Sitting of 15 January 1985

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

  LONDON TRANSPORT (TOWER HILL) BILL [Lords]
  Order for Third Reading read.
  Queen's Consent, on behalf of the Crown, signified.
  Read the Third time and passed, with amendments.

Oral Answers to Questions
  SOCIAL SERVICES

    Cervical Cancer Screening
    Mr. Chris Smithasked the Secretary of State for Social Services whether he is satisfied with the provision for cervical cancer screening in Islington.
    The Minister for Health (Mr. Kenneth Clarke): Health authorities are responsible for operating the cervical screening programme within their own districts. I understand that there is concern about the scope of the recall arrangements in Islington. We are taking this up with the authority and I shall write to the hon. Member when the inquiries are completed.
    Mr. Smith: Does the Minister agree that this area of health care is of great importance to women? Does he further agree that until we get proper recall systems throughout the country, and a proper call system for women to be screened for this form of cancer throughout the country, the provision of services will be inadequate? Does he have any intention of providing funds to district health authorities to enable them to make such provision?
    Mr. Clarke: I agree that cervical cancer is a major cause of avoidable death. We shall do everything possible to continue to reduce deaths caused by it. We have given advice to all district health authorities, asking them to set up effective recall systems, especially for priority groups of women who are most at risk. We shall take up with Islington the fact that, although it has arrangements, they do not seem to comply with our guidance. I shall write to the hon. Gentleman about that. Call systems require an authority or a practice to have an adequate age-sex register of their patients, but not all of them do. As we make more advances with the computerisation of family practitioner committees, and as better information is available to them, I hope that we shall move towards the introduction of call systems if research shows them to be effective.
    Mr. Dobson: Will the Minister confirm that Camden and Islington FPC is not unique in not having a scheme? Will he confirm that more than 25 per cent. of FPC areas have no schemes whatever?
    Mr. Clarke: The schemes vary. Good local schemes are much more effective than the national scheme that we replaced. Islington is operating a scheme but it is not of the form that we have recommended and we are asking it why it does not introduce an automatic recall scheme for at-risk groups every five years. We have just reminded authorities again of their duty to have a local recall system. As we advance further with computerisation and get new FPCs going I believe that we shall get them all up to the standards of the best.
    Dr. Glyn: Although my right hon. and learned Friend has asked local authorities to examine their recall systems, what powers of enforcement does he have?
    Mr. Clarke: We do not use legal powers in this area. We give guidance and instructions and inform authorities of their duty to have a local recall system. I do not find resistance to the idea at local health authority level. We are merely ensuring that we encourage all of them to make progress.

    Social Security Reviews
    Mr. Andrew Bowdenasked the Secretary of State for Social Services if he will make a statement on the current state of his social security reviews.
    The Secretary of State for Social Services (Mr. Norman Fowler): I am currently considering the work which has been done on pensions, benefits for children and young people, supplementary benefit and housing benefit. I hope to be in a position to announce proposals for change in the course of the next few months.
    Mr. Bowden: I fully accept the need for such reviews, but will my right hon. Friend bear in mind that it would be quite wrong if, to obtain some limited savings on administration by streamlining certain areas, he dovetailed various allowances into one level, which meant that those on the highest level no longer received them? Can he assure me that those who get the maximum amount will not be affected, as they are inevitably those who are in the greatest need?
    Mr. Fowler: One of the aims of the reviews is to bring help to people in the greatest need. I shall have to ask my hon. Friend to wait and see in regard to the proposals. I shall not make commitments on that or any other benefit.
    Mr. Park: What is the primary purpose of these reviews? Is it to save money, or to discover whether the services are adequate?
    Mr. Fowler: The reviews have a whole range of purposes. One of the first is to see whether we can reduce the complexity of the system, which I think the hon. Gentleman will agree is bad for claimants and expensive to administer. A second purpose is to ensure that we are making best use of available resources and channelling them to the people in most need.
    Mr. Marlow: Does my right hon. Friend agree that one of the best ways to alleviate the problem of family poverty is to provide some sort of an allowance for those mothers who stay at home to nceslook after their children? Will he talk to his right hon. Friend the Chancellor of the Exchequer with a view to transferring some of the cash from the married man's allowance to those spouses who are not in employment and who stay at home to look after children?
    Mr. Fowler: I hear what my hon. Friend says. I am talking and will talk to my right hon. Friend about the inter-relationship of benefits and taxes.
    Mr. Gordon Brown: Will the Minister confirm that among the recommendations of the social security review committees is the abolition of heating additions, and that this could be the last winter that pensioners receive heating allowances, no matter how cold the weather? If, as he has admitted to me in an answer published today, Treasury officials are attending meetings of the social security review committees, how will it be possible for him to resist the Treasury's insatiable demands for public spending cuts?
    Mr. Fowler: As to the first part of the hon. Gentleman's question, as I said, I am not making commitments on particular benefits. As to the second part, not just Treasury Ministers or officials, but officials and Ministers from other Departments and people from outside Government are attending. If the House contrasts that with what the Labour Government did in 1978 when they had a review of supplementary benefit carried out entirely by civil servants, it will agree that the way in which we have approached this matter is infinitely superior.
    Mr. Galley: I am grateful for my right hon. Friend's assurance about simplification. In seeking to simplify the system, will he seriously consider the possibility of a simple minimum income support system to replace the current complex supplementary benefit, which acts as a gateway to a plethora of other benefits which, in turn, increase the poverty trap and allow some people to milk the system?
    Mr. Fowler: A whole range of proposals have been put forward around that idea. They will be considered.
    Mrs. Beckett: Does the Secretary of State admit that for two reasons the reviews are of limited value only? The first is the no-cost theme which pervades them all, and the second is that he and his Department persist in introducing changes which will be disadvantageous to claimants on pensions or benefits without waiting for the result of the reviews? I have in mind the proposal contained in the Social Security Bill, through which 44 per cent. of those who receive invalidity benefit will lose out. How can the Secretary of State claim that the reviews are fundamental when he is making such changes all the time?
    Mr. Fowler: The hon. Lady must recognise that we cannot stop all change inside the social security system while the reviews take place. The point of the reviews is to have a new look at the whole of social security. It is the first time that it has been done for many years. It is long overdue, and I am surprised that when the Opposition were in government they did not do something of the same kind.

    Secure Psychiatric Units
    Mr. Kilroy-Silkasked the Secretary of State for Social Services if he will make a statement on progress in establishing regional secure psychiatric units.
    Mr. Kenneth Clarke: By the end of 1984 seven permanent regional secure units were open. These will eventually provide a total of 264 places, of which about 120 are now staffed and available. In most units, the places are being brought into use in stages. Seven further permanent units providing in total a further 141 places
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    were completed and undergoing commissioning. These units are expected to admit their first patients in the spring. In addition, two pemanent units providing a total of 128 places are under construction and are expected to be completed during 1985. Four further permanent RSUs, providing over 170 places, are at various planning stages.
    Mr. Kilroy-Silk: Is it not an absolute disgrace and scandal that, over a decade after the Butler committee recommended the establishment of such units as an urgent national priority, regions such as Oxford, North-East Thames and the West Midlands still do not have units despite having received millions of pounds from the Government, and patients from their regions are detained unnecessarily and inappropriately in special hospitals and prisons? Will the Minister ensure that those regions establish units for mentally disordered patients?
    Mr. Clarke: The hon. Member has pressed me on this matter for some time and I have considerable sympathy for some of the points that he makes, but, with respect, his complaints are getting out of date. I have announced a programme which at least is achieving substantial success. We shall have 600 places by 1985. Recently I took up the matter of Oxford region at the regional review which I conducted with the chairman and officials of that region. We set them the priority task of coming back with plans to catch up with the rest.
    Mr. Richard Alexander: May I assure my right hon. and learned Friend that his statement will receive a wide welcome from those who are interested in these matters. Is he aware that those who are working in the special hospitals are particularly concerned about the commitment of the Government to regional secure units? Will he consider further the possibility that if areas do not wish to have regional secure units in their communities they should be put into existing special hospital grounds?
    Mr. Clarke: I agree with my hon. Friend that we should regard regional secure units as part of a range of treatment, ranging from the ordinary psychiatric hospital in the National Health Service, which should deal with many difficult patients who needs secure accommodation, all the way across to the special hospitals which deal with the most difficult patients. We are not laying down a blueprint for every region. They can adopt their own approach. However, all of them must have regional secure units as one part of a range of care, all of which is very important.

    Pensioners (Heating Assistance)
    Mr. Winnickasked the Secretary of State for Social Services what representations he has recently received about financial assistance for pensioners for heating purposes.
    Mr. Andrew F. Bennettasked the Secretary of State for Social Services how many representations he has had about problems of lack of heating for elderly people and for families with children as a result of the changes in the heating regulation for supplementary benefit.
    The Minister for Social Security (Mr. Tony Newton): In November there were changes to the rules for paying supplementary benefit weekly additions for special needs, including heating additions, to pensioners and others receiving the higher long-term rate of benefit. At

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    the same time we extended age-related heating additions to supplementary pensioner householders aged between 65 and 69 and introduced an enhanced heating addition for those aged 85 or over. Heating additions in respect of children were not affected. Since 18 June, when my right hon. Friend announced the changes, we have received about 1,070 letters, including some 680 from hon. and right hon. Members, about the changes.
    Mr. Winnick: Is the Minister aware of the misery that is faced by so many pensioners during this very cold spell who simply do not have enough money to keep their homes adequately heated? They turn off the heating, wrap themselves in blankets and go to bed very early. Instead of cutting £1 from the heating addition given to those elderly pensioners who need that amount to help them more, why do not the Government recognise the problem involved and give the necessary assistance?
    Mr. Newton: It is precisely because of our conern over this problem that we have massively increased heating additions by comparison with the piffling scheme that the last Labour Government left behind. When the hon. Gentleman refers to those elderly pensioners who are most in need, may I remind him that part of the package was an increased heating addition for those aged over 85 which has given to them an extra £2.10 a week.
    Mr. Bennett: Will the Minister remind the House of how much last June's change in the regulations saved the Government?
    Mr. Newton: The net saving of the change in the regulations in this respect last June, which covered not only heating additions but all additional requirement payments, was of the order of £60 million.
    Mrs. Jill Knight: Is my hon. Friend not aware that the answer he has given means that there are people aged between 70 and 85 who are disadvantaged by the new arrangements, and that it is wholly unacceptable to any side of the House that elderly people in this age group should have suffered cuts in their heating benefits, as Department of Health and Social Security officials have confirmed?
    Mr. Newton: I understand what my hon. Friend says, but I must ask her to bear in mind that the original rationale of this deduction was the full difference between the short and the long term rates of supplementary benefit. That is how it was introduced by the Labour Government. On that basis, the deduction would now be not £1 but £11 for a married couple.
    Mr. Speed: Is my hon. Friend aware that the special supplement that he announced yesterday apparently will not apply to Kent, yet Kent has been hit worst by the weather in the past fortnight? That is met with incredulity by many many people in Kent, because there are many elderly pensioners in my constituency. Is my hon. Friend satisfied with that situation?
    Mr. Newton: Frankly, the exceptionally severe weather payments regulation is a pretty weird and wonderful construction. It is operated as best it can be operated on the basis of objective advice from the met office by the chief adjudication officer and I cannot go beyond that.
    Mr. Robert Hughes: Following yesterday's announcement that East Anglia and some parts of southern England
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    are to get special payments, and that the hon. Gentleman's Department is to publicise those payments and invite claims, is he not aware that many other parts of the country are facing serious weather conditions? What steps is his Department taking to draw to the attention of local offices the need for such payments? Would it not be outrageous if claimants throughout Britain were not treated on an equitable basis? Will the hon. Gentleman agree to meet a delegation of Labour Members, especially from Scotland, to discuss the matter?
    Mr. Newton: It cannot be said to be inequitable to operate a regulation on the basis of objective advice from the met office weather stations assessed by the chief adjudication officer. If the hon. Gentleman and some of his hon. Friends wish to meet me or my hon. Friend the Member for Wycombe (Mr. Whitney), or both of us, of course we shall do that.
    Sir Anthony Meyer: Is my hon. Friend aware that the Government's excellent record in caring for the elderly is being disproportionately damaged by the withholding of fuel allowance from some categories of the elderly? Will he urge his colleagues to think again on that issue?
    Mr. Newton: I must make it clear that that applies to all additional requirements. Therefore, the effect varies according to what range of additional requirements exist. Some pensioners' heating allowances will have been affected only to the extent of 50p. I must repeat the underlying rationale and emphasis that part of the package was to enable us to extend heating additions automatically to all supplementary pensions to those over 65 and not least to give extra help to those most likely to be most in need, the over-85s.
    Mr. Wilson: Is it not a perversion of social justice that a minor cold snap in the south of England can trigger off exceptional payments, when it can cost up to 30 per cent. more to heat a similar type of house in Aberdeen as a matter of general conditions? Should there not be a complete review of the heating additions so that claimants receive the benefits to which they are entitled according to climatic requirements so that, wherever one lives in the United Kingdom, one's house is heated to a reasonable standard?
    Mr. Newton: I understand that the hon. Gentleman had a long talk with my hon. Friend the Member for Wycombe (Mr. Whitney) about those matters last year. The very fact that, as measured under the regulation, the weather now is more severe in the south than in the north illustrates the difficulty of some blanket assumption that it is always more serious in the north. If the hon. Gentleman were to ask me to have a further look at the working of the regulation, that would be very much the kind of point my right hon. Friend the Secretary of State has in mind in the social security review.
    Mr. Roger King: Will my hon. Friend give some consideration to concentrating heating allowances during the winter months when they are desperately needed perhaps at the expense of not offering any additional heating benefit during the summer months?
    Mr. Newton: I shall certainly consider that point.
    Mr. Meacher: Since the Government have now spent nearly £5 billion on the coal strike, do they still believe that that is a good investment for Britain, when the alternative

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    could be the use of surplus coal stocks by providing every pensioner in Britain with a Christmas fuel allowance bonus of £100 for each of the next five years? Is not the eradication of hypothermia a much better investment for Britain than the present destructive use of our scarce fuel resources?
    Mr. Newton: There have been few things more depressing this year than the Opposition's persistent support for policies which were bound to result in more expensive coal, to the disadvantage of pensioners.

    Single Payment Claims
    Mr. Pikeasked the Secretary of State for Social Services if he is satisfied with the present arrangements for dealing with single payment claims by his Department.
    The Parliamentary Under-Secretary of State for Health and Social Security (Mr. Ray Whitney): We are broadly satisfied with the existing arrangements, given the complexity of the regulations, but one of the aims of the social security reviews to which my right hon. Friend the Secretary of State has referred is to simplify and improve the working of supplementary benefit generally.
    Mr. Pike: Does the Minister accept that, in the main, the people applying for single payments are the most deprived and the most in need of urgent assistance? Does he really expect them to wait for a Government review? Does he agree that urgent action should be taken to ensure that it is made easier for those people to obtain the help that they need immediately, without having to wait?
    Mr. Whitney: I am satisfied that the regulations are being applied efficiently and with urgency where appropriate. The appeals system is also working effectively. Nevertheless, we recognise that there is reason for improvement. That is why we have launched the reviews of the social security system which, as my right hon. Friend said, are somewhat overdue.
    Mr. Howard: A few moments ago my hon. Friend the Minister for Social Security described the emergency heating regulations which form part of the single payment regulations as "weird and wonderful". Does my hon. Friend accept that they should be examined with some urgency? In particular, will he investigate the reason for the exclusion from the arrangements announced yesterday of Kent and, in particular, my constituency, which is among the areas worst affected? Will he ensure that the regulations are brought into some discernible relationship with reality?
    Mr. Whitney: As my hon. Friend the Minister for Social Security acknowledged, we recognise the complexities of this, but I refer my hon. and learned Friend to the criteria published in the "S Manual", which is available in the Library.

    NHS (Annual Report)
    Mr. Christopher Hawkinsasked the Secretary of State for Social Services what response there hs been to the publication of the first annual report on the National Health Service.
    Mr. Kenneth Clarke: The report has been widely welcomed as a clear description of the developments and
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    achievements of the Health Service in England over the past five years and of some longer-term trends over the past decade.
    Mr. Hawkins: Does my right hon. and learned Friend agree that the main conclusion to be drawn from the report is that we have significantly expanded the Health Service and that it is safe in our hands? Will he ensure that if the annual report is repeated in future years more emphasis will be given to the performance of the Health Service in the regions, rather than just the national position?
    Mr. Clarke: I agree with my hon. Friend. The report focuses attention on the real measure of what is happening in the Health Service—the number of patients treated and the results in patient terms. The report shows that in 1983 alone 300,000 more inpatients were treated in our hospitals, which is a bigger increase than the Labour Government achieved in five years. I agree that future annual reports should show more on progress, perhaps broken down by regions.
    Mr. Meadowcroft: I recognise the usefulness of the report, but is not one of its defects the fact that it fails to evaluate whether the people of this country are actually healthier, and merely seeks to determine whether more people have been treated, which is far from the same question?
    Mr. Clarke: The health status of this country remains extremely good. I see no evidence that people are getting more ill. There is, however, evidence that the Health Service is providing ever more treatment.
    I agree that we should consider how to give more emphasis to preventive medicine so that people do not become sick in the first place, as my hon. Friend suggested yesterday. We are concentrating on all those areas because the purpose of the entire system is to look after the health of the country.
    Mr. Eggar: I welcome the annual report. May we hope that future reports will set clear performance targets for each region and assess performance against those targets?
    Mr. Clarke: We are devoting a great deal of work to producing a credible means of measuring the performance of authorities. That is now well advanced and the sooner we can put it in place and have a real means of comparing performance in different areas the better it will be for all of us, including the service and the patients.
    Mr. Carter-Jones: Does the Minister accept that the whole House would approve that part of the report which describes the advantages of taking elderly people out of hospital and into the community? Will he tell the House now or publish in the Official Report, the impact of rate-capping on that highly desirable exercise?
    Mr. Clarke: I am grateful for the hon. Gentleman's support of our policy of care in the community, which reduces the number of unnecessary long-stay hospital patients and provides better facilities elsewhere in the Health Service and in the community. I do not believe that rate-capping need have any impact on that. Rate-capping affects the totality of local authority expenditure. It affects the expenditure of those local councils which are spending excessively across the whole range of their activities. It is thus quite wrong to suggest that its impact need affect desirable community care, which other authorities provide without getting into trouble with rate-capping.
    Mr. Churchill: While I warmly welcome the positive step that the Government have taken to increase the number of kidney donor transplants, is my right hon. and learned Friend aware of the great anxiety about the inadequate provision of dialysis? Does he accept that it is wholly unacceptable, given the resources already within the Health Service, that each year several hundred people are condemned to death by the failure to provide a known treatment?
    Mr. Clarke: Throughout our period of office we have recognised the need for more renal treatment and have given it a high priority. The figures show that we are increasing the number of patients substantially each year. Now that our new drive is going forward on the transplant programme in particular, the transplant figures are extremely encouraging. Obviously we have further to go. With respect to my hon. Friend, the figures that he quoted in the second part of his question are of an elastic quality, because we depend on a mass of statistics. His emotive language is not justified by facts from hospitals. It is not necessary to dramatise the case in that way or to persuade us of what we already know, which is that there is a need to continue to develop the kidney services.
    Mr. Meacher: How does the Minister justify blocking the appointment of general managers whom Conservative health authorities wish to appoint, for example, in the Oxford region and Lambeth, when at the same time he insists on appointing as chairman of the NHS management board a man who, at his press conference, admitted that he knows little about the NHS and always uses private health insurance for his family, and whose immediate background is confined to the Port of London Authority and the National Freight Corporation?
    Mr. Clarke: We shall come to questions about the specific issues later. The point is that if we are to improve the service, put more money into it and get better value for money we must, among other things, improve its management. With a good, cost-effective management more patients are treated, whatever resources are available at a given time. It is wrong for the hon. Gentleman to question us, although he is entitled to do so, about what he perceives to be inadequacies in the service, and then to say that Ministers should not take a view about who holds key posts within it. Presumably, the hon. Gentleman prefers jobs for the boys, Buggin's turn, to allow NALGO to dominate the process, or whatever else takes his fancy. The new general manager of the NHS has an excellent track record of management, which is now being put at the service of the NHS and its patients. That is a wholly welcome development.

    Ancillary Services
    Mr. Hargreavesasked the Secretary of State for Social Services what savings have been achieved through putting ancillary services out to competitive tendering.
    Mr. Parryasked the Secretary of State for Social Services if he is satisfied at the speed health authorities are dealing with privatisation in the National Health Service; and if he will make a statement.
    Mr. Fowler: I am satisfied with the progress being made by most health authorities in drawing up and implementing their programmes for competitive tendering. We have asked health authorities to provide us with
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    up-to-date figures on savings, but information available to us so far suggests that the policy will result in savings of nearly £20 million over the next three years.
    Mr. Hargreaves: I welcome the news that savings are to be made. That is good news for patients, because of the increasing demands on the Health Service. What plans does my right hon. Friend have to extend competitive tendering to other sections of the Health Service?
    Mr. Fowler: Our first priority is to ensure that the programme of competitive tendering for domestic services in the Health Service is continued and brought to a conclusion in 1986–87. That is our aim. There are substantial further savings still to be made. As my hon. Friend said, the point of savings is that the money saved goes to patient care. That is what our policy is about, and the House is beginning to see it work.
    Mr. Willie W. Hamilton: Is the Secretary of State not worried that at least 40 Conservative Members have direct financial interests in profiteering from the privatisation of these services? Does he not recognise that the code of conduct laid down for local councillors at local level is much more stringent than it is for hon. Members of this House, who can go into the Lobby and vote to line their own pockets?
    Mr. Fowler: I am much more concerned that some Labour Members take their line from trade unions such as COHSE and NUPE and apply an entirely uncritical attitude to those policies.
    Mr. Maclean: Is my right hon. Friend aware that some health authorities may be including unnecessarily restrictive clauses in their tendering documents, which are designed to ensure that private companies cannot compete and that contracts are awarded to in-house, fully unionised labour?
    Mr. Fowler: I shall consider any points that my hon. Friend may wish to raise with me. Of course, in some instances, the in-house organisation will produce a better price and a better service. That is also part of the policy of competitive tendering and it provides savings for the Health Service.
    Mr. Dobson: Will the Secretary of State avoid grotesque exaggeration of the savings that may result from privatisation? Will he avoid misleading the House as the Minister for Health did on 23 July last year, when he told me that Merton and Sutton had made estimated savings of £126,000 compared with the in-house tender. That health authority has told me in writing that there was no in-house tender with which to compare the tenders that it had received, as the Minister had said. He said that Medway had saved £357,000 compared with the in-house tender, but that health authority told me that the figure is only £102,000. He said that north Warwickshire had saved £70,000, but the figure is £22,000.
    Mr. Fowler: The hon. Gentleman is fighting the battles of yesterday's debates. We have asked health authorities to provide us with up-to-date figures on savings, and I shall ensure that those figures are at the disposal of the House. I hope that the hon. Gentleman will not continue to take the absurd position that there is a monopoly of skill in cleaning and domestic services inside the Health Service, and that he will support this sensible programme, which means that more money will go to patient care.

    Health Education
    Mr. Dormandasked the Secretary of State for Social Services whether he will make additional resources available to improve the health education services; and if he will make a statement.
    The Parliamentary Under-Secretary of State for Health and Social Security (Mr. John Patten): Since 1979–80 the Government have increased funding of the Health Education Council from £4·5 million in that year to £9·1 million in the current financial year. This is an increase of 39 per cent. in real terms. The council's funding for 1985–86 is currently under consideration.
    Individual health authorities determine the resources to be made available in their districts for local health education. We have been encouraged by the substantial increase in the number of health education officers employed by the NHS in recent years.
    Mr. Dormand: Despite what the Minister says, when will the Government take health education seriously? The Minister knows that, despite what he said, there is no successful continuing health education service. Will he have new consultations with the British Medical Association, the Health Education Council and health education officers in order to provide a better service? Does he agree that a net saving could be made in the Health Service if we had an efficient health education service?
    Mr. Patten: Uncharacteristically, the hon. Gentleman has ignored my answer and has completely ignored what is happening in health education in the regions and districts. In most regional health authorities, health education is part of the regional strategic plan, and almost every district health authority has a health education officer. Great steps have been made by the Government's preventive policies, and more has been achieved on preventive medicine by this Government than by any other.
    Mr. Coombs: Is my hon. Friend aware of the Tesco initiative on food labelling that was announced last week, and does he welcome it? Does he recognise that the need for health education is made even greater if there is to be a proliferation of such initiatives, leading perhaps to extra confusion for the consumer?
    Mr. Patten: Food manufacturers recognise the public concern for greater knowledge about the contents of the food that they eat, and the demand for better food labelling. That is why my right hon. Friend the Minister for Agriculture, Fisheries and Food is consulting the food industry on this important matter, so that he can draw up guidelines which will be easily understood by the consumer and which will not lead to the confusion to which my hon. Friend referred.

    Geriatric Services
    Mrs. Peacockasked the Secretary of State for Social Services what increase there has been in the number of inpatients per available bed in the geriatric services.
    Mr. John Patten: The number of inpatient cases treated per available bed in NHS hospital geriatric units in England rose from 4·2 in 1978 to 5·8 in 1983.
    Mrs. Peacock: Does my hon. Friend agree that this is a good sign of the hospital care that has been extended to
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    our elderly people, and can he confirm that sufficient funds will be made available for their care in the community subsequently?
    Mr. Patten: Yes, we are totally committed to the promise in our 1983 election manifesto to make better health and care for the elderly our great priority. That is why, in geriatric care, we have increased the number of nurses by 11 per cent., the number of consultants by 17 per cent. and the number of senior registrars by 43 per cent. since 1979. That is a considerable record by any Health Service standards.
    Mr. Eastham: Instead of the Minister playing the numbers game on geriatric care, should he not pay attention to the fact that geriatric hospitals are the worst in the medical service, with antiquated wards and inadequacies in the provision for geriatric patients? Is it not about time that we spent far more money in this sector?
    Mr. Patten: It has been the case, as the hon. Gentleman says, that long-stay geriatric hospitals have often been the part of the National Health Service that has been ignored. My right hon. Friend the Secretary of State for Social Services has referred to that form of hospital care as one of the Cinderella services. That is what we are trying to put right, not only by our massive building schemes for new hospitals and geriatric units, but by the advances that we are making in our care in the community processes, by the increase in domiciliary visits by nurses and those who bring meals on wheels, and by increases in day centres and the other things that make up the new fabric of care for the elderly.

    NHS (Statistics)
    Mr. Pavittasked the Secretary of State for Social Services what is the total number of beds in hospitals within the National Health Service in England and Wales, the number of pay beds and the number of beds now awailable in private hospitals, excluding nursing homes for the elderly; what percentage of the population are now covered by private health insurance schemes; and if he will make a statement.
    Mr. Kenneth Clarke: In 1983, the latest year for which figures are available, there were on average 343,090 beds available daily in NHS hospitals in England. On 31 December 1983 there were 2,987 authorised pay beds in NHS hospitals in England. At the same date, there were, provisionally, 37,980 beds in the private sector, of which 8,100 were in premises with operating theatres. My right hon. Friend the Secretary of State for Wales will send the hon. Member figures for Wales. We estimate that 8 per cent. of the population is now covered by private medical insurance. We welcome the growth of private medicine because patients should have freedom of choice, and because it adds to the country's health care resources and relieves pressure on the NHS.
    Mr. Pavitt: Do not these figures and facts make complete nonsense of the statement by Mr. Victor Paige when defending his BUPA attachment? He said that most people now have private health care and that he would have to take some time to understand the Health Service. Cannot the Minister start thinking again about bringing from business people who have not a clue about health care and provision to run the Health Service? Is it not appalling to pay £70,000 a year to a man whose only previous

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    experience is to preside over the diminution of the Port of London Authority, and over Sainsburys, when he thinks that baked beans going in and out of a checkpoint are the same things as patients?
    Mr. Clarke: The hon. Gentleman has slightly misquoted Mr. Victor Paige, who was describing the arrangements for managers in industry and was not talking about the generality of the population. Unusually for the hon. Gentleman, he is making trite points in a silly attack on Sainsburys and the rest, when we are talking about the appointment of a powerful manager to head a successful and expanding service. We should be concentrating on what we are producing by the changes that we are making, and on the room for changes. We are treating 12 per cent. more patients each year in our hospitals than was the case in the last year of the Labour Government and no fewer than 45 per cent. more day cases each year than in 1979. The appointment of a general manager is the next step in carrying on improving the Health Service.
    Mr. McCrindle: Notwithstanding the rather carping attitude of Labour Members, has my right hon. and learned Friend recently noticed evidence that NHS patients are progressively being treated from time to time in private hospitals? Does this not underline the fact that, far from being competitive, there is a strong argument that coexistence between the public and private sectors is to the benefit of all?
    Mr. Clarke: I strongly agree with my hon. Friend. We should be interested in whether we are treating the patients properly and getting waiting lists down. That matters far more than who owns the building and who pays the staff. If it is a more cost-effective way of treating patients, we would welcome collaboration between the NHS and the private sector if a health authority finds that it gets more inpatients treated that way.

    Limited List Prescribing
    Mr. Wallerasked the Secretary of State for Social Services what recent representations he has received about his proposals to limit the range of drugs prescribed under the National Health Service.
    Mr. Fowler: I have received representations from a wide range of individuals and organisations on both the principle and the detail of the scheme. Consultations are continuing on the content of the limited list, which will be finalised next month.
    Mr. Waller: Is my right hon. Friend aware that, while there is considerable support for the concept of substituting generic preparations for brand name drugs, the idea of having a limited list whereby certain drugs are not available at all on the National Health Service is quite another matter? Will he set his face resolutely against a system whereby a general practitioner has to consider the means of a patient before considering what prescription to write?
    Mr. Fowler: We are not seeking to introduce some kind of two-tier system as has been suggested by some highly misleading advertisements of the Association of the British Pharmaceutical Industry, which I greatly deplore. Let me tell my hon. Friend that my chief medical officer and a team of independent advisers are examining all the drugs that could be on the list. We always made it clear
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    that we would undertake this consultation and that the list was provisional. If we find a branded drug for which there is no adequate alternative, it will remain available for prescription.

  PRIME MINISTER

    Engagements
    Mr. Boyesasked the Prime Minister if she will list her official engagements for Tuesday 15 January.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.
    Mr. Boyes: Is the Prime Minister aware that the Department of Health and Social Services estimates that in 1984 140,000 homeless people, at a cost of £380 million—an increase of over 600 per cent.—will have used board and lodging accommodation, much of it substandard, lacking in heating, lighting and toilet facilities and representing a serious fire risk? Should not the Government be advocating an increase in the amount of cash available for public sector house building rather than a decrease, so that people can escape from despair, desperation and degradation?
    The Prime Minister: No. I believe chat the Government's housing policy is the right one and that most people wish to own their own homes. Home ownership has gone up 1·7 million since we were in power and in accordance with that wish the majority of house building is taking place in the private sector.
    Mr. Sayeed: Does my right hon. Friend agree, and will she take time today to consider, that this nation's economy is not a one-commodity economy, and that to consider it as such is simplistic, if not downright hysterical? Does such a view not ignore the fact that under this Government inflation is down, productivity is up and the export of goods and services is ever-increasing?
    The Prime Minister: Yes, I agree with my hon. Friend. Gross domestic product is at its highest ever level, fixed investment across the economy is at its highest ever real level, retail sales are at their highest ever real level—up 4 per cent. in volume in 1984—profits are up 20 per cent. in the first three-quarters of 1984 and non-oil exports are up 12·5 per cent. in volume in the three months to November over a year ago. Britain is still worth investing in.
    Mr. Kinnock: May I express the wish, with regard to the Prime Minister's last sentence, that many more people agree with her that Britain is worth investing in? Will she accept that on the Opposition side of the House we find the speculation against the pound irresponsible and irrational, but that we also feel that her Government's handling of the current crisis is an epic of bungling indecision that will cost the industries and the households of this country very dear? Will she let this shambles continue, or will she now help the pound by sacking the Chancellor of the Exchequer?
    The Prime Minister: I am not sure whether the right hon. Gentleman means that he would have put interest rates up earlier, not at all, or later. Of course, he will not say—[Interruption.]—because he has not got a clue.

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    The speculation to which he referred has gone on, not only against the pound, but against other currencies. In the last day, record lows against the dollar have been reached by the Swiss franc, the Italian lira, and by the French franc, and the deutschmark also reached a 12-year low. Yesterday, the deutschmark stood at $3·20 in New York. The speculation which the right hon. Gentleman condemns has gone on against all currencies in Europe. We took what we believed to be the right decision because we had to consider exchange rate policy along with several other factors.
    Mr. Kinnock: The truth is that the Prime Minister did not take the right decision in any calm fashion. She and the Chancellor of the Exchequer were eventually forced to panic into taking some kind of decision. As she has compared our condition with that of Germany and Switzerland, is she saying that she would do what the Germans and Swiss do, and that she would intervene? If so, will she come clean and admit it? Will she stop dodging the question and asking what the policies of others are and, instead, tell the country what it wants to know, which is what she and her Government will do to stop the crisis in currency and interest rates?
    The Prime Minister: I recall recently two occasions when Germany intervened. I emphasise that I recall only two occasions. The intervention was not successful, as I indicated — [Interruption.] Will the right hon. Gentleman listen, as he might then learn a thing or two —[Interruption.]
    Mr. Speaker: Order. These are very serious matters. The Prime Minister is seeking to answer the question, and should be heard.
    The Prime Minister: Intervention alone was not successful, because, as I indicated to the right hon. Gentleman, yesterday the deutschmark also reached a 12-year low in New York. No single country has enough reserves to counter large volumes of currency moving round the world. We used the interest rate because we thought it right to do so in the circumstances in the exchange market. I remind the right hon. Gentleman that he predicted doom and gloom in July, when we had to do precisely the same thing. Since July, when he predicted doom and gloom and we eventually managed to get down interest rates, inflation has remained at, or below, 5 per cent., output across the economy has continued to grow, exports have been up in volume and retail sales have been higher in the fourth quarter. What the right hon. Gentleman predicted would happen in July did not happen, and the economy is being properly handled by my right hon. Friend the Chancellor of the Exchequer.
    Mr. Kinnock: In July I asked the Prime Minister what she would do to give new strength to our economy. Since then we have lost 80,000 jobs and billions of pounds have flowed out of our economy. Will she now answer the question that the whole of Britain is asking? What is she going to do to change her policies in order to bring us strength, to stop the speculation, to bring down interest rates and to give us a secure future? The right hon. Lady has not yet answered that question.
    The Prime Minister: The right hon. Gentleman's points are not right. After the interest rate increased to 12 per cent. in July output across the economy continued to grow. Construction output was up 3 per cent. in the third
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    quarter over the second, exports were 6·5 per cent. up in volume in the three months to November over the previous three months and the doom and gloom that he predicted did not come to pass—[Interruption.] It did not come to pass because my right hon. Friend the Chancellor of the Exchequer took the right decision to contain inflation, and we have been containing public expenditure. That is why the Stock Exchange today is 14 points higher than a month ago, 233 points higher than at the time of the 1983 election, 395 points higher than at the time of the 1979 election and 803 points higher than the lowest point under the Labour Government.
    Mr. Rippon: It is a shame to change the subject. Will my right hon. Friend take the opportunity to ask Chancellor Kohl whether he agrees that we are fully entitled to celebrate the end of a war which secured the freedom, not only of Britain but West Germany? Might Chancellor Kohl not agree also that the only aspect we have to regret about our victory on VE day is the fact that the United States did not heed Sir Winston Churchill's advice to shake hands with the Russians as far east as possible?
    The Prime Minister: I know that there is a good deal of feeling that we should have a national celebration of VE day. I understand that feeling and believe that we should celebrate not only victory but peace with freedom and the fact that for some 40 years we have had peace with freedom across Europe. We are considering the form of a national commemoration, which will honour the dead and point to the reconciliation and reconstruction that has been achieved. We shall make an announcement in due course.
    Mr. Steel: Returning to the currency crisis, does the Prime Minister recall that in October 1976, when she was Leader of the Opposition, she said that the drop in the value of pound sterling to $1·66 was due to the lack of confidence of other countries in the Chancellor's policies? Now that the right hon. Lady is in office, does she consider that the current drop in the value of the pound sterling to below $1·12 is a massive international vote of confidence in her Administration's success?
    The Prime Minister: The right hon. Gentleman's question shows that he cannot understand that the strength of the dollar is an entirely new and different phenomenon. Otherwise, the right hon. Gentleman would realise that that currency affects not only sterling but the Swiss franc, the Italian lira, the French franc and the deutschemark, whose value has fallen to record lows. Normally one expects the richest nation in the world to have great outflows of capital to finance other countries. In fact, for some time, the United States has been attracting capital from the rest of the world and has not been putting capital out because of the debts in the rest of the world, because previously the banks overlent and other countries borrowed more than they could repay.
    Mr. Strangasked the Prime Minister if she will list her official engagements for Tuesday 15 January.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Strang: Accepting the Prime Minister's preoccupation today with the sterling crisis, will she take time to reconsider the war of attrition against the miners? The right hon. Lady may believe that the miners are misguided, but they are accepting severe privation and

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    showing heroic determination in fighting for their communities and the dignity of work. Does the right hon. Lady recognise that in June, September and October last year real negotiations which almost secured a settlement took place? Why can we not have a resumption of negotiations without preconditions to secure a principled and balanced conclusion to a dispute which is not helping sterling and is damaging the economy?
    The Prime Minister: Some 73,000 members of the National Union of Mineworkers are not on strike. More than 20,000 members of the NUM have returned to work since the beginning of November, including 1,800 so far this week. The only attrition against the miners is being carried out by the leadership of the NUM.
    Mr. Cartwrightasked the Prime Minister if she will list her official engagements for Tuesday 15 January.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Cartwright: Can I take it that the Prime Minister has now overruled the view of the Foreign and Commonwealth Office, expressed to me last week by letter, that any celebration of the 40th anniversary of VE day would be at best nostalgic and at worse anti-German? Will the right hon. Lady ensure that any celebrations are genuinely international in character and involve all our wartime allies?
    The Prime Minister: I believe that we are entitled to national celebrations, and I have said that we shall be bringing forward some proposals. I hope that those will celebrate the victory of freedom over tyranny and that they will also celebrate 40 years of peace with that freedom. It will, therefore, be a celebration with two aspects to it.
    Mr. Favell: In view of the clamour from Opposition Members for increased public spending, may I ask my right hon. Friend to spare a word for those engaged in the wealth-producing private sector? After all, they have borne the brunt of the recession, they need all the help they can get and, contrary to popular belief, the vast majority of them are not engaged in building roads and sewers.
    The Prime Minister: The health of the public sector depends on having a flourishing private sector, and that
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    depends on not putting so many burdens on those in that sector that they cannot make sufficient profits to re-invest and extend their activities. I absolutely agree with my hon. Friend.
    Mr. Ryman: On a point of order, Mr. Speaker—
    Mr. Speaker: Does it arise directly out of questions?
    Mr. Ryman: It does, Mr. Speaker. In answering questions, the Prime Minister spent seven minutes answering two questions.—[HON. MEMBERS: "Three".] Before the Christmas recess, when a Minister of State at the Home Office purported to answer a question by taking eight minutes, you ruled, on a point of order raised by me, that you would exhort Ministers in future to restrict the length of time they took in purporting to answer questions. The Prime Minister, in her attempt to answer questions, clearly infringed that ruling that you gave before the Christmas recess. I ask for your guidance for future reference.
    Mr. Speaker: The whole house knows that I should like to see shorter supplementary questions, which I think would lead to shorter answers from the Front Benches. In fairness to the Prime Minister, she was answering a very important question put on three occasions by the Leader of the Opposition. As a general principle, however, I agree with the hon. Gentleman that shorter questions would be beneficial.
    Mr. Faulds: On a point of order, Mr. Speaker—
    Mr. Speaker: Does it, too, arise directly out of questions?
    Mr. Faulds: Yes, Mr. Speaker. Two of the three hon. Members who asked questions this afternoon did not, in their preliminary phraseology, refer to the Prime Minister's business today. Is it not the requirement that such a reference should be part of the phrasing of questions, and would it not have been right for you to have drawn the attention of the hon. Members concerned to that fact?
    Mr. Speaker: The hon. Gentleman is entirely right, but I suppose that that preliminary phrase takes up that little bit of extra time. The whole House knows what we are about when we have these open questions.

