firm called Berkeley Glasslab, which is providing a new manufacturing unit.
    Dr. Godman: Will the Secretary of State confirm a report on Radio Scotland, which was heard this morning by my wife, to the effect that an announcement is to be made later this week about an order by Caledonian MacBrayne for a passenger ferry being placed with a yard south of the border which has no experience of building such a passenger ferry? If he confirms that report, will he explain why the Scottish Office was so unsuccessful in dissuading a Scottish company from placing such an important order outwith Scotland?
    Mr. Younger: I cannot confirm that report. Caledonian MacBrayne has put out to tender a replacement for the Hebrides and is evaluating tenders from various firms. It is for that company to decide which is the best tender.
    Mr. Johnston: Does the Secretary of State remember that he was last in Fort William during the election to promote the Conservative cause? When can we expect him back, given that unemployment in Lochaber has risen steadily since his visit? What hope can he give to the people there of improved prospects?
    Mr. Younger: I have been very concerned about unemployment in Lochaber for a number of years. The people of Lochaber will find, as will people in other parts of Scotland, that the measures announced yesterday will be of great benefit in helping to improve employment prospects.
    Mr. Bill Walker: Does my right hon. Friend agree that the Government's policy on aerospace and other high technology projects, such as the A320 and the European fighter, mean a lot to Scotland, particularly to companies, such as Ferranti, which are engaged in high technology?
    Mr. Younger: That is correct. The part that Scottish industry plays in many high technology industries throughout Britain is an important factor in employment throughout Scotland.
    Mr. Ron Brown: Is it not ironic that the Scottish Office did nothing to save the Henry Robb yard which was in the running for building the Cal Mac ferry?
    Mr. Younger: I was also sorry about the closure of that yard, which I knew well in years past. The matter was for British Shipbuilders to decide, taking into account a proper balance between its activities and the market that it has to serve.
    Mr. Dewar: Does the Secretary of State accept that many people in Scotland believe that yesterday's Budget showed a lack of courage and imagination? According to the Chancellor's projections in the White Paper on public expenditure, we may expect the present tragically high levels of unemployment to continue during the next two or three years. Does the Secretary of State accept that the slogan "Steady as you go" makes no sense at all if the economy is on the wrong course? Does he agree that a neutral Budget is a betrayal of the 350,000 Scots on the dole queues?
    Mr. Younger: Of all the criticisms that one might make of yesterday's Budget, even if one disagreed with it, the last would be that it lacked courage and imagination. It was full of both. It is widely accepted as helpful that the Chancellor was able to look further ahead than just one year.
    The hon. Gentleman mentioned dole queues. Anyone in Scotland who reflects upon what it would be like if we went back to the rates of national insurance surcharge which the Labour Government introduced and kept will understand that it would be bad for employment in Scotland and be glad that we have abolished it.

    Crime Statistics
    Lord James Douglas-Hamiltonasked the Secretary of State for Scotland how many offences of theft and break-ins to homes were reported to the police in Scotland in each of the last three years for which figures are available; and what was the percentage clear-up rate of crimes in each category.
    The Under-Secretary of State for Scotland (Mr. Michael Ancram): The available information for 1980 to 1982 was published in Scottish Home and Health Department statistical bulletin No 2/1983, a copy of which is in the Library. Figures for 1983 are not yet available.
    Lord James Douglas-Hamilton: Is my hon. Friend aware of the grave concern among my constituents in Edinburgh at the wave of break-ins recently? Will he pass to the chief constable the message that my constituents would warmly welcome the return of more police officers to the beat?
    Mr. Ancram: I appreciate my hon. Friend's anxiety, and I shall ensure that the chief constable is aware of what he has said. I remind my hon. Friend that in August an increase in the establishment in Edinburgh resulted in the releasing of 38 police officers for general police duties. The chief constable of Lothian has taken, and will continue to take, steps to put policemen back on the beat.
    Mr. Maxton: Since the Government came to power there have been increases in police powers, in expenditure on the police and in the punishment for those who commit crime, so why has the crime rate continued to rise? Have the Government's policies on crime failed as dismally as all their other policies?
    Mr. Ancram: The hon. Gentleman knows fun well the Government's concern about increases in crime. He also

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    knows that the Government are committed, in a way that the Labour party is not, to the defeat of crime. It might be helpful if the hon. Gentleman were to suggest to his colleagues in Strathclyde region that they should make good the shortfall of 138 policemen in the establishment, as that would help the fight against crime in that area.
    Mr. Hirst: May I offer my hon. Friend some good news? Is he aware that last year house break-ins in Strathkelvin reduced by 10 per cent. and in Bearsden by 15 per cent? Does that not confirm the success of the Government's policy on law and order? Is it not also an impressive result of the work of the Strathclyde police?
    Mr. Ancram: I am grateful to my hon. Friend for reminding the House of those facts. A large part of the fight against crime can be helped by the public. I hope that they are aware that, by reporting suspicious incidents and ensuring that the security of their homes is as good as possible, they can go a long way towards helping in this important fight.

    Factory Development
    Mr. Knoxasked the Secretary of State for Scotland how many new factory units and how many square feet of factory space have been built by the Scottish Development Agency since its inception.
    The Under-Secretary of State for Scotland (Mr. Allan Stewart): Excluding major refits, the agency built from 1975 to 1983 a total of 784 factories comprising 4·95 million sq ft.
    Mr. Knox: How many of those factory units are occupied? Is my hon. Friend satisfied that there are sufficient of them to meet anticipated demand?
    Mr. Stewart: Yes. Vacancy rates obviously vary over time. My hon. Friend will be pleased to learn that new lettings last year were at record levels.
    Dr. Bray: Is the Minister aware that there is a shortage of higher amenity industrial and business premises, especially in areas, such as Lanarkshire, which have not been as successful as other areas in attracting new industry? Will he consider discussing with the SDA whether the types of factory building and industrial estates being developed are appropriate to attract the wider range of business that the older industrial areas need?
    Mr. Stewart: I am sure that the agency will note what the hon. Gentleman has said. It has an excellent record in meeting the demands of the market place, including those for higher amenity factories. The hon. Gentleman will be interested to know that currently the agency has 225 units under construction, providing more than 500,000 sq ft of factory space.
    Mr. Corrie: Is there a system whereby a customer can discuss with the SDA a specific type of factory that he might require for his purposes? Rather than take over a factory that has to be changed or renovated, would it not be better to use the finance to build a factory specifically designed for a business?
    Mr. Stewart: Obviously, the agency believes that the customer must come first. It is geared to anticipating and satisfying market demands as necessary.
    Mr. Kirkwood: I accept that the factory building capacity and ability of the SDA are welcome as far as they
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    go, but is the Minister aware that some of the factories that it is developing are not necessarily the most appropriate assistance for rural areas? Is the hon. Gentleman further aware that it is galling for people in Roxburgh to listen to a Border Television news programme explaining what the Council for Small Industries in Rural Areas in England is doing to assist, for example, village shops, when such powers are not available to the SDA? Will he redress that anomaly forthwith?
    Mr. Stewart: The agency has as good a record in providing appropriate factory space in rural areas of Scotland as it has in industrial areas.

    Youth Training Scheme
    Mr. Ernie Rossasked the Secretary of State for Scotland when he next intends to discuss the youth training scheme in Scotland with the chairman of the Manpower Services Commission.
    Mr. Allan Stewart: My right hon. Friend has no immediate plans to do so. The take-up of places this year on the youth training scheme in Scotland has continued to be encouraging, with over 36,000 youngsters having entered since the scheme's inception, 9,500 of them since the beginning of January.
    Mr. Ross: Is the Minister aware that there is urgent need for him to meet the chairman of the Manpower Services Commission to discuss with him the intention of the Minister of State, Department of Employment to reduce by 30 per cent. community-based schemes within the new youth training scheme? Does the hon. Gentleman agree that it would be better to give new community-based schemes the opportunity of the operational year to settle down, so giving them a chance to move smoothly from the youth opportunities programme to the youth training scheme?
    Mr. Stewart: The hon. Gentleman is referring to mode B1 places. Of the 10,000 in Scotland, only 7,800 are filled. Each unfilled place costs the taxpayer at least £2,000. Against that, the MSC's new target of 8,000 places next year is perfectly reasonable. Dundee ITEC, which has been a great success, will double its intake.
    Mr. Kennedy: On the question of the youth training scheme, and further to the point raised by my hon. Friend the Member for Inverness, Nairn and Lochaber (Mr. Johnston), what real hope can the Minister offer young people, for example in the Highlands of Scotland, who now face great difficulties as a result of the economic policies of the Conservatives since 1979? Many of their parents were encouraged to move from the central belt of Scotland and elsewhere to Fort William. When the Fort William pulp mill closed, some of them went to Invergordon to work at the smelter, and since that has closed they have had little opportunity for employment, and the youngsters have even less. What hope do the Government offer people in that situation?
    Mr. Stewart: I am astonished that in the course of that lengthy question the hon. Gentleman could not bring himself even to welcome the youth training scheme. I should have thought that people of all political persuasions could welcome the scheme as a major radical new initiative in providing a bridge between school and work. The Highlands economy will benefit from the steady

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    economic upturn in the United Kingdom and from the measures announced by my right hon. Friend the Chancellor of the Exchequer in yesterday's Budget.
    Mr. Bill Walker: My hon. Friend will be aware that we on these Benches are keen that the youth training scheme should be seen to be, and be accepted as, successful. What progress has been made in the Edinburgh area, where the trade unions have been less than constructive—indeed, could be described as having been destructive—by their failure to help to make the scheme work?
    Mr. Stewart: While I accept that there has been local opposition in some areas, the support of the trade union movement for the youth training scheme has been widespread. Obviously, however, it is frustrating if a good YTS is unreasonably resisted because of local problems.
    Mr. Home Robertson: Why is the MSC cutting the youth training scheme in East Lothian by closing down the community schemes operated by Lothian regional council? Already more than 4,000 people are unemployed in East Lothian. Why should a further 47 young people be deprived of even this short-term opportunity to do a useful job?
    Mr. Stewart: A pause in the start of new schemes in the community programme was necessary late in 1983 to avoid overshooting the target for which funds were available. By providing an additional £15 million nationally for the community programme the Government have ensured that the build-up of places to this year's target of 130,000 may be resumed.
    Mr. Craigen: Will the Minister more fully explain why there has been such a disruptive cut in the number of mode B1 places affecting community-based projects and training workshops? What consultation took place before the announcement was made? May we take it that the hon. Gentleman actually talks to the Minister of State, Department of Employment to make sure that the Scottish viewpoint comes across?
    Mr. Stewart: I assure the hon. Gentleman that I talk to my hon. Friend the Minister of State, Department of Employment regularly——
    Mr. Craigen: But does he listen?
    Mr. Stewart:—and that he listens with extreme care. As for mode B1 places, I have explained the figures to the House and I believe that the MSC target is perfectly reasonable. The employer-based mode A schemes offer the best prospects for youngsters, and a sufficient number of those places will be available. I should have thought that that was a sensible priority.

    Mentally Handicapped Persons
    Mr. Wilsonasked the Secretary of State for Scotland if he is satisfied with the rate of return of mentally handicapped persons to the community in Scotland and with the level of funding available to achieve this.
    Mr. John MacKay: There has been a steady increase each year since 1979 in the return of such patients to the community, and the Government will continue to encourage this.
    Mr. Wilson: Does the Under-Secretary of State agree that, on reflection, his reply is complacent? In Scotland
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    the proportion of people in hospital to those in community care is twice what it is in England. Perhaps that could be explained by the fact that the financing this year is one third the English figure.
    Mr. MacKay: The joint funding project in Scotland started only in 1980, whereas the project in England had been running for three years before 1980, and therefore many more projects were built up in the English scheme than in Scotland. I am happy to say that this year there has been a faster increase in take-up of the scheme than in the past two years. I hope that that will encourage the continuing movement from hospital of those mentally handicapped people who can live in the community.
    Mr. Michael Forsyth: Given the very considerable savings that have accrued to the Health Service from this scheme, why has my hon. Friend been so unsympathetic to the approaches by the Scottish Society for the Mentally Handicapped for funding for development officers, given the weird and wonderful organisations his Department already funds?
    Mr. MacKay: We look carefully at every scheme that comes to us involving health boards and regional councils, which have responsibility for social work. It is a case not just of wondering whether we can save money in the Health Service but of considering the clinical judgment of people involved in the treatment of patients when deciding whether those patients would be better looked after in hospital than in the community.

    Joint Financing
    Mr. Hugh Brownasked the Secretary of State for Scotland how many agreements have been reached on joint financing between health boards and local authorities; what is the cost to health boards to date; and if he will make a statement
    Mr. John MacKay: Seventy-two support finance agreements have been made since 1980, involving nearly £5 million of NHS expenditure in the four years to March 1984. Because of the improved response to the scheme, I am making £4·6 million available in 1984–85.
    Mr. Brown: I believe that we would all welcome the fact that in recent years there has been an improvement in the take-up of this concept. Does the Under-Secretary of State agree that it is now four years to the day since the original circular was sent out and that overall progress has been disappointing? We all want to see some of the most seriously disadvantaged people returned to their homes. Unfortunately, often they live in seriously disadvantaged areas and, therefore, need the encouragement of more Government resources.
    Mr. MacKay: My Department is reviewing the terms of the support finance scheme. I hope to come to a conclusion reasonably soon about new terms for the scheme. In much of Scotland the uptake has been encouraging. I wish that I could say the same for the Strathclyde region, which, unfortunately, for various reasons, has not been very keen to take part in the scheme. I hope that, given the extra money during the corning financial year—an increase of 37 per cent. over this year—the region will review its position and cooperate with the health board in getting some joint schemes off the ground.
    Lord James Douglas-Hamilton: Given the increase in resources, does my hon. Friend accept the principle that the resources should follow the patient?
    Mr. MacKay: That is easier in theory than it is in practice. The simple reason is that there will always be a number of mentally handicapped patients who will require hospital treatment. The health boards must try to improve the conditions in hospitals that care for the mentally handicapped and, therefore, spend money on the patients who remain in the hospitals. That is a difficult balance to strike, but one that the support finance scheme is helping to achieve.
    Mr. Bruce: I am pleased that the Under-Secretary of State is reviewing the terms of the scheme. Will he take the opportunity to bring the joint financing scheme into line with the practice in England, where the take-up of such schemes has been at twice the level in Scotland? Will he acknowledge that, for example, the health board in my area has expressed reservations about taking up joint financing because it feels that it does not have the resources or the revenue to fulfil that arrangement and that the scheme will take funds from elsewhere? Will the hon. Gentleman bear that point in mind when considering the scheme in England?
    Mr. MacKay: The hon. Member means that his regional council is worried because the health board does not have the long-term financing of the project after the joint funding phase is over. That is with the regional council. That matter is part and parcel of the review that we are undertaking. The English reviewed their scheme after five of six years. We are reviewing ours after four years. I am aware of the terms of the English scheme. It is plainly something that I am studying carefully. I shall be consulting COSLA and the health boards about the new terms that I would propose to put before them.
    Mr. Millan: Speaking as someone who is anxious that Strathclyde participates in the scheme, I ask the Minister whether he is aware that the reason for the lack of enthusiasm is the much inferior financial arrangements for Scottish local authorities compared with the position in England? Why is he being so dilatory about reviewing the scheme? We have had the new Act for nearly a year. We were promised a consultation paper. When shall we see an improvement in the terms of the scheme for Scotland?
    Mr. MacKay: The English review was conducted only in the past year or two, and the new English terms are only now coming through. Our terms were the same as the old English scheme. I accept the point that the right hon. Gentleman is making, that we need to make progress on the matter. I also accept that Strathclyde region has used the terms as an excuse. It is interesting to note that the other Scottish regions have not felt constrained by the terms.
    Mr. O'Neill: While I agree that the Minister has been helpful in this matter and has gone some way to fulfil the undertaking that he gave during the Bill's passage, even under the old arrangements in England £96 million was spent. In Scotland we will get only £4·6 million next year. Will the Minister assure us that he will produce the appropriate new arrangement as quickly as possible? I am sure the take-up rate will increase, because about 96 per cent. of the available money has been taken up during the
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    past 12 months. Will he ensure that this will be new money and will not be taken from other parts of the social services budget?
    Mr. MacKay: The money that goes to the joint fund comes from the National Health Service budget and, therefore, comes off the amount that is up for distribution among the health boards. As I have already said, I shall try to expedite the matter of the renewed terms of the scheme, because I think that it is an important scheme. Every year since the scheme started the take-up has not reached the figure that we had laid aside. Last year we laid aside £3·1 million; the take-up reached £2·9 million. That was encouraging and was better than in the past. This year I have £4·6 million and I hope that it will all be taken up.

    Drug Abuse
    Mr. Martinasked the Secretary of State for Scotland how many people have been treated for illnesses arising from drug abuse (a) in Scotland and (b) in the Greater Glasgow health board catchment area in each of the past four years.
    Mr. John MacKay: I regret that this information is not available centrally. Hospital admissions in Scotland with a principal diagnosis of drug dependence in 1980 and 1981 were 179 and 168 respectively; the figures for Greater Glasgow were 45 and 44. Figures for later years are not yet available.
    Mr. Martin: Is the Minister aware that hospitals such as the one in my constituency at Stobhill in the north end of the city are worried because they find more and more that drug addicts are having to be admitted to undergo heart surgery, and in some cases have to be treated for hepatitis and various abscesses which they contract through using dirty syringes? That puts a deplorable strain on the Health Service. Nurses and staff in general hospitals are not trained to look after the needs of such patients. Will the Minister try to make available funds that will help hospitals such as that at Stobhill, and will he also assist the various police forces to do something about the traders who are pushing those drugs?
    Mr. MacKay: The hon. Member made a number of points, which I fully appreciate. I have a great deal of sympathy with him. The increased trade in drugs, especially of heroin, that we have seen mentioned, for example, in the report of the chief constable of Strathclyde, is horrifying. I assure the hon. Gentleman that we shall do anything that we can inside the Health Service to help deal with the resultant problems. The best way to deal with the problem is for the police to find and convict, and for the courts to deal seriously with, those who traffic in drugs.
    Mr. Corrie: Is there any evidence to show that specific areas of Scotland have a specific problem with the number of patients entering hospitals? Is there anything one can do to correlate it to the action being taken by the police in those areas?
    Mr. MacKay: I am unaware of any statistics from the hospital side that would compare one area with another. We have the evidence in the report of the chief constable of Strathclyde of the considerable increase in his area, to which I have already drawn attention. I am sure that the House will join me in backing the chief constable and his men in doing something about it.

    Public Expenditure
    Mr. Douglasasked the Secretary of State for Scotland if he will make a statement on the impact of the Government's public expenditure proposals on the Scottish economy.
    Mr. Younger: The Government's expenditure plans are consistent with our overall strategy for keeping public spending, taxation and public sector borrowing under firm control, and this will be of direct benefit to Scotland by helping to sustain the present combination of low inflation and steady growth in the economy.
    Mr. Douglas: Will the Minister concede that one of the most fearful statements ever heard was the Chancellor's statement yesterday that there would be a continuation of the public expenditure and budgetary policies that have been in operation since 1979 and have caused massive unemployment? What real hope will there be from this socially divisive Budget, bearing in mind that thousands of young people have not worked since 1979 and, if the Government's policies continue, are unlikely to work during their adult lives?
    Mr. Younger: I am not sure that the hon. Gentleman was listening to my right hon. Friend's Budget with his usual attention. Whatever else one may say about yesterday's Budget, it was geared towards income tax changes to help lower-paid taxpayers, of whom more than 750,000 will no longer have to pay tax, and towards business and industry, which is the critical factor in trying to get people back to work. The hon. Gentleman should have warmly welcomed those priorities.
    Mr. Steel: Does the Secretary of State accept that, as a result of the Chancellor's statement yesterday, our economy in 1984–85 will have the lowest proportion of public spending of any Western industrial country and the highest level of unemployment? Does he accept that those two facts are related and could be altered if the Government only had the political will to so so?
    Mr. Younger: I do not believe that the right hon. Gentleman's statements are facts. We do not have the highest level of unemployment in the Western world, although it is much higher than we should like. The right hon. Gentleman must face the fact that in the past few years we have been through the worst recession ever, at a time when the nature of our industrial base has been changing rapidly in response to changes in the world economy. The most encouraging factor, which the right hon. Gentleman should have welcomed, is the huge inflow of brand new high technology industry to Scotland which the Government have achieved in the past few years.
    Mr. Fairbairn: Has my right hon. Friend noticed that the Opposition constantly complain about unemployment, but never say a word of welcome for new employment or for the measures announced yesterday to promote it?
    Mr. Younger: I entirely agree with my hon. and learned Friend. Other great omissions by the Opposition are their failure to accept the causes of unemployment and the need to introduce realistic policies to put the situation right. That is what the Government have been doing.
    Mr. James Hamilton: Will the Secretary of State recognise that Opposition Members listened very attentively to the Chancellor's statements on the economy,
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    as did many Scottish industrialists? Those to whom I have spoken have made it crystal clear that the Budget will have no impact on the Scottish economy. Is the Secretary of State aware that today 24 per cent. of the male population of Lanarkshire are without employment? As the right hon. Gentleman is aware, there have been several liquidations in my area, with one or two pending. I acknowledge that the right hon. Gentleman has done something for the area. While that is true, however, will his actions be beneficial to construction in Scotland, bearing in mind the Chancellor's statement?
    Mr. Younger: No doubt the hon. Gentleman listened carefully to yesterday's Budget, but he must have been very selective in the business men to whom he spoke this morning. The official spokesmen for the CBI in England and Scotland have made it clear that yesterday's Budget was very favourable and helpful to business.

    Housing (Kirkcaldy)
    Mr. Gourlayasked the Secretary of State for Scotland if he will increase the special housing allocation to Kirkcaldy district council so that priority remedial work may be carried out to pre-war houses in Kirkcaldy.
    Mr. Ancram: It is for Kirkcaldy district council to decide on the priority to attach to remedial work on prewar houses within the resources available to it. The council may, of course, supplement its basic consent in 1984–85 by generating additional receipts, as it has done this year.
    Mr. Gourlay: Is the Minister aware that it is the cuts imposed by the Secretary of State on the Kirkcaldy housing grant that have led to the postponement of urgent remedial work on pre-war houses because, for reasons of safety, priorities have to be changed to deal with the system-built housing in other parts of the district? Will the Minister reconsider the position to relieve the distress caused for many tenants by the postponement of remedial work on pre-war houses?
    Mr. Ancram: As the hon. Gentleman knows, my officials have met representatives of the district council and I am fully aware of the representations made with regard to an increase in housing revenue account allocation. I shall, of course, consider those representations in the light of representations made by other authorities if it becomes possible to allocate additional resources in due course.

  SOLICITOR-GENERAL FOR SCOTLAND

    Lord Advocate
    Mr Ron Brownasked the Solicitor-General for v many days on average each month the Lord ends (a) in London and (b) in Scotland.
    The Solicitor-General for Scotland (Mr. Peter Fraser): He spends seven to eight days in London. The rest of his time is spent in Scotland.
    Mr. Brown: When the hon. and learned Gentleman next meets the Lord Advocate, whether it be in Edinburgh, London or Timbuctoo, will he make it clear that the recent trial of Councillors McLaughlin and Wood was a disgrace and that the right to democratic protest against the

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    presence of the South African ambassador in the Scottish capital is perfectly legitimate? If not, are we to assume that the legal establishment in Scotland, like the Government, supports and approves of apartheid, just as it approves of the class system?
    The Solicitor-General for Scotland: It is clear from the hon. Gentleman's question that he does not begin to understand the principles on which the rule of law is based. When prosecutions are taken for breaches of the law in Scotland, this is done with impartiality and is in no way motivated by political considerations.
    Mr. Fairbairn: Does my hon. and learned Friend appreciate that the fact that the Law Officers are sometimes in London, sometimes in Edinburgh and sometimes elsewhere results in a huge waste of time and public money now that advocates depute have to seek a Law Officer's personal permission before accepting pleas of guilty to reduce charges in the High Court? Does he agree that such serious and senior people, once appointed, should be allowed to take the decisions themselves?
    The Solicitor-General for Scotland: I accept that advocates depute appointed by my noble and learned Friend the Lord Advocate are distinguished and experienced advocates capable of conducting High Court prosecutions in Scotland. It has, however, been a standing rule for some time now that if they wish to accept a reduced plea in a murder or rape case before the trial begins they must raise the matter with one or other of the Law Officers. I hope, however, that they do not feel in any way circumscribed in the discretion that they have to exercise once the evidence is before the court.

    Matrimonial Homes (Family Protection) (Scotland) Act 1981
    Mr. Ernie Rossasked the Solicitor-General for Scotland if he will consult the Scottish Law Commission as to the effects of exclusion orders under the Matrimonial Homes Act.
    The Solicitor-General for Scotland: The Government have no present intentions to consult the Scottish Law Commission on the question of exclusion orders.
    Mr. Ross: If the hon. and learned Gentleman meets the Scottish Law Commission, will he dissociate himself from the comments made by Crown Agent Mr. William Chalmers in the correspondence that I sent to the Solicitor-General on 21 February? Does he agree that such comments are liable to help those in society who believe that domestic violence is not really a crime and is not suitable for the courts?
    The Solicitor-General for Scotland: I think that the hon. Gentleman was upset by comments relating to the diversion schemes being introduced in Ayr. I certainly accept that in problems of domestic violence the exercise of a power of arrest may be an important safeguard to ensure that there is no repetition of violence against the wife. Nevertheless, I wish to reserve this position. In seeking alternatives for prosecution it would be premature at this stage to suggest that there is no circumstance in which we might consider problems arising in the home for use of the diversion schemes.
    Mr. Malone: Is my hon. and learned Friend aware of the apparent anomaly in the Matrimonial Homes Act
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    whereby the rights created by the legislation appear not to be subject to the normal Scots laws of prescription? Will he consult the Law Society of Scotland, which has expressed concern about this, and does he intend to introduce legislation to put the matter right?
    The Solicitor-General for Scotland: It is for my right hon. Friend the Secretary of State for Scotland to introduce legislation. However, I appreciate that my hon. Friend and others are concerned about prescription. Following my hon. Friend's earlier representations I am glad to say that, together with my hon. Friend the Member for Edinburgh, South (Mr. Ancram) and my noble and learned Friend the Lord Advocate, I shall meet represntatives of the Law Society of Scotland next week to discuss this among other matters.
    Mr. McKelvey: Is the Solicitor-General aware that the discretionary procedures in the powers of arrest vary from region to region? Does he accept that it might be helpful if a copy of the guidelines issued to the police were placed in the Library so that hon. Members could read them and assist the police in their districts?
    The Solicitor-General for Scotland: My noble and learned Friend the Lord Advocate has issued guidelines to the police to assist them in operating the Matrimonial Homes Act, particularly when matrimonial interdicts, ancillary to exclusion orders, have powers of arrest attached to them. I have already indicated in a written answer to the hon. Member for Dundee, West (Mr. Ross) what in essence is provided in those guidelines. The Act has been in force for only a comparatively short time. Only about 400 orders have been granted, and we ought to see how these bed down.
    Mr. Dewar: Let me press the Solicitor-General for Scotland a little further on that last point. There is now a general acceptance that recent court decisions have removed some of the worries about the way in which these exclusion orders are interpreted in the courts. However, a number of agencies connected with the Matrimonial Homes Act—the fiscals, the police, local authorities and social work departments—need guidance and perhaps help in operating the new rules. Will the hon. and learned Gentleman, in consultation with the Secretary of State, consider whether there is not a case for a code of guidance—perhaps along the lines of that issue in connection with the Housing (Homeless Persons) Act—to help increase the use of the provisions and to ensure that the Act achieves the purposes for which it was designed?
    The Solicitor-General for Scotland: I want to make sure that the operation of the Act is fully understood. As I have already said, I hope that the police and fiscals have clear guidelines. As I told the hon. Member for Dundee, West, where the police have arrested a person for a breach of the matrimonial interdict to which a power of arrest has been added, this should be reported to the procurator fiscal, and I hope that that is now being done throughout Scotland.

    Salmon (Illegal Drift Netting)
    Sir Hector Monroasked the Solicitor-General for Scotland how many prosecutions there have been for illegal drift netting for salmon in the sea for the latest available year.
    The Solicitor-General for Scotland: In the year ending 29 February 1984, 25 prosecutions were commenced in respect of offences involving illegal drift netting for salmon.
    Sir Hector Monro: Does my hon. and learned Friend agree that if we are to stamp out poaching and stop salmon becoming an endangered species there will have to be many more prosecutions and the use of the protection vessels and aircraft? Will he consult his hon. Friends about the banning of drift netting off the English coast, where half the trouble begins?
    The Solicitor-General for Scotland: My hon. Friend's latter point is not for me. In 1982 there were only two such cases. As I have said, in 1983 the number increased to 30, which led to 25 prosecutions. He may be interested to know that, as a result of these detections, no fewer than 71 illegal nets measuring 12·5 miles were seized. I hope that my hon. Friend will accept that the scale of the problem is well and truly understood. The Department for Agriculture and Fisheries in Scotland is heavily involved in ensuring proper enforcement of the law against illegal drift netting.
    Mr. Steel: Will the Solicitor-General for Scotland respond more positively to the hon. Member for Dumfries (Sir H. Monro)? Will he consult his right hon. Friend the Secretary of State for Scotland and look at the annual report of the Tweed commissioners, which points out that only 32,000 fish were caught in the Tweed basin last year as against 70,000 officially recorded by drift netting and heaven knows how many unrecorded? Will they take joint action to reduce the scale of deprivation of salmon stocks in the sea when we ought to be supplementing the river stocks?
    The Solicitor-General for Scotland: With regard to drift netting being illegal in Scottish waters, I hope that effective action will be taken to ensure that poaching does not continue to deplete vital salmon stocks. Obviously, the position south of the border is different and, together with the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel), I am very much aware of the views expressed on the matter by salmon fishing interests in Scotland.

    Royal High School (Crown Office Staff)
    Mr. Canavanasked the Solicitor-General for Scotland how many people are employed by the Crown Office at the old Royal High school building in Edinburgh.
    The Solicitor-General for Scotland: The total number of persons employed in the Crown Office, Scotland, is 93.
    Mr. Canavan: Does that include the Lord Advocate and the Solicitor-General for Scotland, who are squatting in a building which was earmarked for the Scottish Assembly, which is being denied to the people of Scotland despite the fact that over 70 per cent. of Scottish voters voted for pro-Assembly parties at the last general election?
    Will the Solicitor-General for Scotland show us, by repeating to us his erstwhile views in favour of a devolved Scottish legislature dealing with Scottish legislation, that there is at least one honest Scottish Tory left?
    The Solicitor-General for Scotland: The building does, indeed, include both the Lord Advocate and myself. The Royal High school building in Edinburgh was originally consecrated for the study of polite learning. When I listen to the hon. Member for Falkirk, West (Mr. Canavan), I see that there is a continuing need for it in Scotland.

Foreign Affairs Council
3.31 pm
The Secretary of State for Foreign and Commonwealth Affairs (Sir Geoffrey Howe): With permission, Mr. Speaker, I should like to make a statement about the Foreign Affairs Council which took place in Brussels on 12·13 March. There was also an informal meeting of Foreign Ministers to discuss preparations an next week's European Council. There was, in addition, a ministerial conference with the Portuguese.
The two main points for us were 1983 refunds and preparations for the European Council.
On the first point, 1983 refunds, the positions of the Council and the Parliament have now been reconciled. There is, therefore, no technical obstacle to the Community meeting its commitment on time. Two member states were unwilling to approve the adoption of the regulations at yesterday's meeting. The decision has therefore been deferred until next week.
I made it clear that this delay is unjustified and misconceived. The majority of other member states take the same view. It will in any case be difficult to reach agreement at next week's European Council on the main subjects on the agenda. It is clearly not in the interests of the Community for any fresh obstacle to be placed in the way.
The Foreign Affairs Council will meet again on 20 March to consider the regulations. Adoption at that stage would enable the Parliament to take the further step necessary to release the refunds by the end of March.
On the second point, preparations for the summit itself, the principal issues on the agenda are: control of Community expenditure; budget imbalances; reform of agricultural policy; and, if our conditions are met, the question of an increase in own resources. On the budgetary points, some further progress was made, but there is still a long way to go. On agriculture, Ministers were able to make rather more progress, and my right hon. Friend the Minister of Agriculture, Fisheries and Food will be making a statement to the House this afternoon.
The next step is for the Presidency to circulate texts for consideration at the European Council. We shall judge these texts by the extent to which they meet our essential conditions, which remain unchanged.
On the other issues, Ministers agreed in principle to the extension of the Community's coking coal scheme to promote intra-Community trade; to a further programme of demonstration projects to stimulate the development of alternative sources of energy; and to the provision, subject to further discussion by Energy Ministers, of funds for social measures in the coal industry, which will be of benefit to this country. They also agreed that the next Energy Council would consider Community action to promote investment in solid fuels.
The council again considered the Commission's proposal to stabilise imports of certain cereal substitutes. It was agreed that any decisions on this proposal would have to be linked with reform of the common agricultural policy.
Ministers agreed on a Commission mandate for the forthcoming re-negotiations of the international cocoa agreement.
The Council agreed on a proposal for aid for the development of Portuguese agricultural structures. This
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agreement, and a declaration on agricultural issues in the enlargement negotiations, were presented to the Portuguese at the ministerial conference.
Ministers signed the treaty amendment needed to provide for Greenland's withdrawal from the Community.
Finally, the Council also made progress in discussion of the new common commercial policy regulation, to strengthen the Community's ability to respond to illegitimate actions by third countries in international trade.
Mr. Robin Cook: I am sure that the whole House will join in felicitating the people of Greenland on escaping from the consequences of the common agricultural policy and expenditure such as that imposed upon the British people. The right hon. and learned Gentleman, when he addressed the House last month, stated, as he will recall, that the Council of Ministers was unanimous in making representations to the Parliament about the British budget rebate. Are we to understand from his statement today that now that the Council of Ministers has heard from the Parliament it is no longer unanimous about accepting those terms and paying the budget rebate? If that is the case, will the right hon. and learned Gentleman not agree that three weeks later we are further from achieving a solution to the problem? Is it not now becoming increasingly clear, as the Opposition have warned him, that there is no realistic possibility of the British budget rebate's being repaid by 31 March and that in those circumstances the time has come for Britain to safeguard its own position by withholding an equivalent sum from our contribution to the 1984 budget?
The Foreign Secretary advised the House that a greater progress had been made on the agricultural fund. Will the Foreign Secretary confirm that the settlement made by the Agriculture Council earlier this week provides for expenditure greater than budgeted for by the Commission? Is the Foreign Secretary aware of the statement by Gaston Thorn this morning in Strasbourg that, as a result, the Community will be £1,000 million overspent in the current year? The Foreign Secretary will surely not expect the House to accept that settlement as reform of the CAP, or even as effective control of the expenditure of the CAP.
Finally, has the Foreign Secretary noted the statement by his right hon. Friend the Minister of Agriculture, Fisheries and Food that we must continue to live within our means, but, if the summit were to tell us that more money was available, that would be different?
Would the Foreign Secretary not agree that his right hon. Friend has made an excellent, succinct case against any increase in own resources, which, on the testimony of his right hon. Friend, would merely be squandered by the EEC on even higher food prices?
Sir Geoffrey Howe: The hon. Gentleman will have an opportunity later this afternoon of taking up with my right hon. Friend the observations in which he is interested, but I will deal with the main substance of his point on that. There is of course no doubt that one of the hazards to the common agricultural policy and the Community is the extent to which the agricultural budget has been overspent. It is to secure more effective control of that that Agriculture Ministers, and indeed the agricultural community, are having to face very tough and difficult decisions. That is inescapable if we are to curb the growth of surpluses that are unsaleable on any reasonable terms.

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So steps are being taken, as they have to be taken, in the direction of that reform. I hope that the hon. Gentleman will support those steps when they come to be decided.
The hon. Gentleman is entirely right that, on the steps that were being considered at the last meeting of the Council of Ministers, the Council was unanimous in sending forward the proposals that were necessary at that stage to the Parliament.
As far as that stage is concerned, the Parliament has given its opinion and there is no need for any conciliation. But unanimity did not prevail last night, as I pointed out, when two member states declined to adopt the regulations. I described that as an unconstructive act, to say the least, and it certainly has not been helpful. However, it is not right to conclude, as the hon. Gentleman does, that there is no realistic possibility of the Community's fulfilling its commitments. Provided the necessary decisions are taken at the Council of Ministers arranged for next Tuesday, it should be possible for those commitments to be fulfilled. Nevertheless, it is a matter for great regret that that additional delay should have been introduced.
Sir Anthony Meyer: Will my right hon. and learned Friend continue imperturbably along his path in negotiating the best possible settlement of these outstanding problems, while making it plain, as he did in his broadcast, that these problems are common to the Community and are not a matter of the United Kingdom versus its nine partners?
Sir Geoffrey Howe: My hon. Friend is entirely right to point out that the solution of the problems that are on the agenda for the European Council on Monday and Tuesday of next week requires a common and resolute approach by all the members of the Community. They are indeed problems for every one of the member states and for the Community as a whole. We shall certainly continue to do our best to ensure a conclusion that is acceptable to this country.
Mr. J. Enoch Powell: In approaching a European Council at which, on the showing of the Foreign Secretary, it will be difficult to reach agreement on the items that we have insisted shall be on the agenda, will the Government bear in mind that it would be no disaster if this country decided to recover its rights to manage its own finances and to make its own laws and policies?
Sir Geoffrey Howe: The right hon. Gentleman has long maintained that view. It is not a view which was endorsed by the electorate at the last election.
Mr. Powell: That will change.
Sir John Osborn: I welcome the references to alternative energy, solid fuels and the social fund, in relation to pit closures, but did my right hon. and learned Friend take the opportunity to suggest that we should sell more British coal and possibly protect it?
Was the question of acid rain drawn to his attention? That was the subject of questions in the House on Monday, and Germany and other countries are taking seriously the damage to their forests.
Sir Geoffrey Howe: The question of acid rain was not discussed during this meeting of the Council. It is a matter of great importance to Germany and other countries and has been considered at the Environment Council.
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There was no discussion at this Council of the case for more sales of British coal. That is primarily a matter for the Energy Council and, as my hon. Friend said, it is an important subject.
Mr. Bowen Wells: I congratulate my right hon. and learned Friend on his dogged approach to extremely difficult negotiations. He mentioned the settlement of the international cocoa agreement. Will that put any extra charge on the Overseas Development Administration budget?
Sir Geoffrey Howe: I do not think so, but I will write to my hon. Friend to tell him the exact position.
Mr. Merlyn Rees: Does the Foreign Secretary agree with the former Prime Minister, the right hon. Member for Old Bexley and Sidcup (Mr. Heath), that the Government would get better results in Europe if the Prime Minister stopped treating our partners as if they were enemies?
Sir Geoffrey Howe: I do not believe that the judgment implied in that question is correct. It is certain that the provision for our accession to the Community, negotiated by the Government led by my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath), foresaw—it was agreed by the Community countries—that, if an unacceptable situation were to arise, steps to correct it would have to be taken. It is now common ground in the House and throughout the Community that just such an unacceptable situation has arisen and it is necessary for those steps to be taken. It is right that our case should be put firmly and resolutely, but in the spirit that is appropriate between partners. That is exactly what we are doing.
Mr. Russell Johnston: Does that answer mean that the Foreign Secretary rejects the highly critical and widely publicised remarks of the right hon. Member for Old Bexley and Sidcup (Mr. Heath)?
The Foreign Secretary said that the Government would judge European summit texts by the extent to which they met our essential conditions, which remain unchanged. Is it not the case that, if all Governments' essential conditions remain unchanged, the summit will fail?
Sir Geoffrey Howe: It is right that we should judge the outcome of those negotiations against the conditions that we have always made clear. They should make effective provisions for the control of Community expenditure, including, particularly, agricultural expenditure, and should make effective provisions for the changing of the budgetary pattern to secure a fair outcome for this country. Of course, the judgment that has to be made on those matters at the end of the day is a matter of judgment. It is a matter which will have to commend itself to this House. However, the fact that those two conditions have to be fulfilled is inescapable and is well recognised by our partners.
Mr. Ron Leighton: Is not this whole grisly business getting worse and worse and increasingly farcical? Has not every summit since Dublin been a predictable flop, and will not the next summit assuredly be a dismal flop? In those circumstances, would not it be more prudent to explore the suggestion of Mr. Chirac, the mayor of Paris, who suggested that it would be better for the United Kingdom to leave the CAP?
Sir Geoffrey Howe: Mr. Chirac is entitled to his opinion, just as the hon. Gentleman is entitled to his, but I do not share the hon. Gentleman's view. If the issues that are before the Community are not resolved as they have to be, that will be a major setback for the prospects of economic and political co-operation of a sensible sort between Britain and the rest of our partners, but it will not be a dismal flop. I am sure that that view will be projected by the whole House.
Mr. Tony Marlow: If my right hon. and learned Friend is party to an agreement with our Community partners that involves an increase in own resources, will he kindly undertake not to justify it on the basis of the entry of Spain and Portugal to the Community, particularly so as that is not likely to happen until 1 January 1986 at the earliest, when there will be a long transitional period? Therefore, there will not be a significant call on Community funds for at least four years. Will my right hon. and learned Friend give us at least that reassurance?
Sir Geoffrey Howe: I have told my hon. Friend more than once that one of the factors to be taken into account by those who argue the case for an increase in own resources is the accession of Spain and Portugal. He is right in saying that the transition will not take place until 1986, but it is probable that the own resources decision, if one is to be taken, will not be operating until that year. The way in which that operates is another factor, because it will not be automatic. I cannot give the assurance for which my hon. Friend asks. However, the accession of Spain and Portugal is bound to be a factor in considering whether an increase in own resources is justified.
Mr. Eric Deakins: Did the Foreign Secretary make it clear to his colleagues in the Common Market at the Council meeting that the United Kingdom, at the Heads of Government meeting which will take place shortly, will refuse to consider an increase in own resources until the two preconditions that have been laid down have been met, or is there a possibility that the two preconditions will be traded off against each other at the same time at the Heads of Government meeting?
Sir Geoffrey Howe: It has always been part of the agenda set by the Stuttgart summit that all those issues should be considered and answered together. We have always made it clear that the question whether there should be an increase in own resources arises only if the other two conditions are fulfilled. It is plain that at that stage they will have to be considered together.
Mr. Nicholas Budgen: Does my right hon. and learned Friend agree that if, at some late stage, she comes to the House and asks for an increase in own resources, the request should be accompanied by provision for primary legislation? There are so many different factors to be considered. Would not it be right to allow a detailed discussion so that if he makes that request the country has a chance genuinely to express its view upon a multiplicity of factors?
Sir Geoffrey Howe: There will no doubt be a number of opportunities in a number of different ways for the House to consider the conclusions of the summit meeting next week, depending on the nature and extent of the conclusions. As the House has been told on a number of occasions, the procedure for any possible increase in own
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resources would be the laying of a draft Order in Council under section 1(3) of the European Communities Act 1972. that would need to be approved by each House of Parliament.
Mr. Budgen: After one debate.
Sir Geoffrey Howe: The way in which that would be debated would be a matter for the usual channels.
Mr. Roland Boyes: Is the Foreign Secretary aware that, when describing the major items for the agenda of the next Council, he did not mention unemployment, industrial democracy or economic crisis? Is this a reflection of the contempt which he and his Conservative colleagues have for these subjects, or does he agree that it is irresponsible that these items are not to be at the head of the agenda?
Sir Geoffrey Howe: The hon. Gentleman does not have a very accurate insight. The items to which he has referred are of concern to the whole House, and almost all the decisions that we take on almost every economic issue are based upon a consideration of them, but they are not on the agenda for the Council next week. The matters that will appear on that agenda are those that are directly relevant and important to the solution of the problems that he has mentioned.
Mr. Bryan Gould: Will the Foreign Secretary make it clear to his Common Market colleagues that the wider issue of any increase in own resources depends on a fundamental reform of the common agricultural policy and is not linked to the specific and separate question of the rebate which is due to us?
Sir Geoffrey Howe: Here I come back to the same point. All the matters set by the Stuttgart summit for the agenda, which is now under discussion, have to be considered and answered at the same time. Alongside the question whether there is to be an increase in own resources is the question of correcting the budgetary imbalances, and the question of securing effective control of Community expenditure, including specifically agricultural expenditure, and, of course, alongside that are all the items on the Agriculture Council agenda—all those matters that are related to the reform of the common agricultural policy. It is only if the Council is satisfied that those questions have been dealt with, alongside each other, in the right way, that the conclusions can be reached.
Mr. Nigel Spearing: Will the Foreign Secretary confirm that the meeting of Foreign Ministers which will take place after the Heads of Government meeting on 20 March may be asked to take executive action on agreements which have been reached? In that case will he assure the House that no proposal will be approved by the Council which has not been debated in the House?
Sir Geoffrey Howe: I understand the importance of the point raised by the hon. Gentleman. I should judge that the only decision likely to be taken by the Council is one in relation to the adoption of the regulations that I have already mentioned, which would be acceptable to the House.
Several Hon. Members rose——
Mr. Speaker: Order. There is another statement to follow, but I shall call those hon. Members who have been rising to ask questions.
Mr. Michael Shersby: Is my right hon. and learned Friend aware that the agreement that has been reached on a mandate for the forthcoming re-negotiation of the international cocoa agreement will be widely welcomed in the Third world, and that one would hope that it will be widely welcomed by Opposition Members?
Sir Geoffrey Howe: I am grateful to my hon. Friend for what he has said.
Mr. David Winnick: Bearing in mind the resolution recently passed by the European Assembly, could the right hon. and learned Gentleman tell us whether the Foreign Ministers discussed the case of the notorious Nazi war criminal, Rauff, who lives quite freely, and under his own name, in Chile, and who is held responsible for the murder of some 250,000 men, women and children during the war years? What action will be taken by the Council of Foreign Ministers, and other bodies of the European Community, to ensure that Rauff is expelled from Chile to face proceedings in Germany?
Sir Geoffrey Howe: The question of Rauff was not discussed in the Council of Ministers. I shall consider the point raised by the hon. Gentleman to see whether it would be appropriate for that to happen.
Mr. Tam Dalyell: Does the Foreign Secretary dissent from the view that each Greenlander, each year for the next 10 years, will get from the EEC upwards of £200? Is this wholly satisfactory in the circumstances?
Sir Geoffrey Howe: The amount payable to Greenlanders, as a result of the fisheries protocol, which is part of the matters now subject to agreement, and which I think lasts for five years, is significantly less than that which was payable under their former arrangement, and there is no provision for continuation of any payments to Greenland thereafter, in the absence of agreement on the new arrangements.
Mr. Dennis Skinner: Does the Foreign Secretary recall that, when the Prime Minister came back from the Venice summit, after she had been floating down the river in a gondola, looking like someone selling Walls Cornettos, she came to the House, and said at the Dispatch Box that the summit had agreed that there would be a doubling of coal production? Within a couple of years, the same Prime Minister had appointed MacGregor to run the coal industry, and not to double——
Mr. Speaker: Order. Here we go again. The hon. Gentleman must put a question to the Foreign Secretary, not to the Prime Minister.
Mr. Skinner: I asked him whether he confirms, or recalls—perhaps he cannot——
Mr. Speaker: Order. The hon. Gentleman knows the rules. Will he please put a question to the Foreign Secretary?
Mr. Skinner: What many people outside would want to ask the Foreign Secretary is how much longer we are going to have Ministers coming to the Dispatch Box—we have had them for 11 years—talking about summits, talking about getting together, talking about solving this, that and the other, and the most symbolic thing about the Common Market happened a few weeks ago. It happened in that big traffic jam, that big road block, where it proved once and for all——
Mr. Speaker: Order. The hon. Gentleman is abusing my calling him to ask a question.
Mr. Cook: May I tempt the Foreign Secretary to give his view of the agriculture package? Does that package, which will result in increased agriculture expenditure, amount to reform or even to effective control of spending? He is surely not going to try to pass it off on the House as meeting the agriculture requirement of his two conditions for an increase in own resources. Does the right hon. and learned Gentleman recall that after the last Council meeting he told the House that there had been no proposal for an increase in the VAT element to 2 per cent.? Is he aware that on 5 March such a proposal was tabled by the Commission? Surely he will not agree to doubling Britain's VAT payments to the EEC, even after yesterday's raid on the chip shops of the nation. He will surely assure the House that he will not accept such an increase, whatever conditions he succeeds in obtaining next week.
Sir Geoffrey Howe: I have made it plain in answer after answer that the question whether there should be any increase in own resources must be considered before one considers how large any such increase should be Thus, there can be no question of accepting a figure as large as the hon. Gentleman suggests.
The hon. Gentleman must understand that the task of securing effective control and reform not just of the CAP but of almost every agricultural policy in the world, in order to secure effective control of expenditure in a fashion that is compatible with sensible arrangements for agriculture, is enormously difficult. The Agriculture Council, together with my right hon. Friend the Minister of Agriculture, Fisheries and Food, have made substantial advances towards securing reform and more effective control. Their agenda has not yet been completed and the conclusion of their deliberations will have to be awaited.

Agriculture Council
3.56 pm
The Minister of Agriculture, Fisheries and Food (Mr. Michael Jopling): With permission, Mr. Speaker, I wish to report to the House on the meeting of the Council of Agriculture Ministers which took place in Brussels on 11, 12 and 13 March. I represented the United Kingdom together with my hon. Friend the Minister of State.
The Council discussions mainly focused on milk and monetary compensatory amounts.
I am glad to tell the House that a substantial measure of agreement was reached on an important scheme for tackling the growing milk surplus and the horrendous increase in the budgetary costs of this sector. The principal element in that scheme is a supplementary levy. This will be charged on all milk produced above a specified quantity. This Community-wide quota for deliveries to dairies is 98·2 million tonnes for 1984–85 and 97·2 million tonnes for the succeeding four years of the proposed five-year agreement. I should add that 97·2 million tonnes represents the total of Community milk deliveries in 1981 plus 1 per cent., and the quotas will be divided between member states on that basis. The agreement provides for the levy to apply either at the level of the dairy, in which case deliveries in excess of the quota will be charged at 100 per cent. of the target price for milk, or at the level of the individual producer in which case excesses will be charged at 75 per cent. of the target price. Allocation of the quota in member states can be made on a more recent basis than 1981.
It was one of my main priorities to ensure that all producers without exception should be brought within the scope of the supplementary levy scheme. I am glad to say that that objective was achieved. There is no provision for exceptions for small producers or any other special category; and milk not delivered to dairies is also liable to the supplementary levy. The special aid to small milk producers was agreed for an additional two years. This will help with the income problems of small milk producers, but does not exempt them from the supplementary levy.
I know that the industry was concerned about having to face the full rigour of the basic quota immediately. I was therefore glad to accept an intermediate step for 1984–85. In order to finance the additional 1 million tonnes involved, I agreed to a 1 per cent. increase in the co-responsibility levy for one year only.
Under the agreement there would be no intensive levy on milk producers. This was a major objective for me because this would have discriminated seriously against the United Kingdom milk industry.
The agreement is related to a freeze on the common price for milk in 1984–85. There is provision for the butter subsidy to be reduced. But the United Kingdom price of butter to consumers will not increase.
The main outstanding issue relates to possible special arrangements for individual member states. There is reference to a Community reserve of 600,000 tonnes in addition to the basic Community quota. The Irish have maintained their demand for exception from the supplementary levy to enable them to continue to expand up to the average yield levels of the Community. I have maintained a reserve on the whole idea of a Community
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reserve and the linked question of any special arrangement for the Irish or other member states. The Irish made it clear that they wish to pursue this issue at the European Council.
The negotiations on monetary compensatory amounts centred on the German suggestion for dismantling existing positive MCAs, and for avoiding the creation of new positive MCAs at future EMS alignments. I have made it clear throughout that the United Kingdom is concerned about the budgetary implications of the German idea, but this is an issue of high importance to certain other member states. The text which was worked out in negotiation would provide for the dismantlement of German and Dutch positive MCAs in three steps. It does, however, recognise the special position of sterling as a floating currency.
If implemented, the United Kingdom positive MCAs would be reduced in the first stage by about 3 percentage points, but I am glad to say that there would be no effect on the level of support to United Kingdom farmers in terms of sterling. I have maintained a reserve particularly in relation to the budgetary costs of this arrangement. Because of these budgetary implications, the issue will be put before the European Council.
The texts on milk and MCAs are subject to a number of reserves, including a reserve related to the overall agreement on agricultural prices which will need to cover other commodities. The Agriculture Council will be resuming its work on Friday. But the agreement on the implementation of a supplementary levy is, I believe, a historic step forward in bringing sanity to the common agricultural policy. It marks a recognition by the Council that the milk sector cannot go on expanding and adding to the waste of Community resources. My concern now will be to discuss in detail with our own industry how we can most sensibly implement these arrangements in the United Kingdom.
Mr. Mark Hughes: On behalf of the Opposition, I give a general welcome to the Minister's success in reaching an agreement which curtails surpluses and contains budgetary costs. Beyond that we will not go. A number of serious questions pertaining to the dairy industry in the United Kingdom must be asked as a consequence of the statement.
Does the Minister accept that about 150,000 milking cows will have to be taken out of production as a consequence of the agreement and that many dairy farmers will be forced into bankruptcy? Does he accept that these cows are among the most high-yielding, prized and best genetic cattle in the Community and that no differentiation is being made under the agreement between good quality cows, good dairymen and good stockmen, and bad cows, bad dairymen and bad stockmen?
What is the problem in relation to butter? Where is the price differential when we lose the subsidy so that the consumer and the producer of butter have access to an efficient and effective market? What is the meaning of the words,
"there would be no intensive levy on milk producers"?
Does the Minister mean that there will be no levy on intensive milk production or no extra levy on milk production? His statement is unclear.
Can the Minister satisfy the House that there is no undercover arrangement for a tax to be imposed on oils and fats? That suggestion, which appeared in the press as the other side of the equation, would be wholly unacceptable.

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Does the Minister accept that the reserve that he has placed on MCAs requires a great deal of elaboration and that the reserve as it stands does nothing to secure the position either of the consumer or the farm producer? Does he accept that it leaves a great deal to be desired?
Does the Minister accept that, with all those problems, he has managed to arouse the total opposition of most of the National Farmers Union, the Farmers Union of Wales and the dairy industry and that he is bereft of friends on the agreement? Will he therefore ensure that all the reserves on all the other matters are carefully considered at the next meeting?
Mr. Jopling: I am grateful to the hon. Member for City of Durham (Mr. Hughes) for his general welcome of what amounts to controls over surpluses and costs. I noted what his hon. Friend the Member for Livingston (Mr. Cook) said from the Opposition Front Bench about the previous statement by the Foreign Secretary. It was then suggested that more stringent methods should have been used to control surpluses. We can discuss that on another occasion.
The hon. Member for City of Durham asked nine main questions. Farmers will have to decide whether to keep the existing number of cows and have them yield less or take some out of production. They are technical matters to be decided by farmers. The hon. Gentleman should not say that 150,000 cows will be taken out of production, because that is a matter for farmers to decide. The hon. Gentleman said that there is no discrimination between good and bad cows. Farmers will not find that a difficult problem to solve.
The hon. Gentleman mentioned the butter subsidy. We are in the middle of the negotiation and I am now making a progress report to the House. The proposal is to cut the butter subsidy by 75 per cent. It is currently worth about 15p a pound. The Commission proposal before the Council is to reduce the intervention price of butter. The two proposals will balance out. On that basis we are able to say that we do not anticipate consumers having to pay more for butter as a result of the arrangements.
I refer the hon. Gentleman to Commission document No. 500 of July last year, in which the intensive levy is explained. It deals with farmers who produce milk from relatively few acres. It would have been bad for Britain, because it would have hit 6 per cent. of our milk production. We have been able to resist it, because it would have been much worse for the United Kingdom, and perhaps Holland, than others.
I can assure the hon. Gentleman that we remain totally opposed to the oils and fats tax proposition. It was not discussed in the Council this week. I expect that we shall deal with it on Friday, Saturday and Sunday, if we stay that long.
The hon. Gentleman asked me to elaborate my reserve on MCAs. The difficulty with the first stage of the German proposal, which is to revalue the ECU and reduce the level of positive MCAs without reducing the prices of farm produce, is that, at the other end of the scale, it increases the negative MCAs and gives an opportunity for a devaluation in negative MCAs to the countries concerned. That could be extremely expensive for FEOGA funds. We estimate that in a full year it would cost about 401 million ECU. That is what we are especially concerned about, and that is my reserve.
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The hon. Gentleman said that our proposals were opposed by the NFU and the dairy industry. The proposals for a milk super-levy at farm level are supported by the Scottish NFU and by a great many individual farmers. I believe that there will be a general welcome for the fact that, unlike the original Commission proposals, the arrangements that appear possible now—although they are not decided clearly—would not imply a decrease in United Kingdom farm prices, as was originally proposed and about which the NFU was rightly anxious.
Several Hon. Members rose——
Mr. Speaker: Order. I must protect the business of the House, and a great many right hon. and hon. Members wish to take part in the debate on the Chancellor's Budget statement. I shall allow questions on this important statement to continue until 4.25 pm.
Sir Peter Mills: I am sure that the whole of the agriculture industry is grateful to my right hon. Friend for what he has done on the MCAs and the green pound. However, will he bear in mind that, because of the measures, the dairy industry will he in serious difficulties and any cut will be unpleasant, even though it must be made? Will he also bear in mind that it would be far worse if there were any unfairness or cheating by other countries. The extra 600,000 tonnes that will be allowed must not go to the Irish dairy farmers, making it even more unpalatable for British farmers. Will my right hon. Friend bear in mind that fairness in future is the keynote?
Mr. Jopling: I am grateful to my hon. Friend for his kind words, especially about the proposals on MCAs, as far as they have gone. Of course, I accept and agree that to cut milk production, as will be necessary throughout the whole Community, will create major difficulties for milk producers. But, as my hon. Friend said, it has to be done. The problems will have to be faced as soon as possible.
I take on board entirely what my hon. Friend said about the danger of cheating in other countries. We will do all that we can to ensure that these matters are properly controlled. I noted his remarks about exceptions for Ireland and other countries. That is a matter on which we put a reserve, and which will no doubt be discussed by the European Council next week.
Mr. Geraint Howells: Will the Minister inform the House and the dairy producers of Britain whether the proposals are short or long-term measures to help the industry on its way? Perhaps he will clarify the sentence in his statement:
"Allocation of the quota in member states can be made on a more recent basis than 1981."
Does that suggest that British dairy farmers can be based on 1983 production?
What has the Minister in mind to help those dairy producers who have entered the industry since 1980?
Mr. Jopling: The milk proposals involve a five-year scheme with a review in three years. The split-up of the national quota can be done on 1983 or any other up-to-date yardstick, so that hard cases can be dealt with. There will be provision for the Government, the Milk Marketing Board or whoever will be responsible for running the schemes—that is a matter that we must discuss—to make a reserve to deal with the hard cases that the hon. Gentleman has in mind.
Sir Hector Monro: Will my right hon. Friend bear in mind the fact that this is a complex issue? Now that the decision has been taken, is it not important to restore confidence to the dairy industry? Will he say a little more about the timing of the proposals? Even if it is hypothetical, can he say what might be the drop in income of a 100-dairy-cow farm?
Mr. Jopling: I agree with my hon. Friend about the need for confidence. I have told the House previously of my anxiety about the uncertainty throughout the agriculture industry, which does not quite know what is happening but realises that something must be done.
I cannot help my hon. Friend on timing. Clearly those are matters about which we shall embark on early discussions with trade interests and the NFUs. We need to carry out a great deal of consultation.
It is impossible at this stage to make assumptions about the effect on individual farmers. That will depend on many matters—for instance, the price of cereals.
Mr. Thomas Torney: Will the Minister explain or justify his remarks to the angry lobby of British farmers—as reported in The Times this morning—that he believed that the agreement on milk was right for Britain? I ask that question because The Times also reported that the percentage cut in milk from France was 2·95 per cent., whereas for Britain it was 7·32 per cent. Should we not remember that France produces most of the surplus while Britain produces no surplus at all?
In view of the excellent questions put to the Minister by my hon. Friend the Member for City of Durham (Mr. Hughes), outlining the seriousness of the proposals, will the right hon. Gentleman arrange a full debate in Government time with a vote at the end?
Mr. Jopling: The hon. Gentleman's last point is a matter for my right hon. Friend the Leader of the House who, no doubt, will say something about that tomorrow.
The basis of all this is that, during the past few years, French milk production has been relatively stagnant compared with ours. The French have been pressing for an exemption from super-levy for their small producers. I am glad to say that no exemptions have been agreed for small producers or for any other special categories. France and some other countries have substantial off-farm sales of milk and milk products. Those do not go through dairies. In France they account for almost 5 per cent. of deliveries. We have insisted, and it has been agreed, that they must be included in the levy system.
The French were insistent about the levy on intensive milk production. As I said earlier, that would have hit 6 per cent. of our milk production. We have insisted that the matter be dropped, and it has been.
I can sum up the matter by saying that I read in the French press that the leader of the main French farmers' union said:
"The French Government has yielded too much and accepted too many restrictions while France's European partners have not accepted the same sacrifices."
I believe that he is right.
Mr. Ralph Howell: I congratulate my right hon. Friend on at last accepting the idea of production restraint and on-farm quotas. That arrangement has been long overdue. It will save the dairy industry in Britain and is the only way to proceed.
Mr. Jopling: I am grateful to my hon. Friend. I know of his long belief in on-farm quotas. I remember the wise words of the Howell report some years ago.
Mr. Robert Maclennan: We recognise that this is the first step in what the Minister described before the Brussels meeting as the "painful adjustments" that the industry would have to make. Is the right hon. Gentleman determined to ensure that reduction of the positive MCAs will not place our industry at an unfair competitive disadvantage with other member countries? What is the time scale for the German proposal? Why has the right hon. Gentleman spoken only of the impact on farm incomes in Britain during the first of the three periods?
Mr. Jopling: The German proposal is that there should be a revaluation of the ECU this year, but that would not mean a reduction in farm prices for those countries for which there was a positive MCA. It would, however, give the opportunity for countries with weak currencies to devalue their new negative MCA.
The second stage of the German proposal is for a revaluation of the German and Dutch positive MCAs, but allowing them to compensate their farmers through value added tax for the reduction in farm incomes that would be implied by that. That stage would not apply to sterling, as I said earlier.
The final stage of the German proposal is that the remaining part of their MCAs would be taken out of annual price increases through the so-called gentleman's agreement.
Mr. Nicholas Winterton: I congratulate my right hon. Friend on his courageous presentation of the matter at the negotiations. Is he aware that this is a sell-out of the British dairy industry? He may be able to quote the Scottish NFU, but no other farming body is prepared to support him on the agreement which he has made, which will result in at least 5,000 British dairy farmers going out of business. Is he aware that not one dairy farmer in my area will give him support for the announcement that he has made today?
Mr. Jopling: I am surprised to hear my hon. Friend make those remarks. For many months he has expressed his opposition to a supplementary levy. In the debate on 21 November, my hon. Friend expressed his view on that matter. On that occasion I invited him to tell me how we should deal with the over-production of milk, to which he gave me the sage reply that that was a matter for me, not for him.
Mr. Eric Deakins: Once the Community's own resources are increased, what will prevent the Council of Agriculture Ministers from meeting to modify the agreement substantially in the interests of European milk producers?
Mr. Jopling: These matters are not finalised. As I said, we shall be having further meetings on Friday and Saturday to discuss the other products which are an integral part of the price package and of Commission document No. 500. Clearly some matters affecting milk and MCAs are reserved for the European Council. This is a progress report. There remains a good deal to be settled.
Mr. Jerry Wiggin: Is my right hon. Friend aware that, given the complexities and difficulties of the milk surplus, to have reached any

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agreement is most commendable? Is he further aware that a reduction in production need not necessarily lead to a similar reduction in profitability? Will he bear in mind the words of my hon. Friend the Member for Dumfries (Sir H. Monro) that it is important to get this over in clear language to our farmers, because the mumbo-jumbo of Brussels will strike fear, perhaps unnecessarily, into many hearts?
Mr. Jopling: I am totally in sympathy with what my hon. Friend says. I reject the suggestion that this is a sellout. I agree with him that a drop in yield does not necessarily mean a drop in profit. I also agree that it is important that as soon as possible farmers should know where they are going and what the implications are.
Sir Anthony Meyer: Does my right hon. Friend accept that if there must be an agreement, clearly there must be some concessions, and that even so deserving a body of people as the milk producers must be involved in that process? Is he aware that there will be general support for the fine agreement that he has managed to bring home?
Mr. Jopling: I am particularly glad that from the point of view of exemptions—and I always said that my principal concern was that this arrangement should not discriminate against British farmers—I have not had to make concessions. Therefore, concessions will not be given. I remind my hon. Friend that farmers in this country have the major advantage of living in a state which has a relatively low level of inflation. Farmers in other countries—such as France, with 9 per cent. inflation—will have many more troubles than our farmers.
Mr. Ron Lewis: Is the right hon. Gentleman aware that in his county, Cumbria, farmers are very disturbed about this agreement? Is he further aware that many of them believe that they could be put out of business? Will he give an undertaking, at least to Cumbria, that there will be no cuts in milk production?
Mr. Jopling: If the hon. Gentleman was in his constituency on Saturday—he probably was—and heard BBC Radio Cumbria, he would have heard that, following my meeting with the Cumbria NFU, the chairman of that body was kind enough to say that he had no major disagreement with me.
Several Hon. Members rose——
Mr. Speaker: Order. In the interests of balance, I shall call one more hon. Member. Mr. Hicks.
Mr. Robert Hicks: In view of the constraints that are to be placed on the dairy producer, may I ask my right hon. Friend to say how this fits in with his oft-declared objective of correcting the imbalance that has occurred between the livestock and grain growing sectors?
Mr. Ron Lewis: He cannot.
Mr. Jopling: I can do that very well because I have been arguing—and I was arguing last night in the Council of Ministers—for a reduction in grain prices. Grain prices are too high, and the livestock sector has been very hard hit.

Chairman of Ways and Means (Personal Statement)
4.26 pm
The Chairman of Ways and Means (Mr. Harold Walker): With permission, I would like to make a personal statement.
I understand that, following an interview which I gave this morning to Radio Sheffield, concern has been expressed that some of my comments were inconsistent with the political impartiality traditionally observed by the Deputy Speaker.
I hope that the House will appreciate the difficulty of my position as a Member in a constituency which is in the centre of the current national controversy over coal closures; inevitably, there are occasions on which it is impossible for me to keep silent as, in my capacity as a Deputy Speaker, I would wish to do.
I can, of course, give the House a categorical assurance that in no circumstances would I allow any such feelings to influence my conduct in the Chair of this House, or diminish in any way the high standards of impartiality traditionally observed by my predecessors in the Chair.

Falkland Islands Airport (Land Costs)
4.28 pm
Mr. Tam Dalyell: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the cost of land in the Falkland Islands for the Falkland Islands airport."
This matter is specific because it has emerged from the other place that the costs now being asked of, and agreed to, by the Government by the Falkland Islands Company are a staggering 30 times per acre the cost of similar land in the area. One might think that, as other land in the islands is being donated because of what happened, this is a definite case of exploitation.
The subject is urgent because the contract of sale—so the other place was told—has not yet been signed. If this House is to do anything about it—by inquiring into the price per acre and so on—we must do it this week and not next week. To any hon. Member who feels that the Standing Order No. 10 procedure is being abused, my blunt answer is that next week will be too late to do anything about what is regarded as a matter of importance, not only by me but by people whose view of the whole matter is different from mine.
In this connection, I cite a knight of the garter, my noble Friend Lord Shackleton. He says that it is a scandal, and it will be agreed that he is not among the persistent critics of the Falklands situation. Those who are informed about the matter, including Lord Shackleton and many other peers, by no means all Labour, have made it clear that, as the facts emerged from the Minister in another place, Lord Trefgarne, they came to regard it as a scandal.
I put it to you, Mr. Speaker, that there should be at least a statement on the Government's attitude to compensation, subject to arbitration and the confidential sale of land in the Falkland Islands. Why cannot the House of Commons be told about those financial arrangements, as the chief adviser——
Mr. Speaker: Order. The hon. Member is asking for a Standing Order No. 10 debate, not for a statement from the Government. He must show it to be an urgent matter.
Mr. Dalyell: I know the urgency of the timetable, Sir. I shall leave my case at that.
Mr. Speaker: The hon. Member asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter, namely,
"the cost of land in the Falkland Islands for the Falkland Islands airport."
I have given careful consideration to the hon. Member's speech, but I regret that I do not consider the matter that he has raised as appropriate for discussion under Standing Order No. 10. I cannot, therefore, submit his application to the House.
Mr. Dennis Skinner: On a point of order, Mr. Speaker. On a previous occasion my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Sedgemore) raised the matter of the statement on radio on 25 February by the Chairman of the Select Committee on Members' Interests. He talked about what he believed the Committee should do. I know that you have dealt with that matter, Mr. Speaker, but, in view of what we have heard today from the Chairman of Ways and Means, can we expect a personal statement from the Chairman of the Select Committee?
Mr. Speaker: Order. As the hon. Member has correctly said, I have dealt with that matter.
Mr. D. N. Campbell-Savours: On a point of order, Mr. Speaker. My hon. Friend the Member for Linlithgow (Mr. Dalyell) has just raised——
Mr. Speaker: Order. I have dealt with that matter as well.
Mr. Campbell-Savours: This matter relates to my hon. Friend's statement, not to his application. Yesterday a statement was made in the other place in relation to this matter. That statement was at variance with the statement made yesterday at the Dispatch Box by the Secretary of State for Defence. As you, Mr. Speaker, represent the interests of Back Benchers, will you establish the truth for us?
Mr. Speaker: I keep having to say that I am not responsible for statements from the Government Front Bench. I am certainly not responsible for statements made elsewhere.