British Aerospace plc
3.33 pm
The Secretary of State for Trade and Industry (Mr. Norman Tebbit): With permission, Mr. Speaker, I should like to make a statement about the Government's residual shareholding in British Aerospace plc.
My right hon. and learned Friend the Chief Secretary to the Treasury told the House on 14 March last year that it was the Government's policy to sell minority residual shareholdings in privatised companies as the circumstances of the companies, the prospectus undertakings and market conditions permit. In pursuit of that policy, the Government have now decided to sell our residual shareholding in British Aerospace.
Since 1981, when it became the first nationalised industry to be denationalised, British Aerospace has been operating successfully in the private sector. We intend, subject to satisfactory market conditions, to offer for sale all our shares in British Aerospace—48·43 per cent. of the company's issued share capital—in the spring or early summer of this year.
The company has agreed that, before the sale is made, it will recommend to shareholders a resolution providing for the Government to retain a special share in the company. The purpose of this special share will be to ensure that no change may be made without Government consent to the provisions of the company's articles of association which restrict the foreign ownership of shares in the company and require the directors to be British nationals.
When British Aerospace was privatised, the Government said that we would retain at least 25 per cent. of the shares in the company so as to be able to block any changes to those articles. This Government shareholding will be rendered unnecessary by the issue of the special share which will have the same blocking effect.
We will also have the right to nominate a director to the company.
It is the company's intention to raise new equity capital at the same time as the Government's shares are sold. The British Aerospace chairman, Sir Austin Pearce, is making a statement about this this afternoon.
Subject to the approval, as necessary, of the company's shareholders, it is intended that the offer for sale should take the form of a simultaneous offering of the Government's existing shares and new shares issued by the company.
Mr. John Smith: May I begin by welcoming the right hon. Gentleman back to the Dispatch Box? We are very pleased that his recovery has been so complete as to allow him to resume his duties in full. I am sorry, however, that his return to the House has been to deliver such a miserable and humiliating statement.
Is it not crystal clear that the Government have been pushed and panicked into an early forced sale of these shares in British Aerospace because of their incompetent handling of our financial affairs? Is it not the case that as a result of the yet further postponement of the sale of British Airways shares the books will not balance unless the Government sell something else as fast as they can? Is it not a shabby circumstance that valuable public assets of inestimable long-term significance have to be sold in forced sales circumstances which means that the price to be obtained will be well below the true value?
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Is it not now obvious that the whole privatisation process is not a measured and well-considered transfer of assets as between private and public ownership but a scramble to sell off anything valuable that the Government can get their hands on to disguise their financial bungling? Is it not a measure of the Government's desperate straits that they have been forced to break a solemn undertaking that was given to Parliament, presumably in good faith, that they would retain 25 per cent. of the shareholding of the company so as to maintain essential control?
Is the Secretary of State aware that the special share device upon which he places great reliance has not yet been tested in the courts as being effective, especially in cases where the holder of the share has no beneficial interest whatsoever in the company? Does not the Secretary of State realise that if this rather pathetic device fails to achieve its objective the Government will have lost all control of an enterprise which is crucial to the equipment of our armed forces and to our national security? Is it not ironic that if the Government had not failed to obtain the proper value for the shares they sold in British Telecom they might have been spared the ignominy of this forced sale of British Aerospace?
Mr. Tebbit: May I first thank the right hon. and learned Gentleman for his kind personal remarks?
The Government have not been pushed unwillingly into selling these shares. It has been my ambition ever since the concept of denationalisation was arrived at that we should sell all of them. Indeed, we want to get back as soon as possible to the position which obtained before the Labour Government's incompetent decision to nationalise the industry in the first place.
When the right hon. and learned Gentleman talked about this being related to the British Airways decision and about its being necessary to balance the Government's books, he seemed not to understand that this will happen in the forthcoming financial year, during which I very much hope that British Airways will also be liberated.
If the right hon. and learned Gentleman thinks that the shares will be undervalued and sold too cheaply, he is at liberty to buy some. He is even at liberty to suggest that the Labour Party should buy some; it might help its financial state.
As to what the right hon. and learned Gentleman said about the retention of 25 per cent. of the shares, it is clear that he is unduly excited about the mechanism by which the objective would be achieved and is completely oblivious to the fact that it is the objective of ensuring that control of British Aerospace remains in Britain that is important. The right hon. and learned Gentleman chooses to cast some doubts upon the legal validity of the mechanism of special shares. That is an idea that he seems to have invented out of the air today because he has no other valid criticism to make.
Mr. John Wilkinson: In welcoming my right hon. Friend back today, may I say how wonderful it is to have him in such cracking good form and delivering a statement so dear to his heart and so dear to his right hon. and hon. Friends who, for many a long month, have espoused a hope in their hearts that the totality of British Aerospace would be sold in this way? This example should be a very good precedent for the sale—in fact, the liberation—of British Airways? Could the employees of British Airways benefit in the same way that

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the employees of British Aerospace have undoubtedly benefited, those who had the prescience to buy shares in the company when first it was floated?
Mr. Tebbit: I had best not be tempted into discussing the basis on which British Airways shares will be sold, but it is right that I should say to my hon. Friend that on this occasion, on the sale of British Aerospace shares, the existing employees will have priority rights of application with regard to the Government shareholding, but at present I do not envisage that there will be any special incentives beyond that for them to buy.
Mr. Ian Wrigglesworth: I join with others in welcoming the Secretary of State back to the Dispatch Box and add the wish that his wife will also soon be restored to full health.
May I press the point that has been made, that this is like selling off the family silver to pay for the grocery bills? Does not the Secretary of State accept that selling off capital assets in this way would be more acceptable if the funds raised by the Government were not just lost to the Exchequer and the Government's capital investment record were better than it was? Does the right hon. Gentleman agree that an increase in capital investment in the Budget would be widely welcomed using the revenues that have been received from the British Telecom sale, this sale and other sales of State assets?
Mr. Tebbit: I thank the hon. Gentleman for his kind remarks, particularly those concerning my wife, which I shall convey to her.
The hon. Gentleman referred to capital investment. I must confess that my memory may be at fault, but I thought that the hon. Gentleman was present in the House last Thursday when my right hon. Friend the Prime Minister sought to set his mind at rest over the Government's record on capital expenditure, which is very good—and so is the present record of the private sector of industry.
Mr. Kenneth Warren: May I also say how great a pleasure it is to welcome my right hon. Friend back to the House? He has given us good news in his first statement. Can he define for the House and those outside who are partners with the British Aerospace company in international agreements such as Panavia in Germany and Italy and Airbus Industrie in France and Germany what relationships they will have with the new company when it is entirely in private enterprise? Will my right hon. Friend assure them that there will be no change in those relationships and that the Government will continue to back those relationships?
Mr. Tebbit: I can certainly give my hon. Friend the assurance that no change is envisaged in the relationship between British Aerospace plc and its partners in either Airbus Industrie or Panavia, or in the other international projects with which British Aerospace is associated.
Mr. George Park: Bearing in mind the De Lorean experience, will the Secretary of State say what the terms of reference will be for the Government-appointed director?
Mr. Tebbit: The Government director will have the responsibilities of every other director of the company. I do not think that there is very much connection between De Lorean and British Aerospace, not even, I hope, in the mind of the hon. Gentleman.
Mr. Michael Marshall: I welcome my right hon. Friend's statement and am delighted to see him back. Is he aware that those of us who have been involved with this denationalisation process will be most interested in the special share arrangement that he has announced and that, on the face of it, it appears to be a most useful way in which to provide additional opportunities for putting shares on the market? Will he take this opportunity to say how far he hopes that share ownership will be spread as widely as possible, as with small investors for British Telecom? Does he further recall that when British Aerospace was floated 90 per cent. of the employees took their free issue but that 40 per cent. spent money to buy shares? Is that not a promising augury?
Mr. Tebbit: I hope that the share ownership of British Aerospace will be spread widely. I especially hope that many of that company's employees will take advantage of the priority that they will have to apply for shares in the company in which they work and in the success of which they have an enormous interest.
Mr. James Lamond: Is it not an interesting insight into the morality of the Secretary of State and those Members behind him who cheered that, when he attempted to meet the criticism of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) about shares once again being sold at far too low a price, he suggested that the criticism might be stifled by my right hon. and learned Friend trying to make money out of the shares himself? Is that the sort of morality that we now have in the House?
Mr. Tebbit: I am not sure that I am too keen on taking lessons in morality from the hon. Member, but I suggest that he has misunderstood the import of my question. Were he and his hon. Friends and others who believe that something is undervalued to come forward with a better bid, the price would be raised, the taxpayer would benefit, and, as I have suggested, even the right hon. and learned Member for Monklands, East and his colleagues might benefit. When such benefits can be spread widely, it is an unhappy thing that the hon. Member should be so carping. Why does he not celebrate a little?
Sir Edward Gardner: Might I also welcome my right hon. Friend's return to the Dispatch Box? Although he sounded fine on television, he sounded even better this afternoon, giving a message that I know will be warmly welcomed by all of us who have British Aerospace divisions in our constituencies? The announcement will be welcomed as giving new and increased hope for the future of this most important, if not vital, industry.
Mr. Tebbit: I am grateful to my hon. and learned Friend. It is worth remembering that British Aerospace's constituent companies were prosperous and well run before denationalisation. Their success since denationalisation has been quite remarkable—there has been a continued growth in turnover, exports and profitability. We can all hope that that will continue.
Mr. Harry Ewing: How long will it take the Secretary of State to learn that privatisation does not spread share ownership more widely? If he takes the time to investigate the circumstances of British Telecom plc now, he will find that 30 per cent. of its employees who bought shares have already sold them.

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Does the right hon. Gentleman remember that, in the middle of 1984, General Electric Company attempted to gain control of British Aerospace? For one reason or another, the attempt did not materialise. Will he assure us that his announcement is not a back-door method of giving control of an extremely important industry to GEC? If that happened, it would be an utter disaster for the British Aerospace industry.
Mr. Tebbit: The hon. Gentleman has forgotten that, should there be an attempt at a takeover of a company such as British Aerospace, it would fall within the criteria that apply under the Fair Trading Act 1973 and therefore might well be investigated by the Monopolies and Mergers Commission. A conclusion would then be reached by the MMC and the Government on whether such a bid should be allowed to go ahead. There is no question of this sale of shares changing matters in that respect.
Mr. Alan Haselhurst: I welcome the principle of what my right hon. Friend has announced, but is he satisfied that the arrangements that he has outlined will give the Government reasonable certainty that, in its future ownership, the company will retain primacy in matters of aerospace?
Mr. Tebbit: The standing of British Aerospace will be governed by the skill of the work force from the chairman down to the last man and woman on the shop floor. The Government will continue to give British Aerospace the support which they give to all British companies in their efforts to export and prosper.
As my hon. Friend will be aware, the Government have already entered into an agreement with British Aerospace about launch aid for the A320 airbus. That agreement is completely unaffected by the sale. It may also be of some comfort to Opposition Members if I say that we intend to impose a limit of 10 per cent. of the proportion of the shares offered that will be allocated to any single applicant or group of applicants acting in concert.
Mr. Stuart Bell: When answering a supplementary question the Secretary of State said that it has always been his intention to sell all the shares in British Aerospace and yet in the statement he said that the Government intended to retain 25 per cent. of the shares. Can he reconcile the difference between those two statements?
Mr. Tebbit: Simply. I have always had that desire and intention in my mind since the dastardly act of nationalisation was first committed.
Mr. Robert Atkins: In welcoming back my right hon. Friend, may I ask whether he agrees that his statement is an indication of the strength of the company, the commitment of the work force, the excellence of its products and the success of privatisation? Does he agree that that is nothing but good news for the company's employees, at whatever level, and for our constituents?
Mr. Tebbit: I agree with my hon. Friend. I am sure that he would wish to look back on the company's record of profitability since it has been privatised, its success with export orders and many other matters, and take comfort from that. I am sure that the staff of British Aerospace will feel the same about it. I think that they will be glad to be entirely free from Government.
Mr. Dave Nellist: Does the Secretary of State agree that this further act of denationalisation owes less to the idea of the spreading of a company's share ownership, because it reduces public involvement in that company and concentrates it in a few hands, and more to his and the Government's idea of rewarding their political mentors and supporters from before the election with the profits from the privatisation of industry?
Mr. Tebbit: No, Sir.
Mr. Anthony Beaumont-Dark: Does my right hon. Friend accept that most of us on the Conservative Benches accept the logic that there is no need for any Government to own shares in British Aerospace? However, bearing in mind the fact that at one time Thorn-EMI wished to bid for British Aerospace and that GEC is now widely rumoured to wish also to bid and has a huge mountain of cash so that it could do so if his Department allowed it, would it not be sensible to clear this matter out of the way first to save any embarrassment from selling shares at a relatively low price, with a bid being made within a short time, when that profit could accrue to the State instead of to other outside shareholders?
Mr. Tebbit: My hon. Friend neglects the fact that I do not believe that GEC or Thorn-EMI would necessarily take me into their confidence as to whether they intended at some time to bid.
Mr. Dennis Skinner: Now that the Secretary of State is back, and aided in his recovery by the non-privatised section of the National Health Service—[Interruption.] It is a fact—and taking into account the fact that there have been several statements from the Government about privatising sections of the economy and that with each of those statements, like today, there is talk of liberating industry and assisting the economy, why after five years of privatisation measures is the pound in the geriatric ward?
Mr. Tebbit: Oh, dear, Mr. Speaker; the hon. Gentleman must, as usual, have spent more time with his mouth open than with his ears open during the exchanges at Prime Minister's Question Time today. As to what has really helped me back to my present state of what I understand is called rude health, above all else I have been encouraged by the splendid return of miners to work in the hon. Gentleman's constituency.
Viscount Cranborne: Would not my right hon. Friend agree that it was extraordinarily interesting that the right hon. and learned Member for Monklands, East (Mr. Smith), who spoke this afternoon on behalf of the Opposition, made no reference to the possibility of his party renationalising British Aerospace in the unlikely event of its being returned to power? Could that be because he has become an apostate of the theory of nationalisation, or is it more likely that the right hon. and learned Gentleman recognises—
Mr. Speaker: Order. The hon. Gentleman must ask a question which the Secretary of State can answer. The Secretary of State cannot put himself into the mind of the Opposition spokesman.
Viscount Cranborne: Thank you, Mr. Speaker. Will my right hon. Friend therefore agree with me that the

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reason why the right hon. and learned Member for Monklands, East was reluctant to refer to this previous undertaking was that it would be a vote loser and that the people recognise that it would cause extreme damage to the British economy?
Mr. Tebbit: I am sure that my hon. Friend does not really expect me to take responsibility for the state of mind of the right hon. and learned Member for Monklands, East (Mr. Smith) and his colleagues. I do not think that I am quite well enough just yet to take that on. I am quite sure, however, that there will be no question of denationalisation because there is no possibility of a Government committed to that sort of policy ever again being returned to office in this country.
Mr. D. N. Campbell-Savours: As the Secretary of State has returned to the House with all his former "bottle" intact, will he tell the House how much he expects the net gain to the Exchequer to be as a result of this sale? Is it not fair to say that the proceeds of the sale will be used next year to cut the taxes of the better-off in our society?
Mr. Tebbit: One could equally say that the proceeds of the sale will be used by the Government to maintain the value of pensions and other benefits. One cannot distinguish between what one section of money does as it goes into the Exchequer and another.
As to the amount of money which will be raised, at the time when dealings were suspended the valuation of the Government's holding was about £350 million or £360 million. What the valuation will be at the time of the sale depends, as the hon. Gentleman knows, upon many factors.
Mr. Tim Yeo: I welcome both the return and the statement of my right hon. Friend. Does not he agree that, so far from this being a forced sale at a disadvantageous moment, as the Prime Minister pointed out earlier this afternoon, the stock exchange has risen very substantially and therefore this may seem to be a highly opportune moment for disposing of the rest of the Government's stake?
Mr. Tebbit: I very much hope that it will prove to be.
Mr. Andrew MacKay: Is my right hon. Friend aware that his most welcome and boisterous return to the Dispatch Box will give particular pleasure to those of my constituents who work for British Aerospace? His statement is a sign, first, that in the private sector it is now commercially vibrant and, secondly, that it will lead to the final shackles of nationalisation being removed from their workplace.
Mr. Tebbit: It is important to understand—I do not believe that the Opposition have yet quite grasped this —that the denationalisation of these enterprises results in wider share ownership and in a more dispersed control of the company. For who, really, has been controlling the company while it has been nationalised? One sometimes wonders. Certainly it is not a very widespread group of people.

British Broadcasting Corporation Advertising
3.58 pm
Mr. Joseph Ashton: I beg to move,
That leave be given to bring in a Bill to amend the constitution of the British Broadcasting Corporation to allow the Corporation to raise revenue, as and when required, through transmitting advertisements subject to the same rules as to advertisements that apply to independent television.
I welcome this opportunity to put the Bill before the House because, believe it or not, since 1923 when the BBC began the House has never had any say in the fixing of the television or broadcasting licence. It has usually been stitched up as a deal between successive Home Secretaries and Governments and announced at midnight. The public have had to put up with that form of poll tax whether they liked it or not.
There is no doubt that the proposal to increase the licence fee to £65 will bear heavily on the poorer sections of the community. Many families in Britain, probably 5 million, never see £65 in a lump sum. It is not that they do not want to pay £65 for a television licence; it is just that they can never afford to pay that.
The time has come to re-examine the method of financing the BBC and there is a great public demand for that. Obviously, many of my colleagues are opposed to advertising on principle. [HON. MEMBERS: "Hear, hear."] I have yet to see similar opposition to advertising that appears in Tribune, Morning Star, Labour Weekly or the Radio Times, or any other form of financial help which is given to those organisations.
Obviously, it would be better if a subsidy could be paid to poor people so that they would not have to pay a massive £65. But the fact is that no Chancellor, Labour or Conservative, has ever shown any sign that he is prepared to put up that sort of money. It would need about 1·5 per cent. on VAT to pay it. There is no sign even now that a future Labour Chancellor would be able to find between £400 million and £500 million to keep down the cost of the television licence and to pay a subsidy to people on low incomes. Therefore, we must consider how that could be financed.
There is no doubt that some of my hon. Friends will argue that already the poor pay more than £65 in the 1p that they pay on a tin of beans or the adverts on the other supermarket purchases that they make every day. But the fact is that that sort of payment is relatively painless. When people pay a penny on a tin of beans for the advertising, they can absorb that into their weekly budget far more easily than a £65 lump sum payment.
Nobody is denying that £65 would be tremendously good value for money. It would be. It works out at about the cost of a postage stamp per day. But the fact is that the BBC has not yet come up with any method of collecting it, other than in a lump sum. The benefit of paying by advertising is that the people who spend the most tend to pay the most. The poor families in my constituency who cannot afford continental holidays are not paying for the continental holidays to be advertised on television. If they cannot afford to fly British Airways or to pay for beer, they do not pay for advertisements for those. There is a principle in advertising that the ones who spend the most pay the most, which is a good principle on which to work.
The Bill does not tell the BBC how it has to run its affairs or raise funds. It allows it complete flexibility. It

193
has been worked out by advertising agencies that the BBC would need to take as little as 30 or 40 seconds an hour. I have just returned from making a television programme with Mr. Alasdair Milne, the director-general of the BBC. [Interruption.] It is not usual to shout hon. Members down on a ten-minute Bill, but I understand that my hon. Friends do not wish to listen to the argument.
Mr. Alasdair Milne confirmed on television an hour ago that advertising would work out at just over a minute an hour. One commercial an hour is all that the BBC would need to keep the licence fee at its present level. It would have a guaranteed per capita income of £46 and it could then raise as much or as little as it liked to finance its programmes.
Nothing in the Bill says that every programme must contain advertising. The BBC could choose to advertise on "Dynasty" or "Dallas", "Hi-di-hi" or "Blankety Blank", and leave "Panorama" or "Newsnight" alone. It could choose to show programmes from the Olympic games where there were adverts for McDonald's hamburgers or Coca-Cola and then use the cash to subsidise opera on BBC2. The Bill gives the BBC complete flexibility to decide how much it wants to raise and how to raise it.
An alternative argument that would probably be put forward is that advertising tends to lower standards and goes for the mass market. There may have been something in that argument until Channel 4 appeared. Nobody now can say that Channel 4 lowered its standards to get a bigger range of advertising, because it did not. Many programmes on ITV, such as "World in Action", "Weekend World", "TV Eye" and "News at Ten", do not pander to advertisers. They make no concessions to advertising at all. They are excellent programmes of integrity. The miners in my constituency will say that Channel 4 news has given them the fairest coverage that they have had. Therefore, there is no experience at all that advertising lowers standards in Britain, and that is the result of the strict controls that we have. Last year ITV won all seven Emmy awards for dramas such as "Jewel in the Crown" and "Brideshead Revisited" and made a profit from selling those programmes abroad.
We already have massive advertising on BBC every day, especially on sporting programmes at the weekend. The Canon league, the Gillette cup, the Nat-West trophy and all sorts of sponsored events are constantly thrust in front of the public. We now have the crazy situation where the BBC pays Embassy to show its snooker when it should be Embassy paying the BBC to advertise Embassy. How can that be Socialism? To expect people to pay £65 to subsidise Embassy is inconceivable to me.
Advertising is one of the best growth industries in Britain. It is making massive profits. We have only to look at the growth of free newspapers over the past 10 years. Ten years ago Britain never experienced free newspapers being shoved through the door. There has been a phenomenal rise in that market and its profit. In real terms ITV now charges 50 per cent. more for advertising than it did in the 1970s. That is possibly because there is a massive demand for advertising. ITV does not want to change the set-up because it does not want to face competition. If the price of the cost of advertising comes down because the BBC is showing it, it benefits the consumers and the poor people who pay 1 p on a tin of beans towards paying for it.
194
ITV experienced so much demand for advertising last year that it went to the Independent Broadcasting Authority and asked for an extra minute an hour and the IBA turned it down. The market potential there for fund raising is enormous. The only thing that prevents it is that on the one hand the BBC does not want to do it, and on the other it does not want a handout from the Government because it wants to retain its integrity. It cannot have it both ways. There must be some form of help to the poor and lower paid.
That system works well in Italy and Germany. In Italy the fee is £33. One can argue about quality, but we are arguing about financing.
4.7 pm
Mr. Brian Sedgemore rose—
Mr. Speaker: Does the hon. Gentleman seek to oppose the Bill?
Mr. Sedgemore: Yes, Mr. Speaker.
Few Labour Members would have expected to see a Labour Member bring in a Bill to put the BBC in private hands and bring public service broadcasting to an end. I imagine that the hon. Member for Bassetlaw (Mr. Ashton) wants to be remembered as the person who gave the BBC over to commercial salesmen.
Frankly, I am horrified at the way in which the hon. Gentleman has run his campaign on radio and in the press. He knows the long-term and calamitous consequences of what he is proposing but he simply does not care. In bringing the Bill before the House in this fashion he combines, as only he is capable of combining, rampant populism with insistent philistinism and a profound ignorance of television and the importance of the BBC in the maintenance of our culture.
The Bill will damage entertainment, drama, news, art and culture. It may be the hon. Member's intention to turn Bassetlaw into a cultural-free zone before he dies.
The hon. Gentleman has consistently misled the public on radio and television. He has said that the BBC would need only 30 seconds of advertising per hour to keep the licence fee at the present level. That is incorrect, as I have always known. The hon. Gentleman has taken that figure from an advertising agency called DMM. In fact, the BBC would need three times that amount—one minute and 20 seconds of advertising per hour. If I can do my homework on that, I do not see why the hon. Gentleman cannot.
The hon. Gentleman has argued in public and in the House today that people who watch ITV should not have to pay for the BBC. Audience research figures show that 97 per cent. of the public watch BBC television for an average of 10 hours per week. That is the whole population except those who are moving house or happen to be away from home for some reason.
The hon. Gentleman said that the BBC had won no Emmy awards this year. Perhaps he regards those gargantuan competitions as reflecting the quality of television broadcasts, but if he had done his homework he would know that the BBC won no fewer than 100 national and international awards last year.
The hon. Gentleman says that he does not like the idea of lump sum payments by pensioners. I do not like it either. But instead of proposing that one of the most

195
important communications media on earth should be handed over to private, corporate vested interests, he should address himself to the problem in hand. He may not know that one sixth of the BBC's current income comes from the sale of 50p licence stamps, most of which are contributed by pensioners. Why does he not seek to develop that scheme?
Why does the hon. Gentleman not support Labour party policy, which seeks to give pensioners free television licences? I agree that paying the licence fee out of the national Exchequer would require institutional and structural changes, but if the hon. Gentleman wishes to know how that could be achieved he need only read the article in New Socialist by Juliet Steyn and myself on future policy for the BBC and the arts.
The hon. Gentleman refuses to consider the mischief of his Bill. [Interruption.] Despite all the noise and "yahboos" from the Conservatives, I ask him to consider what will happen when instead of competing in the making of programmes the BBC and the independent television companies compete for advertising revenue. What will happen to the programmes when the BBC is run by advertising agencies? What will happen to public service broadcasting when Saatchi and Saatchi tell the BBC that it must increase its ratings to sustain its revenue? What will happen to dramas and documentaries of the type made by Ken Loach and Roland Joffe? "The Sponger's United Kingdom" on BBC could never have been made if the hon. Gentleman's Bill had been law.
The hon. Gentleman's proposal seeks to make it more difficult for the BBC to produce programmes which are disturbing, emotive, sensuous, imaginative, critical, analytical and intellectual. He is seeking to leave people unwittingly and helplessly subjected in their own homes to the lowest common denominator, unable to think sensibly about where they are and what they might become. Some people believe that Socialism can be achieved simply by questioning elitist statements, but any Socialist thinker will confirm that to achieve Socialism in this land we must question every popular assumption as well as every elitist assumption. Given the current state of ideology and popular opinion in this country, that is the only way to mediate between the world as it is and the world as we should like it to be.
One cannot always appeal to authorities, but I ask the hon. Gentleman to consider the words of Alasdair Milne, director-general of the BBC, who has said:
"The fact that broadcasting competition in this country is confined to programmes alone makes for healthy, professional rivalry and is the cornerstone of the British broadcasting achievement."
In this context, I quote with approval the words of David Plowright, managing director of the Granada company, for which I worked. I am no friend of his and I have had arguments with him about censoring programmes on open government, but he showed some sense when he said of the present system:
"It has enabled the two services to avoid damaging, cut throat competition for ratings and strive instead for a full measure of audience interest, appreciation, programme originality and excellence …
The BBC deserves a significant increase in the licence fee. It has set standards we in ITV have done our best to emulate."
In effect, he is saying that Granada would never have produced programmes such as "Jewel in the Crown" and "Brideshead Revisited" if the hon. Gentleman's Bill had been law.
196
At a time when the licence fee and, indeed, the whole future of the BBC is under extraordinary attack from the Conservative party, the Government and the Prime Minister, as The Times today makes clear, the hon. Gentleman comes to the House with this damaging proposal. I do not know how Conservative Members intend to vote, but it would be a disgrace if any Socialist voted in favour of the Bill.
Question put, pursuant to Standing Order No. 15 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—
The House divided: Ayes 118, Noes 159.

Division No. 63]

[4.16 pm

AYES

Ashby, David

Lawrence, Ivan

Baldry, Tony

Leigh, Edward (Gainsbor'gh)

Beaumont-Dark, Anthony

Lightbown, David

Bennett, Sir Frederic (T'bay)

Lilley, Peter

Best, Keith

Lloyd, Ian (Havant)

Bevan, David Gilroy

Lord, Michael

Biggs-Davison, Sir John

McCrindle, Robert

Blackburn, John

McCurley, Mrs Anna

Blaker, Rt Hon Sir Peter

McGuire, Michael

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

MacKay, Andrew (Berkshire)

Brown, M. (Brigg & Cl'thpes)

Maclean, David John

Bruinvels, Peter

Malone, Gerald

Carter-Jones, Lewis

Marland, Paul

Carttiss, Michael

Maude, Hon Francis

Cartwright, John

Maxwell-Hyslop, Robin

Chapman, Sydney

Miller, Hal (B'grove)

Clark, Dr Michael (Rochford)

Miller, Dr M. S. (E Kilbride)

Cockeram, Eric

Molyneaux, Rt Hon James

Conway, Derek

Monro, Sir Hector

Corrie, John

Mudd, David

Couchman, James

Onslow, Cranley

Cranborne, Viscount

Osborn, Sir John

Dicks, Terry

Page, Sir John (Harrow W)

Douglas-Hamilton, Lord J.

Page, Richard (Herts SW)

Dover, Den

Parris, Matthew

Eggar, Tim

Pawsey, James

Fallon, Michael

Portillo, Michael

Farr, Sir John

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

Favell, Anthony

Proctor, K. Harvey

Finsberg, Sir Geoffrey

Rathbone, Tim

Fookes, Miss Janet

Rhys Williams, Sir Brandon

Forsyth, Michael (Stirling)

Rost, Peter

Fox, Marcus

Ryder, Richard

Galley, Roy

Sayeed, Jonathan

Gardiner, George (Reigate)

Shersby, Michael

Glyn, Dr Alan

Silvester, Fred

Gower, Sir Raymond

Skeet, T. H. H.

Grant, Sir Anthony

Smith, Sir Dudley (Warwick)

Greenway, Harry

Speller, Tony

Gregory, Conal

Spence, John

Griffiths, Peter (Portsm'th N)

Stanbrook, Ivor

Grist, Ian

Stern, Michael

Hamilton, Neil (Tatton)

Stevens, Lewis (Nuneaton)

Hampson, Dr Keith

Taylor, Teddy (S'end E)

Hanley, Jeremy

Thorne, Neil (Ilford S)

Hannam, John

Thurnham, Peter

Hargreaves, Kenneth

Townend, John (Bridlington)

Hayes, J.

Tracey, Richard

Hayward, Robert

Trotter, Neville

Hind, Kenneth

Twinn, Dr Ian

Holland, Sir Philip (Gedling)

Ward, John

Holt, Richard

Warren, Kenneth

Hunter, Andrew

Watts, John

Jones, Robert (W Herts)

Weetch, Ken

Kellett-Bowman, Mrs Elaine

Winterton, Mrs Ann

Kennedy, Charles

Wood, Timothy

Key, Robert

King, Roger (B'ham N'field)

Tellers for the Ayes:

Lamond, James

Mr. Joseph Ashton and

Latham, Michael

Mr. Allen McKay.

Lawler, Geoffrey

197

NOES

Abse, Leo

Dubs, Alfred

Adley, Robert

Dunwoody, Hon Mrs G.

Alexander, Richard

Eadie, Alex

Alton, David

Eastham, Ken

Atkins, Robert (South Ribble)

Ellis, Raymond

Atkinson, N. (Tottenham)

Evans, John (St. Helens N)

Banks, Robert (Harrogate)

Ewing, Harry

Banks, Tony (Newham NW)

Faulds, Andrew

Beith, A. J.

Field, Frank (Birkenhead)

Bell, Stuart

Fisher, Mark

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

Flannery, Martin

Bermingham, Gerald

Forman, Nigel

Boothroyd, Miss Betty

Foulkes, George

Boyes, Roland

Fraser, J. (Norwood)

Bray, Dr Jeremy

Freud, Clement

Brown, Gordon (D'f'mline E)

Gale, Roger

Brown, Hugh D. (Provan)

Garrett, W. E.

Bruce, Malcolm

George, Bruce

Buchan, Norman

Godman, Dr Norman

Caborn, Richard

Ground, Patrick

Callaghan, Jim (Heyw'd & M)

Hamilton, James (M'well N)

Canavan, Dennis

Hamilton, W. W. (Central Fife)

Carlile, Alexander (Montg'y)

Hardy, Peter

Carlisle, Rt Hon M. (W'ton S)

Harrison, Rt Hon Walter

Clark, Dr David (S Shields)

Hattersley, Rt Hon Roy

Clarke, Thomas

Haynes, Frank

Clwyd, Mrs Ann

Heathcoat-Amory, David

Cohen, Harry

Heffer, Eric S.

Coleman, Donald

Hicks, Robert

Cook, Frank (Stockton North)

Higgins, Rt Hon Terence L.

Cox, Thomas (Tooting)

Hogg, N. (C'nauld & Kilsyth)

Craigen, J. M.

Home Robertson, John

Critchley, Julian

Howells, Geraint

Crowther, Stan

Hughes, Dr. Mark (Durham)

Cunningham, Dr John

Hughes, Robert (Aberdeen N)

Davies, Ronald (Caerphilly)

Hughes, Roy (Newport East)

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

Hughes, Sean (Knowsley S)

Dewar, Donald

Janner, Hon Greville

Dickens, Geoffrey

Jones, Barry (Alyn & Deeside)

Dixon, Donald

Kaufman, Rt Hon Gerald

Dobson, Frank

Kilroy-Silk, Robert

Douglas, Dick

Lambie, David

198

Leighton, Ronald

Sheerman, Barry

Litherland, Robert

Sheldon, Rt Hon R.

Lloyd, Tony (Stretford)

Shore, Rt Hon Peter

Lofthouse, Geoffrey

Short, Ms Clare (Ladywood)

McCartney, Hugh

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

McDonald, Dr Oonagh

Skinner, Dennis

McKelvey, William

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

Mackenzie, Rt Hon Gregor

Snape, Peter

McWilliam, John

Soley, Clive

Madden, Max

Spearing, Nigel

Marek, Dr John

Steel, Rt Hon David

Marshall, David (Shettleston)

Stewart, Rt Hon D. (W Isles)

Mates, Michael

Stott, Roger

Maxton, John

Strang, Gavin

Maynard, Miss Joan

Straw, Jack

Meadowcroft, Michael

Thomas, Dafydd (Merioneth)

Meyer, Sir Anthony

Thomas, Rt Hon Peter

Michie, William

Thomas, Dr R. (Carmarthen)

Mikardo, Ian

Thompson, J. (Wansbeck)

Millan, Rt Hon Bruce

Thompson, Patrick (N'ich N)

Mitchell, Austin (G't Grimsby)

Tinn, James

Morris, Rt Hon A. (W'shawe)

Torney, Tom

Nellist, David

Wainwright, R.

O'Neill, Martin

Wallace, James

Orme, Rt Hon Stanley

Waller, Gary

Park, George

Wardell, Gareth (Gower)

Patchett, Terry

Wareing, Robert

Pavitt, Laurie

Watson, John

Pike, Peter

Welsh, Michael

Powell, Raymond (Ogmore)

Wiggin, Jerry

Prescott, John

Wigley, Dafydd

Radice, Giles

Williams, Rt Hon A.

Randall, Stuart

Winnick, David

Redmond, M.

Wrigglesworth, Ian

Richardson, Ms Jo

Yeo, Tim

Robertson, George

Robinson, G. (Coventry NW)

Tellers for the Noes:

Rooker, J. W.

Mr. D. N. Campbell-Savours

Ross, Stephen (Isle of Wight)

and Mr. Kevin Barron

Sedgemore, Brian

Question accordingly negatived.

Opposition Day
[5TH ALLOTTED DAY]—considered
Opposition Day

  Unemployment
  Mr. Speaker: Before we proceed with the debate, I should inform the House that I propose to operate the 10-minute limit on speeches between 7 pm and 8.50 pm. I hope that hon. Members who are called before 7 o'clock will bear in mind the fact that there is great pressure to speak during this debate. No fewer than 32 right hon. and hon. Members have so far shown their wish to participate. I hope that the House will think it fair to give precedence to those hon. Members who were not called to speak during the regional industrial policy debate on 28 November.
  I have selected the amendment in the name of the Prime Minister.
  4.28 pm
  Mr. Roy Hattersley: I beg to move,
  That this House condemns the Government's wilful refusal to implement policies which would result in a reduction in unemployment from its present record level and from the even higher total to which it will rise in 1985; and calls upon Her Majesty's Government to concentrate the resources at its disposal on the public sector, thus providing the stimulus which the economy needs in a way which creates the largest number of jobs.
  Today's debate concerns three issues, about which the Government and the Opposition are fundamentally and, perhaps, irrevocably divided. For the Opposition the first is a matter of principle. We believe that the overwhelmingly most important national priority at this time is a reduction in unemployment. Unemployment is at a record level and was set to rise even before yesterday's fiasco, and it will rise further and faster because of the increase in interest rates that was announced yesterday afternoon.
  To the Opposition, a reduction in unemployment is an objective towards which every aspect of economic policy should be directed. I have no doubt that in his speech the Chancellor of the Exchequer will say that he, too, regards a reduction in unemployment as essential, and that he is working towards that end. If the Chancellor says that in good faith, the Government's policy on unemployment is as ghastly a failure as are their policies in every other economic area. If that is their intention, they have signally, indeed spectacularly, failed to realise it during the past five and a half years. For five and a half years we have been promised that a rigorous application of the medium term financial strategy will produce a certain and irreversible reduction in unemployment. Yet for five and a half years that strategy has produced the diametrically opposite result: a continued and unremitting increase in the number of men and women who are without work. But after five years during which that strategy has failed completely and palpably, all that the Government offer in their amendment today is a repeat of the same old discredited economic clichés. Conservative Members who vote for the amendment will be voting for more of the same; and it is more of the same that has pushed up unemployment, on an accurate and honest assessment, to approaching 4 million.
  200
  For us to believe that the Chancellor is remotely sincere in what will be his expressed concern for the unemployed, he must answer one simple question: when does he judge that his chosen strategy for the eventual reduction of unemployment will begin to work? When will the total begin to level off, let alone to fall? When will the unhappy Secretary of State for Employment no longer have to appear on television month after month and describe himself as surprised and disappointed by the monthly unemployment figures? Indeed, the successive disappointments of the Secretary of State, matched only by successive surprises on the same occasions, say little for his judgment but much for his gullibility. We want an honest statement about when the Chancellor expects the strategy, which he has insisted for five years will eventually work, to begin to work.
  I suspect that the Chancellor will refuse to give even an estimate of when unemployment will begin to decrease, so let me tell the House what the honest answer would be. On an accurate and honest measurement of present unemployment, it will still be at or above 3 million at the time of the next general election. Several things will happen before then. Lord Young will perform his duties of manipulating the statistics to make the published figures look more acceptable. The Chancellor will invent new excuses. The Prime Minister will counterfeit concern. But by the next general election, we shall have endured almost a full decade of increasing unemployment, and the real figure will still be 3 million or more.
  Four years ago, the Prime Minister would have said brashly that unemployment is the short-term price that we must pay for long-term economic success. I should describe some of that success to her today in honest terms, not in the sort of terms that she trotted out at the Dispatch Box an hour ago. Putting aside the present record unemployment, and the fact that her success must be measured against higher unemployment than Britain has ever known, the success about which she spoke includes an annual tax bill that is £22·5 billion more than it was when she took office, manufacturing imports exceeding manufacturing exports for the first time in our history, interest rates still at their 1979 levels despite all the promises of reductions, and the pound at its lowest ever value. We have become—this is one success about which the Prime Minister could legitimately boast—what one commentator described yesterday as a one-commodity economy, saved from national bankruptcy by the gratuitous benefit of North sea oil revenues.
  Whenever the Chancellor is reminded of the position in which the public sector borrowing requirement, his hopes for tax cuts, and public expenditure would be were it not for the boon and benefit of North sea oil, for which he can take no credit, he always replies, as he did yesterday, that North sea oil revenues will continue for a good time yet.
  Mr. Anthony Beaumont-Dark: So they will.
  Mr. Hattersley: The hon. Gentleman is perceptive to say that, but that is hardly the point. The point is—perhaps even the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) has noticed this—that North sea oil revenues have peaked during this financial year. From now on they will be a wasting asset, and to rely on those revenues to balance our books instead of using them to

  201
  invest in our industrial base and our infrastructure is to make the British economy tragically vulnerable to every external pressure.
  The true state of our economy is eloquently demonstrated by the way in which the Prime Minister is driven to the most disreputable use of statistics to give a fraudulent impression that at least part of her policy is working. I shall give three examples. On 10 January, she told me that public investment is at the same level as it was in 1978–79—a claim that is statistically plausible only because the Government have changed the definition of public investment. They have been condemned for doing so by the Treasury and Civil Service Select Committee. That is the value of the Prime Minister's honesty in such matters. Another example from the same day—
  Mr. Alan Howarth: The right hon. Gentleman has rightly stressed the importance of honesty in this debate. What contribution to increased unemployment does he believe has been caused by the worst recession for 50 years, by the advent of an extra 1 million people in the labour force in the 1980s, and by the impact of new technology — all factors which it is beyond the scope of this or any Government to control?
  Mr. Hattersley: I assure the hon. Gentleman that it is my judgment, and the judgment of almost all objective commentators—[Interruption]—many of whom I shall quote as the afternoon continues — that were the reduction of unemployment the Government's highest priority, the figure would be lower than it is today. When Conservative Members scoff at that fact, they are not just scoffing at me, which is par for the course between Government and Opposition, but are scoffing at the right hon. Member for Old Bexley and Sidcup (Mr. Heath), under whom they were proud to serve when he was Prime Minister.
  However, I shall not be diverted from giving two further examples of the weakness of the Prime Minister's case, which she manipulates in a way that I can describe only as statistically fraudulent. On 10 January she said that investment in the economy as a whole is at a peak, but she did not add that it is certain to fall next year as a direct result of Government policy. Investment is high now because of the impending changes in investment allowances, which have brought forward investment, but the policy that increases it this year will be the policy that decreases it next year. It is a sign of the weakness of her case that she takes refuge in such subterfuge.
  The Prime Minister did it again today when she told us about the great investment record and the booming economy. I wish that she could have brought herself to answer the question honestly and to admit that, during the past four years, net investment in manufacturing and transport has been in a negative rather than a positive form. These are the facts about the economy, and the Prime Minister does herself no credit by trying to pretend anything different.
  These are statistics that the Prime Minister polishes, hones and manipulates to impress her weaker-minded Back Benchers, but, on the evidence of the recent past, they do not impress international opinion or fool international confidence, for the collapse of the pound is
  202
  in no small measure due to the recognition of the debility of the British economy, for which the Tory Government are responsible.
  Mr. George Walden rose—
  Mr. Michael Howard rose—
  Mr. Hattersley: I shall give way to the hon. Member for Buckingham (Mr. Walden), who is pointing at me with his left hand.
  Mr. Walden: Earlier today, the Leader of the Opposition said the speculation against the pound was irrational. The right hon. Gentleman is now saying that it is an expression of no confidence in the Government's economic policy. Could he elucidate?
  Mr. Hattersley: As I understand it, the hon. Gentleman shares my view that John Maynard Keynes had something important to say about economics. The hon. Gentleman will recall that half of Keynes's general theory was an explanation that psychology and economics could not be adequately divided and that what people thought was happening and their impression of what was happening had an enormous effect on the markets, on confidence and on investment. Therefore, the two things go together.
  Of course there was a great deal of irrationality about the frantic activity on the exchanges last week and the week before, but equally that irrationality was in part based on what was only to be regarded as a rational judgment about investment prospects. I can explain why that is. Many reasons have been given for the run on the pound. The Chancellor acknowledges only two, the instability in oil prices and the strength of the dollar, but there are two more. I know that my right hon. Friend the Leader of the Opposition will agree with me that these are the rational judgments of hard-headed men who have seen the Chancellor and come to some conclusions, not only from his performance but from what he said.
  First, until 11 o'clock on Friday morning, the Government had no exchange rate policy and therefore the market had no idea at what point the Chancellor and the Government would stand and fight. Secondly, and perhaps more importantly, the Government in general and the Chancellor in particular have openly boasted that a continual depreciation, matched with the dollar denomination of the price of oil, would increase the financial adjustment that would enable him to cut taxes. As the Chancellor said that, and as his economic adviser explained in great detail to the Select Committee that continued depreciation and oil being denominated in dollars meant that the Chancellor had more money in his fiscal deficit with which to finance tax cuts, there was a suspicion that the right hon. Gentleman wanted that massive depreciation to meet the demands of his Back Benchers for massive tax cuts.
  Mr. Richard Ryder: In order to meet his own high standards in honesty, will the right hon. Gentleman say whether he wants a higher or lower exchange rate?
  Mr. Hattersley: The hon. Gentleman should not play such palpable games. What I want, and I freely acknowledge that I shall not get, is a different economic policy from the Government. Anybody who believes that I or any of my hon. Friends will fall into the trap of

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  offering tinkerings within the disaster area of the Government's economic policy should improve his tactics. We are calling for a radical shift and change of economic policy. Asking whether there is a better or worse exchange rate, different by 10 per cent. either way, is like asking me where I would like the deck-chair to be placed on the Titanic before it hits the iceberg.
  The run on sterling was in part caused by the Chancellor's boast that depreciation gave him more money for tax cuts, but it was caused by other things as well. Just before Christmas, the Chancellor was talking about having £3 billion to distribute. Yesterday, he was not even sure whether he could maintain the £1·5 billion boast. The fact that he has said so many conflicting things and that hardly anybody outside this country as well as inside trusts either his judgment or his statements has had a deeply damaging influence on our prospects.
  The Chancellor of the Exchequer (Mr. Nigel Lawson): Will the right hon. Gentleman quote, with references, the occasion on which he alleges that I said that there would be a £3 billion fiscal adjustment? I have never said anything of the sort on any occasion.
  Mr. Hattersley: Immediately after the last debate on public expenditure, the right hon. Gentleman, or his agent, briefed every newspaper saying that he hoped for twice as much as he had previously hoped for. The right hon. Gentleman now only adds to his reputation for saying different things on different days. That reputation has done deep damage to the prospects of our economic recovery. The problems of the sterling depreciation were enormously intensified — building on the absence of any exchange policy and the boast about the advantages of depreciation for tax cuts—by the nervous paralysis that inflicted the Chancellor last week. They were then multiplied by the contradictory briefings that were given one day by the Treasury and on the following day by Downing street.
  If the right hon. Gentleman wishes to contradict that, I hope that he will tell me of the errors made in the article by Mr. Samuel Brittan, not always the most devoted supporter of Socialism, which set out the names of the officials who have given the contrary briefings that caused the problem to accelerate towards the end of last week.
  The problem was brought to a head by the Chancellor's indecision running up to yesterday morning. About an hour and half ago the Prime Minister changed tack again and tried to brush the problem aside, saying that this was not a sterling crisis but a crisis for all currencies and a crisis from which all countries similarly suffered. Some right hon. and hon. Members might ask what all the fuss and panic yesterday was about, whether the crisis were as small as the Prime Minister had suggested. Others will ask whether the Prime Minister did not know, or whether she simply chose not to tell the House, that when she said that Britain's currency has depreciated against the dollar but so, too, had the European currencies, that sterling has depreciated against European currencies as well. That is the essential, and, I fear, intentional error in the Prime Minister's answer. Sterling has depreciated by one-third against all currencies, not just against the dollar, and for the Prime Minister to pretend that the dollar strength is what caused the crisis on Friday and Monday is to deceive herself or to attempt to delude the country.
  The underlying cause for the collapse of sterling is the basic weakness of the economy. This leads to the
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  Opposition's second contention—another contention that divides us from the Government—that the abandonment of the medium-term financial strategy would both reduce unemployment and strengthen the economy. There should be positive measures to improve the employment prospects of the country.
  That is why the leader of the Social Democratic party, the right hon. Member for Plymouth, Devonport (Dr. Owen), was silly to spend Sunday afternoon, if the newspapers are to be believed, frantically phoning journalists to denounce what he described as diversions from the assault on the Government. The diversion to which he took particular exception was my proposal for repatriating British capital invested abroad, for increasing investment in British industry, and indirectly as a result of those two things, stabilising sterling values. I say to the right hon. Gentleman that anybody can abuse the Chancellor, as the Daily Mail proved adequately this morning, but what we now need are some positive statements of alternative policy to what the Government are pursuing. We shall certainly not get them from the leader of the SDP since he supports the Government's economic policy. He said on television last night—and I hope that Conservative Members are prepared to cheer—that the economy is now being run better than it has been run for 25 years. He is, in fact, the crypto-Thatcherite against whom the leader of the Liberal party warned.
  Dr. David Owen: Will the right hon. Gentleman give us the chapter and verse of this extraordinary statement that was made on television last night? Since I was on television last night and since I said nothing of the sort, I should be grateful to be told the reference. If not, the right hon. Gentleman should withdraw.
  Mr. Hattersley: I offer two pieces of evidence. First, I and many of my hon. Friends saw the right hon. Gentleman; secondly, it is reported in detail in today's Daily Mail.
  Dr. Owen: If the right hon. Gentleman finds when he looks at a transcript of what I said on television that he is wrong, will he withdraw it tomorrow?
  Mr. Hattersley: Of course. In that unlikely event I shall certainly withdraw it, and I take it that the right hon. Gentleman will take appropriate action against the Daily Mail. That is a bargain, is it not, Mr. Speaker? If I can make a sporting metaphor, I think that I have no takers in this.
  I want to make one other point to the right hon. Gentleman. He complained that the assault on the Government's management of sterling was not adequate. An assault of some sort we made yesterday afternoon. Unfortunately, the right hon. Gentleman was not present to take part in it. I know exactly where the right hon. Gentleman was. He was down the road arguing that he should be allowed to appear on television more often.
  Putting aside these irrelevancies, I repeat that it is the Labour party's view, although apparently not the view of the alliance, that the whole economy would benefit from an increase in real demand.
  On 13 December 1984 the Prime Minister appeared momentarily to endorse that view. At the time she was extolling the virtues of tax cuts that the Government were

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  then proposing, and no doubt as the afternoon wears on we shall hear whether the Government's proposition remains. The right hon. Lady said:
  "Reduction of tax can lead to extra jobs, as it leads to extra demand."— [Official Report, 13 December 1984; Vol. 69, c. 1202.]
  May we be told categorically whether that was one of the Prime Minister's slips or whether, at least at that moment, she meant that an increase in demand was a desirable way of changing the Government's economic posture? [Interruption.] I think that the Prime Minister is saying something — perhaps she would like to say it to the whole House.
  The Prime Minister (Mrs. Margaret Thatcher): An increase in demand as used by the right hon. Gentleman usually means printing money. As he knows, I completely and utterly reject that.
  Mr. Hattersley: It is not an answer to my question, but it is an answer to a question. My question was: did the Prime Minister mean it when she said that an increase in demand would create more jobs? On previous occasions she has merely gone on about mini cars being sold, but not enough of them being British. The demand is there, she said. But on 13 December she changed tack and the House, the country and perhaps even the markets are entitled to know whether that was an error, whether it was then intended or whether it has since been withdrawn.
  I ask the Chancellor that question specifically: does he believe that an increase in demand is desirable? I must tell the Chancellor—
  Mr. Patrick Nicholls: Will the right hon. Gentleman give way?
  Mr. Hattersley: I have given way a great deal. I look forward enormously to giving way more in a moment, but I think that for the time being I ought to obey Mr. Speaker's strictures and press on so that other hon. Members may contribute.
  In the past we have always been told that what would improve employment in the country is not a shift in demand, but a shift in the supply side of the economy. I tell the Chancellor at once that I share his view that radical alterations are needed in the structure of the economy. I want a tougher competition policy. I want new forms of industrial investment. I want more effective training programmes.
  Indeed, my complaint about what the Chancellor has to say about the supply side is that the changes that he proposes are so unambitious. They amount to two things. They amount to arcane tax adjustments and to a call for lower real wages. He will tell us—because he always tells us—that lower real wages are the sovereign and certain cure for unemployment. If the Government choose to make a massive boost to demand, I say, as I have always said, that a moderation of wage claims would ensure or help to ensure that the new resources were concentrated on job creation, but in present circumstances when demand is inadequate — and on 13 December 1984 it was inadequate even by the Prime Minister's judgment—a reduction in real wages is an unreasonable proposition and an unattainable objective. To my regret, I suppose there is one area where it may be achieved and that is the public sector where the Government are pressing their own
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  employees to accept a wage increase of 3 per cent. even though the inflation forecast is 5 per cent. or more. But in the public sector a reduction in real wages will not produce any more jobs because the Government will make sure that there is a reduction of jobs throughout that sector.
  The Chancellor of the Exchequer knows very well the truth about a reduction of wages in the private sector. It will not happen and it is not worthwhile for him to demand it except, of course, for the fact that to the Government the beauty of advocating wage cuts is the knowledge that they will not come about and the consequent opportunity that provides the Government to blame somebody else for their own failures to reduce unemployment.
  Mr. Tim Yeo: Will the right hon. Gentleman say whether he favours higher wage increases and more inflation, and will he further say what effect that will have on unemployment?
  Mr. Hattersley: This must be the last time I give way because of the fatuous questions that I am asked. That is not so much a fatuous statement as an admission of inattention. Two moments ago I made it absolutely clear—and I gladly repeat the exact words—that I want to see a massive boost in demand and a moderation of wages which ensures that that boost in demand is concentrated on job creation rather than an increase in money wages. But without the massive boost in demand the wage increases will not be moderated and it is unreasonable to expect that they would be.
  Having explained that to the hon. Gentleman as simply as I can, let me go on to say that I suspect that this afternoon in this very area — the supply side of the economy—the Chancellor will tell us that it is necessary to do what we can to cut taxes in a way that is tantamount to holding down wages in order to make possible certain adjustments to the economy. He will go on to say that it is also necessary to cut taxes to alleviate what is fashionably called the poverty and unemployment trap and therefore encourage individuals who previously would have chosen not to work to find jobs. I find that a rather offensive analysis of the psychology of the unemployed.
  If the Chancellor is to advocate the view that the unemployment and poverty trap has to be alleviated not by increases in child benefit but by cuts in taxes, I hope that he will read with some care the work done on this subject by the Institute of Fiscal Studies. I shall read its conclusion on this very point:
  "… any Chancellor who rises on Budget Day and claims that by increasing income tax allowances he has made significant inroads into the poverty and employment traps, or started to sort out the nonsensical interactions between the tax and benefit systems, is simply talking ill-informed nonsense."
  I look forward to hearing the Chancellor of the Exchequer on the subject. In the light of that, I ask him whether, as he can best judge today, he intends to pursue the policy of tax cuts which he outlined in the debate on the Estimates. If so, is he doing so solely to influence the supply side of the economy, or is he still claiming—as he and the Prime Minister have claimed — that by cutting taxes there will be a boost to demand that improves job prospects more substantially, pound for pound, than using the available resources in any alternative way?
  We know, of course, that the primary purpose of a cut in income tax rates is to boost the popularity of the Tory party, but I must ask the right hon. Gentleman how he believes that his proposed tax cuts will affect the

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  unemployment figures. Does he believe that there is a better way of using the money at his disposal? I do not think that cutting taxes and letting the unemployed fend for themselves will have the political result that the right hon. Gentleman hopes for and the Prime Minister expects. I share the view expressed or implied by the right hon. Member for Old Bexley and Sidcup that to choose that course would be an insult to the unemployed. I believe that there are millions of voters, including Conservative voters, who have grown more prosperous over the past five years and who would benefit from tax cuts, but who would be revolted by the prospect of their being made more prosperous while the unemployed are left to remain without work.
  In my concluding passages I hope to demonstrate that cutting taxes cannot remotely reduce unemployment in the way that the Prime Minister has now taken it upon herself to pretend. I have always argued—and will continue to argue—that direct investment in jobs is a far better way of achieving that aim, pound for pound, than tax cuts. But before I demonstrate that as best I can, I shall consider how much there is available to spend on tax cuts or alternatively on direct job creation.
  I assume—I have no doubt that the statement by the Secretary of State for Trade and Industry is intended to contribute to this end—that when the Budget comes along the Chancellor of the Exchequer will find it possible to provide the £1·5 billion fiscal adjustment that is, on his present plans, to be devoted to tax reductions. If the Chancellor wished, he could of course retain the public sector borrowing requirement at its present level—still an appreciably smaller percentage of gross domestic product than is the case with many of our more successful competitors.
  After running a long interview with the right hon. Gentleman and a long article by him, The Sunday Times then went on to advocate quite a different course of action which he could take—the spending of £3 billion on job creation and the like. But today I am not even advocating that proposal or cross-examining the Chancellor on it. I am saying that within his own parameters and the terms that he has set himself—or had set himself until Friday—there was £1·5 billion to spend. Conservative Back Benchers who have prepared speeches on the profligacy of the Labour party's proposals had better tear them up for this debate at least, because this afternoon I seek only to argue about how the Chancellor proposes to spend the money that he himself says is at the nation's disposal.
  Within the terms of the Chancellor's own policy he could, if he thought it sufficiently important, use the money to act directly against unemployment. As a byproduct of that, without changing the tax income a penny or a pound, he could use some of the £3 billion annual reliefs that have been enjoyed by the better-off to carry out a redistribution within the tax budget and to do something about taking the lowest paid out of tax altogether.
  But the Chancellor always chooses the high unemployment option when deciding how to spend his money. When I urged that some of the £1·5 billion should be spent on job creation and when, at a recent Prime Minister's Question Time, I urged that it should be spent on direct investment, the Prime Minister said, "Well, that's all very well, but it would create more jobs if it was
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  devoted to the direct employment creation measures." That might be true but the Prime Minister does not propose to spend the money on that either, but to use it to cut taxes.
  There is overwhelming evidence to show that to use the money available to cut taxes would not reduce unemployment by anything like the amount by which it would be reduced if the money was used for direct job creation in two forms. First, the money should be used on the infrastructure. It should be spent on the public sector housing stock and on roads. To spend the money in that way would have two automatic and parallel benefits. Our depleting and collapsing capital stock and our infrastructure would be renewed—and while there was time to do so at a massive but not overwhelming cost. If the Government do not respond to the recommendations of the National Economic Development Office report.. the deterioriation will continue to such a degree that it will become impossible to restore our infrastructure.
  In spending money on building houses, recreating roads, moving the docks into the second half of the 20th century and on all the other desirable projects that are in themselves necessary and right, the Prime Minister would be restoring and creating jobs. She could also do that—and should do it—by a programme of direct job creation in the public sector that would similarly have double benefits. This country needs more nurses, more home helps and more people working in the inner cities. To employ them both rehabilitates our social services and puts the men and women thus employed back into jobs.
  Mr. Richard Tracey: I am grateful to the right hon. Gentleman for giving way, because I am mindful that he has now been speaking for more than half an hour. Will he address his mind to the terms of the motion to which he has put his name and tell us what the "largest number of jobs", which is to be found in the motion, means? How many jobs is he talking about? The Labour party has talked of creating 1 million extra jobs. Surely the cash that he has mentioned could not produce that number of jobs. Where will he obtain the extra cash from? What will it cost in extra taxation?
  Mr. Hattersley: The hon. Gentleman has not been listening either. I have told him exactly what money I was discussing and what money I was asking the Chancellor of the Exchequer to comment on. The point is not that the hon. Gentleman does me no courtesy but that he does the House no courtesy in wasting time with such frivolous interventions.
  I am dealing with the £1·5 billion that the Chancellor of the Exchequer claims to have at his disposal. I am arguing, with the London Business School—once the repository of all economic wisdom — the Institute of Fiscal Studies, the National Institute of Social and Economic Research and even with the figures worked out on the Treasury's own model, that to spend that £1·5 billion to cut unemployment by direct means would in two years cut it by 73,000, whereas to use it to cut taxes would reduce the unemployment total by only rather less than half of that—35,000.
  The evidence that I wish to draw to the attention of the House goes further than that. There is a lot of evidence within the Government, from the Department of Trade and Industry, to show that by using the money for direct job creation one is spending the money more directly in the United Kingdom and not dissipating it on imports that

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  create jobs for other people in other countries. The figures of the Department of Trade and Industry demonstrate two or three conclusive points. If money is invested in construction, only 15 per cent. of it finds its way abroad into competitor economies. If money is spent on domestic electrical equipment or textiles, 40 per cent. of it ends up abroad. Those are the sorts of items on which the money will be spent if it is used to reduce taxes.
  When the Chancellor of the Exchequer had that point to deal with in his article in The Sunday Times two weeks ago he did not deal with the figures or with the input/output tables of the Department of Trade and Industry. He merely took refuge in some sort of sentimental chauvinism saying that he had hopes and beliefs that the British people would not spend their money on foreign textiles and videos. Before the right hon. Gentleman expresses such hopes and boasts, I wish that he would talk to some of my hon. Friends who represent Lancashire constituencies. They would tell him that the increase in expenditure on textiles that is likely to come about by a reduction in taxes and increased consumption would be forced into foreign markets because of the collapse of the Lancashire textile industry which has been brought about largely by his Government during the past four years. There is no alternative, and to dismiss that fact by romanticism about faith in the character of the British people is to fly in the face of the facts. That is a habit indulged in by weak-minded Chancellors and even weaker-minded boards of prejudiced opinion dressed up to look like objectivity.
  The Institute of Directors' policy unit has produced a paper on this subject. The institute says that to allege that taxes contribute more to imports than any other form of public increase in expenditure is a counsel of despair. It may be a counsel of despair, but it is also true. If the Chancellor wants to invest in jobs he will, therefore, use his money in the way that every authority demonstrates creates the most jobs—what the Prime Minister calls the "measures" and what other people want to see by way of direct investment.
  My conclusion—I say this with no pleasure but with deep regret for constituencies such as mine in the northern half of which unemployment runs at 50 per cent. among adult males—is that the Chancellor will not change his ways, because they conform to his policy to choose the high unemployment policy and regard the unemployed as a low economic and low political priority.
  Two weeks ago, the Chancellor promised the country a budget for jobs. That was not a wholly original phrase, because last year the Chancellor promised the country a budget for jobs. Unemployment has risen remorselessly. I do not know whether the Chancellor's habit of boast one day and counter-boast the next, claim one day and counterclaim the next, is the result of his wish to deceive, the product of the economy being wholly outside his control, or the outcome of his personality which oscillates from the manically aggressive to the depressively incoherent. Having seen one phase of his character yesterday, I assume that the right hon. Gentleman will be breaking the furniture this afternoon. Whatever the Chancellor's mood happens to be, I tell him that it is now widely accepted, as the right hon. Gentleman must know if he has read a single newspaper today, that his Chancellorship has been
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  a disaster for this country. While he remains in office, combining strategic ineptitude with technical incompetence, there is no hope of reducing unemployment.
  5.12 pm
  The Chancellor of the Exchequer (Mr. Nigel Lawson): I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
  'rejects the Opposition's doctrinaire commitment to higher government spending and endorses the Government's determination to pursue responsible fiscal and monetary policies, which, along with its policies to improve the efficient working of the economy, provide the only secure basis for ensuring continuing low inflation, steady growth and rising employment.'.
  This debate has been somewhat overshadowed by recent events in the markets. I should like to ask the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) to have the courtesy, at least on this topic, to answer the question put to him by my hon. Friend the Member for Mid-Norfolk (Mr. Ryder) on whether the exchange rate should be higher or lower. It is no use the right hon. Member for Sparkbrook just sitting there with that "Oh to be in Nicaragua look" about him, because in the past he has not hesitated to express views on the exchange rate. Suddenly, when he raises this important issue, he has nothing to say about the exchange rate.
  The turbulence in the financial markets recently, especially in the foreign exchange market, results from three main causes. The right hon. Gentleman conceded two of those causes in a broadcast the other day. Those causes are outside the Government's control. One cause is the strength of the dollar. It is important to recognise that, as my right hon. Friend the Prime Minister said earlier today, we are seeing a massive and excessive strength in the dollar. The dollar has reached an all-time high against other currencies besides sterling.
  It is interesting to examine what has happened during the whole period since the Conservative party first assumed office in 1979 and to note the movements in sterling against various currencies or groups of currencies. During that five and a half year period as a whole there has been a reduction in the value of sterling of 46 per cent. Against the deutschmark—the strongest of the European currencies—the reduction has been 9 per cent. Against the European monetary system index as a whole the value of sterling has increased by 5 per cent. It is clear from those figures that there has been a massive surge in the value of the dollar. That is causing concern to people throughout the world, including those responsible for economic policy in the United States.
  The second phenomenon has been the weak oil market. It is true, as the right hon. Member for South Down (Mr. Powell) and other hon. Members pointed out yesterday, that there are benefits to us from lower oil prices. The plain fact is, however, that the present state of uncertainty only adds to the pressure on sterling, and we no more want an unstable oil market than we want an unstable foreign exchange market. We cannot influence the world price for oil in any substantial way.
  We must assess the extent to which the exchange movements which result from those two factors put future inflation measures at risk, because we must always have that point in our sights. There is no mechanistic way of doing that. It is a matter of judging the combination of monetary growth and the exchange rate that will keep financial policy on track. At times this means that we may have to have a lower exchange rate and higher interest

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  rates than we would like. Taken together, there is no risk whatever to the counter-inflation policy; nor, as we have seen from the events in July, is there any threat to the prospect for growth and employment.
  Mr. Geoffrey Robinson: Given that there has been such a minor devaluation against the deutschmark, why is there no panic about the deutschmark, and why is the three-month lending rate in Germany still 7 per cent. as opposed to 12 per cent. here?
  Mr. Lawson: The reason is that the Germans have succeeded — I admire their success — in bringing the inflation rate down to a much lower level than we have done. Germany has an inflation rate of less than 2 per cent. That is why the Germans can have that level of interest rate.
  The third factor is related most closely to the Opposition's motion. I am afraid that there was a feeling in the markets that the Government had lost their willingness and ability to control their affairs so as to maintain the downward financial pressure on inflation. It is clear from market behaviour that this fear was much stronger overseas than at home, and it is easy enough to see why. Those who deal in these markets do not need to know the truth; they need only play safe. The foreign exchange dealers in the middle east, Europe or the United States cannot be sure that the rantings of the right hon. Member for Sparkbrook will be treated with the contempt they deserve. When they read the newspapers and see that, apparently, the CBI is allied with the TUC at NEDC, they do not realise that the CBI wishes to cut public expenditure. The foreign exchange dealers see only the news of the massive increase proposed by the TUC. They know that, when all the talk is of increasing public expenditure, they had better watch out. They play safe and move into the already excessively strong dollar, and the subsequent slide in the value of sterling can damage inflationary expectations. We come close to a vicious circle, and that is why the authorities' reaction had to be correspondingly robust. That is why we did not merely raise interest rates, but raised them decisively in a high profile way, using the Bank of England minimum lending rate. That instrument was specifically retained for just such circumstances.
  Mr. Hattersley: The right hon. Gentleman says that he raised interest rates decisively. Does he mean his first bite on Friday, or his correction on Monday?
  Mr. Lawson: I should have more respect for that intervention if at any time prior to the increase in interest rates the right hon. Gentleman had once suggested that interest rates should be increased. The use of MLR was retained for just such purposes, and policy overall will maintain even further downward pressure on inflation, because in no circumstances will this Government take risks with inflation.
  The simple lesson is that the millions of people around the world who use sterling for one reason or another will not accept that we can produce a more successful economy simply by providing more public money for this or that project—quite the reverse; and of course they are right. We recall what happened when the newly elected Socialist Government of France attempted to do this not many years ago.
  If growth, employment and economic success were simply matters of public expenditure, every country would
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  have a successful economy, because there is nothing difficult about public expenditure. Indeed, they would have even more successful economies by spending more and then more again. I can see why observers from overseas are amazed to hear that there are some in this country who still believe in this ancient form of witchcraft.
  I reject equally strongly the idea that we can somehow cut ourselves off from the rest of the world. The 1980s are not the 1960s. We are part of Europe. We are part of an integrated Western world. We play an important part—I hope that it will be an increasingly important part—in the international financial system, which provides income and jobs for our people. The Euro-markets centre on London and foreign banks have their European headquarters here.
  We could throw the business away if we wished—clearly the right hon. Member for Sparkbrook wishes us to do so—but there would be plenty of other countries willing to take it on. But even if we were to do it, we still could not put back the information technology lock, which means that there is a market somewhere which can be, and is, actively dealt in 24 hours a day every day. Nor can we alter the fundamental fact that the exchange rate is determined in the modern world by flows of capital of immense size. They cannot be stopped by exchange controls or grotesque devices such as the right hon. Gentleman's latest wheeze to penalise overseas investment; presumably, incidentally, overseas investment in the developing countries as well. We live in an integrated financial world, whether we like it or not, and that is the backcloth to this debate.
  Mr. Stuart Bell: The right hon. Gentleman said that we were part of an integrated Europe. If so, why have we not joined the EMS? Is it not simply because the right hon. Gentleman has no exchange rate policy and cannot possibly join a system of fixed parity?
  Mr. Lawson: We have not joined the EMS because, on the balance of the advantages and disadvantages—and there are both—we have decided that at present it would not be right to join. So far from not being a member of Europe, the ecu market is more highly developed in London than it is in any other financial centre throughout the European Community.
  Meanwhile, the right hon. Member for Sparkbrook persists in arguing—[Interruption.] He does not like listening to any views other than his own; he might have the courtesy to pay attention to what I am saying—that the economy remains in recession and that there has been no recovery. He accused the Prime Minister of some falsification or other, which he was totally unable to sustain. The only falsification which was sustained was his attribution of remarks to myself and the leader of the Social Democratic party, neither of which bore any relation to the facts.
  The right hon. Gentleman's interpretation of the economy is extraordinary and is a distortion of the evidence. Output has been rising steadily since the first half of 1981. We are now well into the fourth year of rising output in Britain and that rate of growth has, by historical standards, been most respectable. Between the first half of 1981 and the first half of last year GDP grew at nearly 3 per cent. a year, allowing for the effects of the coal strike.
  The right hon. Gentleman talks of boosting demand. There has been no shortage of demand. Indeed, the figures

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  for the last three and a half years, when they are finally in, are expected to show a growth of domestic demand of more than 3 per cent. a year—faster than the equivalent period under Labour.
  The balance of demand has also been better. As the House knows, investment—private and public together—has been making a major contribution to growth, and it continues to do so. During the period 1975 to 1979—the recovery period under Labour—consumer spending grew twice as fast as fixed investment. During the current recovery the position has been exactly reversed, with investment growing twice as fast as consumer spending. When final figures are available, they are likely to show that total investment last year reached an all-time record level in real terms, with an increase of 7½ per cent. between 1983 and 1984.
  Dr. Jeremy Bray: Will the right hon. Gentleman confirm that during the recessionary period of the Conservative Government consumption fell by far less than investment?
  Mr. Lawson: That is true of every recession.
  What really upsets the right hon. Member for Sparkbrook is that the economy is set to continue to grow at 3 per cent. A continuation of growth is likely because it is based on sound conditions. That is not just the Government's view. It is the view of the OECD, the annual report of which has just been published and which states, talking about the United Kingdom:
  "Recovery may be rather more durable for it now appears better balanced and it has not been as dependent as in the past on a strong contribution from stock building and an expansionary fiscal policy."
  That is the verdict of the OECD, and that is right, though that is not all. Rising inflation is the mechanism which, in the past, has brought so many recoveries to an end. The striking feature of this recovery, which marks it out from virtually all upturns since the war, is that we do not face rising inflation.
  As the House knows, the reason why we do not have rising inflation is that the Government have persistently pursued financial policies which have supported the recovery of output and declining inflation. Opposition Members have eagerly hung on the words of any commentator they could find who would pronounce the imminent ending of recovery and the onset of recession, and then slavishly repeated those assertions. They have not been short of allies. We have heard it year in and year out ever since the recovery began, but on each occasion they have been proved wrong. They have been wrong mainly because they have failed to understand the key role that financial policy has played in reducing inflation and in supporting the growth of output.
  The strength and durability of our recovery is, on the whole, well understood—other than by the right hon. Member for Sparkbrook and his hon. Friends—and it is respected throughout the world. The OECD, some of whose words I have, quoted, has come to recognise it.
  Mr. D.N. Campbell-Savours: Does the Chancellor believe that the prospect of recovery would be helped by a dollar-pound parity?
  Mr. Lawson: No, I do not. [Interruption.] At least Opposition Members get a direct answer from me.
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  The claim of the right hon. Member for Sparkbrook that there has been no recovery is based entirely on the unemployment figures and, of course, it is a great source of concern to us all that unemployment remains high. It is crucial to understand the fundamental reason for that and for its relationship to the growth of output. Fundamentally, it is due to the strangulation of the economy in the 1970s, the painful visibility of what was hidden for so long, and to the quite unrealistic rates of pay settlements.
  By the end of the 1970s the United Kingdom had a large degree of disguised unemployment. Everybody knows that a combination of controls and sluggishness to adjust produced widespread and heavy overmanning in a wide section of British industry.
  Mr. Dick Douglas rose—
  Mr. Lawson: That is clear from the statistics of the time. In the wake of the first oil price shock—the hon. Member for Dunfermline, West (Mr. Douglas), who is an expert on the oil industry, will recall this—productivity growth in the non-oil economy was negligible. There was scarcely any growth whatever. Had employers followed the pattern of earlier periods and adjusted employment in line with output, unemployment in 1979 would have been much higher than it was. What has happened over the past five years is that we have seen the painful process of adjusting to realistic manning levels.
  Mr. Douglas: If the Chancellor is concerned about the level of unemployment, has he or his officials made any assessment of the opportunity cost of unemployment? Does he accept that it is costing the nation £30 billion to have the level of unemployment at which he is running the economy? That sum has gone for good. That is the cost of the Government's policies.
  Mr. Lawson: The hon. Gentleman does not have to tell me that unemployment has a cost. Of course it has a cost, not merely in financial terms, but in social and human terms. The question before the House is: what are the policies that have the biggest chance of bringing unemployment down? That is what we are concerned with. The starkest evidence of the change of trend is the rapid growth of productivity in recent years. This has reflected industry's attempt to recapture the efficiency which was lost in the 1970s. Productivity in manufacturing industry in particular has risen by more than 20 per cent. since 1980. This is excellent for efficiency, and it is good for costs, but, sadly, it is as bad for jobs in the short term as it is good for them in the long term.
  Despite the need to adjust, the overall employment situation would have been much better without the damagingly high rates of pay settlements. The Opposition speak of their concern for unemployment but never lose an opportunity to support any action that will lead to higher pay rates. There could be no starker example of the triumph of opportunism over genuine concern for the plight of the unemployed. Despite the damagingly high growth of earnings, employment has begun to rise. The latest published estimates suggest that the number of people in work in the United Kingdom rose in the most recent year for which we have full figures, while employment was still falling in West Germany and in France. Although registered unemployment stands much too high, it is often forgotten that this country has one of the highest proportions of people in work amongst all the major countries, and well above the European average.

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  A second significant indication of improving job prospects is the recovery of company profitability, where for so long Britain has lagged wretchedly behind its main competitors. For 1984 the Confederation of British Industry now expects companies operating outside the North sea to show a real net pre-tax return of 7½ per cent., while for this year, 1985, it is forecasting a 9 per cent. real return. If this is achieved, it will be the highest rate of return that we have seen in this country since the 1960s.
  In money terms, profits outside the North sea were up 20 per cent. in the year to the third quarter of 1984. There could be no better news for the unemployed than that British industry is once again profitable. It cannot be repeated too often that it is companies, not Governments, which create jobs. It is the job of the Government to do their best to create the conditions in which business can flourish and create those jobs.
  My answer to a question which the right hon. Gentleman put to me is that I have stressed on many occasions that we do not make forecasts of unemployment. The margin of error involved in such exercises is enormous, but I should like to take this opportunity to describe to the House the route which I expect to have the greatest possible chance of success in reducing unemployment. Inevitably, in the real world, the creation of jobs is a complex process and it is not possible to be too precise about the route through which new jobs will come. Of course, the right hon. Gentleman has no time for these subtleties. To him there is a simple and easy answer. He says that lower unemployment requires higher demand, that demand is unlikely to go fast enough under present policies and, therefore, that the Government should step in and boost demand. I do not think that I am traducing him when I say that that is what he is suggesting. [Interruption.] President Reagan's policy has been to achieve success entirely through tax cuts, which I shall come to later.
  The right hon. Gentleman ignores the failure of his suggested approach to work in the past, because it is not for want of trying, and he simply debates the extent of the largest boost that could be made to sound respectable, a figure which differs each time we debate the issue in the House. That is a mistaken approach. Because of the Government's financial policies, we can be confident that there will be sufficient money demand to generate the growth needed to reduce unemployment, provided inflation continues to fall. It is a question not of creating sufficient demand, but of whether the economy works well enough to be able to take advantage of that demand. That is why I have characterised unemployment as a supply side problem, rather than a demand problem; a problem to be solved by micro-economic reform, and not by fiscal irresponsibility.
  With a well-functioning, efficient economy it is not difficult to see the route by which unemployment would decline in the years ahead. Inflation would fall, leaving room within the monetary targets for faster output growth. Real wages would grow sufficiently slowly for company profitability to rise to a level that would encourage firms to expand their capacity and enlarge their markets and their work forces. Lower public spending and taxation as a proportion of gross domestic product would help sustain the growth of disposable income and consumer spending and help incentives by removing some of the severe distortions in the tax and benefit system. Throughout
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  industry productivity would rise faster once restrictive practices were ended and obstacles to the use of best practice techniques were removed.
  Mr. Robert Kilroy-Silk: Given that we are now in the real world and that in the real world only 6 per cent. of the school leavers on Merseyside this year went into full-time occupation, can the Chancellor say when these measures will provide jobs for the other 94 per cent.?
  Mr. Lawson: As I pointed out a moment ago, the number of jobs in the economy is rising. But output per head in the economy as a whole might not improve to quite the same extent, as the more modest growth in real wages would boost employment in the more labour-intensive, and thus lower productivity, sectors. The growth of output would be above the growth of productivity. We would do better than we have in the past in maintaining our share of world trade and imports would not take the same share of domestic demand that they have been taking. We would probably see a faster turnover of jobs as people moved to those activities that best suited their ability, aptitude and skills. We would see more geographical and industrial mobility, and the structure of industry would change towards producing those goods that we were best at producing.
  These are the characteristics of a well-functioning economy, and they are the only sustainable route to lower unemployment. The Government's supply side strategy is directly aimed at bringing about these conditions. It has been directed towards removing impediments and outdated controls. It has encouraged companies to adopt new techniques and to meet new markets. In general, it has been aimed at helping markets to work better. It has encouraged conditions which assist growth in output and jobs rather than, as too often in the past, holding them back.
  The key aspect of micro-economic policy has been the removal of unnecessary obstacles, particularly those which stand in the way of those seeking work. To that end we have abolished controls on pay, prices, dividends, foreign exchange transactions and hire purchase contracts. We have removed unnecessary planning restrictions on industry. We have strengthened policies to promote competition. We have gone ahead with an unprecedented programme of privatisation. We have introduced the business expansion scheme and the loan guarantee scheme. In this context, one of the things that we suffer from most is that new businesses were not started 10 to 15 years ago which could have made a major contribution to our economy today. That is why it is so important to get them started now. We have reduced the rates of corporation tax. We have instituted the biggest programme of youth training ever. We have tackled the abuses of trade union power.
  All that amounts over time to a transformtion of the supply side of the economy. The measures that we have already taken have helped to set us on the path towards a more enterprising economy. But there is more to be done, and there is more to be done by others, too, because the Government can do only so much. The private sector must respond and take the opportunities that have emerged. The demand is there, profitability has improved, and many of the obstacles to success have been removed.

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  I am confident that we are seeing the first of the rewards from the steps to create a more enterprising economy, and there are more rewards to come.
  The right hon. Gentleman's approach is to say that if there are supply side defects these can be overcome by more demand, but it is clear that
  "macro-economic policies cannot on their own make a major contribution to reductions in unemployment over the medium term."
  Those are not my words but those of the Organisation for Economic Co-operation and Development report. It goes on to say that
  "supply-side measures … are essential in this respect, especially those that reduce rigidities in the labour market".
  I am glad to see that the right hon. Gentleman nods and agrees that we need to reform trade union law to reduce rigidities in the labour market.
  It is simply not possible, except in the very short term, to offset supply side defects by more demand. The only answer is to remedy the defects. It is in that spirit that we must see the debate about public expenditure and taxation.
  The choice between public expenditure and taxation has been characterised by the right hon. Gentleman exclusively as a matter of which creates the most demand. That is how he has presented it. But, as I have stressed, Government financial policy is already designed to deliver the right level of money demand. Therefore, the choice must be on the basis of what is best for the supply performance of the economy.
  Mr. Hattersley: I believe that the Chancellor is now making a genuine mistake. The choice between public spending and taxation has been characterised by me according to which creates the most jobs. I understand that both create demand. My problem is that one creates demand in Japan, America and Germany. That is the point that I am trying to put to the Chancellor.
  Mr. Lawson: Then the right hon. Gentleman must be opposed to any increase in pay, because that might also be spent on imported goods from Japan, Germany and France.
  The choice is stark. As a nation, we have to choose between higher public expenditure and higher taxation or lower public expenditure and lower taxation. If a high public spending, high tax economy were the solution to our problems, the United Kingdom would have been the world's economic success story long ago. If high public spending and high taxation were the answer in the 1960s and 1970s, unemployment would not have risen from cycle to cycle and Government to Government. Profitability would not have fallen from cycle to cycle. Productivity growth would not have fallen behind that of other industrial countries, and living standards in this country would not have fallen so far behind those of our European neighbours.
  If high public spending and high taxation were the answer in the 1960s and 1970s, our markets would not have been increasingly taken by imports, demand growth would not have outstripped supply performance, and inflation would not have become the curse it did become. Instead we would have prospered. After all, why should there be any end to that transfer of purchasing power from individuals to the state if that is the recipe that is proposed?
  There is little difficulty in persuading Governments to tax and to spend. They have always found that very easy
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  and convenient. So where did the policy go wrong? It went wrong because, although Governments may have enjoyed high public spending and high taxes, no one enjoyed the consequences. It was precisely because of high spending and high taxation that the problems that I have outlined emerged. High taxes damage performance and incentives, generate waste of resources, create huge distortions, reduce risk and initiative and banish the spirit of enterprise from our economy upon which everything depends. And it is only lower taxation and lower spending as a proportion of national output that will reverse those pressures.
  Mr. Roger Stott: Can the Chancellor tell me and the 24,000 people in Wigan who are currently on the dole how they will be helped if tax cuts are given to the rich, who will benefit from them?
  Mr. Lawson: I am talking, not about tax cuts for the rich, but about tax cuts for the population as a whole.
  Of course lower taxes do not carry tickets with precise jobs written on them. That is not the way in which market economies work. However, the long-term benefits to employment are real and substantial.
  Of course none of our policy denies the role of a worthwhile public sector investment programme. To listen to the right hon. Member for Sparkbrook, one might imagine that the Government had stopped investing in the infrastructure and had ceased all capital expenditure. The facts conclusively demonstrate otherwise. Public sector capital expenditure has remained broadly stable in real terms since 1979, and in addition to the £24 billion of capital expenditure—public sector capital expenditure—in 1984–85, some further £5 billion has been spent on repairs and maintenance classified in the figures as current, but nevertheless restoring and enhancing the very assets to which the right hon. Gentleman referred. The right hon. Gentleman has only to look around him—
  Mr. Neil Kinnock: What about the Confederation of British Industry?
  Mr. Lawson: Let me refer to the CBI as the right hon. Gentleman has mentioned it. It is concerned about spending on roads. Spending on trunk roads next year is planned to run at 25 per cent. up in real terms on the figure that we inherited in 1978–79. That is the truth. As for the water industry, it is planning to increase its investment next year by £70 million, a 9 per cent. rise.
  Our record is good, even on the blinkered terms of the right hon. Member for Sparkbrook. However, I do not display this as an exercise in statistical machismo, because public spending on infrastructure is not an end in itself. Any particular project has to be justified on its own merits, on the basis of its own rate of return, taking into account the wider economic and social benefits.
  The right hon. Gentleman appears to be oblivious to those elementary points. Along with the Trades Union Congress, for example, he urges additional investment in the nationalised industries. Is he not aware of what the public corporations have said about that matter, as reported in the CBI paper entitled "Fabric of the Nation", published last summer? It states that for the present the nationalised industries
  "take the view that, having pushed up their aggregate capital outlays by more than a half in the past five years, from £4,463 million in 1979–80 to £6,757 million in 1983–84, their present levels and patterns of investment spending are broadly consonant with the proper development of their businesses."
  That is the view of the nationalised industries.

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  Public sector housing has reduced, but that is because of deliberate Government policy to shift housing from the public sector to the private sector, which is what the people want to see. Let us look at private sector capital expenditure on housing. Last year, in 1984, it was up roughly 20 per cent. in real terms over 1978, the last full year of the Labour Government. Last year it was running at its highest level ever in real terms. Total investment is also running at an all-time high, and we expect it to be higher still this year.
  It is a commonplace of our critics to accuse the Government of obsession with theory and dogma. Yet, in the current discussion about whether employment is best served by lower taxes or by higher taxes spent on public spending, it is our critics who are the slaves of theory. To the man in the street it is pretty obvious that in a low tax economy incentives to work, invest, expand and therefore to create jobs are likely to be stronger than in an economy burdened by high taxes.
  The man in the street is much more impressed by concrete examples than by econometric models. It is a fact that Japan and the United States — the two most successful economies at creating jobs and wealth—have far lower tax rates than the United Kingdom. Japan takes little more than a quarter of its citizens' income in tax and the United States takes about one third of its national income in tax, whereas we are taking not far short of half our national income in tax. Faced with that evidence, the man of common sense will not be readily convinced that we can become more efficient and create more jobs by burdening our people with taxes to pay for even higher public expenditure.
  Our sophisticated critics dismiss all this as vulgar populism. What use is the concrete experience of Japan or America to a man who relies on an econometric computer model to tell him how the real world works?
  Mr. Robert McCrindle: Although my right hon. Friend is absolutely right to resist the temptation to see in a large public investment programme the real solution to unemployment, just before he assumes that the only possible alternative is the reduction of direct taxation, will he consider that at least part of any money that he might have to dispense during the Budget might well be dispensed by reducing employment costs—for example, by providing a holiday on employers' national insurance contributions? I am a little worried to find the polarised argument—that it is either one thing or the other—developing. Will my right hon. Friend not ignore the possibility of there being a middle way?
  Mr. Lawson: That middle way is much closer to the way that I was advocating. I am glad to have my hon. Friend's support. He will recall that it was for this very reason that the Government abolished the national insurance surcharge — the tax on jobs — which the Labour Government imposed.
  For the right hon. Member for Sparkbrook and his erstwhile right hon. Friend the Member for Plymouth, Devonport (Dr. Owen), the computer simulations which they like to quote purport to show that £1,000 million spent on recruiting more civil servants would have six times as much effect on unemployment as £600 million spent on raising tax thresholds. That is what the simulations purport to show, yet no nation in the real world has ever attained
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  full employment, higher living standards or sustained economic growth by taxing productive enterprise to build up its own payroll.
  The Government are determined to tackle the harrowing problem of unemployment by the proven, commonsense route of restoring an enterprise economy. That means lower taxes, better rewards for success, fewer restrictions and trade unions being more responsive to their members. It means an education system geared to technical and marketable skills, incentives for new, small and expanding businesses and freedom to own one's home and so be able to move when a better job is available elsewhere. It means converting loss-making nationalised industries from leeches siphoning off resources from elsewhere into new centres of profit and enterprise in the private sector.
  Those are the measures, across a broad front, which the Government have taken to transform the British economy. Consistent with the needs of our counter-inflation strategy, those are the policies with which we shall persist.
  5.52 pm
  Dr. David Owen: The Chancellor has made much of OECD figures. One of the OECD's recent studies has sombre news for Britain. It shows that, of the 20 major industrial countries. our standard of living has slumped to fifteenth. It will not be long, on present trends, before Italy has a higher one. Against that sombre background, we should examine some of the Chancellor's statements.
  When recalling some of the Chancellor's previous statements, it is not unreasonable that we should doubt the veracity of what he says and his capacity to predict. On 12 July he told us
  "There is no lack of confidence in sterling … I have every expectation that the fundamental soundness in the economy will be reflected by a resumption of the trend towards lower interest rates".— [Official Report, 12 July 1984; Vol. 63, c. 1400 ]
  That does not augur well for any of the statements that the Chancellor has made today.
  We must deal, first, with the management of the exchange rate. The Government's management of the exchange rate—at the beginning the pound was worth $1·60, it increased to $2·40 and has now plunged to $1·10 —reflects the Lawson style. It is a strange mixture of insouciance, indifference, intransigence and, finally, sheer incompetence. It is on the last that we indict the Chancellor today. In Question Time today, the Prime Minister made much of the fact that no one country has enough reserves to stop money moving around the world. She is right. There is no doubt about that. No country can deal with speculative flows on its own. The indictment of Britain's policy, especially in the past five years, is based on its inability to mobilise other countries, which feel similarly, to get co-ordinated and concerted international action.
  The Chancellor indicts himself. He said today—the words would have fallen from his lips with more effect a few days ago — that no one has any interest in an unstable oil market or in an unstable exchange market. The Chancellor has been preaching the virtues of utter non-interference in what he purports to claim is a free market in energy prices, when everyone knows that that is complete nonsense. He has also preached the value of no interference in what he also likes to think is a free market in exchange rates. Exchange rates do not always follow