Prevention of Imprisonment (Fine Default)
4.32 pm
Mr. Gerald Bermingham: I beg to move,
That leave be given to bring in a Bill to remove the power of imprisonment in cases of default of payment of fines imposed for offences for which imprisonment cannot be imposed.
The purpose of the Bill is to remove what appears to be an injustice and anomaly in the law whereby a person can be sent to prison for a non-imprisonable offence. This aspect became obvious to me when I recently read in a paper—I am sure right hon. and hon. Members also read the article—of a 74-year-old man who died in prison during his thirty-fourth confinement for nonpayment of a fine levied for not wearing a crash helmet. Surely it could never be said that not wearing a crash helmet should be an imprisonable offence.
When I looked at the matter in more detail, it became readily apparent that not only were such people being sent to prison in increasing numbers, but people who had committed no offence were being sent to prison. For example, the parent of a child who fails to attend school can be fined, and, if the fine is not paid, imprisoned. Similarly, if a child is fined, the parent can be ordered to pay the fine. If the fine is not paid, the parent can be imprisoned.
Such matters lie behind the first limb of my Bill. My Bill seeks to remove from the courts the power to imprison in cases where imprisonment could not be ordered, in the first instance, for the offence.
I accept that to bring in a Bill merely to remove that power would beg the question: how will the fines be collected? Accordingly, as a second limb, my Bill contains a series of alternative methods of enforcing fines imposed in penal and non-penal cases. I use the word "penal" to mean those cases which bear imprisonment.
Our methods of enforcing fines are inadequate. There are only two methods of enforcement: first, the penal sanction of imprisonment for non-payment of fines; and, secondly, the use of the bailiffs to seize goods and chattels. Last year, about 25,000 people were sent to prison for fine default. Therefore, it appears that the prisons are being filled with people who should not be there.
I propose three further methods to deal with nonpayment of fines. One of those methods is already in use
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in matrimonial cases involving the payment and nonpayment of maintenance. Each week a set amount is taken from earnings, subject to stringent safeguards on dependency levels, and so on. The fine for default could be collected in that way.
Secondly, for those on supplementary benefit, a nominal attachment of 10p or 50p a week could he made. That might make courts look at the level of fines imposed on those in receipt of supplementary benefits. Recently a man who had borrowed his brother's car and been involved in an accident was fined £75 for careless driving. His total benefit was approximately £25 a week. The fine effectively represented his income for three weeks. In the same court, about five minutes later, a man involved in a similar case, who had an income in excess of £20,000 a year, was fined £75. There seems to be no correlation between the two cases. Perhaps the part of my Bill dealing with that aspect will make courts, especially in motoring cases, look more closely at the ability to pay and the means of payment of fines before such fines are imposed. Many people in motoring cases are being sent to prison for nonpayment of fines.
I urge the Government to look at the third method of payment. At present, there are a considerable number of community service centres. It would be reasonable for people to work off their fines by voluntary attendance at those centres and thereby provide an input of work into the community for the benefit of the community. A tariff could be fixed for fines to be dealt with in that way.
Those are the limbs of my Bill. The Bill is designed to reduce the prison population. I am sure all hon. Members will support that approach.
Question put and agreed to.
Bill to be brought in by Mr. Gerald Bermingham, Mr. Gerald Kaufman, Mr. A. E. P. Duffy, Mr. D N. Campbell-Savours, Mr. Robert Parry, Mr. John Ryman, Mr. Robert N. Wareing, Mr. Robin Corbett, Miss Janet Fookes, Mr. Charles Irving, Mr. Alex Carlile and Mr. Paddy Ashdown.

Prevention of Imprisonment (Fine Default)
  PREVENTION OF IMPRISONMENT (FINE DEFAULT)
  Mr. Gerald Bermingham accordingly presented a Bill to remove the power of imprisonment in cases of default of payment of fines imposed for offences for which imprisonment cannot be imposed: And the same was read the First time; and ordered to be read a Second time upon Friday 6 April and to be printed. [Bill 124.]
Orders of the Day
  WAYS AND MEANS
  Order read for resuming adjourned debate on Question [13 March].
  WAYS AND MEANS

    AMENDMENT OF THE LAW
    Motion made, and the Question proposed,
    That it is expedient to amend the law with respect to the National Debt and public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

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

    (b) for refunding any amount of tax, otherwise than by a provision relating to supplies to, and importation by, a government department within the meaning of section 27 of the Value Added Tax Act 1983;

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

    (d) for any relief other than relief applying to goods of whatever description or services of whatever description.[Mr. Lawson.]

    Question again proposed.

  Budget Resolutions and Economic Situation
  [Relevant documents: European Community Documents: No. 10156/83, Annual Economic Report 1983–84, together with the final version as adopted by the Council.]
  4.38 pm
  Mr. Roy Hattersley: I offer the Chancellor, even in his absence, my sincere congratulations on his artfully constructed Budget and his skilfully delivered Budget speech. He does not need me to tell him that it was received with genuine enthusiasm by his Back Benchers—something that surprised me not at all, for none of them is poor and none is out of work.
  Yesterday, the Chancellor did precious little about poverty or unemployment, as I propose to demonstrate. In both areas, the Chancellor's claims were simultaneously modest and exaggerated. He announced what he described as
  "reforms that will help to bring new jobs."—[Official Report, 13 March 1984; Vol. 56, c. 286.]
  That is hardly a head-on assault against the waste and misery of the dole queues, but I doubt even the veracity of that claim.
  To convince the sceptics in the Chamber and beyond, the Chancellor must answer a simple question: does he believe that next March the level of unemployment will be lower than it is today? All the Government's calculations assume that unemployment will stay at its present level—3·5 million—even according to the Government's doctored figures. If the increases in unemployment that were recorded in January and February are repeated during the next few months, the total will increase.
  When he replies, I ask the Chief Secretary to tell us whether it is his judgment that as a result of yesterday's Budget unemployment will fall, remain at the same level or even increase. On the Chancellor's current figures—growth of output of 2·5 per cent. and growth of productivity of 2 per cent.—unemployment will remain
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  well above 3 million into the foreseeable future. In the face of that fact, the Chancellor's complacent preoccupation with minor Budget reforms is pathetic. The tax handouts that he has offered to the rich are a disgrace.
  What genuine claim to be about jobs can the Budget make when we consider it even in the terms of the Chancellor's arguments? I shall deal with it under two headings. The first is the abolition of the national insurance surcharge, which my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) demanded during last year's Budget debate, and which is wholly desirable.
  Mr. Richard Page: Demanded! They put it on.
  Mr. Hattersley: I knew that one of the weaker-minded Conservative Members would cry that we put it on, and, therefore, I have two things to say to him. If it were right for every Budget to be the same as every other Budget, we would not need to have any Budgets. Secondly, the Budget that is appropriate for a Government who are presiding over fewer than 1 million unemployed is wholly inappropriate for a Government who have pushed up unemployment to nearly 4 million.
  I welcome the abolition of the national insurance surcharge. I believe that it is one major part of the Budget that should command our wholehearted support. I suppose that the second claim that the Chancellor makes that the Budget is about unemployment concerns the changes in and reduction of corporation tax and the gradual abolition of the investment allowance.
  I give the Chancellor credit for believing that if companies retain more of their profits they will, without inducement or pressure from the Government, use them for investment. That view is wholly at odds with the evidence. Last year there was no shortage of funds that could have been used for investment, but British money flooded abroad—£11 billion altogether. Retained company earnings increased sharply to £30 billion and yet investment last year at £37·6 billion was almost £4 billion lower than during the last year of the Labour Government. The same pattern, despite the increase in profits that the Chancellor has handed to the companies, will apply this year.
  Mr. Kenneth Carlisle: Is that why the right hon. Gentleman's party pursues a policy to impoverish companies so successfully?
  Mr. Hattersley: I blame myself; I should have realised that it would be a question of that sort. Therefore, I go on to say something upon which I hope that the hon. Gentleman will concentrate and try to understand—as to what will happen next year. There will be a pattern not dissimilar to what happened in 1983—some of the profits that the Chancellor has provided will be exported and invested in jobs in competitor nations; some will be distributed as dividends, but most will remain within companies waiting and hoping for an increase in demand. The real stimulus to investment and growth is an increase in effective demand, which the Chancellor stubbornly refuses to initiate.
  I do not expect the Chancellor to accept my word for it, but I wish that he would at least believe the Confederation of British Industry, which makes the

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  position clear in its autumn survey. The most frequently quoted reason for "holding back investment" was the uncertainty about demand.
  The Chancellor persists in ignoring that judgment—he is shaking his head—not at his peril but at the peril of British industry. Because he refuses to accept the CBI judgment, he goes on to make the other major mistake in this area—the removal of the capital allowance—thus penalising the high-growth, high-investment and high-technology companies that should be assisted and supported.
  I know that the Chancellor claims that many of his other changes in corporate taxation will stimulate enterprise and increase initiative. On the evidence of the Budget, the Chancellor suffers from the common Tory delusion that incentives are important only to men and women on high incomes, while workers lower down the earnings scale have no need of such encouragement. Certainly the concessions that he makes have almost invariably been calculated so as to benefit the rich.
  Even the increase in the income tax thresholds, which has been advertised as the Chancellor's attack on poverty, provides much more help for the rich than for the poor—£106 to the couple who earn £5,000 and over £600 to the couple who earn £50,000 a year. If the Chancellor had wanted to alleviate poverty he would, as I shall presently show, have used the money differently, principally on an increase in child benefit.
  The duty has been removed from paraffin, and I congratulate the Chancellor on that decision and welcome it, as will many poor families, but it hardly compares with what has been done at the other end of the income scale. The abolition of the investment income surcharge is a disgrace. It is a benefit exclusively enjoyed by people with savings of over £70,000. Last night on television, Mrs. Sarah Hogg, the economics editor of The Times, described it as the Chancellor's pay-off to the City of London. Yesterday the Chancellor described that decision in different terms. He said that some of the beneficiaries were comparatively badly off, were small savers, and were people of humble means. If they are poor, they are poor with £70,000 of savings, and yet someone on social security is rich with £500 in the bank. That is one example only of the Chancellor's extraordinary priorities.
  The pattern of tax concessions to the well-to-do must raise questions in the minds of decent people about the standards that the Chancellor employs. If there is money to spare for a cut in the duty on share transactions, why must we increase prescription charges by 20p per item, an increase as great as the total price paid when the Labour party was in power and when the right hon. Lady, who is now Prime Minister, promised that there would be no increase under her Government?
  If there is money to reduce the rate of capital transfer tax from 75 to 60 per cent., how can the Chancellor justify a cut of £185 million in housing benefit? The same question can be asked about some of the Chancellor's new taxes. If we are on the recovery road, why must we tax, through the composite rate, small bank savings? There are 3 million small bank savers who hold deposits that would not normally, because of their level of wages, require them to pay tax.
  If we are doing so well, why have we cheated the pensioners out of £1 each week? If we are on the road to recovery, why is nothing done to help the long-term unemployed? Those are questions that the Chancellor must
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  answer if he wants us to believe simultaneously that the economy is moving forward and that he has any interest in the wealth and welfare of the nation. Above all, if the economy is bounding forward, why must we have VAT extended to take-away foods? It is a fragile recovery indeed that is dependent upon taxing fish and chips.
  I ask the Chancellor one more question: if the prospects for Britain shine so brightly, why are we to have so meagre an increase in child benefit? Not for the first time in the House, the Chancellor was less than frank with us. Great questions arise about a debate that is initiated around documents that are not available to the House but, were they at our disposal, might change the reception that the speaker received. Yesterday he told us that the Secretary of State for Social Services will announce new rates of social security benefit, including child benefit, when the May RPI is known. Most of us suspected the worst when the Chancellor said that, because he has not gone out of his way to shield his colleagues from bad news. I put it no higher than that. Our worst suspicions were confirmed by the Red Book, because it hypothesises and predicts that child benefit will increase by 5 per cent. in the coining year. If the Chancellor wants to tell me that that forecast cannot be relied upon, I shall give way to him at once. if he does not reply, I look forward to hearing the Chief Secretary's comments. If neither the Chancellor nor the Chief Secretary responds, we shall assume that what we already know is true—[Interruption.] I pause, not for the benefit of the hon. Member for Lincoln (Mr. Carlisle), who may intervene if he wishes, but in the hope that by chance the Chancellor wishes to say something about his decision to increase child benefit by less than the rate of inflation while income tax will be increased by 12·5 per cent.
  I remind the House, as this is worth repeating, that the Chancellor has given £100 to families earning £:5,000 a year but more than £600 to families earning £50,000 a year. That money would be far better spent on increasing pensions and child allowances, yet it will go to those in least need.
  The Chancellor chose the least efficient way of alleviating poverty, if that was his aim, as early-day motion 563 proves. For a two-child family earning up to £18,000 a year, it costs just as much to finance a tax cut of £1 a week as to provide an increase of £3·90 per week in child benefit. The Chancellor ought to have followed that route as it would have most helped low income families, who desperately need that help. They have suffered most under successive Tory Chancellors.
  It is worth considering how low-income families have fared in the past five years as compared with richer families, having been required to pay increased national insurance contributions and to shoulder the income tax burden imposed on them since 1979. Let us consider a family with two children. Until yesterday a family earning more than £50,000 a year, that is, six times the national average, had had its tax burden reduced by £98 a week since 1979. A bonus of £11 has now been announced so that that family has had its tax burden reduced by £109 a week over the past five years, including yesterday's Budget.
  Let us compare that family with one with average earnings of £180 a week, which has been treated very differently. The past five years of Tory Chancellors, with the four Budgets of the Thatcher Administration. have seen that family's tax burden increased by £3. Yesterday,

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  the Chancellor gave back £1·30. Thanks to five years of Tory Government, that family is still £1·70 down. That family can be compared with a third, earning two thirds of the average income, which is substantially below average. It earns £120 a week and has suffered an increase in the tax burden in the past five years of Tory Government of £3·30 a week. Yesterday, it received £1·30 back. It is, therefore, still £2 down as a result of Conservative policies.
  The simple conclusion—indeed, the obvious one to be drawn from those three examples—is that the poorer the family, the greater has been the increase in its tax burden after five years of Conservatism and the richer the family, the more its tax burden has been reduced over the same period.
  That approach and, indeed, the Budget is wholly consistent with the Chancellor's philosophy. I doubt neither his conviction nor his fervour. His problem is not that he does not believe in what he is doing, but that what he believes is wrong. We need, but are denied, because of the Chancellor's dogmatism, a substantial boost to demand, largely stimulated by increased capital investment, which should be financed in the public sector by an increase in the PSBR. [HON. MEMBERS: "Inflation."] Hon. Members cry "inflation", with the originality that I have come to expect from the Conservative Benches below the Gangway. When the Chief Secretary speaks later he will probably tell me that selective reflation financed by a relaxation in the PSBR, largely to finance increased public investment, is an outdated Socialist heresy. Let me remind him of others who are thus numbered among outdated Socialist heretics. First, there is the Confederation of British Industry, which believes that PSBR should be £2·5 billion higher; secondly, the chambers of commerce; thirdly, the British Institute of Management; fourthly, and perhaps most important, every other OECD Government who borrow more than us and have an almost universally better economic record than we can boast over the past five years.
  The right hon. Member for Old Bexley and Sidcup (Mr. Heath) is the most important of those outdated Socialist heretics. On Sunday he dismissed the notion that Government borrowing automatically increased interest rates and crowded out private investment as "Toytown economics" and he was absolutely right. He went on to ask:
  "What respectable company would run its finances purely on the basis of an income and expenditure account? What respectable company would try to reduce borrowing and run its transactions out of the till?"
  We can answer one of the right hon. Gentleman's questions with some certainty by assuming that a regime that denied borrowing—a company that would not borrow to invest—would not be run by the Chancellor of the Exchequer or the Prime Minister.
  The Chancellor first came to public notice through his receipt of a wholly proper and prudent loan that was the largest ever offered by Kensington and Chelsea borough council. I congratulate him on that, and hope that he will apply the rules governing his personal concerns to his operations on behalf of the nation. I have no doubt that the most famous corner shop in the world, the Grantham grocery store where all the financial virtues were learned, was financed by a bank loan.
  Dr. Jeremy Bray: Does my right hon. Friend think it is in order for the Chancellor to idle away his time on the Back Benches instead of listening to the Opposition Front Bench speaker?
  Mr. Hattersley: I assure the House that I do not mind at all where the Chancellor is. My only regret about his location is that he remains at the Treasury.
  Borrowing for investment in future growth rather than for frivolous or unnecessary purposes is a prudent rule that ought to be applied to the country, just as it is applied to the most successful businesses. Because of the doctrinal rejection of public borrowing by the Chancellor and others of like mind we shall not have growth, but deflation. We are to have a deflationary Budget—[Interruption.] If the Chancellor, now that he has returned to the Front Bench, wishes to intervene rather than just mumble I shall be happy to give way.
  Despite all the talk about broad neutrality yesterday, the Red Book reveals another fact that the Chancellor did not think it safe to entrust to the House. He expects a substantial increase in the total tax take next year. The figure for 1984 is well known. There has been an increase of £17·5 billion in the past five years, thanks to Conservative policies. In table 5.6 in the Red Book the tax take in real terms shows an increase of £21 billion over the past five years. I search my mind for any reputable reason why the Chancellor did not tell us that and why he felt it right to talk vaguely about broad neutrality when the tax take had been substantially increased. I see that he is looking this up. It is in table 5.6 on page 39. It means that we are back on the old, dreary path of higher taxes and unemployment and lower borrowing and public expenditure.
  Lower public spending is reflected in the Government's plans for public expenditure as reported in the Blue Book. I take those plans for granted because, such is the importance of the subject, we shall soon debate with the thorough detail that they deserve plans for public expenditure which, if implemented in full, will produce an unparalleled austerity in the public service. As a result, the Health Service—supposedly so safe with the Prime Minister—will no longer be able to meet the legitimate demands placed upon it. The education service, which the Prime Minister also pretends to cherish, would be virtually destroyed in many respects if the proposals in the Green Paper were implemented, but that is a debate for the future. Today I simply conclude with a final word about the Government's economic record, the subject with which the Chancellor began his Budget speech.
  The Chancellor yesterday described the country's record for the past five years with fine disregard for the facts. I wish to remind him, the House and the nation of some of the things that have happened since 1979. Taxes had already risen by £17 billion and yesterday they rose even further. Unemployment had increased by 2 million even on the Government's doctored figures—a rate of increase twice as rapid as that in any other major OECD country. In 1981, output fell to 5 per cent. below the 1979 level and, despite the Chancellor's phoney diagrams on television yesterday, the figure for the first quarter of this year is still below that which was successfully achieved under the Labour Government. During the Government's period of office 13,421 companies went into liquidation. For every week of Conservative Government, 170 companies have gone into liquidation, and last year the

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  weekly average rose to 270. Between 1979 and 1983, investment in manufacturing industry fell by 30 per cent. while the volume of manufactured imports rose by 20 per cent.
  All those things happened at a time when the Government were in receipt of the uncovenanted windfall of North sea oil—a bonus that no other Government have ever enjoyed. Without that £9 billion annual contribution to national revenues that the Government uniquely enjoy, the country would be literally bankrupt. Yet the Chancellor has the effrontery to describe the Government's record as one of success. God grant that we may be spared such success in the years to come.
  5.3 pm
  The Chief Secretary to the Treasury (Mr. Peter Rees): We have been treated to a vintage performance by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). I suspect, however, that it is not a vintage of which he will be proud in years to come. It shows, perhaps, that within the calculating figure now seated on the Opposition Front Bench there lurks a demagogue struggling to be free and to join the right hon. Member for Islwyn (Mr. Kinnock) in his soft-shoe shuffle on television—perhaps the only vaudeville act of which the two of them are capable. I shall come in due course to the serious parts of the right hon. Gentleman's speech, such as they were, and to such of his party's economic policies as we have been able to glean from his speeches in the past few weeks. I am sorry that he did not draw attention to the latest striking evidence of satisfaction with the Budget—the cuts in base rate announced today by at least three of the clearing banks.
  In a more prosaic vein, I begin with one or two announcements that my right hon. Friend the Chancellor could not fit into his Budget speech yesterday but which the House will wish to hear at the earliest opportunity—[Interruption.] I willingly give way to anyone on the Opposition Front Bench who wishes to announce his resignation either from the office that he holds or from the party to which he affects to belong.
  On holiday lettings, my right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), then Financial Secretary to the Treasury, announced last year that it was not possible to deal with the tax problems of holiday lettings in the abbreviated Finance Bill following the general election but that we should return to the matter in this year's Budget and Finance Bill. We then issued draft clauses for comment.
  Many representations have been made to us about the dimensions of the problem, particularly by my right hon. Friend the Member for Blackpool, South (Sir P. Blaker)——
  Mr. D. N. Campbell-Savours: And by me.
  Mr. Rees: We are willing to include the hon. Member for Workington (Mr. Campbell-Savours), too. No doubt there will be an opportunity to discuss the representations in more detail in Committee. I should make it clear here and now, however, that the proposed reliefs for holiday lettings will be backdated and will take effect from 6 April 1982. I hope that this will go a long way to allay the anxieties of those involved in this area who are responsible for an important contribution to our tourist industry.
  Mr. Eldon Griffiths: In the unfortunate absence of my right hon. Friend the Member for Blackpool, South (Sir P. Blaker), may I ask whether the proposal includes caravans?
  Mr. Rees: That is a detailed point which might be more properly explored in Committee. It is a refined point as to whether a caravan should be regarded as a house available for holiday lettings. I take note, of course, of my hon. Friend's concern. As he knows, there are many types of caravan, some of which are described as temporary homes, but perhaps we may deal with such refinements on a future occasion.
  On the less romantic subject of cable television, capital allowances have been a matter of great concern. The industry and the Inland Revenue have recently had discussions about the tax treatment of providing the protective ducting in which the cable is inserted and the cost of cutting and covering the trenches in which the cable will be laid. The Inland Revenue has taken legal advice on the matter and is today informing the industry that such expenditure qualifies for capital allowances as plant and machinery. Taken in conjunction with my right hon. Friend the Chancellor's announcement about the future rates and allowances, that decision by the Inland Revenue will permit the industry to make its future plans in full knowledge of the tax implications.
  As a result of the Government's privatisation programme, which will continue to be a main theme of this Parliament, the Government hold minority residual shareholdings in a number of quoted companies and questions have been asked from time to time about the Government's intention as regards those holdings. It has been suggested that they represent a continuing and deliberate means of exerting Government influence on the companies after they have passed into the private sector. I wish to reassure the House that that is not so. Such an aim would be quite contrary to the main purpose of the Government's privatisation programme. To put the matter beyond doubt, I should make it clear that it is the Government's policy to sell such shareholdings as the circumstances of the companies, the prospectus undertakings and market conditions permit. I assure the House that a full announcement will be made at the time when individual sales are made.
  The mechanism of a special share may be used in appropriate cases to safeguard the national interest, as has already been done in the case of Britoil, Amersham International and Cable and Wireless. In line with this approach, minority shareholdings in privatised companies have already been transferred from sponsoring Departments to the Treasury, and this policy will continue.
  I now come to the broad sweep of the Budget. It has two themes. It re-emphasises our determination to continue the fight against inflation through sound financial policies, and it introduces a radical programme of tax reforms. Of course, our determination not to compromise our inflation objectives limits what can be done in the tax sphere in the short term. Although my right hon. Friend the Chancellor's task as a tax reformer may be more difficult, his achievements will, I hope, be seen as the more remarkable, particularly his achievements in yesterday's Budget.
  Moreover, this Budget should not be seen as a one-off exercise. It will, I hope, set the tone for a Parliament, and

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  will certainly give the lie to those who have suggested—with very little evidence to support them—that this Government have no energy or policies.
  This is a Budget buttressed by a medium-term financial strategy covering the likely lifetime of this Parliament and a tax and expenditure Green Paper—to which I shall return later—which carries us into the 1990s. It was noticeable that the right hon. Member for Sparkbrook did not care to approach the Green Paper at all.
  A week may have been a long time in politics for Lord Wilson of Rievaulx—and so it must have seemed to him and his right hon. Friends as they limped from crisis to crisis. This Government take a rather longer view of problems and invite judgment of their measures over a longer perspective.
  In order to maintain the strongest pressure to reduce inflation and interest rates, we reassert our policy of tight control on the level of Government borrowing. I shall leave to others on the Opposition Benches, perhaps even on my own, a minute analysis of Professor Friedman's writings. The downward path of inflation and upward path of real output over the past two or three years should be sufficient evidence for any fair-minded observer of the success of our policies.
  The PSBR was reduced from 5·75 per cent. in 1980–81 to 3·5 per cent. of GDP in 1981–82, and that year marked the start of our recovery from the trough of the recession. The 364 economists who criticised Government policy so savagely then—
  Mr. J. Enoch Powell: On that point, might I ask the Chief Secretary on what grounds the Government are predicting a continuance of inflation of between 4 and 4·5 per cent. for the next three years?
  Mr. Rees: We are not predicting it for the next three years. If the right hon. Gentleman looks again at the Red Book, he will see that that is not the case.
  Dr. Oonagh McDonald: Answer the question. The PSBR will fall to 2·25 per cent. of GDP this year, so inflation should fall too.
  Mr. Rees: The hon. Lady will have a chance to make her contribution, which, no doubt, will be staggeringly original. I see no reason to answer her interruption from a sedentary position——
  Mr. Hattersley: Or anyone else's.
  Mr. Rees: The right hon. Gentleman is absolutely right. Perhaps he will restrain the impetuous enthusiasm of his hon. Friend, who in the next few days will have a chance to apprise the House of her own particular qualities. We await her intervention with keen interest.
  For most people, these facts should prove more important than the somewhat theological debates in the senior common rooms of Cambridge and elsewhere. We do not propose to throw these achievements away by any compromises on this front. The level now set for the PSBR in 1984–85 of £7·25 billion, or 2·25 per cent. of GDP, should make it clear to the world that we intend to maintain this central plank in our strategy. I hope that it will also do much to satisfy those who have been urging us to take account of the level of asset sales planned for 1984–85 and the pattern of North sea oil revenues.
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  I come next to our income tax proposals, which mark a further important step in the long-term process of improving incentives and encouraging enterprise. We have repeatedly stressed that our priority is to raise the thresholds of income tax. Our long-term objective is nothing less than to take the low-paid out of tax. It will take several years and tremendous determination—determination above all to keep a tight grip on public expenditure. I hope that we shall have the support of the whole House in that objective and in the means of achieving it.
  Mr. John Maxton: Is the Chief Secretary aware that his tight control of public expenditure certainly takes large numbers of people out of tax—by making them unemployed?
  Mr. Rees: That is a totally fallacious analysis of the situation, but no doubt the hon. Gentleman will have a chance to develop his outworn theories should he catch the eye of the Chair. We shall then have a chance to appraise the depths and maturity of his thought.
  In fact, this is the third successive Budget in which the main personal allowances have been increased in real terms. This year, it will amount to an increase of 12·5 per cent. It will mean that the married man's allowance is now higher than at any time since the war—a point that the right hon. Member for Sparkbrook did not touch on or explain at all in his notable intervention—and that the single man's allowance is at its highest for a decade. It will mean 850,000 fewer income tax payers next year, of which 100,000 are likely to be widows.
  So much for the right hon. Gentleman's unawareness of the compassion shown by my right hon. Friend. The right hon. Member for Sparkbrook might ponder that when he next addresses his constituents. I hope that this is something which both sides of the House can welcome without reservation. It would be nice if there were a warm and generous response from the Opposition to my right hon. Friend's measures. I would have hoped that we could find common ground on the benefits of his measures.
  The cost of the increase in allowances in terms of tax forgone next year will be £1,715 million. The cost of raising these allowances accounts for about 80 per cent. of the full-year cash cost of the income tax reductions in the Budget—so much for the inevitable parrot cry from the Opposition of, "A Budget for the rich," and so much for the stale phraseology of the politics of envy—[HON. MEMBERS: "Boring."] I assure the Opposition that the boredom is on this side of the House, which has heard that theme over the past four years ad nauseam, with less justification than at any time in our nation's history.
  My right hon. Friend's Budget represents a small switch from taxation of personal income to taxation of spending, but the increase in indirect taxes has been modest. Most excise duties have been increased broadly in line with inflation, and the judgment of the European Court on the relative taxation of wine and beer has been met by a very modest increase on beer. I am sure that the whole House was touched by the Opposition's solicitude on this point yesterday. Ever sensitive to the needs of the SDP, my right hon. Friend has reduced the duty on wine.
  Extensions of taxation in this or any other sphere are rarely welcome, but I hope that the House will accept that the extensions of the VAT base are justifiable on grounds of consistency and fair competition and as important

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  component parts of a package that should be judged as a whole. Opposition Members will also be disappointed to learn that they are not regressive.
  Mr. Campbell-Savours: Before the decision was taken to introduce VAT on home improvements, did the Government measure the effect that would have on employment in the construction industry? How many tens of thousands of men will lose their jobs as a result of that new VAT addition? Has not the construction industry this morning already begun the protests that will inevitably arise over the next few months?
  Mr. Rees: The hon. Gentleman and the House should judge the Budget package as a whole. Were representatives of the construction industry to make the points that have been made on their behalf by the hon. Gentleman—with or without their complicity, I know not—I should tell them that they should benefit from the abolition of the national insurance surcharge, the halving of stamp duty, the raising of the threshold and the reduction in the rates of corporation tax. I am sure that those three fiscal benefits will more than outweigh any disadvantages that they may reap from the extension of the VAT base. I cannot speak for the hon. Gentleman's contacts in the construction industry. No doubt they will have a chance to air their point of view through a perhaps more articulate spokesman. [Interruption.] The hon. Gentleman is more than capable of taking care of himself, as I have noticed in many agreeable debates in Committee Room 10. I hope we shall see him again in the course of the summer.
  Extensions of taxation in this or other fields are rarely welcome, but I hope that the House will accept that they are an important part of the overall package. Opposition Members will be disappointed to learn that they are not regressive. Indeed, VAT overall is and remains—to quote the wise words of Lord Barnett—"mildly progressive".
  The extension of VAT to hot take-away food will remove an odd official distortion in the catering world. Of course, food generally will remain zero-rated. The notion that this measure is a sinister attack on the fish and chips of the poor shows how bankrupt the right hon. Gentleman is of ideas on how to attack the Budget. The fact that he can whip himself into a moral fervour on hot take-away food shows that he must be bereft of budgetary ideas.
  VAT on construction work poses a different question.
  Mr. Hattersley: May I offer the Chief Secretary another portion of moral fervour? I was told this morning that sometimes meals on wheel; are distributed not by local authorities but by what are, by usual standards, private organisations—perhaps legally commercial organisations. May we be assured that they will not be subject to VAT?
  Mr. Rees: I can give the right hon. Gentleman the assurance that all meals on wheels distributed by voluntary organisations will be entirely unaffected, but I am not going to debate with the right hon. Gentleman at this juncture the many variations of meals on wheels that he apparently has in mind. If he would like to clarify his thoughts and put a precise question to me, I shall give him a precise answer. But I suspect that his ideas on this matter are as woolly as most of his ideas on the Budget themes.
  I return to VAT on construction work, which the right hon. Gentleman may find a less romantic subject. I know
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  of his deep and continuing concern for the charitable institutions and I assure him that they will be unaffected by the measure. I emphasise that new building will remain zero-rated. That will be of interest to the hon. Member for Workington, who showed such concern—rightly, of course—for the construction industry. But the present system, under which repairs and maintenance are taxed while alterations are not, has proved increasingly difficult to administer. The borderline is confused and determining it takes up a great deal of administrative and professional time. In the construction industry, I hope that all the various relieving measures that I have listed will do more than compensate for any possible reduction of work.
  Mr. Dafydd Wigley: With regard to house adaptations, would the Chief Secretary clarify whether there will be any effect on those elements that would get renovation grant at present, and say whether people who have renovation grants in the pipeline may therefore be caught by having VAT on the charges, whereas it was not in the estimate on which their grants were made?
  Mr. Rees: There is no correlation between the VAT measures and home improvement grants. But, as the hon. Gentleman may have noticed yesterday—the point was emphasised by my right hon. Friend the Chancellor of the Exchequer—the change in the VAT rules will not take place until June this year.
  Turning to the broader theme of tax reform, hope that——
  Mr. Hattersley: May I give the right hon. and learned Gentleman another opportunity to demonstrate, by being offensive, that he does not know the answer to a question? The policy of his Government is to encourage local authorities to privatise as much work as possible—including, I think, building work. Will local authorities have to pay the VAT on construction work done on their behalf by construction companies?
  Mr. Rees: They always have.
  Mr. Hattersley rose——
  Mr. Rees: I am not going to conduct a sort of vaudeville act with the right hon. Gentleman. We shall have many agreeable opportunities in Committee for that kind of exchange. For the moment, the right hon. Gentleman should do me the courtesy of permitting me to carry on with my speech. I did not intervene in the course of his rather ill-judged remarks. I hope that he will show a little patience over the remainder of my speech.
  I hope that the House will recognise that in the field of tax reform this is a great radical Budget. It is not given to every Chancellor of the Exchequer to abolish two taxes.
  Mr. Maxton: Will the right hon. and learned Gentleman give way?
  Mr. Rees: I have given way once to the hon. Gentleman. I am flattered by his interest in the details of my speech, but perhaps he will contain himself for a little longer. I am starting on a new theme. If he has anything to say that is relevant to it, I shall give way to him shortly, but I do not want to lose the thread of my discourse as a result of his blandishments.
  I should like to contrast my right hon. Friend's position with that of the right hon. Member for Leeds, East (Mr. Healey), who introduced three new taxes—national

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  insurance surcharge, development land tax and capital transfer tax. Therein lies one of the great divides between Labour and Conservative Chancellors.
  It still remains a puzzle to me that a Labour Government—supported by a party which affects to believe that jobs are the paramount issue of our time—should, during a period when unemployment virtually doubled, have introduced NIS, a tax on jobs. So much for the depth of their concern in this respect. But I am more amazed that, having surveyed their handiwork, the Labour Government should actually have increased the rate during their time in office. I also record, in case the House may have forgotten—and in case the hon. Member for Colne Valley (Mr. Wainwright) should feel obliged to gloss over it—that the Liberal party complained at the time that the tax was not introduced at a higher rate.
  The national insurance surcharge has now been consigned to the dustbin of fiscal history, but I hope that the record of those involved will be long remembered during our debates, and that we shall be able to test their protestations of concern for the unemployed by their record in office.
  The abolition of the investment income surcharge will remove a penalty on thrift and enterprise and will simplify the tax system. It is important that the facts should be stated clearly. This measure will relieve 280,000 taxpayers of a tax charge. Half of them are over 65, and 40 per cent. would, apart from this change, be liable only at the basic rate. It will save 230 Inland Revenue staff. The cost in 1984–85 will be £25 million and in a full year £360 million. Of course, those facts have not prevented and will not prevent the Opposition from using the shop-soiled cliches of the class war.
  I am surprised that the Opposition have not yet produced that much-loved figure from their fiscal mythology—the bachelor duke with an investment income of £250,000 a year. I believe that the surcharge will pass unlamented by all but the prejudiced few. If we want more investment—Labour Members affect to believe that we do—we cannot discriminate in this way against personal savings and personal investment.
  The disappearance of life assurance premium relief will perhaps be more lamented, since it was introduced in 1799 and has been with us continuously since 1853; in fact, it has become part of the fiscal scene. The younger Pitt, with characteristic Tory concern, introduced it to meet individual hardship. Since then, it has been extended to a much wider range of situations. More importantly, personal saving and direct investment, as opposed to institutional saving and institutional investment, have dwindled. That cannot be right.
  I emphasise that the measure that my right hon. Friend proposes to introduce will not affect existing policies. It will not be retrospective in effect, nor will it affect retirement benefit schemes. I know that there has been concern about this. Those who have personally to provide for their retirement will still be eligible, on the same basis as before, for tax relief.
  It will, I believe, remain possible for taxpayers to protect their families on death at low cost without life assurance premium relief. In 1982, two thirds of life
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  companies' new premium income came from non-qualifying policies. To reassure the House on this score, I should also mention that in Australia, when a similar relief was abolished, business picked up very quickly.
  The essential point is that our tax system should make it possible for people to save—and hold shares directly—without costly and distorting reliefs. Consistent with this theme, we propose the halving of stamp duty and the increase in the thresholds for house purchase. I hope that this reduction will be widely welcomed by home buyers and investors. I hope also that it will help London to compete effectively as an international financial centre. As I have pointed out to the House, it should assist the construction industry in this way.
  Mr. Robert Maclennan: On the point about London as an international financial centre, how does the right hon. and learned Gentleman justify removing the tax relief for residents of other countries, particularly in the banking sector? This is a feature of the debate which he has not yet covered.
  Mr. Rees: The hon. Gentleman may recall, as I and the Chancellor do, the, occasion on which that particular relief was introduced. It was, of course, when tax rates in this country were pushed up to the penal levels of 83 per cent. and 98 per cent. Against that background, it was thought right by the previous Labour Administration to make it a little easier for those from outside our shores who wish to do business in London or elsewhere. That measure of relief received support from the Conservative party, and certainly from me, at that time.
  Tax rates now are of a quite different order. Indeed, for many of the people whom the hon. Gentleman has in mind, particularly those from the United States, the United Kingdom has become a tax haven. I do not particularly mind that, but in the quite altered situation in which we now find ourselves I do not see that it is necessary to perpetuate this rather narrow and complex tax relief, which it takes quite a lot of Inland Revenue staff to administer. I am sure that on reflection the hon. Gentleman will see that it is fair to remove it now, and I see no reason why there should be an exodus of foreign talent from the City of London or elsewhere.
  I come now to the more general field of company taxation. I hope that it will be common ground that a cool look at this is long overdue. We had first the classical and then the imputation system of corporation tax. We have had a complex form of stock relief, first introduced by the right hon. Member for Leeds, East and subsequently refined by my right hon. and learned Friend the present Foreign Secretary. We have lived through a period of declining corporate profits, which have all too often existed on paper only. In a period of recession, local authority rates have often proved a heavier impost on companies than corporation tax. Now, company profits are improving, company liquidity is good and inflation has been brought down sharply, so my right hon. Friend has been moved to take some rather radical steps to bring the system of corporate taxation more in line with the needs of this country in the late 20th century.
  It used to be said that we had the most generous system of capital allowances in Europe, but closer investigation suggests that some of the investment generated has been neither justified nor profitable. Indeed, OECD figures suggest that net capital stock per worker in 1980 was

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  higher in the United Kingdom manufacturing sector than it was in Germany, France and the United States of America, but that capital stock was used much less effectively. The truth is that some investment has been dictated more by tax than by commercial considerations. The changes proposed by my right hon. Friend—the reduction in first-year allowances for machinery and plant and initial allowances for industrial buildings—will go some way to correcting that distortion.
  More important, the savings from the phasing out of these allowances coupled with the savings from the abolition of stock relief open the way to the really substantial and striking cuts which my right hon. Friend proposes in the rate of corporation tax: from 52 per cent. on profits earned in 1982–83 to 35 per cent. in 1986–87 for larger companies, and an immediate cut from 38 to 30 per cent. for 1983–84 and future years for small companies. To show our confidence in what we propose, the whole programme of reductions will be embodied in this year's Finance Bill.
  The House might flinch if I were to describe the United Kingdom as a corporate tax haven. I hope, however, that these measures will serve to re-emphasise the charms of the United Kingdom as a base for corporate activity.
  To those who say without much thought—I am sorry that these include the right hon. Member for Sparkbrook, for whom I have a warm regard—that this is not a Budget for jobs, I would reply—look at the evidence. Look particularly at the abolition of NIS. Look at the reduced rate of corporation tax. This will benefit not just that age-old target of the Labour party, the City, but the whole of the business sector. It should lead to more activity, more profits, more investment and more jobs. It used to be said that the United Kingdom was a good place in which to make a tax loss. From now on I hope that it will be a better place to earn profts. In my party's language, "profits" is not a dirty word, because, I repeat, profits mean investment and profits mean jobs.
  Mr. Campbell-Savours: We agree.
  Mr. Rees: I am delighted to hear that. This indeed indicates a sea change in the thinking of the Labour party. Should the credit be given to the right hon. Member for Sparkbrook? That did not shine through his speech. I give him the opportunity to affirm that no longer are "corporate profits" dirty words, that he is here, as we are, to encourage corporate profits. Would the right hon. Gentleman care to respond to my invitation?
  Mr. Hattersley: I am anxious to see a high level of profits properly used—properly used for investment in industry.
  Mr. Rees: If the right hon. Gentleman would remove his threats of exchange control, a wealth tax and the rest of the battery of measures that he proposes to introduce, he might find the corporate sector responding to his blandishments. I shall come to that in due course.
  I turn now to the Green Paper on the next 10 years, published by my right hon. Friend on Budget day. A Budget must be judged not only against the circumstances in which it is published but also against the long-term pattern of spending and resources. It is therefore singularly appropriate that my right hon. Friend should have published this look into the 1990s at the same time as this great reforming Budget.
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  The Green Paper addresses itself to one of the most important economic issues—some, including me, would say the most important economic issue—of the day: how much public spending can our country afford over the next 10 years? The growth of public spending has over the past two decades been the engine which has driven upwards the burden of taxation.
  As a discussion document, the paper does not attempt to project the path of individual programme totals or to give detailed forecasts of how the economy might develop. I make no apologies. Detailed forecasts of economic variables or of individual programme totals so far ahead would be wildly uncertain, depending as they would on a host of factors, including policy decisions not yet taken. To have gone into such detail would have distracted public debate from the main issue which has been so often ignored in the past and has been ignored by the right hon. Member for Sparkbrook in the present debate. The debate should focus on the totals—the totals of national income, taxation and public expenditure. This is the central strategic question. So I hope that the Green Paper will sharpen the debate, and will enable us to judge in this and subsequent debates the realism of the policies which each party proposes.
  I come finally, with some relish, to the speech of the right hon. Member for Sparkbrook. He has, as the House may or may not be aware, recently completed a series of speeches about the Labour party's—or perhaps just his personal—economic policies. I must say that I have awaited each instalment with the sort of anticipation one reserves for a repeat showing of "All Our Yesterdays".
  In one episode the right hon. Gentleman's patient constituents—one can imagine the scene—sit patiently but expectantly in the Acocks Green school, anxious to hear the right hon. Gentleman's own version of the Budget. It appeared to be a diluted dose—the real dose would have been lethal both for him and for the Labour party's chances—of the mixture served up by the Opposition for many years, over two long periods of Government which few of us will forget. It would be a little unfair to the Bourbons to compare the right hon. Gentleman and his right hon. Friends with that gifted dynasty. That is a rather overworked cliché in our debates and I hope that we can set it to rest once and for all, unless the right hon. Gentleman, with his gripping knowledge of Lord Nelson and his exploits, wishes to assimilate himself to King Bomba of Naples, in which case I am very willing to explore the cliché further.
  The mixture is much as before, spiced with a little more envy, suffused with a good deal more prejudice and clouded with a great deal more ignorance of the real world. There will be increased public expenditure, but there is evasiveness about how much more. Exchange control, of course; but what would that do to the exchange rate? The wealth tax, of course; is that what the right hon. Member for Sparkbrook wants? What would that do to investment? Perhaps the right hon. Gentleman will tell us in his next speech in the House about his party's plans for fiscal reform. Is it still wedded to the introduction of a wealth tax?
  Mr. Hattersley: It is.
  Mr. Rees: Will the right hon. Gentleman repeat that comment from a standing position? That would give his words a little more force. Evasive replies from a sedentary position do not carry the same conviction.
  Mr. Hattersley: Of course we are in favour of a wealth tax.
  The right hon. and learned Gentleman got the wrong Bourbon. King Bomba is the liberal Pope joke, not the "forget nothing" joke.
  Mr. Rees: I am well aware which dynasty hon. Members usually refer to, but the right hon. Gentleman was moving his stance and I thought that he had gone to Naples rather than Paris.
  At least we have one ringing affirmation of fiscal policy, which I hope the business world—and, indeed, the whole world—will note. The Labour party favours a wealth tax, just as it favours exchange control and selective import controls. What would that do for exports?
  We have not been told the cost of Labour's policies. One of the benefits of the long-term debate on public expenditure may be that the country will demand more precision and realism from the Labour party. The remedies of the right hon. Member for Sparkbrook would involve more inflation or higher interest rates or higher taxation or—and this is most likely—a mixture of all three, which would further damage the economy and job prospects.
  It is against that background that we should judge the right hon. Gentleman's criticisms of the Budget. He made heavy play of child benefit and social security benefits. I congratulate him and his researchers on their assiduous trawl through the public expenditure White Paper. However, the right hon. Gentleman is wrong. Assumptions were built into that White Paper and, incidentally, the assumption on child benefit was 5·5 per cent. and not 5 per cent. No decisions have been taken, but the decisions on the social security upratings will probably be announced in June and will, of course, be made by reference to the May to May period.
  The right hon. Gentleman made predictable comments about the abolition of investment income surcharge—handout for the rich, politics of envy and so on. I do not think that I need weary the House with the facts of that impost.
  Mr. Maxton: Go on: we are prepared to be bored.
  Mr. Rees: If the hon. Member will do me the courtesy of reading my speech in Hansard, he will see that my view is on record. We can come back to it in Committee. I shall be happy to cross swords with him on the true nature and scope of that much unloved tax.
  Mr. Jeff Rooker: Does the right hon. and learned Gentleman pay it?
  Mr. Rees: The right hon. Member for Sparkbrook enlisted the CBI in his support. I am sure that members of the CBI will be surprised to know that they are described as outdated Socialist heretics, but the right hon. Gentleman's choice of metaphor and language is his own.
  I remind the House that the CBI has been forecasting a 7 per cent. increase in investment in the calendar year 1984. That shows the confidence of the CBI in this country's economic prospects and the self-confidence of business under a Conservative regime.
  The right hon. Gentleman made a passing reference to the public sector borrowing requirement. I am still waiting for him to tell us what he feels would be a proper figure for the PSBR in the Budget.
  Dr. Bray: As investment in manufacturing industry has fallen by 40 per cent., is the Chief Secretary arguing that an intended 7 per cent. increase in investment is a sign of confidence?
  Mr. Rees: I certainly am. If it were sustained, it would be proof positive of confidence. The hon. Gentleman does not seem to appreciate that we have been living through one of the sharpest recessions that the developed world has seen. Labour Members are never prepared to face unpalatable facts if they do not suit their argument.
  Dr. Bray: Will the right hon. and learned Gentleman give way?
  Mr. Rees: No. The hon. Gentleman has made a fair point, but the published investment intentions of members of the CBI are a pretty good token of confidence in the upturn in the economy. If the hon. Gentleman reads that differently, the House will wait with bated breath for his speech.
  I know that the right hon. Member for Sparkbrook is a kindly person at heart, so I pass over his unworthy personal slurs on my right hon. Friends the Chancellor of the Exchequer and the Prime Minister. The most charitable explanation of his speech is that we should not be distracted by his shallow fiscal and economic speculation and that we should regard him and his right hon. Friend the Member for Islwyn as a light comic turn which is not to be taken too seriously.
  The hollowness of the right hon. Gentleman's criticisms demonstrates more effectively than I can how substantial, well-balanced and imaginative is my right hon. Friend's Budget. It builds on the foundations so courageously and painstakingly laid by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe). It will depend for its success on a firm and continuing control of public expenditure. It makes a decisive break with the dreary rigmarole of new and ever more complex taxes offset by new and ever more complex reliefs. It lets a draught of fresh air into the stuffier recesses of the fiscal system. It will be good for the low-paid; it will be good for home buyers; it will be good for savers; it will be good for business; it will be good for investment; it will be good for jobs. I have no hesitation in commending it to the House.
  5.47 pm
  Mr. Roy Jenkins: I enjoyed the Chief Secretary's speech, but, in the interests of brevity—we have been set good examples by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) today and the Chancellor of the Exchequer yesterday—I had better leave aside the right hon. and learned Gentleman's somewhat random incantations. No doubt he had a theme, but, probably because I was so diverted by the brilliance of his aphorisms, I failed to detect it.
  I am a little put off by the fact that the Chancellor of the Exchequer is looking so pleased with himself, but I start by paying him a genuine tribute. His speech was not only short—I speak as the perpetrator of the two longest post-war Budget speeches—but it was taut and coherent. The right hon. Gentleman told us where he was going to take us, we could tell at every stage where we were on the map and when we got there he told us where we had been. In addition, the right hon. Gentleman provided from time to time a structure of argument for the

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  choices that he was making, which is unusual for a Chancellor. One might not always have agreed with what he was saying, but one could at least follow it.
  The right hon. Gentleman got into a bit of a snarl-up with the monetary aggregates and some jagged bits of jargon were scattered around the scene, but it was a great improvement on what happened between 1979 and 1981 when the Government looked at only one dial on one panel of instruments—sterling M3—and tried to fly the whole aircraft on that alone. All in all, the Chancellor appeared to have rewritten his speech himself—indeed, he may even have written it from scratch—and that showed through and gave it an unusual lucidity. I congratulate him most warmly upon an exceptional presentation.
  Some of the measures were also good in substance but—and it is a very big but—the Budget, although coherent, is fundamentally complacent. It is not so in that imperviously blinkered and blundering way that we came to associate with the previous Chancellor's presentation of Budgets and other financial statements. It was undoubtedly much more politically adroit. However, it is complacent in the sense that it is based essentially on the assumption that the past four and three quarter years of policy-making have been a success, that we are now in a relatively strong and happy position as an economy, and that the general direction can be left on automatic pilot for a time while the Chancellor occupies himself in shifting around some of the fitments and arrangements on the ship. It is essentially "Steady as we go", and some of us remember the last Chancellor who used that phrase. He did, of course, become Prime Minister in due course, but only after a number of considerable vicissitudes to himself and, more important, to the economy.
  Mr. Norman Atkinson: He lost us the 1979 election.
  Mr. Jenkins: The Chancellor's view of achieved success and a relatively secure future is one that I fundamentally contest. Our inflation rate has been reduced but so it has everywhere in the industrial world. It still remains higher than that of nearly all our principal competitors. I detected, rather exceptionally, a certain lack of coherence in the Chancellor's view of the inflation rate in future. He opened with some ringing declarations of moving on at almost all costs towards stable prices, but it seemed on closer examination of the documents that were published that he had projected something close to the present position for at any rate the foreseeable future.
  Our rate of recovery is currently faster than that of most comparable countries, but so, in all conscience, it should be. Our recession has been deeper than that of others. It started earlier and it has been longer lasting. If there were not a substantial element of rebound, where would we be? Although the rate of recovery at present is faster than most, it is much slower than that of the United States. It will leave us with a greater reduction in our ability to pay our way with non-oil exports than most other comparable countries. We are only just back to 1979 levels of total output and we are still—this was the position at the end of 1983—about 4·5 per cent. down on non-oil output. We paid a heavy permanent price for allowing, and almost encouraging, the exchange rate to go so wildly out of line, with permanent damaging and destructive effects upon our manufacturing capacity in 1980 and 1981.
  Nor is our competitive position being fully maintained. There are some disturbing signs—perhaps the clouds are
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  only just beginning to form—that since mid-1983 unit costs are again rising faster in the United Kingdom than in the economies of our principal competitors.
  In a sense, the recent recovery is real. It would be amazing if it were not so in view of world history, but it is undoubtedly fragile. I am not sure whether it is so fragile as to be "founded on fish and chips", in the immortal phrase of the right hon. Member for Sparkbrook whose phrase, to judge from his present absence, seems more immortal than his presence.
  The projections suggest that the recovery could easily turn down again in the fairly near future. I do not think that the Budget will affect that prospect greatly one way or another. If anything, the Budget may be mildly restrictive, though the effect of privatisation, and the import VAT change on the PSBR, as I think the Chancellor would probably agree, makes it rather difficult to judge on the crude figures. However, it is certain that the Budget contained neither help nor hope for the great majority of the unemployed. They are now taken as given, and the right hon. Gentleman treated them as a problem hardly worth mentioning.
  The Chancellor may argue that a further reduction in inflation, if that occurs—this is, as I said, the one issue on which he was not very coherent within his own framework—will generate a spontaneous recovery. I do not believe that there is the slightest evidence that a further reduction in inflation, while in itself desirable provided that an excessive price is not paid for it, would generate a spontaneous growth in employment. It is quite different to believe, as I do, that excessive rates of inflation are the enemy of high employment and to believe that reductions, certainly below a certain level, are in themselves a guarantee, or anything approaching a guarantee, of falling unemployment.
  Nor, I believe, will the taxation changes for industry achieve this. I am rather in favour of a number of the changes. I recognise the argument, certainly in the way in which new jobs have developed in the United States, for example, for encouraging a position in which we can have direct investment by individuals in the smaller growth companies rather than having the juggernauts of the institutional funds doing it all. That makes sense in terms of the modern world, but that is quite different from believing that that will have any major impact upon unemployment.
  I also believe that lower corporation tax—even if accompanied, as it clearly is, by lower allowances—while it is quite desirable as a framework measure, does not go to the heart of the company sector problem. I feel more strongly than the right hon. Member for Sparkbrook. I think that profit levels have been too low, and are too low in the country at present, but I think that British industry has suffered far more from low profits than from high corporation tax. This has not been a country of high corporate taxation, but much more a country of low profits, and the levels of company taxation are not of great significance if there are not profits on which to pay, or not pay, the tax. I think that a stimulus to the economy from the Chancellor would have done more good than these changes.
  There is a much greater danger that we are fairly near the peak of a little boom, from which we may begin to shade down in the absence of any stimulus to the economy in the Budget, and that, if we do so, we shall start the next recession from a level of 3 million-plus unemployed. To

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  start a recession from a level of 3 million-plus unemployed is a pretty frightening prospect. That means, emerging from the many changes that have occurred in the past five years, that there will be not some great sea change, or improvement, in competitiveness, but a step change in the level of unemployment, so that we start from 3·25 million instead of from 1·25 million.
  Mr. Norman Atkinson: Before the right hon. Gentleman perpetuates more of the myths enunciated by the Chancellor yesterday about unemployment and profits, can I point out that unemployment is an integral part of the Government's policy—they have spelled that out—based on their dependence upon money supply, which is related to unemployment? Secondly, if one looks at the biggest 50 major manufacturing companies, whose profits last year went up from £5·25 billion to £5·5 billion, it will be seen that every one of those companies reduced its work force, despite the rise in profits.
  Mr. Jenkins: That, if I may say so, is the sort of intervention that gives a bad name to good interventions. It was very much an attempt by the hon. Gentleman to make part of his speech in the middle of mine, and not to make a comment on my speech. I agree with him about some part of the monetary situation, although I do not agree with him that profits are not of importance.
  I deal next with what I think is an absolutely central question, the level of fixed public investment. This is disturbingly, almost frighteningly, low, measured by historical statistical comparisons. I have seen some reliable figures suggesting that, in relation to the national income, it is lower today—unless one confuses it by bringing in some defence measures which are irrelevant—than at any time since the outbreak of the 1914 war. It is low as measured by the evidence of one's eyes in every direction. I believe that at least £1 billion of stimulus of direct public sector investment would have been overwhelmingly justified.
  I do not believe that a choice would have been necessary in present circumstances. As the Chancellor knows, I can speak as someone who has applied stringent finance, when I believed it necessary. I do not believe that a choice would have been necessary, but, had it been necessary, I would have chosen this, rather than the extra raising of the tax threshold beyond indexation. That in itself is desirable, and the Chancellor referred to it as being "the middle way". I think that it was in this connection that he used that not wholly original phrase. While desirable, it is, however, much less cost-effective in dealing with poverty than are child benefits, and it is much less cost-effective in promoting jobs than a given amount of fixed public sector capital investment, which not only operates on the public sector, but feeds quickly and desirably, with a low import content, into the private sector, and, notably, into the construction industry. To have a substantial jerk upwards to public sector investment is particularly necessary at present, in view of the oil prospect, which is now becoming, rightly so, a dominant factor in our consideration of the outlook for the country.
  Although it is difficult to believe it, considering the economic history of the past five years, we in this country should have been uniquely fortunate over the period of the recession. We are the only major industrial country, with the possible marginal exception of Canada, which has a
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  significant oil surplus, but ours is proportionately bigger. Every other major industrial country has a massive oil and indeed total energy deficit. This surplus, as the Chancellor knows, on any likely projection will reach its peak—it is high already—over the next two to three years. Even in 1983, it produced a £7 billion contribution to a balance of payments, which was in surplus by £2 billion only. In other words, without oil, there was a 1983 deficit of £5 billion on our foreign accounts. It also produced an £8 billion contribution to Government revenue. In 1986, it begins to run down, slowly at first, but quickly gathers momentum. The prospect is then of a decline in oil export earnings by £1 billion to il.5 billion a year, returning not to zero output, but to zero contribution to the balance of payments by some time in the early mid-1990s. In these circumstances, it will require prodigious effort to pay our way at all in the world.
  However, long before that, once we are over the spate—in other words, in not much more than 18 months' time—there is likely to be a dramatic change in market sentiment about sterling, for such changes in sentiment tend to anticipate, and to exaggerate, the reality. We would in my view be wise to enlist the help of full membership of the European monetary system to keep us a bit more steadily up, just as we would have been wise to have used it to keep us a bit more steadily down three years ago. We could have done with its help both ways round. That transition to a non-oil surplus economy is a position that we have to face.
  Mr. Nicholas Budgen: Would the right hon. Gentleman be good enough to explain how the EMS could withstand major changes in sentiment? I think that the House would be well able to understand how it might be able to make corrections at the margin but if there were a major change, how could the EMS do anything about it?
  Mr. Jenkins: Neither the EMS nor any other system can, or in a sense should, stand against what may be called the swell of the ocean. But it can play quite a substantial role against the tops of the waves, or against exaggerated reactions, with the aid of the reserves of the combined central banks, which would be 10 times our reserves. I am sure that, had we been in that system, we would have had to make upward changes in the central rate and would have to make downward changes in future, but that the changes would have been less extreme. Consequently, the damage to our competitive position and the destruction of our manufacturing industry would have been significantly less than it was three years ago. Sudden changes and their effect might be less in future.
  Let no one underestimate how devastating such changes can be. A sharply declining exchange rate will generate great inflationary pressures. In counteracting that, it will be extremely difficult to avoid highly restrictive measures at home. To enter that phase from the starting point of the highest unemployment of any major industrial country, with much of our infrastructure badly run down, even falling to bits, and with a grossly shrunken industrial base and export capacity, is the most lowering economic prospect to have confronted us since 1945.
  The Government's primary economic duty is to fortify us in every possible way against such wholly foreseeable dangers. However, the Budget does not do that. It is ingenious and imaginative, but it has lost its way a bit in

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  the book-keeping. I was amazed to hear the Chancellor of the Exchequer talking last night in his television broadcast about the danger of bequeathing our children huge debts to pay off. That is not the danger that confronts this country. We already have the lowest PSBR in Europe and the lowest, I believe, of all the industrial countries. What is, perhaps, less well known is that in relation to national income, our accumulated debt—which I should have thought had the main rational impact on interest rates, because interest rates should be such as to encourage the non-bank public to hold it on non-inflationary terms—is now, in real terms, well below two thirds of our accumulated debt at the end of the long and relatively noninflationary period of Conservative Government from 1951 to 1964.
  Of course, to a substantial extent that is a result of subsequent inflation. Nevertheless, it is a significant fact that an accumulated debt or a massive PSBR is not the danger facing this country now. The primary danger is that, from the point of view of strengthening our assets, our infrastructure, the force and range of our industry and our levels of technical skill and training we shall have worse than wasted the period of oil spate.
  Mr. John Browne: Rubbish.
  Mr. Jenkins: It is not rubbish at all. The benefits will have been spent on unemployment pay and——
  Mr. Browne rose——
  Mr. Jenkins: I shall not give way, as I am concluding my speech. The benefits will have been spent on unemployment pay, or on chasing the false deities of MO, M1, M2 and M3, and the attendant false god of the PSBR in a foolish and wasted sacrifice. That is the real charge against the Government's economic strategy.
  Mr. Browne: Will the right hon. Gentleman give way?
  Mr. Jenkins: I shall not give way, as I am reaching the conclusion of my speech.
  It is this Government who will bear the full responsibility for having wasted the long window of opportunity presented by oil. They will have presided over its build-up, its spate and the beginning of its decline. The responsibilities that stem from that transcend all the Chancellor of the Exchequer's genuine fiscal ingenuity.
  6.16 pm
  Mr. Esmond Bulmer: Last week, I was talking to a business man in my constituency who said that he hoped that the Chancellor of the Exchequer would have the courage to be boring in his Budget. I thought of the experience of industry in the past 10 years—we have seen interest rates fluctuate between 6 and 17 per cent., inflation fluctuate between 3·7 and 27 per cent., the exchange rate for the dollar, the yen and the deutschmark vary by the best part of 100 per cent., dramatic increases in energy and labour costs and interference from Whitehall and Brussels in every level of business—and I understood what he meant.
  However, I join the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) in paying tribute to my right hon. Friend the Chancellor of the Exchequer for having been bold, imaginative and creative. That does not mean that many people in industry will not now be burning the midnight oil working out how particular changes affect them, and fundamentally recasting marketing and business
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  strategies. There will, of course, be people who will be discomfited. However, the Chancellor's commitment to understanding the problems of industry and to setting out a forward programme for a Parliament was particularly welcome. His understanding that jobs come from creating confidence in industry was also welcome, and he has done several things to promote such confidence.
  However, we should not fool ourselves that what can be done by stimulating industry can make anything more than a small immediate contribution towards providing jobs for all those who are out of work. Nevertheless, North sea oil gives us the opportunity to cushion the changes that are necessary. I hope that my right hon. Friend the Secretary of State for Employment will put considerable resources into analysing those changes and discovering from where jobs will come in future. I come from the west midlands. It is perfectly clear that in 10 years' time we shall be looking not for toolmakers, but for people who can control the computers to make them. Some skill shortages are already developing.
  I come to the measures that my right hon. Friend the Chancellor of the Exchequer has taken to promote industrial confidence and jobs, although I bear in mind that they can only make a contribution. My right hon. Friend properly began by stressing his commitment to controlling inflation. We all recognise what was done by his predecessor, and how unpopular a job it is to grind clown the inflationary expectations of people at work. When inflation was above 10 per cent., it was impossible to plan a business more than a couple of years ahead. The Chancellor is committed to creating a climate in which sensible business planning is possible.
  The Chancellor's commitment to the control of public expenditure carries with it the probability of lower interest rates. We all welcome the fall in interest rates today. Perhaps in this Parliament we shall see industry being able to raise long-term money at a fixed single figure rate. Many companies would certainly come to the market if that happened.
  If the Chancellor achieves the target that he has set himself, I have little doubt that the value of the pound will rise against some other currencies. That will give us an opportunity to acquire assets and productive capacity in parts of the world where it will be difficult for us to compete otherwise. Labour costs and the attitude to work in the Pacific make industries there formidable competitors. We shall also attract inward investment. Nissan and Sharp are examples. We have much to learn from good overseas management.
  I also welcome the Chancellor's commitment to improving industrial competitiveness, to which the abolition of the payroll tax will make a major contribution. The continued attempt to create greater efficiency in the public services is also crucial. Much has been achieved by the privatisation programme, but we still have a long way to go.
  Within the DHSS it is not yet possible for the Secretary of State to account for hours contracted to be worked or for hours worked. The Griffiths report is just the beginning. If one compares the costs of services in hospitals in the west midlands one has a yardstick to measure how much still has to be clawed back by more efficient management for the benefit of everyone.
  Rates remain the largest burden for many small businesses. The Government's determination to tackle overspending councils is well established. The friendship

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  visit to Cuba, the mayor's jacuzzi and the gay bereavement centre may be caricatures from "Yes, Minister", but they are not always so far from the truth. Recent work by Price Waterhouse in the west midlands suggests that savings of 10 per cent. should be obtainable over a period. I hope that my right hon. Friend will discuss with the Secretary of State for the Environment the speed with which returns can be drawn up to allow business people to compare the performance of local authorities in a meaningful way. The way in which local government is organised makes it almost impossible for competent managers to give time to local government. Through Government initiatives we should be able to tighten the scrutiny of local government and ensure that money is more effectively spent.
  About 10 per cent. of local government expenditure represents £2·8 billion. That is a lot of money. I agree with those who would like more spent on capital account. A motorway route from the west midlands to the channel ports would be extremely welcome. Perhaps the most important work on infrastructure is the repair and renewal of our sewers.
  Mr. Nicholas Winterton: My hon. Friend makes an important point. Would he, like the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), put a figure on the amount that he would like to be spent on selective infrastructure projects? The figure of £1 billion was mentioned by the right hon. Gentleman. Does my hon. Friend concede that if such an amount were spent it would not increase inflation and would cause only a modest increase in the PSBR, which would have no effect on inflation or interest rates?
  Mr. Bulmer: I would not wish to put a figure on it. We can all see how substantial improvements can be made to put people back to work, but we must not prejudice the general thrust of the Chancellor's policies, which are directed towards creating confidence in industry through sound money. My right hon. Friend understands clearly the effects of energy pricing on industry. I welcome the fact that he made no increases in hydrocarbons.
  I have talked about the conduct of the mineworkers to constituents who have lost their jobs in the carpet and motor industries. The strong feeling among many in the private sector is that redundancy payments in the public sector are more generous than the offers that they receive. They believe that if it is possible to redeploy people from the old mines, the miners have an obligation to the community at large to ensure that energy costs are as low as possible. If they are kept artificially high, other people lose their jobs.
  I give my right hon. Friend the Chancellor high marks for the way that he has concentrated on creating a framework for increased competitiveness. I also award him high marks for his determination to rehabilitate profit. He has 100 years of prejudice to reverse. It is a question of the effective use of resources. Let us use resources effectively and argue afterwards how the cake is to be divided.
  It must be right to encourage people to put their savings into industry and not to penalise them for not putting them into Government debt. It must be right to encourage profit sharing. I was glad when the provisions in my private Member's Bill to require companies to spell out what they are doing to encourage profit sharing were put into the
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  Employment Act. One way to hold down industry's costs is to ensure that profits are shared and that break-even points are kept low. That is to be welcomed, as are the steps to allow some extra reward for success to those who are most important in the creation of a successful company. That happens in the United States.
  I welcome the Budget. I believe that it will foster industrial confidence and so create jobs.
  6.27 pm
  Mr. Bruce Millan: The simple test that I apply to the Budget is whether it will reduce our appalling unemployment. In parts of Glasgow male unemployment is more than 40 per cent. That also applies to parts of other major cities. I found terrifying the complacency not only of the Chancellor in making his Budget statement yesterday, but of the Chief Secretary today. They exhibited no recognition of the appalling problems that such unemployment causes at personal, economic and social levels. I approach the measures announced yesterday in that context.
  The Chancellor made much of the changes in personal tax allowances. He said that the increases in allowances were considerably in excess of what would have been possible if indexation only had been applied. The effect of going beyond indexation is trivial in terms of money in the pocket. For a single person, the difference is only 69p a week—I use the Chancellor's own figures—and for a married couple the difference is only £1·21 a week. Those are trivial figures in the context of the Budget changes with regard to improving incentives.
  However desirable such tax changes may be—and no one argues against the general desirability—they are extremely expensive. Most of the benefit goes not to those on the lowest incomes, but is spread across the whole of the income range. It is an expensive way to grant concessions, and it will have an absolutely minimal effect on creating jobs. If the Chancellor has that additional money to give away, it should be used directly to increase employment. It is a trivial amount for the individual taxpayer, and, with the changes in VAT, the figure becomes even more trivial.
  Only the rich will benefit—especially those who will be excused the investment income surcharge. The surcharge on investment income starts at more than £7,100 a year, which suggests a capital of £70,000 to £100,000. It is disgraceful to suggest that people in that category should be a special target for concessions when so many people are suffering from unemployment and poor social security benefits. It adds insult to injury when the Chancellor produces, as an additional justification for that concession, the fact that much of it goes to those over the age of 65. Whatever the merits, it will not improve incentives in the working sector. If we are looking for categories within the over-65 range to whom to grant concessions, surely those with capital of £70,000 to £100,000 should be the last category.
  I wish mainly to concentrate my remarks on company and industrial taxation. Although I welcome the abolition of the national insurance surcharge, its effect on company profits or as a stimulus to the economy is grossly exaggerated. It would be better to use the money in a more direct way to create jobs. Although we accept that it is useful to abolish the surcharge, the reductions during the past couple of years have had a negligible effect on stimulating the economy and improving employment.