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  market pressures. They are remarkably brittle and incredibly sensitive to irrational forces. I believe that some of the speculation in the past few days has been irrational. The problem is that that irrationality has been fuelled by the incompetence with which the Government have given signs to the market at home and internationally.
  Many things can be done in an attempt to smooth exchange rate fluctuations. I favour moving away from the firm fixed exchange rates of the past. We have all learnt some lessons from the tragedies that resulted from hanging on to fixed exchange rates for far too long. However, other countries have recognised far more than the Government, it appears, that it is difficult to plan an industrial economy without rather greater stability in exchange rate markets. The Government seem not to understand that we have the power—it is not massive—to influence exchange rates instability by acting with other countries.
  I should like to put to the Chancellor a few serious suggestions about what he should be doing. He is to go to Washington for a meeting of the Versailles group—the five key finance Ministers who already, under the Williamsburg and London summits, are enjoined to try to introduce greater exchange rate co-ordination and stability. The Chancellor will say that there is nothing that we can do about the strength of the dollar. However, there is a lot that the United States can do about the strength of the dollar and there is a lot that it ought to be doing. Moreover, there is much that Europe should be telling the United States straight about what it should do. Britain cannot achieve that alone as we have not the international or financial weight to carry through such a message in Washington.
  It is the Chancellor's duty to tell the Treasury Secretary that we are not prepared to put up with the tight monetary policy that the United States is pursuing and the high interest rates that it involves, and that it is high time that the United States acted to relax its rediscount rate—the equivalent of our minimum lending rate. The Chancellor might say that the United States has no intention of doing that. If so, two things can be done. First, we must mobilise the French and the Germans so that the three European countries at the meeting speak together. That brings me back to asking why the Chancellor persistently refuses to gain the collective strength of being a member of the exchange rate system of the European monetary system.
  The EMS is not the solution to all of our problems. Membership of it involves considerable disciplines. Anyone who believes that that is the soft option or that it means that there will be no increase in interest rates to defend the exchange rate is living in a fool's paradise. Those disciplines are broadly sensible ones within which this country can live. Over the past year, the pound sterling has not moved massively out of line with the EMS basket of currencies.
  To declare this week our intention to join the EMS would have great value in showing the world that this country wanted a more stable exchange rate; would operate within a collective framework within Europe; and was prepared to accept the disciplines of the EMS.
  The Chancellor may say that we cannot go in because the pound is too high against the deutschmark. He has said that we have moved down significantly against the deutschmark in the past few years. People can now argue whether the present rate of the deutschmark is competitive,
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  and that if we are going into the EMS we should try to reach agreement to go in a little lower than the present deutschmark rate. I should like to go in at 3.40 or possibly even a little lower. On the point of entry, we could persuade our European colleagues that we should go in a little lower. That should be done. We should then find within the EMS it much easier to co-ordinate French and German pressure upon the United States to do something about the dollar.
  It is interesting to note that the Bundesbank intervened in the market on Friday in co-operation with the Japanese authorities with the yen to sell dollars. They only did a little, but it is possible for Japan, France, Germany and the United Kingdom — other European countries would follow—to sell dollars if the United States still refuses to live up to its responsibilities. It is time that we said to the United States, "You are not just damaging us in Europe; you are doing grave damage to the Third world and the developing countries."
  The Chancellor may say that the United States will still resist, that it is strong, and that even if Europe sold dollars in a co-ordinated way we should not be able to bring the dollar rate down. I have my doubts about that.
  The Chancellor ignores the other pressure that the United Kingdom has. We are the fifth largest oil producer in the world at the moment. Because our oil is in a rather special category, we have more influence on oil prices than our fifth position might suggest. The Chancellor's stance has been hitherto not to intervene, we must be prepared to say to OPEC that while we had hitherto taken the view—rightly in my judgment—that our interest was not in combining to increase oil prices, and that it was an overall world economic interest to keep oil prices low, so we were not taking part in the cartel, if we were faced with United States' authorities who refused to act responsibly in their world role not just as custodians of the dollar but in terms of their impact across the world economy, we should have to start to intervene in oil prices. [AN HON. MEMBER: "In which way?"] We could reduce our production. That would have an effect also on our revenues. But it is too easy to say that is all right because the oil price is denominated in dollars and a fall in the pound increases our oil revenues. One of the reasons—the Chancellor has used it himself— why sterling has been under such pressure has been the oil price movement.
  The Chancellor talks about us having a petro-currency and uses it as an argument against us entering the EMS. There are times when the Government should intervene in oil pricing. We have been much upset in the past few weeks by the actions of Statoil and the Norwegians. If we were to co-ordinate with them, aś I believe we could, rather more effectively, we should have some impact on stabilising oil prices.
  The policy of complete "hands-off" and of leaving oil pricing to market forces is wrong as it is in relation to the exchange rate. It is something in which the Chancellor has the power to intervene. He can intervene in two directions. They would both put added pressure on the United States. They would be essentially European pressures and would be in the overall interest of the world economy.
  Mr. Alan Howarth: How does the right hon. Gentleman square his desire that there should be some depreciation of sterling against the deutschmark with his proposal that we should rig the oil market so as to increase the oil price?
  Dr. Owen: The only way to achieve depreciation against the deutschmark over and above the one of 10 per cent that we have had since 16 January 1984, and the depreciation of 7 per cent. against the French franc—it may be moving down as I speak—is to reach agreement on entering the EMS and on the rate at which we would enter. When entering or adjusting the EMS it has been a common practice to persuade the other countries involved to go in at a rate lower than the current market rate. I know that our European partners will not like that. They would prefer us to go in at a rate even higher than our present one. It is not unreasonable, however, for us to argue that, given the trends and our competitive figures against the deutschmark in comparative industries, we should be a little lower than we are currently—[Interruption.] If the hon. Gentleman wants us to go in at the present rate, that is a reasonable position. I do not know why the Financial Secretary is laughing. That is a legitimate role, and he cannot have it both ways. Half the time, the Treasury has been arguing against our joining the EMS on the ground that we are not competitive.
  I wish to deal with the subject of unemployment and the indictment of the Government by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). His quotation was wrong. The interpretation, in fairness to him, was not completely right even by the standards of the Daily Mail. In the comment I was referring to the position of the alliance parties. The end of that quotation states:
  "and the Alliance has got to be the party of the future."
  The complete quotation is:
  "There is nothing right wing about running the country's economy rather better than it has been for the last 20 to 25 years and the Alliance has got to be the party of the future."
  The quotation does not relate to what the Government have done. I made it clear—[Interruption.] I agree that it is poorly reported by the Daily Mail, but if the right hon. Gentleman wishes to make the allegation that he has, he should go to the proper text. His veracity was not helped by going on LBC on 27 September and describing me as being passionately in favour of private health and private education. I have never charged a patient in my life, and my children are going through a state education. It would not be a bad start for the right hon. Gentleman if he were a little closer to the truth.
  Let us deal with the right hon. Gentleman's prescription for our economic future, and why we should support the Opposition's motion. First, on the point of substance, he is aware that we have long supported increases in public expenditure, but the problem with the motion—it must be coupled with the extraordinary speech that the right hon. Gentleman made on Sunday—is that it is a wholly false prescription for what the country needs. An increase in public expenditure is needed, but there is also a need for an increase in private investment. Infrastructure is not always public. A great deal of public ordering and contracting goes straight to the private sector.
  Secondly, there is no shortage of funds for investment. Endless studies have demonstrated that, including one by the former Labour Prime Minister, Lord Wilson of Rievaulx. The money is available, but the problem is that people cannot use it because of the high interest rates. The right hon. Member for Sparkbrook proposes the most extraordinary scheme whereby we coerce funds back from overseas—we force repatriation—create a nationalised bank, and then disburse funds at lower interest rates. There is great virtue in an industrial credit scheme. That proposal
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  has been put forward by my party for some time. We could then channel investment into those areas of technology and industry that are starved of funds at the moment because they cannot afford them. The high interest rates which are the consequence of the Chancellor's action are worrying for industrial investment. There is whole raft of other matters where the Opposition's economic policies are not worthy of support.
  I come now to the Government's and the Prime Minister's position on public expenditure. We are asked by the Prime Minister to believe that the current levels of public investment are in some way equal to the levels that were running in 1979. She was at it again last Thursday at Prime Minister's Question Time. But the figures do not bear this out. If one looks at forward investment in the national income and expenditure Blue Book we see that it has progressively fallen since 1973. If we take one particular example—roads—capital investment at 1980 prices has fallen progressively since 1973. It is lower now than it was in 1979. If these were just my criticisms they might be thought to be purely partisan. Yesterday a very interesting speech was made by the chairman of Wimpey in which he said:
  "We have seen over the last five years a gradual deterioration in the availability of work that the Government is prepared to make to the construction industry; reducing from 60 per cent. of total workload in the 1970s to the present level of 40 per cent. We have seen the increase in the power of economists who pursue rigid financial policies which they assure the young people of this country, and the vast number of unemployed, that it will 'come right on the night'".
  There are numerous industrialists in the country who are bitterly critical of the Government's neglect of the infrastructure. It is no use saying that the infrastructure does not need money to be spent upon it. In the Health Service the Davies report estimates a backlog of £2,000 million worth of repairs which have not been carried out, that half of the building stock in use pre-dates the first world war, that three-quarters of it pre-dates the 1939–45 war and that 88 per cent. of our mental health buildings are over 50 years old. It is not surprising to note that capital spending by the National Health Service as a percentage of total spending has fallen since 1974 from 10 per cent. to 6 per cent.
  Mr. Mark Fisher: Will the right hon. Gentleman give way?
  Dr. Owen: No. Twenty-five per cent. of secondary schools suffer from overcrowding; 900,000 temporary places are still in use; 25 per cent. of schools still have outdoor toilets; 90 per cent. are lacking buildings for practical subjects such as applied modern sciences. Do not tell me that construction work on some of these projects would not be an investment in our future. It would not suck in imports and it would bring work in the construction industry to some regions where 40 per cent. of construction workers are unemployed. Something has to be done about this.
  Where is the money to come from? During the last few weeks we have been debating, to cheers from the Tory Benches, how £3 billion is to be spent upon tax cuts. We must have the courage to tell the electorate that it will be unable to have tax cuts of that sort at the standard rate of income tax and that it is not right to take a penny off the standard rate of income tax.
  Mr. Howard rose—
  Dr. Owen: The hon. and learned Gentleman must sit down for a second. If we are asked about tax thresholds, there are better ways of dealing with the problems of the disincentives which undoubtedly exist at the lower level of earnings. Ways of improving family support have to be introduced. Child benefit could be increased but it costs money. That may mean postponing tax cuts. It may be that we shall have to face increased indirect taxes. We have not opposed every single increase or extension of VAT. We wish there to be a widening of the base and some increase in indirect taxation. It has to be sensibly applied. It depends upon where the investment is going, exactly the point made today by my hon. Friend the Member for Stockton, South (Mr. Wrigglesworth). If British Aerospace was to be sold off and the money invested in the new industries of the future, we should find it a great deal easier to support that sale.
  Mr. Fisher: If the right hon. Gentleman wants there to be a widening of the VAT base, will he tell the House upon which items he would impose VAT?
  Dr. Owen: I shall look at the question when it arises. I have made my views quite clear. I am not in favour of VAT on food. We shall look at the widening of the application of VAT or at an increase in the level of VAT when the matter arises—[Interruption.] It is a great joy for the two old parties to go over this ground again. If this country is going to invest in its future and do something about unemployment, people must be prepared to stand up and say that they are prepared to accept some increase in taxation, including indirect taxation. We would not impose VAT on food because we are trying to help those on low incomes. That is why we should increase child benefit and that is why we should not cut the heating allowance or housing benefits. We have to try to share the burdens more fairly. If, however, we are to reduce unemployment there is a cost. It is no good ducking the question. One such cost would be to borrow more than this Government are borrowing, but dangers are involved in borrowing. I believe that the Chancellor will not now have the same room for manoeuvre on the public sector borrowing requirement as he might have thought he had a week ago. Therefore, we have to face the fact that we may have to reduce the amount of money that we put into capital spending. There are other schemes, but they all cost money.
  I wish to speak about the restructuring of the national insurance scheme. The national insurance contribution for employers is very considerable. It has been added to by this Government by £700 million more than the savings which Government made by getting rid of the jobs surtax. They have added to employers' costs. I believe that a restructuring and a reduction of that tax would help greatly, particularly if it were geared to helping those employers who are taking people off the long-term unemployment register. There is a massive degree of support for this, but it will cost money.
  Again we shall be asked where the money will come from. It will add to the public sector borrowing requirement. It might also mean an increase in interest rates, although I do not believe that it would mean an increase in interest rates as they are at present because they have been jacked up, we are told, by forces outside the control of the Government. However, those Conservative Members who do not wish to face up to the issue of
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  unemployment, who are completely insensitive to the consequences and who are not worried about its social impact will go on producing schemes for tax reductions. I am saying that there should not be tax reductions unless they are specifically and positively geared to creating more jobs.
  The most effective way to create more jobs is by a combination of measures. There should be greater investment in the public sector and the private sector, especially in the construction industry—particularly over repairs. I suggest that people should look at what is happening to the secondary roads of our country and their total lack of maintenance.
  Mr. Neil Hamilton rose—
  Dr. Owen: No, I shall not give way. The hon. Gentleman can sit down and later make his speech in his own way.
  The other matter is the restructuring of the contribution made by employers towards national insurance. Preferably there should be an overall reduction in order to ensure that restructuring does not hit even those who are employed in high tech industries but, if not, because there is insufficient money, there should be internal restructuring which would be self-financing.
  Thirdly, the community programme needs more money to be spent upon it. This is perhaps the most cost effective way of creating jobs, but it does not have quite the same forward investment potential and does not have quite the same long-term return as insulation or repair of poor housing stock or new capital construction projects. The Government will have to face up to all of these problems. If hon. Members are prepared to let unemployment rise or stay at its present levels, they will look for tax cuts from the Chancellor of the Exchequer and hope that they will win back for them some of the Conservative support which they are losing in by-election after by-election. However, there are others who are determined to get something done about unemployment and who are prepared to ask for a reasonable measure of sacrifice from those people who are in jobs and who are reasonably affluent. That cannot be done at the expense of those people who are already on low wages and at the expense of some of those on pensions and fixed benefits. We must simultaneously do something about them.
  I wish that the Chancellor could have presented such a broad approach today. To ask the House, and, through the House, the country, to endorse his economic posture and his economic mess of potage that has surfaced over the past few days is an insult.
  I should have loved to believe that the debate—it should have been such a debate—would have combined those critics of the Government's policy across the House of Commons and that we would have had a motion from the Leader of the Opposition for which all of us could have voted which may not have been what he and his party wanted but which was what the country wanted. We would have gladly voted for such a motion.
  Mr. David Steel: That is not the Opposition's style.
  Dr. Owen: As my right hon. Friend says, that is not their style. Their style is to pursue their own narrow interests at the expense of the national interest. That is not the approach of the two alliance parties.
  6.20 pm
  Mr. Edward Heath: I had the opportunity of addressing myself to the subject of unemployment and Thursday's forthcoming debate on regional development last night in Sunderland, in the north-east. As I had what might be considered satisfactory press coverage, unlike the leader of the Social Democratic party—satisfactory except for The Times and the Daily Express—and as I had wide coverage on television and radio, unlike, apparently, the leader of the Social Democratic party, I intervene tonight with some hesitation. But because of the subject's importance I want to draw some points to the attention of the House.
  I must say straight away that I stand here as an avowed advocate of what the Chancellor of the Exchequer described so elegantly as voodoo witchcraft. Perhaps I could explain to the House what I mean by that. It is simply that I regard the present level of unemployment in Britain as appalling. The situation north of Watford is shameful. To go to the north-east of England and find there more than 19 per cent. overall unemployment, to find areas of male unemployment of 30 per cent. or more, and to find in Consett 60 per cent. of juvenile unemployment is to me shameful.
  It is particularly heart-breaking when one goes back to an area in which the Conservative party played such a major part in the plan which Lord Hailsham produced in 1963, and which I had the privilege of implementing in 1963–64, which reduced the impact of the loss of 120,000 jobs so that unemployment became less than 5 per cent. That is the first part of what I mean when I say that I am an advocate of voodoo witchcraft. That situation should never have been allowed to arise and is untenable.
  Secondly, I mean that public investment now has a major part to play in dealing with unemployment. The Chancellor of the Exchequer will not have expected me to be convinced by anything that he said this afternoon. That I fully understand. I am not really interested in the jibes of the Opposition. It is an insult to those overseas to say they are influenced in their foreign exchange policy by anything which the Leader of the Opposition may have said, either publicly or in the House of Commons. I am not interested in the internecine battles between present and former members of the Labour party. What concerns me is the policy which will deal with the present situation; the strategy which will overcome it, and in a reasonable time.
  When a group of young people outside Consett say that they have finished their course and have been unemployed for three and a half years and ask how many more years they will be on the dole before they get a job even if the Government work out a successful strategy, what today can one reply to that? After listening to the Chancellor's speech, what could I say to them that was different from what I said last Wednesday when they put the question to me? It is hardest of all when they say that I am not really interested because the Conservative party does not have many votes in that area and so there is no reason why it should do anything about the problem. That is what we as a party have to face.
  Very well, let us look at the situation. We can build on the fact that public opinion now shows itself clearly as having a priority for dealing with unemployment before dealing with tax cuts. It was originally intended that the debate should be on that question. It was the basic question
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  to be dealt with. Public opinion is now quite clear on that. Those who want to go for tax cuts before jobs must prove to public opinion that theirs is the right means. That, so far, they have failed to do.
  As has already been said, the debate has been greatly influenced by the present situation of the pound sterling. I want to say one or two things before I come to the important point about the analysis that is being made. Those overseas look at us now—and I have travelled overseas quite a lot in recent months and have experienced it myself—as being a country whose economy is being greatly damaged by a miners strike, for a length of time never previously experienced, and with a Government who, for reasons that those overseas do not understand, appear to be unable to do anything about it. That is a major factor in the way those dealing in foreign exchange look at Britain.
  Mr. Tony Marlow: That is not the point.
  Mr. Heath: It may not be the point, but it is the point for them and as they are dealing in foreign exchange that is what matters to the pound.
  Secondly, those overseas, as has already been remarked, have become convinced that we are a one-commodity country. They believe that because they have seen the way that our manufacturing capacity has been destroyed, very largely, looking back, as the result of the pound going up to $2.42. They see that clearly—more clearly, apparently, than some of my hon. Friends behind me.
  The last factor which was mentioned by my right hon. Friend the Prime Minister this afternoon, which some of us have been emphasising for nearly four years now, is the drain of capital from Britain and much of Europe to the United States.
  The point that I want to emphasise in my analysis is that the decline of sterling is not due to anxiety about the public sector borrowing requirement or the fact that the Chancellor may exceed it by £1·5 billion. He has done that in the past and so has his predecessor without similar damage to sterling. That is not the anxiety at the moment.
  The second point concerns money supply. We were told that the last figures might prove to be damaging, but they were nothing of the sort. The Chancellor and the Governor of the Bank of England congratulated themselves on that. There is no reason to believe that the next lot will be damaging.
  No, those must not be used as excuses for what has been happening to sterling. Therefore, they must not be used as a reason for not considering Government investment on its own merit in the future because they would just be an excuse for stopping Government investment or preventing it from being expanded.
  Mr. Tony Baldry: Will my right hon. Friend give way?
  Mr. Heath: No, I am sorry; I want to get on.
  The Chancellor mentioned the Japanese level of taxation and said that it is much lower than ours. In fact, the marginal rate is much higher there. But the characteristic of the Japanese system is that its borrowing requirement is infinitely greater than ours and so is that of every other country. Our public sector borrowing requirement is 2 per cent. of our gross domestic product.

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  The German figure is higher than that at 3 per cent. and the Americans at 6 per cent. The Japanese have a high figure. That is the important factor in connection with the PSBR.
  As I have said before, those are countries which do not have to support a large public sector. Their Governments are not responsible for ensuring that all the nationalised industries get the investment they require. Therefore, if it is inexcusable to have a 2 per cent. PSBR of GDP, those others are infinitely less justifiable. The plain fact is that the Chancellor has always refused to analyse what is current expenditure and what is capital expenditure in Britain. It cannot be denied that on current expenditure we have a massive surplus and on capital expenditure there is justification for looking after the capital of the people of this country.
  I see that my right hon. Friend the Chancellor has now returned to the Chamber. I emphasise again that the reason for the decline in sterling is not related to his public sector borrowing requirement, to any anxiety that he may exceed it by £1·5 billion or to fears that the money supply is out of control, so those arguments cannot be used to try to reduce capital expenditure still further or to block proposals for more capital expenditure.
  Mr. Lawson: I apologise for having missed the opening section of my right hon. Friend's speech. On a point of fact, the German public expenditure and budget deficit as a proportion of GDP is significantly lower than ours.
  Mr. Heath: That is not the figure that I have. As my right hon. Friend the Chancellor knows, the Germans have rightly been boosting their public expenditure in the present circumstances as investment for their country.
  Reductions in taxes as opposed to increased Government investment provide no direct jobs. Jobs may result indirectly if those who have the extra money in their salaries spend it on goods. Those jobs may be in this country or abroad. No direct jobs are provided. That must be plain even to the simplest mind.
  Investment in public expenditure for the benefit of the community as a whole provides jobs for those who are now unemployed. Those people will tend to spend their new income on goods produced in this country whereas all the research shows that people already on higher wages and salaries will tend to spend more on imports. We have learnt that from painful experience. Construction and other public works directly create jobs and thus reduce unemployment.
  My right hon. Friend the Chancellor has said that such projects should be considered on their merits, and I agree entirely. I could cite a large number of projects which are desperately needed in my constituency in the south. They include drainage and sewerage projects. Despite the sneers of my hon. Friend the Member for Northampton, North (Mr. Marlow), those are vital matters in my area, especially in the old village. Projects of that kind would provide jobs. That is a powerful argument for Government investment rather than tax reductions.
  The extent to which my right hon. Friend the Chancellor can produce incentives through tax changes with the £1·5 billion to which he has referred is very limited. Research shows that no tremendous incentive results from such changes. Moreover—my comments on
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  this yesterday have already been publicised and I said the same again this afternoon— it makes no sense to tell people who are unemployed that they need the incentive of tax reductions for those who are in work. Those people want jobs as soon as possible.
  Then there is the emphasis on private enterprise. The purpose of improving the country's infrastructure is to improve the opportunities for private enterprise to become more efficient. Any firm north of Watford will confirm that to be more competitive it needs an improved infrastructure. As no one else is capable of achieving that—the provision of infrastructure cannot be privatised—the responsibility rests on the Government to carry out that task, and they should do so.
  The argument that Government investment is simply printing money has been advanced again today. It is becoming no more than a parrot cry. What is wrong with using people's savings for Government investment? Every country does that. When the Chancellor says that there is plenty of money around, he is talking about the savings of the people. But what happens to those savings? They can go into Government investment for infrastructure or they can go into private investment. No one could argue that there is insufficient to do both as it is clear that private investment will not be squeezed out by public investment in the present circumstances in the economy, and it is with the present circumstances that we have to deal.
  The real danger is quite different. My right hon. Friend the Prime Minister touched on it this afternoon. It is the fact that so much of this country's savings are being drained across the Atlantic in search of high interest rates. That is the danger to us all. One can point to British companies with enormous cash holdings. They are private enterprise companies, but they are not investing in this country. They are putting their money on deposit where they can obtain interest rates above the rate of inflation, and it pays them to do so. Why should they take risks when they can obtain high interest rates simply by moving their money around without taking any risks? That is the real problem.
  It is argued that Government investment is throwing away money. That is nonsense. It is a mere slogan, not an intellectual argument. Again, the argument that we cannot "spend our way out of recession" is used to block every proposal to improve the infrastructure. It was the tragedy of the Labour party that the right hon. Member for Leeds, East (Mr. Healey), when he was Chancellor, used that phrase to justify doing what the IMF wanted. The right hon. Gentleman nods in agreement. The Opposition have been paralysed ever since. They have never been able to put forward constructive proposals with any conviction because of that ridiculous phrase. The people's savings can certainly be used for proper investment and every Government in the past used it in that way.
  Market activity is constantly emphasised. We must recognise the following facts with regard to sterling. It was believed that the Government had a purely monetary policy from which other things such as interest rates were expected to follow. Sterling could do what it liked, and it is clear that it did just that—rising to $2·2 and now falling to a little over $1·1. We have had to learn the painful way that one cannot operate the market like that. The Germans and the Japanese do not do so. They use the intervention powers of the Bundesbank and the Bank of

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  Japan selectively and effectively—not continuously, but when they can lead speculators and others to burn their figures. We must return to that technique.
  With regard to minimum lending rates, too, we are painfully going through the process of learning that one cannot abandon everything, sit back and expect the market to do everything for us. I hope that the Government now recognise that.
  One also cannot operate the market when one party is dominant. That applies to both our national and our international affairs. Nationally, it has been strongly argued that we should not take special measures in regional policy but that we should let the market operate. That was based on the complete fallacy that previous investments in the regions did no good. That can be proved to be a fallacy. It has been picked out by many people as a simple argument to use in an endeavour to help the south.
  The south, the south-east and parts of London are dominant in the United Kingdom, and the remainder is being allowed to suffer. The dominant part is continuously attracting such jobs as exist. The north-east, the northwest, Scotland and Wales are becoming poorer and weaker, while the south becomes stronger and richer. I am sorry that my hon. Friends think otherwise, but those who know those regions know that this is the case.
  The reason for that is that the measures that are being taken are not being co-ordinated, and are not part of a strategy. They use individual incentives in particular areas, which are often damaging. The effect is that firms move from outside an area in to a smaller special area. That is another lesson that we had to learn in the past.
  Mr. Michael Forsyth rose—
  Mr. Heath: No, I shall not give way.
  Mr. John Carlisle rose—
  Mr. Heath: I am sorry, I shall not give way.
  In the past we had to learn that if a regional policy was to be followed there had to be an overall strategy for both the regions and the country. A regional policy cannot be followed in specific pinheads because that only damages surrounding areas.
  I know that Scotland has had success in some respects, especially in new technology, and it deserves credit for that. The north-east is having success at present in biotechnology. However, it is not providing the number of jobs required to deal with unemployment. Until there is an overall strategy for the regions, we shall not get jobs.
  The market is not functioning internationally either because it is being dominated by the United States, which operates regardless of other countries' interests. Tomorrow the Chancellor of the Exchequer will attend a meeting in Washington, but he will return empty handed—he knows it—as will all European countries because the American Administration are in no mood to run their policy in any other way. Even if they wanted to, which they do not, the American people would not allow them to. They would say, "We are walking tall. We are riding high. Look, it has been done by a budget deficit of $200 billion a year and a trade deficit of $130 billion a year, still rising". The United States is living on the rest of the world and it will not stop doing that. The Chancellor of the Exchequer knows that very well.
  Mr. Kilroy-Silk: The Chancellor should not go.
  Mr. Heath: No, it is right that he should go. Europe should use its combined influence. For that reason, I urge on the Chancellor the view that the United Kingdom should become a full member of the European monetary system. He has never yet given an explanation why we have not become a member. He has always said that there are some reasons for joining and some for staying out. What are those reasons? The Chancellor prides himself on being an intellectual. Could he not for once reveal that aspect of his personality? Then we could form a judgment about the Government's policies. There is every reason for joining the EMS at the earliest opportunity. It may or may not be possible to negotiate, as the right hon. Member for Plymouth, Devonport (Dr. Owen) said, but we should join.
  France may be derided. It went through far worse circumstances than we are going through with sterling, and survived them because of the EMS. Moreover, the EMS survived despite France. Why, then, cannot we join and adjust ourselves accordingly? The French followed a policy of reflation at the wrong time because some of their markets were deflating heavily, and, obviously, it suffered. Our job is to join the EMS and to use what influence we have.
  Nothing that the Chancellor of the Exchequer has said today will give any hope to the more than 3 million unemployed—in real terms, it is nearly 4 million. When he returns empty handed, what will he do? Are we to continue to allow the United States to live on the rest of the world for as long as it wishes, with massive unemployment in the United Kingdom, millions of unemployed in Europe, and with even greater unemployment and increasing debts in the Third world? Is that all that the future holds for us, or has the Chancellor a policy? If so, will he confide that strategy to us?
  The crisis that we all face is how long we should continue to support the United States, with its enormous budget and trade deficits, while it continues its policy regardless of the rest of us. That could never have happened under Bretton Woods; it would have been impossible. However, today there is no regulation in the international financial market. It is foolish and the utmost stupidity. Moreover, it is ruining the United Kingdom and Europe.
  The Chancellor of the Exchequer and his hon. Friends must decide what action to take to insulate us from the high interest rates of the United States, which we do not require. Without them capital would cease to flow from the United Kingdom, and we would have capital for public and private investment in the United Kingdom, and some hope to offer those who are today without jobs.
  6.47 pm
  Mr. Eric S. Heffer: I hope that the right hon. Member for Old Bexley and Sidcup (Mr. Heath) will not be embarrassed by what I have to say. Perhaps I can be forgiven for saying that if he continues in the strain of his speech, as I am sure he will, I could easily become what might be described as a Heathite. The only matter on which I disagree with him is whether we should enter the European monetary system quickly. We must be careful and not rush into the EMS, because there are dangers in it for us. All hon. Members who are genuinely worried about unemployment, and all those affected by unemployment, should give the right hon. Gentleman full support for his speech.

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  I do not understand why the right hon. Member for Plymouth, Devonport (Dr. Owen) said that he could not support the motion. We can always improve motions. All hon. Members will agree that a motion does not necessarily carry everything in it that it should. Today's motion is moderate and can be supported by almost all hon. Members, whether they represent the Labour party, the Conservative party, the Social Democratic party, the Liberal party or other parties. I hope that by the end of the evening hon. Members will find it in their hearts to support the motion and so let the Government know that the House believes that the time has come for a fundamental change in the Government's strategy and policies for dealing with unemployment.
  The right hon. Member for Old Bexley and Sidcup was right to discuss how unemployment affects individuals and communities. Too often our debates in the House are unrealistic and seem as though they are taking place in an ivory tower. Some hon. Members are unaware of what is happening to ordinary people in areas of high unemployment. The figures contained in the research note from the Library demonstrate the problems. I shall take as examples some constituencies on Merseyside. In Broadgreen, of a total of 8,049 unemployed, 50·8 per cent. have been unemployed for more than a year. The figure for Mossley Hill is exactly the same. In my constituency of Walton, of 10,397 unemployed 51·9 per cent. have been unemployed for more than a year. Of course, some of them will have been unemployed for much longer than that.
  Those hon. Members who are still unaware of the true position should speak to my young nephew, who is a skilled engineer. I had problems in getting him an apprenticeship in the first place. As I had some status, I was able at least to talk to some companies, and he was lucky enough to get the chance of an apprenticeship with one of them. At the end of the apprenticeship he got a job for a year, but then the company for which he worked collapsed. He has been without work for more than a year. Although he is trying to find a job on the oil rigs, or in another part of the country, he has almost no chance of doing so. He is just one of thousands of skilled workers in a similar position. He may eventually get a job on an oil rig or elsewhere, but what about unskilled workers, who have no chance of getting a job?
  Mr. David Alton: I endorse the remarks of the hon. Gentleman, but does he not think that it is wrong that youngsters should be encouraged to become Dick Whittingtons and be expected to go in search of a living elsewhere? Is it not outrageous that some youngsters who live in the centre of Liverpool face nothing other than 50 years on the dole?
  Mr. Heffer: I agree entirely with the hon. Gentleman. During the campaign for the general election we discovered when we knocked on doors that, more often than not, it was a youngster who opened it. The mother and father may have managed to continue their employment, or the mother may have got a part-time job, and the youngster provided the meal for them when they got home in the evening. What an indictment of a Government who allow our youth to waste in that way.
  That is the tragedy of unemployment. I agree with what the right hon. Member for Old Bexley and Sidcup said
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  about being uninterested in the arguments between those who used to be in the Labour party and some of those who are still in it. I could not care less either. I am worried about the unemployed and about what we can do to create jobs for them.
  Merseyside has about the highest unemployment in the country. Perhaps hon. Members saw the recent television programme about a small drugs squad in Liverpool moving against a young man who was involved in the peddling of drugs, whose use is widespread on Merseyside. It is the old story of the devil finding uses for idle hands. That is what is happening in those communities. There has been a growth in the drugs traffic because youngsters have no employment and wish to find ways of making money. There has also been an increase in burglaries and in petty crimes.
  Unemployment also causes internal tensions in families. Many live in overcrowded conditions, with recently married youngsters living with their parents when they should be living in their own homes. However, they have no chance of buying a home because they are on the dole. Many internal problems can arise between the two women or the two men in a family.
  I am sorry that the leading Government figures have left the Chamber. Perhaps they do not wish to listen to what ordinary Back-Bench Members, as opposed to ex-Prime Ministers, have to say. It would not be a bad idea if they listened to some of those who do not hold eminent positions but who have wide experience of the grassroots of the problem. When I go home at weekends, I meet my relatives who live on council estates. I meet people who are suffering. I must tell Ministers that that is what the debate is about. Too many of them live in conditions that make them immune to the realities of life. Ministers cannot continue to show no understanding and compassion. They must take steps towards investment that will create employment in the regions, as the right hon. Member for Old Bexley and Sidcup said.
  I should draw the attention of the House to what another section of society, the Quakers, believes. The Religious Society of Friends sent me, and probably other hon. Members, a proposal from the Hertford and Hitchin monthly meeting. I was born in Hertford, and it is delightful to know that people in the south are also worried about these matters. The society says in a letter to the Prime Minister:
  "We note with concern the intention of the Chancellor of the Exchequer (announced on 12 November) to use cuts in public expenditure as a basis for a reduction in personal taxation. Whether or not such a reduction would aid the British economy, as is claimed, we believe that it would be morally unjustifiable to benefit taxpayers at a time when so many people are suffering the indignity of unemployment and poverty, and when the needs of the Third World are so acute."
  I agree with that.
  I think that the right hon. Member for Old Bexley and Sidcup is right in one other respect. On one occasion, the Labour party was arguing that we should reduce personal taxation. All parties have done that from time to time. Dick Crossman said to me, "If we reduce personal taxation, that means that I shall have two holidays abroad a year instead of one." Is it not true that the reduction of personal taxation at certain levels will mean that people will have more holidays abroad, rather than that there will be more investment and employment? Is that not the reality?

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  Conservative Members do not live in the same world as people like myself. We believe in further taxation, but not the kind of taxation suggested by the right hon. Member for Devonport. I do not know what he wants when he argues for further VAT. He was asked what sort of taxation he was concerned with—was it extra VAT on books, on newspapers, on children's clothing or on holidays? I believe in taxation based on income. That is what is required, not taxation through VAT, although we may have to raise a little taxation through that system occasionally.
  I shall finish my speech soon, because we have now entered the 10-minute speech period and I do not wish to take too long. I was all right until 7 o'clock, as that rule comes into force at 7 o'clock, but I shall be fair and try not to go over time.
  Today can be an historic occasion. I hope that hon. Members, like the right hon. Member for Old Bexley and Sidcup, who feel strongly about this subject will take a stand. Many Conservative Members have privately told me how deeply concerned they are about the problems of unemployment.
  Mr. Patrick Cormack: Many say it publicly.
  Mr. Heffer: The hon. Gentleman is right.
  The Opposition motion can be supported by all hon. Members. I appeal to Conservative Members. If they are really concerned, as I am sure they are, about the need to begin to deal with the problems of unemployment, they should support the motion. Let us begin the process of getting young people back to work, although we are not concerned only with young people. It has been proved that the majority of those unemployed are well below the age of 55, and that is a real strength that could be used to build up our industry. This country is either an industrial nation, or nothing. Therefore, Conservative Members should support the motion and not continue to support the absurd nonsense that we have once again heard from the Government Front Bench.
  Several Hon. Members rose—
  Mr. Speaker: Order. As the hon. Member for Liverpool, Walton (Mr. Heffer) said, we are now in the time for 10 minute speeches. Ten minutes is the maximum time, and if hon. Members are able to speak for a rather shorter time than that I shall be able to call more than 12 Back Benchers in the time remaining until 9 o'clock.
  7.3 pm
  Mr. Tim Eggar: One cannot but respect the passion of the hon. Member for Liverpool, Walton (Mr. Heffer) even if one does not admire the logic of his argument.
  Over the past few weeks we have heard much argument about whether the Government should spend the Budget fiscal adjustment on tax reductions or on public expenditure. There is a danger that we have become so preoccupied in taking sides on this argument that we have forgotten that our overall priority must be to work towards a package that has only one objective—the creation of jobs, be that through more expenditure, through tax reductions or through reducing employment costs. I shall look briefly at the various options open to us purely in terms of how the choice between those options should or should not create jobs.
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  I am not a strong believer in infrastructural expenditure. It is not good in itself. One has only to look at the saga of high-rise building or at the power stations programme to realise that infrastructural spending itself can be wasteful. The two most widely quoted infrastructural proposals—roads and sewerage—are particularly bad examples because they cost a great deal in terms of expenditure per job created.
  On the other hand, there is a strong need for additional expenditure on the maintenance, repair and improvement of our buildings. Improvements can be made in the way that we spend money. For instance, there is a strong argument for making sure that improvement grants are targeted on those who really need them. Expenditure on the improvement of the building stock should be a priority for this Government.
  Quite rightly, the Government have dramatically increased the amount of money that is spent by the Department of Employment. However, they have increased not only the quantity of expenditure but the quality of expenditure. We have only to look at the move to the youth training scheme from the youth opportunities programme to see that. I hope that my right hon. Friend the Chancellor will make available to my right hon. Friend the Secretary of State for Employment the necessary funds to introduce new initiatives. In particular, I am thinking of extensions to the community programme. Expenditure in this sector is good value in terms of money spent per job created.
  There has been much talk about the removal of supply side inhibitions to job creation. Sadly, too much of it has simply been talk. Planning controls, health and safety regulations and employment protection legislation, to list but a few, were all introduced at a time of near full employment. One has to ask oneself whether the pendulum has moved somewhat and whether we should put jobs rather higher than these regulations, some of which are undoubtedly inhibiting job creation.
  We need to go further and we need to have rather more political courage than we have shown. For instance, we need to tackle the problems of the private rented sector because it is only by improving housing mobility that we can hope to allow people in Liverpool and other areas to move to where the jobs are, which is largely in the southeast. The Treasury should look not only at the cost in housing benefit but also at the tax and economic activity benefits that would accrue by permitting the private rented sector to grow.
  There is also the use of the derelict land register. Should we not be thinking in terms of giving private sector developers the right to force the public sector to sell land for development for housing or industrial purposes?
  The job creation test applies not only to the supply side to expenditure but to our evaluation of the tax reductions. If there are to be tax reductions, I share the Chancellor's preference for raising tax thresholds; but I would go further. If we are to tackle tax thresholds, we should also tackle the impact of national insurance contributions and their incentive effect on the lower paid. There is, I think, a case for complete co-ordination of the national insurance contributions with the income tax system. It is disappointing that the social security reviews are not paying more attention to working towards the ultimate goal of complete integration of the social security system and the tax system. In other words, if there is an argument for creating jobs through reducing taxes and increasing

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  incentives, let us not only think in terms of thresholds but let us realise that incentives are affected by national insurance contributions and by the social security system.
  It is easy for Conservative Members to take a position in favour of infrastructural expenditure or of tax reductions, yet I say to the Chancellor that we are not considering a straightforward choice: it is not a case of one or the other. We are looking to him to produce on 19 March a Budget package which inevitably will involve trade-offs within the broad current economic framework. But there is only one way in which Conservative Members will judge that package—whether it is the best possible package to create new jobs for our people, whether they be in London, in the north-east or in the north-west. My right hon. Friend bears a heavy responsibility.
  7.10 pm
  Mr. J. Enoch Powell: It is one of our national weaknesses—indeed, it may be a human weakness widely shared—not to recognise our blessings when they come and consequently to fail to seize them, if not to count them. There is an example to hand in the manner in which the dramatic financial events of the last week or two have been received and interpreted. I believe that those events hold out the prospect, admittedly a long-term prospect, of hope for a reduction in the level of the unemployment which both sides of the House agree to accept as intolerable, although neither side of the House has an intelligible doctrine to explain how it may be reduced.
  The initial impact of those events was certainly unpleasant. The Chancellor of the Exchequer found that the conjuncture of the anticipated fall in oil prices and the fall in the exchange rate presented him with a difficulty in funding his borrowing requirement. The attraction of lending across the exchanges at an effectively much higher rate of interest than was offering on Government securities threatened the whole basis of the Chancellor's stand against inflation and obliged him to take action to secure the possibility of continuing to borrow from the public to meet his requirement.
  It is, incidentally, not only the borrowing requirement as it features in the Budget statement that the Chancellor of the Exchequer has to bear in mind. A large quantity of sight money in the form of national savings, largely held by persons who are in a position to switch their holdings, is very volatile. The Chancellor of the Exchequer therefore was right to take the action which he did when he did, to protect his ability to borrow from the public and save himself from falling into the necessity of borrowing from the banks. It is in my view quite perverse to accuse the Chancellor of inconsistency in raising interest rates in the short term in face of the fall of the exchange rate. His purpose, the background to his thinking, was not at all to massage the exchange rate. It was not an exercise in the control of exchange rates. It was an exercise in maintenance of the capability of the Government in all circumstances to borrow their requirements from the public and not again have recourse to inflationary borrowing from the banks.
  But that is the short term. In the long term I believe what is portended is that one at any rate of the causes of high unemployment may be in process of changing.
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  There are, of course, many contributory causes to that extraordinary phenomenon. Some of those causes are inaccessible to us. Obviously the demographic cause is inaccessible: we cannot manipulate it. Obviously, too, the rise and spread of technological improvement is something which we could not alter even if we had a magician's wand that would bring it to a standstill or reverse it for us. But among other factors there is one which I believe has received insufficient attention. That is the sudden and massive change in the world situation of the British economy from an economy which was in chronic net deficit on current account and net surplus on capital account into an economy in huge surplus on current account and net deficit on capital account. That changeover was bound to impose upon the economic pattern of this country most painful and severe readjustments, which in turn were bound to express themselves in terms of major unemployment.
  Of course, the cause—not necessarily the only cause, but the overwhelming cause—of that disastrous—in retrospect one might dare to call it disastrous—turn round was that Britain had become an oil-surplus country. It is true, therefore, that in one sense our oil bonanza lies somewhere near the heart of our economic difficulties. It was that more than any other single cause which made us a surplus country on current account and therefore a deficit country on capital account. We have been hearing in the debate this afternoon lamentations about that deficit on capital account, represented of course by outward net investment from this country—at the present time no doubt outward net investment from this country into the United States.
  The impact upon the exchange rate which has been felt has been attributed more than anything else to the expectation of a fall in the price of oil, which appears to be regarded as a potential disaster that the Government ought to do everything in their power to ward off—a continuation of the paradox existing ever since 1973, that Governments, while bewailing dear energy, have clubbed together all over the world to keep the price of petroleum up.
  Now this cannot be right for Britain of all countries. Of all countries, Britain stands to gain by cheap and readily available sources of energy. After all, our former industrial greatness was founded on cheap domestic sources of energy. Indeed, we are now watching the agonies of the industry which placed that energy at the disposal of our industrial revolution and the industrial development of the United Kingdom. I say it is an absurdity, a contradiction, for this country to be party to the maintenance of an artificially high price for a source of energy such as oil.
  I am not saying the Chancellor of the Exchequer would be wise to come to the Dispatch Box and say so in so many words at this moment, but we in the House not governed by the same inhibitions ought to be prepared to welcome anything that could reduce the price of oil and make cheaper energy available to this country in a form the source of which is now predominantly within our own hands, under our own control and within the ambit of our national economy.
  The mere possibility that this might happen, the perceived prospect of this happening, resulted in a marked weakening of the international value of the pound sterling; but that, of course, is only an index of what would happen if we cease to be a current account surplus country and

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  again become a current account deficit country. It is an indication of what we might expect to see if we again became an economy with a net capital surplus, instead of a net capital outflow. Those of us, therefore, who can stand back from the day-to-day management of the Government's finances should welcome the two constellations that have appeared in the financial firmament during the past week.
  First, there is the indication of a potential break in the structure that has artificially sustained a false price for petroleum products. This afternoon I was shocked to hear the right hon. Member for Plymouth, Devonport (Dr. Owen) suggest that we might cut our production in order further to force up the price of the source of energy upon which we depend so extensively. Secondly, the fallen external value of the pound has become a symbol and signal of the fact that we may again be poised to become predominantly an industrial exporting country. The inhibitions that have lain upon us for the past six years—the inhibitions of an oil surplus overpriced at a time when this country has been in the unnatural predicament of not needing to exert its full industrial capacity to maintain the flow of goods and services between itself and the outside world — have shown some signs of weakening. We have at last seen some sign of a break in the disastrous weather.
  That is not something that will necessarily be welcome to the Chancellor of the Exchequer. But it is something that we here should take seriously. We should be able to state it and expose it to examination in a debate such as this — for indeed it involves the future level of unemployment in this country.
  7.21 pm
  Mr. Michael Forsyth: I shall address my remarks to the substance of the motion. It is quite astonishing that we should even be debating this proposition after the lessons of history. It is staggering that the hardy perennial and delusion of British political life—that it is somehow possible to create extra jobs through public expenditure—should continue to be put about by comparatively responsible people who once held high Government office. It is amazing, because there is not a shred of evidence to support that view, and so far we have not heard any evidence tonight to support it.
  Public investment in whatever form may appear to create jobs, but in the long term it destroys more than it creates because of the resources that it takes from the private sector, which it pre-empts in so doing. Public expenditure to create jobs has been used by successive Governments of all parties in two broad ways. I think first of direct subsidy and De Lorean, Invergordon, Corpach, Linwood, Bathgate and a score of other examples. I am sorry that my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) is not in the Chamber, but, in the case of Bathgate, we dragged British Leyland kicking and screaming to Scotland to deal with the appalling level of unemployment, which stood at 7 per cent. Today, because that industry collapsed as it was uneconomic and should never have gone there in the first place, unemployment stands at 20 per cent. and the community has been destroyed by that attempt to move against the market.
  The direct subsidy approach has a familiar pattern to it. We can all find an example in our constituencies. It starts in hope and acclamation. It starts with everyone jumping on the bandwagon and claiming the credit for having
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  brought jobs to the constituency. But, having gone through a period of losing markets, it ends in closure, dismay and recrimination. I am aware of no example to counter that view, and I am surprised that we should even be considering that.
  But there are now some people who say that they agree with that, but that they have found a better, painless way. They say that they have something that will work better, and that the answer lies in the Government simply loosening the reins a little and spending more to create demand. I have no doubt that engineering, building and steel and the other lobbies that we have heard arguing for that would benefit, and that they would take on some labour. But at what cost? The cost would be to send false signals throughout the economy which would result in demand for skilled labour, which is already in short supply, and which would create massive distortions.
  The hon. Member for Dunfermline, West (Mr. Douglas) asked about the opportunity costs of unemployment. If he was in the Chamber, I would ask him about the opportunity costs that arise from the money taken in higher taxes or, less honestly, in inflation from private enterprise. What about the results of less demand that will come from higher prices? What about the reduction in investment and competitiveness, and the destruction of jobs that comes from taxing the private sector? Public expenditure is made at the price of removing demand from the private sector.
  What is so magical about injecting demand through the public sector? If it creates jobs, why does it not also destroy jobs by taking demand from the private sector? The so-called witchcraft that we have had to listen to tonight represents a call for the creation of short-term marginal skilled jobs and for the silent destruction of many jobs in the private sector that are dependent on real demand. The notion that public sector investment would create more employment is defective, because, as my hon. Friend the Member for Enfield, North (Mr. Eggar) said, the cost of capital investment programmes is high in terms of cost per job. If those programmes are financed from taxation or by abandoning job-creating tax cuts. people will cut, or not take part in, several luxury activities. There will be less entertainment, less eating out and fewer people participating in all the things in the economy provided by the service industries that lead to the employment of more people at a lower cost per unit of investment.
  Why, then, should we be debating this issue? I suggest that it is because of the nature of Members of Parliament. The incentive for us as politicians is to dance the light fantastic and to whizz up to the north-east with "Newsnight" or whatever to look at unemployment and to argue for increased public spending with the slogans of care and compassion so that we can be seen to be doing something and to be arguing for expenditure to reduce that unemployment even though the reality is that the jobs that are less visible, and that could be created in the hundreds and thousands by small companies and which do not make the headlines, will disappear. They will not be mentioned and will not be the subject of debate on "Newsnight", or the subject of headlines in newspapers. But then there are no votes to be lost in that.
  Mr. John Evans: What a lot of drivel.
  Mr. Forsyth: The private sector, left to fend for itself and left with the money in its pocket, will invest it far more

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  wisely than any committee or group of politicians haggling over their constituencies would do. It is inherently more expensive and wasteful to command goods and services in the economy with public rather than private money. The hon. Member for St. Helens, North (Mr. Evans) may say that my speech is a lot of drivel, but he should consider the experience in the United States. The jobs there have come not from large firms benefiting from investment arising out of Ronald Reagan's deficit, or any other form of public expenditure, but from entrepreneurial small business. In the past 10 years the Fortune 500 companies have shed more than 4 million jobs, while 20 million jobs have been created by firms employing fewer than 20 people that receive not a penny of public subsidy. It is the United States' experience that jobs come from small business. In 1981–82, 2·6 million new jobs were created by small businesses while large firms lost 1·7 million jobs.
  The problem in our economy is not a shortage of demand. My right hon. Friend the Member for Old Bexley and Sidcup got in a muddle about why rich people were buying video recorders and foreign goods while people who were unemployed could not do so. My right hon. Friend must face up to the fact that there is demand in our economy. The key to creating the jobs we all want lies in a micro-economic analysis of the economy and not in a Keynesian or pseudo-Keynesian macro-economic analysis. If we want more people in employment, we need to make it easier and cheaper for business to employ them. We need to make it less burdensome and more rewarding to start small businesses and to make it easier and more advantageous for companies to expand and grow. Companies will then expand and small businesses will be started.
  We must heed the arguments put forward by my hon. Friend the Member for Enfield, North, who said that the key lies in removing the barriers to employment —removing regulation, allowing people to move to where the jobs are, and dealing with employment protection. It lies in dealing with national insurance contributions, the wages councils, planning, health and safety provisions, shop hours, licensing, rent Acts, VAT and the tax and benefit system which mitigates against employment. We should be looking to those methods to provide hope for those in the north-east and elsewhere.
  7.31 pm
  Dr. Jeremy Bray: I shall question later the fundamental beliefs expressed by the hon. Member for Stirling (Mr. Forsyth), but I would first point out that the debate takes place in a context that differs from the one we expected a week ago. An increase of 2·5 per cent. in interest rates will add perhaps £4 billion in a full year to the £16·5 billion for which the Government have already budgeted. Even if only half that amount materialises, it will more than wipe out the surplus to which the Government look forward.
  Yesterday's events are bound to have a large effect on the Government's economic policy for next year, especially on public spending. I shall seek to sow some doubts in the minds of Conservative Members about the framework within which the cause and effect works out through the medium-term financial strategy. It may not turn out to be as well conceived as some of them think.
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  The events of the past few days have not demonstrated the flaws in the operation of the Government's economic strategy. They have demonstrated the defects in the strategy. The problem lies in the volatility of financial markets which, given no steer by the Government, are wildly unstable. The destabilising effect on expectations does the mischief.
  Suppose that the foreign exchange market is stable with a 10 per cent. interest rate in Britain. Pressures develop on the pound, so the interest rate is increased, say, to 11 per cent. Money as a store of wealth means that the expected earning power of a sterling deposit increases by 1 in 10. Other things being equal, the value of the sterling deposit increases instantly by 10 per cent. In the short term, that increase in value completely swamps the original increase in the interest incomes stream of only 1 per cent. a year. The interest rate has become irrelevant and has been swamped by the expectations effect to which it gave rise.
  But the expectation must be fed. If the Government do not feed that expectation by shaping expectations of the future development of the exchange rate, the longer-term market will be driven by random movements in response to short-term changes in expectations. Those random movements — that drunken walk — will determine the medium-term prospects for the exchange rate and, therefore, for the whole economy.
  This classical argument has been advanced for many years, although it has been developed more rigorously and mathematically in present times. The conclusion reached by not only the Opposition but the economic journals must be that the Government should provide some sort of steering. My hon. Friends say, "Good; let the Government intervene."
  Reserves are small in relation to trade. At the low point at the end of 1976, United Kingdom reserves of $4 billion were down to four weeks' worth of imports. They now stand at $15 billion, which will finance only eight weeks' worth of imports. Although reserves are small in relation to trade, they are tiny in relation to foreign exchange transactions. Total OECD exports amount to about $4·8 billion a day, but foreign exchange transactions amount to about $60 billion a day — more than ten times the volume of transactions needed to pay for imports on current account.
  Total United Kingdom reserves amount to less than two days' worth of the normal foreign exchange transactions in London. If the world had an incentive to take all its foreign exchange transactions through sterling, total British foreign exchange reserves could be exhausted in about six hours. The opportunity for foreign exchange intervention against market expectations is slender.
  The Government's response is to say, "It is obvious what to do." The Government say that they should stick to money supply targets and secure a basic equilibrium in the financial markets around which they can operate abroad and at home. If the Government set targets for the exchange rate there is no way they can deliver, and so the Government's credibility is forfeited.
  Is there no intermediate position? We should consider what happened yesterday. The Chancellor was so set in his belief about the futility of intervention that, after setting a minimum lending rate, he did not intervene. Therefore, Germany did not intervene, and the markets were left uncertain about the expected effect on the exchange rate. No lead was given.

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  The oil market has shifted from a deficit in 1976 of £4 billion in the balance of payments to a surplus of £8 billion today. A dollar per barrel change in the oil price reduces the United Kingdom's foreign exchange earnings on the oil trade by about £400 million per annum, or by about 0·5 per cent. of the value of our exports. The fall in the price per barrel of oil from $40 to $27 accounts for a large reduction of 6·5 per cent. in our total export earnings.
  If a 1 per cent. change in the exchange rate resulted in a 1 per cent. change in exports, the total fall in the price of oil would justify a change in the exchange rate of, at most, 10 per cent. The fall in the exchange rate that has occurred has already discounted the effect of a fall in the oil price in the United Kingdom to below $10 per barrel. That is quite unrealistic in relation to any conceivable movement in the oil price.
  The Government have put the argument qualitatively but have not spelt out the quantitative arguments. What should the Government do? They should give a lead to expectations. The Government are right to distinguish between not having an exchange rate target, and not caring about the exchange rate. But caring and doing nothing are meaningless actions. What are the Government doing? Why are they doing it? The Government are not giving the answers to the foreign exchange markets, so those markets are left groping around.
  The Government's broad approach should be to say what they expect will happen, taking account of the fact that private agents will react to their announcement and speculate. If the Government calculate correctly, they will not play into the hands of private speculators.
  Better results would be obtained if the speculators saw what was happening and played the game. The financial market would thereby be much more stable. But the Government cannot rely on that. The Government must reckon on the fact that the other agents—private agents and foreign Governments — will go on playing the competitive game. However, the Government can create a situation in which it is in the interests of the other parties to start playing the co-operative game.
  On foreign exchange markets, the fundamentals are relative interest rates, rates of inflation, current balances, capital flows and intervention, and exchange rates, of which interest rates and intervention are the instruments.
  We could move over smoothly from the present competitive situation to a co-operative solution, in which some parameters are left free, to be adjusted internationally by agreement, for the benefit of all. In the Bretton Woods system that parameter was the actual value of the exchange rate, but there is no reason why it should be. It could be some parameter in an interest rates and intervention rule, or it could be an exchange rate rule which could be adjusted by agreement between nations.
  Having once started to play this game, there is a sanction by which nations could be brought to play this game. For if they ceased to play it, they would forfeit the support of other countries for their exchange rates, with drastic consequences to themselves.
  My time is up. I plead with the Chancellor and his colleagues to begin to raise these matters in Washington. The right hon. Gentleman will find the most highly developed advocates of them in the research department of the Federal Reserve Board in Washington. If he does not seek allies in the United States, but seeks, rather, the defence of dogma, which is all that he has done today, he will serve this country extremely ill.
  7.41 pm
  Mr. Richard Ryder: I was grateful to the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) for allowing me to ask in an intervention during his speech whether he was in favour of a higher or lower exchange rate. He refused to answer my question. I hope that when the hon. Member for Kingston upon Hull, East (Mr Prescott) winds up the debate for the Opposition he will put that matter right.
  "Failure to reduce inflation further and damp down inflationary expectations could put recovery at risk. Prudent monetary and fiscal policies of the kind that have brought us so far will have to be sustained and, where necessary, strengthened."
  Those are not my words, nor words plucked from the pages of a Conservative general election manifesto. They come direct from the core of the declaration issued at the end of the economic summit held in London last June.
  That declaration was signed by western political leaders espousing such wide political beliefs as republicanism, liberalism, Christian democracy, conservatism and socialism. None of them, from their different political standpoints, could offer instant solutions to the complex international problem of unemployment. Had they been able to do so, I am sure that they would have seized upon those solutions straight away. Those world leaders recognised that reflationary policies could sabotage the careful progress made already and make unemployment worse in the long run.
  The occupants of the Opposition Front Bench are perpetrating a hoax on people if they claim that unemployment can be cured quickly. Those who suggest that it can be so cured are not in touch with the realities of government. Their Socialist friends abroad, some of whom are having to grapple with the problems of office on a daily basis rather than dallying in the rhetoric of opposition, are pursuing largely the same economic policies as the British Government.
  Only last week the French Socialist Prime Minister, Mr. Laurent Fabius, emphasised that the French Government would continue to curb public spending. He also said that he had no intention of raising public sector wages in a bid to court cheap popularity in the run-up to the 1986 French parliamentary elections. He ruled out pump-priming on the grounds that the Government would put inflation at risk and endanger France's external account. Mr. Fabius stressed last week the importance of improving the competitiveness of the French economy, and has throughout recent months made clear his intention to reduce personal taxation this year in an effort to increase job prospects for young people.
  The same pattern is followed in Italy, where there is a Socialist Prime Minister, Mr. Craxi. In a remarkable speech delivered in Trevi just over a year ago, Mr. Craxi said that unless the public expenditure problem in Italy was tackled quickly the whole political and economic fabric of that country would be put at risk. As a result, he doubled prescription charges and cut disablement and supplementary pensions. That was the action of that Socialist Prime Minister. Moreover, in his 1985 budget, published last October, Mr. Craxi gave a commitment to reduce still further the public borrowing requirement in Italy and to reduce the health, education and social security budgets of the Italian Government.
  There is a Social Democratic Government in Sweden. I fancy that their politics are closer to the heart of the right

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  hon. Member for Sparkbrook than to that of the right hon. Member for Plymouth, Devonport (Dr. Owen). The Swedish Government have given up subsidising failing industries, and recently one of the country's largest shipbuilding firms was allowed to go into bankruptcy. The Social Democratic Finance Minister, Mr. Feldt, pointed out recently:
  "We have restructured old industries—shipbuilding, textiles, steel and mining—remarkable in a European context. Steel capacity has been halved, special needs restructured…shipbuilding is a fifth of its original size."
  Mr. Feldt also announced his intention to reduce personal taxation so as to increase job opportunities in his country.
  The Socialist Government of Spain is led by a bright young Prime Minister, Mr. Gonzalez. He has made clear his intention to introduce a modern social market economy in Spain with a smaller role for Government in industry and a more flexible labour market. He has also said that he wants fewer barriers to domestic and international competition. Last month, when opening his Socialist party's conference in Madrid, Mr. Gonzalez said:
  "Without a sound economic policy there cannot be a serious social programme. We were not called on to govern in order to distribute scarcity and hunger."
  He concluded his speech by defending his monetarist approach, which he said was vital to save Spain from crisis.
  When the hon. Member for Kingston upon Hull, East winds up, let him say why the policies being propounded by the British Labour party are inconsistent with those being implemented by Socialist Governments in the remainder of Europe. Unless he can do that convincingly, the British electorate will continue to believe that the Labour party's policies bear no element of truth.
  The Opposition motion calls for that question to be answered. After all, the right hon. Member for Manchester, Gorton (Mr. Kaufman) conceded shortly after the last general election that Labour had lost because the people did not believe them. In the months to come, Labour MPs also have an opportunity to disprove that and to explain at the same time why their policies are inconsistent with those of their Socialist brethren in Europe.
  7.50 pm
  Mr. Bruce George: The Chancellor concluded his speech in a rhetorical flourish with a mixture of illusion, bravado and what the Russians call dezinformazia. He has rushed off no doubt to stem a further run on the pound caused by his speech. I am sorry that the hon. Member for Plymouth, Sutton (Mr. Clark) is not here. He wrote a work on the British military high command in the first world war called "The Donkeys". Perhaps he has rushed off to do field research for its sequel, because the Government of which he is a member show the same obduracy as the British high command in the first world war, with the same disastrous consequences for the economy.
  In his preoccupation with touring the Socialist horizon, the hon. Member for Mid-Norfolk (Mr. Ryder) forgot to read the Sunday newspapers at the weekend, which showed how an ailing company in America, Chrysler, was rescued and put on the road to success by a pro-capitalist President, so perhaps lessons are not learnt so simply as the hon. Gentleman would have us believe.
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  When I made my maiden speech here 11 years ago, the Walsall, South constituency which I described was prosperous, with unemployment under 5 per cent., with companies producing goods which were required and a town which half a century earlier was called a town of 100 trades. Many of those giants of industry are now but memories. Indeed, in the last few years the area has been struck by a major crisis, the industrial equivalent of the black death, because unemployment is over 17 per cent. Ten years ago unemployment in Walsall was below the regional and national level. Now, with unemployment in real terms higher than perhaps 25 per cent., I wonder where the goodies which have apparently been distributed—the Chancellor talks of more rewards to come—have gone in the few years since he took this job, with such disastrous consequences. No Saatchi and Saatchi public relations man can disguise the extent of the economic disaster that has befallen my constituency and the west midlands.
  When one talks of economic crisis, one thinks of Wales, Scotland, the north-east and the north-west. When I became a Member of Parliament over 10 years ago, the west midlands was held to be almost the engine room of the British economy. Measures were taken to siphon industry away from constituencies like mine to so-called less prosperous areas. The decline of the last decade or so has accelerated over the last few years. I would never argue that the crisis in this country began when my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) left No. 10 Downing street, but certainly with the furniture van that brought in his successor there came a rapid acceleration of the decline.
  We have seen under this Government an attack on the public sector. I speak unashamedly as a believer in a healthy private sector working alongside a healthy public sector. We have seen public assets plundered. We have not seen great success, as some people claim, with the British Telecom sale. I am one of the 54 million who are not now shareholders, but who until the sale were public shareholders. We are about to see the flogging off of British Aerospace so that the Government may get a little money to squander. Then there is to be the sale of assets such as the construction of warships, a sell-off which will probably be a disaster. The people who are thinking of buying will have to make up their minds in a couple of weeks whether to purchase.
  Under this Government the maintenance of an infrastructure assumes a low priority. In my constituency no council house has been built for five years. There are 12,500 on the waiting list and 30,000 outstanding repairs to be done. The local authority, which is Conservative and independent-controlled, put in a bid for £37 million under the housing investment programme. It received £9·6 million. In 1978, the last full year in which we were in office, the allocation was £20 million. Yet six years later it has dropped to £9·6 million. There is a desperate need to improve the infrastructure housing and roads.
  In the National Economic Development Council document referred to quite often, there is a reference to the backlog of maintenance and the consequence of delay. It says on page 6:
  "The consequences of delaying required maintenance work can be well illustrated for roads. An average life for a roads' surface dressing may be four-eight years. A failure to renew this dressing…at the appropriate time can lead to the need for complete resurface at a cost per square metre some ten times greater than that for surface dressing."

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  That is a timely illustration of the need to enhance the infrastructure of our economy, not simply because it creates jobs, but because by doing so it cuts the costs that would be involved in future.
  The once prosperous area which I represent now has the unemployment level of one of the worst areas. That I deplore. A further disaster that will make unemployment worse is the abolition of the county council in the west midlands. We have an authority which has sought successfully to create jobs. The council recently asked Cambridge econometricians to forecast what would happen by the year 2000 if the Government's policies were to continue. Then it asked the experts to forecast what would happen if different policies were pursued. The research projected that if present policies were pursued employment would fall by 225,000 by 2001. The alternative was not as dramatic as some would have liked to see. It forecast that about 180,000 jobs would be lost. The difference is that under the alternative policy we would see the creation of 127,000 jobs in the service sector, but only 15,000 service jobs if present policies continue. Perhaps there are alternatives. The research at regional level could be repeated nationally. There are agencies of Government, county councils, local authorities and organisations in constituencies which could play an even bigger role in job creation.
  In transport, the object of a future Labour Government must be to try to undo the damage that has been done to the infrastructure. There is a need for higher investment in railways. The future of transport should not, as the Government propose in their buses White Paper, be handed over to the private sector, which has shown itself manifestly incapable of meeting demands.
  My next point relates less to infrastructure than to substructure. In the west midlands we have suffered recently the effects of past industrialisation. Much of the west midlands has been undermined, not just by the Government's economic policies, but by coal mines which are now defunct, by limestone caverns and by ironstone mines. There are enormous consequences for the sale of houses, house building and factory expansion. In fairness, the Government commissioned a study by Ove Arup to identify what needs to be done. In the west midlands and in my area in particular it is a prerequisite for industrial expansion and for the peace of mind of thousands of people to start infilling some of the enormous holes undermining towns in the black country and the west midlands. Only the Government have the capability to mount that exercise.
  The Government have been an unmitigated disaster, not just for the west midlands, but for the country. Most hon. Members who have spoken already have been critical of the pure monetarism that appears to have prevailed over the past few years. It may be easy for my hon. Friends on the Opposition Benches to advocate what might be done should there be a Labour Government. Perhaps it is on the Government side that pressure will he more important for alternatives within the present framework.
  The Government strike me as being similar to a character in "The Wizard of Oz" following Dorothy or Margaret, collectively searching desperately for a brain, a heart and courage—courage to recognise the failures of their policies and to accept the recommendations of hon. Members who have spoken and who will speak later. The policies of the Government are in tatters. Before our economy collapses completely, let us not be beguiled by
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  some of the beneficial things that are allegedly happening. Surely there must be a change of policy. I hope that even in a small way the debate will contribute to that objective.
  7.59 pm
  Mr. John Maples: The worrying thing about unemployment is not just its present level. Despite 3 per cent. growth and the creation of new jobs at the rate of around 25,000 a month, unemployment is not only not going down but is still going up slightly. If those factors continue, with present demographic trends, we are unlikely to see any reduction in unemployment in the next few years. Just about the only encouraging thing about the unemployment picture is that, as an issue, it has now reached the top of the political agenda. That is not surprising because people find it difficult to accept that the Government can do nothing more about the nation's most serious social and economic problem than sit back and wait for things to get better.
  I am no economist, but like many other people in Britain I find myself looking at a paradox of massive unmet demand for goods and services existing alongside mass unemployment. Like those other people, I ask myself whether it is really beyond our intelligence and imagination to devise some way of bringing together the unmet demand and idle resources.
  On the other hand, those who simply call for a massive increase in public expenditure do not have the answer to the problem. It is difficult to argue that what is wrong with the economy is that there is shortage of demand. Just about the only thing that is booming is retail sales. The money supply is at the top of its target range. To argue that what is needed is a stimulus to demand helps foreign manufacturers rather than our own. At the same time, there are fiscal measures that we could take that would have the effect of creating more jobs without endangering the Government's overall economic strategy, but before looking at some of those specific measures I should like to examine the public sector borrowing requirement because it is central to the way in which the Government see their fiscal stance.
  The Government are in serious danger of becoming obsessed with the absolute level of the PSBR. It has become a self-erected totem of fiscal respectability in much the same way as M3 was before, the sterling-dollar exchange rate has been and the balance of payments was in the 1960s. Perhaps it will go the same way. There is a danger that one is looking at a proxy for what is happening in the economy, finding one simple figure and following it.
  The danger is that in concentrating on the absolute level of the PSBR the components that go to make it up are ignored. The effect on the economy of the different items of taxation and expenditure that go to make up the public sector's activities is far more important than the arithmetical difference between them. Does the incidence of various taxes encourage output and employment? Do various items of public expenditure help to reduce industrial costs? Is a particular item of public sector investment likely to show a good return? There is an enormous difference between borrowing money to pay increased wages in the public sector and borrowing money to pay for something such as the M25 road, which will have a substantial and beneficial effect in reducing industrial costs. What is important is not the absolute

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  amount of the borrowing but the use to which it is channelled and whether that use is productive and will help to increase output and employment.
  My other problem with the concentration on the PSBR is that I find it difficult to convince myself that small differences in the PSBR have much effect on interest rates. This financial year we have seen an overshoot of £1·25 billion in the projected PSBR, which seems to have had little effect on the market and interest rates. I suggest to my right hon. and hon. Friends in the Government that other factors are far more important in determining United Kingdom interest rates — oil prices, American interest rates and the view that is taken by financial markets of the prospects for domestic inflation. All those have a far greater impact on United Kingdom interest rates than marginal differences in the PSBR. I should have thought that £2 billion either way on the PSBR had far less effect on United Kingdom interest rates than a speech by Sheikh Yamani on oil prices or Mr. Henry Kaufman on the prospects for American interest rates.
  Therefore, the Treasury has more room for manoeuvre on the PSBR than it thinks it has. If it planned a PSBR of £10 billion for 1985–86, it could do so with no adverse effect on interest rates if—this is an important caveat—the money were to be productively spent and the commitment to sound public sector finance were continued. If the Treasury adopted that stance, together with the £1·5 billion fiscal adjustment, that would give the Chancellor about £4·5 billion with which to construct a job creation package in his Budget. That is what I hope we shall see, because I do not see how one can avoid the conclusion that tackling unemployment must now come before tax cuts or raising tax thresholds; and every fiscal resource that is available to the Government must be directed to creating employment in the private sector directly or to stimulating output and employment by reducing industrial costs.
  Particularly on Conservative Benches, but also in general, the debate has tended to be divided into those who think that the problem can be solved by increased public spending and those who think that it can be solved by continuing a tight fiscal stance and having tax cuts. In fact, there are other uses to which room for manoeuvre on public sector finances can be put. I shall suggest some ways in which I think the Government could use the £4·5 billion, or, in their own terms, whatever fiscal room they think they have to manoeuvre, to help to reduce unemployment.
  First, I suggest that we have an increased programme of home improvements grants. I suggest the expenditure of an additional £1·5 billion. The net effect on PSBR would be less than £900 million after tax and social security adjustments are taken into account. On generally accepted figures, that could create about 125,000 jobs in the private sector, in work that needs to be done, which is unlikely to be done without help and stimulus from the Government.
  Secondly, we should make a start on reducing the non-pay costs of employment. We abolished the national insurance surcharge, which was right because it was a tax on jobs. Why stop there? Employers' national insurance contributions have exactly the same effect. I suggest that the Government use some of the room that they have for manoeuvre for a phased reduction of employers' national
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  insurance contributions, and I suggest lowering them by 1·5 per cent. a year over three years from approximately 10·5 per cent. to 6 per cent. Some 30 per cent. of national insurance contributions paid by employers is effectively paid by the Government because of the number of people employed in the public sector. Therefore, the cost to the PSBR is far less then it would originally appear to be. It is just under £1·2 billion for each 1·5 per cent. reduction. Such a reduction would both create jobs directly in the private sector and, through lower industrial costs, help to stimulate output and employment indirectly.
  That leads to another matter that we should consider, which is the possibility of giving direct cash subsidies to private sector employers to employ people. If a married man with two children and a wife who is not working is unemployed, it costs the Government about £4,000 a year in social security benefit. If he were employed at average earnings, the Government's net tax revenues from him would be approximately £4,000 a year. Therefore, the difference to the Government in PSBR terms between his being employed and being unemployed is a staggering £8,000. Surely it makes sense for the Government to pay a private sector employer £6,000, for example, which is around 75 per cent. of the marginal cost of that unemployment, to employ the man on average earnings.
  The rates of subsidy would be different for different types of unemployed people, but they could be calculated. I suggest that we consider seriously constructing a temporary system of subsidies, perhaps for net new jobs created in the next two years, with the subsidies being phased out over a period of four years. That would substantially reduce the cost of employment and therefore stimulate the employment of additional people. It would help to lower average industrial costs and thereby stimulate output.
  Finally, we must be more aggressive in our industrial and trade policies in promoting the interests of British companies. We cannot sit around and allow British jobs to be destroyed by unfair foreign competition, and we must not allow foreign companies to capture markets by unfair trade practices. Although we have made some progress on that front, we should be more aggressive in the way that the French and Japanese have been in promoting their national interests. We should adopt the same attitude towards our national interests and the interests of our companies and employers.
  I have suggested what I believe to be a modest programme of action which would be a start in the process of increasing production and creating more jobs. I do not believe, and doubt whether anyone does, that we can create 3 million new jobs overnight. However, we can and should develop practical and imaginative policies to tackle unemployment. We cannot appear to wash our hands of the nation's greatest social and economic problem.
  8.9 pm
  Mr. Richard Wainwright: I wish that at least one Treasury Minister had been in the Chamber to hear the carefully reasoned challenge of the hon. Member for Lewisham, West (Mr. Maples) to many of the Government's dogmas. I also wish that the time limit allowed me to follow up some of his interesting leads. As it is, I shall speak briefly in support of the Liberal-SDP amendment. It contrasts sharply with the Labour motion, which argues something that we feel bound to oppose—a concentration of all of the resources of Government on

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  the public sector. Our amendment is also in clear contrast to the tired and complacent phrases of the Government amendment.
  Today's debate gave the Chancellor a most timely opportunity to show sonic leadership in the new circumstances that result from the exchange rate fracas and the hike in interest rates and the grim prospect for jobs that they involve. Aided by the blurred and blunted approach of the Labour Front Bench, the Chancellor missed that opportunity entirely and fell back on defensive remarks. The responsibility of Government for the level of employment coincides with an equally important duty—their stewardship of public assets. Whether they like the public sector that they inherited is irrelevant to that duty. They also have the historic duty of relieving the poorest in our society. Those are three fundamental objectives that no civilised Government can deny for long and they call for a substantial change in the thrust of Government policy.
  If the Government need one, the recent chain of events has given them a good excuse for changing their policy. The Government's lamentably poor stewardship of public assets is a matter of common report from all parts of the country and all types of organisation. It is partly the House's fault as our primitive procedures never give us the opportunity, which every sensible business takes at least once a year, to review the state of our assets. We should as soon as possible have a system under which we do not vote public expenditure nor accept a Budget statement until we have had a comprehensive review of the state of public property.
  There is plenty of information, which should have been available much earlier, from various private sources and research organisations such as the Policy Studies Institute, and now from the National Economic Development Council. The latter has drawn attention to a backlog of some £2 billion on hospital maintenance, the appalling state of the public sector housing stock, schools, roads and other assets. At the elementary level of repair and maintenance expenditure, let alone capital projects, the Government are falling lamentably short. Until we start to catch up with the appalling arrears in maintenance, there should be no dividend, as it were, to the shareholders who still have jobs and earn a regular income. No business would be allowed by its auditors to pay a dividend until they had been satisfied that the business was putting enough aside for the maintenance of its assets.
  We must also consider proper provision for depreciation, including, in these days of rapid development, provision for obsolescence. We have out-of-date public buildings, especially hospitals, some of which are so ancient and difficult to clean that there is more risk of cross infection than from the disease for which a patient is admitted. They have ancient heating systems such as the one in this House which are prodigal with fuel and damaging to health. We must also consider the state of our housing stock.
  I endorse heartily the appeal of the hon. Member for Lewisham, West for greater expenditure on house improvement grants. The Government seem utterly unaware of the plight of those people who, often at the behest of the Government, have recently become house owners, and now find that the entire household is without work and therefore have not the means to put the roof back or to deal with the broken chimney stack. There should be
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  an improvement grant system, means-tested if need be, to enable our housing stock to be kept in reasonable condition.
  More than 500,000 blue collar workers in construction industries are on the dole. Training opportunities for young people who should be entering construction industries are lamentably few. It ill becomes the Government to boast, as they have done again today, that they have launched what they call the greatest training scheme ever, when their policies are shamefully reducing the opportunities for training in some of our greatest building firms. For example, the chairman of Wimpey reported only yesterday that, whereas in 1979 he had 976 craft trainees, he now has only 260. His figures are even worse for professional trainees in, for example, design and estimating.
  The proper maintenance of our assets and the provision of work and practical training for those who need it, some of whom have been waiting three years, are all related. I am dwelling on housing because it provides the greatest opportunities for lasting jobs. The need is eternal and the work is satisfying. As compared with road construction, which is not my hobby horse, house construction and improvement has been shown by various recent surveys to provide three times as many jobs per £1 million spent as road construction.
  We should not be too proud to take lessons from the United States. The Federal Department of Housing and Urban Development has for some years operated urban development action grants. I do not have the most recent figures but, by 1982, that Department reckoned that $2 billion spent in Government grants had generated $15 billion of useful housing and development projects in less prosperous areas—not just the most distressed. There is much to be learnt from how other countries are tackling the joint problems of public need and lack of employment. It is high time that the Government adapted themselves to these present circumstances.
  8.19 pm
  Mr. Ken Hargreaves: As my right hon. Friend the Chancellor of the Exchequer said, the Government have had some success in reducing inflation; a success which has benefited every citizen, employed and unemployed. Unemployment is now the main worry of most people. There is a feeling that the Government are not doing enough to reduce it. Whether that is true, and whether the criticism is fair, matters little. The Government must redouble their efforts to reduce the number of people who are unemployed. They must, in their own interests, ensure that the public are aware of the effort that they are making.
  I believe that the Government are interested in reducing unemployment, just as they are interested in keeping public expenditure under control and about promoting owner-occupation for people in lower income groups. Increasing spending on improvement grants is the only way in which the Government can achieve those three objectives at the same time. Money invested in that sector of housing is not contrary to the Government's current economic policies. Spending of relatively small amounts of money now will not just provide jobs in the housing construction industry and in manufacturing, but will reduce the need to spend larger sums later and allow owner-occupiers to remain in the private sector.

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  In mine and similar constituencies, we improve our present substandard housing and keep it in the private sector, or we allow it to deteriorate still further so that eventually it must be demolished and replaced by council houses at five or six times the cost of improvement grants. That cannot be in line with the Government's public expenditure policy. Given that the Government are rightly committed to widening owner-occupation and to selling council houses, it cannot make any sense to allow existing owner-occupied properties to fall into disrepair, to be demolished and replaced by council houses.
  Unless the Government alter course, they will in the long term fail in two of the three objectives that I have mentioned. Even if they are successful in the third—reducing unemployment — they will have ensured the need for a massive surge in public expenditure on housing and a shift back from owner-occupation to public sector housing.
  The 1983 Conservative party manifesto clearly said:
  "Our goal is to make Britain the best housed nation in Europe".
  What is the position today? Given present resources, the chance of even approaching that manifesto promise, let alone achieving it, seems impossible. In England alone over 4 million houses are defective in some way, 2 million of them requiring repairs costing between £2,500 and £7,000. The cost of putting all those deficiencies right was estimated at some £30 billion in 1981.
  I realise that the Government have made it a cornerstone of their policy to ensure that public expenditure does not consume too great a proportion of the nation's wealth. Progress towards making this country the best housed in Europe depends upon the provision of a sound economic base and on the creation of productive employment—not just the making of artificial jobs—and I look to the Government to provide a balanced programme for housing, to provide the public finance necessary to pump-prime housing strategy, and to do it in a way which attracts additional private investment to an area of spending which is extremely labour-intensive and in which jobs could be quickly created.
  I was greatly flattered last week to receive a letter from the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) acknowledging the fact that I was a Member of Parliament who put common sense first. I am most grateful for that comment, despite the fact that it probably ruined whatever slight chance of promotion I had inside the Conservative party. Having resisted the immediate temptation to join the Liberal party where promotion is much easier to obtain, I have to disappoint the right hon. Gentleman further by informing him that the same common sense tells me that it is as easy for the Liberals, who have never had power, to tell the Government what policies they should follow as it is for the Labour party, which will never have power again, to advise the Government.
  Anyone can condemn and criticise, but on improvement grants, for example, such condemnation and criticism come ill from the Labour party, during whose term of office from 1975 to 1979 only 67,000 improvement grants were made each year in England—only half the number made by the previous Conservative Government from 1970 to 1974, and less than one third
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  of the 230,000 made in 1983. Criticism comes equally unfairly from the Liberal party, which kept such a disastrous Labour Government in power.
  Conservative Members who recognise what the Government have achieved and who welcome it are entitled to say that they want them to do even more. In my constituency, £223,000 was spent on improvement grants in the last year of the Labour Government. Under this Government we shall spend £1·8 million this year. That is an increase which is greatly appreciated in terms of the number of houses dealt with and the significant effect that it will have on reducing unemployment, but even more needs to be done if we are to make inroads into our severe housing and unemployment problems. It would be disastrous to do less, and a tragedy if we do not take the opportunity to do more.
  I hope, therefore, that, while the Government will ignore many of the comments from the Opposition Benches, they will listen to the worries of many of their supporters and provide a reasonable balance between the rumoured tax cuts and increased spending on labour-intensive projects in areas of greatest need, which would do much to reassure people that we are determined to do everything that we can to reduce unemployment.
  8.26 pm
  Mr. Robert Kilroy-Silk: I wish not to talk about the sterling crisis or economic policy, but to register the despair and despondency felt by thousands of my unemployed constituents. I should not need to do that nor to lay out the bare facts of the level and scale of unemployment in my constituency, but, given that many people in the south and many Conservative Members representing southern constituencies do not know or understand the scale of the problem in areas such as mine, I feel it incumbent upon me to make it clear to them.
  I represent a constituency in which more than 10,000 people are unemployed — a 27 per cent. rate of unemployment — where over 6,000 of them are long-term unemployed, and where in the relatively small town of Kirkby, with a population of between 40,000 and 50,000, there are now over 7,000 men, women and young people unemployed. There are a mere 56 vacancies at the jobcentre and no vacancies — nor have there been for several years—at any of the career offices.
  In the borough of Knowsley in 1983 only 10 per cent. of school leavers went into full-time employment and last year only 6 per cent. Over half of the 18 and 19-year-olds have never had a full-time job. The overwhelming majority of my constituents leave school, get married and have children while on the dole and they are never likely to have a job. Their youth, their life, their aspirations and opportunities have been blighted, if not destroyed.
  Knowsley is a constituency and a borough that has faced a horrendous and unremitting catalogue of factory closures and redundancies, where currently the only economic activity seems to be that of derelict land reclamation which, in effect, amounts to demolishing factories built 10 to 15 years ago and levelling the ground for some other unspecified activity in the distant future.
  As every hon. Member will be aware, the figures do not give an accurate picture of the scale, the depth or the terrifying social consequences of unemployment which are currently a reality in parts of my constituency.
  It is not just that whole families are unemployed, or that not one person living in multi-storey blocks of flats—

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  perhaps seven, 12 or 14 storeys high—is in full-time work, or that people in an entire street are unemployed. There are two boroughs located in my constituency where only 25 per cent. of the economically active are in full-time employment. As one would expect, the result of such long-term unemployment is massive, demonstrable and conspicuous poverty and deprivation.
  The poverty and deprivation are illustrated by a great variety of factors. I shall give two examples. Sixty-eight per cent. of all schoolchildren in the borough are in receipt of free school meals, 61 per cent. of the school population is in receipt of some help with school clothing, 80 per cent. of council tenants, in virtually a 90 per cent. council tenant borough, receive some help with housing benefit and more than 50 per cent. of all households are in receipt of state benefit. We have even reached the stage where Fine Fare is no longer viable in my constituency and has had to close down. We have moved on from the closure of factories, social clubs and the local newspaper to the closure of a supermarket which is selling basic food and necessities. To the despair of the population, it was no longer viable and had to close.
  Whole areas of both Kirkby and, more horrendously, Cantril Farm, or Stockbridge village as it is now called, contain shops which are boarded up, which have no goods to sell and which no longer function. Nobody in Maidstone, Dorking or Guildford can have any conception of what it is like to see only three shops open in a purpose-built shopping centre which was created only 10 or 15 years ago: a video shop, a baker's shop and a betting shop. Every other shop has corrugated iron across what used to be its windows. This is more reminiscent of Belfast than of a mainland town in Britain. The despair, despondency and distress caused by this ever-deepening poverty is shown very clearly by the vandalism and destruction of our public assets.
  Both in this debate and in other debates many hon. Members have alluded to what might be the social consequences of continuing to tolerate such unacceptably high levels of unemployment. Those social consequences are already evident in my constituency. Very few weeks pass without there being some kind of—I use the term in inverted commas but it is used in the full meaning of its term by the police and other members of the local community — "riot" in one part of the constituency. Young unemployed people now burn down schools. They are burnt down with amazing rapidity in Cantril Farm, for example. They then stone the firemen, the ambulance services and the police when they arrive. It has become their only way of showing their frustration and despair. Perhaps it is also their only means of amusing themselves. The way in which this is being allowed to happen without proper public comment, acknowledgement and debate is frightening. Those in the south who speak about an economic revival through tax cuts have no conception or understanding of the depths of despondency in my constituency and other areas like it.
  My constituents are not fools. They know that it does not have to be like that. They know that they do not have to be unemployed and that they could have the same opportunities and advantages as are enjoyed by people in other parts of the country, especially the south. They know that it is foolish to have 40,000 people in Merseyside on the waiting list for hospital treatment while hospitals are empty and nurses and doctors are unemployed.
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  They know that it makes sense to match the need for medical attention with the available resources and that it is absurd that there should be such overcrowding, inadequate housing and homelessness in my constituency, let alone on Merseyside, while their brothers. fathers, relatives and they themselves are unemployed construction workers. They know that it makes sense to use their skills and abilities in repairing the housing stock. They know that it is absurd that such an inadequate social provision should be tolerated while thousands of their fellow citizens are idle. They know that it is possible to put the two together. They know that a totally different world exists in the south and in other parts of the country and that they have been written off.
  It would be both obscene and a betrayal of those people if it should be suggested that economic revival or job creation could be brought about by tax cuts. Even more importantly, we cannot go on telling people that they do not count and that they are worthless. We cannot continue to make them feel that they do not belong to this community, that they have no part to play in our society and that they will never be the beneficiaries. Very soon they will take their revenge, and so they should.
  8.35 pm
  Mr. John Watts: We have heard from the Opposition Benches yesterday's arguments from yesterday's men. I recall that expansion of public spending and borrowing was the Labour Party's prescription for unemployment in June 1983, but their claim that a massive expansion of public spending and borrowing would achieve a substantial reduction in unemployment lacked credibility and lacks credibility now. The seeds of unemployment were sown in those years of rapid growth in public expenditure at a time when the economy was stagnating. As public spending consumed an increasing share of our national resources we saw also the performance of our economy go into inexorable decline. It was to reverse those inexorable trends of rising public expenditure, borrowing and inflation and the continuing economic decline that a Conservative Government were elected in 1979.
  In 1983 we were re-elected with a massively increased majority, of which I am happy to be a part, to complete the task of reversing those destructive trends and setting the economy on a soundly based course of sustainable growth. As my right hon. Friend the Chancellor of the Exchequer reminded the House earlier, the economy is now into its fourth year of recovery. That sustained growth has been achieved without any resurgence of damaging inflation. The present policies of the Government, which have given the highest priority to defeating inflation and controlling public expenditure and borrowing, have created an extra 300,000 jobs in the past year.
  I am not persuaded that a return to the policy of expanding public spending is likely to produce a more rapid expansion of employment. Indeed, the simulation on the Treasury model of the effect of the £1 billion increase in local authority capital expenditure showed an increase in employment of only 24,000 jobs, at a cost in excess of £40,000 per job. If, as the right hon. Member for Birmingham Sparkbrook (Mr. Hattersley) argued, the whole of the £1·5 billion fiscal adjustment were used in this way, the net effect would be the creation of only 36,000 new jobs. I consider that to be no great prize.