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  The Chancellor's remarks about corporation tax were not absolutely clear. I understood him to say that the various corporation tax changes would, in the long term, be neutral in their effect. The stimulus to industry, for which he claimed credit yesterday, will arise basically out of the abolition of the national insurance surcharge, and the changes in corporation tax will ultimately have a neutral effect. In other words, the reductions in the tax rate will be paid for by the abolition of capital allowances.
  I see some force in the Chancellor's argument. I have always thought it rather foolish to have high nominal tax rates that few people actually pay, because they are not making profits or because they have the benefit of the small businesses relief or large capital allowances. In principle, it is undesirable to have high nominal rates that give the impression of punitive taxation while few people actually pay them.
  We must remind ourselves of how we come to be in this position. There was a general feeling that capital investment, especially in manufacturing industry, had been historically inadequate in comparison with some of our more successful industrial competitors, and successive Governments believed that a stimulus to capital investment was required. Yesterday, the Chancellor adopted the argument that a good deal of that investment had been uneconomic, but neither he nor the Chief Secretary produced evidence for that assertion. The Chief Secretary quoted certain OECD figures from 1980 on the under-utilisation of capital. That was more a reflection on our comparatively poor economic and manufacturing performance in 1980 than an argument that the level of capital investment had been too high.
  Let us make no mistake about the matter. The Government are saying that the level of capital investment has been too high in the private sector and that they are taking steps to reduce it. The Government are calling for less investment. The position will be obscure during the next couple of years, because the Government are expecting a surge of capital investment to take account of the still high capital allowances and reduced corporation tax rates. On the Chancellor's argument, I presume that the great surge of capital investment will be precisely the sort of uneconomic investment about which he has been complaining. Otherwise, why should it take place?
  It is important to distinguish between manufacturing and service industries. There is no doubt that the Government's announcement on capital allowances will be disadvantageous to manufacturing industry compared with service industry. I do not know whether that can be changed during the passage of the Finance Bill. I am glad that the immediate comments of manufacturing industry on the Budget have been cautious. As it begins to appreciate the implications of yesterday's announcements, that caution will turn into apprehension about the effect in the longer term.
  It is fashionable in some parts of the Conservative party—and it was reflected in the Chancellor's speech yesterday—to talk down the importance of manufacturing in the economy in favour of the service industries. No one is diminishing the importance of service industries, but manufacturing is an extremely important part of our economy. It has suffered during the past five years when it has been in real decline. The implications for the balance of payments in the long term, especially when North sea oil runs out, are extremely worrying. Even last year imports of manufactures rose by 12 per cent.
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  Manufacturing exports did not increase at all between 1981 and 1983. For the first time last year, we had a deficit on our trade balance in manufacturing goods. That should worry every hon. Member. It is difficult to believe that, in those circumstances, any Government should say that there has been too much manufacturing investment and that we should see less capital investment in future. Nevertheless, that is not just the implication but, presumably, the deliberate intention of what the Government announced yestereday.
  I do not believe that one can interpret it simply as a means of improving the quality of investment. That suggests that we should have the same level of investment, but of a higher quality. That will not be the effect of yesterday's announcement. To argue that it may add to the number of jobs, especially in manufacturing industry, is almost a deliberate deceit. If we do not, in comparison with our industrial competitors, invest in new capital plant and machinery, we shall fall even further behind in competitive terms.
  Therefore, that change—certainly at the drastic level that we had from the Chancellor yesterday—is misconceived, especially in view of the reduction of about 40 per cent. in manufacturing investment in recent years. The 7 per cent. increase as originally projected for 1984 before yesterday's announcement, will not compensate for the considerable reduction that has taken place in the last four or five years.
  I have never believed that capital allowances can produce desirable capital investment if the economic climate is not right. Equally, given the record of manufacturing industry in Britain, it is, to say the least, extremely dangerous to make that sort of drastic change when we are suffering the manufacturing decline that we have witnessed because of the policies that the Conservative Government have pursued in recent years.
  The construction industry is crying out for a boost. Because it is labour-intensive, it could have been provided with a boost which would have helped to reduce unemployment. I fear, however, that yesterday's changes will have only a negative effect on the construction industry. It is foolish to suggest that the reduction in stamp duty, for example, will encourage the industry. People seem to have forgotten that the exemption level was £25,000, compared with the £30,000 announced yesterday, and that the first band of stamp duty was only 0·5 per cent. Therefore, the Budget changes in that respect, however desirable they may be, will not help the construction industry in the way that a direct boost to the industry by public sector capital investment would.
  When one takes account of the VAT changes on improvements and the abolition of the industrial building allowance as part of the capital allowances package—which, in a couple of years, will have a deleterious effect on capital investment in private industry in terms of buildings—yesterday's announcement will damage the construction industry, as ultimately, when it works through, it will damage manufacturing industry as well.
  As the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) and others have pointed out, North sea oil revenues—which, on the Government's figures, will reach their peak in 1984–85 and go into decline thereafter—have, and still do, provide an opportunity to boost the economy. That boost could have been given in this year's

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  Budget. Such an opportunity is not likely to recur, and it will be less available to us as North sea oil revenues begin to decline.
  On the Chancellor's figures, as in the Red Book, there is assumed to be a slackening off in growth, despite the disastrous record of the last five years. The growth projection in GNP terms for 1984 of 3 per cent. is less than that projected in the Red Book for the world economy as a whole. The Government believe that the world economy will grow by 4 per cent., whereas they put our growth at 3 per cent. For the coming five years the Government are assuming an average annual growth rate of only 2·25 per cent. That rate of growth is not grasping the opportunities that now exist and will do nothing to reduce the social and economic evils resulting from today's disastrous and inhumane level of unemployment.
  Rather than a reduction in the PSBR, there should have been an increase over the 1983–84 level to bring it nearer to the average of other industrialised countries of western Europe as a percentage of the gross national product. That increase in the PSBR would have been best directed towards creating jobs by a vastly increased programme of public sector capital investment.
  That argument has gone across the Floor of the House on too many occasions for me to go into the detail of where that public investment might most effectively have been deployed. That it has not been so deployed is the basic reason why Opposition Members object to this complacent Budget. It is a complacent and neutral Budget in the face of 4 million real unemployed in Britain. The Government are not facing the realities of the situation. We should have had a Budget designed to get people back to work. This Budget will keep people on the dole.
  6.46 pm
  Mr. David Howell: I was glad to hear the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) pay tribute to the Chancellor, for although we have differences on party grounds with that right hon. Gentleman and with some of the nostrums that he uttered, in the post-war pantheon of Chancellors of the Exchequer he holds a high place. It was therefore good to hear him pay tribute to another Chancellor who will, I believe, rank high in that same pantheon.
  I have no doubt that we have witnessed a bold Budget, one that has embarked on a major and vital strategy of tax reform. We shall feel its effects and consequences for the better, and for the benefit of society, for many years to come.
  For decades, Conservatives have had a dream—and a theme—of the property-owning and capital-owning democracy. We have argued for and believed in—to borrow a phrase from the right hon. Member for Chesterfield (Mr. Benn)—the irreversible shift of wealth into the hands of working people. We believe that that is achieved not by the old collectivist planning but by wider personal ownership.
  Mr. Maxton: It is only a dream.
  Mr. Howell: Perhaps it was only a dream, but it is starting to acquire the beginnings of reality. We have had to wait for it, but even in yesterday's Budget proposals
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  there are the beginnings of measures to push forward this ambition of much wider ownership in a democratic society.
  The proposal to halve stamp duty will increase and encourage trade in equities and in stocks and shares as well as home ownership. The proposal to do away with the investment income surcharge will be a major incentive for younger people to look ahead and save, invest and work hard for their later years. The hint in the Chancellor's speech that he will apply his mind to more thorough-going reforms of capital gains tax will help. Above all, the Chancellor has made a start on lifting the burden of income tax. He said that, given the right conditions—we must do our best to secure those conditions—he hopes to go further along that road.
  A measure which I particularly welcome is that for the improved treatment of stock option schemes. The Government would do better still in carrying forward the aim of wider ownership if they amended the proposal slightly. The Government should make the approval of stock option schemes conditional on firms bringing forward wider employee share ownership schemes. Conservative Members, and some Opposition Members, would like all families and workers at all income levels to be provided with greater opportunities to achieve a stake in industry.
  The stock option scheme would best represent that spirit if accompanied by, and associated with, further encouragement of employee share ownership schemes similar to those—I strike a bipartisan note—promoted by tax reforms in 1977 under the Labour Government. Those schemes were boosted greatly in the early 1980s, and form an important part of a less centralised society based upon a greater number of owners and earners. I hope that such a scheme will be pushed ahead and adopted by the Chancellor.
  So the Chancellor has struck a bold blow for the property-owning democracy, which is a major theme that we are determined to carry forward. But I also welcome the Chancellor to the camp of that godly group, the so-called supply siders. The Chancellor's Red Book places a welcome strong emphasis on putting tax cuts ahead of Budget deficit reductions. He wants to use the space that becomes available to reduce taxes, not push on to the elimination of the budget deficit. There is a massive proviso to this point: the Chancellor must succeed in freezing the real level of public spending. In coming years, the fiercest political battles across the Floor of the House, and in other dimensions, will be around the attempts to achieve that aim.
  A week ago, in the debate on the public expenditure White Paper, of which the House took note, we recognised the difficult task facing the Government. It involves major challenges, difficulties and reforms in the structure of the public sector which, if left to itself, has the propensity to grow greatly at rates which have no respect for the growth of output generally, but depend on the development of, for example, high technology in medical care, defence considerations and people's expectations of what the elderly in social market, and neighbouring continental, economies should have. Those matters must be confronted. That is where the challenges lie in the unfolding of the economic strategy of which the Budget is a part.
  So the Chancellor is correct in putting cuts in taxation in future years ahead of lower Budget deficits. In fact

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  lower taxes, and the higher growth rate which I hope is associated with them, lead to lower budget deficts. Conversely, the haphazard raising of taxes raises the deficit by jacking up the borrowing requirements and cutting revenues. That is why some Conservative Members, including me, were unhappy last autumn when it was suggested that the Government, in the interests of keeping down budget deficits, intended raising taxes again. We had found from experience, which was patterned elsewhere, that attempts to reduce deficits by that route ended possibly in higher deficits and certainly in higher borrowing elsewhere and inflation of the money supply. In an Alice-in-Wonderland way, the attempt to control the money supply and contain Government borrowing by this means ends by inflating other people's borrowing requirements and producing the opposite of the intended result. I am glad that we have a clearer view of a different set of priorities for the future.
  My only qualification to a Budget which contained many hallmarks of excellence is that I wished the supply side proclivity for the economy which the Chancellor and his colleagues show about future years had been applied a little more vigorously to 1984–85 as well. The 1984–85 deficit is forecast to be about £9·25 billion, comprising £7·25 billion in terms of borrowing requirement and £2 billion which will be raised by the sale of Government assets. But I suspect that the deficit will not even be £9·25 billion in the event. First, we are dealing with an unscientific figure, subject to wide margins of error. Second, that figure is related to other figures which Treasury accountants at Great George street have given my right hon. Friend about the alleged cost of tax reductions in the first full year.
  We will find that those reductions will not cost as much as Treasury officials have said, because many of the tax reductions and changes proposed by my right hon. Friend will have a dynamic effect. The real fall in revenue will be much smaller and possibly will not occur at all. A good example is what will happen with the halving of stamp duty on stocks and shares. The increased trading and the halt in the slide in business away from London to New York, Tokyo, Paris and so on will more than offset any alleged cut in revenue arising from tax cuts. The Treasury officials have understandably given those figures in advance because they must start from certain sums.
  However, I suspect that, in practice, this year's budget deficit will be less than £9·25 billion. I should have thought that this year, looking into an uncertain future in the mid-1980s and thinking of the considerable time necessary to get capital projects under way, there would have been a case for an addition to the budget deficit specifically directed to infrastructure capital investment. That could have been done in a year when many measures were being financed by asset sales. This year would have been the occasion for initiating a boost without damaging the money supply or adding to the pressures on interest rates. Obviously, we would like interest rates to be reduced. We welcome the downward movement in interest rates, which is one of the main intentions of the Chancellor's Budget strategy.
  The boost to capital projects would have made a good Budget strategically excellent. It is not too late to add that dimension to the Government's economic measures, as some Conservative Members argued last week. It is possible at any time in the year to set out on a programme leading to expenditure on infrastructure at a higher rate
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  than expected in the public expenditure plans. It takes two or three years for those measures to work through the system. If we envisage the American economy next year not moving with as much vigour as now, and perhaps higher American interest rates, now would be a good time to start laying plans for such additional expenditure. But that point is marginal to the main thrust of the Budget, which I believe is wholly good and right.
  Of course, few of the Budget proposals yesterday could hope to overcome the fact that wage costs per unit of output are still too high, although they have improved relatively, or that our capacity to develop competitive and well-designed products is inadequate. We must overcome these basic deficiencies if we are not to face a catastrophic decline in our fortunes when oil and natural gas exports run out. I believe that those who say that that will happen suddenly, at the edge of a precipice, are wrong. I believe that it will be a fairly gradual process.
  The oil rundown will almost certainly be slower and the rundown in exports—the amount that we produce over and above what we consume nationally—will be slower than many previous forecasts. There is also the natural gas potential. We should not rule out the possibility of natural gas contributing substantially to our primary product exports over the coming years. We could be talking about a rundown over a decade or more. However, that does not mean that we should not start preparing for it, but I do not think that it requires panic plans of the kind some people are to be heard peddling around the town.
  Those are the problems for the future to which we must address ourselves. In the meantime, the Chancellor has done his bit—and more besides; let others now do theirs.
  7 pm
  Mr. Norman Atkinson: I wish to make just one or two comments about what has been said, and I wish to do so from the trade unionists' point of view, following the admirable lead we had from the Front Bench in response to yesterday's Budget statement. If my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) is looking for any converts or supporters, he can count me among them following the statement he delivered to the House this afternoon. It was an excellent analysis and one with which I completely agree.
  The hon. Member for Wyre Forest (Mr. Bulmer) commented about toolmakers in the west midlands. He said that in the future we will be looking not for toolmakers but for people who can operate numerically and computer-controlled machinery. He talked about the possible threat from the far east. The point about capital-intensive technology is that it is a great leveller. There will be no problems coming from Asian industry once that capital intensity takes place, because wages will be of comparatively little significance.
  Once an industry is capital-intensive, its unit labour costs are almost minimal. The Americans and the West Germans have said that. They said that their high 'wage systems have many benefits, but that they do not worry about some of the products coming from the far east. Cheap money is a far greater problem in terms of capital-intensive investments than those other matters.
  Mr. Bulmer: Does the hon. Gentleman recognise that the threat comes in two forms—from high technology industries, to which his point is relevant, but also across

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  the bread and butter of manufacturing items such as clothing, footwear and so on, where it is extremely difficult to compete with the low labour costs from that part of the world?
  Mr. Atkinson: Yes, but I would consider the matter from the opposite point of view. If we take the 10 leading Western manufacturing nations, we are at the bottom of the wage table. Presumably, on the basis of what the hon. Member just said, that should give us an enormous advantage, but it does not; it gives us many problems because the level of demand and many other things in modern Western economies are so contradictory. I, therefore, do not accept simple analyses of that kind.
  The right hon. Member for Guildford (Mr. Howell) spoke about co-partnership and share ownership and about extending the property-owning democracy. Trade unions have had many arguments about co-partnership and share ownership. They do not like such things. They do not believe that it is in their interests to go in that direction.
  It would be a contradiction for trade unions to be represented in the board room, taking decisions contrary to their interest. Therefore, they do not want to go in the direction of co-partnership, but even less do they want to go in the direction of share ownership, because they believe that the shop floor bonus is a more direct way of recognising the effectiveness of the work force. I hope that the time will come when we can discuss that issue in greater detail.
  Unemployment is deliberate. It is not an act of God. It is man-made or, possibly in this case, woman made. It does not arise by accident; it is an integral part of Government strategy.
  Mr. John Browne: Rubbish.
  Mr. Atkinson: The hon. Gentleman says "Rubbish", but it is perfectly true. The Chancellor's analysis confirms that. He admits that what he has been able to deliver to the City has come from the base of over 4 million unemployed people. His statement should have been a vote of thanks to those 4·25 million unemployed people because he was recognising the contribution that they have made to the successes that he chalked up in his speech.
  Two revealing comments have been made. The first was by the Prime Minister when she was asked whether unemployment was an embarrassment. She replied that in her opinion unemployment was no longer an electoral factor. In other words, there was no difficulty in having a continuous strategy which includes substantial unemployment, or unemployment arising from the strategies pursued. As that was no longer an electoral factor, the post-war method of having the reflationary process just before an election was finished because we can say to the unemployed now, "So long as this Government continue, they will not be taking electoral factors into account." Presumably, therefore, the strategy will continue.
  What did the Chancellor say when he was asked about the manufacturing deficit? He asked who was concerned about manufacturing deficit when there was such a massive surplus coming from oil. He wanted to know why we needed to worry any longer about such matters. Surely that betrays the underlying thinking of the Conservative Front Bench when they talk about the strategy that they believe is so successful.
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  The Budget as a whole was geared to financial rather than industrial capitalism. There is a great difference. When one analyses what the Chancellor has said, it is easy to identify the benefits that he has been able to deliver to financial capitalism. I thought that he was a leading spokesman for the Centre for Policy Studies. It seems that that is the Government's great motivator and that all things relate to the original theories that they were able to propound not so long ago.
  In that context, I reiterate an appeal that I made some time ago to the 365 economists who, in 1981, took to the columns of The Guardian and The Times to denounce the Government policies and strategies, and I ask them to emerge and bring the whole of their combined weight to explain to the country how wrong the strategy is and how it is not in the nation's interests. There are a few economists who would go along with many of the statements made yesterday. They said so two years ago, and I believe that they will say so again.
  I understand that the Chancellor has now gone to take part in the dancing in Threadneedle street. There is great rejoicing in the City and we are well aware why it is rejoicing. He was able to deliver a great deal yesterday to those people whom he claims to represent—the top 8 million income earners. He also demonstrated his attachment to the stock exchange rather than the labour exchange. The clearest class division emerging in the House is between those who represent the stock exchange and those who represent the labour exchange. Inevitably, that division will grow. To answer this afternoon's unanswered question, I believe that unemployment will increase. The policies propounded yesterday will inevitably cause a rise in unemployment.
  Mr. Michael Hirst: Does the hon. Gentleman accept that the stamp duty levy on transactions in the City is driving business to stock exchanges outside the United Kingdom so that there is justification for abating stamp duty as a prelude to abolishing it altogether?
  Mr. Atkinson: The Budget adjustments might have an indirectly beneficial effect on industry, although that consideration is marginal. I am concerned with a major Government strategy and the continuation of mass unemployment, which depends on low incomes. The Opposition's complaint concerns low monetary aggregates and we wonder why the Government repeatedly appeal for workers to accept lower wages. The Chancellor said:
  "Higher profits lead to more jobs. The number of people in work increased by about 80,000 between March and September last year. The loss of jobs in manufacturing has slowed down sharply, while jobs in services increased by getting on for 200,000 in the first nine months of last year … Although our unit wage costs in manufacturing rose by under 3 per cent. last year, our three biggest competitors, the United States, Japan and Germany, did better. The employment prospect would be significantly improved if a bigger contribution to improved cost performance were to come from lower pay rises."—[Official Report, 13 March 1984; Vol. 56, c. 287.]
  Every Chancellor of the Exchequer of post-war Governments has made an appeal for reduced wage levels, to lower levels of demand and do whatever else is necessary for the economy.
  I shall analyse my quotations from the Chancellor's speech. We rarely talk about unit capital costs, which are an important part of industrial analysis. Unit wage costs are necessarily high if unit capital costs are low. We tend

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  to refer to unit labour costs separately whereas they are interrelated. As one goes up, the other comes down. In Germany and the United States unit capital costs have gone up but unit labour costs have come down. That has happened in British industry, too, so if we wish to reduce unit labour costs we should increase unit capital costs. That understanding seems to be missing from the usual analysis.
  The Chancellor referred to an increase of 80,000 people in work between March and September. He went on to refer to the loss of jobs in manufacturing slowing down sharply. It has slowed down, and explains the difference of 120,000 people in employment. The total work force increased by 80,000. Jobs in services increased by almost 200,000, so jobs in manufacturing and similar industries must have fallen by 120,000, in direct relation to the Chancellor's policy, which is why he is disaster itself to manufacturing industry. The difference between financial and industrial capitalism is part of his strategy. Yet he claims some credit for it and swanks about it as though it were something of an achievement.
  The statement went on to deal with employment prospects, which, the hon. Gentleman argued, would be significantly improved with a bigger contribution from lower pay rises. Our great wealth from manufacturing industry comes from manufacturers paying the highest wages. The greatest insecurity in manufacturing industry is in those establishments paying the lowest wages. That makes sense. No matter what analysis is made, when an industry's buoyancy disappears there will be no profits in that sector and wages will be low. High wages reflect an industry's buoyancy, so we should go for higher rather than lower wages.
  The Chancellor was also confused in his reference to productivity, which has continued to improve rapidly. If the manufacturing work force has been reduced, productivity, which is production per individual worker, is bound to increase. If the reduction in production is minimal and the number in work has fallen, productivity must have increased, so the Chancellor takes some credit in terms of the number of people that his strategy has thrown out of work during the year. Production, however, has not increased in manufacturing industry and the Chancellor should be dealing with that instead of productivity, because production, or total output, is very different.
  Those are the Chancellor's arguments, not mine, and we should study his statement closely. His strategy, to which our debate has been directed, is the reason for the boom in the City and the slump in industry. It is unbelievable that London is the most successful financial centre in the world, enjoying unprecedented boom conditions, while there is mass unemployment. They can live side by side when a Chancellor or Government pursue the policy announced yesterday. We can clearly see the reasons for that.
  I have avoided dealing with the effects of unemployment—the impoverished trade union muscle resulting from the Government's policies, which no doubt the Government welcome, and the reduction in spending money, with which I shall deal in relation to the aggregates to which the Chancellor referred.
  I shall make one point in passing, now that the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) has returned to the Chamber. I referred earlier to the top 50 manufacturers. The analysis of their position shows
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  significant developments. As I said in my intervention, their total pre-tax profits over the period referred to by the Chancellor have increased from £5·25 billion to £5·5 billion. In every case, however, the work force has been reduced. Indeed, those companies have been the biggest contributors to the overwhelming reduction during the period under consideration. Only one of the top 50 companies—Vauxhall—is talking about an increase in the work force. The Chancellor should reflect on that when he talks about buoyancy in the economy. Moreover, as the Vauxhall work force was reduced by 39 per cent. in 1982–83 it is hypocritical for it to boast about a 13 per cent. increase in the coming 12 months and to attribute it to the Chancellor's strategy. The CBI itself makes that case. It says that Vauxhall is one of the success stories but that over three years there has been a net reduction an the number of people employed. Profits do not necessarily create jobs, although I accept that a company with no profits and zero investment is unlikely to create jobs either.
  On monetary policy, I do not believe that the Government's theories are credible. The Chancellor's statements and the Treasury theories about monetary aggregates are sheer witchcraft. If theories of that kind were used by engineers, ships would soon be sinking and bridges collapsing. It is witchcraft to talk as though monetary aggregates had meaning in themselves and constituted a method of adjusting the nation's economic behaviour. Whatever indicators are used—M0, M3 or whatever—they are merely barometers or pseudo-barometers. If they were genuine they would only show what is happening, but they do not even do that, so they are merely pseudo-barometers. In any case, it is no use setting a barometer to "rain" in the belief that rain will necessarily follow. It does not work that way. Whet her it is narrow or broad money, all the Chancellor's figures and aggregates merely reflect what is happening in the economy. They do not constitute a means of controlling or intervening in the economy in any effective way.
  The forecasts have all been wrong. Yet the Chancellor went on to suggest that M0, the narrow definition, was more useful for his purposes than any other indicator. He went on to talk about the more important aspect of velocity—the ratio of gross product to the various measures that he mentioned. He then produced a magical figure as though it meant something special to Britain and argued that, whichever indicator was taken, we had to reduce the monetary aggregates. It was clearly spelled out. The level of demand in the economy had to be reduced so as to lower inflation.
  Let us compare the situation here with that of our direct competitors. On the same analysis, the ratio in West Germany is exactly double ours. The velocity figure, the ratio between domestic product and M3, is 35 per cent. here but 70 per cent. in Germany and 120 per cent. in Switzerland. In other words, their monetary aggregates are many times those of this country. Yet their inflation is lower and their general living standards higher.
  Let us take the second aspect of the Chancellor's analysis of the results of Conservative Government since 1979. The top 8 million incomes in this country take, well over half the total income while the bottom 8 million take less than 10 per cent. Whatever one makes of the Government's performance in terms of class analysis, it is clear that their strategies have brought about a monumental shift of income into the top bracket. The difference

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  between this country and Germany or Switzerland is in the redistributive base. That is why it is nonsense for the Chancellor to use aggregates as though they were accurate or meaningful indicators of what is likely to happen.
  I see Conservative Members looking at their watches. The Opposition seem not to be under the same pressure. Nevertheless, I shall bow to the desire of hon. Members to get into the debate and conclude by saying that, once again, the Chancellor has demonstrated the consistency of the policies pursued by the Government. In effect, he was paying tribute to the people that the Government have put out of work. If he can now claim certain results in the economy such as the lowering of inflation, he must recognise that that is due to the fact that the people whom the Government have put out of work now take a very much smaller income than they would otherwise have had.
  7.26 pm
  Mr. Richard Ryder (Mid-Norfolk): As several hon. Members are waiting to speak, I shall be brief.
  There is little to be said for stamp duties, apart from the fact that they created the newspaper industry in Fleet street and gave William Wordsworth a decent living. By starting to dismantle stamp duties, my right hon. Friend the Chancellor has overcome Treasury caution, and even the great Wordsworth's advice has been treated wisely. Wordsworth wrote:
  "The good old rule
  Sufficeth them, the simple plan,
  That they should take who have the power,
  And they should keep who can."
  The emphasis in most previous Budgets was on either taking or keeping, but the hallmark engraved on this one is the reform of our haywire tax system.
  Stamp duty, which is about three times the age of the remarkable Lord Shinwell, impedes change by curdling labour mobility and inhibiting personal investors. In short, as my right hon. Friend the Chancellor stressed yesterday, it represents what the Government are pledged to uproot.
  A year ago, the Inland Revenue published its consultative document, "The Scope for Reforming Stamp Duties." In his foreword, my right hon. Friend the Parliamentary Secretary to the Treasury, then Minister of State, accepted that the review pointed to the abolition of some charges, but warned that the loss of £1 billion would be difficult for the Treasury to bear. Sadly, though understandably, that proved to be the case in yesterday's Budget. Nevertheless, the Government must aim to abolish stamp duty altogether during the life span of this Parliament.
  Despite yesterday's reforms and the welcome rejection of the "slice scale", stamp duty is still a bad tax because it adds to steep transaction costs in the housing market. It is a bad tax because it bears scant relation to the value added, profits, incomes or gains involved. It is a bad tax because it discriminates against people in identical circumstances but who move house with different frequencies. It is a bad tax because it discriminates against achievers and those who, through no fault of their own, lose their jobs but secure new ones in other locations.
  Labour mobility remains a stronger check to the pace of economic recovery in Britain than in other major industrialised countries. In order to lubricate labour mobility, and still reduce the costs of moving, I place the
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  abolition of stamp duties beside a searching review of conveyancing—now being undertaken by the Street committee—an examination of the roles and charges of estate agents, and a tapering of the Rent Acts.
  The Government, in their second term, must give deeper consideration to labour mobility, just as they must, in tune with their philosophy, simplify and encourage the extension of personal share ownership. My right hon. Friend the Chancellor made a fine start yesterday by boosting share option schemes and halving the stamp duty on share transactions to 1 per cent.
  The burden of stamp duty on share deals congeals the stock market and inhibits personal investment at a time when commissions are falling and overseas competition abounds, but stamp duty has at long last been cut down to size. I hope that before leaving the Treasury my right hon. Friend will remove it altogether.
  Stamp duty strangles labour mobility by hitting voluntary job changers and involuntary job seekers, in addition to making a mockery of the capital-owning democracy, so lucidly referred to by my right hon. Friend the Member for Guildford (Mr. Howell). For those reasons, it should play no part at all in a Conservative Government's tax system.
  7.31 pm
  Mr. Dafydd Wigley: I first congratulate the Chancellor on his brevity yesterday—something that was commended by all hon. Members. Unfortunately, although some aspects of his speech were welcome, they did not constitute the majority of it.
  The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) asked whether the Chancellor believed that unemployment would be any lower as a result of this Budget. The question that came to my mind was whether the Chancellor believed that the Budget in any way influences unemployment levels. The impression that we have had from the Government in the past—one that continues in this Budget—is that their strategy is not geared to influencing unemployment levels. There seems to be an assumption that in the fullness of time unemployment may improve, but an attack on unemployment does not appear to be a deliberate objective of policy. Therefore, my condemnation of the Budget is its total lack of strategy in dealing with how unemployment can be overcome.
  The hon. Member for Mid-Norfolk (Mr. Ryder) placed great emphasis on labour mobility. We in Wales have been told that labour mobility is the answer to our unemployment, that we must get on our bikes to look for work. However, labour mobility is no use if there is nowhere to go to look for work. The sad truth is that no area in Britain now has an abundance of work, so labour mobility is totally irrelevant to the problems that we face. Instead, we need an increase in the number of jobs, and that problem will not be solved simply by moving people from one place to another merely to be registered as unemployed in a different area.
  People have moved to various parts of Wales simply because they prefer to be unemployed in, for example, Anglesey rather than in Birmingham. I can well understand that, but that does not solve our economic problems by a long chalk. It may, in fact, aggravate them.
  In many ways the Budget appears to be the pet poodle of the City of London, in that large chunks of it are of little interest or relevance to 95 per cent. of our people. It

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  ignores the fundamental needs of the large majority of our people. The Chancellor spoke of increases in production and projected that there would be increases in the economy of between 3 and 3·5 per cent. over coming years; but, sadly, that does not necessarily mean an increase in employment opportunities. The Government do not appear to have addressed their mind to that.
  We ought to acknowledge and welcome some things in the Budget—for example, the elimination of the national insurance surcharge. I do not think that Labour should have introduced it when they did, and the Conservatives should have got rid of it much earlier—but better late than never. We should welcome the increase in personal tax allowances, which will take so many people out of the tax net. However, there is room to go further in respect of the single person. Although the married allowance is the highest since the war, the single person's allowance in the 1940s was at one stage as much as 110 per cent. of the average industrial wage. We are still a long way from recouping that, so there is further room to move in that direction.
  Although the increase of allowances is of benefit in that it takes people out of the tax net altogether, it is of greater benefit to those on higher incomes. We must not blind ourselves to that attraction, which no doubt appeals to the Government and their party.
  I also welcome the change in VAT on imported goods. That was an anomaly. My only worry is that, given that this is a once-for-all saving of, I think, £1·2 billion, if in the fullness of time there needs to be a policy reversal, we shall face a bill of £1·2 billion. That will present problems.
  I further welcome the tax relief on special vehicles for the disabled. The Government could have looked at other examples, such as VAT on charities, but nevertheless I welcome the steps that have been taken as far as they go.
  On the other side of the equation, I regret the imposition of VAT on house adaptations and alterations. Earlier, I asked the Chief Secretary whether that would not create anomalies for those receiving grants towards the renovation of their houses. Elements of the work could fall into the adaptation category, and this could prove to be a difficult and grey area. I fear that those who have been awarded grants and are waiting for them to be paid—in Wales there is a backlog stretching back several years—may find VAT included in their final bills. Those sums may not have been included in the original estimates, as a result of which they will have to find more money. I hope that that point can be answered and refuted, because so far it has not been. The Government should make the position quite clear for the thousands of people who could face difficulty. It was, I suppose, inevitable that petrol would be increased again. That badly affects rural areas such as my own.
  However, I criticise most of the holding down of the PSBR. Given the productive capacity within the economy and the possibility of triggering greater economic action by a larger PSBR, through capital investment programmes the Government should have risked marginally higher inflation to try to get the economy moving.
  I turn from the general position to the position facing Wales. Yesterday the Chancellor made it clear that his policy is to continue those policies that have been followed over the last five years. He said:
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  "We shall continue the policies that we have followed consistently since 1979 … Economic recovery is well under way and employment is growing."—[Official Report, 13 March 1984; Vol. 56, c. 286.]
  Frankly, we in Wales do not believe it. There is no sign of the economy moving in Wales. Employment there is not growing. It has decreased substantially since 1979 and is still decreasing. That pattern is true throughout the United Kingdom. Since 1979, civilian employment has gone down by 7·4 per cent. throughout the United Kingdom, but that is not true of other countries over the same period. We are told that it is an international depression, yet in Austria civilian employment increased by 3·6 per cent. in Italy by 1·5 per cent., in Norway by 6·5 per cent. and many other countries have held it more or less steady. But in Wales we have not seen an increase, or even a turnround, in employment opportunities. The converse in fact is true, that in Wales unemployment has increased from 81,000 in 1979 to 175,000 now.
  We do not think that the policy pursued by the Government over the past five years is solving our problems or will solve them. It is not sufficient to pursue the present policy and to say, "Steady as she goes." The present policy has been a disaster for Wales, and the Budget's fundamental strategy of retaining that policy is not acceptable.
  The magnitude of the error in strategy makes the details of the Budget largely irrelevant. The Welsh economy is largely geared to public spending. Our major industries—the coal industry, the steel industry and electricity generation—are public industries. Even agriculture—an important industry in Wales—is largely dependent on public expenditure. With cuts in public expenditure, there is a likelihood that Wales will suffer even more than other areas. That should be a warning to those engaged in the coal, steel and electricity industries—and also to farmers in Wales. Farmers, who have considered themselves a mile away from dependence on public expenditure, could suffer very much if present policies are continued, in the way that the Chancellor has warned.
  Many of our needs in Wales have to be answered by public expenditure. There is a need to improve our road infrastructure—and our appalling housing, which is considerably worse than that of the rest of the United Kingdom. The problems of health care need in Wales can be solved only by public expenditure. With retired people moving into Wales there is added pressure on the social services, with consequent further demand for public expenditure.
  From 1980 to 1984, public expenditure in Wales has been reduced by £25 million at constant prices. Over that period public expenditure in Scotland has increased by £135 million, in Northern Ireland by £204 million, and over the United Kingdom as a whole by over £5,000 million at constant prices. The £25 million reduction in public expenditure in Wales has exacerbated the economic and unemployment problems facing us.
  We are fearful as we look to the future, and we do so in the context of the Green Paper on the next 10 years. On page 31 of that Green Paper there is a warning of the Government's intention to reduce public expenditure from 39·75 per cent. of GDP in 1983–84 to 34·5 per cent. in 1993–94—a 5 per cent. reduction in public expenditure as a proportion of the GDP. Given our dependence in Wales on public expenditure, the implications of that warning are devastating.

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  Even in areas where the Green Paper recognises probable increases in demand for health care, social services and pensions, none the less it says, in paragraph 67:
  "There should, however, be no general presumption that higher public spending is inevitable if provision in these areas is to be improved, given the scope for a switching from public to private sectors".
  A switch from the public to the private sector means a reduction in the standard of services and probably also in employment opportunity, judging from what we have seen in the past in Wales.
  We are also extremely concerned by what is said in paragraphs 68 and 69 of the Green Paper. It appears from the Government's strategy for the next 10 years that the level of public expenditure and public services will be determined by the available finance, with no reference whatever to social need or the other criteria that should be taken into account. If that is the Government's intention, the prospect for Wales is bleak.
  Our criticism is not of the detail of the Budget, in which there are some good things and some bad things; it is of the basic strategy of the Budget. It does not approach the problems of our economy and our unemployed, and until we have a fundamental change in the Government's strategy the prospects for Wales are bleak indeed.
  7.44 pm
  Mr. John Browne: I believe that this is an historic Budget, heralding a new dawn for British enterprise. It combines prudence, compassion and courageous innovation. That innovation is vital if we are to achieve the technological revolution. My right hon. Friend the Chancellor of the Exchequer has grasped nettles that should have been grasped by both Conservative and Labour Governments in the past.
  I was very pleased to see that the Chancellor made no massive panic injections to gain popularity. Had he done so, the cost in inflation would have been enormous. It would have meant farewell to all the efforts made by people in Parliament, in local government, in the Civil Service, in industry, and in the labour market generally over the past five years.
  My right hon. Friend has produced his Budget in the face of the great international difficulties that he outlined—probably the worst recession in a century, an international debt crisis, fluctuations in the oil market, and so on. He has produced his Budget despite the constant calls in this House, particularly from the Labour Benches, to return to the old proven failures of the past which followed from the stop-go policies that we know so well. They ended in disaster for decades following the second world war, and we are all paying dearly for them now—none more than the unemployed.
  The Budget maintains the fight against inflation. It has set down a keel. It consolidates the gains that we have made so far, and for that reason my right hon. Friend was able to be compassionate. It continues the much more difficult task of massive reorientation of our entire economy, away from state control, stagnation and overmanning, and towards genuine ownership by the public, enterprise and real jobs.
  The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) has now left the Chamber. I was very impressed
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  by his praise of the Chancellor, but I find it hard to see why the right hon. Gentleman feels that 3 million unemployed, although a great price to pay, is a greater price than an overmanning of 3 million, which would have a massive effect in stagnating the economy.
  Reference has already been made by hon. Members to compassionate measures such as the special tax treatment for vehicles for the disabled and the raising of allowances by 12·5 per cent., or 7 per cent. in real terms—well above what we expected. My right hon. Friend has lifted many people out of the terrors of the poverty trap. That is the compassionate side of the Budget.
  The Chancellor's courageous innovations show the way in which he has grasped the nettle. Contrary to what has been said about the City, I believe that my right hon. Friend has removed many of the tax privileges that were given to institutions in the past at the expense of individuals. That innovation will encourage investment by private individuals. They are much more likely to invest in new and small enterprises than are institutions which have had favoured tax treatment in the past and are the most unlikely source of investment in new and small businesses.
  The removal of the tax discrimination which favoured institutions will help to create the vital conduit that the Government must build between the massive accumulations of capital that are available in Britain and the investment opportunities. That conduit has got to be built, and one of the most important things is to re-create individual investors as opposed to institutional investors.
  The second main plank of this innovation by the Chancellor is the encouragement and reward of profit and employment—the cuts in corporation tax, stamp duty and capital transfer tax, and of course the abolition of the national insurance surcharge. Anyone who has worked in business or in financial institutions in the City will know only too well that these capital allowances encourage enormous distortions in our economy, because they encourage companies and institutions to invest for tax advantage rather than for profitable business. Those cuts and the cut in the rate of corporation tax will, I believe, make a huge difference in investment decision-making throughout the country. Investment decisions will now be made more with a view to making profits.
  I believe strongly that increased profits—particularly increased profits to investors—lead to increased investment. If investment is increased, that leads to growth, and growth leads to more real jobs. Furthermore, the paid real jobs lead to more demand within the economy and therefore to an increase in our national wealth. When that is achieved, we shall be able to afford real spending increases, without inflation, on things such as defence, law and order, and good social, education and health services.
  Although I was very glad to see the content of the Budget, there are three areas in which I should have liked to see more action taken. First, I should have liked to see much more generous expansion and simplicity in the business expansion scheme. Secondly, I should have liked to see the complete abolition of stamp duty. Referring just to trading in bonds and shares, where institutions now find it cheaper to trade the American deposit receipts ofBritish companies in New York rather than the same shares on the London Stock Exchange, I believe that we shall not, by cutting it to 1 per cent., pull back any business from New

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  York. We may stop business flowing from here to New York, but we have not gone far enough. I believe that we really should abolish the stamp duty completely.
  Mr. Budgen: I was very interested to hear my hon. Friend's criticism of the business expansion scheme and his suggestion that it ought to be made more generous. Will he say how it should be made more generous? In particular, I wonder whether he disapproves of the way in which its advantages are no longer to be enjoyed by those who wish to farm.
  Mr. Browne: I promised to be very brief, but I will answer those questions. First, I absolutely approve of its not being applied to farming schemes. I thought that was outrageous.
  Secondly, in order to make it more generous, two matters spring to mind off the cuff. The first is that it should allow for the roll-up of research and development. The second is that we should allow principals involved in entrepreneurial businesses to take full advantage of the scheme, which they are not allowed to do now.
  The third thing that I should have liked to see in the Budget is more emphasis in the Government's spending programme upon capital as opposed to current projects.
  I believe that this Budget shows quite clearly that the Government will maintain a prudently enterprising course. Critics in the House and throughout the country would do well to remember that between the late 1950s and 1979 hardly a year passed in this country without one, two, three or even four financial crises. Since 1979 there has been none whatsoever. I believe that that speaks millions of words. It shows that the financial management of this country is in very good hands—in very difficult circumstances. After my short period of five years in the House, hearing the Budget statement yesterday made me really believe that the British lion is far, far from dead.
  Mr. Deputy Speaker (Mr. Ernest Armstrong): I am grateful for the brevity of the three hon. Members who have just addressed the House. If that is continued, we ought to get in everybody who wants to catch my eye before the Front Bench spokesmen begin.
  7.57 pm
  Dr. Jeremy Bray: I note what you say, Mr. Deputy Speaker, about the Government Benches. I take it that that does not necessarily apply to the Opposition side of the House. [SEVERAL HON. MEMBERS: It certainly does.] I am glad to follow the hon. Member for Winchester (Mr. Browne), whose arguments I always find interesting, even though I am likely to put forward a mirror image of the speech he has just made. I certainly join him in congratulating the Chancellor on the ingenuity of his Budget and, in a more sensitive man, I would say also the courage. It is a classic case in the history of Cabinet procedures of a Chancellor bouncing the Cabinet into a set of decisions which it would never have had the courage to make as a body.
  In the first flush of enthusiasm felt on the Government Benches for what the hon. Member for Winchester described as a historic Budget we see some of the naivety that is often demonstrated following a Budget such as this—only to be overtaken in the following months by disillusion, as people begin to discover the snags.
  The hon. Gentleman referred in particular to the prudence of the Chancellor, but surely it will not have
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  escaped his attention that the Chancellor is paying for the beneficial roll-on of the reductions in the corporation tax rate, exceeding the reductions in the value of the corporation tax allowances, by a once-and-for-all impost on importers. This is all good fun, but it is certainly not something that can be described as long-term prudence—the use of a once-and-for-all gain, such as the advancing of the payments of VAT, to trigger a long-rolling programme of alteration of the structure of corporate taxation.
  The Chancellor is seeking to lead the country out of depression into a pre-industrial society. He has put forward policies for a pastoral world of small shopkeepers and craftsmen in a world of high technology and multinational companies. The pastoral world of his vision has no room for institutions. The trade unions, of course, are enemies of the people. They should have been dispensed with long ago. Now they have been joined by the life insurance companies. The idea of corporations having any accumulated wisdom and experience that gives them an edge in judgment and the appropriate use of financial resources is wound down by the reduction of the difference between corporation tax and income tax and the reduction in tax allowances. Community life is under attack through the gloomy picture of public expenditure stretching out over the next 10 years which the Chancellor has put forward in the Green Paper. The very idea of national goals is degenerating to the aphorism that finance must determine expenditure, without any conception that, instead, aspiration can liberate energy and compassion can call forth effort.
  The Chancellor lives in—and has put forward a Budget to match—a primitive world with all the economic sophistication of 18th century Scotland—the world of the shopkeeper and the craftsman. All the arguments so eloquently and accurately spelt out by Adam Smith we find reflected in the arguments that the Chancellor was using yesterday. At the beginning of his speech he made it clear that his particular view was justified by the framework which he has set himself and within which he allows himself to roam freely; that he was continuing the policies of the Government and that there would be no letting up in the Government's determination to defeat inflation.
  Inflation has indeed fallen, but at what a price. It is not just that inflation has been defeated at the cost of the most enormous increase in unemployment and loss of output, but that the country is being asked to jump up and clown on the grave of inflation when there is no threat at all of it emerging as a threat to the economy today.
  That framework, which the Chancellor is relying on, is enforced by a tightness of monetary policy that the Chancellor has made clear he means to maintain. The tightness of monetary policy is no longer measured by his monetary targets. He maintains the fiction of setting sterling M3 targets, but the Government's record of broken targets and the rebasing of targets from year to year has made the wide measures of money no longer credible. Therefore, they have been joined by MO. The other "Ms" provided no sustenance and the Chancellor has ended up with MO.
  That decision follows a detailed study by Mr. R. B. Johnston who produced a Treasury working paper to which I referred in our public expenditure debate. He showed that even in MO there is such a pace of structural change that the velocity of circulation relative to MO is increasing 3

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  per cent. faster than MO itself. Therefore, there is a differential between MO targets and sterling M3 targets which is necessary to shore up the fiction of monetary targets.
  The MO target depends on the rate of financial innovation, as measured by the number of bank accounts and building society accounts and the distribution of maturity between different types of building society loans, continuing in future as it has in the past, which seems extremely unlikely. It could go faster or slower or the nature of MO as a monetary aggregate could change.
  That framework is needed not so much because it provides operational guidance on the tightness of monetary policy—plainly, it does not—but because it is necessary to shore up the fictions of the Prime Minister's household economics and the slightly more sophisticated medium-term financial strategy of the Chancellor.
  There creeps into the last sentence of the last paragraph on monetary policy in the Chancellor's speech the phrase "the exchange rates" and it is said that they will be taken into account. That is a concession to reality, but the Chancellor did not follow up its implications in his exposition of monetary policy or in tracing the effects on industry. The fiction of the Government's monetary strategy—so splendidly exposed by Mr. Fforde in the Bank of England Quarterly Bulletin in 1983 as rationalising the pursuit of a wildly deflationary policy and creating high unemployment, which made it possible to undermine the bargaining power of trade unions and inflationary pressures of all kinds—is being dressed up in monetary mumbo-jumbo that is not even of operational significance in the money market transactions or overseas currency interventions by the Bank of England.
  That framework has gone wrong and the cost of the strategy that has emerged is far heavier than the Government expected when they embarked upon it. We have experienced a sustained misalignment of exchange rates that will lead to the same uncertainties in future as it has in the past.
  The current major source of uncertainty is what will happen to the dollar after the American presidential elections and as the campaign progresses. The Chief Secretary's dismissal of high table talk as irrelevant to anything that might colour the Government's policies does not represent the views of his Cabinet colleagues. I am referring not to the baleful influence of the All Souls high table, but to the wellspring of the Chancellor's ideas in Chicago and, in their latter manifestations, in Minnesota and its federal reserve bank in the persons of such distinguished economists as Sargent and Wallace, as well as the elderly guru, Professor Friedman.
  I hear from an unimpeachable source who has a strong interest in the vindication of the Chancellor's strategy that at a recent conference in Minneapolis, at which both Sargent and Wallace were present, there was a discussion on exchange rates and currency misalignments and one brave participant proposed that the economists present should vote on whether they preferred fixed exchange rates or fixed monetary targets. The vote was nem con in favour of fixed exchange rates. In the citadel of modern monetarism, there was a switch in policy and strategy from that being pursued by the Chancellor. The intellectual foundations of his case have been destroyed.
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  The Government, having got it all wrong in monetary strategy, have resorted to the translation of their monetary strategy into the pursuit not of sterling M3 targets, but of PSBR targets. The Financial Statement and Budget Report of 1980, when the medium-term financial strategy was first put forward, set out the course for the public sector borrowing requirement:
  "This … is not to be interpreted as a target path. It is a projection of the course of the PSBR based on the assumed growth of GDP and present public expenditure plans that should be broadly compatible with the monetary objectives. Fiscal policy will be operated so that the PSBR for any particular year will be consistent with declining monetary growth in the particular circumstances of the time."
  The pragmatism has shifted. The PSBR is now the hard target and the choice of monetary targets and the rebasing of monetary targets are rigged so that the borrowing requirement, as a percentage of GDP, can be dragged down to wildly deflationary fiscal balances.
  Another absurdity in the choice of the PSBR as a financial target was brought out well by the Institute of Fiscal Studies in its paper on Budget options published just before the Budget. It set out a much more fundamental consideration—the balance sheet of our public sector. There is a huge overall surplus of assets over liabilities of £235 billion. There are huge shifts from year to year. In 1982–83, there was a fall in the balance of £26 billion, which grossly overshadowed the PSBR. Within the financial sector, the shift in the balance of financial assets over financial liabilities happened, by accident, to equal the PSBR in 1982–83, but the net financial liabilities in 1981–82 decreased by £3 billion despite a PSBR of £9 billion. They went in opposite directions.
  The Government's financial measures of the public sector are wildly innaccurate descriptions of the true position. The Government derive about £9 billion a year in revenue from the North sea. That is, in effect, the product of running down a national asset. At the same time, we have the unfunded public sector pension liabilities increasing financial liabilities at the rate of £15 billion to £20 billion a year. Is none of these considerations relevant to the financial strategy of the Government, or does that merely deal with the oil in the lubricating system, merely the narrowly defined PSBR and its highly variable impact upon the money supply in each particular set of circumstances?
  Having arrived at a set of dogma, and having, in however rickety a manner, disproved, and overtaken by the technical arguments, a framework which has bamboozled the Cabinet, the City and Conservative Members, the Chancellor of the Exchequer feels at liberty to roam freely into the lush pastures of tax reform and the supply side.
  I have considered some of the details and I have a certain amount of sympathy and admiration for what the Chancellor has been trying to achieve. On investment allowances, for example, he is a Johnny-come-lately. He is 20 years behind the times. The really distorting effects of investment allowances on the capital structure of industry and unemployment took place during the 1960s and 1970s. They have no appreciable effect given the. present depressed levels of investment. As a Member for Teesside, and where I hope I could have been excused special pleading, I spoke repeatedly in the House about the absurd effect that the investment allowances were having in encouraging the chemical, oil and steel industries to invest in technology with the deliberate intention, in a

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  development area, of replacing every possible job. The effect of the capital allowances was vastly to increase unemployment instead of reducing it.
  If the investment allowances had been replaced by something more relevant to the redevelopment of British industry, I would have been warmer in my commendation of what the Chancellor of the Exchequer did yesterday. The hon. Member for Winchester showed the glimmerings of a hopeful way forward when he suggested the rolling-up of research and development in the business expansion scheme. That idea was argued on a much wider canvas by the Select Committee on Science and Technology in another place. The Committee argued that tax allowances should be payable on research and development expenditure generally. That is a good idea and one that I would extend still further.
  The development of a business nowadays involves much more than investment in plant and machinery or in research and development. It involves long periods of building up personnel, the training of employees in very expensive ways, the opening up of new markets and new process technologies and new product designs. In this process capital expenditure can be quite small when compared with overall costs.
  I offer as an example the cost of getting into silicon chip manufacture. In that sector it is necessary for a company to play itself in with possibly rather low profit margins in product areas where its competitors have a considerable lead. If it does not go through that learning phase, it will never be possible to get into the market at all. If the Chancellor had addressed himself to the cost of entering some of the modern technologies and had worked out the institutional means of doing so, realising what this means in the support of existing institutions and not their destruction or the undermining of them in favour of the isolated individual saver, if he had not relied on the financial system to mediate wholly between the individual saver and the person who is to do the investing and had given more sensitive consideration to the processes of industrial development, it could have been a Budget that deserved the description "historic". However, his prejudices mean that he will not make any move in that direction during this Parliament.
  We have ample evidence that technology is an accumulation of know-how and experience within an enterprise. It is not something that can readily be transferred from one country to another or from one firm to another. It has to grow up within the firm. It must be learnt and kept alive within that firm and team and must be built on past success. That continuity of the enterprise is something that the Chancellor went out of his way to undermine in the Budget. Instead, we are moving in the direction of the caricature of the pension fund manager who divides his fund into four entrusts each quarter to one of four merchant banks and annually sacks the bank which performs the worst during the year, inducing absurdly short-term behaviour into the judgment of investment success. Yet that is precisely the direction in which the Chancellor wants to go.
  The overall direction in which we have found ourselves moving over the past 10 years has had a remarkable resemblance to the course of events 50 years ago. The course of events of GDP, unemployment and investment from 1975 to 1983 has followed closely the course of
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  events from 1925 to 1933. The question is whether the future course from 1983 onwards will follow closely the course from 1933 onwards.
  From 1933 onwards there was a sharp recovery in industrial production, a sharp fall in unemployment and a remarkable transformation in the economy. Today there is little prospect of that breakthrough. The Government point to productivity growth. I commend hon. Members who are interested to study the Brookings papers on economic activity. In the second volume of 1983 Buiter and Miller review the evidence of the scrapping and closures of plant and regard it as accounting for the increase in productivity that has occurred. If hon. Members want to consider the evidence in more accurate company level detail, I commend them to read the excellent report on textiles of the Manmade Fibres Federation, which spells out in physical terms the reductions in capacity that have taken place over the past four years. If the tail is cut off, it is inevitable that the average batting score of the higher level batsmen will be higher, and that is where the increase in productivity has come from.
  What are the prospects of the overall economic policy allowing room in fiscal and monetary policy for growth to take place? The gloomy Green Paper has underlined the excessive fiscal——
  Mr. Budgen: The Green Paper says nothing.
  Dr. Bray: The hon. Gentleman is right. The Green Paper says nothing except gloom, gloom and more gloom. It offers no prospect of that gloom coming to an end in the next 10 years. If we are to have a change, we must address ourselves to the exchange rate and competitiveness, to policies that will do something directly about unemployment and investment. It will be necessary to take into account in the assessment of fiscal policy the cyclical and inflation corrections that are applied in the United States. When they are applied to the United States they still leave a huge budget deficit stretching out into the future. When they are applied in the United Kingdom, they show that we are in gross surplus.
  The continuation of those accounting methods that the Chancellor is pursuing and his failure to apply the necessary corrections offer us no prospect of relief from the monetary and fiscal constraints which will deny to the country the pace of recovery that it experienced from 1933 onwards. Nevertheless, I would not rule out a recovery, and a continuing recovery, over the lifetime of this Parliament. I would not necessarily share the views of the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) that it will be a short recovery only. I think that it could well be sustained. There is today the technological and human possibility for sustained growth, which is huge if we can only get ourselves organised, and not even this Government may have the wit totally to frustrate the growth that is available.
  Faced with the situation of continued possible recovery, I think it would be a mistake for Opposition Members simply to say that there is disaster round the corner. I do not think that there necessarily is. There may well be a continued moderate improvement. We have to underline the prospects of squalor held out in the Government's Green Paper, but, more importantly probably, we have to offer a more coherent strategy, constrasting with the Prime Minister's household economics, and the degeneracy of the Chancellor's doggerel of finishing school economics

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  out of which he drafted his medium-term financial strategy. We need to look at the practical and technical level of those who are facing the music, and writing the score, in industry, and in the contemporary research in modern economics.
  The pursuit of the final objectives of full employment, growth and stable prices would lead to a quite different combination of policies from those that the Government have been following. This is not contrary to the basically human and social inspiration of my right hon. and hon. Friends, but I would regard carefully designed work on our own future policies as a necessary concomitant of our human and social concerns.
  8.21 pm
  Mr. Steven Dorrell: The speech of the hon. Member for Motherwell, South (Dr. Bray) was, as always, thoughtful. I agreed with much of what he said about monetary policy, to which I will return later.
  People always react to Budgets at two levels. First, there is the level of the specific changes, which are relatively easy to assess, and the reaction is quick, and usually remains unchanged. People also react to a Budget at the level of its overall impact on the direction of the economy. This assessment is much more complex, and it is perhaps that which Iain Macleod had in mind when he said that Budgets that are well received on Budget day tend to look slightly less acceptable three months later. I wish to look at the Budget from both those points of view.
  I congratulate my right hon. Friend on a number of very welcome tax changes. First, I congratulate him on the move he has made on VAT on imports which, in the short term, is an imaginative way of squaring the circle of the tax changes that he wanted to introduce this year. It also has the effect of limiting the attractiveness of imports at the stage in the economic cycle at which consumers are tending to suck in imports, and, therefore, to reduce the pressure of imports on the level of output in the economy. As I say, it has the effect of paying for important changes elsewhere in the Budget package.
  Secondly, I congratulate my right hon. Friend on the manner and content of the changes that he has introduced in corporation tax. It is absolutely right to put the emphasis on lowering the marginal rates on the profits of companies. If he was going to do that, he clearly had to do something to reduce the levels of allowances against corporation tax. I believe that that emphasis was exactly right. Furthermore, I congratulate him on the way he did it, because the way in which it is to be phased will encourage firms to bring forward capital investment into the next two years at the stage in the cycle at which we should be hoping the investment programmes will be maximised.
  On a smaller point, but applying the same principle, just as I welcome the fact that my right hon. Friend is removing some of the allowances for corporation tax, and giving us the benefit of the marginal rate, so I welcome the fact that he is removing one of the allowances which had outlived their usefulness—the allowance which had been provided against life assurance premiums. That is a further extension of a principle that I believe is right, to extend the tax base, and to put the emphasis on the reduction of the marginal rate of tax. I welcome both those examples of that principle.
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  Finally—here my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) may note an apparent contradiction—I welcome the fact that, on income tax, my right hon. Friend put the whole benefit on the increase in the thresholds for the payment of standard rate income tax. That is right in equity for the impact on the poverty trap. It is also right in economic terms in this financial year, because it will put demand into the pockets of those most likely to use the cash to maintain consumer expenditure. To the extent that this recovery has been started off by consumer expenditure, I think that the effect of that decision on tax thresholds will be a tendency to maintain the level of consumer expenditure. That is also welcome.
  From those specific tax changes, I move to the more general impact of the package set out by my right hon. Friend. Here I join the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) in congratulating the Chancellor on the clarity with which he expressed his objectives. As the right hon. Member for Hillhead said, we know where we are going, and we know, at least in general terms, why we are going in that direction. Not the least of the reasons why I welcome the fact that the Chancellor went to some trouble to make that clear in his speech is that it also provides those of us who may not agree with every detail of his economic analysis with an opportunity to take him up on one or two of the points that he made, and to express some reservations about the emphasis that he placed.
  In 1983, the Government were re-elected because the electorate was prepared to take on trust the claim of the Conservative party, which I believe was justified, that, having taken some unpopular decisions in the Government's first term, if we were re-elected, the opportunity existed for some of the benefits of that medicine to come home. We were effectively saying, "You have had the medicine, re-elect us, and then will come the good news." The good news, in the view of the majority of the electorate, will be measured in terms partly of the number of extra jobs that we create, and partly in terms of improvement in the level of benefits that we can provide, both of which are the direct result of growth. Those of my electors who looked forward to the wages of virtue, after what my right hon. Friend the Leader of the House called three years of unparalleled austerity, will, I suspect, feel a slight twinge of disappointment if the projections of growth included in the documents yesterday turn out to be true. A growth rate that is peaking in the current financial year at just over 3 per cent., and which one sees decaying to barely more than 2 per cent. in the years ahead, will not be enough to reverse the tide of unemployment. There is a danger that it will not even be enough to mop up the extra labour that will flow on to the market as a result of increasing productivity.
  While I supported last year the view that, in the early stages of recovery, it was important not to try to push too fast a pace into the economy, I believe now that we should be looking for ways of improving upon the growth projections included in the documents published yesterday. I do not quibble with the principle, particularly in the public expenditure Green Paper, that there is a danger in projecting too fast a growth rate, with the implication that one then makes plans which, in the event, one cannot satisfy. I accept that there is a danger in projecting too fast a growth rate, and making one's plans on that basis. If we are to draw a distinction between a budget and a target, let us at least be clear that our target

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  is higher than our budget. I believe that the combination of high unemployment and relatively high productivity growth offers us the opportunity of promoting more ambitious growth rates than were stated in the documents published yesterday.
  For that reason, I am somewhat concerned by the passage in the Red Book and the Budget statement on monetary policy. What my right hon. Friend the Chancellor of the Exchequer had to say yesterday on the various forms of "M" was reminiscent of the earlier Budgets of his predecessor, now the Foreign Secretary. Under the previous Chancellor of the Exchequer, monetary policy had latterly come to be more broadly based. As the hon. Member for Motherwell, South mentioned, it had latterly come almost to be based principally on an assessment of the effect on the exchange rate.
  Yesterday, my right hon. Friend the Chancellor of the Exchequer said that the exchange rate would still be relevant. However, his remarks and those in the Red Book seemed to emphasise a return to monetary aggregates. If that is so, it is bad news, for two reasons. First, experience shows that monetary aggregates are an unreliable indicator of monetary conditions within the economy. They cannot be used in the short term as an accurate meter of what is going on in the economy. More seriously, table 2.2 in the Red Book contains figures that project a reduction of 4 per cent. in the rate of growth of monetary aggregates between the financial year starting 5 April and the end of the period. The Red Book says that they are not forecasts or targets but simply illustrative examples. If that is so, it is difficult to argue against them. However, let us hope that they do not come to pass.
  If monetary policy is to be tighter by four percentage points at the end of the period than at the beginning, it can only mean a reduction in inflation of 4 per cent. or a reduction in output of 4 per cent. The experience from 1979 to 1981 tends to suggest that, if there is a conflict between those two, it is output not inflation that gives. In making up his monetary policy, I hope that my right hon. Friend will be flexible—as he promised to be, and as the small print clearly says he will be—in the interpretation of those targets and projections. If we are tied to very tight monetary targets and to tight credit, and we consequently lose an opportunity for growth, the electorate, rightly, will not be very happy about it and in my view it will be right.
  When assessing monetary policy, the key question is whether additional demand as a result of a looser monetary policy would lead to extra output or to higher prices. If it simply led to higher prices, no one would argue that that policy should be pursued. However, if a looser monetary policy led to extra output, I fervently hope that my right hon. Friend would be prepared to tolerate it and would not put his targets above that assessment.
  There is another element of flexibility that concerns the plans for public expenditure. The public expenditure White Paper, which was published a fortnight ago, and the various comments on public expenditure in the Budget documents emphasise the Government's commitment to maintaining public expenditure in real terms for the indefinite future. If the economy is to grow—as all yesterday's figures forecast, albeit rather more slowly than I would like—it is not right to insist that every penny of
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  that growth should go to produce tax cuts rather than extra public services. We all know that there must be a choice between higher public expenditure and tax cuts.
  Tax cuts can be, and in many circumstances are, an important part of a Government's strategy, not least because of their impact on output. But in assessing whether the benefit should be felt in tax cuts or extra public expenditure, we must remember that public expenditure can also promote output by, for example, increased training. My hon. Friend the Member for Wyre Forest (Mr. Bulmer) rightly asked for that, because if there are labour shortages we should ensure that training is adequate to meet them. Another form of public expenditure that our competitors undertake, and that we should also undertake, is public expenditure to promote and support the development of competitive enterprises to participate in international trade. The idea that all public expenditure is a burden is not borne out by the facts.
  Furthermore, we must remember that there are services which, for the vast majority of our constituents, are supplied only by the state. Education and health are the two most prominent examples, but defence and law enforcement could also be mentioned, as well as all the infrastructure capital investment projects that are provided only by the state. It would be wrong of us to preclude any possibility of spending some of the additional wealth that we create as a result of that growing economy on improving those aspects of our national life, just as it would be wrong to say, when the economy is growing, that we are not prepared to tolerate increases in public expenditure which could result in increased pensions or increased provision for the sick and disabled.
  It would be a mistake to imagine that we can assume for the indefinite future that public sector employees will be happy to see private sector employees' living standards rise while theirs are held stable. That is a perfectly acceptable and sensible policy in the short term, and of course we do not want to see public sector wages out of control, but we cannot sensibly imagine that public sector employees will be content indefinitely to see their wages held in real terms while the wages of others rise.
  For the moment, I give this Budget two cheers. I give it the first cheer because it gives us a very clear view of what the Chancellor's plans are and where he is going. I give it a second cheer, because it has undertaken some major and important tax reforms. The third cheer will be deferred until my right hon. Friend the Chancellor has delivered a good growing economy. I look forward in keen anticipation and expectation to the day when it is delivered.
  8.37 pm
  Mr. David Winnick: I regret that I missed some of the earlier debate as I was in a Select Committee and had other commitments in the House. In previous Budget debates I have asked at the start, as I do now, the following question: will the proposals have any effect on reducing the large-scale unemployment?
  As we know, unemployment has continued to increase over the past few years. However, this Budget will not do anything to reduce it. Neither the Chancellor in his speech yesterday nor the Prime Minister in her reaction to unemployment or in her response to debates and questions in the House seems to grasp the plight of those who are denied a right to a job. I noticed that the hon. Member for

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  Loughborough (Mr. Dorrell) expressed similar reservations towards the end of his remarks. The danger is that the level of unemployment that we have had for some time will be seen as natural and inevitable. Even if there was a modest recovery, as my hon. Friend the Member for Motherwell, South (Dr. Bray) pointed out, such mass unemployment might still be seen as inevitable. Labour Members totally reject the notion that almost 4 million people have to be denied a job for recovery to take place.
  Any Budget that does not deal with that cancer in our society must be considered a failure. Despite all the cleverness of the Chancellor of the Exchequer's presentation yesterday, it will not add up to a success unless the Budget's proposals lead to a substantial reduction in unemployment.
  Like my hon. Friends, yesterday I saw Conservative Members standing up cheering and waving their Order Papers at the Chancellor of the Exchequer as he concluded his speech. As I watched, I wondered how many of the unemployed, especially the long-term unemployed, and how many of their families who are desperately trying to live on inadequate incomes would give that speech the same enthusiastic welcome when they heard it on the television or read about it in the press. It is interesting that in yesterday's debate the hon. Member for Staffordshire, Moorlands (Mr. Knox) said:
  "The Budget will … be judged not on the 'technical changes' … but on its general effect on the well-being of the British economy."—[Official Report, 13 March 1984; Vol. 56, c. 323.]
  He said that the Budget in that respect was "most disappointing."
  We needed a Budget that stimulated demand in the economy and gave a real boost to manufacturing industry. That is certainly what we need in the west midlands, where, under this Government, unemployment has risen from 5 per cent. to 15 per cent. and to 17 per cent. in my local travel-to-work area. Behind those percentages are the people involved. Such is the economic climate now that, once they have lost a job, or on leaving school cannot find a job, they lose the right to earn a living and—to use a phrase often used by the Prime Minister—the right to stand on their own two feet.
  As in previous Conservative Budgets presented by the right hon. and learned Gentleman who is now Foreign Secretary, we were told yesterday that recovery is on the way. That has been a familiar promise in Budgets in recent years. I do not believe that this Budget will be any more successful than those presented by the present Foreign Secretary.
  The Opposition welcome the increased tax threshold, because a number of people on low incomes will not have to pay income tax. Many of us have urged that for some time. However, after the changes take effect, more than three out of four families poor enough to receive family income supplement will still be subject to income tax.
  The Government have emphasised the shift in the burden of taxation away from the rich towards the poor. We remember the promises about reducing the taxation burden. The promises were believed by many, but the figures show, for example, that only those with incomes of £18,000 a year—about £345 a week—now pay less
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  in income tax and national insurance than they did in 1978–79, the last year that a Labour Government were in office.
  For a married couple with two children on two thirds of average income, the tax burden has risen 7 per cent. since this Government took office. Even worse, the tax burden of a couple with two children on half average income has increased by over one third. That is without the increasing burden of indirect taxation on those on limited incomes.
  It is estimated that all the proposals in the Budget will mean that the low paid will pay at least 91p a week more in indirect taxation. It will be interesting to see whether the Minister challenges that estimate. If it is correct, it will certainly cancel out much of the income tax gain for such people. The poor suffer most from increased fuel charges, the substantial increase in council house rents and other essential household costs.
  I urge yet again that the long-term supplementary rate be given to people who have been unemployed for 12 months or more. It is as if the Government were punishing the unemployed for being unemployed. How ridiculous it is, when it is so difficult in the west midlands and throughout much of the country to find a job, to say that those who have been unemployed for a year or more, through no fault of their own, should be denied the increase. The increase in supplementary benefit may not mean a great deal to Ministers or to Conservative Members, but it would at least give the long-term unemployed the opportunity to provide for their families somewhat better than they can today.
  Pensions should be increased more substantially than is likely to be proposed next month. Proposals to contain public expenditure and to continue cuts in all types of public services not only cause harm to the community, but lead to even more unemployment. We must bear in mind that a number of people's housing benefits will very shortly be reduced as a result of Government policy.
  For all the reasons that I have described, I believe that the Budget is disappointing. It will do nothing to help those who desperately need a job. It is likely that when the next Budget is presented the unemployment level will the same as it is today, if not worse.
  8.46 pm
  Mr. Nicholas Budgen: The hon. Member for Walsall, North (Mr. Winnick) was right to emphasise the importance of unemployment and the way that it has affected the west midlands. Wolverhampton's experience is similar to that of Walsall. The hon. Gentleman was a little ungenerous in the way that he attacked my right hon. Friend's Budget. I should have thought that he would applaud the abolition of the national insurance surcharge. In previous years I have suggested that that tax should be abolished, and I recollect that the hon. Gentleman agreed with me.
  I should have thought that the hon. Gentleman would be pleased at the way in which, albeit gradually, the subsidies given to capital are being reduced. That means that when business men make a choice between robotics and the man in the unemployment queue, the tax system, at least, does not push him towards robotics. I should have thought that the hon. Gentleman would be generous enough to refer to that.
  I am one of those who called for the Green Paper on public expenditure. We called for the Green Paper for a

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  basic political reason. We did not want to discuss the minutiae of public expenditure, but we believed that there was a need for a restatement of the Government's political priorities. We felt that we had not cut public expenditure as much as we had hoped in this Government's first Parliament. The general feeling was that the Government lacked direction and decisiveness about public expenditure.
  It is heartening that the Budget has given a new sense of decisiveness and direction to the Government's political feel. There is no doubt that, perhaps for the next fortnight or month, the sense of elation and satisfaction on the Government Benches as tax policy is dealt with in a direct, decisive and intellectually distinguished way will carry the Tory party along.
  We also need a proper statement on the political preferences for public expenditure. We want to know whether the Government have a serious intent to reform the way in which the NHS is financed. We wonder whether the Government intend to reduce public expenditure on defence. None of those questions is even referred to in the public expenditure Green Paper. The time that it was published shows that the Government know that it is a wholly inadequate response to the political cry from the Conservative Benches. If the Government had wanted to provide even some of the questions, let alone some of the answers, they would have published the document at a time when it could receive proper public discussion and interest. It has been thrown in with an extremely interesting Budget so that the Government can say, "The Green Paper was published and, therefore, we have met your demands."
  When my right hon. and learned Friend the Chief Secretary referred to the Green Paper today, he did not say much about it. He was quite right, because there is not much to say about it. We need something more fairly quickly so that the sense of direction that has been lacking is given back to the Tory party in order that it may move forward in an agreed and cohesive way, rather than simply treading water.
  My second point relates to the EC. It is obvious that our relationship with the EC is moving towards a critical stage. The Government must make a difficult choice. Some say that there are signs within the corporate character of the Government that they are prepared to risk a break-up of the EC if they do not get what they demand. Others say, "Never mind the rhetoric. They are fudgers and conformists and, in the end, they will not risk a break." I vary between those two positions according to whether I had a good or a bad breakfast. There is plenty of evidence to support either of those positions. No one can tell what will happen.
  It is certain that if the forces of fudge win, the advocates of fudge will come to the House and ask for an increase in own resources—the 1 per cent. creamed off VAT. From a technical and legal standpoint, all that is then required under section 1(3) of the European Communities Act 1972 is for an Order in Council to be approved by each House of Parliament. In theory, there could be a short debate after 10 o'clock, and we would then lose control of a further slice of our public expenditure—the Eurocrats would say for ever, and less helpful people would say at least until Britain leaves the EC.
  Is it not extraordinary that today we start on the necessary long and detailed journey by which the House of Commons authorises for only one year the extraction of
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  taxes from our fellow citizens? We shall have debate after debate on the minutiae of taxation. Yet the British people run the risk of losing a substantial slab of their money—perhaps for all time—to the EC. The Government propose that it will be lost after one short debate in the House of Lords and one short debate in the House of Commons.
  I am sure that it comes as no surprise to you, Mr. Deputy Speaker, that the legal and technical position has been substantially amended by the good sense, kindliness and generosity of Lord Whitelaw. The House may recollect that when the European Assembly Elections Act 1978 was passing through its stages, many people said that if we had direct elections those directly elected would wish to enhance the powers of what they would impudently call their Parliament. It was argued in the House that there should not be direct elections. Lord Whitelaw was wise about that. On 24 November 1977 he responded to those who feared an increase in the power of the European Assembly by saying:
  "We must know exactly what the Bill will do and where we stand under previous legislation and this legislation. I do not imagine that anyone is suggesting that we should have another Act of Parliament if the Assembly wished simply to change some of its own procedures. On the other hand, if it were minded to increase its powers at the expense of national Governments or Parliaments, it is unthinkable to anyone that such a change could happen, or could be allowed, without an Act of Parliament in this House. I should have thought that that was undoubted. If that is the case, it may have to be written into the Bill to make sure that it is so. We ought to know how it will be done and whether, if it be necessary, the Government will introduce a new clause to that effect. No one imagines that it could be otherwise. We simply wish to have it made perfectly clear during the passage of the Bill."
  My hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) intervened and asked about further powers. Lord Whitelaw continued:
  "I think that my hon. Friend misunderstands my purpose."
  This is the authentic voice of generous Lord Whitelaw.
  "I was not seeking to be narrow or legalistic in the matter. If I did not explain myself properly to my hon. Friend, let me try again. If such circumstances as he outlined should arise, making a very clear increase in powers of the Assembly at the expense of national Parliaments and Governments, surely neither he nor anyone else is suggesting that that should not be done by an Act of Parliament here".—[Official Report, 24 November 1977; Vol. 939, c. 1780–81.]
  I remind the House that the Assembly forms part of the budgetary authority of the EC institutions. The Assembly can—indeed must—approve the budget and it has powers to reject the budget; and, when the funds given to the EEC budget are increased, that is an increase in the powers of the Assembly.
  I agree wholeheartedly with what Lord Whitelaw said. If there is to be a fudge and an application by the fudgers to this House for an increase in own resources, let it be done by an Act of Parliament and let public opinion decide on the various complicated factors which will be brought forward. Let public opinion decide, for example, whether it is vital that Spain and Portugal come into the EC. Let all these factors be decided by the people as they apply their interest to an Act of Parliament going through this House.
  9.2 pm
  Mr. Tim Eggar: I hope that my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) will forgive me if I do not follow him down the second path that he took. On the first, I, too, argued for

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  the publication of the Green Paper, but I do not take such a pessimistic view of the outcome of that request. It may have been less than we hoped, but it is slightly more than I feared. I hope that it is the base building block on which the Select Committee and individual hon. Members can proceed.
  Time makes it inevitable that my remarks will be staccato rather than that I should develop a sustained argument, I shall pick out three detailed points in the Budget. First, the reduction of stamp duty on house purchase is a welcome step towards a more mobile society—a step which I hope my hon. Friend the Minister for Housing and Construction will follow up, particularly in the private rented sector.
  Secondly, I welcome the change in the treatment of stock options. That is long overdue. However, I hope that Treasury Ministers will make it clear that firms should take advantage of the generous treatment of stock options, not only for their top executives but throughout their companies, because that is the real way to get employee ownership and participation in capitalist enterprises.
  While I welcome those aspects, I doubt the equity of the Chancellor's decision to scrap the investment income surcharge. It is difficult to defend giving away £360 million to people who have capital of perhaps £80,000 each, while measures are being taken to withdraw housing benefit from people with small occupational pensions.
  However, the overall judgment of the Budget must not be made on detailed points, welcome or unwelcome as they may be. The detailed judgment must be made on the core of the Budget—the medium-term financial strategy and the corporate taxation reforms.
  First, the MTFS. I was concerned, when the Chancellor on super Tuesday spent some time discussing what may be nicknamed "the big M0", that he elevated the monetary targets, giving them an importance that they last had in 1981. I hope that I am wrong about that. I hope that the move to M0 and M2 simply marks the evolution of the management of monetary aggregates, rather than a change and a raising of the importance of those monetary targets. On a careful rereading of his speech, I believe that that was the Chancellor's message. It is important that the Chancellor should continue to look at all the monetary aggregates and the exchange rate.
  Initially, I was worried—I agree with other hon. Members—about the PSBR targets. Obviously a reduction from £10 billion, which is this year's likely outturn, to next year's target of £7·25 billion is dramatic. But when that figure is examined in more detail, it is not as restrictive as one might suggest.
  Next year, asset sales will be at least £1 billion higher than this year. The cash flow effect of the welcome imposition of VAT on imports will add another £1·25 billion. Those who believe that the PSBR can be higher than it has been in past years can reasonably claim that the target for which the Chancellor is aiming is more likely to be £8·5 billion or £9 billion than the £7·25 billion that he spelt out in his speech.
  The most important point, which I believe is buried in the Red Book and has not really been brought out in the press, is that PSBR targets beyond 1984–85 are to stay at £7 billion each year. The Chancellor, consciously or unconsciously, has struck a bargain. He has said to the spending Ministers, "If you agree to keep your spending
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  levels in real terms"—I doubt whether they can achieve that—"I, in my turn, will agree to keep my borrowing requirement level in real terms. In future years, I shall not pull a fast one on you and take back some of the money you have saved by reducing my borrowing requirement; I shall ensure that the excess cash goes into tax reduction." That is a reasonable bargain, to which I hope the Chancellor will stick in the next four years.
  I hope that my right hon. Friend the Chancellor—I made this point in the debate on the public expenditure White Paper—will be flexible in his approach to the PSBR, monetary aggregates and total public spending. We must recognise that international events may mean that a plan set now for two years ahead will not be sustainable in the light of changed circumstances. I believe that the Chancellor has the imagination to recognise and act on that point. We must have a slightly more flexible approach to these matters than was adopted in the past.
  The most important factor about the changes in corporation tax is that they will liberate a vast army of tax advisers so that they can do something productive. A large number of skilled, qualified, able people in companies and in the City——
  Mr. Rooker: Some of them are in here as well.
  Mr. Eggar: That may be true—have devoted their energies to rearranging their affairs to cheat the tax man. They have avoided taxation. They have said that they managed their tax affairs as efficiently as they could. The extent to which such practices were adopted was absurd. If the tax changes do nothing else, the liberation of a number of skilled and able individuals will have been extremely important.
  I offer one word of caution. At present we all welcome the corporate tax changes. I suspect that, in two or three weeks' time, when the pressure groups and the different industry lobbies have worked out the implications of the tax changes for them, they will come whooshing along to hon. Members. We will be lobbied extensively about why, although the measure is fine as a general approach, it is rotten for a particular firm or industry. My hon. Friends must be stalwart in their defence of what the Chancellor has done. We must remember the greater good, because I am sure that that is to the country's overall advantage.
  I hope that in the next Budget my right hon. Friend the Chancellor will apply the robust approach to personal taxation that he has applied to corporate taxation. He has made a start. He has dealt with allowances. He has removed the absurd tax allowances for life assurance investment. I hope also that, by that time, my right hon. Friend the Secretary of State for Social Services will have brought forward a plan on the pensions front. I hope that my right hon. Friend the Chancellor will find room to remove tax incentives on a number of pension investments and will tackle the subject of mortgage interest relief.
  If there is one anomaly above all else throughout our tax system, it is the way in which the individual is encouraged to invest in property as against any other form of investment. I believe that we have this whole matter out of proportion. Year by year, the tax cost of investment in housing increases, and we have an almost unlimited bill. It is a difficult subject with which to deal politically and practically, because of the effect on house prices and everything else, but I believe that the Chancellor should apply the same logic to personal taxation as he did to

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  corporate taxation. It is something to which he must address his mind. There are a number of other points I would like to make, but I will finish there.
  9.11 pm
  Mr. Michael Hirst: After sitting here for six and a half hours, I am pleased to be able to add a few words in conclusion from the Government Back Benches. I welcome the proposed reform of corporate taxation as a bold and imaginative step. As one who has spent his professional working life as a practising accountant, I know well the difficulties of advising clients on a scheme that seems perfectly reasonable and proper one year but which is promptly turned on its head because of budgetary changes the following year.
  Uncertainty has a most corrosive effect upon confidence. It is confidence that the Government have started to rebuild. I saw yesterday's statement by the Chancellor being welcomed, not just because it brought some overdue reforms, but, perhaps more importantly, because it introduced a degree of stability and certainty for the rest of Parliament and, therefore, for the planning and business decisions taken by the business community.
  Too often I have seen investment decisions taken on the basis of the tax implications rather than on whether the investment was commercially justifiable. I was known as something of a curious species in my profession because I used to advise people to make an investment if it was worthwhile and profitable, whereas I often found colleagues who advised an investment because there was some significant tax saving to be achieved.
  The "new Lotus" syndrome is well known—the successful business man who has a fancy motor car or a new piece of plant which he has bought because some amorphous accountant has told him that it is sensible to do so. I welcome the budgetary measure that will remove the distortion, which I suspect many of us feel that there has been in capital investment. I hope, however, that during the transitional period there will be a stimulus for capital investment and that the investment boom that we see at the moment will be sustained until a lower tax regime is capable of sustaining it naturally.
  The right hon. Member for Glasgow, Govan (Mr. Millan) is saying something from a sedentary position that I cannot hear, but I heard him earlier today speaking about his worry over the jobless. Coming from the same part of Scotland as he does, I am well aware of the problem and keenly aware of the anxiety felt there. I believe that lower rates of corporate tax will do much to stimulate business confidence and investment, which will lead subsequently to that virtuous circle of job creation.
  I welcome the commitment we heard from the Chancellor yesterday to simplify the tax system. I acknowledge that the Budget goes some way in that direction. I believe that it could have gone further. I listened, for example, to what my right hon. Friend proposed to do for development land tax and how, by raising the threshold, he would remove a third of the cases. How sorry I am that he did not abolish the tax altogether and allow the operation of capital gains tax to tax such gains.
  The abolition of development land tax would have been a symbolic gesture greatly welcomed by hon. Members such as myself who yearn for a simpler fiscal regime. I advance that suggestion for inclusion in the 1985 Budget.
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  I proposed in my maiden speech on the Finance Bill when I came to the House last year that stamp duty should he reduced.
  Probably the most welcome feature of the Budget is that the Chancellor has mapped out the direction in which the country is going and has given a clear indication of the benefits that can be realised, provided that we continue to be vigilant about the proportion of the nation's resources taken up by public expenditure. Opposition Members should not assert that the Government lack direction or the purpose and will to make radical reforms, which the country needs and wants.
  I hate to end on a slightly discordant note, but, after sitting for nearly six hours to hear the Opposition's contributions, my pleasure at the Chancellor's announcement is matched by a certain foreboding and sadness that there has been little recognition by the Opposition that we have taken bold, imaginative and good steps that will help the economy, and play a vital part in creating the investment from which future jobs will come.
  9.16 pm
  Mr. Terry Davis: I should like to begin with three comments on the Chief Secretary's speech.
  I shall not follow him in style. His speech contained much sarcasm and he will probably conclude, on reflection, that that was unwise. We shall have a long Finance Bill and spend a considerable time in Standing Committee. The Chief Secretary will have plenty of time to reflect that he has put the atmosphere of Standing Committee at risk today. The Committee may not be so agreeable as he would wish. As to his remarks about my hon. Friend the Member for Thurrock (Dr. McDonald), I hope that he will follow them by making a point of being present to listen to her contribution tomorrow.
  The Chief Secretary complained that my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) did not discuss the Green Paper, "The Next Ten Years: Public Expenditure and Taxation into the 1990s". We shall be delighted to debate the Green Paper, but today's debate is on the Budget. I agree with the hon. Member for Wolverhampton, South-West (Mr. Budgen) that we need proper time to debate the Green Paper rather than linking it with the Budget debates. We shall be delighted to debate it before the summer recess and we expect the Government to provide time for that.
  Listening to the Chief Secretary today and the Chancellor yesterday afternoon, I was struck by the similarity of their measures and their definition of aims to those of Treasury Ministers in 1979. That Budget was also the first Conservative Budget after a general election, with a new Conservative Chancellor. The increase in VAT and indirect taxes was greater than yesterday's increase because Treasury Ministers almost doubled VAT on that occasion. A proportionately larger increase in personal allowances for income tax was also introduced, and it took 1·3 million people out of tax—a higher figure than this year.
  The 1979 Budget was also described as a tax reform Budget and an incentive Budget. We were given to understand that it would encourage entrepreneurs and foster enterprise. Today, the Chief Secretary described the aims of the Budget as being to improve incentives and encourage enterprise in almost the same words that we heard five years ago. Yet the result of the 1979 Budget and

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  its successors has been an increase in the amount of taxation and an increase of more than 2 million in the number of people unemployed.
  Let us spare a moment to consider some of the details of this Budget. On this occasion, the Government have increased VAT by including take-away food. I wonder how the Prime Minister squares that with her constant exhortation that people should invest their redundancy compensation in new enterprises. Many people have invested their redundancy money in taking on franchises for fast food take-aways. Now they will feel the impact of the Budget.
  The construction industry will feel the effect of the extension of VAT to building alterations. I agree entirely with my right hon. Friend the Member for Glasgow, Govan (Mr. Millan). The construction industry will certainly not be helped by the change, and it needs and deserves help. It will also not be helped by the abolition of capital allowances on industrial buildings. The reduction or abolition of stamp duty on houses will have some offsetting effect, but it is doubtful whether it will equal, let alone exceed, the penalties imposed on the construction industry by the other measures.
  As my hon. Friend the Member for Motherwell, South (Dr. Bray) pointed out, the extension of VAT to imports for one year only will bring a one-off lump sum windfall of £1·2 billion. It merely brings forward revenue that the Treasury would have received in any case. How will this year's tax cuts be paid for next year? This Budget is supposed to be for this Parliament and beyond. It is like oil revenue, but with a shorter time scale. What will happen next year? Would it not have been better to invest the windfall rather than using it for tax cuts? I put that question to the Chief Secretary and no doubt we shall be able to discuss it further with him in Standing Committee. The Chancellor's response when asked how he will find the £1·2 billion and how he will deal with the longer-term losses when oil revenues begin to decline seems to be that a reduction of tax for people on high incomes will lead to greater enterprise and higher growth. The Government tried that in 1979 and merely made the recession worse than it would otherwise have been.
  For most people, the changes in personal allowances will mean £1 per week for a single person and £2 per week for a married couple. People on higher incomes will do better, as one expects with a Conservative Government. The reductions in tax are most welcome at the lower end of the tax scale, but let us not for one moment accept the Government's assertion that those people have been taken out of tax. The Government have not removed all taxes on wages up to £40 a week for a single person or £60 a week for a married couple. National insurance begins at a much lower level than that, at wages of £30 per week, and national insurance is a tax of 9 per cent. on wages. The Government have done nothing about that.
  As a result of the changes in tax allowances, a single person earning £40 per week will be about £1 a week better off and a single person earning £500 a week will be £6 better off. A single person earning £1,000 a week—£50,000 per year—will be better off still, while a married couple with the same earnings will be £17 a week better off. Some people with incomes of £50,000 actually work to earn that money, but most do not. In most cases, it is unearned income from investments. It makes little
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  difference whether they are single or married. People with unearned income of £1,000 a week or £50,000 a year will be nearly £150 a week better off as a result of the Budget. Not many people work for £50,000 a year, but rather more work for £25,000 per year. They will be only £6 a week better off, but if the £25,000 is unearned they will be £60 a week better off. There is a difference here, not just between those on high incomes and those on low incomes but between those with incomes from investments and those who work for a living and receive wages. This Budget is not a reward for enterprise or for business men. Nor does the Budget do anything for those who are sick and disabled and cannot work. I qualify that criticism. We all welcome the abolition of the tax on cars designed for disabled people. However, what is there in the Budget for those who are sick? In the first part of the Budget announced last week,, there was an increase of 15 per cent. in charges paid by those people in some parts of the Health Service.
  The Chancellor and Chief Secretary have told us that the changes in tax allowances will take 100,000 widows out of tax. They also regard as a cause for congratulation the fact that half those who will benefit from the abolition of investment income surcharge are retired. But people with unearned incomes of £7,000—the point at which that surcharge began—have capital of about £70,000. What about all the other widows, widowers and retired couples with small private pensions? They will get nothing from the Budget, because the age allowance has only been indexed. There has been no real increase in that.
  Equally, nothing is offered to those pensioners who depend entirely on the state pension topped up by supplementary benefit, except the abolition of excise duty on paraffin. While that is welcome, the Chancellor and the Chief Secretary should not be surprised if pensioners throughout Britain, huddled around their paraffin heaters, are less than grateful to someone who can afford to abolish investment income surcharge but cannot afford to give a real increase in pensions, or supplementary benefit rates for pensioners, or the heating allowances that are given to pensioners through supplementary benefits. They will be especially less than grateful in view of that fact that they often use those paraffin heaters because they cannot afford to turn on the gas or electricity, yet this is the same Chancellor who has forced the gas and electricity industries to put up their prices.
  What about families with children? A major omission from yesterday's Budget was any comment, statement or forecast of what would be done to child benefit. When challenged by my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley), the Chief Secretary said that we should not read too much into the figures in the Red Book, which suggest that child benefit will be increased by only 35p. We were told that we must wait until June.
  It is not necessary to wait until June if there is to be a larger increase than the rate of inflation. We need do so only if the Chancellor and the Secretary of State for Social Services are waiting for the rate of inflation in May. Had they intended to announce a real and genuine increase in child benefit, it could have been announced today. However, we shall be patient and wait until June, but I should tell the Chief Secretary—I hope that he will tell the Chancellor—that, come June, we expect the increase to be at least 80p a week.

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  That is what the Conservative party promised when in opposition. [Interruption.] It seems that the Chief Secretary is not aware of that promise. It was made in a Conservative party press release in 1977. Even then it was making promises which, I hope, it expected to honour after the general election, because it specifically said:
  "the next Conservative Government which is pledged to major reductions in direct taxation would regard improvements in Child Benefits, which are replacing Child Tax allowances, as part of this process".
  Elsewhere it was stated that the Conservative party was committed to treating increases in child benefit in the same way as reductions in taxation. It was also said that child benefit was replacing the child allowances, and that therefore any changes in allowances for taxation would be reflected in child benefit. So we shall expect 12·5 per cent. on child benefit; otherwise a commitment that was given by the Conservative party in opposition will be broken. The pledge will be broken unless child benefit goes up by 80p this year, in line with the changes in personal tax allowances.
  Let us consider the position of a young couple buying a house. We have heard from several speakers about the reduction in stamp duty. I hope that the Minister, in replying to the debate, will tell us how many people are affected by that change. The Chancellor of the Exchequer said on television that 90 per cent. of first-time buyers would not now have to pay stamp duty, but how many of those people would not have been paying stamp duty before the Budget? The figure then was £25,000 and a house below that figure did not incur stamp duty. Will the Minister tell us how many people will really benefit? Will he also tell us how many of those people will lose the benefit of using a life insurance policy as an endowment mortgage?
  I understand from reports in the press that as many as 60 per cent. of people taking out mortagages use a life endowment policy. I doubt whether they will do it in future, because there will be no tax advantage to them. But if the money is available to improve the tax position of people who are buying houses, why do the Government treat so unfairly those people who receive housing benefit? That is a point to which I and my hon. Friends will return frequently during the Budget debates.
  The hon. Member for Mid-Norfolk (Mr. Ryder) said that he welcomed the changes in stamp duty because there was a need for greater labour mobility. He urged the Government to abolish stamp duty on all houses because people were needing to move in order to change their jobs or to find work. He received a straight reply from the hon. Member for Caernarfon (Mr. Wigley), who asked where the unemployed were to go in their search for jobs. In the 1920s and 1930s, as the hon. Member for Caernarfon said, the people of Wales went to industrial cities such as Birmingham and often found jobs there. I can tell the House that they do not find jobs there now. The abolition of stamp duty may or may not be a good measure, but it has nothing to do with improving the mobility of labour.
  The unemployed will not get anything out of the Budget. As my hon. Friend the Member for Tottenham (Mr. Atkinson) said, they are the people who have made the greatest sacrifice in the fight to reduce inflation. The people who have lost their jobs are the casualties in the fight against inflation. There are no benefits in the Budget for them, unless we are to be told that there will be something for them in June. They are entitled to another
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  £1 a week in real terms if they are not to lose as a result of being unemployed. A single unemployed person should be getting another £1 a week if he is to be treated equally with his colleagues who still have jobs.
  The Budget will not do anything to provide jobs or to encourage the provision of jobs. We are told that it will produce many jobs because it is a Budget designed for savings and investment. The Chancellor of the Exchequer talks as if those things are the same. That may be correct from the point of view of economists, but there is a difference between savings and investment and between savers and investors in the real world. This Budget is bad for savers.
  I have already referred to the change concerning life insurance policies. One of the first forms of savings to be used by most people who can afford to save is a life insurance policy. I am surprised that this part of the Budget has not been criticised by anyone on the Conservative Benches. Indeed, it was actually welcomed by the hon. Members for Loughborough (Mr. Dorrell) and for Winchester (Mr. Browne). The hon. Member for Loughborough said that the Government were re-elected on the promise of good news to come. I am not sure whether he regards the abolition of tax relief on life insurance as part of that good news. I am confident that he did not include it in his election address, and that no other Conservative candidate included it. Indeed, it was not included in the Conservative party manifesto.
  Mr. Dorrell: If the hon. Gentleman reads my election address, he will find that I said that the party was committed to reducing marginal rates of tax. Would the hon. Gentleman explain to the House any other way of reducing marginal rates of tax without tackling the problem of tax allowances?
  Mr. Davis: That is a very interesting point, but the hon. Gentleman did not tell the electorate of Loughborough that the Government were going to abolish the tax relief on life insurance policies. That was not in the Conservative manifesto. It was, however, in the Conservative campaign guide. I concede that point. It was not listed as a promise by the Conservative party. It was listed as a threat from the Labour party. The electorate knows better now.
  The Chancellor is also extending the composite rate of tax to interest from bank deposit accounts and interest on money increasingly held in bank current accounts and, I understand, in trustee savings banks. That composite tax is a tax on people who were not previously liable for tax on the interest which they receive on their savings. According to the Committee of London Clearing Bankers, there are 3 million people in that category—3 million people who are now being brought into income tax, as compared with the 800,000 who have been taken out. Some of them may well be the same people.
  Furthermore, for the first time a Government will be taxing people on supplementary benefit. It is possible for somebody on supplementary benefit to have up to £3,000 in a bank account without having any reduction in supplementary benefit. Many old people keep money in a bank account which is intended to be used when they die; it is money to pay for their funeral. The income on those small savings will now be taxed at a composite rate, whereas previously it was not taxed.
  The composite rate is good for investors, because they are paying much more than the composite rate. People

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  with a large amount of savings will benefit from this change, just as they will benefit from the investment income surcharge. They are people with an investment income of over £7,000 and people who have £70,000 in capital. They will benefit also from the reduction in stamp duty on share transactions. The people who can afford to invest £25 a week in shares through the share option scheme will also benefit. Then there is the reduction in capital transfer tax. That is not going to foster enterprise. That is a reduction in taxes paid by people who are dead.
  This Budget may be good for investors, but I question whether it is good for investment. The hon. Member for Winchester thinks it is, but I doubt it very much. I have already mentioned the tax on life insurance policies and the composite rate on bank accounts. Those changes may well lead to less money being entrusted to insurance companies and more money being put into bank deposit accounts because of the effect on people with very high incomes. They may well lead to less investment in new enterprises and to more money being put into bank deposit accounts for the same reason. It pays a person with a very high income to use a form of investment on which the composite rate of tax will be paid, because then less tax is paid.
  Then there is the reduction in corporation tax. What is going to happen to that money? How will the higher profits be used? It is quite possible that they will be used to pay higher dividends or that the profits will go abroad, thanks to the change in exchange controls.
  The phased withdrawal of capital allowances by 1986 will simply bring forward some investment which otherwise would have taken place in future years. As my right hon. Friend the Member for Govan explained, it will not lead to extra investment, unless it is panic investment for the wrong reasons—the very reasons that the Chancellor deplored yesterday.
  The Chief Secretary seemed to accept today that there will be less capital investment as a result of the abolition of capital allowances. He made the point that our capital stock is higher than in other countries. I believe that he is right on that point. The problem, he said, is that our capital stock is used less effectively. I am sure that he is right on that point, too. But the Chief Secretary draws the wrong conclusions.
  First, the right hon. and learned Gentleman assumes that our capital stock is as good as that of our competitors. He assumes that the plant and machinery used by British industry is as up to date as that of our competitors; and he forgets that capital allowances are given for investment in new plant and machinery, not existing capital stock. As for his second point about our capital equipment being used less effectively than that of our competitors, the Chancellor expressed the same idea in a different way when he said that we need more profitable investment. But why is our capital stock being used less effectively? The problem is that the slump in our country has been deeper than that in other countries. Profits depend on sales and the size of the market, and the size of the market depends on growth in the economy. The trouble is that the Chancellor does not accept that, in order to achieve a bigger market for industry, we need growth in the economy, and that manufacturing investment leads to economic growth.
  Public expenditure and manufacturing investment are the twin engines of growth. The trouble is that the
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  Chancellor has an overwhelming dislike of public expenditure and a general disdain for manufacturing investment. Yesterday, he actually defended his Budget by saying that the abolition of capital allowances and less investment would lead to more jobs. My right hon. Friend the Member for Govan has dealt with that.
  Of course, the Labour party welcomes the abolition of the national insurance surcharge, because it will reduce costs. The Government should have done that a year ago, but better late than never. However, that is the only help given to industry, and it will not foster growth in the economy. The reduction in corporation tax will also not foster growth. It has not been introduced as an incentive. If that is supposed to be the reason, why is the reduction to be applied to last year's profits? The phasing out of corporation tax means that it will be better for companies to use creative accounting skills to defer their profits.
  The changes, especially when the reduction and abolition of capital allowances are taken into account, will not affect all businesses in the same way. Manufacturing industry pays little corporation tax and will derive little benefit from the reductions because manufacturing companies have built up substantial capital allowances to offset against corporation tax.
  However, as my right hon. Friend the Member for Govan said, some services, particularly financial services and the City of London, will benefit, because they do not have capital allowances unless they buy a new computer. Those in the City who do not take advantage of capital allowances will certainly benefit from reductions in corporation tax.
  If the Chancellor had really wanted to help industry, he would not only have abolished the national insurance surcharge, but increased the public sector borrowing requirement to pay for public sector capital investment.
  This is not a neutral Budget. It is a very good Budget for those with high incomes, but disappointing for the rest. It is a very good Budget for financial institutions, but bad for manufacturing companies. It is a good Budget for the City of London, but mainly irrelevant for the city of Birmingham, the city of Manchester, the city of Newcastle, the city of Glasgow and all the other cities that depend on manufacturing industry.
  9.42 pm
  The Minister of State, Treasury (Mr. Barney Hayhoe): I thank the hon. Member for Birmingham, Hodge Hill (Mr. Davis) for restricting his remarks so that my hon. Friends the Members for Strathkelvin and Bearsden (Mr. Hirst) and for Enfield, North (Mr. Eggar), who had been here all day, could make their speeches. I note that the hon. Member for Hodge Hill took most of that time out of my allocation rather than his own, but he is only paying me back, because last Tuesday he allowed me more than my fair share.
  The congratulations to my right hon. Friend the Chancellor of the Exchequer have come from all parts of the House. A welcome and elegant tribute was paid by the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), who has explained that a previous engagement prevents him from being present for my speech.
  However, perhaps the most eloquent tributes have been the speeches of the Leader of the Opposition and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), which were so far below their normal standards that one can only assume that the strength of the

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  content and presentation of the Budget rendered them hardly able to put together a coherent speech. There has been an almost unique reaction from the press, the public and the House to the Chancellor's speech. It was a very remarkable Budget.
  Much of today's debate has covered well-worn ground, but some detailed questions were asked and I shall answer some of them.
  My hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) asked about caravans and holiday lettings. My right hon. and learned Friend the Chief Secretary was quite right to say that this is a matter of definition and that if caravans meet the detailed requirements of the definition of holiday lettings they will qualify for tax relief.
  The right hon. Member for Sparkbrook asked about meals on wheels and local authority building contracts. When a local authority is providing a meals on wheels service it will not be subject to VAT. If, however, the work is contracted out by the local authority to private contractors, the VAT charged to the local authority by the private contractor would be recoverable by the local authority. Charities that provide similar services will not be affected by the extension of VAT. I hope that that will be welcomed in all parts of the House.
  Questions have been asked about local authority expenditure on building works and whether alterations to local authority buildings will be taxed, especially if the work has been put out to private contractors. Work on the repair and maintenance of the same buildings will, as in the past, be subject to tax. The regime will not alter except that it will now extend to alterations. However, local authorities can reclaim that tax.
  The hon. Member for Caernarfon (Mr. Wigley) asked about home improvement grants. No special addition to local authority budgets to cover VAT is being allocated. Whether that is due will depend on when the work is done or when payment is made. If the work has been completed and paid for by 1 June, there will be no VAT charge. If the work is unfinished by 1 June but full payment has been made, no VAT will be charged. If the work is unfinished and payment has not been made, VAT will be chargeable. Many improvement grants relate to repairs, which have always been taxable.
  Throughout the debate, and including the remarks of the hon. Member for Hodge Hill, there has been a general welcome for the raised thresholds. Different views have been expressed about the priority accorded to this tax relief. The criticism has been made that the cash effects of the relief will be greater for the higher paid. The right hon. Member for Sparkbrook said that the Chancellor has "given away more cash". That shows that Opposition Members are in a frame of mind that leads them to think that the cash belongs to the Chancellor and the Government. It does not. The Chancellor is deciding to take less from the taxpayers' own resources, and we must always insist upon making that distinction.
  If we have a progressive income tax system, it is inevitable that the higher paid will enjoy larger cash reductions if a reduction is made in the tax system. In real terms, the tax reductions this year have been concentrated on basic thresholds. There has been no increase in real terms in the higher rate thresholds. If account is taken of the percentage of incomes taken in tax, the average tax rate, the gains are larger for the lower paid than for others. The point is well illustrated in a block chart which appears in the Financial Times, which shows that this year the
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  lower earner has done relatively better than the higher earner, who has not benefited from higher rate bands being increased by more than inflation. That is referred to in the caption and it is useful to get the record straight.
  It has been suggested that the increased thresholds will not really help the low paid. It is argued that they do not improve incentives because those who are taken out of tax do not matter all that much. I do not agree with those comments. This year's real increases in thresholds remove from the poverty trap about 10,000 who would otherwise have remained in it. It is a useful change but not a dramatic one. It must be seen in the context of the long-term programme to push up the thresholds to more sensible levels. Unless we make a start in this process, we can never attack the problem that is caused by the tax thresholds being far too low for those earning below and around average earnings. This year's progress is therefore of real value, but what is perhaps more important is that it brings yet more low-paid families within reach of the further threshold increases that we hope to achieve in future.
  Reference was made by the hon. Member for Hodge Hill, in his summing-up, to the changes in the thresholds for the elderly. It does not mean, as he indicated, that these have been adversely affected by the Budget. The allowances have been fully protected against the effects of inflation. The result is that some 60 per cent. of elderly households will have to pay no tax in 1984–85. Those who still have to pay tax will gain at least 75p a week, if they are single or widowed, and at least £1·15 a week, if they are married.
  Mr. Rooker: That is inflation.
  Mr. Hayhoe: No, that is their gain in real terms, because one is elevating the threshold.
  My right hon. Friend the Member for Guildford (Mr. Howell) referred to the aim of the Conservatives to attain a property-owning and capital-owning democracy—the one aim from Anthony Eden, and the other from Iain Macleod. We are making considerable progress, as he recognised, in owner-occupation, and the Budget makes a step, and encourages wider share ownership, directly and indirectly. My right hon. Friend suggested a link—I think that he meant an absolutely firm link—between share option schemes and wider share ownership, save-as-you-earn schemes, within any specific enterprise. I am sure that his suggestions will be carefully considered.
  The right hon. Member for Hillhead expressed concern about increases in unit costs damaging our competitive position. I believe that the intention of the Budget is to increase our competitiveness. This reduces business costs, allowing increased profits and keener pricing. That in turn means more output and more investment, and it is good for growth and for jobs. Our economic policies in the Budget present a great opportunity, and it is vital that that is not wasted. In the last couple of years, we have seen unit wage costs in the United Kingdom rise more slowly than in the early 1970s, and productivity has gone up dramatically.
  Over the past few years, the level of wage settlements has fallen steadily. Nevertheless, manufacturing wage costs of some of our major competitors—the United States, Germany and Japan—are improving faster than ours. We need to do better, therefore, and it would be disastrous to slip back into our old bad habits of increasing

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  labour costs. This, of course, means lower pay settlements than occur at present. The responsibility rests with the employers and the employees. If too much is taken out in pay, we shall not make the gains of competitiveness that are so vital. I therefore urge all those concerned in pay negotiations to remember that inflation is down, and that it is expected to fall to 4·5 per cent. by the end of the year. Those in work have been increasing their average earnings in real terms, as a result sometimes pricing others out of jobs. Increased profits and increased productivity are not the signal for large wage increases. Excessive settlements put at risk the future of firms, the jobs of people elsewhere, and the prospects of new jobs for the unemployed.
  Our policy is to create the conditions for sustained noninflationary growth. I was glad that the hon. Member for Motherwell, South (Dr. Bray) acknowledged that such sustained growth was within our growth. However, excessive wage increases could damage the competitiveness of the goods and services that we produce, and that could fritter away the opportunities now before us.
  The right hon. Members for Glasgow, Govan (Mr. Millan), for Sparkbrook and for Hillhead made their concern about jobs a central issue of their criticisms of the Budget. All called for increased public expenditure. The right hon. Member for Hillhead put in his bid at £1 billion. Indeed, he said that he would have preferred £1 billion extra spent on public sector capital spending, if need be by not even increasing the tax thresholds above basic indexation. Table 1.13 of the public expenditure White Paper, which we debated last week, shows that public sector capital spending is running at about £21 billion. Therefore, the right hon. Gentleman is suggesting that an increase of about 5 per cent. will be absolutely decisive. That suggestion typified much of what the right hon. Gentleman said.
  The right hon. Member for Sparkbrook said that he wanted to see increased public spending but he did not even put a figure on it. However, last night I heard him say on the radio that, if pushed, he might consider it right to spend £2 billion extra. The right hon. Member for Govan also said that more should be spent, although he did not say how much. He properly acknowledged that it involved an old and basic argument between the two sides of the House. The arguments that we deploy are well known and were pretty central to last year's general election campaign.
  Of course, the right hon. Member for Sparkbrook gave his verdict on that debate when he concluded in The Guardian of July last year that Labour's promise then
  "to put Britain back to work—was a net vote loser. Nobody believed that our theories"—
  his theories—
  482
  "could be put into practice".
  They did not then and they do not now. He continued:
  "Our vague hopes"—
  his vague hopes—
  "of achieving growth through Government spending were barely understood and rarely believed."
  The position is just the same now, yet the right hon. Gentleman has even forgotten the words that he then used. Today he put forward the same outdated solutions to our problems. Surely it is time that he learnt and had a new tune that he could play.
  I am also grateful for the many other contributions that have been made. My hon. Friend the Member for Wyre Forest (Mr. Bulmer) spoke of the need for much more effective management in the public sector, and explained how he believed that there was scope in both the NHS and local government for considerable efficiency savings, which would thereby reduce the burden on public expenditure and the public purse. I entirely agree with him, and as a result of the Griffiths report we hope to see a considerable improvement in the value for money achieved by the NHS. The resources thus freed can then be made more directly available for patient care.
  One has only to look around to see what some local authorities are spending their ratepayers' money on, and the sort of new jobs that they are spending money on, in order to appreciate how many savings could be made.
  Questions were also raised by the right hon. Member for Govan and others about the major tax change in the Budget concerning capital allowances and corporation tax. I understand that my hon. Friend the Financial Secretary will reply to tomorrow's debate and will speak on that matter.
  Reference has also been made several times to child benefit. That subject was quite properly not included in the Budget, because last year we changed the system so that the uprating for child benefit and other benefits is determined by judging from the increase in the retail price index in May what the uprating will be in the following November. That is the procedure that we shall follow. It is perhaps an indication of the strength of my right hon. Friend's Budget and of his provisions that it is not they that are attacked, and that Opposition Members should single out and attack subjects that are properly a matter for debate on another occasion.
  The measures announced in the Budget reinforce the recovery that is clearly under way. The measures will help to sustain economic growth over the longer term. By bringing inflation under control we have laid the foundations for economic success. By keeping it under control we shall ensure that those foundations remain solid.
  Debate adjourned.—[Mr. Archie Hamilton.]
  Debate to be resumed tomorrow.

  Live Animals (Exports)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Archie Hamilton.]
  10 pm
  Miss Janet Fookes: It might appear that there is no connection whatsoever between the debate which has just been adjourned until tomorrow and the topic for tonight—the export of live animals for further fattening and slaughter. There is one common denominator—money. These wretched animals are exported live only because there is money in it for those who do the exporting. On every ground this is a detestable and disreputable trade.
  The trade has been going on since the mid-1950s, with one short and welcome break in 1973 when there was such an outcry about breaches of the old Balfour assurances, which were supposed to protect animals in transit, that the Government of the day refused to allow further export licences to be granted. I regret to say that in 1975 the ban was lifted and the trade was resumed.
  The Royal Society for the Prevention of Cruelty to Animals, with which I am closely connected, has built up a tremendous expertise in following consignments of animals from the port of disembarkation in France. Its testimony cannot be lightly disregarded. It has been built up over many painful years. On occasions there has been an element of near melodrama in its following of consignments.
  I want particularly to draw attention to the latest inquiries that the RSPCA has made. They make sad reading. In late 1983 and the beginning of this year it undertook four trails, as it calls them. It is worthwhile explaining briefly what the trails consisted of. The first, in November 1983, involved a British vehicle which was followed to Mirande in the Gers region of south-west France for a distance of 694 miles. The journey took 28 hours 18 minutes. It was taken without rest or food for the animals. I believe that that is a shocking indictment.
  The second trail in the same month involved a British vehicle, again containing calves. It was followed for a distance of 476 miles and kept under observation for 21 hours before the RSPCA unit lost contact. We do not know what happened in the end.
  A third trail took place early in December 1983. Again, it involved a British vehicle which delivered calves to the same destination in Mirande. A different vehicle was used for following that transporter. The distance recorded on that occasion was 695·8 miles. The percentage point shows the meticulous way in which the RSCPA follows these vehicles. The journey time was 28 hours. Again—and it is horrifying to relate—there was no rest or food for the animals.
  Another trail in December 1983 involved a British vehicle that was followed to somewhere in the Garonne region. That journey lasted 27½ hours over a distance of 646 miles—again with no rest or food en route. There has been another trail this year, but I do not have the details of that. The four cases that I have spelt out show that nothing has changed since the 1970s when the matters were looked at in detail by the RSPCA.
  I fear that we are dealing with not just a few animals. I asked my hon. Friend the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food in a parliamentary question to give the statistics for 1983. At
  484
  the risk of boring the House, I want to show the scope of the trade in that year. I have rounded up the figures for ease. Calves for further fattening numbered 210,000; sheep, 10,000; pigs, 14,000 and sheep for immediate slaughter—a rather different category—nearly 35,000. We are dealing with a sizeable export trade.
  This has come about despite the EC directive that was supposedly intended to cover the welfare of these animals. Yet the five trails undertaken by the RSPCA show that the directive has been ignored. It is against that background that I felt real anger, amazement and horror when my right hon. Friend the Minister announced in January that there was to be a resumption in the granting of export licences for veal calves going to Italy by road. Previously, that had been permitted only by air.
  I am indebted to my hon. Friend the Parliamentary Secretary for telling me in answer to a parliamentary question that the journey from a port of disembarkation in France to the Italian border is no less than 600 miles. That excludes any journey that might have been undertaken in Britain. Although the animals are rested for 10 hours, the calves may have a long journey in this country, a 10 hour rest in a lairage at the port of embarkation, the sea journey to France, the journey across France to Italy, and then who knows what—how many more miles before they reach their destination where they are to be fattened before slaughter? That happens to animals which, on average, are about three to five weeks old. Until that time, they would have been accustomed to regular feeding and quiet conditions, but suddenly they are subjected to all the strains of transport.
  What is worse, and what worries me even more, is that we do not know whether the actual rearing of the animals until they are slaughtered is carried out in a way that would be acceptable in Britain. There is a fondness in Italy for white veal, and that involves methods of keeping the animals that I find horrible, wholly unacceptable and that would probably lie outside our welfare codes. There must be a very real risk that these unfortunate little beasts will be kept in conditions that would be unlawful in Britain.
  I am primarily concerned tonight with the question of transport, for which we are asked to place reliance on an EEC directive. In my view, it is not worth relying on because the relevant section says:
  "During transport, animals shall be offered miner and appropriate food at suitable intervals. Animals shall not be left more than 24 hours without being fed and watered. This period may, however, be extended if the journay to where the animals are unloaded can be completed within a reasonable period."
  There is no definition, however, of what is reasonable. There is a second directive which refers to licensing provisions. Thus, the basic directive is feeble. Whatever safeguards we endeavour to place on animals before they leave this country are not enforceable under our laws once they get abroad, and we must rely on the EEC directive.
  I am sure that tonight my hon. Friend the Minister will be at pains to explain the so-called safeguards embodied in the export licences. Frankly, I shall not believe one word of it, because enforcement is the key. In the light of what the RSPCA has discovered, I do not believe that there is any likely enforceability. In those circumstances, I shall be far from satisfied, whatever my hon. Friend tells me about good intentions. The road to hell is paved with good intentions.
  I refer the Minister to what I believe is the overriding principle that I should like to see written out and placed

  485
  on her desk and, above all, the desks of Ministry of Agriculture, Fisheries and Food officials at Tolworth. It is the principle, enunciated by the British Veterinary Association, that animals should be slaughtered as near as possible to the point of production. By that standard, sending animals overseas cannot be justified.
  It seems all the more strange when one considers that there are in this country adequate means of slaughtering animals to the requirements of overseas customers. There are good methods of refrigeration and good facilities for transporting animals when they are dead rather than when they are alive. I cannot believe that that could not be undertaken if there were the political will to bring it about.
  It saddens and shames me that a nation which is supposed to love animals can permit this trade—which must bring considerable stress, even under the best conditions—to continue. What is more, it makes no allowances for inclement weather conditions and other difficulties. Consider, for example, that extraordinary spectacle when the whole of France seemed to grind to a halt in the recent troubles. What would happen to unfortunate animals caught up in such a predicament, when our own lorry drivers were in difficulty? What help would there be for these unfortunate beasts in such a situation? We should never allow them to be placed in that position.
  I appeal to the Government to take the action that they have resisted for far too long—to ban the export of live animals for slaughter and further fattening, and to do it soon.
  10.14 pm
  The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mrs. Peggy Fenner): I appreciate that, in recent weeks, much public concern has been expressed about the welfare of food animals exported from this country. I am grateful to my hon. Friend the Member for Plymouth, Drake (Miss Fookes) for raising this matter now, because I believe that much of the concern has arisen because the background to recent events and decisions has not been widely appreciated. I am glad to have the opportunity tonight to present a fuller picture.
  To put things in perspective, I shall first outline briefly the important ways in which the measures that protect the welfare of animals exported from here to the Continent have been developed in recent years. My hon. Friend has recalled that between 1973 and 1975 there was a complete prohibition on the export of food animals from this country. I held my present post for part of that time. After that—following the report of the O'Brien committee—this House on a free vote favoured a resumption of the trade on the basis that common European regulations would be developed to protect the welfare of animals during international transport and at the place of slaughter.
  Subsequently, Community directive 77/489, to which my hon. Friend referred, which entered into force in 1978, laid down various requirements on the conditions for animals during international transit. Prime among these were the requirements concerning pre-export veterinary inspection, and one on feeding and watering, which runs as follows:
  "During transport animals shall be offered water and appropriate food at suitable intervals. Animals shall not be left
  486
  more than 24 hours without being fed and watered. This period may, however be extended if the journey to where the animals are unloaded can be completed within a reasonable period."
  My hon. Friend made a good point about that reasonable period. This requirement is based on international veterinary opinion on what is needed to protect the welfare of farm animals in transit. The provision for the 24-hour period to be extended reflects the view that, if the animals' journey is largely complete, it is better for them to be taken straight to their destination without a stop.
  When we came to office in 1979, as we promised, we reviewed this trade and decided that it should be allowed to continue subject to added legal safeguards. To make in particular the feeding and watering controls more effective, we pressed for and secured a further Community directive—81/389—which came into force in 1982. Under this, every consignment of food animals exported from Great Britain is accompanied by an international certificate in the form prescribed by the directive. The details on the certificate include veterinary certification of fitness and, most importantly, the time of loading as certified by an official. Obviously, the fact that this certificate accompanies the animals and must be taken into account by the authorities at frontiers greatly enhances the enforcement of the Community requirements.
  As hon. and right hon. Members will appreciate, member states are legally obliged to implement these directives on their own territories. To discharge fully our obligations where exports are concerned, we made the Export of Animals (Protection) Order 1981. Apart from implementing the strict requirements of the directives, this lays down that food animals may not be exported, as my hon. Friend said, unless they have first been rested for at least 10 hours at an approved export lairage. During this period they must be offered suitable food and water. The order also introduced new licensing arrangements under which no consignment of cattle, sheep, goats or pigs may be exported except under licence, and my right hon. Friends may not grant a licence unless they are satisfied that the arrangements for transporting the animals to their final destination are such as to protect them from unnecessary suffering. Thus, animals exported from this country not only have the protection of the Community directives when they reach the Continent, but our own licensing arrangements allow us to ensure, before permitting an export to take place, that it has been planned in a way that will meet the directives and protect the animals.
  I come now to our recent decision, to which my hon. Friend referred, concerning overland trade in food animals to Italy. I should first make it clear that food animals—actually calves—have in recent years been exported to Italy for further fattening. However, we have been prepared to issue licences only for transport by air. It is important to understand that the distance involved has never in itself constituted a welfare problem for farm livestock, provided that the animals are carried in the conditions laid down by Community directives.
  When the live export trade in food animals to the Community was resumed in 1975, overland transit to Italy was permitted in only a very few exceptional cases. Those all concerned adult cattle for fattening, and no calves were involved. However, the experience of these consignments raised doubts as to whether satisfactory mechanisms existed to ensure that the Community requirements could be met on overland journeys to Italy involving two frontier

  487
  crossings. In the absence of these mechanisms, successive Governments have since insisted that all food animals consigned to Italy must, without exception, travel by air.
  We could have abandoned our insistence on air travel on the strength of the existence of directive 77/489, but we did not. We could have abandoned our insistence on the basis of the entry into force of directive 81/389, but we did not. We could have abandoned it on the strength of the adoption by Italy in late 1983 of national measures implementing directive 81/389, but we still did not.
  Before making our decision we discussed and agreed with the French and Italian authorities a special system for our respective veterinary services to monitor any resulting exports, which will involve in some cases my own veterinary staff accompanying consignments right through to their final destinations in Italy. That will have two very important benefits. First, a great deal of information will be available to us on the conduct of this trade. I can give the House my categorical assurance that if this information suggests that animals in any future consignments will be at risk of unnecessary suffering, for any reason, export licences for such consignments will not be issued. The second, and equally important, benefit will be that we and our French and Italian colleagues will collect scientific and technical information on the transportation of animals, which will be of great value in the development of Community measures.
  My hon. Friend also made particular mention of the public allegations that have recently been made by the RSPCA about export consignments of calves being carried across France without stops for food and water. I am pleased to say that on Monday this week we at last received details from the RSPCA—I had asked before—of four of the reports to which my hon. Friend referred and which underlay these allegations. One of the reports, incidentally, concerns a consignment on which my officials and the French authorities have already been in contact.
  I know that the House would not expect me to have reached conclusions on this information in the time available to me since Monday morning. However, I can say that my officials have already relayed the substance of the allegations to the French authorities for them to consider whether there are any contraventions of the directives on their territory and what action is called for. It will be apparent from what I have already said that good co-operation exists between my officials and their French opposite numbers, and contacts will be maintained on this.
  Meanwhile at our end we shall, of course, need to check whether there is any discrepancy between the plans that were declared to us by the export licence applicants in the cases concerned and what is alleged actually to have taken place. The action that we shall need to take will, of course, depend on what we find and on what explanations are given, but it would be an offence for anyone to make a false declaration for the purpose of obtaining a licence, and the outcome of our investigations may be highly
  488
  relevant when my right hon. Friends have to decide whether they are satisfied with any subsequent related export licence applications.
  I appreciate also that there has been much concern recently about the possibility of export animals having suffered in the recent hold-ups both at the Italian frontier and on the roads in France. I hope that I can reassure my hon. Friend, first, that no licence applications have yet been received to export food animals overland to Italy, so no food animals exported from here will have been on the approaches to the Italian border during the recent blockades.
  Further, during the French lorry drivers' action. my staff at ports of export advised anyone still planning to take farm animals to or through France to contemplate travel only if their French customers or agents could assure them that they could reach their destination without difficulty. No export of farm animals took place for a period at the height of the action. When it was reported that the situation had generally eased, we delayed issuing export licences until we had confirmed very thoroughly through official channels that difficulties were really over.
  My officials were in touch with the French authorities, and they were able to advise that no animals exported from Great Britain were involved in incidents arising from the blockades. They also indicated more generally that reports of incidents involving animals on French roads were much exaggerated, that no animals died in the delays and that in the few instances which arose involving animals special arrangements had been made to let them through.
  I have served in the House for exactly as long as my hon. Friend the Member for Plymouth, Drake and I know well her concern about animals. For part of that time I have had the privilege of serving in this Ministry. My hon. Friend knows that I share her views about the care of animals. She will also know how surprised I am at the number of Conservative Members present today and the absence of any Opposition Member, although one is sometimes led to imagine that the Opposition hold a special brief on caring about both animals and people.
  I assure my hon. Friend that I saw the RSPCA reports only on Monday morning, so she will understand that I have not had time to have them thoroughly investigated. I assure her that that is now being done. I hope that she will accept that it is even more valuable for us, as members of the Community, to ensure that care is taken of animals over a wider area, among more people and in a larger number of countries, rather than to be concerned only about animals in our own country.
  I appreciate my hon. Friend raising yet again a matter about which she feels very strongly, as she has made clear throughout her entire parliamentary career. I hope that I have been able to reassure her today.
  Question put and agreed to.
  Adjourned accordingly at twenty-eight minutes past Ten o'clock.

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Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Rochester.
The Lords following took and subscribed the Oath:

Evelyn Adelaide, Baroness Sharp

John Michael, Lord Tedder

Robert, Lord Balfour of Burleigh

Derek Hugh Tremenheere, Lord Dowding

North Sea Oil and Energy Strategy
Lord Ezra: My Lords, I beg leave to ask the first Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what is their long-term energy strategy given that oil production from the British sector of the North Sea will probably reach its peak within the next couple of years.
The Parliamentary Under-Secretary of State, Department of Energy (The Earl of Avon): My Lords, the eventual decline in oil production from the United Kingdom continental shelf makes it more important than ever that all economic sources of energy in the United Kingdom are exploited, supplied and used as efficiently as possible. In particular, the Government are seeking, through their policies towards offshore oil development, to maximise future economic production.
Lord Ezra: My Lords, in thanking the noble Earl for that reply, may I ask him whether he would agree that in the 1990s we could well once again be a net oil importing country, and in the light of that prospective situation we ought to be putting in hand immediately a very detailed study of the prospects and initiating a public debate thereon? Would he therefore tell us whether the Government would propose to do those things?
The Earl of Avon: My Lords, indeed we agree, and a public debate is going on at the moment, I believe, at Sizewell on the question of policies in the energy world in the future. We believe it is a crucial sector of the economy; it is essential that it is produced and used as efficiently as possible, and this is what our plans are at the moment.
Lord Shinwell: My Lords, in the circumstances that we may discover a loss of that energy which is essential if we are ever to hope for recovery, or even to continue in our present situation, is it not of the utmost importance that we should cease to close down pits, even if some of them are unprofitable and uneconomic, because in the course of a few years we may discover that even uneconomic pits are essential in the circumstances?
The Earl of Avon: My Lords, I am sure that the noble Lord will agree, when he looks at the figures, that the pits being closed down are no more now than they have been over the whole of the last three decades; and the only purpose of closing down the pits is to close down the uneconomic pits in order that the coal industry itself should be profitable.
Lord Shinwell: My Lords, may I ask the noble Earl what is an uneconomic pit? Is he aware—and I am sorry to ask this question, because it is long before the noble Earls time—many years ago, when I first came to another place, way back in 1922, they closed down pits in Lanarkshire, as a result of which a vast number of people were unemployed, only to discover a few years later that they were able to reorganise the pits, and that they are now operating?
The Earl of Avon: My Lords, I am grateful to the noble Lord. I am sorry I was not born in 1922. I am even more sorry that when I was born, in 1930, it was not in my home county of Durham. However, if I may answer the noble Lord, the position at the moment is that it is necessary to make our coal marketable. At the moment, internationally, coal is being produced cheaper than we can produce it, and it is necessary to close our uneconomic pits so that we can join the free market in the world.
Lord Campbell of Croy: My Lords, as there has been some confusion on television programmes and elsewhere about this, can my noble friend confirm that while the annual rate of flow may reach its maximum during the 1980s, oil is expected to be produced from our continental shelf for at least 40 years provided that there are incentives for developing new fields.
The Earl of Avon: My Lords, I agree with my noble friend, and the excitement which is now going on in the North Sea—the new exploration as a result of the tax concessions given, not in this Budget but the one previously—is very encouraging.
Lord Stoddart of Swindon: My Lords, is it not true, and will the noble Earl confirm, that we shall in fact begin to lose self-sufficiency in oil towards the middle of the next decade? Under those circumstances, would it not be as well if the Government concentrated on energy saving, on CHP, and, above all, on electric traction, which of course is likely to save a good deal of the oil that is used?
The Earl of Avon: My Lords, I quite agree with the noble Lord, as to self-sufficiency, that we may indeed become an importer of oil, rather than an exporter, during the next decade. I would equally agree with him that energy efficiency is a very important theme. I noted it was one of the themes in the Labour Party manifesto, and I am sure they would therefore be delighted at the setting up of the Energy Efficiency Office, which is fulfilling these particular wishes. As far as CHP is concerned, the noble Lord will know that we are hoping to make an announcement in the near future.
The Earl of Lauderdale: My Lords, would my noble friend not agree that we must also press on with our

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nuclear power programme, seeing that a tonne of fuel in an ordinary nuclear reactor is worth 25,000 tonnes of coal, and in a fast reactor more than a million?
The Earl of Avon: My Lords, indeed the Government are looking at that situation, and it has always been part of our policy to diversify the energy base, which of course includes nuclear power.
Lord Stoddart of Swindon: My Lords, I am sorry to come back to the Dispatch Box, but the noble Earl did not answer my question about the development of electric traction. I should be most interested to learn his view on that.
The Earl of Avon: My Lords, the Government are indeed looking at electric traction, and I am to make a speech at an event relevant to this in the near future. I am not yet quite sure what I am to say, but I am certain that the noble Lord will be interested in it.
Lord Molloy: My Lords, may I please ask the noble Earl whether he would be prepared to consider the view of very well-known geologists and mining engineers that a pit which today might well be uneconomic to run can be closed without necessarily being dispensed with for ever? It can, so to speak, be "mothballed", bearing in mind that peradventure its contents may be required in years to come. Ought that point not to be seriously considered by the Government with regard to industrial energy processes?
The Earl of Avon: My Lords, what the noble Lord says is very much a question for the National Coal Board. I am not an expert on this subject, but my understanding is that if a pit could be "mothballed" it certainly would be. There is no question of trying to get rid of what is available.
Lord Blyton; My Lords, is the Minister aware that it is impossible to "mothball" a pit? Once a pit is closed, the geological weight results in the roads being closed, and it would cost more to reopen it than to try to "mothball" it.
The Earl of Avon: My Lords, I am grateful to the noble Lord, hut I think that this is very much a question for the industry and I should not be drawn into it.

North Sea Gas Reserves
2.45 p.m.
Lord Ezra: My Lords, I beg leave to ask the second Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government when they consider that commercial reserves of natural gas in the British sector of the North Sea will begin to diminish; and what they then intend should be done to meet the demand for this premium fuel.
The Earl of Avon: My Lords, the 1983 Brown Book estimates proven and probable recoverable reserves initially in place on the United Kingdom continental shelf to be some 1,374 billion cubic metres. Of these, about 470 billion cubic metres have been produced so far. The remaining reserves are equivalent to 20 years or so of gas consumption in Britain at 1983 levels. This period will be extended by the availability of gas imports. In the longer term, as traditional sources of gas supply become exhausted, there will be the options of importing liquefied natural gas and manufacturing substitute natural gas from coal.
Lord Ezra: My Lords, I thank the noble Earl for his reply. Would he not agree that this is a very important market? It is one which has been built up at great cost and with great success. It is therefore important that people should know where supplies will be coming from in due course. The noble Earl referred to imports. Will be kindly indicate to us what are the options so far as importing gas is concerned, and whether he will be contemplating a pipeline connection with the continent?
The Earl of Avon: My Lords, it may not be widely known, but at the moment we actually import 25 per cent. of our natural gas, anyway. Future sources are, I understand, in negotiation with the British Gas Corporation at the moment, and the options include both the Norwegian Sleipner Field and a Dutch field. Noble Lords may have seen a week ago BP's new exploratory plans. This question of gas supplies is an exciting world, and one that we are looking at, and I can assure the noble Lord that the gas corporation is well aware of the future prospects.
The Earl of Lauderdale: My Lords, can my noble friend say whether the Government are prepared to look kindly on any project for a cross-channel gas pipeline funded by private enterprise?
The Earl of Avon: Yes, my Lords.
Baroness Burton of Coventry: My Lords, coming nearer to home, may I ask the Minister whether the plentiful supplies which he has mentioned will have any effect on gas prices to consumers in the more immediate future? Is the noble Earl aware that I ask that question because in the gas industry there is considerable disquiet over the fear that the Government may without consultation impose on that industry a requirement to make additional payments to the Treasury, as it did with the electricity industry?
Finally, since I was unable to do so yesterday, may I now ask the noble Earl whether he will look at the reply that he then gave me in regard to paragraph 46 of the report of the Select Committee? The noble Earl said then that he could not give me an answer to a recommendation. Is the noble Earl aware that I was not asking him for a reply to a recommendation, but was making a statement of fact, which I thought it would be useful for him to read?
The Earl of Avon: My Lords, as usual I am grateful to the noble Baroness for her three supplementary questions. I shall indeed look at my reply of yesterday.

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So far as gas prices are concerned, the noble Baroness will of course be aware that on this particular occasion the gas industry and the Government were in agreement on the size of the rise in prices recently announced. The announcement follows the increased cost of gas to the British Gas Corporation itself. With regard to her first supplementary question, gas prices in this country will now be influenced by international prices.
Baroness Macleod of Borve: My Lords, though the Question is specifically about the North Sea, can my noble friend the Minister say whether there are finds of gas in other seas around our islands?
The Earl of Avon: Yes, my Lords; there are some in the south basin of the North Sea. I am not sure exactly what area the noble Baroness has in mind when she refers to the North Sea.
The Earl of Lauderdale: My Lords, further to his answer about a cross-channel pipeline, can my noble friend say whether the Government are prepared to consider allowing the export of gas from this country, so that gas would be available at European prices, so providing a better incentive for exploration?
The Earl of Avon: My Lords, my noble friend raises an interesting point but I think that he is a little ahead of the times. At the moment we are still importing about 25 per cent. But we are not by any means closing the door to what my noble friend suggests.
Lord Stoddart of Swindon: My Lords, can the noble Earl give some indication of the extent of the increased prices that consumers will be facing over the next few years? I have heard estimates of an increase of up to 40 per cent. I believe that consumers would be interested to know what his estimate is. Can the Minister also say whether there are any plans for extensive coal gasification? Is he able to comment on the question raised in another place that there is a possible market for 90 million tonnes of coal for gasification in the future?
The Earl of Avon: My Lords, I shall take the last question first because that is always easiest. I reiterate what my honourable friend said in the other place. He does not know where that figure comes from, and it has absolutely no bearing on the situation at all. On coal gasification, we are making progress. The National Coal Board is doing so, as is the Gas Corporation in its gasification plans. These are going well. As for the price in the future, we can look back on the present rise of just over 4 per cent., which is under the rate of inflation, and also to a year's freeze before that. We can say to the gas consumer that we hope very much—I cannot go beyond that because it is on international world markets that gas is now traded—that there will not be the rises that we have seen in the past.
Lord Molloy: My Lords, can the Minister say that if, as the Gas Corporation indicates, the levy from North Sea gas amounts to around £500 million, this will be judíciously used or even stored ready for the day when we have to pay for gas from elsewhere?
The Earl of Avon: My Lords, the levy transferred the windfall gains on early North Sea gas, which is exempt from petroleum revenue tax, from BGC to the nation as a whole. So really, the nation is benefiting from this gas levy.
Lord Bowden: My Lords, can the Minister say whether it is true that nearly half the gas put into the mains escapes before it ever gets to the consumer? If so, can he say whether steps are being, or could be, taken to mend the pipeline?
The Earl of Avon: My Lords, there is indeed some leakage but nothing like the amount that the noble Lord suggests. Modernisation and new technology all the time lessen this fact.

Magistrates' Powers: Increased Fines
2.52 p.m.
Baroness Sharpies: 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 when the recently-announced measures to increase the fines magistrates may impose upon offenders will come into force.
The Parliamentary Under-Secretary of State, Home Office (Lord Elton): My Lords, my right honourable friend the Home Secretary intends to make an order doubling maximum summary fines and other sums affecting magistrates' powers. The maxima in the proposed order will apply to offences committed on or after 1st May 1984.
Baroness Sharpies: My Lords, while thanking my noble friend for that reply, may I ask whether he can say what has been the reaction of the Magistrates' Association and, further, can he say whether these fines are expected to be across the board? Can he give an assurance on that point?
Lord Elton: My Lords, the Magistrates' Association has indicated its welcome for this overhaul of magistrates' powers to impose financial penalties and says that sentencing practice is unlikely to change suddenly because they are obliged by law to take account of offenders' means. I take it that that answers my noble friend's second supplementary question.
Lord Mishcon: My Lords, would the Minister agree that one of the dangers of having very high fines is that there must be a temptation in some cases for the more wealthy to be fined because they can pay the fine whereas those who cannot afford it might have prison sentences imposed upon them? Would that not be a very undesirable situation?
Lord Elton: My Lords, it would indeed be an undesirable situation. That is why we have in Section 35 of the Magistrates' Courts Act 1980 a requirement that magistrates should have regard to the means of an offender before they fix the level of the fine.
Lord Inglewood: My Lords, can my noble friend say what proportion of fines imposed today are in fact never paid?
Lord Elton: My Lords, I have an idea that if I was a little quicker with my papers I could answer my noble friend more rapidly than I am now doing. I understand that about 1,750,000 fines are imposed each year but that only 25,000 of those fined have to be imprisoned for default.
Lord Elwyn-Jones: My Lords, can some fresh look therefore not be taken at a situation where 25,000 were sent to prison for non-payment of fines? Is this not a very serious and unhappy situation?
Lord Elton: My Lords, it is both serious and unhappy. The effect of the length of sentences is that at any one time only about 1,000 members of the prison population are in prison because of default. It is necessary, I think, to have this reserve threat to those who contemplate not paying fines. If we did not have it, the balance between those who pay and those who do not would be far more inappropriate than that which I revealed in my last but one supplementary answer to my, noble friend.
Lord Avebury: My Lords, do not the courts have power to distrain on the assets of people who fail to pay fines? If they do not have any assets, what is the point of sending them to prison anyway?
Lord Elton: My Lords, if I have understood the noble Lord aright, if a person has committed a crime and cannot pay the penalty in cash terms, it is not right that he should escape paying any penalty at all.
Baroness Masham of Ilton: My Lords, have the Government looked at community service as an alternative to prison for those who do not pay their fines?
Lord Elton: My Lords, I am obliged to the noble Baroness for her question. We are, indeed, considering making community service available as an alternative to imprisoning fine defaulters. We are also about to send a circular to magistrates' courts drawing their attention to a range of procedures and measures that can be used to improve enforcement and reduce the need for imprisonment.
Lord Avebury: My Lords, will the noble Lord answer the first part of my question as to whether courts do have the power to distrain on the assets of those who fail to pay fines, and why have they not used that power in the case of the 25,000 people who went to prison?
Lord Elton: My Lords, I do not know what the bases of the decision on the 25,000 individual cases were. As to the power of distraint, I regret that I cannot give the noble Lord a straight answer because I do not know. I suspect that many of your Lordships do, and I apologise for my ignorance.
Lord Hylton: My Lords, do the Government think that weekend imprisonment might be a suitable
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penalty for fine defaulters, particularly those who happen to have jobs?
Lord Elton: My Lords, we are concerned to examine the possibility of intermittent imprisonment, among others. We wish to reduce the number of people in prison in default of fine payment. It is better that they should pay and stay out.