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  The major achievement of the Government's economic policy has been to combat inflation. I believe that that must remain the first priority. But the achievement has been somewhat more modest when it comes to reducing taxation, even though income tax thresholds have been increased substantially in real terms. When comparisons are made between our economic performance and those of the United States and Japan I find it to be more persuasive that the substantially lower levels of taxation enjoyed in those countries have more to do with their economic success than with any higher level of borrowing.
  Reducing taxation must be our top priority. It is not an insult to the unemployed to recognise the need to remove tax disincentives from taking relatively low paid employment. The priority which my right hon. Friend the Chancellor attaches to raising income tax thresholds is right. However, I would also urge him to have regard to another similar disincentive, that which arises from the incidence of national insurance contributions.
  I urge him to consider two changes. First, he should change the system whereby the total income becomes liable to contribution once the threshold is crossed. That results in a confiscatory marginal rate of tax and is every bit as much a disincentive to taking relatively low paid employment as is the incidence of income tax.
  Secondly, following an argument similar to that advanced by my hon. Friend the Member for Lewisham, West (Mr. Maples), I ask my right hon. Friend to consider providing an incentive by way of remission of employers' contributions to businesses which increase employment. What I have in mind is not an across-the-board reduction in rate or any specific payment of subsidy, but rather a system where perhaps a ceiling is set on the amount that a company would be required to pay in employers' contributions. That should be set at the level paid in the previous year so that the company will have, so to speak, a year's tax holiday from paying the employers' part of the national insurance contribution that related to any increase in its payroll costs.
  If that were done, it would not only provide a direct incentive to increase employment, but it would also have the effect of reducing unit labour costs. I am reminded of my right hon. Friend's assertion in the debate on unemployment in October 1984 of the connection between reductions in the level of real earnings and increases in the level of employment in the economy—that for every 1 per cent. reduction in the level of real earnings there is an increase of between 0·5 and 1 per cent. in the level of employment, between 150,000 and 200,000 jobs. A further reduction in employers' national insurance contributions in the way that I have suggested would achieve a similar result.
  I commend my right hon. Friend's rejection of siren calls for a return to voodoo high expenditure policies, whether those calls come from the Labour Benches or from below the Gangway. Such policies have not achieved conspicuous success in the past and I have no reason to believe that they will be more successful now.
  For my part, I shall continue to support the economic strategy on which I fought and won my election campaign in Slough in June 1983.
  Mr. Barry Sheerman: The hon. Gentleman will not be here long.
  Mr. Watts: Time will tell whether I or Labour Members are right.
  That strategy is one of continued lower inflation, firm control of public spending and borrowing, and progressively lower taxation to provide the best recipe for sustaining economic growth and increasing employment opportunities.
  8.42 pm
  Mr. Austin Mitchell: I do not intend to follow the hon. Member for Slough (Mr. Watts), but his speech was a manifestation of the state of mind that Back Benchers of a faltering Government get themselves into, whistling in the wind to keep their own spirits up. It is potentially a manifestation of the bunker mentality which is coming over the Government as they attempt to talk up a recovery which is faltering. It was never a real surge of growth, but a rather small bounce back from the immense depression and deflation which they inflicted on the economy between 1979 and 1981. If the Government have an economic strategy, it is essentially the belief that since phoenixes rise from ashes, the more ashes we create the better the health of Britain's economy will be.
  Nor do I intend to speak at length in praise of the Opposition's motion, because that is so obviously straightforward that there is no more to be said about it. We are in a situation which Galbraith described in the 1950s, which I then thought applied to America rather than to Britain, of private affluence and public squalor. That description is beginning to describe what is happening in Britain under the Government. Thanks to that, there is so much to be done by public spending that the motion speaks for itself.
  However, we must emphasise the other side of the story. We need to emphasise the problem of manufacturing and, yes, the problems of the private sector. The Labour party is the only real friend of the private sector, particularly manufacturing industry, in Britain. It is the only party whose policies can provide should be dedicated to provide, and will be dedicated to provide, the climate of expansion, growth, buoyancy and optimism, and the framework which industry needs if it is to expand, to grow, and to bring down unemployment.
  The Government, the so-called friend of the private sector, have done the exact opposite. They have inflicted immense damage on industry and the private sector. The Prime Minister's economic policies are not really economic at all. They are a system of morality. The right hon. Lady wants, not growth, but a discipline on the economy. Unfortunately, in a modern, complex, capitalist economy, discipline is the enemy of that which is needed to provide the dynamic for the future — investment. Investment needs the expectation of profit. It needs the climate of optimism and the expectation of growth ahead. All that the Government have generated is depression, discipline and gloom, which are the enemies of the investment that we need to get us out of our difficulties.
  The real agency of mismanagement under the Government has been the exchange rate. The value of the pound as against other currencies, the means which adjusts our relationship with the world, is essentially an instrument of economic policy. It is not something to be put aside and neglected entirely; nor is it the phallic symbol which Conservative Governments in the past have seen it as.

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  It is a test of the stupidity and intellectual failure of so much of British industry that it has not seen the importance of the exchange rate and the importance of bringing that exchange rate down to improve our competitive position in the world and to give to industry and the economy the only boost which can now get us back into a competitive situation. The fall, which has really been a rise in the dollar, should have been welcomed by the Government, and, indeed, by the country, because it was taking us back towards a competitive situation. Unfortunately, the Chancellor lost his nerve and decided to increase interest rates to defend the pound, as if the pound, having been neglected by the Government for so long, was suddenly a sacred symbol again.
  Yet the Chancellor has done that just at the moment when the decline against the dollar was opening up substantial opportunities in America to British exporters. We were not seizing them as avidly and successfully as the Japanese or Germans, but the opportunities were there and British industry was responding to them. The right hon. Gentleman is trying to choke off those opportunities, and at the same time he has failed to recognise that the pound is still substantially over-valued against the currencies of those countries which are now our major industrial competitors, particularly West Germany and Japan. We are still substantially over-valued in real terms against West Germany.
  At the end of 1976 the Labour Government pledged themselves to the IMF to manage the exchange rate to maintain the competitive position of British industry at home and abroad. Yet the pound is now in real terms about 40 per cent. over-valued against the deutschmark. How can we maintain a competitive position against West Germany? It is no wonder that we are running such a huge deficit in manufactured trade with the EEC—a deficit which this year will almost certainly be over £10,000 million.
  We are essentially becoming an industrial and manufacturing colony of West Germany, not a great manufacturing power in our own right, thanks to the way in which the exchange rate has been mismanaged by the Government. The effect has been felt by manufacturing industry. That is where the jobs have gone. That is where the expansion needs to come. That is where our efforts need to be concentrated. To fulfil those efforts we can only use the exchange rate to get us back to a competitive situation.
  The surge in unemployment has come, not in the public sector, but in the manufacturing sector of the economy. The jobs have been lost there. The number of jobs lost in manufacturing is almost as great as the total increase in unemployment. In the five years to June 1984 we lost nearly 1,700,000 jobs in manufacturing. That has been the basic cause of the rise in unemployment. In the five years to the second quarter of 1984 employment in manufacturing in the United Kingdom dropped by 22 per cent., compared with a fall of only 7 per cent. in the United States and an increase of about 5 per cent. in Japan. Whether a developed economy loses manufacturing jobs depends upon how the economy is run and with what aim. The loss of manufacturing jobs is a uniquely British failure, caused largely by exchange rates.
  The problem is therefore to get the pound down. To do that, we need to spend. Recessions arise from no other cause than a deficiency in demand, which means a deficiency in spending. The only way to get demand up
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  again is to spend. Whether that spending comes from the Government or the private sector is immaterial. The Labour strategy would be a combination of both. There must be an increase in spending to redress the deficiency in demand. In my view, that increase in spending must be financed not just by borrowing and taxation, both of which merely transfer purchasing power from one section to another, but by the creation of additional purchasing power—as has occurred in the United States thanks to the inflow of funds from overseas. Conservative Members who believe that unemployment is inevitable should consider that in the United States that process has created 7 million jobs in little more than two years.
  In this country we might need to print the money, but we must have that increase in the money supply to boost purchasing power so as to achieve an expanding economy. With the old-fashioned gold standard, if the economy was depressed gold would flow in, thus enlarging the credit base and increasing the money supply so that interest rates fell and investment picked up. That was an automatic adjustment mechanism. The Government are doing exactly the opposite. Instead of printing the money and expanding the money supply, they have been over-funding and taking money out of the economy, largely so that the Chancellor could achieve monetary targets which were mere fetishes bearing no relation to the economy, as well as helping his banking friends.
  Expansion in the sense that I have described may produce a surge in demand for imports, but there is no harm in that if those imports are used to create jobs and investment in this country. Even if they merely reduce the balance of payments surplus, they will bring down the pound, and by bringing down the exchange rate will make industry and the whole economy more competitive. There is no inevitable, fatalistic correlation between being an oil power and going into industrial decline. Whether manufacturing industry declines depends—
  Mr. Deputy Speaker (Mr. Harold Walker): Order. I call Mr. Alan Howarth.
  8.53 pm
  Mr. Alan Howarth: It is said that the Labour party motion on the supremely important subject of unemployment amounts to no more than a recycling of the illusion that we can spend our way into prosperity and into jobs. The hard-won experience of a generation should have taught us that that is not so, that to concentrate resources in the public sector is to use them relatively inefficiently and unproductively, that a spending boost born out of panic generates few and temporary jobs and that the increases in taxes, interest rates and inflation caused by such a boost are damaging and destroy jobs elsewhere in the economy.
  My right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) referred to Lord Halisham's expedition to the north-east, but in 1963–64 public expenditure represented 34 per cent. of GDP, whereas in 1983–84 it was 43 per cent. Somewhere in that progression or deterioration we crossed the critical threshold beyond which high and stable employment, which should always be a cardinal objective, is no longer to be had and political stability is even at risk.
  It is strangest of all that the Labour party should put down this motion at the very time when the Government, whom the Opposition condemn for heartless stringency,

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  are being given a rather rough time by the markets, which suspect a certain fiscal laxity. One wonders where the pound and interest rates would be if the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) were Chancellor.
  I wish to refer briefly to four elements which should be part of our strategy for jobs. I believe that the Government can do significantly more and that there are more levers to pull than my right hon. Friend the Chancellor has recognised.
  First, we should renew our attack on inflation and be more consistent about it. It is no coincidence that in the years since the war peaks of inflation have been followed by new peaks of unemployment. The reasons are clear. Inflation saps the profitability of companies, reducing the capacity and willingness of managers to invest. It induces aggression in pay bargaining. It drives up interest rates. In all those ways, inflation destroys jobs.
  Unemployment is properly the intense preoccupation of all of us. There can be no Member of Parliament who is not urgently concerned to find ways to reduce unemployment and the unhappiness that it brings. It does not follow from that, however, that we should somehow subordinate our attack on inflation to policies to reduce unemployment. On the contrary, the two are inextricably tied together. I am concerned that the Government have slackened their drive to reduce inflation. It was 3·7 per cent. annualised at the time of the general election. In the year ending last November it was 4·9 per cent., and it is predicted to be 4 per cent., 5 per cent. or even more in the coming year. I am even tempted to suspect that my right hon. Friend the Chancellor has become something of a crypto-reflationist. His last Budget marked a certain shift away from the emphasis on control of public expenditure and the reduction of inflation towards a preference for tax cuts and growth. At that time inflation was predicted to be 4 per cent. in the second quarter of 1985. The autumn statement marked a further shift in the same direction and the prediction rose to 4·75 per cent.
  I believe that my right hon. Friend has run certain risks in the reflationary direction. He has made it clear that he is impatient to bring interest rates down — naturally enough, but in my view somewhat impetuously—and he has made it clear that he has been happy to see some devaluation of the pound. He has also held out the prospect of tax cuts. The markets have now made it clear to him that he has dared too much.
  It is appropriate that we should now renew our quest for honest money. Unless we have financial stability and money in which people can be confident, our economy will be on shifting sands and less able to generate jobs than it otherwise could be. I suspect that my right hon. Friend the Chancellor of the Exchequer would not disagree with me about any of that.
  I agree with my right hon. Friend that if we are to have more jobs we must have lower taxes. High taxation drains the lifeblood from the private sector, which is the source of the wealth of our economy and of our capacity to employ people. I am glad, however, that recently my right hon. Friend has displayed caution about the prospects of tax cuts being deliverable in the spring. I have been worried that tax cuts should be held out as a prospect, not on the basis of securely limited public expenditure, but on the basis of oil revenues at a peak and asset sales, similarly
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  at a peak. We would be left with a structural PSBR too high to be consistent with the requirements of low interest rates, stable sterling and low inflation.
  The problem has been that the public sector has been recalcitrant to reform. The Chancellor's strategy has therefore been to hold public expenditure steady in real terms and to allow the growth in the economy to express itself in the private sector. I doubt whether that strategy is politically achievable. Pressures for higher public expenditure surround us at every point on the battle front. I do not believe that our economy is as stably based as the Chancellor posits. A choice must therefore be made. Either we move with great national reluctance down the path to Socialism, along which the Labour party beckons us, or we move towards a Conservative society based on greater freedom and responsibility.
  I had hoped that my right hon. Friend would invite the country to debate the role of the state and respective commitments of the public and the private sectors. I had hoped that the debate would be led by the Conservative party in its manifesto at the general election and that it would be developed in the Green Paper on the next 10 years, but that was a disappointing document. It is not too late—indeed, it is more critical than ever—to develop such a debate.
  I am in favour, not of sudden or draconian action, but of gradualism. The debate should be conducted in calm, humane and reasoned tones. I do not underestimate the opposition that there would be from vested interests, entrenched orthodoxies, the faint hearted and the factious, but I believe that the debate is necessary.
  Notwithstanding my reservations about the difficulties and the unsatisfactory condition that we face in public expenditure, if it is judged responsibly that we have scope for tax cuts this spring, I hope that my right hon. Friend will look for the most employment-effective tax cuts. I shall suggest two.
  Many hon. Members have referred to the opportunities that might be found in the reform of the national insurance system. If the threshold for the employers national insurance contribution is raised to £6,000, it will become 10 per cent. cheaper to employ 40 per cent. of British workers. That would make a significant difference. I do not believe that we shall have lower pay settlements as a result of rather bleak rhetoric and exhortation, but if we make it cheaper to employ people, more people will be employed.
  Secondly, it is worth mentioning a further valuable opportunity. VAT is levied on firms with an annual turnover of more than £18,700. In 1983–84, 93·3 per cent. of net VAT payments were made by the 24 per cent. of VAT registered businesses with taxable turnovers in excess of £100,000. The benefit to the Exchequer, after the cost of collecting VAT on three quarters of businesses, is therefore very small. At the same time, the administrative burden of completing VAT returns is a drain on small businesses, which should be the main source of new jobs. To raise the VAT threshold for businesses to a turnover of at least £100,000 is, therefore, attactive and should be given high priority.
  Thirdly, I hope that the Government will do more to call off the bureaucratic harassment of businesses. It is disproportionately hampering to small businesses, the principal asset of which is the energy of the boss. Yet in this country someone running a small business must put up with a barrage of statutes, statutory orders, European

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  Community regulations, local government regulations and the ministrations of, at the last count, 2,167 quangos. No wonder the contribution to employment by small businesses is less than it might be. I hope that the Government will be willing to consider taking discretionary powers to exempt small businesses from a range of bureaucratic requirements.
  I shall not enlarge on the scope that exists for reforming the labour market, which is the fourth area in which our strategy needs to be energetically developed, other than to observe that trade unions, by forcing pay above what the market will bear, and by resisting technological change, are still destroying job opportunities. We must find a fairer balance between employers and unions. Similarly, wages councils are asking for more than the market can bear. That hurts the employment of the young and the unskilled especially.
  The Government have no magic wand to wave, but, by pursuing a vigorous and coherent approach in these four areas, they can hasten the structural reform of the economy and bring closer the moment when there will again be enough jobs to go round.
  9.3 pm
  Mr. John Prescott: I wish that the hon. Member for Stratford-on-Avon (Mr. Howarth), who has 3,000 unemployed people in his constituency, would visit my area and explain to the 20,000 unemployed there—unemployment has increased by three times since the Government came to office—those sorts of solutions. It is no surprise that the Secretary of State for Employment allowed some of his time to the hon. Gentleman, because he is one of the few hon. Members to support the Government's policy on unemployment.
  The debate is about the increase in mass unemployment in the United Kingdom after five years of Tory policies, three of which the Government claim to be years of recovery. It is also about the Government's priority for reducing unemployment. Since 1979, we have witnessed the trebling of unemployment, despite the Government's efforts to massage the figures downwards by recording only those who claim unemployment benefit and those not on Government schemes. The reality is that almost 4 million people are unemployed, which cruelly exposes the Tory election poster, showing queues of unemployed people, which said, "Labour isn't working." That Labour Government could at least claim that they left office, despite an increased working population of 900,000, with 310,000 more people in work than when they came to office in 1974, although I admit that they were extremely dissatisfied with unemployment at 1·2 million. If we enjoyed unemployment of 1·2 million today, that would have been welcomed by most speakers in this debate and by most people outside the House, with the exception of the Government's spokesmen, as was revealed in the deplorable speech of the Chancellor of the Exchequer at the beginning of the debate.
  There is clear evidence that since 1979 the Government have contributed directly to increasing by 2·5 million the number of unemployed through their obsession with the public sector borrowing requirement and cutting public capital expenditure, which they believe will secure lower inflation. For every 1 per cent. reduction in inflation since 1979, the Government have contributed to throwing half a million people on the dole in order to create what they
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  call an honest money policy. That honest money policy has been cruelly exposed on the currency exchange market during the past few days.
  Mass unemployment was the expected result of such a policy. Indeed, I would argue that it was the Government's intention to create unemployment on that scale as an instrument of policy to achieve lower inflation. Most people predicted that it would happen if they pursued those policies. The policies are being pursued in the name of outdated theories, and are financed solely by the squandering of a massive amount of oil wealth which, a few years ago, everyone believed would be a blessing, but which is now talked of, at least in this debate, as though it were the curse of the British economy. It is clear that oil revenue has financed the experiments with our economy, of which the main cost has been 4 million unemployed.
  Today we stand witness to the abject failure of Government policy to increase sufficiently production, demand and investment, which are essential prerequisites for the reduction of unemployment. Earlier today the Chancellor quoted from the OECD report—I hope that he will be able to join us before the debate ends—but he did not quote the essential part of the report that deals with the amount of investment that has been made in Britain. The reality is that the investment per head in the United Kingdom compared to the rest of the OECD countries is worse than that in 18 other countries, and only Portugal and Greece come after us. That is one reason why we have a worse level of unemployment than that experienced by other OECD countries which have also suffered from the world depression.
  We have been told today that the Government do not have a bottomless purse of public expenditure to solve this crisis by spending our way out of it. That point has also been made by Labour Members. However, the debate today has been about the availability of resources under this Government. The argument as to whether we are prepared to spend millions or billions to reduce unemployment is not the issue of the debate. As various hon. Members have pointed out, the issue concerns the amount of resources that the Government acknowledged in their autumn statement to be available for either tax cuts or for reducing unemployment.
  The essence of the dispute in this debate has been whether the £1·5 billion should be used for public expenditure or given in tax cuts. We know that unemployment can be reduced by either of those courses. The dispute is about whether we can reduce unemployment more by using public expenditure or by cutting taxes. We wish to make it unequivocally clear that any available resources should be used to increase public capital expenditure because that reduces the level of unemployment far more and at a faster rate than by simply giving the money out in tax cuts.
  All this is apart from the morality of the argument of whether we should give more money to people who are better off rather than use it to help those who are worse off, those suffering because of the increased level of unemployment. There is also the increased number of those who have been unemployed for over a year, with more than 1 million in that category.
  It was interesting to listen to hon. Members and to see how the level of unemployment in their constituencies was reflected in what they said. I am not saying that those hon. Members with low unemployment in their areas had no

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  concern for high unemployment and its attendant problems, but there is a remarkable correlation between a low level of unemployment and the hon. Members who have spoken in favour of the Government's policies. The constituency of the hon. Member for Stratford-upon-Avon has an unemployment level of about 3,500. The hon. Member for Slough (Mr. Watts) represents an area with a similar level of unemployment, and he said that he did not want the Government to deviate from their policies. The Secretary of State for Employment and the Chancellor of the Exchequer have similar rates of unemployment in their constituencies.
  However, in my constituency unemployment is 8,000, and my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) has about 10,000 unemployed. In Slough, Stratford-on-Avon, Blaby and Bridgwater over 30 per cent. of the unemployed have been without a job for more than a year. In the Labour constituencies that I have mentioned, over 52 per cent. have been unemployed for more than a year. My hon. Friend the Member for Knowsley, North (Mr. Kilroy-Silk) has 50 per cent. unemployment in some parts of his constituency, with 60 per cent. of the children on free school meals.
  The social consequencies of long-term high unemployment have been vividly illustrated in the debate. I calculated the total levels of unemployment in the areas represented by the Labour Shadow Cabinet and those represented by Ministers in the Cabinet. The same relationship is evident. There are twice as many unemployed in the constituencies represented in the Shadow Cabinet as in those represented in the Cabinet. I believe that that has an effect on the Government's attitude in determining their priorities as between tax cuts and public expenditure.
  In reading to prepare for the debate, I was strongly impressed by the booklet by the "Weekend World" television programme in which the interview with the Chancellor was reported. The Chancellor said:
  "Thinking that Government can determine the level of employment—that is totally false".
  I do not think that any hon. Member has doubted today that the Government can use their resources to increase employment and reduce unemployment. It is a question of whether they have the will and the desire to do so. I think that the Chancellor is completely wrong in adopting the position he has. The Government can influence the level of employment to a considerable degree.
  The Chancellor was heard to make disparaging remarks about the computer models by which one can make certain comparisons. He made great play of the Labour party's policy before the election and the effect of devaluation on some of the policies that were drawn from such computer models. If we do not use objective criteria and attempt to evaluate what the models tell us, we shall fly by the seat of our pants, and the Chancellor has not been doing very well this week in making just such judgments. All the information contained in these models and, indeed, in the Treasury's own model, with which we must work quite considerably, shows that from twice to five times the number of jobs can be created by public expenditure programmes rather than by tax cuts. It is a matter for the
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  judgment of hon. Members and particularly of the Government who have the power to decide which course of action they are prepared to take.
  Listening to the debate one would think that we were entirely at the mercy of market forces and that it was not Government policy that had created unemployment in the country. Many Conservative Members have regularly and consistently voted for policies which have deliberately increased unemployment, partly in the belief, as the Chancellor said tonight, that the public sector industries are over-manned. Whether that is true or not. one of the consequences of tightening the financial targets and borrowing of those industries is to shake people out. That has taken place on a considerable scale, and Government claim credit for it.
  The Government say to the rail industry—and this is what I find most offensive—"Yes, you can have your electrification programme". They do not give the industry more money to improve services or to extend electrification. They simply say, "Throw more people on the dole and that is the way you'll pay for the investment." That is what British Rail is now doing, and the state then picks up the tab for more people on the dole. They do not thereby boost demand but, rather, increase the burden on the Government and on public expenditure in supporting those policies. When one considers what the Government have done in roads, hospitals, education and the water boards—and much of this has been said in the debate—even if the level of public expenditure can be shown to be the same in the capital areas as in 1979, frankly, it is not enough. That is not the benchmark. Unemployment then was at the level of 1 million. Unemployment now is approaching 4 million and is likely to continue to increase. In those circumstances, one has to make a proper assessment of public expenditure.
  I advise anybody who has any doubt about the deterioration in the country's infrastructure not necessarily to read the TUC report or to rely on the CBI report, but to read the Neddy report which only this week described the state of the infrastructure—the deterioration in the roads, the costs involved, the running down of the water and sewerage systems, all of which involve national public sector investment to a considerable extent. There is a whole range of choices which can be taken into account in these public expenditure options.
  As to voting for tighter financial targets and reducing by £300 million the amount invested in regional policy, we have seen that regional expenditure has created jobs under both Tory and Labour Governments. It might not have produced enough and might have produced them more expensively than others, but there is no doubt that it created extra jobs. But we spent less in real terms on regional policy in 1984 than we spent in 1964, when unemployment stood at 500,000.
  Mr. Maples: If public sector capital investment is such a good thing, why did the last Labour Government cut it by 40 per cent. in real terms?
  Mr. Prescott: I have to admit that the figures are clear. I do not know about the precise quality of that public expenditure, or whether the figure was 40 per cent., but there were cuts in public expenditure. As a result, there was an increase in unemployment. I shall not run away from the point — how can I? The figures on public expenditure are there for all to see. But the hon.

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  Gentleman will have to accept that public expenditure influences unemployment and that the Government have the choice of using the £1·5 billion that they say is available in that way.
  The hon. Gentleman served with me in Committee on the London Regional Transport Bill. He should have realised that supporting that Bill would lead to more unemployment, fewer buses on order, and so on. But all that is now clear. The Bill was enacted simply to save £500 million of public expenditure, and as a result thousands more will be thrown out of work. I just ask the hon. Gentleman to question what he was doing in Committee. The answer is that he was voting for unemployment.
  The point about public expenditure on a national level is equally true of public expenditure at the local authority level. We have already heard a lot about housing, roads and so on. Public expenditure is involved in all of those areas, yet the Government have sought, by financial controls, to reduce the amounts of money available to authorities. One particularly offensive effect of the restraints on local authorities is that the local authority enterprise and employment units that have been creating jobs at £3,000 a time have been cut at a time when the Government's enterprise zones produce a job for about £80,000 a time.
  Therefore, the Government and their Back Benchers have been voting for constraints on local authorities despite the fact that those authorities can legitimately point to the number of jobs that they have created. Thus, the effects of public expenditure at the local and national level, and on both the public and private sectors, are clear. After all, we have all received letters from the private sector calling for expenditure in the public sector because, in the main, all the orders involved are private orders. Both sectors produce wealth and jobs. The money comes from the Government via the taxpayer.
  The House is asked to make a choice in the order of its priorities as between public expenditure and tax cuts. I would be more convinced of the Governments' policies if they believed that we must get out of what some call the old smokestack industries and into the sunrise industries. Last night, a television programme showed miners in Scotland talking in silicon glen. They could not see any prospect of jobs, even if they left the mines. Why? The answer is that the Prime Minister's adviser, Professor Ashman, has produced a report for NEDC that talks about the crisis in our information technology industries. He says that the sun has set on the sunrise industries. Indeed, the Chancellor is reported as saying, "Please don't use such purple prose in my presence." Last night on television he was quoted as saying that, but I do not know whether it is correct.
  The Government have put £200 million into information technology and have now ordered a moritorium on investment in it. The Germans have put £800 million into information technology—four times as much. The Government believe in their privatisation programme, but it is a pity that the money that they secured from selling British Telecom—about £4 billion—was not invested in the information technology industries to provide a way forward for the new type of industry needed in this country. I wish that the Government had given to the information technology industries the almost £400 million they gave the bankers to float off the deal instead of paying their friends in the City to privatise an important and essential industry. If the
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  Government had done that, their privatisation programme would have made more sense than feeding public borrowing to support the high level of expenditure needed to maintain massive levels of unemployment.
  The Chancellor will go to the United States this week to convince the Government of his policies—I hope that he does better than he did today—and will come back telling us about the importance of the service industries. Britain has increased the number of jobs in the service industries. The problem is that she has allowed her manufacturing industries to collapse, whereas such industries have increased in America, even though they may have been assisted by deficit financing, as the right hon. Member for Old Bexley and Sidcup (Mr. Heath) pointed out. That policy has led to greater growth and lower unemployment in America, but apparently the Chancellor considers that approach to be voodoo economics.
  The Secretary of State for Employment makes great efforts to increase training. He claims that the expenditure of £2 billion is a fourfold increase; and so it is. It is, however, a threefold increase on the amount we spend on the dole, but we do not claim that as a success. More youngsters cannot obtain jobs. We massage the unemployment figures, and we must pay for that action. The Neddy report shows how much our major competitors in Germany, France and the United States spend on their labour forces which are already twice as well qualified as Britain's labour force.
  Training is desperately needed for the new types of industry in Britain at a time when, according to a CBI survey, every industry is screaming for more resources and skill training. I am a little contemptuous when I hear the CBI say that, because it led the campaign to reduce the number of training boards so that it did not need to pay the levy. The Secretary of State for Employment complains that employers do not pay enough towards training. We knew that in the 1960s, and training boards were set up to make employers face up to their responsibilities.
  The Government are even wrong in their attitude to training our labour force. They claim that they are spending £2 billion, but that is not enough. If resources from the £1·5 billion are to be available, much more money could be put into training. That could be done by extending the youth training scheme to provide more quality training for at least two years, as is done by most of our competitors. No doubt some of those ideas are being considered by the Government.
  Britain's performance in training has always been poor compared with that of its competitors. The Government are the only body able to change that position, because our industries have refused consistently to do anything about the quality of training. One or two firms may throw in training schemes, but the fact is that there are now half the number of engineering apprentices that there were many years ago.
  The Government have abolished the boards that imposed the training levy and have closed the skillcentres. We are desperately short of skills, training places and instructors, and there are plenty of people on the dole who want training. At the Government's behest, the Manpower Services Commission, to meet the obligation to break even financially by 1986, is closing 29 of our skillcentres. Five of those centres are profitable. I never thought that profitable training centres would be closed under a Tory Government. Some of those centres specialise in

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  technology and some in youth training. Some of them are concentrated in the coal mining areas. The skillcentres say to the miners, "Readjust to the new economy. Come out of the uneconomic areas." The training centres, which are supposed to retrain people for the new industries, are being closed down by Government agencies.
  We have been reminded of the information on social trends that has been produced this week. It is clear that there is a direct connection between sickness, drinking, smoking and suicides, which have increased at a phenomenal rate, and unemployment. The facts are there to see. Those are the social consequences of mass unemployment. Those consequences are not paid for by Conservative Members. They are paid for largely by the people in areas of high unemployment.
  That is the real cost of five years of Tory policies. I am glad to hear talk of some Tory Members deciding to revolt, though I do not expect to see them in the Lobby revolting tonight. I am reminded that following the 1979 general election the Prime Minister, on reaching 10 Downing street—in her "spitting image" voice, reminding one of being invited into the parlour by the spider—quoted St. Francis of Assisi. Her quip was carried in the Daily Telegraph of 5 May:
  "Where there is despair may we bring hope."
  Today there is little hope for the unemployed, little hope for the sick and the needy, and little hope for those in the wages council industries; and some are suggesting that the councils should be abolished as a means of solving our problems.
  Because they are worried about their policies, the Government have made a policy change. They have brought in Lord Young. I am not sure who is now dealing with the problems of and policies affecting unemployment, the Secretary of State for Employment or Lord Young. At present, Lord Young is making most of the announcements. It is clear that he has the prestige spot; he is to appear on the Jimmy Young show on 30 January. Will the right hon. Gentleman have that distinction?
  The Secretary of State must agree that Lord Young was the first to advocate that the way to get more youngsters into training schemes, even if they did not want to join them, was to conscript them, suggesting that if they still refuse to join they should have their benefits suspended. That was Lord Young's first idea. His second idea, it seems, is the abolition of wages councils. We are talking about the sort of bodies that are concerned with industrial wages of £50, £64 and so on. I do not know whether the Secretary of State intends to abolish the wages councils, and perhaps he will say tonight whether he intends to notify the ILO of his decision to abolish them.
  In any event, why did the right hon. Gentleman not abolish the agricultural wages council? He had an opportunity only last year to do something about that. Is the farming lobby so influential in the Tory party that he does not want to do anything about that council? Or is he concerned only with industrial workers? I am not advocating a reduction in the agricultural council wage; it is little enough that the workers get now. Nevertheless, we should be told why there is a difference in approach— that is, if the Government are proposing to abolish wages councils.
  I hear that the farmers have made a 20 per cent. profit this year. I hope that that will be borne in mind when they
  270
  talk about what their workers are paid. I wish there was as much pressure from Tory Members for giving agricultural workers a decent wage as there is backing for the subsidies given in support of that industry.
  Our salvation now appears to rest on small firms. Tonight we have heard how we must get the small firms going again. Are not Tory Members aware that there have been record numbers of bankruptcies, among small and big firms, since the Conservatives took office?
  We hear talk of a survey by Lord Young. What is he really doing? I have the documents with me and I gather that he is considering, as a solution to our problems, scrapping the conditions placed on small industries for unfair dismissal, redundancy pay, aspects of race relations, equal opportunities, truck Acts, working environment, maternity leave — [Interruption.] Some Conservative Members may think that such action is jolly good for many ordinary folk, but it is no good for those who work in low-wage industries. That is especially true of industries in which health and safety authorities have warned the Secretary of State that the greatest threat to safety arises in small industries.
  After three years of legislation attacking the trade unions, the Government are turning for a solution not to a change in policy but to an attack on the statutory rights and conditions of workers. Parliament gave them those rights and conditions because they were not strong enough as groups of workers to secure them by ordinary trade union negotiations.
  After the 1979 election the newspapers told us that the Prime Minister had quoted St. Francis of Assisi:
  "Where there is discord may we bring harmony."
  Considering her record in government, she should have quoted the part from the prayer that she must deliberately have omitted:
  "Lord make me an instrument of thy peace."
  The iron lady, who is more concerned with resolution than charity, has no concern for the problems that we face. She is leading us to a society more divided between the north and the south, the rich and the poor. That is the result of the Government's policies.
  The motion gives a clear opportunity to the House to vote for public expenditure on capital programmes that everyone outside the Government says will increase employment. To increase employment is the major priority. There must be a clear signal from the House. If it backs Tory policy, it will be saying apparently that the rich are not rich enough and the poor are not poor enough. If the Government continue with this policy, there will be social discord of a kind not seen since the 1930s.
  9.35 pm
  The Secretary of State for Employment (Mr. Tom King): The debate has dealt particularly with investment and infrastructure. It has generally been well attended apart from a period in the middle when the Chamber was rather empty. I have considerable sympathy for the hon. Member for Colne Valley (Mr. Wainwright), who suggested that one aspect of infrastructure on which there might be greater investment was the House of Commons heating system. The hon. Member for Kingston upon Hull, East (Mr. Prescott), in his closing speech for the Opposition, made a contribution to try to improve the position; it generated more heat than light on the motion before us.

  271
  The motion that the Opposition have chosen to put before the House today condemns what they call
  "the Government's wilful refusal to implement policies which would result in a reduction in unemployment".
  That is a serious charge to level against the Government. It might have carried greater credibility if it had been moved more convincingly by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who chose to be at his most bombastic and at times abusive to the Chancellor. He delights in a choice of adjectives to describe his opponents. Perhaps the most appropriate adjectives to describe his speech would be flatulent and fraudulent. If we may once again with some pleasure use a cricketing metaphor in regard to the right hon. Gentleman, every question he was asked removed his middle stump; and he showed total incapacity to answer the questions that were put to him.
  In his opening remarks the right hon. Gentleman sought to suggest that the debate should be conducted with a high standard of honesty. He went on to allege that my right hon. Friend had suggested that £3 billion of funds and resources were available and then had failed to substantiate that; he suggested it might have been said by his agents.
  The motion accuses us of wilful refusal. It is a motion that any opposition could propose in any assembly building in Europe at present. My hon. Friend the Member for Mid-Norfolk (Mr. Ryder), in a well-informed and researched tour of the Socialist leaders of Europe, showed how totally fraudulent was the allegation made by the Opposition. My hon. Friend was able to point to the speech of Mr. Fabius, the Prime Minister in President Mitterrand's cabinet, to the Prime Minister in Spain, to Mr. Craxi and to the difficulties they all face equally in tackling the intractable problem of unemployment.
  At the end of his speech, the right hon. Gentleman's case seemed to be based on his policies for investment, taking the infrastructure route, which would create some 36,000 more jobs over a two-year period than my right hon. Friend the Chancellor alleged would be created by the approach of reductions in taxation. That did not seem to me to be a comprehensive approach to what is undoubtedly a major problem, with the appalling levels of unemployment, including long-term unemployment, that we face.
  Of course, the debate has been overshadowed by the recent position of sterling, and I believe that the House will accept that that is a clear warning of the limitations in our freedom of manoeuvre in tackling the problem.
  My right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) described the situation in the north-east which, with parts of the south-west and Ayrshire, in particular in Scotland, faces some of the most appalling problems in unemployment. I would not seek to argue with him in his use of adjectives to describe the appalling nature of the problem. However, the hon. Member for Kingston upon Hull, East did not need to embroider his case by seeking to distinguish between unemployment in constituencies of members of the Cabinet and of the Shadow Cabinet. I have said at the Dispatch Box more times than I care to remember that every Member of the House accepts that the present levels of unemployment are far too high and that unemployment is a major problem.
  In approaching the debate and comments made by right hon. and hon. Members, I should like to start not in a divisive sense, but on what I hope is common ground on which we stand. I hope that it is common ground that we
  272
  must achieve the lowest level of inflation, and that for our industry to be competitive we must have low inflation. I hope that it is common ground that we must see a continuing improvement in productivity and performance in our industry. I hope that it is common ground that we must see increasing investment. I hope that, in spite of some of the remarks by the hon. Member for Kingston upon Hull, East, we have common support for the need to increase the content and quality of training.
  I hope that it is common ground that we support the need for substantial investment in infrastructure. I hope that it is common ground that we face genuine problems with the power of the dollar. My right hon. Friend the Member for Old Bexley and Sidcup and the right hon. Member for Plymouth, Devonport (Dr. Owen) commented on the challenge faced by my right hon. Friend the Chancellor in his journey to Washington tomorrow. The House will recognise the vital need for recognition in the United States of the problems posed by its deficit, and I am sure that hon. Members will wish my right hon. Friend god speed in his important mission.
  I hope that it is common ground that we cannot isolate ourselves and oil prices in the North sea from world markets. I say to the right hon. Member for Devonport that I agree with the right hon. Member for South Down (Mr. Powell). His suggestion that somehow we would connive with OPEC at an artificial sustaining of a higher oil price was not realistic, and could not be sustained.
  This is where the arguments will now lie. I hope that there is common ground that there is ultimately a limit to the level of public expenditure beyond which the Government cannot go without a risk of increasing inflation and even higher interest rates which would be counterproductive in the loss of employment that they would cause. We must ask ourselves what is a reasonable level. That is a Government judgment. The right hon. Member for Sparkbrook carefully went no further than the figure that my right hon. Friend the Chancellor gave in his autumn statement. When considering public expenditure, the creation of employment and the alleviation of unemployment, we must start from the soundest possible base. In the light of the problems of the past 48 hours, it is easy for people to get a misleading impression of the basic strength of the economy.
  I was impressed by the adviser to the Senate Finance Committee, who was interviewed on the "Today" programme this morning. He said that there is a feeling in Washington that the fundamentals in Britain are strong and that Britain is basically on a stable path. When asked whether the pound would continue to weaken against the dollar, although he made it clear that his answer was speculative, he said that, although the pound might weaken slightly, there was every reason for it to strengthen.
  It is important to be aware of the background. If Opposition Members are worried about unemployment, they must accept that we must have a strong economic base. We have achieved lower inflation. It is now 4·9 per cent., though it must be lower still. That level is still a great improvement. There has also been an improvement in productivity, which is now three times its level between 1974 and 1979. In the past three years, it has been twice that of France and Germany. In 1983 we had the highest growth in the European Community. Although that has been depressed by the miners' strike, the latest forecast is that, in 1985, we shall again lead Europe. The

  273
  combination of growth and low inflation gives us the best prospects since the 1960s. We have good retail demand and the prospect of high fixed investment, which increased by 8 per cent. last year and is forecast to reach the highest ever level next year.
  We have good export volumes. I am sure that right hon. and hon. Members who have suggested that manufacturing exports are dead on their feet will take great pleasure at the 14·5 per cent. increase in manufacturing exports. We now have industries' best profit performance since the 1960s and the longest period of sustained growth since the war. The right hon. Member for Sparkbrook suggested that what I have described is a picture of a weak economy. That opinion does not carry much credibility with anyone who studies the figures.
  Against the background of a sound base, we face the problem of unemployment. There must be an improvement in inflation. We must recognise the problems caused by continuing excessively high increases in earnings. We must face problems arising out of the miners' dispute. It is interesting that when Mr. Jimmy Reid lectured the Leader of the Opposition on the Labour party having no alternative but to stand up and fight Scargillism, the right hon. Member for Islwyn (Mr. Kinnock), once again, walked away from the problem and his responsibilities.
  We have halted the haemorrhage in the loss of jobs and started to create more jobs. The latest figures show the highest level of vacancies for the past four years. The largest private agency has forecast the best recruitment prospects for five years. There is an improvement in job prospects.
  We face a major problem with the increase in the working population and the long-term unemployed, and the biggest industrial and economic upheaval since the industrial revolution. It is against that background that we must determine the best way to face change and bring hope to our people. It makes demands on us all — Government, individuals, and unions. It is the duty of the Government and Opposition parties to tell people the truth and not to perpetrate on them the fraud that there is some easy solution.
  "Our country is engaged in a critical process of economic and social modernisation … the … people are sufficiently mature to understand that any action leading to recovery requires time and continuity. When one is a Prime Minister or a Minister of whatever political persuasion, there are economic realities and national interests which transcend the political divide."
  Those are not my words or those of my right hon. Friend the Chancellor of the Exchequer. They are the words of a Socialist Prime Minister of France telling the truth to the British people and talking more directly than any Socialist Member of the House has been prepared to do.
  In the present circumstances, the Government have a duty to make the possibilities clear to the people and to help in any way that they can. It is not, as the House has argued today, whether we are for or against infrastructure. My right hon. Friend the Chancellor of the Exchequer made it clear that in the coming year we will have the highest level of fixed investment. There will be some £24 billion of capital expenditure and a further £5 billion of vital maintenance and renewal expenditure. Substantial investment will be made in housing, roads, railways and sewerage. The argument is whether there should be more and whether it is the most cost-effective way to ensure more jobs.
  274
  The biggest single extra investment that the Government have made in addition to the more conventional investment is in my Department's programmes. The Government, as the hon. Member for Kingston upon Hull, East mentioned fairly, has quadrupled investment in training, helping people obtain jobs and tackling the skill shortages that exist, where training has a vital role.
  Mr. Campbell-Savours: In so far as the community programme is a cheap way of reducing unemployment, can the Secretary of State show some flexibility on numbers and show the way for movement there?
  Mr. King: The hon. Member will be aware that at the time of the autumn statement I announced new measures to improve the quality of the community programme to ensure that next year the long-term unemployed would also have the opportunity to train on that programme to help them into work.
  There is no question of this Government sitting back and arguing their case from a doctrinaire standpoint.
  I have dealt with the suggestion that we are not investing in the infrastructure. On the programme to help the long-term unemployed by increasing self-employment, I announced recently a further expansion of the enterprise allowance scheme. I have made it clear that we are prepared to examine every approach which may help to improve employment. My hon. Friends the Members for Stratford-on-Avon (Mr. Howarth) and for Lewisham, West (Mr. Maples) referred to the contribution which could be made by an adjustment of national insurance contributions. This is a matter to which I have previously referred. I have also referred to deregulation, as has my hon. Friend the Member for Stirling (Mr. Forsyth).
  We are anxious to ensure that everything which can be done to help people to obtain jobs is done. We are particularly anxious to help young people to gain employment. We are determined to do what we can to create better opportunities for more people to set up their own businesses. We want to examine how we can further develop the enterprise allowance scheme, which has been such a success. We are determined that every opportunity for employment in all its aspects should be given. We shall examine the ways in which we can help those in our society who are most in need. This requires a contribution from us all. I hope to have the support of every hon. Member and also a substantial contribution from trade unions and employers in order to improve, by training, the skills of the people of this country. There are skill shortages, particularly in new technology.
  I have been able to demonstrate the enormously improved profitability of British industry. Because of the problems we face, and because of the contribution that the Government will make, I hope that British industry will be prepared to contribute to the training that is necessary in order to ensure that existing opportunities are taken. Although the volatility of the exchange rate causes certain difficulties, it provides an exceptional opportunity for British industry to maximise its exports and increase the job prospects of the people of this country. I hope that every employer will grasp the opportunities that are provided by the exchange rate. I hope that the unions will recognise the contribution that they can make to the improvement of the productivity of British industry and that they will ensure that we achieve maximum competitiveness.