Secondary School Curriculum
2.58 p.m.
Baroness Faithfull: 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 proposals they have for the reform of the secondary school curriculum in England and Wales.
The Earl of Swinton: My Lords, my right honourable friend the Secretary of State for Education and Science has announced a programme, including proposals in relation to the curriculum, examinations and teachers, designed to improve standards in both primary and secondary schools. It is the Government's intention to seek a broad consensus about the objectives of each phase and of each subject area of the curriculum, what in each needs to be learnt by all pupils, and what should additionally be attempted by some. My right honourable friend is now discussing these matters with the Government's partners in the education service.
Baroness Faithfull: My Lords, will my noble friend agree that this statement will give great encouragement both to parents and to employers? Will be further agree that employers will welcome the opportunity of seeing laid out the exact capabilities and skills of each individual child?
The Earl of Swinton: My Lords, I agree most strongly with what my noble friend says. Indeed, my right honourable friend's programme has generally been welcomed by parents, employers and the education service. I believe that this is because it is the Government's overall purpose to seek higher standards. Our specific target is to bring 80 to 90 per cent. of all pupils to the level now achieved by pupils of average ability across a number of subjects. A clearer definition of the objectives of the curriculum has an important part to play in that process as do our proposals for an examination system which reflects more closely than the present one what pupils can actually do.
Baroness David: My Lords, can I ask the noble Earl what plans are being made to ensure that the curriculum takes more fully into account the experiences and needs of working-class children? I do not mean just the basics.
The Earl of Swinton: My Lords, I do not think that there is any discrimination in regard to a child's background. The curriculum caters for all children.
Baroness David: My Lords, will the Minister not agree, however, that there perhaps needs to be some difference and that their experiences need to be taken into greater account?
The Earl of Swinton: My Lords, I do not altogether agree. My right honourable friend has made it clear that we want pupils to be able to demonstrate knowledge, skills, understanding and judgment—in a word, "competence"—across a broad curriculum. That goes for the working-class child—I personally do not like the expression "working class"—and for every type of child in any of our schools.
Lord Glenamara: My Lords, will the noble Earl tell us under what section of the 1944 Act the Secretary of State has any legal power to interfere in matters of curriculum, in view of the fact that there are no state schools in this country but only local authority schools?
The Earl of Swinton: My Lords, my right honourable friend is in no way interfering. As I said in my original Answer, his proposals have been generally welcomed and he is consulting with local authorities. I do not think that he needs to use any powers whatever to try to encourage a higher standard of education in our schools.
Baroness Masham of Ilton: My Lords, I should like to ask my noble kinsman how the Government see health education in the curriculum and what they are doing to encourage local authorities to spread information about the dangers of our permissive society to pupils, especially as regards drug abuse and venereal disease.
The Earl of Swinton: My Lords, health education has an important place in preparing young people for personal, social and family responsibilities. It is for the schools themselves to decide what to include in health education courses, what materials to use and what teaching methods to employ. Before embarking upon particularly sensitive areas of health education—such as sex and drug education, as my noble kinswoman has mentioned—schools are recommended to consult parents. Indeed, the regulations made under the Education Act 1980 require schools to publish details of the sex education which they provide.
Lord Jacques: My Lords, will the Minister bear in mind that one of the purposes of training is to reduce the experience necessary to reach proficiency and, therefore, experience ought to be taken into account?
The Earl of Swinton: Yes, my Lords, that is why the Government are very interested in also producing a system of records of children's achievements at school.

Business
The Earl of Swinton: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Trefgarne will, with the leave of the House, repeat a Statement that is to be made in another place on the Foreign Affairs Council on 12th–13th March.
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This will be followed by my noble friend Lord Belstead who will, with the leave of the House, repeat a Statement on the Council of Agriculture Ministers on 11th to 13th March.
It may be for the convenience of your Lordships to know that it has been agreed through the usual channels that, in view of the very large number of speakers in this afternoon's debate, the Unstarred Question standing in the name of the noble Lord, Lord Hatch of Lusby, will be deferred until Wednesday, 28th March. The Unstarred Question at present on the Order Paper for that day in the name of the noble Lord, Lord Graham of Edmonton, will be deferred until Wednesday, 4th April.
There are 36 noble Lords down to speak in this afternoon's debate. I should point out to your Lordships that if they were all to speak for a quarter of an hour the debate would last for some nine hours. With the two Statements which we also have this afternoon, it means that the debate would end well after midnight. I hope, therefore, that although there is no formal time limit on this debate, noble Lords will do their utmost to keep their speeches short.

Higher and Further Education
3.3 p.m.
Lord Annan Lord Annan rose to call attention to the need for change in universities, polytechnics and colleges in higher and further education; and to move for Papers.
The noble Lord said: My Lords, 20 years have passed since the noble Lord, Lord Robbins, published his report, and perhaps the House would agree that the time has come to look at what has happened. That report was entirely right in urging that places in higher education should be available for all those qualified. I am still totally unrepentent at having welcomed mass higher education as I did at that time, because our wealth as a nation and our potentiality to be better-informed and more civilised depend upon it.
But the report was wrong—and I and others in my generation were wrong—in not recognising that you cannot have both mass higher education and Rolls-Royce education. The report never considered cost effectiveness. It never considered changing the scale and the system of financial support. It never urged ways, for instance, of inducing more students to live at home—instead, it recommended building more halls of residence. It recommended the transformation of colleges of advanced technology into universities, and I was wrong to support that. Of course, like many others, I wanted some universities to have a strong vocational bias. But what we in fact did was to add, at a stroke, millions of pounds to the estimates without adding a single additional student.
In order to remedy the bias in the report towards universities, Mr. Crosland created 32 polytechnics; and later the teacher training and other colleges were upgraded. But again the same mistake was made. Instead of creating cheap institutions, the polys were put on the same footing as universities. They too were to give three-year degree courses and they often dropped diploma work. Even the further education

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colleges were permitted to offer degree courses—and no wonder because those who taught them were better paid as a result.
If I had to say in one sentence what the strategy for higher education should be in the next 20 years, it is this. Make it less costly and make access to it easier. How can one do this and maintain standards? You cannot, unless you acknowledge that there are different kinds of institutions and they do different things. I am unrepentant in wanting easier access, but I am also an unrepentant elitist. We should formally acknowledge that eight of our universities contain so many top departments that they are acknowledged internationally as centres of excellence; and, if challenged, I am perfectly ready to name them. In America, for example, there are 4,000 colleges and they range from Berkeley, Cal Tech, MIT, Harvard, Yale and Chicago to what the profession in America calls "Academic Siberia". France has her Grandes Ecôles, Germany has her Aachen technische Hochschule, and Clausthal-Sellerfeld and the Max-Planck Institutes. But it is recognised on the Continent that the large majority of institutions will teach those with modest attainments on entry and for the attainment of modest qualifications. We on the contrary run a monolithic university and polytechnic system. We cannot afford to do this any longer from public funds. In future, research in many of our universities will have to be funded from private funds. Again I look forward to the day when the polytechnics are no longer, in Lord Vaizey's phrase "Artytechnics". All their courses should be strictly vocational. Should there really be a department of philosophy in Middlesex Polytechnic? Should there be anthropology taught in Oxford Polytechnic? Should a single further education college teach for a degree? Surely not.
How are such changes to be brought about? Such changes will never occur by begging institutions to reform themselves. The rationalisation induced during the past three years would never have taken place without the Government imposing drastic cuts. A fortnight ago I was in Toronto talking to the distinguished climatologist Dr. Kenneth Hare. We were recalling how in 1967 we began to hold informal meetings with other heads of schools in London University to discuss rationalisation of resources. Every initiative we proposed was turned down, and it is only now that Dr. Hare and I can see Birkbeck College and University College, which are next door to each other, uniting their departments. Lord Todd's recommendations for rationalising London medical schools and, a decade later, those of Lord Flowers, were both rubbished. Only now are mergers taking place.
In 1969, after the devaluation of the pound, Mrs Shirley Williams put her 13 points to the universities. Everyone knows what happened. They were not well received. When the Chairman of the Committee of Vice-Chancellors and Principals, the late Sir Hugh Robson, and myself as his Vice-Chairman, tried to take one of those points, the green seas of academic bureaucracy closed over us and we sank without a trace. The polytechnics even more than the universities for years refused Government's request to reduce the numbers of overseas students. In the end Government lost patience. They imposed a ham-
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handed scheme which later had to be modified. The universities and polytechnics received a great deal of help, notably from the noble Lord, Lord Gladwyn, and especially from the noble Lord, Lord Carrington, when he was Foreign Secretary. But what help did they ever give to Government on this particular problem?
It is now two years since the Secretary of State asked the universities to consider academic tenure. Except at Cambridge, a young lecturer will be appointed at about the age of 25. The decision to grant him or her an unshakable contract of employment until he is 65 years old will taken two and a half years later. That has for long been a scandal. There is a rumour—and it is only a rumour—that the universities might now put forward the daring scheme of extending the probationary period from three to five years. I would not expect that to satisfy the Secretary of State, who believes that redundancy should be a fit cause for dismissal at any time. I think that he is wrong.
A university, like the Civil Service, is a different sort of institution from a business. Last Monday I was glad to see The Times reminding us that it was concerned with matters which cannot be measured in monetary terms, such as cultivating a critical intellect, transmitting culture, innovating and civilising. Those are the jobs of a university. However, one can hardly blame the Secretary of State for being impatient. Should not the universities be told that there will be difficulty in granting money for new blood posts or for amendments proposed to charter and statutes, unless in two years' time major changes in job security are introduced to the satisfaction of Parliament?
Why is it that in higher education people are so unwilling to respond to the hints and initiatives which come from Whitehall? I believe that the reason lies in their system of governance. Initiatives and proposals arise in departments; then senates and academic boards put them in order; governing bodies rubber-stamp them, and the University Grants Committee, the National Advisory Body and local authorities hold Government at arm's length. To describe this, academic staff use a phrase with which some who have been punished in days long gone by at their schools will certainly concur; it is the principle which is called "bottom up, hands off". Paradoxically, this Government, which are dedicated to rolling back the frontiers of state control, are being forced to adopt a policy of "top down, intervene".
The trouble is that governing bodies do not govern. The governance of the polytechnics is sometimes subject to disgraceful political bias, and requires investigation. In the case of the Polytechnic of North London, I think that it would have been more revealing if the Secretary of State had investigated its governing body rather than its department of sociology, so scandalous has been its mismanagement of the polytechnic's affairs over the years. It makes me ask whether we really need eight—or is it nine?—polytechnics in Greater London?
But let me leave the iniquities of the Polytechnic of North London to the tender mercies of the noble Baroness, Lady Cox. Rather than govern, what governing bodies do is to ratify the deals which are made on senate and academic boards. These deals are not discreditable, but they inevitably represent what gives least pain to academic staff, and not the most

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effective use of resources. In my judgment, the administrative staff of universities are wonderfully efficient and far fewer in number than they are abroad. But what hampers them is the committee system organised by academic staff. For instance, the committee system of the University of Sussex is renowned for being Byzantine in its complexity and benighted in its interminability. Could the noble and learned Lord the Lord Chancellor confirm that the body that the Secretary of State intends to set up to examine the efficiency of universities will report on their method of reaching decisions and on their committee structure?
There is, however, one committee which every university and polytechic should have—a small planning committee composed of lay members from the governing body and academic staff. Before it comes to any decision, the governing body would naturally receive the comments of the senate or academic board on the proposals this committee makes. But the governing body alone should decide what is to be done. The lay members should be in a substantial majority on that governing body. Therefore, may I ask whether the Secretary of State will be studying the instrument of governance in each institution to see whether the lay membership needs reinforcing?
There are, of course, several bodies crucial to change in higher education. It is too early to judge the performance of the National Advisory Body in relation to the polytechnics, and I can only say what good furtune it is for the universities that Sir Peter Swinnerton-Dyer is chairman of the University Grants Committee and the noble Lord, Lord Flowers, chairman of the Committee of Vice-Chancellors and Principals. Both of them, as I well remember, gave the University of London signal service in identifying its problems and suggesting models for change. Both of them understand the difficulites and the need for change.
Someone at the Department of Edcuation and Science paid a tribute to Sir Edward Parkes, when he retired as chairman of the UGC, after he had made a controversial allocation discriminating in favour of one institution and some subjects and disciplines against others. The official said, "Excellent, but we could never have done it here. We would have cut across the board". Cutting across the board—or as Lord Keynes used to say, "Equal misery for all"—is the coward's way out.
No doubt the noble Lord, Lord Perry of Walton, and the noble Lord, Lord Wilson of Rievaulx, whose maiden speech we are all looking forward to this afternoon, will make the case out for preferential treatment for the Open University much better than I can. But the Open University is one of those cheap forms of higher education for adults that I have been advocating. I sometimes ask myself whether the Department of Education and Science discriminates sufficiently in its allocations.
This afternoon, I am sure that we shall hear many accounts of the misery now being experienced in universities and polytechnics. I hope that no one supposes that I do not have sympathy for my former colleagues. For them it is a time of withered hope and fears for their own future. The fact that millions of
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others suffer in this way is not much comfort. The universities have been being cut ever since the oil crisis. The cuts of the last three years, though more intense, are nothing new. A vice-chancellor said to me the other day that the new set of projected cuts will force him to tell his council that sometime soon his university will cease to be what has been understood by that term. The answer to that is this: rationalise resources with other universities; transfer staff and departments; reduce the ludicrous number of courses and options in each place; rethink the curriculum. When the present consultations which Sir Peter Swinnerton-Dyer has initiated are completed, the UGC and the NAB should intervene and declare that a grant to a university, a poly or a college will be at risk unless some activity or department is phased out, or transferred elsewhere to make it stronger.
What alarms me is that in 1972 we were in sight of mass higher education, and by that I mean when 15 per cent. or more of adolescents are educated after the age of 18. Today, the intake is declining at a time when it is rising among our competitors. The trouble starts in the sixth forms. Between 1970 and 1980 the number of boys and girls staying on at school at the age of 18 increased in France by 7 and 14 per cent., and in Germany by 20 and 25 per cent. respectively. In Britain it fell in each sex by 1 per cent.
Why, today, do fewer sons and daughters of manual workers try to obtain some qualification after the age of 16 than they did before 1977? Why do our academic staff and students display a reluctance to respond to the demands of the market place? Of course it is natural for all of us here to be proud that the £700 millon spent from public funds on fees and maintenance enables students from poorer homes to study. But is it possible that this system of support frees students too much from the obligation to choose a course of study which might be relevant to their future careers? If I have appeared this afternoon over-dogmatic, let me admit that on this and on many other matters I am as puzzled as anyone.
Speaking from these Benches, I cannot believe that anyone, monetarist or welfare economist, élitist or égalitarian, wants to see our centres of excellence decay, or is willing to see our student numbers be prevented from rising to at least 15 per cent. of the age group. I ask the Front Benches to declare that this is so. If it is so, and if we admit that an aging population and a struggling economy are bound to reduce resources, then surely the strategy for the next 20 years is clear. In the long term we must cut costs in higher education, and differentiate sharply between different kinds of institutions and what they do. We must enable the quality which matters most in life, leadership from the top down, to operate and make the necessary changes. My Lords, I beg to move for Papers.
3.22 p.m.
The Earl of Swinton: My Lords, I should like to thank the noble Lord, Lord Annan, for giving this House the opportunity to debate this most important topic of the nature and development of higher education. I think its importance is emphasised by the phenomenally long list of speakers that we have this afternoon. Like other Members of your Lordships'

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House I look forward with great enthusiasm to hearing the speech of the noble Lord, Lord Wilson of Rievaulx. I am afraid that, being a North Yorkshireman born and bred and knowing that lovely abbey and village, nothing will persuade me to pronounce it anything other than "Rievo" for the rest of my life.
Among the many honours that the noble Lord has received over the years is his honorary fellowship of University College, Oxford. My only contact with that august body was to fail to get into it! Instead, I went to a well-known agricultural college from where I imagine—as in my day—most of the students are assembled, together with certain Members of your Lordships' House of a less academic bent, at Cheltenham Racecourse to observe that great festival of National Hunt racing. In view of the fact that I had an agricultural rather than an academic education, I am particularly grateful to my noble and learned friend on the Woolsack for undertaking the winding up of the debate. It is very good of my noble and learned friend, particularly in view of the time at which this debate may finish.
The noble Lord cites in his Motion the need for change in institutions. While unashamedly seeking to restrain public expenditure on higher education, this Government have sought to provide change and improvement across the sectors, with the aim of encouraging institutions to become more efficient, and more flexible and responsive to the economic and social needs of the country.
Despite the increasing size of the 18-year-old population, the Government have preserved access to higher education. There has been some stiffening of competition for university places. But intakes to the local authority sector have been expanded and there are now some 50,000 more full-time home students in higher education than there were in 1979. The higher education age participation rate has accordingly risen from 12 per cent. to 13 per cent. The available evidence suggests that there continues to be available sufficient places for qualified candidates who want a place in higher education even although the percentage of those qualifying who wish to enter is relatively high—about 87 per cent. in 1982–83. The Government's expenditure plans envisage that with increased institutional economy it should be possible to continue to satisfy qualified demand for higher education at least at the lower bound of the current demand projections. We have said that we will review the position if it appears that qualified applicants are unable to find places somewhere in higher education.
The Government acknowledge that institutions have had to face difficult and painful decisions about how best to adjust to changes in their budgets and what their priorities should be. But such a process of review is necessary across all public spending, and there are many academics who will admit that there was some room for a tightening up across the system, and that institutions have emerged from the process stronger and more ready to face the challenges of the future.
Where specific needs have been identified, the Government have made additional resources available to help meet them. For example, in the universities, to assist with unavoidable increased costs (such as
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employers' superannuation contributions) and with the costs of redundancy and early retirement. We have also introduced a programme to assist universities in recruiting bright young researchers and teachers into departments of excellence, mostly in the sciences and technology, where because of age structure opportunities for new appointments would otherwise be severely limited. Two hundred and forty two of these "new blood" posts have so far been allocated to universities by the UGC in consultation with the research councils, and the distribution of a further 349 posts for the academic year 1984–85 will be announced shortly.
In the local authority sector of higher education, the National Advisory Body, and its Welsh counterpart the Welsh Advisory Body, were established in 1982 in response to the general view that the local authority sector needed a central focus, not only to advise on the distribution of increasingly scarce resources, but also to act as a national voice, equivalent to that of the UGC for the university sector. The NAB and WAB have made an impressive start in seeking to fill this role—and although the NAB is still formally an interim body, it is not generally expected that major changes will be made in present arrangements before it takes on a more permanent role. In October 1983 the Government increased by £20 million the amount provisionally allocated to the sector for 1984–85 following representations from NAB that this sum would assist in the essential long-term rationalisation of provision.
The NAB has already carried out a major planning exercise for the whole sector, focused on intakes for September 1984, which reflects many of the Government's central concerns as expressed in my right honourable friend's general guidance early last year. The NA B's plans, which have been accepted in full and embodied in resource allocations for 1984–85, entail a shift in provision towards sub-degree courses, as well as a switch to vocationally relevant subjects, which I shall deal with in more detail later. It has always been recognised as one of the strengths of the local authority sector that it is close to, and can be responsive to, the needs of commerce and industry. It can also offer flexible regimes of entrance and attendance to mature and other students unable or unwilling to undertake full-time study on leaving school—and courses at sub-degree level in vocational and technical subjects for those wanting a more focused alternative to 3-year degree courses.
The Government are promoting a change in the balance of higher education whereby there is greater emphasis on subjects of direct relevance to the country's industrial and commercial development, particularly in science and engineering. Institutions and industry are being encouraged to collaborate more closely for their mutual benefit. We have introduced a special 3-year programme to enhance teaching and research in subjects related to the important area of information technology. This will provide for about 5,000 extra student places at all levels across higher education and for associated staff posts. About £25 million a year is being committed through the research councils to fundamental and applied work in IT areas. Graduate output in science and engineering from universities in 1983 was about 25,000 compared with

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21,500 in 1979. In 1986–87 it will be about 26,500 and nearly 40,000 across higher education as a whole.
The National Advisory Body's plans for 1984–85, which we have accepted as the basis for funding in the local authority sector, provide for the intake of first-year students to full-time and sandwich courses in engineering to rise by 15 per cent. relative to 1982; in science and applied science by 7 per cent. and in mathematics and computing by around 50 per cent. Emphasis is also being given to other vocational subjects such as management and business studies. We believe this shift in emphasis is desirable and long overdue, but I would like to make it quite clear that the Government also recognise the value of the rigorous pursuit of scholarship in the humanities. I know that my noble and learned friend the Lord Chancellor intends to say more about this later in the debate—I hope not too much later.
It is vital that higher education institutions and industry should draw closer together if the wealth of expertise and the facilities that exist in institutions are to make the fullest possible contribution to industrial growth. There has been progress in this area, but there is scope for a great deal more activity. We have welcomed the report of the Advisory Council for Applied Research Councils on improving research links between higher education and industry. The recommendations of this report, which include proposals for two schemes involving additional resources, and for removing the technical barriers to the exploitation of research in the local authority higher educational sector, are under consideration. But meanwhile the Government have taken action on various aspects of collaboration referred to in the report. For example, new guidelines are being prepared, in consultation with the Committee of Vice-Chancellors and Principals and other interested parties, on the exploitation of research council funded research following the ending of the British Technology Group's monopoly in this area. The Government have also announced an inquiry into pensions matters, including the issue of personal portable pensions, which many argue can bear on the ease of staff interchange between industry and higher education institutions. On 15th February the Committee of Vice-Chancellors and Principals announced the establishment of an advisory committee on university and industrial links. The new committee includes several eminent industrialists. I welcome their willingness to give their time.
All this is movement towards change for the better; but the Government wish above all to ensure that standards in teaching and research in institutions are maintained and. where possible, enhanced. The quality of our higher education is deservedly held in high regard both at home and abroad, but questions have been raised about the overall effectiveness of the methods for monitoring quality and for validation. We therefore welcome the initiative taken by the Committee of Vice-Chancellors and Principals in setting up a working group under the chairmanship of the vice-chancellor of Lancaster to study universities' methods and procedures for monitoring academic quality. I understand that the group will start by looking at activities related to undergraduates and at
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methods and procedures of external examining, but will also go on to look at postgraduate supervision; research evaluation; the validation of college degrees and the accreditation procedures of professional bodies. The Government are considering whether a parallel initiative is required, in respect of the local authority and voluntary sectors of higher education.
On the critical subject of the funding of research activities, noble Lords had a comprehensive and weighty debate on 10th February, thanks to the initiative of the noble Lord, Lord Sherfield, in the context of the First Joint Report by the chairman of the Advisory Council for Applied Research and Development and the Advisory Board for the Research Councils. My noble friends Lord Lucas and Lord Whitelaw spoke for the Government on that occasion. I am not going to cover that ground again, but hope it will suffice to say that we recognise the great importance of this function of our higher education institutions. The noble Lord, Lord Annan, raised specifically some points about tenure in universities. This issue will be dealt with by my noble and learned friend when he speaks later in this debate.
I should like to say a few words about adult and continuing education. That education is a process which continues throughout adult life is becoming increasingly recognised. This is true for vocational education as well as study undertaken for personal intellectual satisfaction. Almost every area of working life is today subject to rapid change, and the pace is unlikely to slow. Employees at all levels of the workforce need to be updated simply to cope efficiently with their existing jobs. Industry's success—and ultimately therefore the nation's wellbeing—depends on its being abreast of the latest technology, the newest scientific developments and the most effective management techniques. Our universities, polytechnics and colleges are well-placed and uniquely qualified to identify and meet this updating need. They have the knowledge and the teaching experience to mount successful provision; they have a long tradition of vocational education and have the local contacts necessary to establish what industry needs.
Much is being done already in the field of vocational updating, but for it to become an integral and mainstream part of an institution's work there needs to be a change of attitude within the education service and the will and ability to enter the market place. Since 1982, the Department of Education and Science has been working through the PICKUP (professional, industrial and commercial updating) programme to emphasise the importance of this work and the need for changes within the present organisations—nationally and locally—to enable our institutions to respond quickly and effectively. In a series of regional workshops and seminars the department has been encouraging institutions and local education authorities to promote themselves as suppliers of this service and to organise themselves effectively to ensure that the demand is met. Institutions are responding to these challenges and are bringing forward imaginative and exciting programmes to meet the needs of employers. There is a new emphasis on the collaboration and co-operation which must exist between provider and client if relevant provision is to be made. But there is no room for complacency.

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The recent White paper Training for Jobs endorses the Manpower Services Commission's proposals for a comprehensive adult training strategy to ensure an adequate supply of people with up-to-date skills to meet the demands of new technologies upon which economic growth must be based. Our institutions of further and higher education have an important part to play. The recent report by the UGC Continuing Education Working Party and the work of the NAB Continuing Education Group underline this point.
Looking towards the future of higher education generally, the Government have initiated a wide-ranging public debate on how higher education should be developed into the 1990s, given the continuing need for economy and the demographic trend. There have been published exchanges of correspondence between the Secretary of State and the chairmen of the UGC and the NAB Committee setting out some of the issues on which the Government are looking for advice. These two bodies have initiated a comprehensive public consultation exercise and are hoping to let my right honourable friend have their views in the summer. The Government will be considering how best to proceed in the light of that advice. We are convinced of the need to encourage the greatest possible exchange of views between all interested parties. I look forward to the rest of the afternoon's debate. I shall be listening with interest to the points raised by noble Lords.

Foreign Affairs Council
3.36 p.m.
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne): My Lords, with your Lordships' permission, I should like to repeat a Statement being made in another place by my right honourable friend the Foreign and Commonwealth Secretary. The Statement is as follows:
"With permission, Mr. Speaker, I should like to make a statement about the Foreign Affairs Council which took place in Brussels on 12th and 13th March. There was also an informal meeting of Foreign Ministers to discuss preparations for next week's European Council. There was, in addition, a ministerial conference with the Portuguese.
"The two main points for us were: 1983 refunds; and preparations for the European Council. On the first point, 1983 refunds, the positions of the Council and the Parliament have now been reconciled. There is, therefore, no technical obstacle to the Community meeting its commitment on time. Two member states were unwilling to approve the adoption of the regulations at yesterday's meeting. The decision has therefore been deferred until next week.
"I made it clear that this delay is unjustified and misconceived. The majority of other member states take the same view. It will in any case be difficult to reach agreement at next week's European Council on the main subjects on the agenda. It is clearly not in the interests of the Community for any fresh obstacle to be placed in the way.
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"The Foreign Affairs Council will meet again on 20th March to consider the regulations. Adoption at that stage would enable the Parliament to take the further step necessary to release the refunds by the end of March.
"On the second point—preparations for the summit itself—the principal issues on the agenda are: control of Community expenditure; budget imbalances; reform of agricultural policy; and, if our conditions are met, the question of an increase in own resources. On the budgetary points, some further progress was made, but there is still a long way to go. On agriculture, Ministers were able to make rather more progress, and my right honourable friend the Minister of Agriculture will be making a statement to the House this afternoon.
"The next step is for the presidency to circulate texts for consideration at the European Council. We shall judge these texts by the extent to which they meet our essential conditions, which remain unchanged.
"On other issues, Ministers agreed in principle to the extension of the Community's coking coal scheme to promote intra-Community trade; to a further programme of demonstration projects to stimulate the development of alternative sources of energy; and to the provision, subject to further discussion by energy Ministers, of funds for social measures in the coal industry, which will be of benefit to this country. They also agreed that the next Energy Council would consider Community action to promote investment in solid fuels.
"The council again considered the Commission's proposal to stabilise imports of certain cereal substitutes. It was agreed that any decisions on this proposal would have to be linked with reform of the CAP.
"Ministers agreed on a commission mandate for the forthcoming re-negotiations of the International Cocoa Agreement.
"The council agreed on a proposal for aid for the development of Portuguese agricultural structures. This agreement, and a declaration on agricultural issues in the enlargement negotiations, were presented to the Portuguese at the ministerial conference.
"Ministers signed the Treaty amendment needed to provide for Greenland's withdrawal from the Community.
"Finally the Council also made progress in discussion of a new common commercial policy regulation, to strengthen the Community's ability to respond to illegitimate actions by third countries in the field of international trade".
My Lords, that concludes the Statement.
3.40 p.m.
Lord Cledwyn of Penrhos: My Lords, we are obliged to the noble Lord for repeating the Statement. It is, of course, overshadowed by the Statement on the agricultural summit which is to follow. I shall not comment on that, save to say that whereas the latter was positive in its results, this Statement on the main issue was, unhappily, negative. I support the Foreign Secretary in

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what he said about the delay. On the question of the 1983 refunds, can the noble Lord say which countries objected to the adoption of the regulations, and on what grounds? Can the Minister confirm that the Foreign Secretary is looking for a cut in the British payment of about 1.2 billion European currency units, which I think is about £680 million, after the accession of Spain and Portugal? If this is the case, is it not a larger contribution than was mentioned by the Prime Minister at the Athens Summit? Is it the kind of compromise which the Government have in mind in an effort to seek a solution?
In view of the fact that no further ministerial meetings are planned between now and the summit next week, can the noble Lord say what action is being taken in the meantime to save the summit from failure? Can we assume that exchanges are continuing to take place between the governments concerned?
Since the last Statement on the Foreign Affairs Council on 22nd February, the Prime Minister has met the German Chancellor, the French President and the Dutch Prime Minister. Can the Minister say whether these meetings were successful in helping to achieve a settlement? Furthermore, the Statement confirms that the core of the problem remains the imbalances in budget discipline, but says that there is still a long way to go. This is somewhat depressing and we must hope that there will be a greater willingness to make concessions when the time comes next week. Can the noble Lord say whether he and the Government are in any way optimistic that a solution can be found in time? Does he agree that if no solution is found the European Community will become bankrupt?
Finally, as to energy policy, will the Government support the action proposed to promote investment in solid fuels? Will this be discussed with the National Coal Board and the National Union of Mineworkers in this country? In view of the need for brevity, especially today, I shall merely say that we note with interest the last five points in the Statement.
Lord Gladwyn: My Lords, we, too, are grateful to the noble Lord for repeating this important Statement. It is indeed satisfactory that the European Parliament has now agreed the regulations regarding our agreed refund of £475 million, but it is, if I understand the situation correctly, necessary to achieve unanimity in the Council before these regulations are finally approved. It is regrettable that, I believe, France and Italy—there is not much secret about that—should be reserving their position on this extremely important matter. Even if they come along on Tuesday evening next to a hastily-summoned meeting of the Council of Foreign Ministers, after agreement is reached—if indeed it is ever reached—on the major outstanding points considered by the European Council. it will still be necessary for the European Parliament to agree with the Commission on the transfer of funds. But I imagine that in such circumstances—agreement in Brussels in the European Council—there is unlikely to be much opposition in Strasbourg to this transfer of funds. Perhaps when the noble Lord replies he will answer that point.
For the rest, I am happy to learn that at least there has been some progress on the crucial budgetary issue,
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and even more happy to hear that there has been some notable progress on the agricultural front, though I agree with the Government that there is still a long way to go. I had hoped that the apparent agreement on the limitation of milk, agreed in the small hours of yesterday morning I believe, could be regarded as a major step forward, but no doubt my noble friend Lord Mackie of Benshie will be expressing his view and our view on this important point.
Of course, the general conclusion is that everything depends on what happens in Brussels on Monday or Tuesday. As regards that, we shall have an opportunity to discuss these major issues tomorrow when we consider the report of our committee on the financing of the EEC.
3.45 p.m.
Lord Trefgarne: My Lords, I am grateful to both noble Lords for their response to this Statement. I shall pick up as many of the points made by the noble Lord, Lord Cledwyn of Penrhos, as I can. I am not sure I agree with the noble Lord that the result of this Council meeting was wholly negative. Certainly we would have wished that the Council would have reached a decision on the regulations, which I referred to in the Statement, so that our refund could have proceded without further delay. As I say, agreement has now been reached between the Council and the European Parliament.
To pick up the point made by the noble Lord, Lord Gladwyn, on the future mechanics of these arrangements, the noble Lord described them quite correctly. After the matter has been considered, hopefully positively, by the additional Foreign Ministers' Council which is to be held next week, it will then have to go to the Commission, as I understand it, to effect a transfer from one heading to another, then back to the Parliament for final approval. I hope that those subsequent stages are likely to prove mere formalities once the Foreign Affairs Council has agreed to this matter. We therefore see no difficulty in achieving a satisfactory outcome to this matter by the end of March, as has always been anticipated.
The noble Lord, Lord Cledwyn, asked me which countries had held out against an agreement on this occasion. I understand that it was France and Italy whose views were such that it was not possible to reach agreement as we had hoped.
As for the forthcoming European Council, a number of important matters, referred to in this Statement, are to be taken at that Council. As the Statement says, the French Presidency is circulating papers on those matters and we hope very much that important progress can be made in those areas. However, I think it must be fair to say that these matters have preoccupied European Community thinking for quite a while now, and it would perhaps be unrealistic to imagine that full and complete agreement on all those matters can be reached at the next European Council. We hope nevertheless that substantial progress can be made.
I can confirm that my right honourable friend the Prime Minister has had important meetings with various European leaders since the last Council and I

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am certain that the rapport that has emerged from those meetings will assist very much in the forthcoming Council.
The noble Lord also asked me about the size of our net contribution after Spanish accession, when it comes to pass. The press report, which I think emerged today, or yesterday, about the amount involved, is of a sum much greater than the reality of the situation, but, as my right honourable friend said at Athens, we would be prepared to countenance a modest net contribution to achieve that particular outcome.
The noble Lord also asked me about the question of support for the mining industry in this country. This is something to which we attach particular importance, not so much to support uneconomic mining activities but rather to mitigate the social effects when mines, unhappily, have to be closed for the reasons with which the noble Lord is familiar. Those are the principal points put to me. If there are any others, I shall be happy to try to deal with them.

Higher and Further Education
3.50 p.m.
Debate resumed.
Baroness David: My Lords, from the number of speakers it is obvious what an important and entirely relevant topic higher education is at the present time. When the suppliers and the consumers of this commodity, in both the public and private sectors, are being subject to cross-examination, we are grateful to the noble Lord, Lord Annan, for putting down this Motion—particularly so as we shall be able to hear the noble Lord, Lord Wilson of Rievaulx, make his maiden speech. He, as a prime mover in the setting up of the Open University, will I hope be speaking on that, and we all look forward to hearing him.
The terms of the Motion are very wide. As we are in a fortnight's time to have a debate on education and training and the White Paper, Training for Jobs, I propose not to talk of further education today, important though it is—not least for the preparation of students to enter higher education. Many questions are being asked at the present time of the universities and colleges by the UGC and the NAB. Whether all the right questions are being asked is another matter.
The Labour Party would have welcomed a wider debate on the whole future of higher education, its aims and needs over the next 15 years until the end of the century, and the role it should play in satisfying people's educational aspirations. Instead, the Government seem determined to restrict the terms of the debate to consideration of ways of cutting higher education provisions. I hope that here today we can go well beyond that and thereby perhaps influence the Government in their decisions.
The DES, in the Report on Education No. 99, made certain assumptions about falling rolls. We want to challenge those assumptions. In the report, a fall is shown in numbers entering HE from 162,000 in 1982–83 to between 123,000 and 132,000 in 1987–88. From a Written Answer I received from the Minister on 27th February, I understand that the assumptions
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underlying these projections are under review but the revised projections will unfortunately not be issued until around Easter. The figures have been queried by the CVCP, the Association of University Teachers and the Royal Society. The Royal Society, in its conclusions, notes that predictions of future demand based solely on gross birth-rate trends are seriously misleading. So far, the DES has failed to grasp the reality of increasing numbers of traditional candidates for higher education from social classes I and II and of the well-documented trend of the increasing participation of women.
The proportion of university women undergraduates has risen from 30.6 per cent. of the total in 1970–71 to 41.3 per cent. in 1982–83. In both France and the USA they have achieved parity of participation rates; in Canada, there are now more women than men in the system. Therefore, it is surely right to assume that this factor in the intake of universities will be steadily rising; this we must hope for. Those who listened to the debate initiated by the noble Baroness, Lady Burton of Coventry, last week will know that women have a very long way to go in achieving parity with men in the professions, in industry, and in public life. Women have not done badly in this House, but we shall not feel that we have really got there until we have a woman bishop on the Bishops' Bench and a Lady Chancellor.
However, taking into consideration those two elements of an increasing entry of those in social classes I and II (both because of the birth-rate not falling so fast there and because of social mobility) and the increasing number of women, the CVCP and the AUT predict that university admissions will go on rising until 1990. Then there will be a dip in demand for places to the current level of provision by 1995, but after that demand will rise again in excess of present provision.
There are other matters to consider. The past year has seen the greatest number of applications for places. In 1979, 53.9 per cent. of applications were accepted and, in 1982, there were only 46.4 per cent. Some 25,000 well-qualified young people have been denied places in the universities since the UGC imposed cuts in July 1981. Many of them found their way into the public sector, which responded typically quickly to need. It is irritating and, indeed, dishonest for the Government now to be congratulating themselves on an increased age participation rate when their intention was quite the reverse—to reduce the numbers overall and, therefore, the cost to the Exchequer. The numbers applying can surely be expected to go on rising with the increasing numbers staying on at school and at college (for whatever reason), and with the improvement in standards and performance which Sir Keith Joseph has said he is determined to achieve.
To aim to reform the school curriculum, to educate more young people in science and technology, and so on, and yet to cut and make impossible the next higher stage of their education, seems sheer lunacy. We want much wider access. We hope that young people from working-class homes who have so conspicuously not been going on to higher education will in future be taking their part in it.

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The Royal Society paper Demographic Trends and Future University Candidates, concludes that the proportion of 18 year-olds in social classes I and II will rise from 27 per cent. in 1977 to 40 per cent. by 1988. There is bound to be greater demand for HE from this quarter. Mature students can be expected to come forward in much greater numbers, both for their own satisfaction and for retraining in industry and commerce. Early in 1983 the Institute of Manpower Studies stated that, although the recession might be suppressing the need for more trained graduates, training for the future was vital.
The institute emphasised that there is a training lead time of five years. On their projections, there will be insufficient graduates to meet the needs of an expanding economy. They drew attention specifically to electronics, computing and similar disciplines. I was interested that in two recent debates in this House—that on the joint report of ACARD and the Advisory Board for the Research Councils and that on industry which was held two weeks ago—there were repeated criticisms of the cuts in higher education and of course of the inadequate funding of research.
I am glad that the noble Earl, Lord Swinton, spoke of continuing adult education. The Advisory Council for Adult and Continuing Education—now defunct and with to date no successor to carry on and put into practice its policies and recommendations—did a lot of work on continuing education and part-time degrees. I should like to pay a warm tribute to Richard Hoggart and his council for their pioneering work. If the Government do not respond—and with rather more than the rumoured extra £50,000 for the National Institute of Adult Education—I shall consider it as positively insulting those who for six years did so much to publicise and prove the need and the demand for continuing education.
Adult education seems sometimes to be a totally blind spot with this Government. The report which they called for, The Legal Basis of Further Education, which was a largely agreed document between officers of the department and local authorities, appeared in June 1981 and has been ignored ever since, in spite of a great deal of prodding by me at Question Time, I may say. Much expenditure on further education at the moment is ultra vires, the report said; and if no action is taken soon one cannot help hoping that LEAs may be taken to court by frustrated parents and students or litigious ratepayers. Of the cuts in the Open University budget and the reduction of opportunities for mature students there, others, I know, will be speaking; but I must ask the Government for an explanation for one thing to do with the Open University. The Open University launched last October management education courses. Two thousand five hundred students have already been recruited. Block bookings have come in from substantial and middle-tier firms. Barclays Bank has lent a quarter of a million pounds in order to get these courses going and has done so at reasonable rates of return, unlike loans from the DES, where full interest has to be paid and the capital paid back within four years.
The Open Tech, created to educate more technicians, who are much needed, has gone up-market and started management education courses
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with around £2 million from the MSC. It is funding other agencies to reinvent distance learning at management level. Strathclyde has got £360,000 and Bucks. College of Further Education £700,000. So public money is duplicating effort. Do two Government departments not know what each is doing? I hope that the noble and learned Lord can throw some light on this extraordinary story.
Coming back to continuing education, in January there was published the excellent report of the Continuing Education Working Party, set up by the UGC, which the noble Earl mentioned. Its 23 recommendations I should like to read out in full, but I will refrain and be content with two: first,
"that the stated policy of universities should be to regard continuing education as a central part of their role and to give it status and recognition equal to research and to the traditional teaching of young undergraduates."
And, secondly,
"that, in order to encourage universities to provide more part-time degree and diploma opportunities, the UGC should provide grant commensurate with that given for full-time students."
The report happily echoes many of the recommendations in the Labour Party's consultative document, 18+: Expansion with Change, and, indeed, many of those also in the Leverhulme Trust report, Excellence in Diversity: Towards a New Strategy for HE. So, if the Government are not to ignore the very many powerful and well researched arguments for expansion of opportunities for mature students, they will have to revise very quickly their policies of restriction and contraction. The motive behind these policies seems to have been the simple desire to reduce public expenditure, even though this motive has now assumed the disguise of a restructuring of the whole system of HE. No one would deny that there was room for rationalisation, that the advanced further education pool was uncontrolled, but our contention is that there has been no well-thought-out policy for achieving a balanced and progressive system for education and re-educating the future generation who will be the innovators, the researchers, the managers and the teachers.
How much research, I should like to know, has gone into the value in lifetime rates of return to the community and to students themselves of a degree? In reply to a Question for Written Answer, I was told that recent studies in the DES suggest that the average real rate of return for full-time first degrees is of the order of 20 per cent. to the student and 5 per cent. to the community. But a discussion paper The Economics of the Degree Industry by Professor Robin Marris of Birkbeck College suggests that it is much higher at 7.6 per cent. and possibly considerably higher than that.
Instead of a positive and constructive policy by the education Ministers, there has been an almost Pavlovian reaction in accepting any demand for cuts and then there has been retreat. Last year, some universities were actually fined by the UGC for admitting extra students. Now we are told that universities are allowed to take in extra students but with no extra money. Over 4,000 university staff have been forced to take early retirement or so-called voluntary redundancy, with, perhaps, over-generous terms, to judge by the numbers who leapt at it.

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But then the effect on the age structure of those remaining and the shortage of researchers for the future dawned on the Ministers and the New Blood scheme was introduced. Has there really been any saving of public money? I understand that £80 million had been saved in recurrent grant between 1980–81 and 1983–84. But £80 million has gone in redundancy and retirement payments and compensation. Provision for New Blood and information technology posts has cost £6 million and will go on rising until at least 1986–87. It seems an Alice in Wonderland situation. Action has been ill thought out, haphazard, opportunist and inept.
I have said that the Labour Party favours much wider access to higher education for women, working-class students, students from the cultural minorities, mature students and part-time students. In order to achieve this wider participation, the awards system must be re-examined. It is 20 years since the Anderson report on awards—which was then a progressive document—brought us the present basic structure, and it is time for a new look. The 16 to 19 area is in a real mess, but that is for another time. In higher education, the dividing line between mandatory and disretionary awards is becoming increasingly blurred and artificial. The original rationale was that mandatory awards should be available for students taking courses of higher education which had a strictly policed entrance qualification—normally two A levels or equivalent—but the whole administration of this matter has become increasingly theological, even Byzantine.
In 1978–79, the Council for Local Education Authorities, with the co-operation of the DES and the SED, established an officer working party to study the matter. It suggested that the criterion for a course to be accepted for a mandatory award should be that the course took the student up to the point where he could embark on his chosen career. The report was welcomed, but no action was taken. Action is urgently needed. The system is creaking. May we please hear what is the Government's thinking on this subject? I assume that they are thinking, and if not they ought to be.
Another point which needs clarification is the position of a student who is regarded as independent of his parents and their income. At present, three years' self-support is needed but in these days many young people, through no fault of their own, may find themselves unemployed. I believe that there has been some relaxation of the rules, but it would be helpful if, in the reply to the debate, the present position could be made clear.
Perhaps the most important subject which we should be discussing today is the relationship between the private and the public sectors, in which I include the voluntary colleges. On them there is a lot to be said, but, as the right reverend Prelate the Bishop of Coventry is to speak, I imagine that he will make their case. The question of the relationship between the two sectors is raised in both the UGC and the NAB questionnaires. The time is surely ripe for a real advance towards unifying higher education. This means equalising the resources in all senses, moving towards co-operation and planning across the binary
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line. Mergers may be possible and they are being investigated in certain cases where, geographically, the two institutions are not far apart.
It was, after all, the present Prime Minister who in her 1972 White Paper, Framework for Expansion, coined the phrase "the higher education family" to cover both the university and the non-university sector. Members of a family may not always see eye to eye on all issues, including financial issues, but they should stand together and take an interest in each other's affairs. I think it is not unfair to say that, at present, many people in the university world come fairly near to withdrawing the hem of their garment from non-university higher education affairs. Of course, there are exceptions and it is good to know of the close co-operation between Mr. Christopher Ball, Chairman of the NAB, and Sir Peter Swinnerton-Dyer, chairman of the UGC, and that they attend each other's meetings. With the appraisal that is now going on, surely this is the time to take some very positive steps forward.
The increasing importance of local authority higher education needs to be more fully understood. It provides for nearly one-third of a million students following over 10,000 courses in nearly 400 local authority colleges. I quote from NAB's paper:
"The characteristic features of the sector lie in its variety, its flexibility, its responsiveness to the local, regional and national needs of industry, business and the public services, and its openness in terms of non-traditional access. About 150,000 students are on degree courses, many of whom are mature entrants…and a significant minority have come in without fomal qualifications."
There are already more first-year home students on full-time and sandwich courses in the local authority colleges than in the universities. There were 4 per cent. fewer students in the universities in 1982–83 than in 1981–82; 7 per cent. more in the public sector. Even with the restrictions now being sought on expenditure there, it is expected that there will be more first degree students there than in the universities, even though the number of postgraduates will rightly be larger in the universities and, obviously, research should be primarily in the universities. The noble Lord, Lord Annan, suggested taking away some of the degree work from the colleges, but if that is done how many young people will be deprived of their opportunities, and the nation of much needed qualified manpower?
Many questions are being asked about length of courses, length of terms, methods of instruction, short vocational courses and so on, and it is right that there should be such questions asked. If there is to be change and greater flexibility in the system, it must apply in both sectors. We must avoid an outcome where the universities go on their present way more or less unchanged, and the public sector is expected to pick up the pieces and take on what is left over at a lower unit of resource.
Why is the university student so much more expensive? It has been very difficult to get up-to-date and comparable figures. A reply from Mr. Brooke in December last gave the net institutional average annual recurrent cost per student in 1981–82 as £3,120 for a poly and £4,400 for a university student. Of the £1,280 differential, £500 relates to teaching alone, not research. Can this difference be justified?

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Dr. Rickett, director of Middlesex Poly, said in a recent talk that the difference in levels of resource for students is related to the staff-student ratios and the salary levels in the two sectors.
It is not only a matter of salary levels at comparable grades; it is also that the universities are allowed in excess of 40 per cent. of their posts at senior lecturer/reader grades and above, whereas in the public sector there are few institutions which have 25 per cent. of their staff at principal lecturer level. This position has been worsened by the decision of NAB to reduce the unit of resource by about 11 per cent; in the universities the unit of resource has been maintained.
If you look at the mixture of disciplines in the polys, 60 per cent. of the courses are in science and technology and in administrative and business studies, with 16.5 per cent. in art and design and other professional courses. So over 75 per cent. are providing just what the Government say they want. Let the universities concentrate, if they will, on their academic values, provided they do so at the same level of cost as Coventry Poly applies to its very successful engineering department and its research on wave energy.
Each sector should not necessarily be doing the same things. They can be different. Variety of provision is needed. What we would like to get rid of is the pecking order: universities top, polys next; other major institutions third, minor colleges fourth. I wish I knew how to get rid of the élitist attitudes, if we are to advance as a unified nation we must. We should aim at what Anthony Crosland wanted to achieve and which he explained in his speech at Woolwich Poly in 1965:
"The Government accepts this dual system as being fundamentally the right one, with each sector making its own distinctive contribution to the whole. We infinitely prefer it to the alternative concept of a unitary system, hierarchically arranged on the 'ladder' principle, with the universities at the top and the other institutions down below. Such a system would be characterised by a continuous rat-race to reach the first or university division, a constant pressure on those below to ape the universities above, and a certain inevitable failure to achieve the diversity in higher education which contemporary society needs".
He then outlined the need for vocational, professional and industrially based courses in higher education, but continued:
"… a system based on the 'ladder' concept must inevitably depress and degrade both morale and standards in the non-university sector. If the universities have a 'class' monopoly of degree-giving, and if every college which achieves high standards moves automatically into the university club, then the residual public sector becomes a permanent poor relation perpetually deprived of its brightest ornaments, and with a permanently and openly inferior status. This must be bad for morale, bad for standards, and productive only of an unhealthy competitive mentality".
We have come much too close to what Crosland did not want to happen. We have the "ladder". The question is, how do we get off it and have a really close co-operation and equal prestige? The people teaching and learning within each sector should know they are doing an equally important, if different, job. If, when the noble and learned Lord replies to the debate, he can make some positive suggestions as to how the higher education system could be made to work as one unified system, there will be real change and a brighter future for higher education and for the country.

Council of Agriculture Ministers
4.15 p.m.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): My Lords, with the leave of the House, I shall repeat a Statement being made in another place by my right honourable friend the Minister of Agriculture, Fisheries and Food. The Statement is as follows:
"With permission, Mr. Speaker, I wish to report to the House on the meeting of the Council of Agriculture Ministers which took place in Brussels on llth, 12th and 13th March. I represented the United Kingom together with my honourable friend the Minister of State.
"The Council discussions mainly focussed on milk and monetary compensatory amounts.
"I am glad to tell the House that a substantial measure of agreement was reached on an important scheme for tackling the growing milk surplus and the horrendous increase in the budgetary costs of this sector. The principal element in this scheme is a supplementary levy. This will be charged on all milk produced above a specified quantity. This Community-wide quota for deliveries to dairies is 98.2 million tonnes for 1984–85 and 97.2 million tonnes for the succeeding four years of the proposed five-year agreement.
"97.2 million tonnes represents the total of Community milk deliveries in 1981, plus 1 per cent., and the quotas will be divided between member states on that basis. The agreement provides for the levy to apply either at the level of the dairy, in which case deliveries in excess of the quota will be charged at 100 per cent. of the target price for milk, or at the level of the individual producer, in which case excesses will be charged at 75 per cent. of the target price. Allocation of the quota in member states can be made on a more recent basis than 1981.
"It was one of my main priorities to ensure that all producers without exception should be brought within the scope of any supplementary levy scheme. I am glad to say that this objective was achieved. There is no provision for exceptions for small producers or any other special category; and milk not delivered to dairies is also liable to the supplementary levy. The special aid to small milk producers was agreed for an additional two years. This will help with the income problems of small milk producers but does not exempt them from the supplementary levy.
"I know that the industry was concerned about having to face the full rigour of the basic quota immediately. I was therefore glad to accept an intermediate step for 1984–85. In order to finance the additional 1 million tonnes involved, I agreed to a 1 per cent. increase in the co-responsibility levy for one year only.
"Under the agreement there would be no intensive levy on milk producers. This was a major objective for me because this would have discriminated seriously against the United Kingdom milk industry.

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"The agreement is related to a freeze on the common price for milk in 1984–85. There is provision for the butter subsidy to be reduced. But the United Kingdom price of butter to consumers will not increase.
"The main outstanding issue relates to possible special arrangements for individual member states. There is reference to a Community reserve of 600,000 tonnes in addition to the basic Community quota. The Irish have maintained their demand for exception from the supplementary levy to enable them to continue to expand up to the average yield levels for the Community. I have maintained a reserve on the whole idea of a Community reserve and the linked question of any special arrangement for the Irish and other member states. The Irish made it clear that they would wish to pursue this issue at the European Council.
"Turning to the question of monetary compensatory amounts, the negotiations centred on the German suggestion for dismantling existing positive MCAs, and for avoiding the creation of new positive MCAs at future EMS alignments. I have made it clear throughout that the United Kingdom is concerned about the budgetary implications of the German ideas. But this is an issue of high importance to certain other member states. The text which was worked out in negotiation would provide for the dismantlement of German and Dutch positive MCAs in three steps. It recognises the special position of sterling as a floating currency. If implemented, the United Kingdom positive MCAs would be reduced in the first stage by about 3 percentage points but there would be no effect on the level of support to United Kingdom farmers in terms of sterling. I have maintained a reserve particularly in relation to the budgetary costs of this arrangement. Because of these budgetary implications, the issue will be put before the European Council.
"The texts on milk and MCAs are subject to a number of reserves, including a reserve related to the overall agreement on agricultural prices which will need to cover other commodities. The Agricultural Council will be resuming its work on Friday. But the agreement on the implementation of a supplementary levy is, I believe, a historic step forward in bringing sanity in the common agricultural policy.
"It marks a recognition by the Council that the milk sector cannot go on expanding and adding to the waste of Community resources. My concern now will be to discuss in detail with our own industry how we can most sensibly implement these arrangements in the United Kingdom".
My Lords, that concludes my right honourable friend's Statement.
4.20 p.m.
Lord John-Mackie: My Lords, in thanking the Minister for repeating this Statement given in another place, I venture to think that everyone would agree that it is a very long and complicated Statement, and one which requires quite a lot of study. I am sure that
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the House would wish to debate this matter on a future occasion, particularly when many of the other matters which are before the Council of Ministers and the Commission in general are settled.
In the meantime, I shall just comment on a few of the points in the Statement and ask the Minister a few questions. The first concerns the 97·2 million tonnes for the first year, 1984–85. I feel that this is going to be slightly unfair to UK farmers. The year 1981 was not an average year, and I wonder why the Minister did not press for an average of four years rather than taking one year.
Can the Minister explain what is meant by,
"the allocation of the quota in member states can be made on a more recent basis than 1981."?
That, I think, requires a little explaining. The question of special aid to small milk producers, I understand, hardly affected this country at all. It really assists the very small producers in France and Italy, and I think it does not affect us; but would the Minister care to comment as to whether or not we do get any, or much, benefit from that?
The question of what is called "an intensive levy" mystified me. I assumed it was a misprint for "intensive milk production", but I understand that this was to be a super levy. Would the Minister just confirm that, as, of course, it would have discriminated against our industry in this country? On the agreement to freeze the common price for milk in 1984–85 along with the provision for the butter subsidy to be reduced, the Statement says that the UK price of butter to consumers will not increase. Perhaps the Minister would explain to the House how that is to be carried out. I should like very much to agree with the Minister on the question of the special arrangements for other countries which he has been against.
On the question of MCAs, we are looking forward to seeing what is to happen next because the MCAs, green pound et cetera—as the noble Lords know—create great difficulties, great confusion (if nothing else) with farmers as to how exactly they work.
The statement says:
"The implementation of the UK positive MCAs would be reduced in the first stage by about 3 per centage points but there would be no effect on the level of support to UK farmers in terms of sterling".
I should be obliged if the Minister could give us some slight guidance as to how that comes about.
On the question of the supplementary levy latterly—there is no question of budget—this is a step in the right direction and we look forward perhaps to seeing the results. I should like to ask the Minister about this. On a calculation based on the number of producers in this country (which is about 39,700), and if they are to have the reduction mentioned on the basis of 1,100 gallons per cow in this country, that means we are going to do away with about 200,000 cows (if that is the way to reduce production) which might mean 300,000 acres—an acre and a half a cow (and I believe it might be even more than that)—which has to be put to some other use. Or would the Minister advise farmers to go in for a low input/low output system which might give them adequate profits and still reduce the milk supply? I wonder, what advice should we give to dairy farmers?

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The last point I should like to ask the Minister about is this: does he think this will do the trick? After all, even if we go down to 97.2 million tonnes of milk, it still leaves a surplus of 9 million tonnes, and that has to be got rid of. I just wonder whether this will get rid of the surplus of milk products, and particularly butter and skimmed milk powder. I am sorry to ask so much but, as I said at the beginning, this is a complicated and important Statement. I should be glad if the Minister could answer some of these points.
4.25 p.m.
Lord Mackie of Benshie: My Lords, I should like to thank the Minister for what I, too, think is an important Statement and a very great step forward in bringing sanity into the operation of the CAP, because the way that we have avoided taking steps—or the Council of Ministers have avoided taking the necessary steps—has brought the whole concept to the verge of breakdown, and it is a policy which has resulted in very great benefits to the balance of payments in this country and to the security of food supplies in Europe. What has been wrong up till now has been that politically the Council of Ministers have never had the courage to take the necessary steps to make the policy work. I myself would much rather have seen a straight cut in price which would have been simpler to operate and might have been fairer, but this is a really savage and, I am afraid, necessary step if we are to stop the whole thing breaking down. For that reason I welcome it.
My noble kinsman has asked most of the pertinent questions, but there are a number of comments which I should like to make. I think that the whole Statement leaves unanswered a very large amount of detail. I am very glad to see that the allocation of the quota in member states can be made on a more recent basis; in other words, member states can work out the best way to apply the quota for their own farmers. I think that this is a completely necessary step because it is a little hard on the people who have increased their efficiency of production that they should be savaged, whereas people who have held this status since 1971 should not. I hope that the Minister and the industry can work out the proper way of carrying out this task.
On the intermediate step, do I gather that the other levy—noble Lords will understand that there is already a levy of 2 per cent.—is going up to 3 per cent., and that levy which is unfairly applied across the Community will be able to pay for the extra production? Can the Minister tell us until when? Is it for this year, or for how long before what is known as the "super-levy" comes into operation? Can he enlighten me as to why, if the dairies or the Milk Marketing Boards are applying it, then the payable levy will be 100 per cent., but if it is applied to producers individually it will be only 75 per cent.? I think—and my noble kinsman asked about this—it is quite extraordinary that the Commission or the Council should be asking for, or thinking of, an extra 600,000 tonnes quota when already we are 10 million tonnes over the consumption on the basis of 97 million. I should like the Minister to comment on that point.
Would the Minister also say whether the Irish—who
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may or may not have a case—have agreed to this? It is only a detail which has been negotiated. Will be also say whether or not unanimity will be needed for the whole question to be resolved as agreed?
Lastly, I do not understand the question of an MCA reduction for 3 percentage points in this country without any effect on the farmers' prices. This appears to me to be difficult because when we were talking about the Commission's demand for a 4·2 per cent. alteration, we were talking about a drop in farmers' income here of something like 5 per cent. I think that we ought to have that explained.
There are many other questions. There is one important question which arises right at the end of the Statement, when the Minister said that reserves are being maintained for discussion at the next Council on other prices. I hope that he will press for realistic prices for cereals, on which so much depends in the other sectors and in, other livestock sectors and which are very important. We must also realise that too savage a cut at this point might do enormous harm to an industry which has saved this country about £2½billion a year in imports over the past 10 years. Therefore, while the cuts are necessary to make the CAP work, we must watch to see that we do not destroy too much of the industry in the process.
4.31 p.m.
Lord Belstead: My Lords, I am grateful to the noble Lords, Lord John-Mackie and Lord Mackie of Benshie. The noble Lord, Lord John-Mackie, asked whether 1981 plus 1 per cent. as the basis for deciding how the quota was to be shared out between member states was not unfair. May I say in reply that there are obviously other ways of dividing up the quantity, but I think I ought to say that it has been worked out by us that all would have given the United Kingdom a proportion which would have come to approximately 16 per cent.; which is in fact what we are going to get from the formula of 1981 plus 1 per cent. The noble Lord, Lord Mackie of Benshie, answered the question put by the noble Lord, Lord John-Mackie, which is: what is the meaning of the words.
"Allocation of the quota in member states can be made on a more recent basis than 1981."?
It simply means that whereas the national allocations are on the basis of 1981 plus 1 per cent., in allocating to individual farmers—if, of the two options which have been agreed in the agricultural Council. that is the way we are going to do it—we could use another year as a base year; for example, 1982 or 1983.
The noble Lord opposite asked about aids to small milk producers which are to continue. Indeed, we have not benefited a great deal, so I understand, from this particular aid and there is nothing specific that I should add. The noble Lord, Lord John-Mackie, asked specifically about the reference in the Statement to the fact that under the agreement there will be no intensive levy on milk producers. I know that we are pressed for time, but may I just say that there are four things which are most important and which come from this very complicated Statement. The first is that, at last, the surpluses are reined in and the costs of the milk sector will be reduced. In answer to the last question of the noble Lord, Lord John-Mackie, we hope that it will do the trick.

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Secondly, we have ended the idea of having special exemptions, which the French wished, for small producers. The small producers will benefit in other ways from the continuation of the special aid for them, but not by saying that because a producer is so small he can fall outside this whole basic levy system altogether. Thirdly, my right honourable friend the Minister insisted that off-farm sales should not he exempted from this system. As most of our milk in this country goes through dairies, this was absolutely essential for Britain's interest, and we secured that. The fourth point, which answers the noble Lord's question, is that there was indeed an idea for a second levy—an extra super levy—which the French pressed for and which would have affected at least 6 per cent. of our production. That has not been agreed in the agricultural Council.
To be much more quick, if I may, both noble Lords asked about the situation regarding butter. The Commission proposes to cut the butter intervention price. The reduction in the butter subsidy takes account of the change in the intervention price and, as a result, the total effect should be to leave butter prices in the shops unchanged. Both noble Lords asked me to try to interpret the passage in the Statement on MCAs. The meaning simply is that my right honourable friend the Minister has stood out stalwartly against a revaluation of the green pound. This will mean that the returns to our producers, farmers and horticulturists will not be affected by the plans of other member states to alter MCAs.
So far as our exports are concerned, I am advised that the reduction of our MCA—not the green pound—will be balanced out by the re-calculation of the central rate and, therefore, there will be no effect on our exports or, indeed, on our imports. I think that concludes my replies to the questions put by the noble Lord, Lord John-Mackie.
The noble Lord, Lord Mackie of Benshie, asked me to confirm that the co-responsibility increase of 1 per cent. is for one year only. It was agreed by the agricultural Council for one year only. The noble Lord asked me about the significance of the difference in the two options which member states can choose: either going on the 100 per cent. levy if the milk goes through the dairies, or the 75 per cent. levy if it goes through producers. My understanding is that these ought to be very similar when worked out in practice.
This brings me to my final point. There is no question but that there is still a very great deal of work to be done on this enormously complicated document. For instance, we have to discuss very seriously with the farmers' unions and the Milk Marketing Board exactly how it is to work. I assure the noble Lord that we shall do the best we can for our national interest. In that context, may I say that my right honourable friend will again be back in Europe on Friday. For instance, as the noble Lord, Lord Mackie of Benshie, said, cereals are still to be dealt with and there is still much to be discussed.
Lord Shinwell: My Lords, may I ask a question about procedure? On those occasions when we have short debates, as for example today—
Noble Lords: Not short!
Lord Shinwell:—a very important issue is raised. A large number of noble Lords wish to take part in the debate. Why should we have these long, wordy Statements thrust upon us? I am not seeking to criticise, but merely stating a fact. In two cases Ministers have taken a quarter of an hour or 20 minutes to repeat a Statement made in another place and then from our side we have two Front Bench speakers—not ordinary people like ourselves—
Lord Stoddart of Swindon: Since when has the noble Lord been ordinary?
Lord Shinwell:—who made long speeches, for example, on agriculture, and on other subjects. Surely some arrangements can be made so that our short debates are not interrupted as they have been today. Moreover, when long Statements of this character are made, instead of only a couple of Front Bench speakers taking nearly an hour between them to express their views, could not the whole subject be thrown open to general debate, so that some of us on this side of the House, who are not so well educated or well-informed as the Front Benchers, can offer an opinion? I should like an answer to that question of procedure.
Lord Belstead: My Lords, I think my answer to that must be that I think it is irritating. But it is important in this particular case for very large numbers of our farming community, and it is necessary for the procedure of your Lordships' House. With apologies for having taken up rather a lot of time, may I suggest that perhaps we move on to the next business and some very important speeches.
Lord Jacques: My Lords, may I suggest that, in future, when there are Statements they should be postponed until after the maiden speeches have been made in a debate?
Lord Belstead: My Lords, I will draw the suggestion of the noble Lord, Lord Jacques, to the attention of my right honourable friend the Chief Whip.

Higher and Further Education
4.40 p.m.
Debate resumed.
Lord Flowers: My Lords, I am not in the least irritated. I would propose that we now return to our debate. In doing so, I should like to say that we on these Benches are extremely grateful to the noble Lord, Lord Annan, for proposing this debate and for setting the stage so comprehensively. We also look forward to the maiden speech of the noble Lord, Lord Wilson of Rievaulx, and I hope he will not feel too constrained by the customs of this House, because it is obviously going to be one of those occasions when there will be no holds barred.
As chairman of the Committee of Vice-Chancellors and Principals, which was referred to with such generosity by the noble Earl, Lord Swinton, there is a

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great deal I could, and no doubt should, say about the grand objectives of higher education: its participation rate, its impact on the schools and on the professions, and the need for it to continue throughout life. All of these are matters under close examination at the present moment, stimulated by the UGC's 28 questions and otherwise.
But since I believe that many other noble Lords will wish to address these important topics and time is short, may I simply say about them that the demographic trends described by the noble Baroness, Lady David, make it possible for the universities. collectively, with the other institutions of higher education, and in a great variety of ways, to offer education that is the equal of anything in the world to a higher proportion of the population than has ever been the case before. In spite of the recent deprivations wrought upon us over the last five years, it is still not too late for the Government to affirm their belief in the importance of having highly educated and well prepared citizens, and to help us to reach our full potential. As it is, Government policies have reduced the chance of university entry over the last few years by about one in seven, which is a strange way to affirm that belief.
The noble Lord, Lord Annan, has asked your Lordships to consider the need for change, and I am grateful to him for the kind references he made to myself. I propose to say a few words about the changes that are already taking place, for it is a sad fact that until this week, at any rate—and I, too, was very glad to see the leader in The Times on Monday—the media have regaled their readers with every bit of regrettable student behaviour, to the neglect of our more significant achievements. They have not reported, for example, that students have formed over 50 industrial societies, the larger ones having more than 700 student members each.
Of course, academics do not take very readily to change. Our most important duty is scholarship, by which I mean the protection, in a rapidly changing world, of the integrity of knowledge. Every new discovery creates conflict for the body of received wisdom, and that conflict has to be resolved by patient reflection and fearless argument. It is in order to protect scholarship that most academics believe in some form of tenure. I can do no better than to quote from an article published in 1972 by Kingman Brewster, at the time President of Yale and later United States Ambassador to London, now happily back with us living in this city:
"If teaching is to be more than the retailing of the known, and if research is to seek real breakthroughs in the explanation of man and the cosmos, then teachers must he scholars, and scholarship must be more than the refinement of the inherited store of knowledge. If scholarship is to question assumptions and to take the risk of testing new hypotheses, then it cannot be held to be a timetable which demands proof of pay-out to satisfy some review committee.".
Scholarship is a long and painful business, and that is why we sometimes react less rapidly than some would like. Retired vice-chancellors, I have noticed, can be particularly impatient. Perhaps they feel they are planning for a better past, with not much time left.
In spite of that, the pace of change is growing. We are getting closer to industry and to commerce, and I
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am glad that the noble Earl, Lord Swinton, acknowledges this. Every month or so there is announced the formation of a new science park, almost invariably in collaboration with a university, or of an industrial liaison company. The latest announced are at Nottingham and Birmingham. The venture capital business is booming, much of it associated with university research. Many small companies are being formed. Two recent ones are QMC Anchor Technology, which is producing a pile-driven anchor for oil rigs, and Vuman, which is to exploit the results of research in the Victoria University of Manchester.
A still small but growing proportion of our income is coming from the private sector in the form of research contracts and services. University scientists and engineers are thereby learning to adopt to commercial criteria of tight cost control and strict time limits, and these new attitudes also permeate the teaching. Much of this work is highly innovative; some of it requires the sort of interdisciplinary collaboration one simply could not expect to find outside a university. An example is the speech-driven typewriter being developed by Plessey, jointly with academics from Edinburgh, Loughborough and Imperial College. Still more fascinating to some will be the contract between the University of Birmingham, with its department of English language and literature and its centre for computing and computing science, and Collins, the publishers, to produce a new dictionary for advanced learners of English as a foreign language—an example of high technology being harnessed to spread the influence of our native culture.
Some of the work is highly competitive. Surrey is the only university in the world to have designed, built, had launched and now to be controlling its own satellite. The general aim is education for space engineering, but the concept of cheap communication in near earth orbit has meant that schoolchildren can now receive transmissions from space, with very little equipment beyond a television set and a competent science master. Its cost was minimal—a few hundred thousand pounds—and it was completed on time.
It is tempting to go on trying to interest your Lordships in achievements of this kind. I have enough material to carry on for several hours, most of it quite outside my competence, in the humanities, for instance, in economic and social studies and in medical research. I merely wanted to illustrate the fact that there are many things taking place in our universities today that would not have been taking place a few years ago, and that some of it is extremely relevant to the needs of the society we see developing before our eyes, and of which we are all a part. Many of us believe we can do even more, and it is for this reason that the vice-chancellors have recently set up an advisory committee on industry, with several very distinguished industrialists taking part, to see what barriers to effective collaboration remain, and how best to cause them to be removed, by ourselves or by the Government, as the case may be.
There are organisational changes, too. The binary line was not of our invention, and many of us wish it were not there, distorting the whole fabric of higher education and contributing to the relative neglect of non-degree work. We are beginning to collaborate across the line in continuing education, and to share

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facilities between contiguous institutions. In an effort to live within reduced resources we are combining small departments. Manchester gave a lead long ago, pooling with UMIST its efforts in computing and metallurgy.
But London has done by far the most, committees and all, and I am proud of it. It was the painful duty of the noble Lord, Lord Annan, assisted a little by me in the vexed matter of the medical schools, to bring home to our university a few years ago that we had far too many small components that were dangerously vulnerable to the threatened cuts. Of course, it was not easy, and your Lordships' two noble friends became extremely unpopular, not least in this House. It is now all coming to pass under the inspired leadership of Professor Randolph Quirk, our present vice-chancellor. Guys and Tommy's have become one medical school under one charter and with one governing body. Westminster and Charing Cross are following suit; their act of union will shortly be before your Lordships. University College and the Middlesex, with some of the postgraduate institutes thrown in, are set fair to become the strongest centre of medical teaching and research in Europe.
As for the rest of the university, it has been decided to reduce from 10 to five, and in some subjects four, the number of independent schools in which scientific subjects are taught and researched. Bedford College is joining up with Royal Holloway at Egham; Queen Elizabeth College and Chelsea are joining Kings; Birkbeck is collaborating closely and sharing facilities with University College. It is a very remarkable achievement, much as though the universities of Lancashire and Yorkshire, or of Scotland, had agreed—God forbid!—to halve their number. Let no one speak of the need for change in ignorance of these facts.
Under the auspices of the Committee of Vice-Chancellors we are also preparing to conduct a Rayner-type examination into the efficiency of university administration and the use of material resources. We announced yesterday that it is to be led by Sir Alex Jarratt, the distinguished industrialist and former civil servant who has now become Chancellor of the University of Birmingham, and its report will be ready early next year. We enter the examination without fear, for we have for a long time been conscious of the need to conserve resources.
Let me end by quoting a short passage from the minutes of the Committee of Vice-Chancellors:
"The Chairman referred to the issue of Ministerial attitudes … and in particular, to recent statements relating to the efficiency of universities. There was agreement on the need for universities to take every opportunity of demonstrating their cost-effectiveness, their responsiveness to national needs and the fundamental importance of their contribution to society".
Those are not my words, my Lords. They are the words of the much revered Vice-Chancellor of Manchester, Sir Arthur Armitage, uttered just nine years ago. Today, sadly, there is taking place in Manchester Cathedral a service in memory of the life and work of Sir Arthur. He wrought great changes in Manchester, and if he were with us today, he would be astonished by anyone who does not understand that change has long since become the order of the day throughout our universities.
4.52 p.m.
Lord Wilson of Rievaulx: My Lords, in hoping for the indulgence of the House for my maiden speech, I should perhaps confess that this is not in fact the first time that I have spoken from these red Benches. My first parliamentary speech in 1945, in the role of the then lowest form of ministerial life—Parliamentary Secretary to the Ministry of Public Building and Works—was made from the Front Bench in here because, owing to the bombing of another part of the Palace of Westminster, their then Lordships graciously made this Chamber available. I was assigned to the task of directing the progress of the other building.
I should just like to mention that that was after Walter Elliot (remembered by the older ones of us here), seeing from Whitehall that the Palace of Westminster was on fire, ordered—simply ordered, without any authority—the fire brigade to let the other place burn, pointing out that it was only 100 years old, having been built after the Treasury, as usual, had tried to save money the wrong way and had burnt all those tally sticks. So the fire brigade managed to save at any rate this part of the building.
I do not know whether in a debate such as today's I have to declare an interest as Chancellor of the University of Bradford—unpaid. But at any rate this debate on education gives a number of us—including myself—the opportunity to express our anxieties over present and forecast future difficulties that the Open University (OU) is required currently to face.
I had conceived the idea of the Open University well before anyone ever thought of making me Leader of Her Majesty's Opposition. I think that I called it the University of the Air, and I kept it under wraps right through the summer of 1964 before announcing it. I announced it finally, with the usual hand-outs, in September. So far as I recall, not a single newspaper reported the plan, except the Economist, then edited by Geoffrey Crowther, who was rapturous about the idea, and later he became the first Chancellor of the University.
In making that proposal, which, as I say, did not receive a lot of early support, I had particularly in mind the fighting men of World War II, many of who perhaps would have gone to university but for the war, and who had married and had family commitments: the Open University gave some of them a chance to earn wages or salaries and at the same time to study. I do not need to tell this House that the Treasury was implacably opposed. Well, of course—what would your Lordships expect? But so, I am sorry to say, was the Department of Education, which I understand has improved a little from those days. But the resources of civilisation were not to be discounted. I appointed my noble friend Lady Lee of Asheridge Minister of State in the Department of Education. It was no idle threat, I assure your Lordships, and she had to take charge of the whole operation, and the outcome was a triumph on her part.
At the same time broadcasting involvement was essential. Fortunately, at about that time the heads of the BBC wanted something from me. They came to see me, for a second channel. Well, we negotiated—if you can call it that. The condition that they accepted was an adequate provision of time for the new broadcasting university; and in fact their co-operation was invaluable in those years when it was an entirely

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new operation, as it has been in all those years since. I think that the university has also been quite useful to the BBC in providing a new area of training for its people.
I am not quite sure of the rules, but perhaps at this point I ought to record, or declare, a family interest. My elder son, who has been a maths don at four Oxford colleges, is an OU lecturer, and over the years he has given me a good deal of evidence that the course there is at least as tough and as difficult as they required for an Oxford degree; and our other son has graduated through the Open University.
The interesting fact is that today there are over 50 such universities all over the world, all modelled on ours, and for many years our balance of payments was fortified by sales of teaching material and, at least for a time, of equipment. Some of the engineering students needed to have engineering equipment and others needed equipment for similar studies. But it is, sadly, on the record that two or three years ago, when they cut back on university finances in our new universities, Her Majesty's Government at the same time put the brake on so far as the OU was concerned.
I should like to refer to what happened to the British universities. There were big debates in both Houses. In Bradford, for example, all our students in, say, engineering (our main subject), are required to work about a third of their four-year course in British factories or firms. In a few years' time—and here I am thinking in particular of those who come from the Commonwealth, or further afield—whether as civil servants who have to authorise the import of this or that particular piece of machinery, or whether as industrialists themselves, those former students, as a result of their presence here in this country, working in one British factory or another, may well dictate what equipment they should import.
Now I should like to turn to the Open University. I believe that the recent cuts forced on OU programmes will prove at least as serious as this short-sighted anti-Commonwealth attitude which we have seen developing in other ways and in other parts in recent years. The 1982 financial provision for the OU of £58.7 million has been cut to £58.2 million in 1983. You may say that this is not very much, £58.7 million to £58.2 million. But it is, of course, a much sharper cut than it appears to be because the figures make no allowance for inflation. Again, if we look at student grants, they amounted to £924 in 1980 and, at constant prices, to £814 in 1981. In real terms, they were 13½ per cent. lower. Over four years from 1980 to 1984, the university's grant from Whitehall has increased by 24 per cent.—yes, thank you very much, certainly—while the retail price index has risen by 42 per cent., or two-four reversed.
The £50-odd million that I have mentioned may seem a large sum, but not if' one realises that the university teaches three-quarters of the whole nation's part-time university students. It is not sufficiently appreciated that there are these part-time courses and that three-quarters of them are taken in charge by the university. It is also worth knowing, and the Treasury, which perhaps has some responsibility in this area, ought to be pleased to hear—I hope that it will hear—that the Open University graduate costs the
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country only a little over half as much as a graduate from a conventional university.
I shall not weary the House with the whole catalogue of cut and cut again. I shall just instance computers. There are two novel and highly successful courses for managers and engineers in industry all over the country, not simply for those who can travel locally to a university. These same managers and engineers in industry have courses dealing with micro-processors and product design and development. It is a fact that already 30,000 engineers and managers have taken these courses through the OU. This year there are 1,100 undergraduates studying the digital computer. There are 2,300 studying the course "Computing and Computers" at a very low cost to the nation. This is a good investment.
Jointly with the Science and Engineering Research Council, itself of high repute, the university is now planning postgraduate courses which will bring working engineers, working scientists and managers up to date in the latest developments in both manufacturing and the industrial application of computers. Current plans are now at risk at the hands of the rather less than imaginative Treasury, which seems to resent the kind of world in which we all live; these threatened plans would provide for 60,000 citizens of this country operating in this field.
To cut these research facilities is, to use an old cliché, selling the seed corn, and this at a time when the university's own industrial company—yes, it is a limited company—the Open University Educational Enterprise Limited, has handed over nearly £440,000 from interest and profits on its activities. I am sure that my noble friend Lord Perry, who has much more experience of this subject than any of us and who was really the creator of the Open University as we know it today, could confirm and verify with far more authority than I can command the alarming figures I have quoted, these current trends and the threat of more to come. He could estimate, I think, their significance for higher education in the widest sense. The facts show that over the next three years, to 1986, on the plans laid down by the authorities, the university will have to cut expenditure by £13·5 million.
What the statistics will not show are the disappointments and the broken prospects of a generation of students whose potential contributions to British industry and to British inventiveness and competitiveness in a growingly competitive world are being snatched away, from what industry and the education process could provide, by the Treasury, which could not, in my view, in terms of the problems I am describing—I may be a little biased but I have known the Treasury for 40-odd years, and I was First Lord of it once—with any marked success, run a fish and chip shop.
Noble Lords, at least those of my generation—I remind them of this before I sit down—will know the story of the man during the war who, having climbed the Duke of York's steps and walked along to Whitehall, was asked by a passer-by "Which side is the War Office on?", eliciting the reply "Ours, I hope". After what I have described, based on firm and irrefutable facts and figures—there are lots more of them if anyone wants to have them—the need is for

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more work, more jobs and, if I may say so, more proof that Her Majesty's Treasury is really fully committed in this war, this most desperate war, that we have in this country today, the war against unemployment.
I wish to conclude by referring briefly to this. During the war, I was involved at the head of a series of Government statistical departments. I have to emphasise—and I would be ready to give reasons for this estimate, perhaps when we debate economic affairs in a different way—that the real unemployment figure for Britain is not 3⅓ million. Not at all; that is a completely phoney figure. The real figure is at least 4⅓ million, if one allows for the fact that school-leavers, for example, have been given great help in the creation of training courses by leading firms. In every speech I make in America or when touring abroad, I always pay tribute to one or two in the constituency that I represented for what they do to create jobs that do not really exist for some of these kids. I am thinking of Messrs. Pilkington, British Insulated Callender's Cables and our Ford factory. But, of course, if our industry is to flourish, and if we are to keep among the top nations in this new technological revolution, then it is essential that the Government stimulate education for industry.
I had the privilege, as I have said, of working for a time on Winston Churchill's staff, before he sent me round to other departments to try to get their statistics as he would like to see them—not "cooking" them, but making them credible, understandable and comprehensible. Winston Churchill—there are many here who knew him better than I did—was undoubtedly a humanist. He did a great deal for people who were unattached to him. If he or Clement Attlee were alive today, if either was in charge, I can just imagine that a battery of brief and pungent directives would be flying around Whitehall headed "Action this day". Many in this House have seen or received and shuddered when they got those documents, as I did. However, on youth unemployment, on stagnation in industry and on training for industry, I am certain that their message would have been "Action now" to stir our people and, above all, the younger generation to genuinely satisfying work and to training facilities that anticipate economic needs and opportunities of the remaining years of this century.
Is it too much to ask that the same power and sense of direction be now applied in our training and education systems, and in a relevant attack upon the factors that are producing youth unemployment, through the provision of adequate, however varied, educational opportunities on which not only the future of those children, the future citizens, depend, but on which the future of Britain herself in the next half century will most certainly depend?
5.10 p.m.
The Earl of Perth: My Lords, it is my very pleasant duty to thank the noble Lord, Lord Wilson of Rievaulx, for his excellent maiden speech in this House. I stress "in this House" because so many of us remember him speaking when he had another guise in another place. I am also very happy that he chose this subject to break the ice, because it shows the importance that he attaches—as, indeed, do the 40 other noble Lords who are speaking today—to this
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particular subject; and it is the better because of the great responsibility that he has had for the Open University.
I was particularly happy that the noble Lord mentioned the name of Geoffrey Crowther. Geoffrey Crowther happened to be not only a great friend of mine but also my exact twin, and many were the birthdays we enjoyed together. The noble Lord's speech was the model of what a maiden speech should be. It was not too controversial except, perhaps, on the subject of the Open University—and, if I may say so, it was very proper that the noble Lord should press the case of the Open University. The speech was full of meat, and I would only express the hope that, having started, the noble Lord will give us the benefit of his great experience and great wisdom very often in this House.
What are my qualifications for speaking? I have only one. I have been on the court of the University of St. Andrew's for 15 years. I point out to the noble Lord, Lord Annan, that I think our court has a majority of lay members—but if not, it is very close to having that, particularly if we include the students who are members of the court. Looking back over those 15 years, what do I find? I find that for the first 10 years we were faced with a problem which was, perhaps, unusual; namely that, having been divorced—if that is the right word—from the University of Dundee, our numbers were under 3,000, and we felt that it was very important that we should increase our numbers. At this moment, we are near to the 4,000 mark.
When we were "divorced", we naturally had serious gaps in our curriculum. At present, we have more or less succeeded in filling those gaps. But again I would say to the noble Lord, Lord Annan, that we are very conscious of the need to make the best use of resources in the coming years. We are working very closely with the University of Dundee in trying, if not to marry again, anyhow to interrelate the subjects which one or the other of us may choose to teach.
The first point I want to make is that, in increasing the number of students, clearly we had to increase the places where they could live—the residences for the students. In that respect, we were enormously helped by Government grants. But the other source was, of course, appeals which were very generously answered by the alumni. But there was a curious situation: namely, that certain standards were laid down by the University Grants Committee with the Treasury behind it saying, "This is the amount that you can spend per student". When we asked occasionally, "Can we also use some money from our appeals to make the amenities slightly better or to improve the standard of the building?", we were told, "No, if you put any money in in that way, then we will deduct the same amount from the central grant".
Therefore, we had an extraordinary situation and, believe me, it was a great pity from many angles, because it meant that not only were the buildings not quite as distinguished as they might have been, but some of the standards were lacking and we had to put them right later. I am referring to such matters as the thinness of the walls, the insulation and so on. So my first point is that if and when there is to be new building—and there certainly will be in some of the universities in the future—the Government should not

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insist on a standard which is low and which does not allow private money to go alongside. After all, universities are not at this time very rich and they certainly will not be profligate in their spending. That is my first point.
Having achieved in those 10 years the type of thing that we wanted, what came next? We faced the problem of cuts like every other university and, in a sense, I say, "Quite right too", because there are certain features of university life—and I have particularly in mind tenure—which were out of date and not of the present time. When we debated or corresponded with the University Grants Committee about the type of cuts that we had to make, they finally insisted that there were three subjects which we had to cut out of our curriculum altogether. Those subjects were linguistics, maritime archaeology (although we are located by the sea and we had the greatest expert in this country on maritime archaeology) and the third subject was music. I well understand their anxiety to ensure that we kept our scope within reason, but it is very dangerous for the University Grants Committee to get down to quite that detail: what a university should or should not teach. Let them lean on the university by all means; let them indicate the direction in which they want the universities to go; let them set a standard as regards what should be the budget for the particular university, but then they should leave it to the university to act within those disciplines. It is opening a very dangerous vista if they insist on this, that or the other being altogether cut. That is my second point from my experience as a member of our court.
Now we face further cuts. We have been warned and asked to consider the position in the 1990s when the number of students of 18 years of age will be on the decline. It is quite right that we should be warned, but it does not necessarily mean that the proportion of monies that we receive should be based on the fall in the number of 18 year-olds who are to come. It should be a chance for us—if we are doing the right thing—to improve the excellence of the students and their proportionate number.
Finally, we must not forget that universities are for students. Students should have a very real role to play in the future of the universities. I can well recall the struggle we had to get students on to our court. But we, and many other universities, in the end got them on to the other governing bodies. Our experience has been a very good one. They really have helped. I know that there are some "louts"—and I use the word advisedly—who, for one reason or another, prevent free speech and they do the cause of the universities grievous harm. I say that because inevitably the public say, "Why should we pay for this sort of behaviour?"and what is done in one or two universities is, quite wrongly, attributed to all.
Therefore, my last message would be: remember that, on the whole, students want to do what will benefit them most in their future careers. They have a very good idea of what that will be. On the whole, they want to do what the country needs because that gives them the opportunity for their future livelihoods. So I conclude by saying: do not forget to bring the students, who cannot be here today, very much into this debate.
5.21 p.m.
The Lord Bishop of Coventry: My Lords, I, too, am grateful to the noble Lord, Lord Annan, for introducing this debate on a subject of importance and growing concern. As, with education in the schools of our country, we look back to the 1944 Act for the inauguration of significant change, so in the sphere of higher education we look back to 1963 and the publication of the Robbins Report.
Throughout that report it is regarded as an axiom that higher education should be available for all those who are qualified by ability and attainment to pursue it and who wish to do so. Robbins thought that there would be little distpute over that general principle. Of course, in an era of expansion it is a simple affirmation, but in an era of contraction it is very much more difficult. However, the present Government have re-affirmed that principle and, in re-affirming it, have also drawn attention to the constraints of the present time. In the 1984 public expenditure White Paper it is said:
"The Government's main objectives for higher education are to maintain access for all those who want it and are suitably qualified, to improve efficiency and economy in all sectors whilst maintaining standards, to secure a further shift in provision towards science, engineering and technology, where the output of graduates is set to increase, and to maintain the quantity and quality of research".
Constant adaptation to new needs is a common feature of any change, and an important quality of institutions is not their permanence but their capacity for change. Innovation is therefore necessary for survival, and in that sense there is nothing new about the experience of change. In the sector of higher education in which I have worked for many years and with which, therefore, I am most familiar—namely, the colleges of education and the voluntary sector—change has not been gradual and very often it has been positively catastrophic.
Change can and, I think, should keep an institution on its toes, alive, and alert. But when change is accompanied by the fear of possible closure—and the issue is about current understandings of viability necessary, not for change, but for survival—then it is not creative. It kills initiative and it makes innovation too fearful a risk.
At the moment, there are not a few institutions of higher education which are in need of the assurance of stability to continue, rather than more change. I, personally, am sceptical about the ability of structural change to effect institutional change. On the contrary, I think that, given the space for institutions to innovate and adapt, structural change is more likely to be effected.
My reading of the Robbins Report does not lead me to the view that what was envisaged was the imposition of mass higher education, and that it should all be funnelled through our universities. We should dispel the notion that we have a mass higher education system, for our percentage of the relevant age group in higher education is much smaller than that in many other countries. I speak as one who was, initially at least, one of the educationally disadvantaged, and I had to break into the higher education system. I felt out of place; an interloper.
That experience makes one realise how uniform the system is, how lacking in flexibility, how slow it is so

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often to grasp opportunity, and how little innovation there has been. Because of that experience, I may, therefore, be more sensitive to claims of social justice in education than many others. I do, in fact, beiieve that the deteriorating social class inequality in our universities, and the lack of real contact with schools and with local communities, are evidence of a failure of educational institutions to adapt and to innovate.
It seems to me that the failure since Robbins has been our inability to diversify. Perhaps another Robbins Report is now required with that particular need as its focus. William Temple used to tell us to take note when people are affirming, but to be very wary when they are denying. I agree when people say, as we have heard it said this afternoon, that we must preserve our universities as centres of excellence—but I do not believe that it should be at the cost of different kinds of excellence in other institutions. After the James Report we heard much of the dictum, which I think was attributed to Kingsley Amis, that "more means worse". I do not believe that that is necessarily so, though I do believe that "more" should mean "different".
I am nervous at the implication that there is only one kind of excellence, and in our system we suffer from the kind of academic snobbery which sees the ancient universities as the only models of excellence and which reduces all other institutions to pale reflections of them; it runs right through our education system.
When they were instituted, secondary modern schools felt it was necessary to justify their existence by the number of O levels that they could achieve. Initially, the polytechnics could only find credibility in the student market by the kind of achievements thought necessary for universities. We lost opportunities for innovation with the raising of the school-leaving age, with the so-called upgrading of the colleges of advanced technology, and with the creation of the new universities which we might have expected to find new ways of doing old things in new subject combinations, and so on. I do not want a British Ivy League which suffocates initiative elsewhere. I do want a bigger choice of higher education institutions with clearly defined objectives, establishing their own kinds of excellence, and meeting a wider variety of individual and social needs.
A favourite word among planners and administrators, especially in the DES at the moment, is "concentration", which I understand to mean a larger number of students in fewer compartments. That of course will have positive advantages—the advantages of more stability, of economy of scale, and the sort of internal balance which could ensure quality. My fear again is of being forced into a single mould and an absence of that kind of flexibility which allows growth and innovation.
Ought we then to be working for a smaller number of comprehensive institutions strategically placed in our country geographically? I think not. I think we need a greater diversity of institutions with clearly defined objectives achieving their own excellences, with easier transfer between them and with a greater willingness to share resources. The polytechnics, I believe, are now established as a distinctive sector of
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higher education complementary to our universities but with their own strengths in access, in links with the community, and links with commerce, industry and the schools.
Let me illustrate from my own diocese. The University of Warwick and the Coventry Polytechnic jointly validate three open access courses which are taught at local colleges of further education. The specially designed courses provide an alternative route to GCE A levels for adult students in order to gain places in higher education. Almost every student who has successfully completed the programme is now studying at a university or polytechnic.
Or again, as part of the Government's PICKUP initiative, the further and higher education institutions in Coventry have joined together to form a unique collaborative venture. By pooling staff and physical resources the Coventry institutions are able to offer local firms a variety of services across a wide range of subjects at all levels. In this way the Coventry consortium provides a single professional and accessible force to education in this area.
These initiatives, together with the University of Warwick's science park, are illustrations of co-operation between diverse institutions which permits each of them to concentrate on its own particular area and level of expertise, thereby providing a whole which is greater than the sum of its parts, and also for the benefit of a complex of institutions and people.
The present constraints must not have a negative, inhibiting effect, but rather provide a stimulus for new kinds of exploration. Talk of efficient and economic viability is threatening, and of course it is desperately important that economic pressures do not lower the quality of our current provision. I am anxious that a definition of "economically viable" does not automatically rule out smaller institutions. There is a danger that definitions become self-fulfilling because resources are given to some institutions at the expense of others. As a recent submission from the Church of England Board of Education said:
"The death of a deliberately under-nourished child is easy to justify on the grounds that his small body just could not stand the strain".
Similarly, quality is a very elusive concept for which it is notoriously difficult to lay down criteria, and it is so elusive that it becomes a matter of faith rather than of exact science. The danger is that in the absence of clear criteria we then resort to statistics. Surely it must be ascertained on grounds which are educationally justifiable. There is increasing use of the phrase "quality control" in the Department of Education and Science; it is a phrase that comes from industry and not from education, and while we must welcome all attempts to enhance quality we must also ensure that it is a matter for professional judgment and not for quantitative measurement.
Again it is right that society should expect value for money. There is financially a very large investment in higher education, but there is also a danger of interpreting the phrase solely in terms of that kind of educational activity which offers quantifiable financial returns, and that must be resisted. What is invested in our higher education system is in the end to do with values and direction of society, and that is why it should always be under scrutiny, but it must he given

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resources and room to breathe, room to develop, if it is faithfully to serve society.
5.36 p.m.
Lord Alport: My Lords, I very much regret that I found it difficult to follow the speech of my noble friend Lord Swinton. I had the totally unworthy suspicion that his mind was more on the winner of the Queen Mother's Championship Chase at Cheltenham than it was on higher education. Certainly if the horse he backed there went as fast as he went during his speech, he will be a richer man tonight.
I should like, if I may, to congratulate the noble Lord, Lord Wilson of Rievaulx, on his maiden speech. Many of your Lordships have heard him in another place and indeed here previously in this very Chamber. We have admired his technique and his wisdom, and we look forward to hearing him on many future occasions. I should like to add my thanks, if I may, to the noble Lord, Lord Annan, for giving us an opportunity of discussing the future of higher education at this particular time. I put down a Motion for a short debate on the subject some months ago, but I was glad to withdraw it in favour of Lord Annan's Motion, for the wealth of knowledge of your Lordships' House would not have had the full opportunity for expression in two-and-a-half hours, as the long and distinguished list of speakers in this debate amply proves.
My special interest, which I should declare, is as chairman designate of the Academic Advisory Committee of Gresham College. To me the reemergence of this ancient experiment in higher education, started in the heyday of the Tudor age, after centuries of decline and neglect, is an event of significance and romance. It is due to the wisdom of the corporation of the City of London, the Mercers' Company, and the City University. We shall, I believe, have an opportunity of planning the development of Gresham College in accordance with the educational needs and expectations of the next half-century and beyond.
It is to assess these needs and expectations that the Secretary of State has asked for a wide-ranging debate and that is the reason why, as the noble Lord, Lord Annan, has mentioned, the chairman of the UGC circulated his questionnaire on 1st November to all vice-chancellors and principals. He asked for replies to reach him by 31st March, so your Lordships' debate is aptly timed.
There are, I think, three central issues. The first is how to ensure the continuous recruitment of young and lively minds to the staffs of universities so as to maintain vigour and enterprise in both teaching and research. Without this, the universities will not be able to respond flexibly to changing patterns of student demand and national priorities. As one vice-chancellor writing to me recently said:
"Unless some special measures are taken by Government, most universities will have unchanging staff growing old ungracefully together, and this is bad for innovation and had for morale".
Again I refer to the point made by the noble Lord, Lord Annan. I agree with him in that I do not think that the present security of tenure from graduation to the grave is right. Nor do I think that early retirement
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is the answer. When I was Pro Chancellor of the City University and long before there was any general scheme I introduced a system of early retirement—of a rather primitive character, I am afraid—since we had too many elderly members of staff left over from the CAT days. The result was that we lost a number of good men who knew that they could get jobs elsewhere, while those that we hoped would go stayed on. I think that appointments to universities should be for a term of years, renewable, but perhaps with a grant of a tax-free capital sum given at the end of service dependent upon length of time on the staff. I think that professors and senior lecturers should be encouraged to accept part-time appointments, professorial appointments, perhaps, and to take on consultative work in civil life, thereby making their very special abilities available to business and industry.
The second issue is how far higher education, particularly at universities, should be available to all who would benefit from it. These fall into three categories. First, young people of the 18-to-21 age group in the United Kingdom. The Government cuts were estimated in 1981 to produce a loss of some 10,000 places over two or three years—just at a time when demand was nearly reaching its peak. I believe the actual number was some 12,000. There is no reason to assume (as the Ministry appears to assume) that demand will decrease, since a disproportionate number of applications for university places come from social Classes Ito XI in which the numbers of 18 year-olds will rise until 1990 and then fall, only slightly, until 1995 before rising again.
In addition there will be a greatly increased demand from women for higher education, as the noble Baroness, Lady David, mentioned in her speech. As it is, or own age participation is far below what the 1972 White Paper envisaged and, in so far as comparisons can be made, far below that of other industrialised countries. The second category is mature students, particularly those seeking to refresh and bring up to date their professional qualifications. The demand from mature students will certainly rise. Those who wish to advance their careers realise nowadays the importance of qualifications and an increasing number will wish to make good opportunities lost earlier in their lives. Moreover, with increased leisure, as the experience of the Open University has shown, many people wish to equip themselves with knowledge to add to the quality of their lives and to widen their intellectual horizons by study at university level.
According to a report in the Daily Telegraph of 1st February, the Minister for Higher Education gave the Open University an ominous warning while disclaiming any intentions to close it down. I am glad to hear in the maiden speech this afternoon the account of the founding of the Open University from the noble Lord, Lord Wilson. I believe that between now and the year 2000 the demand for higher education from what we call mature students, for whom the Open University has produced, in its 13 years of existence, a unique record of success, will greatly increase; and that demand must be met.
The third category is overseas students. If we were to project ourselves into the year 2,000, which, after all, is only 16 years away, and were to try to assess the

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reasons for the progressive loss of Britain's influence in the world, I think that we might quite easily come to the conclusion that one of the most important causes was that for purely financial reasons the Government shut the doors of the universities of Great Britain to a large number of men and women from countries overseas who otherwise would have come here for higher education and who, in so doing, would have absorbed the educational, social and democratic values which have made our country great.
Five or six years ago I went to call on the vice-chancellor of the great technical university in Peking. I intended to encourage him to send students to the United Kingdom. Almost the first question that he asked was, "How much would it cost?" I told him. He replied that, although it would be difficult, it was not impossible. I asked him if he knew this country. "Oh, yes," he said "I know it very well and admire it. I did all my training many years ago at the City and Guilds. I should like my students to have the same opportunities as I had". Now, with the increased cost of higher education here for overseas students, he will not be sending anyone to Britain and, as in so many other cases, this country will be immeasurably poorer as a result.
This brings me to the third and central issue which the Government and the universities have to consider and to which reference has already been made on several occasions during this debate. I refer to the availability of resources. One cannot avoid the impression, at least I cannot, that over the last four or five years the attitude of the Government has been influenced by the outrage created by student troubles in the 1960s and early 1970s and by the treatment received by Ministers at the hands of students as recently as last month. I recollect asking the vice-chancellor before a meeting, during the period of unrest, whether he thought that everything would be all right. "I think so," he said. "But my secretary has in her handbag 'phone numbers of all the local police stations".
That reflects an intolerable situation. No one condones hooliganism or the abuse of the privileged position which membership of an institution of higher education provides. The taxpayer and the ratepayer object to subsidising young men and women who behave in such a way. But it would be disastrous if the Government and the Conservative Party in general were to allow this sort of thing to influence their attitude to providing resources which are needed to enable the universities of this country to make the contribution which they alone can make to our future progress and prosperity.
If I hear Ministers talk about "cost-effectiveness" or the "discipline of the market place" (to which in some degree, the noble Lord, Lord Flowers, referred) when referring to university education, I reach, metaphorically, for my gun. I believe that my father was the first of his fellow researchers at St. Mary's Hospital to whom Sir Alexander Fleming showed the blood-plasma slides which he had left on the windowsill and which had developed a growth. Who can assess the cost-effectiveness of Sir Alexander's researches? Who can assess the cost-effectiveness of a British contribution to higher education for someone from, say, a third world country who later in life achieves
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prominence and ensures that that country remains close and friendly to Britain, politically and economically? Who can assess the cost-effectiveness of the money spent on the education of the rising generation of the early years of the 21st century, who will man our new technological industries, give vitality to our national administration and provide the inspiration for our cultural and artistic life?
Unless this country is prepared to invest in higher education to provide the resources which the universities require, to allow the able and dedicated men and women who preside over them to have freedom of judgment and initiative which is an essential part of our whole academic tradition, then the decline of our country's fortunes to which the Prime Minister has so frequently referred will be a reality at an accelerated pace. This will certainly be true if the attitude of the Government to the universities continues to be characterised by interference, discouragement and parsimony.
My only regret about this debate is that my late noble friend Lord Butler is no longer with us and therefore is unable to give us the benefit of his wisdom. The last time I saw him, very shortly before he died, he made clear his anxieties about the damage which he believed the current policy of the Government was doing to higher education in general and the universities in particular. I can only hope that this debate will do something to influence the Government's policy before that damage becomes irreparable.
5.50 p.m.
Lord Grimond: My Lords, it is a great pleasure to follow the noble Lord, Lord Alport. I particularly agree with what he said about the importance of overseas students. I am glad to say that the University of Kent, with which I am most acquainted, still succeeds in spite of difficulties in attracting a remarkable number of overseas students. I should like to join the congratulations offered to the noble Lord, Lord Wilson Rievaulx, and also to join those who have thanked the noble Lord, Lord Annan, not only for giving us a very long day on education but for his most refereshing speech about universities—especially coming from a paid-up supporter of the universities.
My interest and excuse, I suppose, for joining in this galaxy of people who know far more about education and universities than I, is that I am at the moment the chancellor of the University of Kent. I have been rector of two Scottish universities and I am presiding over an inquiry (believe it or not!) into the University of Birmingham. I am eternally grateful to the noble Lord, Lord Hunter of Newington, for appointing me to that position; I have had a most enjoyable and interesting time.
So far, it seems to me, not only in this debate but in the general debate on the UGC's letter and so forth, that the stress has been upon the part that universities can play in collaboration with industry, the need for some specialisation (and the noble Lord, Lord Annan, implied I think that some universities should give up teaching certain subjects altogether), and for practical education in all its forms. I do not dissent from that. I am proud to say that the University of Kent is in the forefront of supplying industry with the collaboration

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it looks for, and we have a very high reputation for practical research.
I want to stress what I believe the fundamental purpose of a university is: it is, to be a centre of universal study and knowledge. Therefore, I would not like to see specialisations carried too far. Of course, a university is a community of scholars. It used to call itself a "centre of excellence". I am glad that that has been given up. It is for other people to say that universities are centres of excellence, and not for the universities themselves to do so. One of their most important functions is to teach judgment, to teach people to use their minds better, and to use them in the service not only of themselves but of the country.
That seems to me to be what has been behind the great university disciplines, the great and moral tripos at Cambridge, and the humanities taught in the Scottish universities. It is absolutely central to the whole notion of a central universal knowledge—the reason being that you can only use your mind well and improve it if you have some knowledge of the history of the country, of the civilisation of your country, of the rest of the world, and of mankind in general, if you understand something of the great philosophies of the world; and, above all, if you understand something at least of the scientific method and the advance of science, the use of science, and the possible developments of science.
As the vice-chancellor of Kent University puts it, universities try to teach a better understanding of how problems, both academic and in real life, can be approached and analysed. If you really want scientific research, you can have that in specialist institutions. Indeed, you can import it. Research is international. You can get the results of research from all over the world.
What you cannot import or teach in specialist institutions is judgment, the better use of the mind, the creation of a better society, and the better handling of the problems which our country faces.
If you take the advance of technology, it is important that universities should be in the forefront of pushing forward the frontiers of science. It is also important that they should give their mind to what you are going to do with the development of technology. It seems to me there is a danger that the result will be that you will get a few highly qualified people; that you will have a limited number of people who do very interesting work and who make a lot of money, and that you will have a large element of the population left.
Are you content with that? What are you going to do about it? This is the sort of problem that is pre-eminently for universities. Again, as our vice-chancellor has pointed out, this is not perhaps a good moment to stress the need for too much Specialization—there may be a need for some—because much of the most interesting research going on is, as I understand it, on the borderline of the different disciplines.
For instance, molecular biology is on the margins of physics, chemistry and biology. It should also be borne in mind that the whole point of the university, in one way, is the cross-fertilisation between people who approach problems in different ways. You have the scientist who is impersonal and objective in his
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examination of problems before him. Then you have the student of humanities who is given to making value judgments and will bring to bear a more personal attitude to the solution of problems.
In the University of Kent, we have developed a collegiate system. The great asset of a collegiate system is that it forces people of different outlooks to live together and to consider problems from different angles. Also, this is the moment, I understand, when vice-chancellors are pressing upon the schools the view that they should broaden the sixth-form curriculum. I think that is right. But they should not at the same time be too keen to narrow what goes on in the universities themselves.
I must say that on reading the 28th question sent round by the UGC, I found this aspect of universities rather left out. Of course, there is one question left out and maybe it was covered in that question. There is a lot in the 28th question about how they think they will compete with cuts, how they will train vets and all that. But what I regard as the fundamental purpose of the universities—to turn out more people with better judgment—is not so much stressed.
If I am right about the fundamental nature of a university it must be said that the more people who go to a university, the better. I must point out that it has never been a belief of the rich in this country that only the clever should go to university. That is something the rich have never believed. I think they were right. A great many people can benefit from university who may not be all that clever; some of them may even be sitting in this Chamber this evening. I, myself, would be sorry if entry to universities was confined only to scholars and to those who held particular skills which the country thinks may be of great advantage. I am a little alarmed at passages in the UGC letter from which it would transpire that the universities should really be forcing houses for turning out engineers, vets or whatever industry or the Government think we should need. I am sceptical about that. In my lifetime, government planning has always been wrong. If a government lay down that they want a lot of engineers, you can be quite certain that in 15 years' time that is exactly what they will not want. I am very glad to say that the children of this country refuse to be trained in the disciplines which may be appropriate to communist Russia but wholly inappropriate to this country. If they do not want to be engineers, they will not be engineers. For my part, I say good luck to them. If we have to import engineers from somewhere else, we can do it. Of course it is very important that universities should know what is in demand and should be in touch with industry, but I do not think that the process should go too far.
I should like to see the growth of higher education in all its forms, and I wholly agree with the right reverend Prelate that university education should by no means be the only form of higher education. I think universities have done a remarkably good job in trying to compete with the cuts of Government. I am not convinced that further economies might not be made. The noble Lord, Lord Annan, referred to the 13 points. I am constantly drawing the attention of various universities to these. I was on the University Court when they were first put round and I remember the bravado with which they were swept aside, but

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they are worth looking at again: there are some quite good suggestions. There are various other points which are rather sore points but which I think might be worth looking at again.
There is the question of the university year. The university year had really nothing to do with the academic life but it was fixed to suit the harvest. The boys had to get back for the hay harvest in June and they were not to leave home until they had got the oats in or possibly the potatoes; so the universities did not start again until the middle of October. It had nothing whatever to do with research or with examinations, but with the harvest.
In the southern universities—I hasten to say not the University of Kent—the summer term hardly exists. By the time you have got through rag week you are into examinations and the senior staff are already booking their summer holidays. I believe that there is a great deal to be said for a longer university year and also for learning from the independent university. It is possible to run two-year courses, and certainly you can deal with a lot of subjects in a three-year course.
As regards the use of buildings, there is a lot to be said for siting universities on the outskirts of the whole country. If they were in the Shetlands or the Scilly Isles they would be much more fully used; but all those which are near London are largely vacated by students from Friday night until Monday morning; so there is a great waste of building space. Nevertheless, perhaps that has to be accepted.
The noble Lord, Lord Annan, referred to committees. To my mind, a great many academics are deeply addicted to committees. There is nothing they like better than a good go in commitee, so that many universities have become very much over-administered. What ought to be left to the excellent registrars and secretaries, as the noble Lord, Lord Annan, said, takes up the time of the academics.
But when one has said all that, I think that the universities have done a remarkable job in cutting their costs, and they could be in greater difficulties if they are cut further. If £200 million is necessary for engineering, I hope that is not going to have to come out of other university budgets. I must say that I wholly agree with the noble Lord, Lord Alport, on the difficulty of talking about what is cost-effective in universities. We sometimes forget what an enormous store of devotion they rely upon. Referring to Pro-Chancellors—the Governor of the Bank of England and now the right reverend Prelate the Bishop of Rochester—they are incomparable men, and all for nothing. You will not get this situation except in institutions which can inspire extraordinary loyalty. You get staff who work all hours and take immense trouble with students. It is impossible to say what the cost is and what the effect is. All we know is that universities today are one of the most successful parts of this country. Not only are they well served by people who get some recognition, but nearly all universities rely on people who toil away at their finances. Our treasurer at Kent, Mr. Alexander, is one example, and there are many others. You cannot put a value on them: it is impossible.
So I hope that the Government, having made these cuts, will give the universities some assurance that the process of cutting is not going on indefinitely, and that
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they will have something to plan on for the next three or four years at least. I hope they will realise that these are some of the most successful British institutions. They are comparatively cheap and they depend very largely on the great goodwill that they themselves have engendered. They should not be threatened too much by external influences which try to distort them from their true purposes.
6.4 p.m.
Lord Glenamara: My Lords, first of all I should like to thank the noble Lord, Lord Annan, for giving us this opportunity of debating this very important subject. I fully support the broad general objective of wanting to see at least 15 per cent. of our sixth form students going in for some form of higher education, which is broadly the Robbins principle. But I do not think he would expect me to support some of the elitist paths by which he hopes to achieve that objective. The noble Lord, if I may so say, appeared to be using interchangeably the words "élitism" and "excellence". They have nothing to do with each other. I am all for excellence but all against élitism.
Secondly, although it may sound a little presumptuous of me, I must congratulate the noble Lord, Lord Wilson of Rievaulx, on his maiden speech. I worked under him as Secretary of State for Education when the Open University was set up. I shall always be grateful for the magnificent support he gave me against a particular Chancellor of the Exchequer to get money for the Open University. I may say that the gentleman in question, who was then Chancellor of the Exchequer, is now an ornament of the SDP in another place.
I wish to speak briefly on one point only, and that is on the educational apartheid which is developing in higher education in this country: the universities on the one hand and the polytechnics on the other. The polytechnics, many of which I had the honour to designate, came into existence as a result of the Labour Government's White Paper in 1966. They were to be, in the words of the White Paper, "separate from but equal to" the universities.
The idea of the polytechnics was thrown up by a very able but very tough Under-Secretary in the Department of Education and Science. He sold it to my late colleague, Mr. Crosland, who with some difficulty sold it to the Cabinet. I supported it but, with the benefit of hindsight, if I could put the clock back to 1966 I do not think I would support it today.
Having said that, one must recognise that the existence of these 30 vigorous institutions—many of them bigger than most of our universities— concentrating in the main on applied and vocational studies, with progression from sub-degree work through first-degree work to post-graduate work, must be a considerable asset to this country, particularly as we enter an age in which we as a nation must concentrate on much more sophisticated products from our manufacturing industry and much more sophisticated expertise to export overseas if we are to maintain, let alone improve, our living standards.
Although most of the universities have directly vocational degree courses, they do not on the whole have the applied and vocational "skew", if I may use

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that horrible "in" word, to their work that the polytechnics have. No Government since 1966 has changed the essentials of the binary system. There have been two peripheral but quite significant changes. First, in the mid-1970s, teacher training was cut and a number of colleges of education became redundant. They have emerged as small colleges which in the range of their work look like polytechnics but are not. Indeed, the public sector today contains no fewer than 370 institutions of one kind or another but only 30 polytechnics.
The second change was—again using this dreadful jargon—that by "capping the pool" and establishing a national advisory body, the Government have switched the burden of financing these institutions from mainly local authority sources to mainly national sources, but they still maintain the pretence that the pool is the first charge on the block grant to local education authorities. Despite this change in the funding, the funding per student per year in the local authority sector in the polytechnics is from £1,300 to £2,400 a year less than in the university sector, as I will show in a moment.
To justify this, it is argued that the universities are the research sector. It is true that much more fundamental research takes place in the universities, but there is a substantial amount of research in the polytechnics. I have here the research report, containing 238 pages, of the Newcastle Polytechnic for the years 1981 to 1983, each page being stocked with items which are directly relevant to this country's economic performance. But the universities are funded for their research and the polytechnics are not. Nobody knows how much of the money which the universities get for research in fact goes to research. Nobody knows where it goes and nobody knows how much of it does not find its way into research at all, because, unlike the research councils, the universities are not accountable for money which they receive for research.
It has been estimated recently by Mr. Christopher Ball, who is warden of Keble College Oxford—so, presumably, he knows what he is talking about in the universities—and is chairman of the National Advisory Body, that the universities are receiving £400 million a year towards research from the money that they get from the UGC. I believe that that is an overgenerous estimate, because it is based on the postulate that all university teachers do research and that no polytechnic teachers do research, and both bits of that assumption are obviously wrong. However, for my argument, I will use this figure of £400 million.
This year, higher education in Britain is costing £3,300 million. I apologise for all these figures, but they are necessary. That £3,300 million is made up in this way: £1,300 million goes to the universities and, as I have said, it is estimated that £400 million of that is for research; £700 million goes to the local authority sector and the voluntary colleges; £500 million goes to the research councils and £800 million is used for student support. That is a total of £3,300 million.
If we take this assumed figure for research of £400 million from the £1,300 million which the universities get, we have a figure of £900 million for the
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universities' teaching purposes. So it is —900 million to the universities for teaching purposes and £700 million to the polytechnics for teaching purposes, and the number of students in the local authority sector is rather bigger than in the university sector, although they receive so much less money.
If we take the two lots of teaching costs together, the universities and the polytechnics, we get a total of £1,600 million for teaching costs right across the binary field. How do the teaching costs in the two sides of the binary system compare with this across the board average? The across the board average is something like £4,800 per student per year. Again taking this year, teaching costs of students are these: in the polytechnics for an arts student, £2,400; in the universities for an arts student, £3,700, and that is with the research element taken out. If that is put in, there is a greater disparity. So arts students cost 50 per cent. more per year in the universities.
For science students in the polytechnics the cost is £3,400 a year and in the universities it is £5,800 a year, so the cost is 70 per cent. higher in the universities. Again, I remind your Lordships that that is without the research element. So there is this enormous disparity between the money which is allowed for teaching in the two sides.
So what of the future? The Chancellor recently brought out the White Paper on public expenditure. That shows that this gross disparity of treatment between the two sectors will not only continue but will, in fact, increase over the next three years. The figures are these, taking this year and the next three years: in the universities £1,305 million, which I rounded off to £1,300 million; the next year £1,338 million; the next year £1,380 million and the next year £1,410 million, which is an increase of 8 per cent. over three years in the universities. For the polytechnics, the figures are £600 million this year, £585 million the next year, £600 million the next year and £620 million the following year, which is an increase of 3.3 per cent.
I am not saying for one moment—I do not want to be misunderstood—that the universities are over-generously treated. I do not believe they are. I am not even arguing for equal funding for equal work. What I am saying is that the funding of the polytechnics has reached the point this year where it is barely adequate, and next year and for the following few years, if these figures are maintained, it will be inadequate. So what I am pleading for—it has nothing to do with the universities—is adequate funding of the polytechnics, funding which is commensurate with the contribution that the polytechnics, are making to our national well-being. The very least that the Government should do is to fund their research function. I gave your Lordships the example of one polytechnic and no funding of that from the Government.
If the polytechnics are to engage in research—and I think all noble Lords will agree that at this level of teaching they must do so—then all the research in the whole binary system on both sides should be recognised and funded. If this were done, more money would still go to the universities because of their more fundamental research, but the balance would be shifted and it would help. Given the applied basis of the research in the polytechnics, this change would be wholly advantageous to the economy. This matter is of

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such great importance to the polytechnics that I ask the noble and learned Lord the Lord Chancellor to reply to it when he winds up.
In conclusion, may I say this? The funding which has developed in higher education in this country over the past few years is very similar to what happened in secondary education after the second world war. There is a group of students who are easier to teach—indeed, who can teach themselves much more easily—who get better facilities and who are adequately funded. But there is also a slightly bigger group of students who, in the main, require more skilful teaching and more careful teaching, who enjoy the barest minimum of facilities and who are inadequately funded. It is very similar to the treatment of grammar schools and secondary modern schools after the second world war. I was a headmaster in one of those after the war, so I know about the disparity of treatment there. That disparity led to the pressure to end the binary system in secondary education—usually called the tripartite system, but of course it was no such thing; it had only two wings.
The most important question in higher education now is: should we now plan to get rid of the binary system in higher education? I have come to the conclusion that our medium to long term goal should be to erase the division between the polytechnics and the universities; gradually to rub it out. I have always believed, and have often said, that educational institutions should never be static; they should evolve all the time. I believe that we should now begin a gradual movement towards ending this divided system and we should do so on a number of fronts.
First, one or two outright mergers between polytechnics and universities could, and should, take place at once. Indeed, one is taking place at this moment in Northern Ireland, quite satisfactorily. Secondly, where a polytechnic and a university are contiguous—and I support the noble Lord, Lord Flowers, on this—there should be the closest co-operation in the sharing of facilities and resources, including staff There is not always that co-operation at the moment. The DES could, I am sure, do a great deal more to encourage this. There should be cross-representation on governing bodies. If a university argues that it is unable to do that because of its charter, may I say, as a previous Lord President of the Council, that there is no problem about getting a charter altered. I cannot speak for the Government, but I am quite certain they would not object to this kind of change.
Fourthly, there should be an extension of the idea of cross-binary subject committees of the National Advisory Body and the University Grants Committee. Indeed, there should be, I believe, a gradual merger of the UGC, the NAB and the CNAA.
Finally, and immediately, as the least the Government can do there should be some funding for the research which is done now in polytechnics. Whether or not your Lordships agree with this long-term goal, everybody who is concerned about the education of our students must agree that what we should not allow to continue is an educational apartheid of the kind which disfigured our secondary education for far too long.
6.21 p.m.
Lord Fulton: My Lords, I, too, would like to thank the noble Lord, Lord Annan, for bringing forward this Motion. May I also congratulate the noble Lord, Lord Wilson of Rievaulx, on his maiden speech. It will surely have given great pleasure to the university in his native Yorkshire and to the Open University, of which he was the progenitor, that he has chosen the occasion of this debate for his maiden speech in your Lordships' house.
I have re-read the record of that other occasion when, in 1960, your Lordships debated the universities on the eve of the appointment of the Robbins Committee whose report was a milestone in the social history of our country. What is most striking is the change of atmosphere between then and now. Then the whole world—not only the West—was fully convinced that in education lay the main hope for the future. The noble Lord, Lord Adrian, Master of Trinity, in his speech entertained the idea that there should perhaps be an increase from 5 per cent. to 20 per cent. in the number of young people entering on courses for degrees. Certainly a policy of expansion was supported from every quarter of the House. There was less said than might have been expected about the substance of what was to be taught. Confidence was quite general that what the young got from their time at the university would be good for them and good for their country. The next time your Lordships debated the subject—in 1976—the warmth had somewhat gone out of the air. The reasons for this are various, but they need not be part of our discussion now.
The economic recession has intensified doubts and certainly tightened purse strings. For the past three years there have been cuts in public funds. In consequence, qualified applicants have been turned away. When I was privileged to start the University of Sussex, I remember that we started it two years early in order to catch a few of the young people who would otherwise have gone without a university education. For us at that time it was an obscenity that the young should be deprived of the cultivation of the talents that they brought to society. In a number of other countries there has been more than an end to expansion. The issue is now whether—and, if so, how—the system is to decline. Whereas in the post-Robbins expansion there was room for a generous measure of delegated authority to existing institutions (increased in number by seven new foundations) to plan their own development, when stability is reached, and, still more, when contraction is the order of the day, there has to be a tighter centralisation of decision-making. The contrast is sharp indeed between the policy of creating new universities in the 1970s—to increase, it was hoped, the inventiveness of the system as a whole—and that of the present time. Since 1981 we have seen cuts on universities of varying degrees of severity which left them in doubt about the intentions of their authors.
In the circumstances of today—that is, of falling resources in real terms—institutions cannot be expected to volunteer for their own decline or for the chopping block. In these circumstances, the role of the central government becomes increasingly important, and governments need to be clearer than ever before about what they are doing and what its effect will be.

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In the past, the University Grants Committee—inadequately described as a "buffer"—was the envy of the world, as a medium through which the formulation of policy for higher education was shared between the universities themselves and the government of the day. Inflation destroyed its necessary instrument, the quinquennial grant, and there is little shelter left for governments exposed, as a result, to the risks of making up their minds. Attempts are now being made by the University Grants Committee to set up a series of consultations with the universities, but it has disclaimed responsibility for important policy decisions. And thus the initiative lies with the Government. Since this is so, may we hope that when the noble and learned Lord comes to reply to the debate he will take us into the Government's mind on wider issues than just the prospect of reduced revenues?
The Times, in a leader two days ago, called for a broad and less numerical assessment of the worth of this form of educational effort. I wish to offer such an assessment by referring to my own experience in the early post-war years. In 1947 I left a teaching career at my old college at Oxford to become head of the University College of Swansea. Like its much older sister colleges in the University of Wales, it owed its origin after the First World War to the passionate devotion of the Welsh people to education. But it had a hard early struggle for resources. There were then no capital grants for buildings, no mandatory grants for students.
However, in 1946 the Barlow Committee had recommended a doubling of the output of scientists and technologists from British universities within the next 10 years. The susceptibility to change was reflected in the fact that it was done in just five. Swansea was a natural centre for the advanced study of science and technology, the birthplace of metallurgy. Around it was the coalfield and a new oil industry. It rose to the opportunity of the Barlow Committee. It gained a due share of resources. Its student population grew rapidly—not only, of course, in the sciences—and so, in consequence, did its academic faculty.
I wish to speak for a moment only about a fragment of the whole. In 1946 there was only one professor of engineering and one of metallurgy. By 1956 there were four chairs of engineering and a second chair of Metallurgy endowed by the Steel Company of Wales. With these added resources young men from the most prestigious university centres of research were attracted to the college's chairs. So what had been accomplished? The young men and women entering the college from the local schools were brought into contact with young professors and their colleagues working on the problems of their subjects at the very periphery—and I mean by that what some people call frontiers—of existing knowledge. So for their students something of vital moment had indeed happened to them while they were undergraduates. I must say in passing that if the noble Lord, Lord Annan, had brought about a system such as he advocated in his speech earlier today, none of this would have happened. It could not have happened because the two elements in the process would have remained separated and inaccessible to one another.
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As time passed, many of the newcomers went on to higher things. One, for example, went on to a famous chair in the Imperial College of Science and Technology and another became President of Cornell University, but they went not before they had left their own marks on the college and given their pupils an insight into, as Plato put it:
"The wheel of education once started has to move faster and faster."
The most important lesson of all was one not lectured about or tested by examination: the need to accept the inevitability of change and development—high research is not for the reinvention of the wheel, you see—and to be prepared for periodical regeneration as frontiers yield to new intellectual assaults.
Nearly 100 years ago the hard-headed fathers of the North of England wanted for their children an experience which had been denied to themselves. Thus, they sought to found the civic universities of the great cities which are now great international institutions. They intended to prepare these children for a still unknown but knowable future; and who can say we are in less need of this today than they were at the time?
The question is: what should we ask from our universities today to arrange their institutional affairs so as to ensure that the multifarious intellectual talents entrusted to them are realised in the fullest possible degree, and that the young who pass through them are so taught that they accept the need for self-regeneration at regular intervals during their working lives? We expect it of our doctors in response to the accelerating pace of medical advance. What is it? Is the cycle of medical knowledge and practice 10 years? That is some four times in the course of a working life.
In the face of massive changes impending in the nature of work and in the balance of world forces, whole industries may well be casualties and even be destroyed. The response of the nation as a whole will he powerfully affected by the quality of outlook of the 15 per cent. of our youth at present in our system of higher education and those who will follow them. A modern state simply cannot do without strong universities.
The only other remark that I should like to make in this context is drawn from some authoritative research carried out by the Carnegie Corporation of New York. It suggests that unless 10 per cent. of young people in every generation are so educated as I have already defined, an advanced economic system will not work. Beyond 25 per cent. the benefits of further investment have to be sought in social, individual and non-economic terms—as America is now in fact doing. The figures that I have been given are these: we have achieved 15 per cent. from the 5 per cent. at the time of the Robbins appointment; Japan has achieved 25 per cent. calculated on the same basis. These are students in universities taking degree courses, in the Open University, or in polytechnics under the sponsorship of the CNAA. Our figure is 15 per cent.; America's is 25 per cent.; Japan's is 25 per cent.; Russia's is 25 per cent.; and Germany is on a par with us at the moment, but prepared to go to 25 per cent.
It seems to me, in the light of these figures, that although we seem to have done well since the days of

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1960, we would be speaking very much against our own interests if we allowed it to be thought that it was time now to go back on the Robbins' report.
6.38 p.m.
Lord Crowther-Hunt: My Lords, I understand from the noble Lord, Lord Pennock, that he could not stay on long enough to make his speech, so he indicated that I should follow the noble Lord, Lord Fulton.
We are all indebted to the noble Lord, Lord Annan, for initiating this debate which looks like turning into something of a midnight feast or midnight wake.
Noble Lords: No!
Lord Crowther-Hunt: At the risk of taking it just beyond midnight, may I congratulate the noble Lord, Lord Wilson of Riveaulx, on his maiden speech. No doubt that is a rather presumptious thing to do for someone who gave me the privilege of a junior post in one of his Governments; but not to have referred to the maiden speech of the noble Lord, Lord Wilson, might have been misinterpreted in some way or other, and I prefer to he presumptious rather than to be misinterpreted.
Anyway, this debate comes just at the right time: it comes at the time when the UGC is about to consider the replies to its letter to the universities of 1st November 1983 about the development of a strategy for higher education into the 1990s, as it is called. Replies—as noble Lords have pointed out—were due in by the end of this week, so besides the replies from the universities I hope the UGC will consider many of the points which are being made in this debate today.
In this context, I should like to make three quick points. My first or starting point is the letter that the Secretary for Education, Sir Keith Joseph, sent to the UGC on 14th July 1982. In that famous or infamous, letter—depending on one's point of view—Sir Keith talked about what he called the restructuring of the universities following the Government's decision to make a lower level of resources available to them. That letter has been much maligned, but I should like to start by saying something good about it. In what the Secretary of State for Education was euphemistically calling restructuring he was in fact, although cutting back, putting forward and supporting some very important new principles at that time. First, he said he was supporting the idea that the reduction should, as it was put,
"be applied selectively in the context of subject provision across the country as a whole".
He emphasised that this should,
"involve a change in the distribution of students towards natural science and technology".
Secondly, he said that the universities should be able to respond positively to meet our national needs and he invited the UGC to give particular attention to demands for manpower and research which, as he put it,
"are likely to contribute to, and be generated by, our economic recovery".
I was glad to hear the noble Earl, Lord Swinton, stress that it is still Government policy to push people more in the direction of science and technology.
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Those seem to be admirable sentiments and are indeed a condemnation of the relatively unplanned expansion in our universities which followed the report of the noble Lord, Lord Robbins. That report enunciated, as has been mentioned this evening, the general principle that we should provide enough places in higher education, as it was put, "for those qualified and willing to take them up". That was admirable in itself but to that principle was added the phrase, "in the subjects of their choice". So the guiding principle of the great expansion that took place after the Robbins Report became providing enough places in higher education for those qualified and willing to take them up and, "in the subjects of their choice". This meant that this big expansion in student numbers which then took place was proportionately greater on the arts and humanities side than in science and technology.
In this context, when I became Minister of State for Higher and Further Education in 1974 I remember, as it were, metaphorically hitting the roof when one of the first decisions I had to make in the department was to approve an extra grant of, I believe, £1 million to the UGC so that the universities could convert empty science places for use by arts and humanity students. That is a concrete illustration that the great expansion which then took place did so without any proper sense of priorities, or indeed with a total lack of priorities, at that time. So I commend the Secretary of State for Education and Science and the UGC for their proper sense of priorities; that is, changing the distribution of students towards the natural sciences and technology. That is clearly where our future lies.
Here I criticise, or venture to criticise, the noble Lord, Lord Grimond, who seemed rather to imply that the judgment was to be found only among those who had read the arts and humanities, as though scientists and technologists are bereft of all sense of judgment. Our future—and this is where I support what the Government are doing—is pushing more people in the direction of science and technology. But it is at this point that I part company from both the UGC and the Government. While I applaud their priority of changing the emphasis in favour of science based subjects, in my view they are entirely wrong to be doing so within a policy of reducing student numbers in our universities and in higher education generally.
This is where we come to this vexed question of student demand. The Department of Education and Science estimates that student demand for places will drop by between 20 per cent. and 25 per cent. between 1989–90 and 1995. But that is absolute nonsense and a nonsensical way of planning higher education. It is based on some sort of concept of natural demand. But there is no such thing as natural demand. This was a point I remember making very forcefully to my civil servants in the Department of Education in 1974–75 when I was asked to approve their reduced estimate of demand for places in higher education in the early 1980s; their reduced estimate of demand to give effect to the Robbins principle of providing enough places in higher education for those qualified and willing to take them up. I was asked, in the maintenance of this principle, to approve and announce a reduced estimate of places needed in the 1980s; a reduction to 640,000 from the then planning figure of 700,000.