  275
  We debated this subject on an earlier occasion, and I was able to announce a number of measures that the Government had taken to improve the prospects for the long-term unemployed. I said that I did not want people to be under the illusion that this was the end of our approach to the deep-seated problem of unemployment. It is the most difficult and serious problem that faces the Government. On that occasion I made a number of announcements. I said to my right hon. and hon. Friends, and I confirm it tonight, that further work is proceeding on a number of other approaches to the unemployment problem.
  To those who seek to criticise us, facing the most difficult and modern scourge of unemployment, I give the assurance that we shall not rest until we see a real improvement for the British people.
  Question put, That the original words stand part of the Question:—
  The House divided: Ayes 182, Noes 383.

  Division No. 64]

  [10.00 pm

  AYES

  Abse Leo

  Dobson, Frank

  Adams, Allen (Paisley N)

  Dormand, Jack

  Anderson, Donald

  Douglas, Dick

  Ashley, Rt Hon Jack

  Dubs, Alfred

  Ashton, Joe

  Dunwoody, Hon Mrs G.

  Atkinson, N. (Tottenham)

  Eadie, Alex

  Bagier, Gordon A. T.

  Eastham, Ken

  Banks, Tony (Newham NW)

  Ellis, Raymond

  Barron, Kevin

  Evans, John (St. Helens N)

  Beckett, Mrs Margaret

  Ewing, Harry

  Bell, Stuart

  Faulds, Andrew

  Benn, Tony

  Field, Frank (Birkenhead)

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

  Fisher, Mark

  Bermingham, Gerald

  Flannery, Martin

  Bidwell, Sydney

  Forrester, John

  Blair, Anthony

  Foulkes, George

  Boothroyd, Miss Betty

  Fraser, J. (Norwood)

  Boyes, Roland

  Freeson, Rt Hon Reginald

  Bray, Dr Jeremy

  Garrett, W. E.

  Brown, Gordon (D'f'mline E)

  George, Bruce

  Brown, Hugh D. (Provan)

  Gilbert, Rt Hon Dr John

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

  Godman, Dr Norman

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

  Golding, John

  Brown, Ron (E'burgh, Leith)

  Gould, Bryan

  Buchan, Norman

  Gourlay, Harry

  Caborn, Richard

  Hamilton, W. W. (Central Fife)

  Callaghan, Jim (Heyw'd & M)

  Hardy, Peter

  Campbell, Ian

  Harrison, Rt Hon Walter

  Campbell-Savours, Dale

  Hart, Rt Hon Dame Judith

  Canavan, Dennis

  Hattersley, Rt Hon Roy

  Carter-Jones, Lewis

  Haynes, Frank

  Clark, Dr David (S Shields)

  Healey, Rt Hon Denis

  Clarke, Thomas

  Heffer, Eric S.

  Clay, Robert

  Hogg, N. (C'nauld & Kilsyth)

  Clwyd, Mrs Ann

  Holland, Stuart (Vauxhall)

  Cocks, Rt Hon M. (Bristol S.)

  Home Robertson, John

  Cohen, Harry

  Hoyle, Douglas

  Coleman, Donald

  Hughes, Dr. Mark (Durham)

  Cook, Frank (Stockton North)

  Hughes, Robert (Aberdeen N)

  Cook, Robin F. (Livingston)

  Hughes, Roy (Newport East)

  Corbyn, Jeremy

  Hughes, Sean (Knowsley S)

  Cowans, Harry

  Janner, Hon Greville

  Cox, Thomas (Tooting)

  Jones, Barry (Alyn & Deeside)

  Craigen, J. M.

  Kaufman, Rt Hon Gerald

  Crowther, Stan

  Kilfedder, James A.

  Cunliffe, Lawrence

  Kilroy-Silk, Robert

  Cunningham, Dr John

  Kinnock, Rt Hon Neil

  Dalyell, Tam

  Lambie, David

  Davies, Rt Hon Denzil (L'lli)

  Lamond, James

  Davies, Ronald (Caerphilly)

  Leadbitter, Ted

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

  Leighton, Ronald

  Deakins, Eric

  Lewis, Ron (Carlisle)

  Dewar, Donald

  Lewis, Terence (Worsley)

  Dixon, Donald

  Litherland, Robert

  276

  Lloyd, Tony (Stretford)

  Robertson, George

  Lofthouse, Geoffrey

  Robinson, G. (Coventry NW)

  McCartney, Hugh

  Rogers, Allan

  McDonald, Dr Oonagh

  Rooker, J. W.

  McGuire, Michael

  Sedgemore, Brian

  McKay, Allen (Penistone)

  Sheerman, Barry

  McKelvey, William

  Sheldon, Rt Hon R.

  Mackenzie, Rt Hon Gregor

  Shore, Rt Hon Peter

  McTaggart, Robert

  Short, Ms Clare (Ladywood)

  McWilliam, John

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

  Madden, Max

  Silkin, Rt Hon J.

  Marek, Dr John

  Skinner, Dennis

  Marshall, David (Shettleston)

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

  Mason, Rt Hon Roy

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

  Maxton, John

  Snape, Peter

  Maynard, Miss Joan

  Soley, Clive

  Meacher, Michael

  Spearing, Nigel

  Michie, William

  Stewart, Rt Hon D. (W Isles)

  Mikardo, Ian

  Stott, Roger

  Millan, Rt Hon Bruce

  Strang, Gavin

  Miller, Dr M. S. (E Kilbride)

  Straw, Jack

  Morris, Rt Hon A. (W'shawe)

  Thomas, Dafydd (Merioneth)

  Nellist, David

  Thompson, J. (Wansbeck)

  O'Brien, William

  Thorne, Stan (Preston)

  O'Neill, Martin

  Tinn, James

  Orme, Rt Hon Stanley

  Torney, Tom

  Park, George

  Wardell, Gareth (Gower)

  Parry, Robert

  Wareing, Robert

  Patchett, Terry

  Weetch, Ken

  Pavitt, Laurie

  Welsh, Michael

  Pendry, Tom

  White, James

  Pike, Peter

  Wigley, Dafydd

  Powell, Raymond (Ogmore)

  Williams, Rt Hon A.

  Prescott, John

  Wilson, Gordon

  Radice, Giles

  Winnick, David

  Randall, Stuart

  Redmond, M.

  Tellers for the Ayes:

  Richardson, Ms Jo

  Mr. James Hamilton and

  Roberts, Ernest (Hackney N)

  Mr. Austin Mitchell.

  NOES

  Adley, Robert

  Brown, M. (Brigg & Cl'thpes)

  Alexander, Richard

  Browne, John

  Alison, Rt Hon Michael

  Bruce, Malcolm

  Alton, David

  Bruinvels, Peter

  Amess, David

  Bryan, Sir Paul

  Ancram, Michael

  Buck, Sir Antony

  Arnold, Tom

  Budgen, Nick

  Ashby, David

  Bulmer, Esmond

  Aspinwall, Jack

  Burt, Alistair

  Atkins, Robert (South Ribble)

  Butcher, John

  Baker, Rt Hon K. (Mole Vall'y)

  Butler, Hon Adam

  Baker, Nicholas (N Dorset)

  Butterfill, John

  Baldry, Tony

  Carlile, Alexander (Montg'y)

  Banks, Robert (Harrogate)

  Carlisle, John (N Luton)

  Batiste, Spencer

  Carlisle, Kenneth (Lincoln)

  Beaumont-Dark, Anthony

  Carlisle, Rt Hon M. (W'ton S)

  Beith, A. J.

  Carttiss, Michael

  Bellingham, Henry

  Cartwright, John

  Bendall, Vivian

  Cash, William

  Benyon, William

  Chalker, Mrs Lynda

  Best, Keith

  Channon, Rt Hon Paul

  Bevan, David Gilroy

  Chapman, Sydney

  Biffen, Rt Hon John

  Chope, Christopher

  Biggs-Davison, Sir John

  Churchill, W. S.

  Blackburn, John

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

  Blaker, Rt Hon Sir Peter

  Clark, Dr Michael (Rochford)

  Body, Richard

  Clark, Sir W. (Croydon S)

  Bonsor, Sir Nicholas

  Clarke, Rt Hon K. (Rushcliffe)

  Bottomley, Peter

  Clegg, Sir Walter

  Bottomley, Mrs Virginia

  Cockeram, Eric

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

  Colvin, Michael

  Bowden, Gerald (Dulwich)

  Conway, Derek

  Boyson, Dr Rhodes

  Coombs, Simon

  Braine, Sir Bernard

  Cope, John

  Brandon-Bravo, Martin

  Cormack, Patrick

  Bright, Graham

  Corrie, John

  Brinton, Tim

  Couchman, James

  Brittan, Rt Hon Leon

  Cranborne, Viscount

  Brooke, Hon Peter

  Critchley, Julian

  277

  Crouch, David

  Hogg, Hon Douglas (Gr'th'm)

  Currie, Mrs Edwina

  Holland, Sir Philip (Gedling)

  Dickens, Geoffrey

  Holt, Richard

  Dicks, Terry

  Hooson, Tom

  Dorrell, Stephen

  Hordern, Peter

  Douglas-Hamilton, Lord J.

  Howard, Michael

  Dover, Den

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

  du Cann, Rt Hon Edward

  Howarth, Gerald (Cannock)

  Dunn, Robert

  Howe, Rt Hon Sir Geoffrey

  Durant, Tony

  Howell, Rt Hon D. (G'ldford)

  Edwards, Rt Hon N. (P'broke)

  Howell, Ralph (N Norfolk)

  Eggar, Tim

  Howells, Geraint

  Emery, Sir Peter

  Hubbard-Miles, Peter

  Evennett, David

  Hunt, David (Wirral)

  Eyre, Sir Reginald

  Hunt, John (Ravensbourne)

  Fairbairn, Nicholas

  Hunter, Andrew

  Fallon, Michael

  Irving, Charles

  Farr, Sir John

  Jackson, Robert

  Favell, Anthony

  Jenkin, Rt Hon Patrick

  Fenner, Mrs Peggy

  Johnson Smith, Sir Geoffrey

  Finsberg, Sir Geoffrey

  Jones, Gwilym (Cardiff N)

  Fletcher, Alexander

  Jones, Robert (W Herts)

  Fookes, Miss Janet

  Jopling, Rt Hon Michael

  Forman, Nigel

  Joseph, Rt Hon Sir Keith

  Forsyth, Michael (Stirling)

  Kellett-Bowman, Mrs Elaine

  Forth, Eric

  Kennedy, Charles

  Fowler, Rt Hon Norman

  Kershaw, Sir Anthony

  Fox, Marcus

  Key, Robert

  Franks, Cecil

  King, Roger (B'ham N'field)

  Fraser, Peter (Angus East)

  King, Rt Hon Tom

  Freeman, Roger

  Knight, Gregory (Derby N)

  Freud, Clement

  Knight, Mrs Jill (Edgbaston)

  Fry, Peter

  Knowles, Michael

  Gale, Roger

  Knox, David

  Galley, Roy

  Lamont, Norman

  Gardiner, George (Reigate)

  Latham, Michael

  Gardner, Sir Edward (Fylde)

  Lawler, Geoffrey

  Garel-Jones, Tristan

  Lawrence, Ivan

  Gilmour, Rt Hon Sir Ian

  Lawson, Rt Hon Nigel

  Glyn, Dr Alan

  Lee, John (Pendle)

  Goodlad, Alastair

  Leigh, Edward (Gainsbor'gh)

  Gorst, John

  Lennox-Boyd, Hon Mark

  Gow, Ian

  Lester, Jim

  Gower, Sir Raymond

  Lewis, Sir Kenneth (Stamf'd)

  Grant, Sir Anthony

  Lightbown, David

  Greenway, Harry

  Lilley, Peter

  Gregory, Conal

  Lloyd, Ian (Havant)

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

  Lloyd, Peter, (Fareham)

  Griffiths, Peter (Portsm'th N)

  Lord, Michael

  Grist, Ian

  Lyell, Nicholas

  Ground, Patrick

  McCrindle, Robert

  Grylls, Michael

  McCurley, Mrs Anna

  Gummer, John Selwyn

  Macfarlane, Neil

  Hamilton, Hon A. (Epsom)

  MacGregor, John

  Hamilton, Neil (Tattoo)

  MacKay, Andrew (Berkshire)

  Hampson, Dr Keith

  MacKay, John (Argyll & Bute)

  Hancock, Mr. Michael

  Maclean, David John

  Hanley, Jeremy

  Maclennan, Robert

  Hannam, John

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

  Hargreaves, Kenneth

  Major, John

  Harris, David

  Malins, Humfrey

  Harvey, Robert

  Malone, Gerald

  Haselhurst, Alan

  Maples, John

  Havers, Rt Hon Sir Michael

  Marland, Paul

  Hawkins, C. (High Peak)

  Marlow, Antony

  Hawkins, Sir Paul (SW N'folk)

  Marshall, Michael (Arundel)

  Hawksley, Warren

  Mates, Michael

  Hayes, J.

  Mather, Carol

  Hayhoe, Barney

  Maude, Hon Francis

  Hayward, Robert

  Mawhinney, Dr Brian

  Heath, Rt Hon Edward

  Maxwell-Hyslop, Robin

  Heathcoat-Amory, David

  Mayhew, Sir Patrick

  Heddle, John

  Meadowcroft, Michael

  Henderson, Barry

  Mellor, David

  Heseltine, Rt Hon Michael

  Meyer, Sir Anthony

  Hickmet, Richard

  Miller, Hal (B'grove)

  Hicks, Robert

  Mills, Iain (Meriden)

  Higgins, Rt Hon Terence L.

  Mills, Sir Peter (West Devon)

  Hill, James

  Miscampbell, Norman

  Hind, Kenneth

  Mitchell, David (NW Hants)

  278

  Moate, Roger

  Speed, Keith

  Molyneaux, Rt Hon James

  Speller, Tony

  Monro, Sir Hector

  Spence, John

  Moore, John

  Spencer, Derek

  Morrison, Hon C. (Devizes)

  Spicer, Jim (W Dorset)

  Morrison, Hon P. (Chester)

  Spicer, Michael (S Worcs)

  Moynihan, Hon C.

  Squire, Robin

  Mudd, David

  Stanbrook, Ivor

  Murphy, Christopher

  Stanley, John

  Neale, Gerrard

  Steel, Rt Hon David

  Needham, Richard

  Steen, Anthony

  Neubert, Michael

  Stern, Michael

  Newton, Tony

  Stevens, Lewis (Nuneaton)

  Nicholls, Patrick

  Stevens, Martin (Fulham)

  Norris, Steven

  Stewart, Allan (Eastwood)

  Onslow, Cranley

  Stewart, Andrew (Sherwood)

  Oppenheim, Phillip

  Stewart, Ian (N Hertf'dshire)

  Oppenheim, Rt Hon Mrs S.

  Stokes, John

  Osborn, Sir John

  Stradling Thomas, J.

  Ottaway, Richard

  Sumberg, David

  Owen, Rt Hon Dr David

  Tapsell, Peter

  Page, Sir John (Harrow W)

  Taylor, John (Solihull)

  Page, Richard (Herts SW)

  Taylor, Teddy (S'end E)

  Parkinson, Rt Hon Cecil

  Tebbit, Rt Hon Norman

  Parris, Matthew

  Temple-Morris, Peter

  Patten, Christopher (Bath)

  Terlezki, Stefan

  Patten, John (Oxford)

  Thatcher, Rt Hon Mrs M.

  Pawsey, James

  Thomas, Rt Hon Peter

  Penhaligon, David

  Thompson, Donald (Calder V)

  Percival, Rt Hon Sir Ian

  Thompson, Patrick (N'ich N)

  Porter, Barry

  Thorne, Neil (Ilford S)

  Portillo, Michael

  Thornton, Malcolm

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

  Thurnham, Peter

  Powell, William (Corby)

  Townend, John (Bridlington)

  Powley, John

  Townsend, Cyril D. (B'heath)

  Prentice, Rt Hon Reg

  Tracey, Richard

  Price, Sir David

  Trippier, David

  Prior, Rt Hon James

  Trotter, Neville

  Proctor, K. Harvey

  Twinn, Dr Ian

  Pym, Rt Hon Francis

  van Straubenzee, Sir W.

  Raffan, Keith

  Vaughan, Sir Gerard

  Raison, Rt Hon Timothy

  Viggers, Peter

  Rathbone, Tim

  Waddington, David

  Rees, Rt Hon Peter (Dover)

  Wainwright, R.

  Renton, Tim

  Wakeham, Rt Hon John

  Rhodes James, Robert

  Waldegrave, Hon William

  Rhys Williams, Sir Brandon

  Walden, George

  Ridley, Rt Hon Nicholas

  Walker, Bill (T'side N)

  Rifkind, Malcolm

  Wallace, James

  Rippon, Rt Hon Geoffrey

  Walters, Dennis

  Roberts, Wyn (Conwy)

  Ward, John

  Robinson, Mark (N'port W)

  Wardle, C. (Bexhill)

  Roe, Mrs Marion

  Warren, Kenneth

  Ross, Stephen (Isle of Wight)

  Watson, John

  Rossi, Sir Hugh

  Watts, John

  Rost, Peter

  Wells, Sir John (Maidstone)

  Rowe, Andrew

  Wheeler, John

  Rumbold, Mrs Angela

  Whitfield, John

  Ryder, Richard

  Whitney, Raymond

  Sackville, Hon Thomas

  Wiggin, Jerry

  Sainsbury, Hon Timothy

  Wilkinson, John

  Sayeed, Jonathan

  Winterton, Mrs Ann

  Scott, Nicholas

  Winterton, Nicholas

  Shaw, Giles (Pudsey)

  Wolfson, Mark

  Shaw, Sir Michael (Scarb')

  Wood, Timothy

  Shelton, William (Streatham)

  Woodcock, Michael

  Shepherd, Colin (Hereford)

  Wrigglesworth, Ian

  Shepherd, Richard (Aldridge)

  Yeo, Tim

  Shersby, Michael

  Young, Sir George (Acton)

  Silvester, Fred

  Younger, Rt Hon George

  Sims, Roger

  Skeet, T. H. H.

  Tellers for the Noes:

  Smith, Sir Dudley (Warwick)

  Mr. Robert Boscawen and

  Smith, Tim (Beaconsfield)

  Mr. Ian Lang.

  Soames, Hon Nicholas

  Question accordingly negatived.
  Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 33 (Questions on amendments):—
  The House divided: Ayes 353, Noes 200.

  Division No. 65]

  [10.15 pm

  AYES

  Adley, Robert

  Currie, Mrs Edwina

  Alexander, Richard

  Dickens, Geoffrey

  Alison, Rt Hon Michael

  Dicks, Terry

  Amess, David

  Dorrell, Stephen

  Ancram, Michael

  Douglas-Hamilton, Lord J.

  Arnold, Tom

  Dover, Den

  Ashby, David

  du Cann, Rt Hon Edward

  Aspinwall, Jack

  Dunn, Robert

  Atkins, Robert (South Ribble)

  Durant, Tony

  Baker Rt Hon K. (Mole Vall'y)

  Edwards, Rt Hon N. (P'broke)

  Baker Nicholas (N Dorset)

  Eggar, Tim

  Baldry, Tony

  Emery, Sir Peter

  Banks, Robert (Harrogate)

  Evennett, David

  Batiste, Spencer

  Eyre, Sir Reginald

  Beaumont-Dark, Anthony

  Fairbairn, Nicholas

  Bellingham, Henry

  Fallon, Michael

  Bendall, Vivian

  Farr, Sir John

  Benyon, William

  Favell, Anthony

  Best, Keith

  Fenner, Mrs Peggy

  Bevan, David Gilroy

  Finsberg, Sir Geoffrey

  Biffen, Rt Hon John

  Fletcher, Alexander

  Biggs-Davison, Sir John

  Fookes, Miss Janet

  Blackburn, John

  Forman, Nigel

  Blaker, Rt Hon Sir Peter

  Forsyth, Michael (Stirling)

  Body, Richard

  Forth, Eric

  Bonsor, Sir Nicholas

  Fowler, Rt Hon Norman

  Bottomley, Peter

  Fox, Marcus

  Bottomley, Mrs Virginia

  Franks, Cecil

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

  Fraser, Peter (Angus East)

  Bowden, Gerald (Dulwich)

  Freeman, Roger

  Boyson, Dr Rhodes

  Fry, Peter

  Braine, Sir Bernard

  Gale, Roger

  Brandon-Bravo, Martin

  Galley, Roy

  Bright, Graham

  Gardiner, George (Reigate)

  Brinton, Tim

  Gardner, Sir Edward (Fylde)

  Brittan, Rt Hon Leon

  Garel-Jones, Tristan

  Brooke, Hon Peter

  Glyn, Dr Alan

  Brown, M. (Brigg & Cl'thpes)

  Goodlad, Alastair

  Browne, John

  Gorst, John

  Bruinvels, Peter

  Gow, Ian

  Bryan, Sir Paul

  Gower, Sir Raymond

  Buck, Sir Antony

  Grant, Sir Anthony

  Budgen, Nick

  Greenway, Harry

  Bulmer, Esmond

  Gregory, Conal

  Burt, Alistair

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

  Butcher, John

  Griffiths, Peter (Portsm'th N)

  Butler, Hon Adam

  Grist, Ian

  Butterfill, John

  Ground, Patrick

  Carlisle, John (N Luton)

  Grylls, Michael

  Carlisle, Kenneth (Lincoln)

  Gummer, John Selwyn

  Carlisle, Rt Hon M. (W'ton S)

  Hamilton, Hon A. (Epsom)

  Carttiss, Michael

  Hamilton, Neil (Tatton)

  Cash, William

  Hampson, Dr Keith

  Chalker, Mrs Lynda

  Hanley, Jeremy

  Channon, Rt Hon Paul

  Hannam, John

  Chapman, Sydney

  Hargreaves, Kenneth

  Chope, Christopher

  Harris, David

  Churchill, W. S.

  Harvey, Robert

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

  Haselhurst, Alan

  Clark, Dr Michael (Rochford)

  Havers, Rt Hon Sir Michael

  Clark, Sir W. (Croydon S)

  Hawkins, C. (High Peak)

  Clarke, Rt Hon K. (Rushcliffe)

  Hawkins, Sir Paul (SW N'folk)

  Clegg, Sir Walter

  Hawksley, Warren

  Cockeram, Eric

  Hayes, J.

  Colvin, Michael

  Hayhoe, Barney

  Conway, Derek

  Hayward, Robert

  Coombs, Simon

  Heathcoat-Amory, David

  Cope, John

  Heddle, John

  Corrie, John

  Henderson, Barry

  Couchman, James

  Heseltine, Rt Hon Michael

  Cranborne, Viscount

  Hickmet, Richard

  Crouch David

  Higgins, Rt Hon Terence L.

  280

  Hill, James

  Morrison, Hon P. (Chester)

  Hind, Kenneth

  Moynihan, Hon C.

  Hogg, Hon Douglas (Gr'th'm)

  Mudd, David

  Holland, Sir Philip (Gedling)

  Murphy, Christopher

  Holt, Richard

  Neale, Gerrard

  Hooson, Tom

  Needham, Richard

  Hordern, Peter

  Neubert, Michael

  Howard, Michael

  Newton, Tony

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

  Nicholls, Patrick

  Howarth, Gerald (Cannock)

  Norris, Steven

  Howell, Rt Hon D. (G'ldford)

  Onslow, Cranley

  Howell, Ralph (N Norfolk)

  Oppenheim, Phillip

  Hubbard-Miles, Peter

  Oppenheim, Rt Hon Mrs S.

  Hunt, David (Wirral)

  Osborn, Sir John

  Hunt, John (Ravensbourne)

  Ottaway, Richard

  Hunter, Andrew

  Page, Sir John (Harrow W)

  Irving, Charles

  Page, Richard (Herts SW)

  Jackson, Robert

  Parkinson, Rt Hon Cecil

  Jenkin, Rt Hon Patrick

  Parris, Matthew

  Johnson Smith, Sir Geoffrey

  Patten, Christopher (Bath)

  Jones, Gwilym (Cardiff N)

  Patten, John (Oxford)

  Jones, Robert (W Herts)

  Pawsey, James

  Jopling, Rt Hon Michael

  Percival, Rt Hon Sir Ian

  Joseph, Rt Hon Sir Keith

  Porter, Barry

  Kellett-Bowman, Mrs Elaine

  Portillo, Michael

  Kershaw, Sir Anthony

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

  Key, Robert

  Powell, William (Corby)

  King, Roger (B'ham Wield)

  Powley, John

  King, Rt Hon Tom

  Prentice, Rt Hon Reg

  Knight, Gregory (Derby N)

  Price, Sir David

  Knight, Mrs Jill (Edgbaston)

  Prior, Rt Hon James

  Knowles, Michael

  Proctor, K. Harvey

  Lamont, Norman

  Pym, Rt Hon Francis

  Latham, Michael

  Raffan, Keith

  Lawler, Geoffrey

  Raison, Rt Hon Timothy

  Lawrence, Ivan

  Rathbone, Tim

  Lawson, Rt Hon Nigel

  Rees, Rt Hon Peter (Dover)

  Lee, John (Pendle)

  Renton, Tim

  Leigh, Edward (Gainsbor'gh)

  Rhodes James, Robert

  Lennox-Boyd, Hon Mark

  Ridley, Rt Hon Nicholas

  Lester, Jim

  Rifkind, Malcolm

  Lewis, Sir Kenneth (Stamf'd)

  Rippon, Rt Hon Geoffrey

  Lightbown, David

  Roberts, Wyn (Conwy)

  Lilley, Peter

  Robinson, Mark (N'port W)

  Lloyd, Ian (Havant)

  Roe, Mrs Marion

  Lloyd, Peter, (Fareham)

  Rossi, Sir Hugh

  Lord, Michael

  Rost, Peter

  Lyell, Nicholas

  Rowe, Andrew

  McCrindle, Robert

  Rumbold, Mrs Angela

  McCurley, Mrs Anna

  Ryder, Richard

  Macfarlane, Neil

  Sackville, Hon Thomas

  MacGregor, John

  Sainsbury, Hon Timothy

  MacKay, Andrew (Berkshire)

  Sayeed, Jonathan

  MacKay, John (Argyll & Bute)

  Scott, Nicholas

  Maclean, David John

  Shaw, Giles (Pudsey)

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

  Shaw, Sir Michael (Scarb')

  Major, John

  Shelton, William (Streatham)

  Malins, Humfrey

  Shepherd, Colin (Hereford)

  Malone, Gerald

  Shepherd, Richard (Aldridge)

  Maples, John

  Shersby, Michael

  Marland, Paul

  Silvester, Fred

  Marlow, Antony

  Sims, Roger

  Marshall, Michael (Arundel)

  Skeet, T. H. H.

  Mates, Michael

  Smith, Sir Dudley (Warwick)

  Mather, Carol

  Smith, Tim (Beaconsfield)

  Maude, Hon Francis

  Soames, Hon Nicholas

  Mawhinney, Dr Brian

  Speed, Keith

  Maxwell-Hyslop, Robin

  Speller, Tony

  Mayhew, Sir Patrick

  Spence, John

  Mellor, David

  Spencer, Derek

  Meyer, Sir Anthony

  Spicer, Jim (W Dorset)

  Miller, Hal (B'grove)

  Spicer, Michael (S Worcs)

  Mills, Iain (Meriden)

  Squire, Robin

  Mills, Sir Peter (West Devon)

  Stanbrook, Ivor

  Miscampbell, Norman

  Stanley, John

  Mitchell, David (NW Hants)

  Steen, Anthony

  Moate, Roger

  Stern, Michael

  Molyneaux, Rt Hon James

  Stevens, Lewis (Nuneaton)

  Monro, Sir Hector

  Stevens, Martin (Fulham)

  Moore, John

  Stewart, Allan (Eastwood)

  281

  Stewart, Andrew (Sherwood)

  Wakeham, Rt Hon John

  Stewart, Ian (N Hertf'dshire)

  Waldegrave, Hon William

  Stokes, John

  Walden, George

  Stradling Thomas, J.

  Walker, Bill (T'side N)

  Sumberg, David

  Walters, Dennis

  Tapsell, Peter

  Ward, John

  Taylor, John (Solihull)

  Wardle, C. (Bexhill)

  Taylor, Teddy (S'end E)

  Warren, Kenneth

  Tebbit, Rt Hon Norman

  Watson, John

  Temple-Morris, Peter

  Watts, John

  Terlezki, Stefan

  Wells, Sir John (Maidstone)

  Thatcher, Rt Hon Mrs M.

  Wheeler, John

  Thomas, Rt Hon Peter

  Whitfield, John

  Thompson, Donald (Calder V)

  Whitney, Raymond

  Thompson, Patrick (N'ich N)

  Wiggin, Jerry

  Thorne, Neil (Ilford S)

  Wilkinson, John

  Thornton, Malcolm

  Wolfson, Mark

  Thurnham, Peter

  Wood, Timothy

  Townend, John (Bridlington)

  Woodcock, Michael

  Tracey, Richard

  Yeo, Tim

  Trippier, David

  Young, Sir George (Acton)

  Trotter, Neville

  Younger, Rt Hon George

  Twinn, Dr Ian

  van Straubenzee, Sir W.

  Tellers for the Ayes:

  Vaughan, Sir Gerard

  Mr. Robert Boscawen and

  Viggers, Peter

  Mr. Ian Lang.

  Waddington, David

  NOES

  Abse, Leo

  Cook, Frank (Stockton North)

  Adams, Allen (Paisley N)

  Cook, Robin F. (Livingston)

  Alton, David

  Corbyn, Jeremy

  Anderson, Donald

  Cowans, Harry

  Ashley, Rt Hon Jack

  Cox, Thomas (Tooting)

  Ashton, Joe

  Craigen, J. M.

  Atkinson, N. (Tottenham)

  Crowther, Stan

  Bagier, Gordon A. T.

  Cunliffe, Lawrence

  Banks, Tony (Newham NW)

  Cunningham, Dr John

  Barron, Kevin

  Dalyell, Tam

  Beckett, Mrs Margaret

  Davies, Rt Hon Denzil (L'lli)

  Beith, A. J.

  Davies, Ronald (Caerphilly)

  Bell, Stuart

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

  Benn, Tony

  Deakins, Eric

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

  Dewar, Donald

  Bermingham, Gerald

  Dixon, Donald

  Bidwell, Sydney

  Dobson, Frank

  Blair, Anthony

  Dormand, Jack

  Boothroyd, Miss Betty

  Douglas, Dick

  Boyes, Roland

  Dubs, Alfred

  Bray, Dr Jeremy

  Dunwoody, Hon Mrs G.

  Brown, Gordon (D'f'mline E)

  Eadie, Alex

  Brown, Hugh D. (Proven)

  Eastham, Ken

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

  Ellis, Raymond

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

  Evans, John (St. Helens N)

  Brown, Ron (E'burgh, Leith)

  Ewing, Harry

  Bruce, Malcolm

  Faulds, Andrew

  Buchan, Norman

  Field, Frank (Birkenhead)

  Caborn, Richard

  Fisher, Mark

  Callaghan, Jim (Heyw'd & M)

  Flannery, Martin

  Campbell, Ian

  Forrester, John

  Campbell-Savours, Dale

  Foulkes, George

  Canavan, Dennis

  Fraser, J. (Norwood)

  Carlile, Alexander (Montg'y)

  Freeson, Rt Hon Reginald

  Carter-Jones, Lewis

  Freud, Clement

  Cartwright, John

  Garrett, W. E.

  Clark, Dr David (S Shields)

  George, Bruce

  Clarke, Thomas

  Gilbert, Rt Hon Dr John

  Clay, Robert

  Godman, Dr Norman

  Clwyd, Mrs Ann

  Golding, John

  Cocks, Rt Hon M. (Bristol S)

  Gould, Bryan

  Cohen, Harry

  Gourlay, Harry

  Coleman, Donald

  Hamilton, W. W. (Central Fife)

  282

  Hancock, Mr. Michael

  Owen, Rt Hon Dr David

  Hardy, Peter

  Park, George

  Harrison, Rt Hon Walter

  Parry, Robert

  Hart, Rt Hon Dame Judith

  Patchett, Terry

  Hattersley, Rt Hon Roy

  Pavitt, Laurie

  Haynes, Frank

  Pendry, Tom

  Healey, Rt Hon Denis

  Penhaligon, David

  Heffer, Eric S.

  Pike, Peter

  Hogg, N. (C'nauld & Kilsyth)

  Powell, Raymond (Ogmore)

  Holland, Stuart (Vauxhall)

  Prescott, John

  Home Robertson, John

  Radice, Giles

  Howells, Geraint

  Randall, Stuart

  Hoyle, Douglas

  Redmond, M.

  Hughes, Dr. Mark (Durham)

  Richardson, Ms Jo

  Hughes, Robert (Aberdeen N)

  Roberts, Ernest (Hackney N)

  Hughes, Roy (Newport East)

  Robertson, George

  Hughes, Sean (Knowsley S)

  Robinson, G. (Coventry NW)

  Janner, Hon Greville

  Rogers, Allan

  Jones, Barry (Alyn & Deeside)

  Rooker, J. W.

  Kaufman, Rt Hon Gerald

  Ross, Stephen (Isle of Wight)

  Kennedy, Charles

  Sedgemore, Brian

  Kilfedder, James A.

  Sheerman, Barry

  Kilroy-Silk, Robert

  Sheldon, Rt Hon R.

  Kinnock, Rt Hon Neil

  Shore, Rt Hon Peter

  Lambie, David

  Short, Ms Clare (Ladywood)

  Lamond, James

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

  Leadbitter, Ted

  Silkin, Rt Hon J.

  Leighton, Ronald

  Skinner, Dennis

  Lewis, Ron (Carlisle)

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

  Lewis, Terence (Worsley)

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

  Litherland, Robert

  Snape, Peter

  Lloyd, Tony (Stretford)

  Soley, Clive

  Lofthouse, Geoffrey

  Spearing, Nigel

  McCartney, Hugh

  Steel, Rt Hon David

  McDonald, Dr Oonagh

  Stewart, Rt Hon D. (W Isles)

  McGuire, Michael

  Stott, Roger

  McKay, Allen (Penistone)

  Strang, Gavin

  McKelvey, William

  Straw, Jack

  Mackenzie, Rt Hon Gregor

  Thomas, Dafydd (Merioneth)

  Maclennan, Robert

  Thompson, J. (Wansbeck)

  McTaggart, Robert

  Thorne, Stan (Preston)

  McWilliam, John

  Tinn, James

  Madden, Max

  Torney, Tom

  Marek, Dr John

  Wainwright, R.

  Marshall, David (Shettleston)

  Wallace, James

  Mason, Rt Hon Roy

  Wardell, Gareth (Gower)

  Maxton, John

  Wareing, Robert

  Maynard, Miss Joan

  Weetch, Ken

  Meacher, Michael

  Welsh, Michael

  Meadowcroft, Michael

  White, James

  Michie, William

  Wigley, Dafydd

  Mikardo, Ian

  Williams, Rt Hon A.

  Millan, Rt Hon Bruce

  Wilson, Gordon

  Miller, Dr M. S. (E Kilbride)

  Winnick, David

  Morris, Rt Hon A. (W'shawe)

  Wrigglesworth, Ian

  Nellist, David

  O'Brien, William

  Tellers for the Noes:

  O'Neill, Martin

  Mr. James Hamilton and

  Orme, Rt Hon Stanley

  Mr. Austin Mitchell.

  Question accordingly agreed to.
  MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.
  Resolved,
  That this House rejects the Opposition's doctrinaire commitment to higher Government spending and endorses the Government's determination to pursue responsible fiscal and monetary policies, which, along with its policies to improve the efficient working of the economy, provide the only secure basis for ensuring continuing low inflation, steady growth and rising employment.

Consumer Protection
10.30 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alex Fletcher): I beg to move,
That the draft Food Imitations (Safety) Regulations 1985, which were laid before this House on 11th December, be approved.
Mr. Speaker: I have not selected the amendment.
Mr. Fletcher: The proposed regulations replace and extend the Scented Erasers (Safety) Order 1984, made on 30 January 1984. They revise the size criteria, introduce severance test procedures, cover appearance and taste resemblance, in addition to scent, and extend to certain other products.
Mr. Eric Forth: Why?
Mr. Fletcher: I hope to explain what we are doing to my sedentary questioner.
But I am pleased to see from the terms of the amendment tabled by my hon. Friend the Member for Southend, East (Mr. Taylor) that he takes as his starting point the existence of a safety problem for which a solution must be found. I know that he will appreciate that the House cannot make drafting amendments to the regulations tonight. The regulations must either be approved or not. But I shall endeavour to show my hon. Friend that the solution to the problem with which he is concerned lies in the draft regulations. As I know of my hon. Friend's keen interest in EEC matters, I assure him that the regulations are not in any way inspired by the European Commission.
The definition of "safe" contained in section 9 of the Consumer Safety Act 1978 is
"such as to prevent or adequately to reduce any risk of personal injury".
That is what we must keep in mind when considering the need for regulations made under the Act.
After careful consideration we reached the view that there is a need to remove from supply certain products which, by that definition, cannot be considered safe particularly for young children, because by wilfully and unnecessarily imitating food, they increase the risk of choking presented by all small objects.
Mr. Forth: Will my hon. Friend explain why he is not banning other items that can be equally, or more dangerous to children's health? That would help the House enormously.
Mr. Teddy Taylor: Marbles.
Mr. Fletcher: As I shall point out, the problem is that of course there are many objects that small children, especially those under the age of three, swallow or push up their noses. Indeed, my statistics show a greater incidence of the latter than the former in this instance. The danger is bad enough with ordinary products, but I propose that the House should continue to refuse to accept the products that wilfully and unnecessarily look like and smell like food. The resemblance has nothing to do with their purpose, and that is the danger. Some of the products actually encourage children to put them in their mouths. Again, that is the danger, and that is what the regulations are concerned with.
Mr. Teddy Taylor: If these food imitations are so dangerous to children that they could choke and die, why
284
is my hon. Friend the Minister going to allow them to be sold if they are in dolls' houses? Why is he allowing them to be sold for export? If they are killer rubbers, is it not shameful that he should wilfully allow them to be manufactured in Britain and sent to Ethiopia?
Mr. Fletcher: I shall take my hon. Friend seriously on this point. Most of the goods under debate are imports. Indeed, the majority of them are imported from far eastern countries. Most countries in Europe and elsewhere already have similar regulations to those that I propose tonight.
I stress that these regulations need cause no concern to suppliers of toys, novelty and stationery items if the goods they market do not imitate food. One is bound to ask why should such goods look, taste or smell like food? What is the point of making a pencil sharpener look like a strawberry or a rubber shaped like a typewriter smell like bananas? Any ordinary adult finding such items in the shops will react with surprise, but if he or she is the parent of small children that surprise is likely to turn into concern and annoyance, because parents are well aware of the habit of all small children of putting things in their mouths. Parents have every right to be concerned when small objects appear in the shops that positively invite children to pop them into their mouths.
Of course, consumers constantly demand novelty, and suppliers rightly exercise ingenuity in responding to that demand, but suppliers must be responsible. The unfortunate fact is that some suppliers are not thoughtful or careful enough for the public to be protected without regulations of this kind. For that reason, responsible manufacturers and traders look to Parliament for guidance on particular aspects of safety. In most cases, my Department or the trading standards officers approach suppliers and ask them to take goods that they consider dangerous off the market, and the suppliers co-operate. Only exceptionally do the actions of suppliers of such products require an order of this kind to persuade them not to maintain dangerous goods on the market.
Mr. Richard Hickmet: What is the evidence that the product which the regulations seek to ban causes the damage my hon. Friend suggests? What will happen to those people who had substantial quantities of this product in stock at the time my hon. Friend introduced these regulations 12 months ago and still have the product in stock?
Mr. Fletcher: If my hon. Friend will allow me, I shall come soon to the question of evidence. Those traders who have found themselves with stocks of goods that they cannot dispose of—I regret that fact as much as any hon. Member—had 18 months of warning of the views of the Government and local authorities on the safety of these products.
Mr. Teddy Taylor: That is not true.
Mr. Fletcher: My hon. Friend must not say that that is not true. That point was established by a Standing Committee, and in July of this year an attempt was made in a judicial review to challenge the Government's actions. I am sure that my hon. Friend will wish to know that the judge found in all the challenges made, including the challenge about consultation, that my right hon. Friend the Secretary of State had acted correctly. I do not like, even from a sedentary position, the suggestion by my hon. Friend the Member for Southend, East (Mr. Taylor) that I am trying to mislead the House.
Sir Bernard Braine rose—
Mr. Fletcher: If my right hon. Friend will forgive me, I should like to reply to the point made by my hon. Friend the Member for Southend, East. Ample warning was given. There was ample opportunity for traders to heed the views of the Government and local authorities that these products were dangerous to children. The fact that traders ignored those warnings has resulted in a number of them incurring a financial penalty. I regret that fact, but the fault is that of the traders and not that of the trading standard officers or my Department.
Sir Bernard Braine: I wish to press the point that has just been made. My hon. Friend the Under-Secretary of State has just told the House that traders were given 18 months' warning. We are anxious to learn of the evidence before that time showing that regulations of this nature were necessary. What additional evidence was presented during the warning period showing that the decision taken in principle to introduce these regulations would be justified? My vote turns on the case my hon. Friend the Under-Secretary of State makes to the House showing that action was necessary before the warning period and that experience during the warning period revealed that the initial decision was justified.
Mr. Fletcher: Warnings were given—the trade was advised — by my Department, by my predecessor as Minister with responsibility for consumer affairs and by local authorities, and there was the withdrawal of these products to a considerable extent from the market. But, despite the warnings that had been given, these products arose again, and in larger numbers, and at that point, after asking the trade — as we ask many traders and companies to withdraw products if we consider them to be dangerous—to withdraw them and after those warnings had failed, action was taken.
This is the seventh occasion since the passage of the Consumer Safety Act 1978 when a prohibition notice of this kind has been made forcing companies to take goods from the market. On many other occasions none of this heavy legislation—and I am the first to admit that we should not be considering a matter of this kind in the House of Commons — has been necessary. On only seven occasions has it been necessary to introduce legislation of this kind.
If people will not take notice of warnings and if the best advice that we in the Department have—medical advice and advice from the laboratory of the Government Chemist and others, including trading standards officers and local authorities — is that products such as these are dangerous, something must be done. Here is a chocolate that looks and smells like a chocolate but happens to be an eraser, when its function as an eraser does not require it to look like a chocolate. Kiddies who will normally put things in their mouths are surely much more tempted to do so when erasers are in that form.
Mr. David Ashby: My hon. Friend has referred to warnings having been given during the last 18 months. Would he consider the letter of 29 March 1984 sent out by a Mr. Rider of his Department to a number of suppliers and retailers—going behind the backs of the suppliers, as it were—to have been one of the warnings? The link between scented products and glue sniffing was the real problem.
Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. I am anxious to help the House, but I must remind hon. Members that this is a short debate and that we have had more interventions than we have had Minister's speech. I hope that we can now proceed.
Mr. Fletcher: That letter, if dated 29 March 1984, would have been sent out after these goods had been banned, so it was not a warning. The goods were banned in January 1984, which is why this instrument is before the House tonight. [Interruption.] I cannot explain a particular letter sent out by my Department in March 1984. I thought that the substance of my hon. Friend's argument was that he was trying to demonstrate that inadequate warning had been given. I have explained that that letter was written after the time warnings had been given. The letter to which my hon. Friend referred was written in the normal course of business between my department and a supplier, and I do not think that my hon. Friend the Member for Leicestershire, North-West (Mr. Ashby) is objecting to what I have said.
Mr. Teddy Taylor: Who was warned?
Mr. Fletcher: I gather that my hon. Friend the Member for Southend, East insists that there was insufficient warning. I repeat that this matter was debated in Standing Committee last year and was part of the case brought in the High Court against my right hon. Friend. I would not expect to convince my hon. Friend about the former, but in the latter the court ruled in favour of my right hon. Friend on all counts and awarded costs in his favour. I am sure that my hon. Friend the Member for Southend, East is aware of these facts.
During the last year the Department carried out extensive consultations with the trade. In all, 104 bodies were consulted. They included 30 trade associations and 16 individual firms. Half of the 104 responded; 2 had no comment, 39 were generally in favour and 11 opposed the concept. By not responding, the 52 bodies which sent no reply can be assumed to support the principle or to have no firm views. The 11 opponents among the 104 which were invited to comment were all traders. Some, if not all, of the concerns of the trade associations whom we consulted have been met by subsequent amendments to the regulations and all comments received have been fully considered in determining the form and content of the draft regulations.
In regard to available accident statistics, the increase in the number of accidents involving erasers in the statistics available for 1983 and 1984 provided by the Department's home accidents surveillance system confirm that action is needed. The 1984 total, which is not yet complete, is 16 accidents in which erasers were swallowed or stuck in the noses of children. This is a survey of only 20 hospitals in England — that is about 7 per cent. of hospitals. It means that 16 erasers—
Mr. Douglas Hogg: Of what kind?
Mr. Fletcher: Of all kinds.
Mr. Hogg: How does my hon. Friend know they were of all kinds?
Mr. Fletcher: I do not think they were all the one kind of eraser. There were several kinds of eraser involved.
Mr. Alan Williams: I am grateful for the fact that the Minister has given us that extra