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Noble Lords will recall that at one time, at an earlier stage, it was thought that to give effect to the Robbins principle we would need over 800,000 places in the early 1980s. That figure, to give effect to the Robbins principle, was dropped to 750,000 and then to 700,000. I was on the receiving end of having to make an announcement that the principle was still being maintained but that now 640,000 would be needed in the 1980s. The explanation that I was given by my civil servants for this was that they had over-estimated demand. It was not that the department had got the size of the relevant age group wrong; after all, we had 18 years' notice of the size of the relevant age group. What they had misunderstood or mis-estimated was the size of the demand from that age group. That was the explanation given to me on why I was having to make the announcement that we were now planning for 640,000 places.
I remember at that time asking my officials if they thought that student demand for places at our universities would increase if I were able to announce a doubling of the student grant in financial terms. What would that do to demand? They said that it was not a very fair question and that it was, in any case, hypothetical. I then asked, "What would happen to student demand if I abolished student grants tomorrow, if I could do that, and moved to a loan system?" They said, "That is a hypothetical question, too, because you are not going to do that". What this was saying was that there is some concept of God-given student demand; but there is no such thing as a God-given concept of student demand. Student demand is something that can be manipulated upwards or downwards depending on the financial and other inducements of the time. Therefore, to base the planning of our higher education system on the concept of student demand and estimates of it in the late 1980s and 1990s is, I suggest, a lot of nonsense.
In my view, what we should be doing is for the Department of Education and the UGC to follow a very different approach. They should decide what proportion of age group we, as a country, would find it is in our national interest to educate to university level. Having made that decision, they should use the techniques of demand management to get that number of students coming forward. Of course, that is no easy policy, either. But as some guide what we ought to do is find out first of all what proportion of an age group—the noble Lord, Lord Fulton, gave us some interesting figures a moment ago—are given university or equivalent level education in, say, France, West Germany, Scandinavian countries, the United States and Japan. I do not mean what proportion enters university and higher education; I mean what proportion of an age group comes out, because we all know that in the United States many people enter higher education but that there is an enormous wastage rate. What we want to know is what proportion is actually educated to university level and in higher education and comes out at the other end in these different countries.
I found that information enormously difficult to obtain from the Department of Education. It had not thought of this as something to be looked at. Perhaps the noble and learned Lord may have managed to
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squeeze some figures on this aspect from the department and can give them tonight. What we want are figures showing what proportion of an age group comes out of higher education and universities in other countries.
Then, because I believe that in this country we have as high a proportion of talent in an age group as they have in the United States, Japan, Western Germany or anywhere else, we should seek to emulate and reach the proportions that they are producing. I think that nothing less than this will be good enough to give us the highly trained manpower and educated manpower that we need. When we know what proportion of an age group we are aiming at, we can then set about getting that proportion wanting to come into higher education and we can use differential grants to get them moving in the right direction.
My last and third point (and I will be quick about this) is an attack on the UGC. The UGC is today, in my view, badly composed for its original role as a buffer between the Government and the universities, preserving the independence of the universities from the Government which controls the purse strings. It used to share, as the noble Lord, Lord Fulton, was saying, in some sort of policy co-ordination or policy development with the Government. It is no longer fitted to do that. Its members are essentially nominees of the Department of Education and Science. That is how they are chosen; that is how you get on the University Grants Committee. Secondly, its staff is almost entirely drawn from civil servants seconded by the Department of Education and Science to serve the UGC for a short period of time. Thirdly, of course, just in case it gets slighty independent, the UGC hardly ever meets unless the Permanent Secretary of the Department of Education and Science is present at its meetings. It is a pure lap dog and is no longer the independent policy-making policy advisory body that it should be. We want a UGC which is not a poodle of the Department of Education. We want a UGC, perhaps merged with the NAB, which is capable of advising the Government on what this country really needs in higher education if it is to match the highly trained output of educated manpower which so many of our competitors seem to be producing. Above all, we want a UGC which will stand firm against any Government whose overall higher education policies are clearly misguided and do not match our national needs.
6.52 p.m
Lord Perry of Walton: My Lords, I am very grateful to the noble Lord, Lord Annan, not only for initiating this debate but also for saying things that I believe badly needed saying, and I should like to reinforce his arguments. I listened with a great deal of interest to my noble friend Lord Flowers, who spoke with great fluency about the changes that have already taken place in the universities. Of course, he is absolutely right: they have moved a very long way, much further than I ever thought they would.
However, I do not think they have been radical enough. I am of course, like the noble Lord, Lord Annan, another of the impatient, retired vice-chancellors, of whom my noble friend Lord Flowers

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spoke. He rightly stressed the importance of scholarship. The great glory of the English university system was that it deliberately set out to produce, and often succeeded in producing, the scholars of the next generation. It was geared to the needs of what my noble friend Lord Ashby has called "the thin clear stream of excellence" that is academic excellence. It was a system that made entry competitive and it catered for a system that made entry competitive and it catered for an intellectual élite. It was a system that served the nation well over many years. It was a system that was very efficient in terms of the proportion entrants who graduated. It had a success rate in terms of the proportion of entrants who graduated that was around 90 per cent.—higher than any other system of higher education. It was a system that achieved all this and still managed to award honours degrees in only three years, unlike other countries, which took four. It was a system in which most people took pride. But within it there were serious defects that became more and more apparent as the general level of school education rose and as comparisons began to be made with the emerging systems of higher education in other developed countries. Our system looked efficient because it made very few errors of commission; but it achieved this only by making a very large number of errors of omission. It did nothing at all for the 90 to 95 per cent. of the age group who were excluded from it.
In the United States of America, about 40 per cent. of the age group were entering some form of higher education when our proportion was 6 per cent. They had what looked like a very inefficient system—only about 50 per cent. came out at the other end with degrees, compared to our 90 per cent.—but 50 per cent. of 40 per cent. is 20 per cent., and 90 per cent. of 6 per cent. is only 5 per cent., so which was the more efficient system?
The increasing demand for higher education and the realisation that we were not educating a large enough proportion of our young people, led to the Robbins Report and to acceptance of the principle that all those qualified for university entry should be assured of it. This was very important and of course we tried to cling to it; but, in implementing the principle, we simply expanded the existing system, making it cater for more students.
I hold, as did the noble Lord, Lord Annan, that this was the major mistake. The country needed many more educated men and women; it did not need more scholars, and our system was geared to the production and the nurture of scholarship. But academic excellence is only one kind of excellence. Most young people, however intelligent, do not really want to become scholars: they want to go out into the world and do things, but they were not getting the sort of training they needed for that. The essence of academic scholarship is study in depth. How many times has that phrase been used to describe the purposes of honours degrees or of Ph.D programmes? But we can have study in depth only by neglecting study in breadth. Life in the extra-mural world demands an understanding of a very large number of different things, and a very detailed understanding of only one is not enough.
I come from an academic background and I, like my colleagues, used to sneer at the college curriculum
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followed by many Americans, referring to it as "a rag-bag of miscellaneous credits". But I think I was wrong. I think that some of those rag-bags may well have been just the sort of education that those students needed for the jobs they went into and that many of our own students would find them much more useful than some of their current programmes. We now have 15 per cent. of the age group entering higher education and we have improved the programmes they study very considerably, but we do not yet have the 40 per cent. to 50 per cent. entry that they have in the United States and we are already finding that our current system costs too much. We must go on nurturing the "thin clear stream of academic excellence". Perhaps we ought to do it in the eight centres of excellence that the noble Lord, Lord Annan, was advocating, but however we do it, the stream is thin. The rest need something different, something broader, something cheaper, and we must find the ways to pay the bills to provide for even more of our young people getting some exposure to higher education.
I wish I knew how we might change the system. I feel like I often did when I practised medicine: I am sure of the diagnosis but not very sure about the treatment. We have tried experiments with CAT, with polytechnics, with colleges of higher education, but none of them have really worked. I think the main obstacle to change lies in the deep-seated belief in the minds of most British parents that the most successful, most prestigious careers for their children lie in the learned professions. Their aim, and indeed the aim of most teachers, is to train the young to succeed academically to obtain first class degrees and to proceed to a career in the university as dons. It somehow seems a bit of a failure for someone to get a good degree and then have to take a job in industry. It is this attitude that we must change. If we could do so, radical changes in the patterns of education would become both acceptable and possible. It will need a lot of political ingenuity and will to achieve that change, but the gain to the nation would be immense.
My Lords, I now turn, if I may, to the particular problem of the Open University. I gave 13 years of my life to trying to build it and I claim a right to speak with some authority, if not with the fluency and the wit of the noble Lord, Lord Wilson, in his excellent maiden speech. The political will of the noble Lord, Lord Wilson, established the Open University, and the imaginative dedication of the noble Baroness, Lady Lee of Asheridge, laid down its ground rules. I was the first member of staff and had the job—the most exciting job in the educational world at the time—of implementing their ideas. At that time I was a member of no political party, and one of my aims was, while recognising that the university owed its origin to the Labour Party, to take it, as a national institution, out of the arena of party politics. When the Conservatives won the 1970 election and our present Prime Minister became Minister of Education, I was of course delighted when she stood up for the new institution and kept it in being throughout that Administration. It is, I think, true that by the time I retired in 1981 the Open University had become a part of the educational establishment, accepted by all parties as a necessary part.
But, my Lords, things have recently begun to change for the worst. It is only to be expected that when it is

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Government policy to cut deeply into public expenditure, the Open University should be asked to bear its share of the burden of cuts. But it is being asked to bear an unreasonable share; and it is in fact the kind of institution which requires exceptional treatment—and I am unashamedly indulging in special pleading.
I am not making out a special case on social grounds, though it is easy to do that, and indeed several noble Lords have alluded to it. I shall speak only of hard, economic facts. We built the Open University as an institution designed to cater for large numbers of students. In our first year (1971) we admitted 24,000 students. To achieve high standards in the courses that were offered demanded very high initial expenditure, but on the other hand there was a built-in economy of scale. At the moment one course in science and technology—a course equaivalent to half a full-time year's study—can cost about £1 million to produce. But it costs the same whether it is taken by one student or by a million students. The direct cost for every extra student is very low. The whole system was built on this concept
At the moment the university is being forced to consider ways of cutting its costs. Let me look at just three of them. Can it reduce its broadcasting costs? It currently pays the BBC £10 million a year for the services provided. If it cut the number of programmes by half, it would save £1 million out of the £10 million. Most costs are fixed in keeping the production studio running. It would make more economic sense to increase their utilisation.
Can the university reduce the number of undergraduates? Of course it can. But if it reduces the total number by 10 per cent.—that is, by 6,000—it saves nothing whatsoever. The fees paid by a student in the Open University—forced up and up by Government decisions—are now almost exactly equal to the direct cost of teaching that student. Thus to increase the number of students now costs nothing at all until the increase is such as to lead to a quantum jump in the fixed overhead costs. But, similarly, it is necessary to reduce student numbers by a big enough amount—probably between 20 to 25 per cent.—before significant savings are realised by a quantum drop in the fixed overheads. If such a reduction were made, what would happen? The cost per student or the cost per graduate—the unit cost—which is currently the lowest in the country, would simply go up. That would not be the way to increase efficiency.
Could the university then cut the number of courses that it offers? Yes, of course it could. But again there are problems. It saves nothing to cut existing courses. There they are, lying on the shelf. The choice to students of courses to make up a meaningful degree programme is already very small—much smaller than than in any other university—because of the high initiation costs. The only way to cut the number of courses on offer is to stop production; but now that we have reached at the Open University the level that we aimed for, most new courses being produced are replacing out-of-date courses, and so there would be an inevitable reduction in standards; and a reduction in standards is the one thing that will kill off an institution quicker than anything else.
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I hope that I have said enough to show that the present policy of the Government in relation to the Open University makes just economic nonsense. In order to save between £5 million, on their own estimate of inflation, and about twice that amount in terms of what the Open University considers it has to save, they run the risk of destroying a quite unique institution, admired and copied across the world. The Government's policy has already had a profound effect in reducing morale in the institution.
I have been delighted to hear tributes to the Open University from so many noble Lords this afternoon. I agree so much with the noble Lord, Lord Alport, that demand from adults for education will go on increasing. Some of it could be met so easily by expanding, at very low cost, the Open University. But that will be impossible if it is damaged, as I believe it will be, by the present cuts.
Finally, let me try to link what I have been saying about the Open University to my earlier thesis about the overall shape of higher education. The Open University does, indeed, offer a much more broadly based degree than do most other universities. It does, indeed, offer a three-year pass degree and a four-year honours degree. It does not demand specialised entry qualifications. It has in fact made the very sort of changes that I have argued should be made within the conventional institutions. In making these changes it has not produced second-rate degrees; but it has produced a degree that is recognised to be of equal quality, if of different structure, to any other in the country. If that can he done in the special case of the Open University, then it can be done elsewhere. However, it requires an act of political will—just as did the formation of the Open University. The educational world would never have created the Open University; nor will it reform itself radically from within.
7.7 p.m.
Lord Todd: My Lords, I must begin by thanking the noble Lord, Lord Annan, for two things: first, for introducing a very important subject for debate today; and, secondly, for giving us the opportunity of hearing a most excellent maiden speech by the noble Lord, Lord Wilson of Rievaulx. It was, if I may say so, a speech in which he revealed not merely an interest in, but a very considerable knowledge of, both the Open University and the technical universities at least, coming from his office as chancellor of Bradford.
I shall be brief this evening. First, I should say that I share the views of the noble Lord, Lord Annan, about things that have gone wrong in our universities in recent years. I should perhaps add that I am not surprised to find myself in agreement with the noble Lord, Lord Annan, because on many issues we begin by being diametrically opposite, but after a few years we discover that we have come together again; and that I believe applies a little to this question of higher education.
I think that everybody would agree that changes are necessary. I must confess that I feel that many of the problems we have—problems of the relations between universities and industry, problems over our relative backwardness in matters of innovation—rest on social attitudes. In particular, they rest on the curious anti-

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industrial bias which has marked our society since about the middle of the last century. No doubt there were many factors involved in shaping the kind of society that we inherited from the nineteenth century. But it seems clear that, for whatever reason, the successful entrepreneur-industrialists who put this country in the lead in the early days of the Industrial Revolution did not, as a rule, wish their offspring to follow in their footsteps. They sought, by education, to take them out of industry and put them into a non-industrial social élite. This tendency was reinforced last century by the phenomenal growth of our Empire, particularly during the latter part of the century. With it came a great demand for people who could administer and organise this huge Empire. To be an administrator or, if you like, a servant of Empire, was a job much more in keeping with the idea of the wholly mythical English gentleman. A position like that was very much more socially acceptable than operating in industry. Not only was that the case, but with it there came a gradual change in our educational patterns—because educational patterns rest on social attitudes—to accord with the production of the scholarly administrator, the servant of Empire.
At the same time there was a separation and downgrading of technical and industrial education in favour of what we now regard as the traditional type of university education which was, in fact, the pattern of our older universities. This separation and downgrading brought about a separation of the engineer and the technologist from the élite of British society, a separation that never occurred either on the Continent of Europe or in America. It was, I believe, the feather-bedding effect of wealth derived from our colonial Empire that for a long time concealed from us just what was happening to us. Indeed, it is only since the last war that we have really come to realise the plight that we are in. We are still a very long way from getting it put right. There is still a great change of heart necessary in many areas of our national life, and not only in higher education.
It would be impossible in a short contribution to a debate like this to do more than touch on one or two features of our higher educational scene. I shall speak in a general way. As I shall be speaking in a general way about broad problems, I do not intend to produce any statistics. A number of statistics have already been put to us. I believe that we missed a great opportunity in this country some 20 or so years ago when, as a consequence of the Robbins report on higher education, we approximately doubled the number of our universities and set out with success—let us be clear that it was with success—vastly to increase the number of students. This increase has had, as a few of us predicted at the time, rather unfortunate results because it did not involve any real attempt to change the pattern of our university education.
No one would seriously dispute the thesis that higher education should be available to all those who can profit from it. The trouble is that in creating these new universities and expanding existing ones we proceeded, in my view, to put into universities many students with no real motivation for the type of élitist, almost anti-industrial, education of our traditional universities whose pattern all of the new ones sought in varying degree to follow.
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The reservoir of talent appropriate to that type of education was far smaller than many people at the time imagined. Many, and, in my view, a majority of the new entrants to the universities would have been very much better served, as would the nation, if they had undertaken a more vocational type of education such as, at least, could have been provided by the polytechnics. Expansion and development of these institutions, the polytechnics, was what we really needed at that time. With that expansion, we also needed a much greater degree of technical or, if you wish, industrial orientation in at least the scientific and technological courses in our existing universities.
But, of course, simply to point out where we went wrong is not of very much help, except perhaps as a warning for the future. Had funds for higher education remained as readily available today as they were 25 years ago, we would probably still have muddled through. It is a fact that almost any system will work provided money is unlimited and growth is the order of the day. But, alas, the financial winds now blow cold. We have been, and are, faced with cuts in university and polytechnic expenditure which, already severe, could become even worse. What then should be done? I shall mention only a few matters that seem to me to warrant urgent and serious attention.
I think that everyone agrees that in the world of today, industrial progress depends ultimately on research. Of course, there are many different kinds of research, from the so—called pure or basic research through strategic, applied, directed and all the rest of it. All of these forms of research are important. All that I will say here is that the pure or basic research is essentially a function of the universities, and that the applied and directed forms of research become increasingly prominent as one proceeds through polytechnics to industry itself. Broadly speaking, universities operate under a dual support system. According to it, speaking very roughly, they have a grant placed on the number of students that they have. It is assumed that a more or less fixed proportion of the grant is available to provide a base for research, additional grants for specific pieces of research being provided on top of that by the research councils.
We hear a lot, most of which I do not believe, about research being the absolute lifeblood of every university. We are told that it is essential to the maintenance of teaching that only those who are deeply involved in research can teach properly, in addition to the fact, as I would admit, that from pure research come the concepts on which ultimately technological progress depends. I do not think, however, that anyone who has been in charge of large scientific departments in universities over a long period of time would be inclined to agree with the statement that unless a man is deeply involved in research, he will be no good at teaching. That is simply not true.
However, as things stand, these appeals and cries from universities have meant that we find ourselves faced with heavy expenditure to maintain research schools more or less everywhere in all the popular subjects. The cost of these research schools rises every year with the forward march of instrumentation. I do not believe that we need 50 research schools of chemistry or physics in this country. Nor do I believe

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that we have the people available in sufficient number to have 50 first-class schools.
Especially when money is short, why do we not concentrate and avoid trying to do everything in every university? The noble Lord, Lord Flowers, tonight drew attention to the fact that some kind of concentration was now—rather belatedly, if I may say so—being put into action in London. Why do we not have it on a very much wider basis? After all, why should not some of our universities become essentially teaching institutions? There are many great universities in America whose reputations rest upon teaching rather than upon research. I know that it will not be easy to make some sort of decision about which universities should do what. Indeed, it will be very difficult. But I still think that we must face up to this and stop pretending that all of our universities should be, or even could be, centres of excellence in research.
On the teaching side, I would like to see an increased practical bias in much of our teaching, especially in science and technology. I draw your Lordships' attention to the recent recommendations from the Engineering Council about practical bias in engineering courses in universities. That points the way ahead and it could apply in a good many other fields apart from engineering. There should also he an extension of polytechnic education. The polytechnics could, with profit, take into technologically-oriented studies some, at any rate, of those now in universities, and particularly those now pursuing social studies of rather dubious value.
In summary, what I am trying to say is this. Our continuing industrial decline stems largely from our archaic educational system which, in turn, rests on what I would almost call anti-industrial social attitudes in this country—attitudes which have developed over quite a long period of time. As long as we had the feather-bedding effect of a large colonial Empire, our decline was largely concealed from us. Now, however, only a radical reform will get us out of the trouble that we are in. That reform will, I believe, entail a restructuring of our entire educational system with a reduction in specialisation at all levels. The present concentration on scholarship and pure research should remain only—as, for example, in the United States—in a few elite university institutions; most of our other universities should become more practically oriented teaching institutions. The polytechnic sector ought to be stimulated and enlarged relative to the university sector. But the polytechnics must remember that they are vocational institutions. They must stick to their last and they must not seek to ape the older institutions.
The trouble at present is that we have a vastly expensive system of higher education designed for, and probably appropriate to, the few; but we are busy trying to push it on to the many, and we are doing that at a time when we are in sore financial straits and we really cannot afford the waste of talent that is inherent in the system that we have at present.
7.24 p.m.
Lord Beloff: My Lords, were it not for the seriousness of the subject that we are debating this evening, I must admit that my first reaction to the
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speech of the noble Lord, Lord Annan, to whom we are all so grateful, would be one of mild amusement. The noble Lord, Lord Annan, has been saying to a respectful and hushed House of Lords things about the difficulties of our system of higher education which a few radicals like myself were howled down for saying in the 1960s, when the first evidence of what was happening should have been plain. It is, of course, nice to welcome the noble Lord, Lord Annan, to our ranks, however belatedly.
What were the reasons for believing that the higher education—
Lord Annan: My Lords, may I ask the noble Lord to clarify one point? Is he saying that in the 1960s he was in favour of large-scale expansion and easier access to higher education?
Lord Beloff: My Lords, that was not the point in the noble Lord's speech to which I was referring. I was referring to his belief that we should have a more varied system of higher education with greater differentiation among institutions, and that there were in our management of higher education important obstacles to achieving that aim. My reason for taking that view at the time was that there was a major watershed in our affairs when the UGC was transferred from the Treasury—with which it had previously worked directly—to the Department of Education and Science (as it became). It seemed to me then, and it still seems to me, inappropriate that a department which has a massive responsibility for a quite different kind of activity—namely, education in the schools—should also take on this particular task. It seemed to me almost inevitable that, with a major Government department balancing one form of educational expenditure against another (and. of course, in the Robbins period it was the universities which profited at the expense of the schools—but later things became different) there would be an increasing degree of control from the centre, an increasing degree of uniformity, and all the matters which the noble Lord. Lord Annan, and the noble Lord. Lord Todd, with whom I totally agree, now proclaim.
By chance I was enabled to test the receptivity of our system of higher education to innovation, when I took part in founding the University College at Buckingham, which as the noble Lord, Lord Grimond, pointed out, actually tackled at least one of the major legacies of the past—the harvest year as the measure of academic activity. The discovery I made in the course of those years in the early 1970s was that the obstacles to innovation were enormous.
We were opposed—perhaps not surprisingly, given the political control at the time—by the Department of Education and Science and by its offshoot, the CNAA. We experienced great opposition in the form of almost everything except mass picketing from the AUT, which is a trade union of so reactionary a cast that it makes even the print unions appear very enlightened exponents of technological advance.
We were opposed by the educational press, which were always asking us the same question: "Will not the fact that you depend largely upon private endowment mean that there will be strings attached?". I wonder what the present vice-chancellors think of their

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relations with the Government? Ropes or chains, perhaps, would be more appropriate than strings. We were opposed—and this is the most regretful thing of all—by the major part of the university establishment outside Oxford and Cambridge—that is to say, by the Committee of Vice-Chancellors and Principals and by the people who spoke on behalf of the established universities.
I should like, particularly as we are to have the pleasure of listening to him later, to pay a personal tribute to the courage of the noble Lord, Lord Hunter of Newington, who was the only vice-chancellor who accepted an invitation to the opening ceremony of the University College at Buckingham. I should also like to thank him for the very considerable help we received from the University of Birmingham in those early years.
As is now well-known, we survived this phalanx of opposition—largely, I think, due to the confidence expressed from the beginning in our experiment by three individuals. They were the present Prime Minister, the present Secretary of State for Education and Science, and the noble and learned Lord the Lord Chancellor, who now combines the august office of state that he holds with the relatively modest one of the first Chancellor of the University of Buckingham. I should also like to take this opportunity to express my gratitude to him.
Many noble Lords who have spoken today have seen this important system operating, as it were, from the top down as Ministers, as vice-chancellors of great universities, or as members of the UGC or of the Committee of Vice-Chancellors and Principals. Unlike them, I have seen this system from the underneath; I have the same view of the system as a worm might have of a system of agriculture.
What do I derive from this experience?—the view that our universities suffer from a controlling structure which is so top-heavy that even if they were filled, as they are perhaps not filled, by individuals with a genius for innovation, they would face a very severe task in carrying out their innovations. It is a tribute to them that they have gone as far as the noble Lord, Lord Flowers, reminded us that they have in very recent years. Indeed, the noble Lord, Lord Wilson of Rievaulx, reminded us that we have the Treasury—the Treasury is always there.
I regret to say that under the Treasury (because this is the pecking order in all Cabinets) there is the Department of Education and Science. Under the Department of Education and Science there are the University Grants Committee and the research councils. Below them there is the Committee of Vice-Chancellors and Principals, which itself is now a major bureaucracy. Then there are the universities themselves. I agree with the noble Lord, Lord Annan, that by comparison with some institutions in other countries our universities are rather modest in their administrative requirements and expenditure. But their administrative requirements are made very much greater than they otherwise would be by having to answer to and to deal with this immense pyramid of authorities which they confront.
At the bottom of the heap we are left with the people about whom we should primarily be concerned—the individual teacher and the individual student. The
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individual student goes to his teacher for instruction, hut the teacher is probably occupied filling in a questionnaire from the University Grants Committee, and he tells the student to go away and return when he is less busy. This is not altogether a caricature. When I return to Oxford these days and compare the Oxford of today with the Oxford I first knew as a young fellow before the war, I am very much struck by the degree of de-personalisation—the degree to which teachers are absorbed and taken away from their work by the needs of administration, and by the needs of arguing about the resources for their respective subjects.
It is perhaps not surprising that major changes of the kind which the noble Lord, Lord Annan, would like to see—major differentiation—are very difficult to achieve because many of the teachers, who might otherwise be to the forefront—because, in a sense, many disciplines would gain if, for instance, there were some amalgamation of departments—are overwhelmed by a form of organisation which detracts from their ability to give academic leadership or to devote themselves to their pupils in a way which would have seemed normal a generation ago.
We would have to begin at the top. We would have to begin by making a major change which would put universities and their services to the state and to the nation in the forefront of the public and political mind. For this reason I regret that a suggestion made by the noble Lord, Lord Wilson, when he was in Opposition was not carried out when he came to power in 1964—namely, that what this country ought to have had was a department of higher education and science linking together research and higher forms of education, and representing in Cabinet and to the nation the importance which all speakers here have attached to the contribution that can be made. It seems to me that, as the noble Lord, Lord Annan, said, not only must we be radical about institutions, but in this respect we have to be radical about the machinery of government.
7.37 p.m.
The Earl of Longford: My Lords, it is always a pleasure to listen to the noble Lord, Lord Beloff, speaking as he does entirely without any script. On this occasion it would be churlish not to join in extending to him the congratulations which he has bestowed so liberally on himself. The noble Lord presented himself on surviving in the face of possible odds. I do not want to hurt the noble Lord's feelings, but, after all, the noble Lord is not the only Member of this House who has seen matters from what he calls "the worm's eye view", although I do not think there is anybody else but the noble Lord who has actually started a small university. Most of us have been students at some time or other at a university, and a few of us have been college tutors. When I initiated the first debate ever held in this House on universities in 1957 I was the only college tutor: now there are quite a number. So I am afraid that I shall not allow the noble Lord to exercise a sort of monopoly in "life at the coal face".
A debate of this kind takes me back to the days which I have just mentioned. I initiated a debate in 1957 in which I pleaded for a great expansion of the universities and, incidentally, for less specialisation. I was followed by Lord Cherwell who took a similar line

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to that which has just been adopted by the noble Lord, Lord Todd, demanding a great increase in engineering students. We were replied to by the noble Viscount, Lord Hailsham, as he then was, who, on that occasion at least, expressed a good deal of sympathy.
In 1962 I was back again, this time dividing the House—and we got a very credible Division for those days—against the failure of the Government adequately to expand the universities. Lord Hailsham again replied, this time rather more sharply. But between those dates I proposed the idea, which then was so revolutionary, of transferring the responsibility from the Treasury to the Ministry of Education. If anyone looks up that Hansard he will see that there were quite a few shouts of "Oh", which I suppose is the nearest to a protest that is made in this House. Lord Hailsham said that I was clearly pulling a hornets' nest about my ears. However, not very much later that was duly carried into force and has been operated ever since, though I am not sure that the noble Lord, Lord Beloff, likes it very much.
Those were the old days. In the last 20-odd years there have been two big developments. The adoption of the Robbins Report—the ever memorable Robbins Report—which has been applauded by a number of speakers including the noble Lord, Lord Fulton, for example. That was a tremendous step forward. That committee was set up by a Conservative Government, and all credit to them. When they reported, their report was adopted by a Conservative Government; so all credit to them again. However, as time went on the virtue of the Conservatives declined, and by 1981 we had the new policy, and we had the chairman, as he then was, of the vice-chancellors saying that the new policy was profoundly misguided and that it represented a kind of madness. There was no doubt that there was a sharp departure on the part of the Conservative Government in 1981 when they repudiated the Robbins principle. There is no escaping that fact. It was adopted in 1963. It may be that the noble Lord, Lord Beloff, regretted that, but it was adopted in 1963, and repudiated in 1981. That is the history of the struggle to expand our universities.
Now there are many people here in the Labour Party, like my eloquent noble friend the principal spokesman today, Lady David, who will state the main case against the Government policy. She stated it fully, and I naturally endorse all she said, so I shall not spend long repeating those damning arguments. I must confine myself to just two topics, and I shall try to deal with them briefly. On the one hand, I should like to say one more word about the Open University beyond what was said earlier by the noble Lord, Lord Wilson, who played the main part in creating it. Before doing that I should like to congratulate him most fervently on his delightful maiden speech. I felt sure that it would be good, but it was even better than I expected.
What I was going to add to what he said about the Open University is something that has been brought to me in view of my connection these days with the whole question of the disabled. The authorities at the Open University have brought home to me the fact, which I am bound to say I was not fully aware, that the Open University do a tremendous amount for the disabled.
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They say:
"The Open University has often been referred to as the university of the second chance. There is, however, a very significant group of students for whom this institute and this university are the only chance. Of prime concern among this group are currently some 2,000 disabled students."
With all these vast figures of money and student numbers being bandied about, I should like to ask the House for a moment to concentrate on the 2,000 disabled students who are very likely to suffer under the proposals of the Government. I gave notice of only an hour or so to the noble and learned Lord, Lord Hailsham, and therefore I cannot expect a considered reply to this, but if he is unable to reply tonight perhaps he will be able to let me know whether the Government are fully aware of the peril to the disabled students at the Open University. That is a question that I should like to put to the Government for answer now or later.
The only other topic with which I am going to deal is a question that was raised by the noble Lord, Lord Crowther-Hunt, though I missed part of his speech. I am not quite sure how far it could be said to have been raised by the noble Lord, Lord Beloff, but I think he was concerned with it too; it is this question of the UGC. It seems a fairly wide-held opinion in the university world, certainly it was the opinion expressed by the Vice-Chancellor of Oxford in his oration last November, that the cuts, in additon to the quantitative damage, may also do some further damage by way of by-product. In other words, they would tend to lessen the autonomy of the universities.
At this time of night I am not going to spell that out. If anybody would like to know what the Vice-Chancellor of Oxford has said about that, no doubt he will be able to obtain a copy of his speech. However, let us take that threat to be one which is at any rate feared by a good many of the leading people in the university world. What kind of protection does the UGC offer? I would say none at all. As I believe the noble Lord, Lord Crowther-Hunt, said, it has become an agent of Government. This is a view widely held, certainly among my own political friends. It has become for all practical purposes a busted flush. We must ask ourselves, in other words, what good the UGC now does.
There was a time when something of that sort was inevitable. In the days when the Treasury were responsible for the universities it was inevitable that some educational organisation should come between them and the universities. There was some justification for it in those days. But today that particular necessity has been removed, and I would suggest that the University Grants Committee has ceased to assist the universities and has just become an agent, and a not very efficient agent, of central government, which, as the noble Lord, Lord Beloff, said, excels itself in sending out tremendous questionnaires to justify its existence.
I therefore leave the question on the table tonight, supporting the view that I believe has been expressed by the noble Lord, Lord Crowther-Hunt, that so far as the University Grants Committee is concerned its time is up. I shall only say, as Leo Amery said to Neville Chamberlain:
"You have sat here too long for any good you are doing. In the name of God, go!"

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That is a message which I hope the University Grants Committee will be able to understand without the help of an elaborate questionnaire as to its actual meaning.
You may ask me what I intend to put in its place. Supposing that somebody is interested in that question—I see that I have been speaking for 10 minutes, which is quite enough at this time of night—the proposals of my party, which in general terms I am ready to endorse although not committed to every detail, have been spelled out at great length elsewhere. I therefore end on the thought that the universities' freedom is threatened by the cuts in addition to all the other damage done, and that the University Grants Committee is of no assistance. Indeed, the sooner it disappears, the better.
7.48 p.m.
Lord Alexander of Potterhill: My Lords, as this debate has proceeded I have had serious doubts as to whether I should make any contibution to it at all, because I find myself unhappy. But I have been greatly encouraged by the speech of the noble Lord, Lord Todd, who seemed to me to say some of the things that I would have wished to say. I entirely accept the importance of a complete review of the structure and administration of higher education, and in that term I include the polytechnics as well as the universities and other colleges.
However, I believe it is even more important to recognise the need for a complete review of the whole education service and not merely higher education. The Act of 1944 has now been on the statute book for 40 years, which is at least 10 years more than any previous Education Act survived: 1870; 1902; 1921; 1944. It is time we had a new Education Act altogether, because the present structure of the education service is designed not for the 21st century but very much for the earlier part of the 20th century. My worries have increased because of the continued, in my judgment, over-emphasis on academic values. Frankly, I believe that the over-emphasis on academic values has done more to prevent the development of an effective education service than almost any other single thing. We set up technical high schools; they became grammar schools. We set up colleges of advanced technology; they became universities. We have now set up polytechnics, and I wonder what road they will travel.
The plain fact is—and this is where I found Lord Todd's contribution so relevant—that the needs of the 21st century will depend very much more on the study of science and technology than on the study of the subjects which are held high in esteem in terms of academic value. I fear that the universities are not ready to recognise that fact. After all, it was the universities' resistance that prevented the colleges of advanced technology from being able to award degrees when they were first established.
The other thing that has worried me is the apparent assumption that there is a high correlation between the provision of higher education and the economic strength and social stability of a nation. Unless I am misinformed, the facts of history prove very much to the contrary. There is a limited correlation, but there is a very high correlation between the education that all of the people in a nation get and the economic
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strength and social stability of the nation. If your Lordships doubt that, I remind you that in 1917 Russia probably had one of the best systems of higher education in the world, but in the absence of adequate provision of education for all the people revolution was inevitable. Therefore I think we should put very much more emphasis on the education that all the people receive. I plead for a new Education Act because I think the present Act is inadequate for future needs.
I worry about our provision for the 16 to 19-year-olds which lags so far behind and is being approached, in my opinion, so thoroughly badly at present. The concept of young people leaving school at 16 and getting a job, in my opinion is as dead as a dodo. Unemployment among that group of young people is not transient; it is permanent. Therefore we have to look to the future in which we provide a thorough system of education up to the age of 18-plus for all our people.
My other worry is even more deep-seated. I always believed that the education service, properly developed, would lead to people as a whole acting reasonably, showing a sense of responsibility, being able to make judgments on a reasonable basis. Judged in these terms, the education service in this country has failed signally. This is surely accepted by all of us and at all levels. It is not merely in the schools that we have disciplinary problems. We have them throughout the structure, including the universities, where, in some cases, the behaviour of students leaves a very great deal to be desired.
Therefore I plead with the Government not merely to examine higher education, but to consider carefully whether the stage has now been reached where we have to take a new look at the whole of the education service, looking to the needs of the 21st Century rather than to the present.
7.55 p.m.
Baroness Cox: My Lords, like other Members of your Lordships' House, I wish to thank the noble Lord, Lord Annan, most warmly for giving us the opportunity to discuss this important subject. I would especially like to thank him for referring explicitly to polytechnics. This is because I believe that the polytechnic sector of higher education has a particular contribution to make and because I myself owe a debt of gratitude to polytechnics.
When I left school many years ago, it was not possible to combine nursing with going to university. I chose nursing and I have never regretted it. But when in later years it became possible for me to combine family responsibilities with part-time studies, it was a polytechnic which gave me the opportunity to work for both my first and my higher degrees, albeit under the aegis of the University of London's external degree system.
I, like many thousands of others, have benefited from the polytechnics' tradition of providing higher education on a more flexible basis than the universities. Subsequently I taught in polytechnics for 10 years, enjoying teaching students who typically came from a broader range of social and educational backgrounds and a wider age range than their university counterparts. Therefore, in my brief

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contribution to this debate, I will concentrate on the polytechnics, touching on their development, the extent to which they are fulfilling their original brief and some of the issues now confronting them.
As your Lordships will remember, it was in 1965 that Anthony Crosland laid the foundations of the binary system of higher education in his famous speech at Woolwich Polytechnic. Then, in 1966, the White Paper A Plan for Polytechnics and Other Colleges spelt out in more detail the characteristics of this separate,
"strong and distinctive sector of higher education".
It was to be distinguished by its comprehensive range and character of work, and especially by its commitment to part-time students and to a wide range of courses with closer and more direct links with industry, business and the professions.
However, the ways in which the polytechnics developed did not always correspond to Crosland's original vision. For example, in 1972, Anthony Crosland himself, speaking at a conference on the future of the polytechnics, described three different ways in which they had developed since their original designation. Some had sought to emulate universities, concentrating on degree level and postgraduate work. Others had concentrated on meeting regional needs, but were not noted for developing courses at the level of higher education; and only a minority were seen by Crosland as meeting the polytechnic ideal: in other words, not trying to ape the universities but offering higher education which was distinctive in its technical and vocational orientation, retaining a commitment to part-time courses and catering for a greater diversity of types of students than was generally found in universities.
As we moved from the 1970s into the 1980s we saw new trends emerging. In the last academic year there were over 507,000 full-time home students in higher education; the highest recorded level and an increase of 3 per cent. over the previous year. However, this coincided with a 7 per cent. fall since 1981 in first-year home students going to university, but an increase of nearly 25 per cent. in the non-university sector where the polytechnics predominate.
Similarly last year, 53 per cent. of all first-year students in full-time higher education were on courses outside the universities, compared with 47 per cent. in the universities. Only two years previously, these percentages were reversed, the majority being in universities. Now, in the early 1980s, the picture is one of overall, modest expansion of higher education but of a reduction of entrants to universities.
I think that these trends are worthy of comment with particular reference to the non-university sector. I will limit my comments to two areas. First, I am concerned about the lack of rationalisation resulting from an absence of an overall policy for higher education; secondly, I wish to raise the question of comparability of academic standards. On the first issue, your Lordships may recall that I emphasised at the outset my gratitude to and appreciation of the polytechnics. I believe that their raison d'être as originally specified in the 1966 White Paper is highly commendable. We need institutions of higher
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education committed to the provision of the highest possible standards of vocational and technical education.
A number of polytechnics and departments within polytechnics have risen to this challenge but, as Crosland himself noted, a number have been eschewing their distinctive contribution and opting instead for a quasi-university role. It appears that this trend is still continuing to some extent. For example, last year the proportion of full-time students in non-university colleges studying arts subjects was over 23 per cent. That is higher than the proportion in the universities, which was just over 21 per cent. This is despite the fact that arts subjects are inevitably and, indeed, appropriately among the least vocational of all subjects. I hope that I do not appear to be hostile to the arts subjects; I merely point out that they are diminishing in the universities and expanding in the non-university sector which was intended to specialise in vocational, professional and industrially-based courses.
I am aware that the National Advisory Body is now attempting to achieve some rationalisation of resources and courses in the non-university sector. It has identified some of the questions that it will be considering but I have seen no reference to the question which was indicted by the noble Lord, Lord Annan, himself earlier as to whether we really need to maintain eight polytechnics in the London area. I should like to see this question considered because these colleges often have relatively small numbers of students in some departments which are expensive to maintain. Moreover, they often enjoy lavish funding in diverse areas ranging from well-staffed and well-equipped media resources units to student unions, with as many as six full-time, highly-politicised sabbatical officers paid from public funds. Is this a good use of resources, especially at a time when other sectors of higher education have been making considerable savings?
My Lords, I turn briefly from rationalisation of resources to academic standards. I must emphasise that the issue I am now going to raise is not intended to cast a slur on the polytechnic sector as a whole. But I am so concerned about the reputation of polytechnics that I do not wish to see them devalued. I will cite one specific example of which I have direct knowledge because it raises wider issues which have implications beyond that particular situation. I refer to the polytechnic of North London, where I was head of the Department of Sociology until 1977. That college suffered as much as, or more than, many others in the times of disruption in the late 1960s and early 1970s. I would not refer to that now if those were things of the past. The tragedy is that they continue—although only rarely is the press made aware of them because the college authorities wish to improve the college's image.
Only last year there was a major occupation which closed a library and disrupted both teaching and examinations. Earlier this academic year, many students were prevented from attending an academic lecture by a noisy and most unpleasant demonstration. But, perhaps most worryingly, certain academic practices are condoned which many outside that college believe are unacceptable. I refer, for instance, to the practice of circulating information about

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examination questions on all the final honours degree papers in sociology three months in advance of those exams. Although this information is ostensibly in the form of revision themes, in recent practice in almost every case there has been a direct correspondence between the 12 themes and the 12 examination questions on every paper; and the wording may be virtually identical. I will, if I may, give two examples which would perhaps be entertaining if the matter were not so serious. Revision theme: "Marx and Psychology". Examination question: "Does Marx have a psychological theory?" Revision theme: "Medicine and social control". Examination question: "In what ways can medicine be said to function as an instrument of social control?"
My Lords, I have gone into this detail because it raises points of principle and questions of policy. The principle is that of comparability of academic standards. How many students elsewhere, agonising over revision for genuinely unseen examination papers for honours degree, would love to have some such explicit guidance?—and to be able to reduce the amount of revision accordingly! I know Open University students who have to revise with no such guidelines, who have been furious when they have heard of the system operating at that polytechnic. They feel that they have to work much harder and do not see why the polytechnic students' degree should be seen to be of equal value to theirs.
Moreover, a particularly worrying development occurred very recently. The Council for National Academic Awards, which is the degree-awarding body charged by Royal Charter to award degrees comparable in standards to those of universities, recommended that this practice of pre-circulating themes for revision should stop. In response, a busload of students went to the offices of the CNAA and demonstrated noisily outside, insisting on an interview with the chief officer. At the end of that interveiw, he immediately issued a letter conceding the students' demands and promising to recommend that the circulation of themes should continue. This letter was carried back in triumph to the polytechnic's director and the students have since been boasting of the effectiveness of their so-called direct action. I cannot help being worried about academic standards when those charged with the responsibility for maintaining them appear to be swayed by student action of this kind. And I am not alone in my concern about the CNAA. Others such as Professor Julian Gould have expressed similar anxieties.
My Lords, in conclusion, I emphasise that I have given examples of the continuing problems at the Polytechnic of North London because they illustrate two points. First, that as a nation we must be sure that none of our institutions of higher education gives students academic short shrift or abuse the precious resources entrusted to their charge, and that while academic freedom is protected there is sufficient accountability to see that it is not abused. Secondly, precisely because I believe in the value of the contribution which the polytechnics can make to higher education, I should like to see them developing in ways which are true to their original remit. As a nation, we need the highest possible standards of education in vocational and technical subjects.
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The tragedy of a situation such as that which I have described at the Polytechnic of North London (but which is not unique to that college) is that it may scar the reputation of the polytechnics and devalue the qualifications of the students who study there. The great majority of those students are conscientious and hard-working. Many of them have come into higher education later in life, sometimes at considerable personal cost. We owe it to them to make sure that they receive the best possible education.
I therefore hope sincerely that the polytechnics will develop and will flourish in ways which will fulfil their original brief in expanding educational opportunities for full-time and part-time students, particularly in vocational and technical subjects, for in so doing they can offer a service of inestimable value both to their students and to the nation.
8.10 p.m.
Lord Rochester: My Lords, I speak as chairman of the council of a university, and for 10 years until recently I was chairman of the governors of a college of higher education. It is easy enough to agree that there is the need for change in higher education. The difficulty is that views as to what changes there should be differ sharply, depending on the interests of those who express them.
Your Lordships' Select Committee on Science and Technology has recently done me the honour of inviting me to join the sub-committee set up on education and training, having regard to the emergence of new technologies. From the relatively little expert evidence we have so far been able to hear, it is already plain that, depending on the identity of the person or body giving the evidence, there are widely varying ideas as to the changes in educational structure and curriculum, and as to the other changes which should be made to deal with that aspect alone of the overall problem.
I once bore responsibility in a large industrial undertaking for training people in the management of change. There are two things I learned from that experience which I should like to mention now. First, if the aim is to see that change actually becomes effective rather than merely being talked about, it is desirable for objectives to be formulated that are clearly defined, understood and, so far as possible, accepted by those required to implement them. Secondly, if complex problems involving interfaces between two or more groups are to be solved, it is best to see that representatives of all the groups having a stake in the outcome confront it together wherever possible, or at least have parity of access to the decision-making body. I suggest that these two points have clear relevance to the subject of this debate.
The substantial and, in my view, largely irreversible restructuring of universities that is now taking place is not the result of a considered national discussion. Surely what is now needed is a thorough examination of higher education as a whole in which the interests of both the university and the local authority sectors are represented. It may be said that the introduction of such a review is a recipe for delay and that the pace at which the country must adapt to change is such that more immediate action is needed; but I do not believe

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that those two desiderata are contradictory. For example, it may well be that the greater emphasis now being placed on science and technology should continue, although it has to be recognised that this necessitates a shift in a more expensive direction and to bring it about when resources overall are falling sharply is very difficult. That may indeed be an argument for some diversity of educational function, although it should be balanced by what is in my view a key criterion for short-term change: that such change should be capable of being integrated with the conclusions of the more considered review which I have advocated.
In a recent speech at the University of Warwick, the Prime Minister is reported to have said that part of the role of Government in trying to achieve progress in a society of which we are all a part was to provide leadership in attitudes to change, and that she constantly found herself trying to force the pace of change just a little bit faster. I understand and respect what she was then saying, but if we are to overcome the obstacles of fear and habit that stand in the way of acceptance of change, then, in my experience, we must also make sure that, by moving too hastily, we do not fall flat on our faces.
In this very limited contribution to the discussion, I have sought to avoid the temptation to engage in any special pleading; but there is one exception to that approach which I should like to make. Having once worked in the chemical industry, I have more cause than most to encourage the scientific disciplines but, as the proud standard-bearer, for the moment, of the institution of which Lord Lindsay was the first head, I fervently hope that the humanities will not suffer unduly in that process. On that point at least, I look for support from the noble and learned Lord the Lord Chancellor when he comes to reply to the debate. An experience of higher education which leads to comprehension and communication between the scientist and the non-scientist should surely be one of our most relevant aims for the 1990s.
It is almost exactly seven years ago that I had the privilege of introducing a debate in this House, to which I remember the noble Lord, Lord Annan, making a distinguished contribution. It was on a motion calling attention to the urgent need for agreed action aimed at increasing the esteem in which industry was held in society, particularly among students. I suggest that such an aim has equal application to the subject of this debate. In other words, the fate of higher education, the various elements and even the individual institutions that comprise it depends in the last resort on the public support that they earn. And that, my Lords, is just as it should be.
8.18 p.m.
Baroness Lockwood: My Lords, I start from the premise, as have a number of your Lordships today, that this is not the time to cut back the numbers in higher education. I hope that when the revised student projections are available around Easter time, they will more realistically reflect both the demand across the whole spectrum of the community and the need for higher education. As the noble Lord, Lord Alport,
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said, the country cannot afford a reduction in the supply of highly educated people. Indeed, the future of industry will be seen in terms of the intellectual skills of our people rather than in the broad industrial complexes that we have had in the past.
There are already skill shortages showing. On the 21st February this year, the Financial Times published an article under the title of "The jobs they cannot fill". It quoted one company (Plessey) who said that they could use another 700 graduates in electronics. It went on to say that they are beginning to seek recruits in Australia, New Zealand. Belgium and the Netherlands, simply because we cannot supply their needs in this country. It is fairly clear that a number of people share this view. Indeed, it was recognised at a recent meeting of the National Economic Development Council, when a memorandum from the Secretary of State for Trade and Industry pointed out that Japan produces as many engineering graduates as we do graduates of all kinds. All right, my Lords, there may be differences in the definition of a graduate, but the contrast is too great for us to ignore.
At this same meeting, the Secretary of State for Education stated in his paper that the situation calls for judgments about the present and future needs of the market, and about the nature and level of student output to meet that demand. He went on to say that, while accepting the case against detailed or comprehensive planning of student supply, the situation appeared to require the Government to give a broad steer. I hope that that steer will not only be towards some change of emphasis in favour of science and technology, but also towards a broader base for higher education altogether and more realistic financial support for our educational institutions. The fall in numbers of the 18 to 20 year-olds gives us an opportunity to assess real demand and to broaden the access to higher education.
I want to refer to two areas of access to higher education and then, very briefly, to refer to organisation and finance. Whatever else may be said about the projections for the 1990s, I should have thought it fairly evident that the steady growth in the participation rate of girls and women will continue. My noble friend Lady David referred to this and pointed out that, in the 11 years from 1970–71 to 1982–83, there had been almost a 1 per cent. increase per annum in the proportion of women in our undergraduate population. The same rate of progress has been made among post-graduate students, too, where we now see that women represent 36.1 per cent. of all postgraduate students.
So, at this rate it is clear that we shall he reaching parity at some time in the early '90s and the only harrier to that parity. I suggest, is if the Government's steer is too far in the direction of science and technology, because it is here where girls will miss out. It is the subjects that they choose rather than the participation rate which is now the problem. For example, women still represent 68 per cent. of undergraduates in education and languages, but only 7 per cent. in engineering and technology. So unless we take positive steps to give girls a steer towards science and technology, we may find that there is some delay in reaching parity.
Unlike the noble Lord, Lord Annan, to whom we are deeply indebted for introducing this debate, I do

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not take the view that courses should be strictly vocational. I would not want us to move the balance too heavily away from the arts and humanities, because they will still be a very essential attribute to our society. What I should like to see much more is some attempt to bridge the two sides of education. In this respect, I must say that I am very sorry that two years ago the UGC did not see fit to support the conversion courses, which the EOC and a number of universities were pressing on the committee at that time. But I am glad to note that a number of polytechnics are now proceeding with similar conversion courses; in other words, taking girls with A-levels in arts subjects and helping them through the first year in science and technology.
There is a very pressing need for a better balance in subjects and careers for girls, and, again, I hope that the joint campaign of the EOC and the Engineering Council, under the title "Wives or Women into Science and Engineering", during the current year will be a pointer to schools, universities, polytechnics and other institutions, as well as to girls and parents themselves, and will help them to see that it just does not make sense to concentrate 50 per cent. of our intellectual resources into a few subjects and a few career outlets.
But as well as the conversion path, there is also another route to bridge this split in our culture. In the recent report of the HMIs on 13 polytechnic engineering departments, I was very sorry to read that their experience had been that mixed discipline courses—that is, a combination of engineering and business studies—were less sought after by students and were liable to encounter serious problems in industrial placement. I must say that this has not been the experience of Bradford University with which I have some association.
There the university has what it calls an industrial technology course, which is a sandwich course. It combines a 60 per cent. engineering content with a 40 per cent. managerial content and it accepts students with A-levels in any subjects. The experience of Bradford has been that there is a demand for this course from both male and female, and the female participation in the course is encouraging. I visited one of the women students on placement only last Friday, so I know that it is attracting women. So there is no problem in getting the students, there is no problem in placing the students and the students have had a good record of finding jobs in a wide range of companies and industries. So there is more scope in this direction than perhaps the universities have seen in the past.
I suspect that one difference between the Bradford experience and the experience of the inspectorate in the polys is that the engineering departments of the polys are probably under-funded. The other important difference is that the Bradford course is a planned and integrated course carried out in one department, although, of course, it draws on the expertise of other departments. I feel that this is an important development, because, as well as our need to encourage more engineers to move into top managememt in industry, there is also the other need to help and encourage managers, who may have been trained in the arts and humanities, to understand just
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what the new technologies can do for industry and, certainly, to understand about the computer sciences.
That is my first point. My second point relates to continuing education. I welcome wholeheartedly the report of the UGC working party on continuing education. Its recommendations are worthy of very serious study, in particular the recommendation that the universities should regard continuing education as a central part of their role. The recommendations take account of the need of the universities and the public sector institutions to develop a modular and a credit system. Another recommendation is that parity in funding between part-time and full-time courses should be ensured.
These recommendations, important in many ways, are of particular importance to women. As the noble Baroness, Lady Cox, demonstrated, they would help women with family commitments to combine those commitments with study at a university or an institute of higher education. Part-time studies are easier to combine with domestic responsibilities. This point applies also to the modular system, for women sometimes have to take a break from education or work because of their role as the producers of the next generation.
My first regret about the report is that it has not completely grasped the nettle of educational support for part-time students. We need to look at this question very carefully indeed. My second regret (here I must declare another interest as President of Birkbeck College) is that the report makes no reference to Birkbeck College, which, apart from the Open University, is the major institution catering for part-time education at both first degree and postgraduate level. It successfully combines that provision with the important research function which is part of a university college. Birkbeck should be used as a prototype; three or four similar colleges ought to be based in major centres of population in this country. That would be another important contribution to the development of part-time and continuing education.
Finally, and very briefly, perhaps I may comment on the organisation and funding of our system. I say "very briefly" because I agree to a very large extent with the points which have been made by my noble friend Lord Glenamara. I agree with his analysis of the financial basis of the polytechnics. I agree also with my noble friend that there should be greater parity between the two sides of the binary system, particularly in the case of the technically based polytechnics and universities. The engineering departments of the polytechnics should be as well funded and supported as those of the universities. In geographically adjacent areas there is great scope for combining the services and facilities of the two sides of the system.
To my noble friend's six points I would add one other: that if there is to be the development, as we hope, of science parks and the development of Cad-Cam centres in our institutions of higher education, there needs to be the involvement of both the university and the polytechnic in a particular area so that they can both contribute to and use the system. If this is to come about, it may mean that there will have to be some change in the tight funding of the polytechnics. They do not enjoy the same freedom as the universities over, for example, selling their

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expertise to industry and husbanding the profits from the sale of that expertise for investment in new equipment. That area needs to be looked at very carefully.
As my noble friend said, I, too, am not suggesting that parity should be brought about at the expense of the universities. In recent years both the universities and the polytechnics have suffered from the uncertainty which has been caused by the financial constraints. I believe that they need a few years in which to be able to follow a steady course, secure in the knowledge that their funding is assured.
8.37 p.m.
Lord Thomas of Swynnerton: My Lords, in this long, far-reaching, interesting and often enjoyable debate, your Lordships have been addressed by many chancellors of universities, retired vice-chancellors, retired principals of great colleges and also by a retired Prime Minister. I speak from what is superficially a less important position; namely, as a retired admission tutor at a provincial university specialising in the humanities, a subject which has not gained universal support from your Lordships tonight as being of importance—a university which I cannot even be certain would have been selected by the noble Lord, Lord Annan, or the noble Lord, Lord Todd, as a centre of excellence whose future is entirely assured, although the university is of the greatest distinction. That is a matter to which I shall return in a moment.
Over the years, most of us have been convinced of the wisdom of the principles underlying the recommendations of the noble Lord, Lord Robbins. Those of us who listened to the speeches of the noble Lord, Lord Fulton, and the noble Lord, Lord Crowther-Hunt, will, I am sure, have been convinced that there is a strong argument for a larger proportion of those of university age being able, if we are to compete with our neighbours and rivals, to attend places of higher education.
I am also sure that most of those who heard the speech of the noble Lord, Lord Annan, will have been convinced by his suggestion that we are in some degree of trouble because of the way in which the changes were put into effect, following the Robbins Report—if only for financial reasons, as suggested by the noble Lord, Lord Todd, the noble Lord, Lord Parry, and other speakers. I find it more difficult to follow the noble Lord, Lord Annan, and the noble Lord, Lord Todd, in their statement that it is likely to be easy for us to make a distinction between, in the university context, a centre of excellence and, although neither of those speakers gave an alternative term, a centre of, let us say, modest expectation.
That would not be an easy subject to decide, of course, but anyone who has visited a university which has declined because of the withdrawal of Government support at some stage would know that a very musty flavour takes over. Anyone who has recently visited the once magnificent university of McGill in Montreal will know, for example, that the political prejudice which has now concentrated resources, in the province of Quebec, in the French-speaking Montreal Department of the University of Quebec, has led to the quite irreversible diminution of
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drive, enterprise and quality in what was once a great university.
There is another question which immediately comes to mind, which is: how do you select the students who would go to the centres of excellence or centres of modest expectation? This brings me to a point which I believe is the weakest one in the whole educational sector; namely, the link between the university and the school. As your Lordships will be aware, the normal method of admission to the university is by filling in the now famous UCCA form; the form sent out by the Universities Central Council of Admissions. How melancholy it is to see in the autumn these forms fluttering over an admission tutor's desk. "Melancholy" is the right word because these are wholly inadequate documents. They are penned in painfully neat handwriting by the applicants, but as far as giving an impression of why he or she should go to university or wants to go to university, they are utterly inadequate. The only section of the form which has any life whatsoever is the report by the headmaster or headmistress, and this is often, naturally, a reflection on past achievement in the school concerned rather than any kind of indication that the would-be pupil would be able to grasp the qualities of judgment which the noble Lord, Lord Grimond, regarded as an important achievement at university; or indeed, the capacity for scholarship which the noble Lord, Lord Flowers, mentioned; or, perhaps, to use a word which I have heard the noble Lord, Lord Annan, use on another occasion (something for which the university should be) even contemplation. These documents are indeed a poor service to the pupil, to the university, to the school and, indeed, to the nation. This is one suggestion which I hope the Secretary of State for Education might look at in the future.
Noble Lords will be saying, of course, "There are the famous 'A' level exams". But your Lordships will know perfect1), well that these, too, are reflections on past achievements rather than any indication of any promise in the future. What we need. in truth, is some degree of examination devised by the university or by the centre of higher education; but, regrettably, even Oxford and Cambridge at the present time—the only survivors of the old system—are, I understand, having to withdraw from that tested way of satisfying the natural desires of universities concerned to rely on something a little more than using this odious form.
I think it would be difficult to imagine that we could go back to university entrance by examination, but I see no reason why we should not experiment with an obligation by a student to perform a special examination attached to his Advanced Level papers at his schools, the papers or paper concerned being available to the university's admission tutors.
It is not simply the fact that the method of entry is wrong. What is evident is—as the right reverend Prelate the Bishop of Coventry suggested was being looked at in his diocese—that the whole link between school and university is one of lamentable ignorance. The best pupils in the best schools, of course, get to know where the best courses at the best universities are. But that is not the point. The vast majority of school children are in a state of great darkness as to what courses they should attend at which universities,

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and this needs to be examined, I think, as a matter of great importance.
While I am speaking about this, I should mention a point to which reference was made by the noble Lord, Lord Grimond, and perhaps by one other noble Lord whose name I do not remember: namely, that the excessive specialisation which characterises sixth forms in schools is beginning to be questioned by university vice-chancellors, and I think most of us would say, "Not an instant too soon." If you are in touch with pupils who are in their sixth forms, it often seems that they are preparing for their proposed university course with an intensity and specialisation which in any other country would characterise work for an advanced degree rather than an ordinary university degree. The level of specialisation which schools insist upon is quite preposterous.
I have, in conclusion, four other suggestions which I believe should be examined, each one of which might be the object of one of those inquiries which many noble Lords have presided over with such distinction in the past. The first is the question of residence. This has not been touched upon much, I think, during the course of this debate, but many of our neighbours on the Continent of Europe do not make such expensive provision for students to live in the circumstances which they do in this country. It may be that there are special reasons why English university students should wish to live away from home, but this does not seem to me necessarily the best use of income derived from revenue.
Secondly, I think certainly in art subjects there could be a much greater use of technology, and particularly of television. It always seems odd that there should be so many lecturers and professors throughout the nation each lecturing on the same subject with more or less the same level of competence, whereas it might well be possible for the most distinguished of our academic staff to lecture in such a way that their products would be available nationally as well as in the locality where they live.
Thirdly, I come to the question of overseas students. The moral case is very strong for encouraging overseas students to come to this country, but the economic cost is, of course, out of control. How many students is it suggested should be encouraged to come? If the doors were completely open it would not be just the sort of numbers who were here at the same time as the Vice-Chancellor of the University of Peking—to whom the noble Lord, Lord Alport, spoke in the 1960s. In his day there were perhaps eight or ten thousand students from abroad. Now, if the doors were open, the numbers would be something like 100,000 at least. My suggestion to deal with this problem—which is obviously one of great importance and of interest to many noble Lords—is this: we should try to see whether some of the richer countries who are so keen to send their students here, could not contribute, perhaps with voluntary contributions, to the provision of a national scholarship fund in this country. It might at least try to ensure that something like the numbers of overseas students who were able to come here in the past—before 1939, say—are able to do so in the future, if only for the benefit of encouraging cultural diversity in this country.
My final point is one which was also mentioned by the noble Lord, Lord Alport. He pointed out that
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because of the foundation of a large number of universities, more or less at the same time in the early 1960s, there was a great immobilisation of university staff places. The young and promising output of these universities which in the past always were able to find a university place within a year or two of having left university, now find it very difficult to do so. At the same time there are a great many people who found a place in the 1960s in, say, the University of Lancaster much to their surprise, but would have preferred to spend part of their lives, at least, in the South. It should be possible to devise some system, a kind of clearing house, whereby some of these problems could be satisfactorily resolved. This nation has a great record of creating offices in which officials of tact and understanding manage this sort of problem. I should not have thought it impossible for the UGC, even given the lessened prestige it may have, as indicated by the noble Lord, Lord Crowther-Hunt, to devise a plan of this sort.
8.52 p.m.
Lord Bowden: My Lords, the debate so far has been extremely interesting to me, and I should like to add my thanks to the noble Lord, Lord Annan, for introducing it. If I may I should also like, without being thought impertinent, to add my congratulations to the noble Lord, Lord Wilson of Rievaulx, on his maiden speech. I never thought in my wildest dreams that it would fall upon me to do such a thing as that.
When I decided to speak in this debate I thought that the best thing I could do, since I knew I would be called upon fairly late, would be to prepare a brief based on the peculiar problems of the universities and institutions in the district from which I come. There are several of them and I wrote to the directors, principals, heads or vice-chancellors of all of them and went to see most of them. I came away with an enormous amount of information which would form the basis of a very lengthy speech, which I am afraid time will not permit me to deliver. However, there are a few observations which I feel I must make. I should like to take first of all the problems which afflict the University of Salford because, as your Lordships will remember, its grant was more dramatically cut in the last round of UGC cuts than any other institution of higher learning and lost a very large part of its total funds. It so happened that the vice-chancellor who took office at about that time had been the chairman of the Think-Tank in the Cabinet Office. He therefore came to Salford thinking that he could either crawl into a corner and die, or do something very dramatic. He did something dramatic. An organisation was set up called CAMPUS—the Campaign for the Preservation of the University of Salford. They are now trying, very deliberately, to take technology into local industry and also to the local schools. For example, they have acquired a double-decker bus on which they have installed a large number of computers, and they go round to schools giving them a few days opportunity to study a modern computing system; thereby at the same time not only educating the children, but persuading them of the value of the University of Salford. That bus came down to London and was parked outside No. 10 Downing Street. It showed its wares to the Prime Minister herself and to many other officials, who were most impressed by the

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initiative, enterprise and courage which the university was showing in extremely difficult circumstances. That was the first of these institutions.
The second is the local technical college close by. It has problems because it is short of funds. It says the problem is, "We do not know what local industries we should be educating our people for. We have always in the past tried to educate people for the basic industries which are now so savagely, dramatically and appallingly in decline in the North-West". So it has its particular problems.
I now come to the University of Manchester. It has a new and very vital vice-chancellor. We discussed his problems. Of course, he is short of funds. He is fearful that if the Greater Manchester Authority is abolished he will lose its support, which helps pay for the remarkable museum, which is much the best in the country and probably the best in the world—the Museum of Technology—which is being funded jointly by Manchester, by the university and also by the art gallery which is also being strongly subsidised. He is afraid that he may lose that particular source of funds.
He made one point of great importance. Over the past decade or so, every year, and particularly for the past four or five years, the necessary standard a student has to attain before being admitted has increased. There is a points system in which a student is allocated so many points for an A-level, a distinction, and so on, all the way down. The number of points required for a minimum standard has gone up consistently. This must mean, of course, that students who would have got in very easily a few years ago are now being deprived of an opportunity of a university education.
He also made the very real point that the standard of entry for the medical profession is now so extremely high that I, at least, am fearful that many of the students who enter that school will be of a type much better qualified to become medical research workers than to become general practitioners. The qualities which general practitioners need—kindness, understanding and humanity—are only coincidentally correlated with the abilities which are tested in the A-level examinations. So much for the University of Manchester. It is in very good heart. It has an extraordinarily good vice-chancellor, and I am sure that all will be well with it.
I now come to the Manchester Polytechnic. There is a very remarkable figure which I must give to your Lordships. In considering the universities of this country in order of size, obviously London is the biggest; Oxford and Cambridge come next. I shall not discuss the Open University, which may be the biggest of them all, but argue on the assumption of what I call the normal universities. Owens is the next biggest, and is the biggest of all the provincial universities. Then comes the biggest academic institution in terms of the number of degree students: Manchester Polytechnic. It is bigger than any other university in this country with the exception of Oxford, Cambridge, London and Manchester. That is very remarkable because it suffers from all the problems which have been described so lucidly by some of the speakers who have already addressed your Lordships this evening. It also suffers from the very real embarrassment that it is not master in its own house. It is subjected to detailed control in
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all sort of unfortunate ways by the city council.
There once was a time when my own institution was directly under the City of Manchester and, about the year before I went there, the City council decided just to save money by stopping all research for a year. Fortunately there were the May elections. The particular party concerned lost and the newcomers restored the cuts, but it does give you some idea of the potential for harm that exists if an academic institution is subjected to direct, detailed and constant supervision, intervention and control by a not particularly well informed local government body and by members of committees not particularly well informed about the affairs of the institution concerned. For example, there are stories of an academic discussion with the council of a polytechnic at which the local government representatives were worsted but simply said, "We will put this right in the town hall". That is no way to run an academic institution.
I feel that one of the problems we have been discussing is this concept of what is really meant by research, and I think I must explain at least one point which may be a little obscure after the noble Lord, Lord Todd, described the details of the most advanced type of research which can be done in an academic institution. Research in science is in effect what is meant by doing science: you cannot learn science merely by sitting down and absorbing a body of facts; you have to experience the scientific method for yourself, and that is what all academic institutions have to provide for if they are to teach science in any meaningful sense.
This is even more true of the teaching of engineering. When I was myself engaged in the teaching of engineering, I used to say that no man can count himself a professional engineer unless he has been frightened out of his wits at least twice. That is true. You have to be prepared, if you are to be a professional engineer, to accept the obligations of responsible decisions that you have made yourself and stand by the consequences even if they kill you. That is what I mean by becoming a professional engineer. The noble and learned Lord on the Woolsack will understand very well what I mean when I say it is not unlike the experience that a man goes through after taking a law degree, when he is subjected to the immediate control of his pupil master and ultimately learns to become a member of the Bar. He has to have had the personal experience of something other than the facts of the case: he has to experience the nature of the profession and he can only do that by the kind of work which is traditioally done in academic institutions if they are engaged in teaching engineering and science in the only ways they can be taught.
Now I should like, if I may, to raise one awful point, which is this: that I read a newspaper article to the effect that the grant to be given to the Medical Research Council is to be dramatically cut, as a result of which three major groups of people working in the universities—I think Cambridge was one and I have forgotten which the others were—are to lose their grants and effectively stop work. Of course, this is serious enough because it deprives the community of the opportunity and the expectation of the results for which these people are looking. But it is at least as serious that it loses the opportunity of exposing young men, at the most creative period of their lives, to the

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experience of doing pure research under the supervision of a very very competent pupil master. I do hope that I have been misinformed and that the noble Lord, the Lord Chancellor, can reassure us.
I should like to end by saying that these problems of ours are not by any means unique to this country. some long time ago, I went out to Moscow to discuss the problems of university education with Mr Rudnev, who was then the Minister concerned and responsible for it. We talked about, for example, the education of engineers and he explained to me that nearly all surveyors who go out and measure up the roads, the maps and things, are women—and there are a large number of women engineers too. but we got on to the subject of the organistion of higher education and he said this to me: "We have in Russia a most elaborate system for assessing the need for different types of scholar, for arranging courses to suit them and arranging appropriate jobs for them when they emerge six, seven or eight years later. We always get the answer wrong. You in England, on the other hand, have no system at all: you let people go to read what they want to do and when they come out you hope you will be able to find them a job. You get the answer wrong, too. What I should like to discuss with you is which of us is worse." We had a very interesting discussion on this and in the end we concluded it was probable that their system was the worst for the reason that it gets bogged down in a tremendously complicated bureaucratic machine and it is very, very slow indeed to make any changes in direction which may be necessary—and particularly necessary these days as technology changes so quickly. They were very slow indeed to develop electronics in Russia for the very good reason that they did not have it in the system with which they had started and they could not introduce it without an enormous bureaucratic upheaval. It was his view, in the end, that their system was worse than ours because it had an extra load of bureaucracy and it seemed to provide explicitly for the production of people whom they thought they were going to want but whom did not necessarily need when they got them.
We then got on to the question of what I regard is much the best way of introducing students to other communities, and I discussed with him the idea of the migratory scholar, who was of course a feature of mediaeval Europe. He is still a most important person, through whom cultures can be transferred. I told him that my institution in Manchester had got students from 65 countries in it at that moment and I said that we did nothing whatever to attract them: they just came of their own accord. Mr. Rudnev went on to say that they had an institution which contained representatives of 66 countries, but they got them by going all over the world and offering people grants and fellowships to come. He was greatly impressed by the fact that our people came of their own volition and were so anxious to experience our own society for themselves.
He then introduced me to a colleague who was sitting with him, who, he said, was the director of the University of Tiflis in Georgia. This gentleman said to me, "I do believe that you are right in saying that it is important that scholars should be encouraged to wander the earth." He said, "We have been sending scholars abroad to study ever since we sent them to
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Athens to study in the academy with Plato and Aristotle". That is an academic record, if true, the like of which the world will never see.
But I beg your Lordships to believe that our problems are not unique; that all countries have them; that no country knows how to solve them; that we are doing not so badly; and that, if only we can cope with some of the problems which I have enunciated about the governance of some of the polytechnics, we shall, I think, be doing really quite well.
9.8 p.m.
Lord Drumalbyn: My Lords, I venture to intervene in a debate in which so many have spoken so brilliantly of educational issues on a national scale. My purpose is a narrow one: to refer to a small section, to which I would apply the description, "vulnerable" used by the noble Lord, Lord Flowers, in his wonderful speech. The University Grants Committee has the unenviable job of cutting out dead wood from time to time, and I would not dissent from the suggestion of the noble Lord, Lord Annan, that the committee should tell an institution in question that its grant will be put at risk unless some cut specified by the committee is imposed. I hope that I have understood the noble Lord correctly.
But should not the University Grants Committee act in this way only where the branch (if I may change the metaphor) is indubitably rotten, or at least rotting, or where the establishment is clearly no longer needed? I am sure that in all cases the University Grants Committee will do all that it can to avoid the sheer misery of defeat that closure entails for those concerned.
I am speaking tonight because the issue that I wish to raise is imminent. Next week, I understand, the UGC will meet and on its agenda will be the fate of a relatively small department of a thriving university in Edinburgh: the Heriot-Watt. The department began over 200 years ago as the Royal Public Dispensary, and it is said to have been the first pharmacy school in the Kingdom. Ever since, it has moved steadily forward; providing diplomas in pharmacy, first on its own, and then, from 1935, under the wing of the Heriot-Watt. Its diploma course became a four-year honours degree course when the Heriot-Watt became a university in 1966. It serves an area in the East of Scotland from Tayside region in the North to the Lothians and the Borders in the South-East.
In Scotland, there are three major teaching hospital groups—Edinburgh, Glasgow, and Aberdeen—and three pharmacy schools to match them. There are also three corresponding recruiting areas for pharmacy students. Though the Heriot-Watt pharmacy department has been the smallest, with an average intake, until recently, of 48 first degree students, its academic record has been as good as any. On average, 85 per cent. of students have achieved first-class or second-class degrees, and no student, the department claims, has failed to obtain employment on graduation. Indeed, most of the present fourth-year students already have jobs fixed up. Some nine out of 10 students take up retail or hospital pharmacy; the remaining 10 per cent. or so go into industry. More and more of the pharmacy staff, I am told, are becoming involved in research.

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Not surprisingly, the pharmacy department in Edinburgh occupies somewhat antiquated accomodation, but the UGC has generously agreed that the whole university should move out to Riccarton, where it will have its own campus. The move should be complete by 1990—a splendid prospect for the future! The opportunity has been taken for an integrated new building at Riccarton, housing both pharmacy and the biological sciences. This is designed to promote collaboration between pharmacists, biochemists and biologists. It is a feature of the Riccarton plan that was very much welcomed by the UGC main committee when it visited the university in June 1982. Another advantage is that the plan will redress the balance between male and female students—in the current jargon, "to improve the social mix"—and I should perhaps explain that a high proportion of pharmacy students are female, whereas a similar proportion of biochemists are male.
This general plan is called into question by the sentence being imposed on the pharmacy department. Seven years ago, the then chairman of the UGC, Sir Frederick Dainton, wrote to all universities in the United Kingdom drawing attention to the view expressed by the Advisory Panel on Pharmacy that expansion in pharmacy teaching was no longer needed. Heriot-Watt heeded this advice and deliberately restrained its intake, although it seems that not all pharmacy schools did so. Consequently, the yearly intake at Heriot-Watt is now somewhat reduced.
Four years later, the University Grants Committee initiated a study of pharmacy schools to be carried out by its Panel on Studies Allied to Medicine. The panel recommended that the minimum annual intake of pharmacy schools should be 60, on the grounds that anything less would not suffice to ensure enough teaching staff to cover the range of chemical and biological disciplines required and to cope with new developments. It put the requisite number of teaching staff at 18. This figure, I am told, was not discussed with the university when the panel visited it. Had it been, no doubt the principal and the head of the pharmacy school would have explained that the department has access to other staff in the university in addition to the staff of the pharmacy department. If the UGC is minded to insist on a minimum of 18 departmental staff, surely, in all fairness, it should allow the university to increase its staff accordingly and to raise the annual intake of students to 60.
The Advisory Council of the Pharmaceutical Society of Great Britain, to the UGC, notes that while a minimum intake of 60 had some support in council,
"the Council does not rule out the possibility in special circumstances of a different intake level being appropriate in a particular institution".
I would hope that all your Lordships would agree that exceptions have to be admitted to all rules if fairness and efficiency are to be maintained. I venture to commend this broad-minded view to the UGC in considering its decision on the Heriot-Watt case next week. Would it really be sensible to phase out the pharmacy school from the beginning of the 1984–85 session on the grounds that the university is making the most economical and effective use of its staff resources and sees no object in increasing them?
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Would it, I wonder, be wise to ignore the strong support for the continuance of the Heriot-Watt pharmacy school from, for example, the office in Scotland of the British Medical Association, the Pharmaceutical Society and its Scottish branch, the health boards of the Lothians, Tayside, Forth Valley and Ayrshire and Arran Regions, the department of general practice of the University of Edinburgh, the University Teaching Hospital Department and the Western General Hospital of Edinburgh? That represents a substantial spread of support indicating the need that is felt for this institution.
I hope, too, that in reaching its decision, the UGC will refer to the letter that Mr. Robin Duthie, chairman of the Scottish Development Agency, wrote to the UGC chairman expressing acute concern at the proposed closure and enclosing a report on the pharmacy department from Mr. Chalres Fairley, director of the health care and biotechnology division. Mr. Duthie says that the agency believes that,
"The Department of Pharmacy plays a substantial role in underpinning the pharmaceutical industry and that, with appropriate encouragement from the UGC, this could be considerably increased".
Certainly, the research activities of the pharmacy department have increased considerably in the last year or so. Indeed, the Heriot-Watt, as a whole, exercises a positive influence in bringing industry to, and keeping industry going, in the east of Scotland. These are grave considerations that have to be borne in mind.
Perhaps the most fitting tribute to the pharmacy department comes from Boots the Chemists. It says:
"The quality of students produced has always been second to none. They are invariably well motivated and trained to meet all their professional responsibilities".
Lastly, will the UGC look carefully into the question of where the present intake of the pharmacy school will go if the UGC decides to require it to be closed down? I am told that the Strathclyde and Aberdeen schools may not be able to accommodate them. Perhaps the UGC will say, "Well, there are plenty of schools in England, aren't there"? But would English pharmacy schools take these students? I am told that they would insist upon applicants having A-levels. Where in Scotland would one get an A-level? The Scottish education and examination systems are not by any means the same as those in England. So unless the UGC can arrange for the English schools to accept Scottish leaving certificates in this case, that solution would he a complete non-starter.
Perhaps the UGC have not fully appreciated how closely the courses at Scottish universities are linked with the Scottish school system. A high proportion of university students live at home. It seems, therefore, that most of the students who would have gone to Heriot-Watt would be forced to choose another profession altogether. If so, would a shortage of graduate pharmacists develop in Scotland?
Those are the types of consideration that arise on the generalities that the House has been considering this afternoon. I thought that it would be some mitigation for me to bring them out of in a debate of this kind to show exactly how things work out on the ground. I hope that I have not judged the House incorrectly.
9.22 p.m.
Lord Tedder: My Lords, I crave your Lordships' indulgence. My train returns to Scotland leaving King's Cross at 10.15 and the noble Lord, Lord Hunter, has very kindly offered to swap places with me on the speaking list.
I approach this debate with more than usual trepidation. Seldom have your Lordships seen such a gathering of academic colour. I speak not as a chancellor or vice-chancellor, but as a lecturer who was in the first-year teaching laboratory yesterday afternoon, and who will be in a research laboratory first thing tomorrow morning if I catch my train.
When times are bad we have to face financial stringency. But I think everyone would agree that financial cuts, if necessary, must be made selectively. North Sea oil will see the country through until the end of the century, but thereafter we have nothing but the wits of the British people to live by. As the son of a former chief of the defence staff, of course I appreciate the importance of maintaining defence. As the brother of a consultant virologist, of course I realise the importance of maintaining our medical services. As the father of a social worker, of course I am aware of the needs of deprived children. However, I believe that, no matter how important, indeed how vital, these services may be, their further development must take second place to the development of teaching and research in science and engineering. Because unless we can compete in those fields we shall have no means to pay for our defence, medical care or social work. If we do not produce the engineers and scientists of the very highest calibre, the outlook for the United Kingdom will be bleak indeed.
I have the impression that many noble Lords do not realise how very substantial the cuts have already been. In St. Andrew's it meant an 18 per cent. cut in income over a three-year period, and of course many universities were hit very much harder. We were promised thereafter "level funding", but even if pay awards were restricted to the proposed 3 per cent.—which is well below the rest of the public sector—the universities are only being allowed 2.63 per cent. Because of incremental scales, even a complete pay freeze would increase the universities, salary bill by 1 per cent. In other words, so-called level funding in fact means further considerable cuts in the universities income.
I am very concerned that we are in danger of killing the goose which lays the golden egg by attempts to improve our university system at the present time. We have already had considerable variety in our tertiary education—and times when finance is tight are not the most opportune for innovation. Nevertheless, it has been my impression and experience that not only are undergraduate courses in chemistry continually being revised because of new knowledge, but that there is also a continuous reappraisal of teaching methods and educational techniques.
An essential feature of university education is that the university teacher is active in research. Here, I do not agree with my noble mentor, the noble Lord, Lord Todd. I do not believe it is possible to overestimate the importance of the research activity for a university lecturer in a science department, and I was glad that
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my noble friend Lord Bowden gave me support in this. A lecturer who is an active research worker can speak about his subject with an authority which someone who is not in research can never achieve.
There is much that I should like to say about the development of universities as centres of learning, but my main theme is so important that I do not wish to divert attention to detail. For the sake of the future of this country, I believe that it is essential that university activity in the fields of engineering and science is fully supported, even during the present financial stringency. Indeed, teaching and research in science and engineering must not only be maintained, but must be expanded if this country is ever to climb out of its present financial difficulties. Let us make sure that the future generations have a chance.
9.27 p.m.
Lord Irving of Dartford: My Lords, like other noble Lords, I should like to thank the noble Lord, Lord Annan, for giving us the opportunity to discuss this subject tonight. First, I want to say how sad it is that when we ought to be taking a dispassionate view of the future of higher and further education in this country, most of those concerned are convinced that this is a cost-cutting exercise in which it would be difficult to avoid taking a short-term view rather than a long-term view and where, instead of considering the nation's need or the students' need, we are more concerned with finance.
I am bound to say that the picture looks very different to those working in higher and further education, particularly to members of the Association of University Teachers and NALGO (and I am associated with both), than it does from the Government Front Bench. I want to convey a little of what the members of those organisations feel are saying about their position at the moment. The general secretary of the AUT writes:
"By the end of this year 11,500 jobs in the university system will have been lost. Over 4,000 highly qualified and expensively-trained teaching and academic support staff will have been forced to take early retirement."
She then says:
"Let there be no mistake"—
and these are very strong words, and strongly felt
"this country's highly praised and respected university system is near to breaking point."
The staff/student ratio has deteriorated sharply. Lecturers are demoralised, with no time to do research or to teach their students properly, and they have poor career prospects. Secretarial and technical support services have been reduced to skeletal level. Vital maintenance has been neglected; learned journals have been cancelled; and there is little money to buy new books. There are endless committees to cope with the cuts. As the AUT says:
"This is not a leaner and fitter system, it is one in which the quality of teaching and research has suffered grievously and where a national asset is being thoroughly squandered".
As for student numbers, the union says:
"25,000 well-qualified youngsters have been denied places in the universities since the UGC imposed cuts in student numbers in July 1981. The competition for places has increased to the point where selectors are having great problems relying on fine shades of difference between excellent grades".

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I think they regard it as particularly galling that at this very moment, when the Government are using an expenditure-led education policy based on restrictive cash limits as a justification for what the union regards as a lack of policy, the Prime Minister should be praising this country's universities. As she said the other day:
"Throughout the world British universities are renowned for their research and for their original work, and our prestige stands very high in every academic centre the world over".
It is clear that if the action of the Government over the last two years continues it could be a serious threat to the very standards which have been so characteristic of British universities. Despite the cost-cutting exercise the Government have not yet saved one penny, as I and others predicted in the last debate, because of provision for redundancies and compensation for staff which has equalled the savings they were hoping to make, and in this respect this policy has utterly failed.
We are invited to take part in a great debate. We certainly need a policy for higher education rather than the lurches we have had over the last two or three years. Can anything be more ludicrous than a university being fined for taking in too many students last year, and being urged to take in more this year?
On the one hand, the unit of resource is reduced by 15 per cent., and on the other the DES projection of a fall in student demand of 20 per cent. by 1995 means in essence what would be as much as a one-third cut in the recurrent grant. The projections are seriously challenged by the AUT in an excellent report that they produced recently. Taken together these amount to almost one-third reduction in the current grant. How can anyone seriously contemplate that as a sound planning basis? In an increasingly complex technological society are we seriously being asked to contemplate a 20 per cent. decrease in trained graduates? This is hardly the basis for industrial regeneration.
Any sensible look at the universities has been made more unrealistic by talk of private funding. This cannot be the answer, as the best teaching and research cannot take place in an atmosphere where teachers and staff have to run around looking for funds. Anyone who looks at that massive tome, Research in British Universities, Polytechnics and Colleges, in three volumes, published each year by the British Library, will know that a good deal of money comes into universities other than from Government sources. But this comes for the founding of chairs, for the establishment of projects and programmes, and is in no sense likely to be able to make a real contribution to the day-to-day running of our universities.
It is difficult under all these circumstances to enter into an exercise of looking at change in our universities without the feeling that one is merely contributing to the success of the cost-cutting operation for its own sake rather than improving the effectiveness of our higher education system. If it is to be a real debate we are entitled to point to the binary divide between local authority institutions and our universities. It would make much more sense to have a unified planning structure for all post-school education, so that the planning of our local authority further and higher education, and the universities could take account of
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what was happening in each sector.
The next thing to say is that almost any kind of change would have resource implications. Since the university system has been cut to the bone it would be quite impossible to make any significant changes without providing the extra financial resources for this to be done. A straightforward example of this has just come to the fore, as the vice-chancellor of the University of Kent at Canterbury has pointed out to me. The Engineering Council has asked for £200 million for extra training for students of engineering subjects. There is no doubt that such extra training would be good for the country as a whole. But if it was to be instituted by taking a similar sum away from other subject areas it would produce far more damage than would be compensated for by the additional engineering students. Such changes as these would bring us into line with the large amount of vocational training being carried out by a good number of other countries in the West. It must, however, be financed as a new venture and not by a redistribution within the system which now has no fat left.
Another practical point is that care should be taken to understand the age profile of academic staff when seeking to make changes in any institution. Any change in any direction normally implies the appointment of new staff with a corresponding reduction in other areas. If a particular institution has a reasonable number of staff coming up to retirement age, such change can often be made by not replacing those who retire in less needed subjects and by transferring such posts to the new development areas.
It is quite impossible to do this in the present situation if institutions have very few staff approaching retiring age during the next few years. Such institutions will, therefore, find it extremely difficult to implement any changes, however important and advantageous they may be. It is therefore essential for the DES and the UGC to take careful account of the staff-age profile of all institutions when planning changes.
The local authorities' role should be strengthened and there should continue to be a regional input. The National Advisory Body is to hold a consultative exercise on this question of regional input. The NAB talks of the concentration on "centres of excellence". Both the CNAA and the HMIs have expressed grave doubts about the NAB plan, claiming that little or no consideration has been given to the standards of existing institutions.
I am suspicious of this concept. I have already raised in the House the case of the closure of the Dartford College of Education, formerly the Osterberg College, now part of the Thames Polytechnic—a centre of excellence of an outstanding kind for decades and an essential part of the history of physical education for women in this country. It was closed last year despite many protests and against the advice of HMIs. Towards the end of the year it received three teacher awards from the Royal Society of Arts. This was a degree course in primary education which abandoned the concept of a main academic subject and concentrated on solving problems that confront staff in a classroom. Dartford was the first to be recognised in this new education capability recognition scheme run by the Royal Society of Arts.
One would have thought that such projects, which

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had shifted the emphasis of education towards helping people to be competent, to cope, to create and to cooperate, would appear to be more relevant than ever before. This year all enrolments closed at Dartford and with it the hopes of hundreds of mature students who had been encouraged to join the programme.
The National Advisory Body questionnaire raises the question of teaching methods and the size of classes, the use of distant learning techniques and computer-assisted learning. It ought to be said that changes of this kind would all be more expensive and should not be viewed as having cost-cutting implications.
It is clear that the Government have abandoned their undertaking, given before the election, of level funding and that they have now given up all pretence at maintaining the Robbins' principle. This is bad news for many parents and for many young people.
In conclusion, in making changes I should like to plead that the needs of certain groups be not neglected. We need more women students; we want more working class students. We need a more satisfactory provision for overseas students as an investment in goodwill, peace and understanding; to say nothing of foreign trade. We should have an effective provision for mature students and minority groups, ethnic and others, who will not initially have adequate qualifications for access to higher and further education. An élitist system will not do justice to the nation as a whole and it will deprive us of many who, properly trained, could make an effective contribution to the nation's wellbeing.
9.39 p.m.
Lord Hunter of Newington: My Lords, I suppose my qualification to speak in this debate is that for five years I was a member of a grants committee and chairman of its medical sub-committee. I joined the UGC just at the time it was becoming the responsibility of the Department of Education and Science and no longer that of the Treasury. This was celebrated by a modest party in the basement of the Treasury at which the guest of honour was the noble and learned Lord, Lord Hailsham. These were the days—although a cloud somewhat bigger than a man's hand had appeared on the horizon on the previous quinquennial round. On that occasion, the Government no longer accepted the UGC's estimate of university needs and had argued and cut the submissions. A few years later, the UGC sent the first list of guidelines to the universities and a whole range of sub-committees was formed to bring in expert knowledge in various disciplines.
The scene was changing, but in the exchanges between the Secretary of State and the chairman at that time there was the same flavour as in the recent exchanges between Sir Keith Joseph and the present chairman of the UGC. In his letter of 24th November 1982, Sir Edward Parkes states:
"It [the UGC] accepts that there are broad strategic requirements covering the expenditure of public money for which it is appropriate for Ministers to take explicit responsibility".
But it is important, states the chairman, that there should continue to be consultation before the decisions are taken, and the UGC welcomes the Secretary of State's emphasis on the need for close
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dialogue in his letter.
The chairman continued:
"At the same time, the UGC is responsible for considering the academic provision as a whole and the allocations to individual universities".
The Secretary of State had upheld this principle also in his letter. But the principles and priorities laid down by the Secretary of State included the requirement that restructuring should involve a change in the distribution of students towards the natural sciences and technology and this reduction should be applied selectively.
The annual report on Government funded research in 1983 says more, however, on the Government's attitude to universities. It refers to the universities' block grants and their use for teaching and research because staff were concerned with both, a dual responsibility. May I quote:
"In the science field, the intention of the UGC input into research is that it should provide the basic 'floor' of research capability in university departments. But since university research activities and expenditure cannot he clearly distinguished and, therefore, the UGC's objective in funding the expenditure cannot be clearly distinguished from its wider objective in funding the university system, the assignment of resources to research is based on a notional attribution of university departments and central expenditure between research and teaching".
But the Secretary of State, we have noted, had already markedly changed the policy about science and technology.
I also note that, in fact, in real terms, as far as one can determine, the base line of research support has been steadily falling and the equipment grant has certainly become very substantially less since 1971. The Merrison report of a joint committee on support for university scientific research (Cmnd. 8567) examined this difficult matter in some detail and concluded:
"that as a long-term objective and notwithstanding adverse effects elsewhere, universities should channel proportionately more of their funds into research; also that universities will have to concentrate research funds into selected areas because, wherever research is done, it should be of high quality and properly supported".
They accepted, however, that there was no reliable means by which one could assess research support—the same view as the Cabinet Office paper—and they suggested earmarking for specific purposes by the UGC. In the UGC letter of 24th November the statement is made that the UGC believes that, in general, resources are likely to be used most effectively if they are in the form of block grants. This, I am afraid, is only true if there is a quinquennial indication of block grant, and it is not realistic to persist. I am surprised that the UGC, which now has a rolling triennial system, feels that this is a satisfactory matter.
As your Lordships have said tonight, a vital influence on this matter was the Robbins Report on university education. Though I have to confess my personal disappointment at the lack of initiatives and imagination surrounding the new universities, they were all desperate to conform, even the ex-technological institutions: and the Robbins proposals for "sister", specialist institutes for scientific and technological education and research were not implemented. The one "sister" of outstanding merit and success is Cranfield, which has flourished without

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the help of the UGC and the sacred principles of unversity development.
Soon after these substantial additional commitments were entered into by the Government, the Secretary of State of the day, in the famous Woolwich speech, announced the formation of the polytechnics without any discussion or knowledge as regards the UGC; and within a matter of a few years it was stated that they would be eligible for research grants. Did that mean additional basic funding for polytechnics? Apparently not. I hope that the noble and learned Lord the Lord Chancellor will tell us about this and about the whole question of the policy, as suggested by the NAB's discussion document on support of research. I feel that we would like to know the Government's reaction to it. Surely this major development in higher education, when the notional requirements of the new universities and their research base could not possibly have been estimated, was a very difficult thing to do and it is difficult to understand what was the Government's policy in this matter.
Having noted the concern in Sir Alex Merrison's report about the need for adequate funding of research—and research and development is even more expensive—one begins to wonder whether the resources are likely to be available which will match up to the legitimate demands of independent chartered institutions, whether the money comes from the UGC, the research councils, departments of state or private industry. Presumably the alternative to general cheeseparing has been considered. If not, it should be considered now, with the continuing austerity, talk of
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rationalisation and priorities decided by committees at at least three different levels.
But what of the alternative? The alternative, my Lords, is surely to do what industry would do or what this Government would do in another context. The policy has changed. There are strict priorities laid down by the Government. The UGC has lost so much by losing the quinquennial block grant system as it existed. There is required to be concentration on natural science and engineering, which are far more expensive than traditional university activities. I suspect that if we were talking about industry there would be serious consideration given as to whether six or eight universities should be shut so that the remainder could be adequately funded.
The Government have been repeatedly told that the kind of research they want to be done cannot be done on the cheap. This interminable trimming of all institutions is, to say the least, ineffective. For the UGC, in these circumstances, to support the block grant principle seems very strange. Do the university freedoms mean so much? If we think of the success of government research institutions, for example, one wonders. Should all the universities really be doing basic frontier research or research and development, or should some of them become polytechnics? Should the UGC have its remit changed to something more in keeping with the reality of the situation? I believe that the House wants to know. But will the Government face up to these things? By its very nature and composition, the Vice-Chancellor's Committee will find it almost impossible to do so. The Prime Minister has referred to the new function of universities. Surely, she must be prepared to pay for it.
9.50 p.m.
Baroness Masham of Ilton: My Lords, I thank the noble Lord, Lord Annan, for this opportunity. My contribution to this debate will be very short, but there is concern from many people that the limited and hard striven-for facilities for severely disabled students in universities, polytechnics and colleges of higher and further education may be cut back. I hope that the noble and learned Lord the Lord Chancellor will give some assurances that these valuable assets will be safeguarded and that when there is change the needs of disabled students will not be forgotten.
More than ever before, disabled people want to be part of normal society, being able to integrate into the university or college of their choice. Because of access and care difficulties, that is not always possible and they are restricted in their choice. For example, a few years ago a star pupil of her school went as an undergraduate to Exeter University. After three days of being at university, Joanna Owen was involved in a tragic car accident in which she sustained a broken neck. The car driven by another student was passing a lorry when the lorry swung out without warning. After months in hospital, Joanna remained paralysed but was able to return to university, for in no way had her brain been impaired.
Exeter would have had her back, but it had no special facilities so she was transferred to Sussex University, where there is a special unit which is part of the university campus. This was carefully planned to accommodate four civilian handicapped students. The money was donated and the unit is called Kulukundis House. This provides care as well as accommodation, which is vital. I heard a rumour that Kulukundis House might be turned into a university health centre, which would be tragic. Unless there are some special facilities, these bright but handicapped people will be even more handicapped, as university will be denied to them.
Some years ago, I had the honour officially to open Clarkson House, which is a hall of residence for handicapped students at Southampton University. The disabled students are assisted by able-bodied students who live above them in Clarkson House. Reading University also has made an effort in helping disabled students, as has Leeds. Several other universities, such as Birmingham, have professors and lecturers on their staff who are disabled. Teaching and research are excellent occupations for handicapped people, if their intellect is up to standard, and I hope that there will be more opportunities in the future. Many colleges of futher education do not have suitable facilities for disabled students and it is difficult for many of them to be offered admissions.
I much appreciated the fact that in 1981 I was awarded an honorary degree by the Open University. Many of your Lordships may know that the Open University has played a significant role in offering disabled people access to higher education. The university is currently facing severe cuts in its Government grant. At the moment there are 5,000 disabled students registered with the university, of whom 2,000 are actively studying on courses in the undergraduate and associate student programmes. These special support services are at risk of being
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reduced, if Government cuts in the grant are fully implemented. The Open University has a reputation throughout the world in the provision of higher education to disabled people through distance education, and it accepts the responsibility to meet the educational needs of its disabled students. There are special procedures for examinations and assessment which can be put into operation to benefit those who need them: for example, the granting of extra time, the use of amanuenses, the use of braille, the use of typewriters, the sitting of examinations at home or at a special centre under strict invigilation. These facilities are not to give a disabled student any unfair advantage but to compensate for known handicaps which affect performance.
The variety of disabilities is wide, the encouragement given great. I hope that change in the future will not limit but will expand the opportunities for those people who, because of handicaps, have less choice in job opportunities and therefore need the chance to develop and nourish their intellectual abilities.
9.56 p.m.
Viscount Caldecote: My Lords, this is a most timely debate on an important subject and I know how grateful we all are to the noble Lord, Lord Annan, for introducing it. I believe that the role of the universities has never been more significant in this era of rapid change in the pattern of work and leisure. The basic purpose of universities, I think we all agree, is enrichment of life, not only for those who attend universities but for the whole community. Universities must both lead and reflect changes in society. In a free society like ours, effective leadership involves respect and confidence.
I am afraid that universities in general have lost a degree of the respect which they should have in a civilised society, because in so many cases they seem to have been excessively resistant to change, with a few honourable exceptions, as mentioned by the noble Lord, Lord Flowers. In preparation for the debate I looked at some of our debates in the 1960s in which I took part. There was a debate in 1960 on higher education in general, and in 1964 there was a debate on the Robbins Report. In the first debate I said that times were changing and that the universities must change with them. In our debate on the Robbins Report I said that we must avoid the risk that engineering and technology departments in universities do not become fully integrated into the industrial life of the nation. Plus ça change and, alas! plus c'est la mêrne chose in too many places.
Academic freedom is too often quoted as an argument against reacting to external change. It is an important concept but, like freedom in general, it can be and has been abused. But if full respect and support for universities is to be restored, they need to be more responsible to the changing scene in the exercise of this valued freedom.
About half a century ago I decided that I wanted to study engineering, preferably at Cambridge, for it was an excellent opportunity and it was one that I was lucky enough to be able to take. Nobody pushed me. Quite the reverse. To go from an independent school to university to read engineering was rather unusual

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and not thought to be a very good idea. I did not do it to satisfy some desirable trend that had been identified by some remote body; that would have been a laughable concept. I made the choice as an individual. I took the opportunity which was available and which I had the luck to be able to take, and as a result I have had a satisfying, happy and varied career in engineering. Surely our aim must be to give everybody who can benefit from it a similar opportunity in the subject of his or her choice.
The noble Lord, Lord Annan, suggested that some 15 per cent. of sixth form school-leavers would be a sensible objective. I do not disagree. However, we come here to the nub of the problem to which the noble Lord, Lord Annan, also referred. University education and research is a form of expensive investment, but it is a very important investment because it is an investment in people. The resources for that investment can come only from the creation of real wealth. The main source of our real wealth is manufacturing industry, in which engineering plays such a vital part. Only to the extent that we create that wealth and allocate from it adequate resources to universities can we achieve our objective: opportunities for all who can benefit from going to universities.
In the late 1940s I had another opportunity to return from industry to Cambridge to teach engineering. In due course I represented the Faculty of Engineering as a member of the main university committee responsible for administering and allocating resources to the various faculties. I learned much of university politics and the internal stresses between faculties and the cumbersome bureaucracy. I experienced the bigoted attitude of some academics to expansion and to the support of engineering, which was then so ably led at Cambridge by the noble Lord, Lord Baker, under whom I had the privilege to serve.
I have many memories of acrimonious arguments with those who were against such expansion, and some years later I remember a similar antagonism to change when I was serving as a member of the council of the old Cranfield College of Aeronautics under the chairmanship of the noble Lord, Lord Kings Norton, when he was trying to obtain the charter status of a university for that college as the Cranfield Institute of Technology, as it now is. There was a tremendous antagonism in those days from all the old-established universities to Cranfield becoming a post-graduate technological university but happily, under the leadership of Lord Kings Norton, those difficulties were overcome.
I had hoped that such attitudes were long-since dead and that the importance of engineering in education was now fully accepted. So it was a great disappointment to me to observe the events of the last few years, when the UGC had to allocate reduced funding to universities. As the noble Lord, Lord Annan, said, they rightly resisted across-the-board cuts. There may have been differing views as to how they allocated the funds between the different universities, but they did indicate quite clearly to universities that cuts should be minimised for engineering and science departments. Many universities responded by making across-the-board
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cuts totally at variance with the UGC's recommendations and expressed wishes, and totally at variance with the example which the University Grants Committee itself had set.
This misguided policy was a further example of the universities' failure to meet the changing needs of society in the field of engineering. I hope we have learned those lessons now from our mistakes of the past, for it is urgent that we do so. Our share of world trade in manufactures is still falling. Last year we had a deficit of £2½ billion in export and imports of manufactured goods compared to a £2 billion credit a year before. We are still training far fewer engineering graduates than our major competitors in Japan, Germany and France. I very much hope that the Government, and the Secretary of State for Education and Science particularly, will take quick action on the recently-published proposals of the Engineering Council of which I am a member, and to which the noble Lord, Lord Todd, has referred.
There is no time to go into the details tonight, but I should like to make three important points of principle which are contained in the Engineering Council's recommendation. First, regarding resources, the council recommends that there should be a 10 per cent. swing from arts-based to science-based places in universities, with the majority of science-based places going to engineering students. I should add that, in my view, some emphasis ought to be placed on production engineering courses, including a big concentration on manufacturing systems, and the like, which are so vital to restoring our competitive position in industry.
I cannot agree with the noble Lord, Lord Irving of Dartford. He said that there should not be a switch of funds but that additional funds should be provided. It seems to me that in these days that is an unrealistic approach. We must recognise that to achieve that objective of a swing of 10 per cent. from arts to the science-based places will need a bigger than 10 per cent. swing in resources, because science and engineering are more expensive than arts. If that is to be done quickly and effectively the Engineering Council recommends that for five years funds for engineering education should be earmarked for accredited courses. I know that in some academic circles that will be very unpopular, but in my view it is the only possible way that we will achieve the changes at the speed that we must make them if this country is to survive in this competitive world.
Secondly, on quality, the council has recommended both enhanced and extended engineering courses. In my view, both are needed. However, to achieve the maximum effectiveness both in time and value for money I would give preference to enhanced three-year courses with perhaps a longer 40-week final year. Nor must we be carried away by the cult of specialisation in information technology or in anything else. Engineering and industrial problems increasingly require a broad understanding of engineering principles. Specialisation can easily be added later when it is required—perhaps with the help of the Open University, to which so many noble Lords have referred in such glowing terms, and rightly so.
Thirdly, the council recognises the need for much closer links between universities and industry in two

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most important areas: a greater involvement of universities with industrial training, particularly in the first year of the so-called thick sandwich course; that is, a year in industry, three years in university and another year training in industry. It is no use sending off a school-leaver and shoving him into the deep end of industry without any contact with the university to which he is to go for his education. It is essential that that first year should be properly supervised by those who are to look after him in the university. We need much greater attention to that.
The other area is in technology transfer and the exploitation of new knowledge to bring more industrial relevance to engineering courses. We need more exchange of staff to give academics a better appreciation of the relevance of time, markets and money, and industrialists a clearer appreciation of the need to keep up to date in new knowledge. Action on all these points is urgent if in this technological age we are to keep up with our competitors and create the wealth—not least the wealth needed to sustain our university activities—to give young people the opportunity to develop and meet the challenges of a rapidly changing world.
I hope we shall take the long view and that we shall allocate the resources that we need, for by the 21st century—and it is only 16 years away—advancing technology will have created massive changes in the pattern of work and leisure. Because it is in universities that many of the new ideas must evolve, it is of the utmost importance not only that they should have adequate resources but also that they use their privileged freedom wisely and respond more readily to the changing needs of the community.
Before I sit down I should like to express my appreciation, which I am sure will be shared by all noble Lords today, to my noble and learned friend the Lord Chancellor for sitting on the Woolsack and giving such close attention throughout this very long debate.
Noble Lords: Hear, hear!
Viscount Caldecote: I see that he has taken copious notes and we look forward eagerly to his response.
10.10 p.m.
Viscount Hanworth: My Lords, I must give my most humble apologies to the House for putting down my name to speak at the end. In fact, I had my name down on the list of speakers, but due to transport difficulties, when I thought the debate was going on until one o'clock or so I cancelled it.
My reason for speaking, and why I have taken this rather exceptional step of putting my name down again at the last moment, is that in March 1971, that is 13 years ago, I initiated a debate on this subject, and it was shortly after Lord Annan's Reith lecture. On looking back at the speeches I have made in the House, I think this was possibly one of the most important, one of the most provocative speeches I have made, but I think that in a way it was useful. Therefore, to follow on after 13 years is perhaps something I am entitled to do.
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Much has changed since then, and in the direction which I hoped for. I believe it is worth recalling that at that time some people seemed to believe that, whatever was taught at a university, and however badly it was taught, it was self-justifying—just because it was taught at a university. It was also apparent that, to some extent, universities were ivory towers opposed to all change and conveniently insulated from outside pressures.
Today, with one or two exceptions, I do not wish to criticise our universities, but to raise some matters which I believe need consideration. I am sure that, as a first step, we must define and keep under review the objects of higher education. I suggest, as I did 13 years ago, that there are basically three: first, to train future academics and research workers; secondly, to provide education likely to be of direct use after students leave university; thirdly, to broaden the outlook of students and to make them more rounded persons and better citizens.
I do not feel qualified to comment on the first objective, which I believe the universities do well, but it does seem that the award of doctorates might be worth investigation as standards are rather uneven. In considering education of direct use in subsequent employment there is the overall problem of how many students the nation requires in any one discipline; for example, the number of medical students to fill the likely future requirements. Bearing in mind the fallibility of any forecast, I would only say it is a problem that must not be swept under the table.
I am sure that the methods and approach to teaching receive far too little consideration at universities, and that many are too proud to learn from outside knowledge and experience. It may be true that a potential first-class student can learn from any professor, however had he is at imparting his knowledge, but this is most certainly not true of the less gifted student. University lecturers should, on appointment, have to attend a teaching course and periodically discussion-type seminars thereafter.
Turning now to the third objective, briefly, the making of more rounded persons and better citizens, I have considerable doubts, for example, as to whether arts courses—or some arts courses—simply provide a soft option for the harsher world outside. Without doubt the sudden expansion of the universities spawned some very C3 arts courses run by inadequate lecturers. To what extent this may be true today I simply do not know, but it remains an area which should come under examination, particularly with the cutback in university funds. In general in the arts field, I am sure that lecturers should not move directly into their posts without first having some experience of the outside world. Equally well, I believe that most of the courses should have a substantial element of other disciplines included in the syllabus.
It is sometimes worth while looking back to see the viewpoint of a previous generation. Before the last war, it was accepted by many that the only really good training of the mind was the classical discipline. That is in stark contrast to the more recent view I mentioned earlier, which could be summed up—I

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wonder whether the noble Lord is listening; or must he continue his conversation over quite a long period? As I was saying, that is in stark contrast to the more recent view I mentioned earlier, which could be summed up by saying that anything taught at a university is equally useful. There are fashions in viewpoints, and the truth usually lies between the two extremes.
However that may be, there would seem to be three matters of importance. The first is, to train people in making a logical assessment of any problem presented to them. The very simple, Army approach of the disciplined appreciation is far and away superior to anything usually taught in higher education. Secondly, in industry and elsewhere, what is of paramount importance is judgment. In some university work there is too much emphasis on simply repeating eminent persons' views for and against some proposition, without the student personally considering the practical and common-sense validity of the arguments.
The third, and last, point I want to make is difficult to put across, but I regard it as very important. We used to think that education would make people more reasonable because they would be better able to assess and to balance arguments put forward in support of any cause or proposed action. It was hoped that, by their knowledge of history and the realisation that there are always two sides to any argument, such educated people would avoid making judgments on a purely emotional basis; reason and common sense, one hoped, would prevail.
That has not been the case. We have only to look at situations where the arguments for and against are fairly evenly balanced, to find that in such cases most people become increasingly hot under the collar. One cannot eliminate the emotional aspect of judgment. In most cases it is a necessary part of any decision process, but it should be employed only on weighting all the relevant arguments on both sides.
I should like to take an extreme example. Having considered all the social merits of freer abortion, the Catholics, on religious grounds (and in this context that is emotional) considered that there was only one paramount factor: that of taking human life. One can disagree, but one knows how the conclusion is reached and to some extent one may be able to sympathise with the viewpoint.
The all-important point in making any decision or adopting any viewpoint is to hear both sides of the argument. I submit that, to some extent, this can be taught in universities by means of what I would call case studies. There are plenty of historical cases devoid of immediate emotional connotations. Free trade and the corn laws might be such subjects. It is then possible to move on to emotional subjects. I think that at that stage it would he possible to train people to work or to think in the sort of way that I have tried briefly to outline.
The business schools provide this kind of mental discipline. What I have in mind could be dignified by some suitable academic title and included in the students' curricula. I am afraid that I have argued the
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case on this third point very inadequately. I hope, however, that I have said enough to awaken some interest.
Lastly, I emphasise the importance of having two streams of higher education. The academic approach of some universities suits a limited number of students. For others, the more down to earth approach of the old technical colleges is what is needed. I apologise once more to your Lordships for exceeding my normal time limit of 10 minutes and for having broken almost every unwritten law in making this speech.
10.22 p.m.
Baroness Seear: My Lords, anyone who, like myself, has spent a number of years working in a university must, I think, accept that there is plenty of need for change and room for reform and a good deal that can be criticised as well as much that can be praised and admired in the way that universities have been running and are running at present.
The noble Lord, Lord Annan, referred to the problem of tenure. The claim for tenure is based in large part on the principle of academic freedom. But that argument of academic freedom, as the noble Viscount, Lord Caldecote, said, can be extended far beyond what is its real justification. That justification is a basic and essential one. It is the right of the academic to speak the truth as he sees it without any fear of reprisals. That is as far as it should go. It should not be used to justify the continued employment of people who are less than competent and who are just plain lazy. I believe that I should not be exaggerating in saying that there have been occasions on which it has been used for just that purpose. It is that kind of thing that leads to a great deal of criticism of the academic world from people outside and which academics are unwise to defend.
I was heavily involved in the student riots as an academic at the end of the 1960s. I am bound to say that all the faults were not on the side of the students. Two students said to me during that time that they had been introduced to their tutor in October and did not see him again until June. I think that the student who did not riot under those circumstances would be sadly lacking in appreciation of what was due to him and what he was expecting to get from the university world. Behind that lay a number of things but, in particular, over-emphasis on the wrong kind of research.
Much has been said in the debate about the importance of research. Of course, real research and real scholarship are of the greatest importance. But. in the universities as they exist today, there are a large number of people who are not, in the old sense, scholars and great seekers after truth. They are competent at academic work. They can contribute from time to time to research but they are not profound research workers. I doubt whether it is wise to devote so much resource to research or to attach so much importance to it in estimating people's suitability for promotion.
A great deal of trouble has arisen from the fact that,

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as everybody knows, promotion is given not for good teaching, but for publication, and publication requires research. We might do a great deal better if we remember that the purpose of universities is not only research—although that must be a very important aim—but also the transmission of knowledge to the next generation and the exciting of interest in knowledge in that generation which can only come from good teaching.
One of the things which has gone wrong is that there has been too little emphasis on teaching and too much encouragement of research, often of rather dubious value. When a would-be Ph.D comes to us—and I have had it happen to me—and says. "I want to do research, can you suggest a subject?" I suggest that that is ample evidence that that person should, under no circumstances, be engaged in research. Unless one is so excited by one's subject that one is prepared to research into it come what may, one should get out and do something else.
However, having said that, there is no doubt at all that the universities at their best—and as we hope to see them in the future in all their various forms—are central to the life and advance of this country. We need more and better higher education. We need it because frankly we are a badly educated people and we are rather proud of it. If we reflect, I believe that we are the only society in which there is no social stigma attached to being ignorant. It is no discredit to anybody either not to know what words mean or to be able to speak no language but his own. People boast of their ignorance in all classes of society in this country. I do not believe that we should find that in any other country in the Western world or, indeed, elsewhere for all I know. We have been able to get away with it in the past, but we shall not be able to get away with it in the future. It will not be a comfortable world for the ignorant and the uneducated. The sooner we get out of the idea that it does not matter that we do not know and understand, the more chance we shall have of progress.
There are large categories of people capable of various forms of higher education who have been denied them and for whom those opportunities must be made available. Others in this debate have referred to those categories, and I shall say little about them now. But there are cohorts of potential mature students capable of taking advantage of the Open University of the Open Tech.—which, I think, has not been mentioned very much during this debate—and, indeed, of opportunities in universities and other colleges of higher education.
If we look back at the percentage of women in universities in the past, we find that that percentage is now improving. But in the past women have been grossly under-represented. After all, in this country we live on our wits and half the wits are in female heads. We have done very little to make the most of those female wits. There are a large number of women who, in middle life, are perfectly capable of, and would like the opportunity to have, higher education of one sort or another. We should make those opportunities available to them. Also, even though it is perhaps not so obviously directly relevant to this debate—although others have also mentioned it—let us bring back the
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overseas students, not only because of the training opportunities (although they are very important), not only because of the view that is taken of us elsewhere in the world as a result of the way we have denied those opportunities, but for the benefit of our own students. At the London School of Economics, where I work, it was with great pride, and it was a great educating factor for British students, that we could boast that we had 42 different nationalities in that one college at one particular time. There is an educative effect in having that mixture of students so that differences between races and people are taken in their stride and nobody stops to ask: where did he come from, what colour is he, what is his nationality? They are just other students. This education is of the greatest possible value.
Of course, I know that the extension that we need will cost money and this debate is, in part, about that. Of course, it is investment. This Government tend to win their battles, but they are in grave danger of losing the war. They may win the battle for immediate economy, but they will lose the war if they economise in this direction. They will lose the war for a continuing, sound economy and a nation which is able to hold its own in the 21st century. That is the longer view which we must beg the Government to take.
I am not saying that there should not be economies; I believe that there can be many economies, and I could have suggested a great many in my own institution. Individual organisations left to themselves, or when they feel that the going is rough, have shown that they can be extremely ingenious in finding resources themselves. Salford is a case in point. In the view of many of us, Salford was extremely badly treated by the University Grants Committee, but it went out and found resources—and good luck to it! The London School of Economics did the same. After all, a school of economics ought to be able to go and find money. One doubted that is would be as practical as that, but it was. It went round the globe and raised a considerable amount of money to keep itself going when the allocations from central Government became extremely difficult to rely on.
I am not saying that the problem of finding money is not a real one; it is. I believe, however, that with effort and encouragement it can be overcome, especially if the Government take a rather longer view of the value of university education. But what sort of higher education? What sort should it be? I hope that we can get rid of talk about "élitist" and "anti-élitist". Personally, I detest the terms. There are, of course, people who are better at things than other people are; there are people who are extremely gifted and people who are less gifted. That does not mean that they are less good people, and we want to encourage excellent performance in all areas. But there are different forms of excellence, so let us forget that argument and get on with the much bigger job of saying what sort of higher education and what variety and diversity of higher education we want to have.
For a great many people coming into the universities at the present time—and I have seen the results of this—I do not believe that the English type of honours degree is suitable. I believe that more practical and applied courses, perhaps spread over different periods of time and not necessarily all done in

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one three-year block, are more appropriate for people with different interests—not less good or less worthy interests, but different interests and different abilities. We should be working on diversity and a great opportunity for choice to match the interests and abilities of different kinds of people who do not fit the old kind of degree course that we have at the present time. To push people into honours degree courses who are not of that kind does not do them any good; I believe that it does them positive harm, and some people who have taken a third in sociology have been permanently damaged for life! They are awfully difficult to teach after they have had that searing experience.
We have to find what is appropriate for the other type. The polytechnics began to do this, but some of them (not all of them) were deflected. Some of them are still doing an excellent job, but there has been a tendency for them to ape the universities and this is a sad reflection of the weaknesses of our society. It is not the other way round. As the noble Lord, Lord Todd, said, it is because society has this deeply entrenched anti-industry bias that the polytechnics have been affected, and they believe that it would be better to look more like universities, If they had had a good, long look at some of the universities, they might have said that the best thing was not to look like them.
The colleges of advanced technology, the "CATs", had the opportunity to turn themselves into institutions of the type of Cranfield, but the great majority had not the courage to do it, or could not resist the lure of trying to he like universities. Instead of going out for the Cranfield model, which could have gained them very high prestige had they pursued that line, they took the other path and became universities of a sort, some of them no doubt very good, some of them a pretty inferior model of what they were trying to imitate. We want to start again and try to build up institutions with real prestige which are different but equally valuable for the people who work in them and the students who attend them.
What really matters when you are teaching is that you teach something that the students are excited by; that when you have finished teaching them they have caught it so that they want to go on by themselves; that they are stretched, and stimulated and excited. If you do not do that, you have failed, and if you do do it you have succeeded, whatever it is you started by teaching them. That is the secret of dealing with these bright people who are not academic. They have to see that it is relevant; thay have to think that it is interesting; and they have to feel that it is exciting. Then they will go on, and that is the test of successful teaching. It can be done, but only if we have the courage to find these new ways.
This is not a question of narrow specialisation. I believe we can all agree that narrow specialisation is out. It is out not only because it is educationally bad but because it is totally impractical and it does not apply to the needs of the world today. What we need today is people who can collaborate across different disciplines, and you cannot collaborate across different disciplines unless you have a reasonably good grasp of some discipline other than your own, and that is the key to the kind of teaching that we need.
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I am horrified to see that at this time of night I have talked for 16 minutes. I crave your Lordships' pardon. The most exciting thing that has come out of this debate is the realisation that a great deal of change of the right sort is going on. If we have learnt nothing else from this debate, it has been worthwhile.
10.38 p.m.
Lord Elwyn-Jones: My Lords, I cannot refrain from thanking the noble Baroness for her delightful speech. It is obvious that the Liberal Party has a formidable leader in your Lordships' House. I begin by declaring my own interest as President of the University College of Wales at Cardiff, and by congratulating my noble friend Lord Wilson of—
The Lord Chancellor (Lord Hailsham of Saint Marylebone): Rievaulx.
Lord Elwyn-Jones: Rievaulx, I have got it right. Bravo Rievaulx, I shall remember it hereafter! I congratulate my noble friend on his fascinating speech. The old master has obviously lost neither his skill nor his wit, and it was great to hear him.
The one aspect of university life that has received universal approval during this debate has been the Open University. Not a word has been said against it. The noble Lord, Lord Perry of Walton, and the noble Lord, Lord Wilson, have, as founders and inspirers, received full approval of the House. But I have been very disturbed today to receive a letter from Y Brifysgol Agored Yng Nghymru— which, being translated, none of you knowing the language of heaven, means "The Open University in Wales"—which expresses the great concern of the Welsh director for the fact that
"The demand for Open University courses in Wales has never been healthier, and I fear that serious cuts of the kind proposed by the DES may have their greatest impact in the Principality and similar regions".
There is hardly an aspect of our higher education scene that has not suffered grievously from the Government cuts and that includes even the Open University.
The noble Lord, Lord Annan, has rendered a service to the House by drawing attention to the university and the higher education scene at this point in time. It is, sadly, a time when there is a mood of suspicion and fear and uncertainty among a large proportion of those who are concerned in higher education, arising from what I submit have been the arbitrariness and severity of the current use of financial attrition. The letter which my noble friend Lord Irving of Dartford read from the AUT perhaps has highlighted that fact. In the university scene, thousands and thousands of well-qualified young men and women are being denied places in the universities since the UGC imposed cuts in student numbers in July 1981. The Robbins principle, which has run like a golden thread throughout this debate, that places shall be found for all those young people able and willing to benefit from higher education, has been thrown overboard. Yet, as the noble Lord, Lord Robbins, said in the House in February 1982, that principle is part of the very principle of equality of opportunity.
I confess myself to be an unrepentant egalitarian, and I reject totally the élitist commendations of the

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noble Lord, Lord Annan. I do not know whether the University of Wales and its colleges come within his chosen eight. He was perhaps wise and discreet not to identify them to us. It may have caused the gravest affront to numbers of vice-chancellors and presidents of those not worthy of inclusion in his Nirvana of suitable and qualified universities. While it is significant that, for instance, in the field of science, British science has had a great reputation for the generation of new ideas and concepts for a very long time, it is not the prerogative of the larger institutions. Indeed, if the academic roots of eminent British scientists are examined, their origins are often in the smaller and less fashionable institutions. The eminent scientists turned out by the University of Wales over the last two decades are a very good example. If you kill off the smaller universities, as has been suggested in one or two of the speeches as a desirable development, you are likely to cut off the lifeline of the larger establishments.
It is worrying to note from the statistics of UNESCO and the OECD how badly, in terms of the percentage of our population entering higher education, we compare with the United States, Japan, Australia, Canada and many other countries. I regard this as a serious indictment of our arrangements, and the situation is now becoming worse through the current cuts. Universities are now operating on a severely depleted financial base as a result of the 1981 cuts, the introduction of Full-cost fees for overseas students and the resulting drop in their numbers. This has reduced the finance to the system by over 10 per cent. in the years 1979–80 to 1983–84. Any further cuts in the units of resource would, I submit, he gravely damaging to university education and research.
The comment of the The Times leader, in a powerful editorial of last Monday, I think rightly stated:
"The Government's policy for higher education has been the product of its general offensive against public expenditure embroidered with expedience to limit the damage".
Admirably expressed!
My Lords, I fear that yesterday's Budget speech gave no indication of an anticipated betterment. Indeed, the thought that I have had after hearing the anxious, authoritative speeches in the course of the long and notable debate today is that, perhaps, it is time for a full and new assessment of the financial needs of our great academic institutions. The Times article ended with the writer asking: What are the universities for? How much do they matter? Indeed, my Lord Chancellor, a good question!
As I suspect the noble and learned Lord would agree, they matter a great deal; and I hope that, at least, that message will emanate from this debate—and, not least, I submit, as a centre of initiative and resource for the regions where they are located, and as an intellectual focus for the people of that area. I believe that the university college with which I have the honour to be associated fulfils those functions.
My Lords, one valuable university trend in recent years has been that they have increasingly regarded continuing education as a central part of their role. I have been interested to read the comments of Dr Richard Hoggart, the chairman of the National
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Institute of Adult Continuing Education, when he wrote:
"I am not convinced that this Government takes the case for continuing education seriously."
I know that the noble and learned Lord has been asked to answer a multitude of questions but, if he can come round to that one, I think it may be quite important because:
"Formal continuing education is a necessity if the national economy is to avoid being handicapped by critical skill shortages and if we are to have the knowledgeable, adaptable and skilled workforce which is essential for the prosperity, economic health and progress of the country."
Those words are from the working party report of the UGC on continuing education. My Lords, one of the matters that we have considered a good deal in the debate today is whether universities are still tending either to be ivory towers or, even worse, to have a positive attitude of disapproval towards, of alienation from, industry and direct involvement in industrial matters. I do not think that that is any longer the case, if once upon a time it was. There is no anti-industrial approach, I believe, in our universities today. Indeed, we live at a time when there is considerable publicity for industry and academic co-operation. There is a tremendous example of it—if I may say so without doing too much of a commercial—in the University College of Wales, Cardiff.
Science parks, industrial liaison centres and a host of other initiatives are being seen sometimes as the universities merely reacting to hard financial times. But in truth I think it is fair to say that academics have been clamouring for that kind of activity for a very long time, and what has spurred it on perhaps is the realisation by industry and by City investors that in the United States a great deal of high technology industry has grown up around their universities and that the more successful centres, like MIT in Boston, have built up a profitable marriage between higher education and industry. This has been aided in America for decades by the availability of venture capital. Unfortunately, we in this country have of late had very little industrial investment and very little venture capital. Indeed, I believe there has never been a better time for industries, cities and universities to sit down together and plan their contribution for our future. That must he equitable to all parties, because only then will a long-term contract be possible.
The universities, of course, contribute greatly to industry in the form of contract work which is related to its commercial requirements. It is right and proper that that should be so; but I believe it to be wishful thinking to imagine that industry can contribute adequately to finance basic research. Such research often has no direct commercial application and has to be conducted against a long time-horizon. It is also, sadly, the case that outside defence work, British industry's own expenditure on research and development compares unfavourably with our main industrial competitors, particularly in such key industries as mechanical and electrical engineering. And what is deeply disturbing is the decline in the number of our young people receiving training, for instance, in the field of engineering. In the key sector of the engineering industry, the engineering training board has recently reported a drop in the number of

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apprentices from 20,000 in 1979 to 7,000 in 1983—and this at a time of massive unemployment among young people.
What I believe to be necessary are not policies designed to substitute business support for Government support for university research: what are required are policies aimed at increasing research and training both in universities and in industry. Government finance of university research should be increased and they should be seeking ways of encouraging industry to increase its own efforts in research and development and in the training of skilled labour.
I have taken a little time on an aspect of the matters we have discussed which I think is of great importance for the future of our country, and I should like to end by reiterating the anxiety expressed by the noble Baroness, Lady Seear, about the continuing decline in the number of overseas students coming to this country to complete their education. They pay for themselves. Every extra student, indeed, in pure cash terms helps to reduce the overall bill. They spend their money here; and when one asks why they come from all over the world to our places of learning and training, the answer is, because of the enormous reputation that this country still has in science and the arts.
That has not come out very clearly in the debate today. There has been what one might call a mood of general denigration and a running down of our academic institutions, which I do not like very much. But that reputation in science and the arts had not been built overnight, and is the product of generations who understood that a civilised world depended on harnessing human reason and not force to solve the problems of the human condition. Knowledge knows no boundaries, and the benefits which accrue to this country from sponsoring knowledge in our own citizens, and among those from foreign countries, are enormous, if incalculable, in the short run. Those are the visions which we should be acclaiming, and we should not be looking at these problems merely through the eyes of the Treasury accountant.
10.56 p.m.
The Lord Chancellor: My Lords, when I was a very young Fellow of All Souls, I knew a very much older Fellow of All Souls and he knew, so he claimed, a man who had known Napoleon. So I asked him the obvious question (as he had intended) and, imitating the voice of a very old man, he replied "He said to me, 'It was easy to see that Napoleon was not a university man". Next Saturday or thereabouts is St. Patrick's Day; he was not a university man either, and nor was my father, who became Lord Chancellor.
I am going to talk about higher education, because it is a subject which interests me profoundly. But I begin with the observation that one can perfectly well succeed in the field of ideas, and in national life, without actually being a university man. If St. Patrick could do it my father could do it and Napoleon could do it, then so can a great number of other people.
When I undertook to answer this debate, I realised that I was undertaking an unmanageable assignment.
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There have been somewhere between 30 and 40 speakers, each more eminent than the last, each with an important contribution to make to the subject, and each making that contribution extremely well. But if I were to give two minutes, say, to every one of them my speech would last more than an hour, and I have a feeling that the House would gradually begin to dwindle if I were to undertake the task—although I am quite certain that, if I were to do justice to any one of those speeches, it would take me a great deal more than two minutes.
There is a separate reason why the assignment was unmanageable from the start; it is, that this is part of a great debate which is currently taking place outside this Chamber and in the world of higher education. To some extent it was initiated by the famous questionnaire of 28 questions by the UGC; to some extent, by the strategic document of the National Advisory Board. May I say in passing—because I am afraid that this has to be, to some extent, a ragbag of ideas—that I rather shared 20 years ago the dislike of the binary system, which has attracted a certain amount of criticism even tonight. I can see the noble Lord, Lord Glenamara, who was one—not the only one—of its critics. I was defeated.
I advocated, as did my noble friend Lord Beloff at an earlier stage in the debate, a department of higher education and science but I was beaten, as usual. I believe we are stuck with the binary system so it is no good complaining. The truth is that higher education ought to be a continuum and it is to some extent, artificially divided down the chine by the binary system. I am afraid we cannot help that and we must go on planning as it continues.
Both the NAB document and the UGC document have given rise to national debate. I can assure your Lordships that this debate in your Lordships' House will play an important part in the national debate as it continues. However, it is obvious that it would be presumptuous for a Minister of the Crown to give positive answers to many of the questions which have been raised, as though he anticipated the answers which will be given as a result of the debate. Public discussion of the issues involved is still in its early stages and it would be inappropriate if I were to anticipate the result. Nonetheless, I shall make one or two exceptions.
Apart from anything else, I should like to join those who welcomed our one maiden speaker, the noble Lord. Lord Wilson of Rievaulx—a member of that distinguished little club of ex-Prime Ministers whom we are gradually accumulating in this House—who, in addition to his already vast public experience, has professional experience of the university world. I hope that on numerous occasions he will draw on his other experience in wider fields and so lead us to enjoy many more speeches from him.
It would he invidious of me to pick out for particular praise or even for particular mention any of the speeches which have been made. However, if he will allow me to say so, I was particularly struck by the opening speech of the noble Lord, Lord Annan, who chose this as an extremely appropriate subject for today's debate. It seemed to me to be very original, provocative and well delivered and it raised a number of issues, some of which I may be able to answer but most of which will go into the general pool of ideas

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which will emerge from the national discussion. I do not know whether he is still here, but I was also particularly struck by the speech from the Cross-Benches of the noble Lord, Lord Todd, which happened to coincide very closely with some of my own ideas and with those of my noble friend Lord Beloff, who I see has endured to the end—like the rest of us.
The noble Lord's Motion speaks of the necessity for change In reply I would say that, on the experience of the past, change in tertiary education is absolutely inevitable. Throughout my life such change has been taking place and it continues to take place. In fact, there has been a revolution. The point was made by the noble Lord, Lord Flowers, and I believe also by the right reverend Prelate the Bishop of Coventry, that change has never proceeded at a faster rate than in the years following the Robbins Report. And the very public discussion to which I have already referred indicates a new epoch, based in part upon the development of the needs of society but partly also on demographic change. And the constraint of economic and fiscal pressure is already under way.
However, I agree with those who said—and the last to say it was the noble and learned Lord, Lord ElwynJones—that we ought to begin by asking ourselves seriously what it is that we expect from these various institutions whose future we have been discussing: the universities, the polytechnics and the colleges of further and higher education. The noble and learned Lord and the noble Viscount, Lord Hanworth, asked: what is a university for? What do we look for in a polytechnic? Certainly a polytechnic is today a totally different institution from that which was initiated by my grandfather, in conjunction with Sidney Webb, about 100 years ago. What should be the relationship of these institutions to one another? This question was raised by the noble Baroness, Lady David, I believe. And what should be the relationship between the schools, the adult education movement, the learned professions, the Churches, the research institutes and the population at large? What should be their internal governance? Our educational establishment has been built up somewhat higgledy-piggledy: like Topsy it has grown. It may not he the worse for that, but it makes generalisation more difficult and it makes dogmatism, perhaps, a little more dangerous.
There are propositions about which I do feel inclined to dogmatise somewhat. The first is that, however much tertiary education is to an overwhelming extent likely to remain dependent on funds from central government sources, tertiary education must remain independent of the state. It should, therefore, look to a multiplicity of' sources of finance wherever it can, whether from the public purse or from the private purse. The reason is basic: the independent structure of higher education is, in its way, as important as an independent judiciary or independent professions. Even though, therefore, the government remain the principal source of income for almost all these institutions, multiplicity of funding sources—even from government funds—is essential. Other sources of finance are even more valuable where they can be found.
May I say to the noble Lord, Lord Irving of Dartford, that Robinson and Wolfson and Nuffield
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colleges at Oxford and Cambridge proved the validity into the 20th century of independent benefactions. Oxford and Cambridge, of course, retained both their prestige and their great reputations. I expect that they were among the institutions of excellence in the mind of the noble Lord, Lord Annan. But let not all these benefactions go to Oxford or Cambridge.
My noble friend Lord Beloff deserves, if he will allow me to say so, immense praise for his work in connection with the independent Buckingham University. May I say—since he mentioned my own modest connection with it—that when the degree ceremony takes place there a very high proportion indeed of the graduates are precisely those overseas students who have figured so largely and so eloquently in the speech of the noble and learned Lord, Lord Elwyn-Jones, and the noble Baroness, Lady Seear.
In any event, the American systems of funding through alumni associations and the special appeals referred to by the noble Earl. Lord Perth (about St. Andrew's University and others) are not, in my opinion, widely enough practised here, and in the case of the polytechnics have hardly been practised at all since the days of my grandfather.
Quite apart from funding by donors, organisations such as the Beit Foundation in the field of research fellowships or the Medical Research Council, which in addition to government funds has private funds of its own, the various agricultural research institutes, the research foundations associated with particular diseases like arthritis and multiple sclerosis, organisations for industrial research and the connections between industry and universities which take place as a result either of scholarships or of research contracts, vary very much, but they do keep teaching and research closely allied and independent of one another inside the universities and provide that multiplicity of fundings of which I have been speaking.
May I say that I fully accept what has been very largely a matter of discussion; namely, a connection between research, or pure scholarship, and the teaching function. This is not to say that one necessarily adopts a snobbish attitude towards research. The young—and universities are very largely about the education of the young—need association with the frontiersmen of knowledge, as I believe the noble Lord, Lord Fulton, said. The frontiersmen of knowledge, in my opinion at least, need constant contact with those who teach the young, and with the young themselves, so that their fresh minds can maintain the impetus and vitality of thought and research. I am not by any means saying that there is not a place in the structure for pure teachers, pure researchers or for institutions devoted to teaching, as some speakers have suggested.
I began my speech about money. Money is indeed necessary. Nothing can be done without it, and it is, however, somewhat ironical that nuclear physics which began in such a small way with Heath Robinson equipment, should now have some of the largest and most expensive research and teaching machines in the world, some of them even funded internationally, like CERN in Geneva. We are now spending £3.5 billion on higher education. Although it is obvious that the university and higher education world is going through constraints of an economic and financial kind, I do not

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think that all the anxiety which was alleged to exist by the noble and learned Lord is quite justified in the face of a figure of that kind.
I would, in passing, say that one must, when one is dealing with a single area of public endeavour, remember that it is not enough to identify an area of human need to say that the human need will be entirely met if we lavish a great number of megalitres of public money upon it. "What no money?" said the great Rutherford to his students, "Why then, we must use our brains." There I endorse what the noble Lord, Lord Annan, said about diversifications, and what the noble Lord, Lord Flowers, said about mergers and concentration of effort. I find that the demand of constant refunding with new money is not enough in the face of all the other demands—all of them openended—which are quite rightly made upon the public purse. We postponed the Unstarred Question of the noble Lord. Lord Hatch of Lusby, who was recently demanding much more money for starving countries in Africa. We know that the noble Lord, Lord WellsPestell, is constantly urging the needs of the sick. My noble friend Lady Masham of Ilton quite rightly urges in this context, but not always in this context, the needs and requirements in terms of money of the handicapped and the disabled. That is all right, but one must realise that each and all is a drain upon the other. State after state which has experimented with the heresy that money is a cornucopia filled from some supernatural widow's cruse has found its progress coming to a grinding halt followed by a humiliating journey to Canossa in the shape of the International Monetary Fund.
May I say, in passing, that student behaviour does not enter into this equation at all. According to my way of thinking, it is lamentable, it is a mark of defiance of authority and sometimes of the violence which we all deplore; but it should not lead to a restriction of finance. That was the point made by my noble friend Lord Alport who is sitting there ready to take my place on the Woolsack.
There is another point about which I should like to offer a few thoughts. Again I refer to what was said by the noble Lord, Lord Annan, and the noble Baroness, Lady Seear. Tertiary education is about quality and not simply about quantity. I am glad both those contributors stressed the point. You may anathematise élitism as much as you will; you may concede, as you must, that in the republic of learning there is no place for privilege of wealth or privilege of birth, and that the Robbins principle of access for all willing and qualified participants is the right approach. In that connection, I do not accept for a moment the strictures of the noble and learned Lord that that principle has been thrown overboard. Quite the contrary. But I stress that it is access to higher education and not simply to selected university institutions that is referred to.
Tertiary education is, I would say, amongst other things, about the pursuit of excellence or it is nothing. Although applied knowledge may be of a great utility to the nation—and I fully support what has been said this evening and what is cerainly in the thinking of my right honourable friend, about the necessity of a shift towards vocational and practical training and
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education in the higher education field—if we ever idolise utility as an end in itself, higher education will lose at once its inspiration and its moral authority. Scholarship for its own sake is an ideal never wholly to be abandoned, either in the field of science or in the field of the arts.
"The integrity of knowledge" was phrase used by the noble Lord, Lord Flowers, and it is one which I particularly liked. Never make fun of the absentminded professor. His mind may be absent from his bootlaces because it is far away, seeking higher things.
Not all professors are so admirable. You can overdo absent-mindedness about material things. In the nature of things, whether we live under a dictatorship or whether we espouse communist or capitalist ideals, a nation is going to be administered to a very large extent by its graduates. But graduates—this has been said, though I forget exactly by whom—are not necessarily scholars. In the Middle Ages, when most of your Lordships could write no more than the sign of the cross wherewith to authenticate your letters, Oxford and Cambridge were busy producing graduates in the learning of the day to do their writing for them and even to administer the country. After the Reformation, learning at our two English universities—Scotland already, I think, boasted four at that time—first moved into a concentration on the secular classics of Latin and Greek and finally to a kind of Sargasso Sea in which real scholarship was hardly at a premium and genuine men of learning like Dr. Johnson, although he was an Oxford man, were hardly amongst the most successful.
It is odd that, despite that, despite Blackstone's professorship, law was never studied as a university degree subject throughout the 18th century. What legal learning there was was imparted to people like young Shallow at the Inns of Court, between the chimes of midnight and other occupations. Again, as a bencher of one of the Inns of Court, may I say that noble Lords would be quite pleased—and so would the noble Baroness—to see what a number of overseas students we do call to the Bar. The same, of course, is true of the other part of the profession, but it is particularly true of the Bar.
The point I am making is that in the midst of this preoccupation with the classics and similar learned subjects, science, technology and even mathematics were for a very long time almost ignored until the need of them was suddenly rediscovered somewhere in the beginning or in the middle of the 19th century.
This takes me on to another point I want to make. It is the need for a multiplicity of disciplines in the greater part of our institutes of higher education—and I am glad that that point was made by the noble Lord, Lord Flowers—even going as far as the need for a multiplicity of scientific disciplines. Polytechnics must never be monotechnics, and universities, though each may have its especial glory (such as the Cavendish at Cambridge. or the Clarendon at Oxford), must be multidisciplinary in character, or nothing. I think that the noble Lord, Lord Grimond, made that point, too.
Both England and Scotland were madly short of scientific chairs and lectureships until the 1920s. Generally speaking, the more vocational aspects of higher education were, until very recently purveyed in

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my grandfather's Regent Street Polytechnic, or the predecessor in Strathclyde, called Anderson's Institute, which were indeed pioneers in their day. But they had not the funds to keep up the pace.
Moreover, long after the classics had ceased to enjoy their primacy in prestige and professional chairs, there was (as the noble Lord, Lord Todd, quite rightly said) a kind of social snobbery in what might be called—even in the scientific disciplines—pure science, as against, for instance, engineering. That is a point which was stressed by my noble friend Lord Caldecote. The older universities, in particular Oxford, I think, were long kept out of some of the most exciting fields of scientific learning.
I do not think that the world has fully appreciated the extent to which this nation is in debt to my noble friend Lord Eccles for his White Paper in the late 'fifties, I think it was. The same remarks apply in regard to the noble Lord, Lord Bowden (who is still here with us, and who took a notable part in the debate) for his work in Manchester, and to many other pioneers. Their work led first to colleges of advanced technology, and then to institutions modelled on the Technische Hochschulen, on the continent. Finally in this connection, I would mention the noble Lord, Lord Robbins, for his epoch-making report in the time of the Macmillan Government.
The modern university and the modern polytechnic are essentially multidisciplinary to an extent never appreciated before this present age. If evidence were required of the need for change (which is the theme of this debate) let those concerned consider this. The academic world has been transformed during my own lifetime and is no doubt undergoing change even as I speak.
I have not mentioned—though I do so now—the Open University, that gate of opportunity to the latecomer, which was referred to several times in the debate, as, for instance, by the noble Lords, Lord Annan, Lord Perry of Walton and Lord Wilson of Rievaulx. I was, I confess, originally extremely suspicious when the Open University was launched, but I now publicly recant, and in doing so draw attention to the work of my noble and learned predecessor. Lord Gardiner. So far as I know, he was the only human being in history who has been both chancellor and an undergraduate in statu pupillari at the same university at one and the same time. I am glad to know that the university is currently enjoying something like £60 million of public funds.
I am glad that the Motion includes colleges of higher education. I cannot exaggerate the importance of these in the total picture. I am convinced that in this country we have consistently under-estimated the importance of tertiary education at all levels. If we are to make comparisons with the output of graduates in other countries, I think we should remember that some of our colleges of higher education are providing courses which, though technically would not lead to degrees, are producing results which would certainly lead to degrees if they took place anywhere else but here.
I think that perhaps we have concentrated too much on school education, too little on vocational courses; and within vocational courses perhaps to little on their academic component, which, after all, is what distinguishes them from apprenticeships. We have
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also paid too little attention to business and industrial management studies, and I am afraid that we have allowed Harvard to steal a march on us here.
I would applaud the existence of research departments in polytechnics, universities and colleges of higher education, especially when they carry on contract work for government, industry and business generally. For too long, our tertiary education has been too narrow. Pure learning has always been at the heart of university life, but multiplicity of discipline is essential to the spread of a generalised culture.
Here, may I come back—because I am now reaching my conclusion—to my original questions? What are these institutions for? I have never accepted the formula of the two cultures put forward by the late C. P. Snow. Culture is a continuum. It moves imperceptibly from the classics to nuclear physics, from religion to biochemistry, from philosophy to engineering, from languages to mathematics. At the outset of this speech, I was asking among other questions what should be the relationship between these tertiary bodies and the people as a whole. The noble Lord, Lord Rochester, I thought, provided a partial answer. A section of the answer at least must be the spread of a generalised culture throughout the community. The point was echoed by the noble Lord, Lord Grimond, and by my noble friend Lord Caldecote. I have said that again and again, and I now repeat it in this particular context.
A free society needs cement as well as freedom to differ. However much we may spend our time airing our differences in detail, we need to develop as a society the means of expression and institutions which bind us together in common loyalty. Our possession of our Royal Family is, of course, one of these institutions. I would add that our Christian inheritance is another, our common law and an impartial juciciary, a third. But let us not neglect our seats of learning, old and new, academic and vocational, as another. Let the universities, the polytechnics and the colleges of higher education play their full part in bringing a generalised culture to the nation and they will earn the gratitute of their fellow countrymen. They are among the leaders and unifiers of society. I trust that, under any foreseeable government of any political colour, so they will long remain.
11.27 p.m.
Lord Annan: My Lords, it was Lord Macaulay, I think, who, speaking of the difficulty that readers of Spenser's Faerie Queene came up against, said:
"Very few and very weary are those who are in at the death of the Blatant Beast".
I congratulate your Lordships that quite a number are here at the end of this debate. I should like to thank all those who took part in it. I have listened to all the speeches and I have been enormously impressed by the expertise and the devotion to the values of higher education that have been shown here this afternoon and tonight.
I must naturally thank the ex-Prime Minister, the noble Lord, Lord Wilson of Rievaulx, for choosing to make his maiden speech in this debate. I want particularly to thank the noble and learned Lord the Lord Chancellor and the noble and learned former

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Lord Chancellor for winding up the debate and showing how much they value those things that I remember having to declare that I would promote to the best of my ability when, some years ago, I was appointed a Fellow of King's College, Cambridge. They are education, religion, learning and research. That is what higher education is about.
I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.
House adjourned at twenty-nine minutes past eleven o'clock.

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