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information. When the companies have written to him, and when I have written to him to ask for more information about the 20 accidents referred to previously, he has replied that it would be too expensive to find out what type of eraser was involved.
Mr. Fletcher: We have some more information although I cannot say exactly what sort of eraser was involved in each accident. That information is not available. The right hon. Gentleman is correct.
The point remains that 16 children were admitted to hospital. These are just hospital cases in 7 per cent of hospitals in England where erasers where swallowed, stuck in the throat or stuck in the nose and therefore the children required medical treatment. Obviously it does not take account of the number of cases where parents or schoolteachers rescued children from danger of choking.
Mr. Peter Griffiths: This seems to be the crux of the matter. How many children were admitted to those 20 hospitals with foreign bodies pushed into some bodily orifice? Was it a small proportion or a high proportion?
Mr. Fletcher: There should be no ambiguity about this. I have already conceded that children swallow all sorts of objects; for that matter, so do adults. I ask my hon. Friends to bear in mind that the danger we are trying to deal with is the manufacture of products which deliberately attract children to swallow them or to put then in their mouths or noses.
The regulations deal with food imitation. Like Germany, France, Greece, Ireland and other countries, we are saying that we should ban a flood of objects of this kind from Far Eastern countries. That is the object of the regulations. I see no benefit to the economy in the import of erasers shaped like lemons, strawberries, oranges and chocolates. It should be remembered that the home accidents surveillance system covers only home accidents that are treated in hospital. As I said, many are dealt with speedily by parents and schoolteachers and therefore are not recorded.
In taking action, the House will do two main things. First, it will keep known imitation food products, which are mainly scented erasers, off the market and avoid a potential increase in the number of accidents associated with them. Secondly, it will pre-empt the introduction of other products which imitate food. As I said, they can hardly be said to be making any contribution to the British economy.
In making permanent regulations, it is logical to cover not only scented erasers but other similar products that are equally dangerous, and to include other means of food imitation.
In order to cause the minimum restriction on trade, the product coverage has been confined to those items known to exist, or which can reasonably be surmised could exist, in food imitation form, whose utility does not require them to bear any resemblance to food and to which children have ready access.
I have adopted a targeted approach so that the trade should know with certainty what would and would not be permissible. My target is not the traditional toys of long standing, but the new and more dangerous products that have come on to the market in recent years, and almost all from the far east.
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The regulations contain three simple tests, all related to the size of objects. The main test is a truncated cylinder. I am sure that my hon. Friends will be interested to know that it was originally developed for consumer safety purposes—to test goods that should not be swallowed—in the United States, hardly a nannying economy. It is now internationally recognised as a guide to the size of toy products that are suitable or not for children under the age of three.
It is a better test than that specified in the Scented Erasers (Safety) Order, whereby an eraser was banned if it had at least two dimensions each less than 45 mm, because it is directly related to the size of object a child could swallow. Trading standards officers favour the use of this simple, inexpensive, gadget as the main test of size.
There is also a potential hazard from larger objects from which small children can detach smaller pieces by biting or pulling. Therefore, two severance tests are necessary to simulate the abuse things are likely to receive in the hands and mouths of small children.
I remind my hon. Friends that the Government, in a White Paper published last July proposed to strengthen the legislation on the safety of goods. It is proposed that a general duty be placed on all suppliers to ensure that their goods are safe in accordance with sound modern standards of safety. Of course, they will mainly be BSI standards.
In addition, powers are proposed to enable enforcement officers to seize or freeze and thus prevent the distribution of suspected dangerous goods and to allow customs and excise to notify the importation of such goods. All these measures will have the effect of diminishing the need for safety regulations and prohibition orders and notices of the kind that we are considering tonight.
Finally, the House will wish to know that there is legislation in a number of countries banning small objects that imitate food — in France, West Germany, Switzerland, Sweden, The Republic of Ireland, Greece and Australia. Belgium, Denmark, The Netherlands and a number of other countries are proposing similar action shortly.
I invite the House to support the regulations.
10.53 pm
Mr. Alan Williams: When I listened to the winding-up speech on fluoridation last night, I reached the conclusion that it was hardly possible for a Minister to make a speech more calculated to ensure a rebellion on his own Back Benches. We have now shortened our time scale in politics and discovered that a day is a long time. I congratulate the Minister on exceeding my expectations in his speech tonight.
I begin from the rather humble position of not wanting to intervene in the argument, which the Minister will clearly enjoy, between himself and his parliamentary friends—
Mr. Fletcher: The right hon. Gentleman knows that I was happy to give way to my hon. Friends. There is no danger of his speech being interrupted by his hon. Friends.
Mr. Williams: There is a very good reason for that—I told them to go home. I shall explain a little later why I told them to do just that.
As one who used to be a Minister with responsibility for consumer affairs, I take a pragmatic view of these matters. I agree with what the Minister is doing. I do not

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agree with the proposition that is implicit in some of the criticism—that we must wait for some poor child to die before we accept that there is a hazard. It is the duty of parliamentarians to identify a hazard and eliminate it if possible. It is irresponsible to ask "How many deaths have there been?" If, as a result of what happens tonight there are no deaths, we will be able to say that this was one of the House's more successful ventures.
Mr. Robert B. Jones: The only time when, as a child, I choked on something and had to go to hospital, it was on a square sweet, which fulfils all the criteria laid down by my hon. Friend the Minister. Presumably neither the right hon. Gentleman nor my hon. Friend proposes to ban sweets on that count. Where does the right hon. Gentleman draw the line?
Mr. Williams: My understanding is that the average sweet is soluble and therefore more likely to be survived. If the hon. Gentleman wants to extend the scope of the regulations, he should table amendments to that end.
It seems self-evident that if objects look and smell like sweets to adults, they will certainly look and smell like sweets to young children. It is inevitable that, unless we take appropriate action, there will be an accident, for which we will all feel ashamed if we reject this proposal.
I want to support the Minister. Indeed, I bailed him out in the rebellion in the Committee of March last year. I used our vote, or the threat of it, to enable the Minister to get the legislation through because I thought it was needed, although he presented it ham-handedly and unconvincingly. The hon. Member for Southend, East (Mr. Taylor) will recall that we thought we had extracted an assurance that, if we let the regulations go through, there would be immediate consultation and an amending regulation would be introduced within 12 months. We did not think that we should have to wait for so long as we have done.
Mr. Fletcher: We intended to introduce the regulations as quickly as possible. We started consultations after the Committee debate, but were immediately involved in a case in the High Court, which prevented consultations from starting until after July, as we were obliged to defend the charges.
Mr. Williams: That is not a credible argument. Indeed, the High Court case rendered consultation more necessary, to prepare the Government to present a perfect proposal if the court turned the hon. Gentleman down. Although that case might have prevented discussion in the House, I cannot believe that it interfered with the process of consultation. It is more likely that the Department diverted consultations to glue sniffing and other matters.
The Opposition would have supported the regulations had that been necessary, but I told my right hon. and hon. Friends to go home. The Government have been less than adept in their presentation. The matter has been incredibly mishandled. Even the consultative process has been a sham. Although we might disagree with people, if we are to have a meaningful consultative process we must consider their arguments carefully.
Mr. Fletcher: I did.
Mr. Williams: The Minister says that he did. I had a letter from the suppliers whom I had attacked in
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Committee. They said that the Minister had quoted 20 accidents involving erasers from the hospital surveillance system that I set up in the late 1970s.
Mr. Fletcher: A worthwhile system.
Mr. Williams: I do not receive many compliments, so I am happy to receive one, from whatever source.
The Minister was asked how many of the 20 were attributable to scented erasers. He replied to the industry and said, in effect, that he saw no point in finding out. Even by ministerial standards that savoured of high-handedness.
I thought that I would try a little parliamentary comradeship and therefore I dropped the Minister a note, in the kindest and politest of terms, asking him for clarification about the 20 cases. The answer that I received was:
"I do not think it necessary to pursue the further reported accidents to justify the action that has been taken. That would be going to unnecessary expense with no guarantee of establishing any meaningful statistics."
"Unnecessary expense" to find out about 20 cases? The people who are losing £200,000 of stock would have paid for the inquiry if the Minister had given them a chance to do so.
"Unnecessary expense with no guarantee".
Does there have to be a guarantee? As he was calling those cases in support of his argument, surely the industry was entitled to have them thoroughly investigated, but as there was no guarantee of establishing meaningful statistics, the Minister was not willing to do that.
One is left with a further suspicion. The suspicion in my mind, and, I am sure, in the minds of the Minister's hon. Friends, is that he did not go ahead with an analysis of those 20 cases because he was afraid that they would come out the wrong way. Strangely enough, only a few moments ago the hon. Gentleman referred to a different number. I shall not quibble about which number is correct, because it may not be relevant. The numbers may have been over a different time scale.
When I asked the Minister what types of eraser were involved, he told me that they were of all types. When I intervened to ask how he knew that, he said that they must have been. He does not know. It is of some significance when the Minister gives the House a categorical assurance—
Mr. Fletcher: It was not.
Mr. Williams: It was not a categorical assurance, but the Minister was trying to persuade the House. Is he saying that if the accidents had been analysed it might have been found that the erasers were of all types?
Mr. Fletcher: No.
Mr. Williams: What is the Minister saying?
Mr. Fletcher: I said that the possibility of going back to these cases and establishing what type of erasers were involved was extremely remote. It was not a lack of willingness to go back but a doubt whether any substantial evidence would be available. That was the first consideration. Secondly, when the right hon. Gentleman asked what type of erasers they were and I replied that they were of all types, I was saying that one could safely assume that more than one type was involved if there were a number of accidents. That is the point that I was trying to make.
Mr. Williams: The Minister said that he was afraid that the information might not be available. Surely the Government, even with their present economy campaign, could have afforded 20 second-class letters to find out whether there were any records, even if they did not explore further. What the Minister says does not wash. It does not bear analysis.
Mr. Christopher Hawkins: The right hon. Gentleman cannot have it both ways. First he says that he thinks the Government are right not to wait until someone dies, which is a view I am delighted he has taken and completely endorse, and then he complains that the Government have not analysed the statistics to discover how many scented erasers are involved. The hon. Gentleman's argument was that Parliament's job was to decide whether, on balance, these were likely to be the cause of serious accidents. I totally accept his argument that they are very likely to be the cause of serious accidents.
Mr. Williams: I was not basing my position on 20 cases, but the Minister was. The Minister might care to look at his correspondence and at the information that he sent to the suppliers. It was the Minister, not me, who came here and put forward the proposition. It is his evidence, not mine. I started from the position that I was in favour of what he was doing, but I still say to the House that it is entitled to clear information. The hon. Gentleman misled the House inadvertently — perhaps that is too generous: frivolously is nearer the truth; it was not done malevolently — and without due consideration. He misled his colleagues about the nature of the evidence in his possession. He does not have the evidence which he originally claimed to have.
I deal next with the question of voting because I want the Minister and Conservative Members to understand our position. As I said, in Committee, we made it clear that we would have supported the regulations had there been a vote. We should also have been happy to support the regulations this evening, but the Government's handling of the matter has been so appallingly bad that they do not deserve to he supported. However I believe that this is a desirable measure, and therefore I am not willing to ask my hon. Friends, despite the ham-handedness of the Government—
Mr. Fletcher rose—
Mr. Williams: I told them to go home, for that very reason.
Mr. Fletcher: Is the right hon. Gentleman saying that before the debate began he asked his hon. Friends to go home?
Mr. Williams: That is right. I have all the Minister's letters. Does he not stand by the letters that he sends to his parliamentary colleagues? We knew that he had messed things up in his analysis of the situation. Consequently, I said to my hon. Friends that in no circumstances would we vote against the regulations but that it was not up to us to get the Government's chestnuts out of the fire when they had mishandled the situation so badly.
Mr. Douglas Hogg: The hon. Member owes the House a further explanation. He has told the House in the clearest possible terms that these products constitute a hazard and that people can die. Faced with that fact, I simply do not
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understand how, in all honour, he can say that because the Parliamentary Under-Secretary has behaved an odd manner he will withhold his support for the regulations.
Mr. Williams: Is the hon. Gentleman suggesting that the regulations will be defeated?
Mr. Hogg: That is not the point.
Mr. Williams: I see. I did not know that we had a rebellion on our hands. If the hon. Gentleman had come to me and said that he needed the support of the Opposition to get these regulations through the House, of course we should have rallied our troops, but perhaps I had better leave the Government to sort out their own problems.
11.8 pm
Mr. Christopher Hawkins: I support the regulations. Some people have said that nobody has died because of scented erasers, so why ban them? Having found my youngest daughter when 18 months old with one such eraser in her mouth, I did not wait to see whether it killed her before taking action. Personally, I am delighted that the Government are not waiting either until somebody dies before they take action.
Mr. Ashby: Why did my hon. Friend buy it?
Mr. Hawkins: I did not buy it. It turned out that my other daughter had a collection of 20 or 30 of these dangerous toys which neither my wife nor I knew about. I am sure that that has happened to many other people.
Some people say that children can die from swallowing marbles, coins or dice, so why not ban them? There is a very good reason. Even a young child who cannot yet speak can be trained not to swallow anything except food and drink. My wife and I have done that, as have most parents. Marbles, coins and dice do not look like, feel like or smell like food. I would object, however, if somebody made marbles which looked like aniseed balls and smelled like aniseed balls. We should ban such marbles, because they would fool a child into believing that they were food.
My objection to scented erasers is that they appear to be what they are not. They are purposely made to look and smell like sweets. They present a danger that we cannot train a young child to recognise. We cannot tell a child that does not yet speak our language that there are some imbeciles in the world who will take a perfectly useful object and use science and chemistry to make a small child think that it is a sweet or some kind of food so that they might eat it and choke themselves to death.
I should use two criteria. First, will a product fool a child into thinking that it is edible? Secondly, will it be dangerous for a child who tries to swallow it? Could he choke? Scented erasers fail to be acceptable on both those counts. However, marbles do not fail to be acceptable on both those counts. Some products may be marginal and some will fail strongly on both counts. Few of us would want people to start manufacturing household bleach that looked, smelled and tasted like orange juice.
To digress from the debate, I understand that another imbecile is making a product called gremlins which are half an inch long, look like sweets, and when dropped into water swell to five or 10 times their size. They will also do that in the mouth. I hope that my hon. Friend will look at those as well and take action. Many parents are equally concerned about that.
We should not over-protect the public, but products which look and smell like food or sweets and which can

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be dangerous if a child tries to swallow them should be banned. That is why I welcome what the Government are doing, and that is why I will support the regulations.
I know that there is a big revolt among my hon. Friends. I have had personal experience of a child who might have died. Before my hon. Friends continue with their revolt. I ask them please to have an open mind. The bible says
"He that is without sin among you, let him first cast a stone".
Let the first child die because of this dangerous product, and which of my hon. Friends will tell the parents why he revolted?
11.12 pm
Mr. Michael Meadowcraft: I take the same view as the hon. Member for High Peak (Mr. Hawkins) about the seriousness of the matter. Whenever any Government decide to interfere in the commercial aspects of such a matter, the detail of the regulations can easily be mocked. There is no doubt that the amount of pressure and the number of Newtons required to pull something apart, and so on, in the regulations before us tonight can easily be laughed at.
There is an argument that Governments interfere too much in the ordinary affairs of people. The Minister said that the order seeks to ban items which positively invite children to put products into their mouths illegitimately. I accept that it cannot be imagined that the item that we are discussing is a high priority for time on the Floor of the House. But it is on the Floor of the House for debate, and so the question for those Conservative Members who mock the regulations is whether they are beneficial or not.
Clearly, on balance the regulations are beneficial. For instance, I quote a case in the constituency of my hon. Friend the Member for Isle of Wight (Mr. Ross) of a six-year-old child who on Christmas day 1983 swallowed a pen top and died as a result. The question is whether an item would encourage someone illegitimately to eat it.
In Committee in March 1984 the hon. Member for Southend, East (Mr. Taylor) criticised earlier regulations and then made play of only banning scented erasers rather than items imitating food. His hon. Friend the Member for Shipley (Mr. Fox), who was also critical, said categorically that he would go further than the order and ban food facsimile erasers, whether they were scented or not. He said that anything that looks like food should be banned. That would make more sense to industry and the public. That criticism made in March has been met.
The logic is that the items mentioned do not have to look or smell like sweets, if they do, young children might eat them. It is not the world's greatest issue, but it is worth supporting.
11.15 pm
Mr. Teddy Taylor: I hope that the few points that I shall make will persuade the Minister to withdraw the order. The order is ill-conceived, unnecessarily severe and badly drafted. The trades and industries involved have been treated shamefully.
We must first ask whether there is any justification for the order. If we had the slightest belief that these items were more dangerous than the generality of small objects which children can swallow, we should certainly support the banning of them. However, there is not a shred of
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evidence from the Minister or anyone else that these items are any more dangerous for children than the multitude of small items which children can be tempted to swallow.
Mr. Christopher Hawkins: We are dealing with an essential and important point. A child can be trained not to put in its mouth things which are not for eating or drinking, but a child who cannot yet speak cannot be trained not to put in its mouth things which appear to be food.
Mr. Taylor: I am sorry, but the evidence is exactly the opposite. I do not want to quote accident statistics. They are simply a means of saying "Let's wait for a death". However, one can use statistics to discover what children swallow and cause danger. I appeal to hon. Members before they vote to look at Hansard and the answer from the Minister about the number of children and others who received hospital treatment for swallowing things. It is there in black and white. The Minister says that 2,174 people, mainly children, received hospital treatment for swallowing things. What kind of things? A total of 690 received treatment for swallowing bones, 290 for swallowing money and an astonishing 74 for swallowing marbles. Only one child last year received medical treatment for swallowing an eraser— and we do not know whether it was scented.
On the basis of that information, there is a case for treating the marbles problem much more seriously than the eraser problem. If the Minister disagrees, I ask him whether there is any evidence that they are uniquely dangerous. There has been not a shred of evidence.
I have not picked out figures from one year. I have the figures for the last five years, which reveal that a multitude of children have been given hospital treatment for swallowing things, but they do not reveal evidence that scented erasers are any more dangerous than any other small objects which children pick up.
Mr. Fletcher: Sometimes I think that my hon. Friend the Member for Southend, East (Mr. Taylor) argues with himself. There is no argument about the items that adults and children swallow. But why invite children to swallow things by designing products which do not have to look, smell, or taste like food so that more of our children are encouraged to put them into their mouths? Of the 16 cases that I mentioned, 15 involved children getting parts stuck in their noses. The unnecessary smell must have something to do with it. Even my hon. Friend would admit that. The victims had to go to hospital to have the items removed. No one, including my hon. Friend, would recommend that to parents or children.
Mr. Taylor: If we are to include all the figures, the figure of 2,000 will rise substantially, as the Minister knows. Last year's evidence showed that 74 children received hospital treatment for swallowing marbles, and one child for swallowing an eraser. The Minister has not even found out whether it was a scented eraser or one which would not be affected by the regulations.
If we accept the Minister's arguments, the crucial question is whether he warned the trade. Did he seek its co-operation? The only warning that I can trace—I have followed this matter up in many parliamentary questions — was given by my hon. Friend the Member for Reading, East (Sir G. Vaughan), the previous Minister, on 8 November 1982. He issued a Department of Trade and Industry circular letter entitled:

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"Scented novelties: Common sense and a caution rather than a ban."
It stated that the Minister had considered the evidence and continued:
"I do not think a ban would be justified."
However, my hon. Friend appealed to suppliers and shopkeepers to stop selling smaller-sized novelties of the kind particularly likely to cause choking if swallowed.
The Minister knows that the trade was not advised of this regulation. It appears that a copy was sent to the toy manufacturers association, which is involved in only a small way, and that none of the 40 individual suppliers who are in touch with me was aware of a warning. If the Minister had told the trade that he was worried about small rubbers that look like sweets, the trade would have agreed to act immediately to avoid emergency regulations, which have caused it enormous hardship and considerable financial loss. It has been confirmed in parliamentary questions that the vast majority of the trade was wholly unaware of that warning. The Minister knows that, because I asked him for full details of all those who were consulted and approached.
Mr. Douglas Hogg: If my hon. Friend is telling the House that the trade would have agreed to withdraw small rubbers, why should we object to prohibiting them?
Mr. Taylor: The trade would have agreed to withdraw all erasers that looked like sweets, which is a small percentage of those which are covered by the regulations. They deal with erasers which look or smell like sweets. That is about 30 times the number of those which look like sweets.
The Minister knows that he could have introduced regulations with the agreement of the trade to ban the sale of erasers that look and smell like sweets. The matter would have been resolved satisfactorily, not because the trade or those involved thought that there was a need for a ban but because the Minister thought that something had to be done. The matter could then have been resolved easily and without hardship.
It has been said that the association of district councils and others have put forward similar recommendations. The Minister knows that all such associations were under the impression that the Minister was considering erasers that looked like sweets. If we accept that there is a danger, although there is not a shred of evidence to support it, why is the Minister making three exceptions to the regulations?
First, he says that these small food imitations can be sold if they are contained in dolls' houses. If he is worried that these items are a danger, are they not an even greater danger to children if they are contained in dolls' houses? Why should they be excluded because they are contained in dolls' houses?
Mr. Fletcher: Only if they do not smell or taste like food.
Mr. Taylor: The order uses the words
"products bona fide intended for use to represent food in a dolls' house or other model … setting."
Mr. Fletcher: If they do not smell or taste like food.
Mr. Taylor: They must look like food if they are to represent food in a dolls' house. Therefore, something that looks like food and is in a dolls' house should be excluded.
The second thing that the Minister has excluded entirely is marbles. If we believe that marbles are dangerous, why do we not exclude them? Last year, 74 children were taken
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to hospital after swallowing marbles, compared with only one child taken to hospital after swallowing an eraser. The third exemption is for exports. If those objects are dangerous, why should we allow companies to export them?
The Minister should ask himself whether the order goes too far. He said that large erasers would be covered if one could bite pieces off them. What is the bite test? As the Minister will know from the regulations, the bite test involves a very sharp edge — much sharper than the teeth of a small child—with a weight of 50 lbs, which is larger than one's baggage allowance for flying across the Atlantic, going down onto the eraser. That is a much larger load than any child could bring to bear on an eraser.
The next thing that we must ask ourselves is whether the order is a fair way of dealing with the trade. The main problem is with erasers that smell like sweets or flowers. The trade has been dealing with the erasers for about a year, and I assure the Minister that they have created genuine fears. He will be aware of the case of a company in my constitutuency which took specific erasers to the trading standards officer in Hertfordshire and was told that they were perfectly lawful. They did not fall within the criteria for banning. The company was then prosecuted in another county for selling exactly the same erasers. The Minister knows that many such cases have arisen because trading standards officers and the courts must work out the smell of food and sweets. Many of the erasers are shaped like typewriters or spacemen. It is extremely difficult to work out the smell of food. I would suggest that it is completely unworkable.
Sir John Page: I was sent a yellow and brown snail, which I believe is covered by the Bill. It smells of soap. I was wondering whether it would be more offensive if it smelled like escargots, or more dangerous if it smelled like glue. Does the matter that we are discussing this evening compare with the Spotted "Hummerfly" Protection Bill, about which my hon. Friend knows a great deal?
Mr. Taylor: My hon. Friend has raised an important point. What is the smell of food? Under the order, every trader will have to work that out for himself. He will have to seek advice. What is the point of a trader going to a trading standards officer and being told that the eraser is all right if he is prosecuted for it by a neighbouring authority?
Mr. Fletcher: This order follows consultations and is an improvement on the original order; but, on the evidence of the original order, the judge in the judicial review accepted that such tests had to be made and that, in those circumstances, they were acceptable. As I said earlier, he found in favour of my right hon. Friend the Secretary of State. My hon. Friend is disagreeing not just with me—that does not matter—but with the firm judgment on the case which was taken to the High Court by the trade which he supports.
Mr. Taylor: The Minister is in danger almost of misleading the House. The judge was not called upon to express a view on the merits of the case or on the feasibility of operation of the tests. He was asked whether this was a lawful use of emergency powers. Does the Minister agree that traders have taken erasers to trading standards

297
officers and, indeed, to public analysts, been told that they are all right, and then been prosecuted for selling them in other authorities' areas?
The Minister is aware that the complaint is not made by a few nutcases. This view is held throughout industry and, indeed, by the CBI. I have a letter from the CBI, which says:
"The regulations as they stand are in danger of bringing consumer legislation into disrepute, because of its obscurity for business and enforcers alike."
At a time when we have over 3 million unemployed, and industry and trade are fighting for survival, my hon. Friend the Minister has treated an important business in a contemptuous way, and has not taken its views into account. If there was a problem of safety and a danger to young people, this could readily have been resolved in proper discussions and consultations.
My hon. Friend has made no case to show that the objects covered in the legislation are in any way more dangerous than the generality of many small objects that children can put in their mouths. If there were such evidence, most of us would jump into the Lobby to support such legislation. My hon. Friend has not proved the case for extending the order from things that look like sweets to things that smell like sweets or flowers. The sensible thing to do would be to withdraw the order. My hon. Friend should have proper consultation with the trade and bring in a new order, if he wishes, to ban erasers that look like sweets, instead of bringing in messy, unworkable regulations, which have caused a great deal of distress, anxiety and unnecessary loss of business. They are not in the interests of safety, but in the interests of senseless, bureaucratic nonsense.
11. 31 pm
Mr. Douglas Hogg: I am sorry to disagree with my hon. Friend the Member for Southend, East (Mr. Taylor), who delivered his speech with a great deal of feeling. It is wrong to criticise my hon. Friend the Under-Secretary for introducing these regulations. They are sensible, wise and prudent. I entirely agree with the view put forward by my hon. Friend the Member for High Peak (Mr. Hawkins), by the right hon. Member for Swansea, West (Mr. Williams) and by my hon. Friend the Under-Secretary, that these things constitute a trap. By nature and design, they are a trap. If one creates an eraser that looks and smells like a strawberry, one must not be surprised when a child puts it in his or her mouth.
The eraser that I have in my hand looks and smells like a strawberry. I would not be surprised if a little child put it into his or her mouth, and I would not laugh if a child did so. That is true of many other substances covered by these regulations. We may not have any clear evidence that anybody has died or suffered serious injury from products covered by these regulations, but, as the right hon. Member for Swansea, West said, are we to wait for a serious injury or a fatality before we act? Is that a sensible exercise of the discretions and functions of the House? Surely not, because we are considering a hazard, and we are entitled to guard against it.
It is true that some aspects of the regulations probably go further than is necessary. However, my hon. Friend the Minister made the sound point that we cannot embark on a drafting exercise. I regret that as much as anybody else.
298
I wish that we could amend these regulations. However, we are faced with the choice of accepting the regulations entirely or rejecting them entirely. We can go on bringing them back, changing them in draft, carrying on negotiations, and one thing and another, but what would we be doing that for? My hon. Friend the Member for Southend, East feels that there are other great counterbalancing factors to be considered. He talked about 3 million unemployed, and about large concentrations of stock on the shelves, but are those real considerations?
I sense that some hon. Members believe that the garment of liberty is indivisible, and that we cannot have fluoridation, seat belts and crash helmets, and we must allow people to produce dangerous objects. This is the old argument. I do not agree. I think that hon. Members are entitled to form a judgment in the broad, and in the broad these objects are dangerous. I do not see any counterbalancing arguments which support the point of view of either of my hon. Friends.
Mr. Hickmet: My hon. Friend applies the law of tort to his analysis of this issue, and I am sure that if we were in the High Court we would all applaud his analysis. But where is the evidence that these rubbers are dangerous? If we are to say that we exercise a judgment in these cases and it is not necessary to wait until a fatality occurs, where does one draw the line? Surely one has to use judgment. If one is to ban particular objects, why should one not ban the whole range of similar objects which my hon. Friend the Member for Southend, East (Mr. Taylor) has already described?
Mr. Hogg: I never mentioned the law of tort. I never contemplated the law of tort. I invited the House to apply common sense and good judgment. As my hon. Friend is a criminal lawyer, he is unduly preoccupied with evidence.
Mr. Hickmet: On a point of order, Mr. Deputy Speaker.
Mr. Hogg: Is it a point of order?
Mr. Hickmet: No, I want to ask my hon. Friend—
Mr. Hogg: No, I will not give way. If it is a point of order, I am perfectly prepared to give way, indeed I must give way, but I do not have to give way to an intervention.
Mr. Deputy Speaker: Order. This is a very short debate.
Mr. Hogg: Guided by the principle of common sense, we are being asked to consider a number of products which are for no very good reason designed to resemble sweets and other articles which would be attractive to children. It seems obvious to me that small children are likely to put them in their mouths and suffer serious injury. Faced with that obvious, clear and predictable risk, I think that the objections put forward by my hon. Friends are simply absurd.
11.36 pm
Mr. John Watson: I should first declare something of an interest, in that until 1979 when I was elected to the House I was the managing director of Waddington Games, and I am still a director of the holding company. While I speak from a position of some interest, it is not a position of vested interest, because the company

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makes none of the products that are now known rather euphemistically as scented products. We used to make such products. In the early 1960s we produced a series of jigsaw puzzles which were perfectly round, one of which was printed with scented ink. It was a picture of an Italian pizza. The slogan on the carton was, "Looks like pizza, smells like pizza, but tastes like cardboard". So far as I can see, such a harmless product would indeed be banned under the regulations. That is the one reservation that I have about them.
I will support the regulations, because I believe in the principle that they seek to achieve. I follow the common sense, if not entirely the arguments, of my hon. Friend the Member for Grantham (Mr. Hogg), when he says that something that looks like chocolate and smells like chocolate runs the risk of being swallowed as chocolate.
Where I differ from my hon. Friend the Parliamentary Under-Secretary of State for Trade and Industry is in the scope of the drafting of the regulations which seems to me to be unnecessarily wide. For example, why are adults included? I quote—
"'Toys' means playthings whether intended for adults or children".
Adults, I submit, know what they can eat and what they cannot eat. I acknowledge. that the catering department of British Rail may have done its best to blur the distinction in recent months, but by and large adults know what they can eat and what they cannot eat and do not need statutory protection in the matter. Secondly, why is it necessary to include the smell of flowers? Again I quote—
"any regulated product—
(a) which looks like food, or smells like food or like flowers".
Children by and large do not eat flowers. I have three children and I pride myself on believing that they are fairly normal. I can assure the House that they do not go rampaging round the garden biting the heads off the roses and munching their way through the gladioli. I do not think that children need protection from things that smell like flowers.
Why do we need to include the specific product Playdoh? By implication, at least, that is included in the definition
"modelling clay, plasticine and products of a like nature".
Clearly that would include Playdoh although it is dough, and can be eaten. As I know to my cost, if someone puts it in the oven he will get a sort of technicoloured chapatti, which may not be particularly appetising but which is at least edible.
If we pass the regulations, I fear that a little old lady running a toy shop in Bishop's Stortford, who is sitting down on a quiet Thursday afternoon doing her scented jigsaw puzzle of a scented rose, will be faced by a geezer from the trading standards office who says, "Will your pieces fit into my truncated cylinder? And, by the way, could the cherries in your hat be described as 'play things', because, if so, your hat has just been banned by Parliament?"
I am quite content to vote for the regulations, but I shall do so with the anxiety that they have been drafted with perhaps unnecessary width. I very much hope that they will not be used as a basis for a witch-hunt against products which Parliament is perfectly happy to permit.
11.40 pm
Mrs. Edwina Currie: It is with some trepidation that I enter into the debate. I was
300
introduced to these items in exactly the same way as my hon. Friend the Member for High Peak (Mr. Hawkins) was. My elder daughter brought them home from school, and I caught my younger daughter — who was then about four—trying to eat them. It was immediately apparent to me that what appeared to be harmless was not, and that what seemed to be clever and fun—and these items are very clever—was in fact, quite alarming.
The programme "That's Life" has been mentioned. Those of us who watched the programme for several weeks when it highlighted this problem are aware of the tremendous public concern that was produced. It also highlighted decorative items such as a brooch in the shape of a bar of chocolate that was being given away in Cadbury's drinking chocolate. It is interesting to recall that that was immediately and voluntarily withdrawn. If no one else will, I will pay tribute to the "That's Life" programme, because it has done an excellent job on this and other dangerous items and brought them to the public's attention. I also pay tribute to Derbyshire county council's trading standards department, which made renewed and persistent efforts to ensure that some regulations were introduced.
One of the problems is that most of these items are made for children and are therefore pocket-money items. They are obtained through swaps, too, and are extremely difficult—just about impossible—for parents to control, even for those who make every effort to supervise and control what their children buy. These articles look nice, look like food, and smell nice. We have all been sent a model snail by a company which readily admits that it stands to lose £140,000 in written-off stock. The point is that in support of its case it did not send us the strawberry smelling of strawberries, the—
Mr. Ashby: Will my hon. Friend give way?
Mrs. Currie: I shall not give way, as there is not time. That company did not send in support of its case an eraser that looks like a piece of candy and smells of mint, or a snail that smells of snail. If it had it might have better proved the point. I suspect that we all ended up knowing exactly what my hon. Friend the Member for Harrow, West (Sir J. Page) uses in his bath, because that company sent us a snail that smells of lemons. That is dangerous, because when small children smell it, the first thing that they will do is put it in their mouths to see whether it is food. The younger the child, the greater the danger. If such items are put in children's mouths, their size makes them dangerous. Anyone who has been with a choking child knows that it is a terrifying experience. Choking can cause not only brain damage, but death. It is not good enough to ask how many deaths. Our answer should surely be "as few as possible".
It is argued that other things cause problems — I accept that they do—but these items are new and are not traditional. They create a new hazard to which the public have reacted very strongly. They expect Parliament so to react as well. Secondly, because these articles are designed to be like food, they are designed to deceive, and they will do so. They will specifically deceive small children who do not know any better. Thirdly, just because some other goods are dangerous, these items should not be condoned. We are not excused from taking action to ban smelly rubbers just because something else is

301
dangerous. This is a dangerous world for children, and this one small specific move to tackle a particular problem is welcome.
I seem to have made several paternalistic speeches this week. Normally, I am a great believer in caveat emptor and I prefer to emphasise the responsibility of individuals for their own welfare and that of their families. My support for such measures is, therefore, only given with caution. In this case, I believe that the Government are right, and I urge hon. Members to support these regulations.
11.45 pm
Mr. David Ashby: There has been great misunderstanding in this debate. I intervened—so I did not have to make a speech—to correct that misunderstanding. It must be understood that the trade does not object to the strawberry that smells like a strawberry, to the sweet that smells like a sweet or to any of those items. It is easy to frame regulations to cover those items. When some larger different object that does not look like a sweet or food has a scent that enables traders to sell it, I do not believe that it can be harmful. I agree with my hon. Friend the Member for Grantham (Mr. Hogg) that the regulations should be changed to include those types of items, and I believe that there is across-the-board agreement on that point among Conservative Members.
We must realise that we are talking about a small trade in which many people have small amounts of money tied up. By and large, small entrepreneurial companies will suffer greatly from the effect of these regulations. Employment is involved and employees will be affected by this legislation. This is the most ill-advised legislation I have come across during my 18 months as a Member.
This is a classic example of the Minister deciding on a measure and then finding an argument to match it. My hon. Friend the Under-Secretary of State has decided that these objects are dangerous. My hon. Friend has told us of 16 cases of erasers stuffed up noses or down mouths. Yesterday, a written answer about objects swallowed showed that in the catogory
"Other articles recorded less than 10 times, including erasers" —[Official Report] 14 January 1985; Vol. 71, col. 21.]
only one article was swallowed in 1984.
Mr. Fletcher: What about items put up the nose?
Mr. Ashby: My hon. Friend tells me that I have not included items put up the nose. They are included in those 16 cases. What will happen when I ask my hon. Friend for the same sort of figures for marbles, money and other items stuffed up the nose? Vast quantities of items seem to be stuffed up noses.
As any parent knows—I have a child—small objects are a danger to children. Parents are vigilant about keeping small objects away from their children. It does not matter whether those items smell of flowers or food — they must be kept from children.
Mr. Hogg rose—
Mr. Ashby: I shall not give way. One must be vigilant: one knows of the dangers of any item in the hands of children.
I am worried most by the way in which the new regulations have come about. My hon. Friend the Under-Secretary of State told us that the measures are an
302
extension of the existing emergency regulations, and they certainly are that. I have said that this is a classic example of the Government deciding on an action and then finding arguments.
Mr. Hogg rose—
Mr. Ashby: I shall not give way. A letter dated 29 March 1984 was sent in vast numbers to toy manufacturers and retailers. That letter by Mr. Rider, which was headed "Scented Children's Products", stated:
"You may know that in the recent debate in Parliament on the Scented Erasers (Safety) Order 1984, the Minister indicated that consideration would be given to the need to make regulations covering such products on a permanent basis, because of continuing concern about their scent."
The crucial point followed:
"Although medical opinion has not so far established any link between the smelling of scented products and glue sniffing, commonsense suggests that the addition of a scent to children's non-food products (except toiletries which children do not generally use in play) must encourage children to smell them for pleasure and thus carries a possible risk in that it may lead to something more serious,"
What did the official of the Minister's Department mean by that letter? Although one might say that there is no real link, I suggest that there was an attempt there to link any sort of scented object, including flowers, to glue sniffing. The object was to establish in the minds of the people the thought that once one started sniffing a scented rubber, the next step was glue sniffing. It is the most ridiculous argument I have ever come across.
Mr. Robert Banks: I challenge my hon. Friend on the point he is making. He underestimates the amount of parental opinion that believes that there could be a link between sniffing these rubbers and glue sniffing. The scents used in these items are particularly pungent. Children develop a kind of addiction to them. If one talks to teachers, one hears that they have had a major problem with children who have sniffed rubbers continually through lessons.
Mr. Ashby: Can one really suggest that children become addicted and that the next step is glue sniffing? The nose is a vital organ. [Interruption.] There is taste and smell, but why on earth should these products be singled out from among the millions of pleasurable smells, including scented flowers, that exist? One need only go to a garden designed for the blind to realise the beauty of scented flowers.
Perhaps teachers should realise that children are constantly developing their senses. That is part of their education. Having something to hand to smell is a development of the sense of smell. [Interruption.] I appreciate that this is a subject of some mirth; it is bound to be because of the connotations that arise. As I say, smell is part of children's education and I should expect them to explore smells.
The argument that is being adduced for extending these provisions is designed to create a sense of fear. We are being asked to go far beyond what is required amd what commonsense dictates. If the instrument were confined to objects that look and smell like food, nobody could object, but it goes much further, and, for that reason, I shall oppose it.
11.54 pm
Mr. Eric Forth: This is one of those profoundly disappointing and disagreeable occasions when one is left thinking that it is a sad day if this is all that the Government have to concern themselves with.
Other hon. Members have pointed out that, as parents, when they have found their young children in the process of eating these objects, they have stopped them doing so. That surely is where the primary responsibility for such matters has lain and will always lie. It is not for the House to try to usurp the role of parents in watching what their young children are doing before they reach the age at which they can make a sensible decision for themselves.
The Minister cited, as is often the case when it suits. other countries which had done this and said that this was therefore an excellent reason for doing it. He mentioned Greece. I for one am not always anxious to follow everything that the Greeks do in such matters. This sits ill with the fact that just last night in the debate on the fluoridation of water we were told that, in spite of the fact other countries did not fluoridate their water, we would go ahead and do it.
The Government must make up their mind about whether they wish to pray in aid what other countries do. I am prepared to follow one course or the other but I am damned if I shall follow both. For that reason, and for many others given by my hon. Friends, I shall not be supporting this nonsense.
11.56 pm
Mr. Jeremy Hanley: It is the Government's job to try to protect people for whom they have a responsibility. They also have a duty to spot those items which are manufactured deliberately to try to entice young people, particularly when it gets to the stage that such items form part of a craze, as notified to many of us by school teachers.
In the Second Standing Committee on Statutory Instruments on 7 March I pointed out to my hon. Friend the Under-Secretary of State that at that stage 50 million scented erasers were already in circulation and were not being banned or withdrawn because of the regulations. I asked my hon. Friend whether in the year following he would come back with statistics to show exactly how many of them had caused accidents. My hon. Friend the Member for Grantham (Mr. Hogg) talked about common sense and probabilities. Out of these 50 million I wonder when one ingested by, according to Hansard, "persons of any age" in the past 11 months has been a proven danger to people under the Government's responsibility.
I am disturbed about these regulations because they extend further than most people want the Government's protectionist arm, but it is the Government's duty to recognise dangers when they exist. Therefore, I would not vote against the Government, because it is their duty to protect people through consumer legislation, and they do not do so often enough. However, I cannot support the regulations because I do not believe the case is proven in this instance.
Question put:—
The House divided: Ayes 183, Noes 13.

Division No. 66]

[11.57 pm

AYES

Alexander, Richard

Baker, Rt Hon K. (Mole Vall'y)

Ancram, Michael

Baker, Nicholas (N Dorset)

Atkins, Robert (South Ribble)

Baldry, Tony

304

Banks, Robert (Harrogate)

Hind, Kenneth

Banks, Tony (Newham NW)

Hogg, Hon Douglas (Gr'th'm)

Batiste, Spencer

Holland, Sir Philip (Gedling)

Beaumont-Dark, Anthony

Holt, Richard

Beith, A. J.

Hooson, Tom

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

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

Benyon, William

Howarth, Gerald (Cannock)

Bermingham, Gerald

Howell, Ralph (N Norfolk)

Best, Keith

Howells, Geraint

Bevan, David Gilroy

Hubbard-Miles, Peter

Blackburn, John

Hughes, Simon (Southwark)

Boscawen, Hon Robert

Hunt, David (Wirral)

Bottomley, Peter

Hunter, Andrew

Bottomley, Mrs Virginia

Jopling, Rt Hon Michael

Bowden, Gerald (Dulwich)

Kennedy, Charles

Boyes, Roland

Key, Robert

Brandon-Bravo, Martin

King, Roger (B'ham N'field)

Bright, Graham

Knight, Gregory (Derby N)

Brinton, Tim

Knowles, Michael

Brooke, Hon Peter

Knox, David

Brown, M. (Brigg & Cl'thpes)

Lang, Ian

Browne, John

Latham, Michael

Bruce, Malcolm

Leigh, Edward (Gainsbor'gh)

Bruinvels, Peter

Lester, Jim

Burt, Alistair

Lilley, Peter

Butterfill, John

Lloyd, Peter, (Fareham)

Callaghan, Jim (Heyw'd & M)

Lord, Michael

Carlile, Alexander (Montg'y)

McCurley, Mrs Anna

Carlisle, Rt Hon M. (W'ton S)

McKay, Allen (Penistone)

Carttiss, Michael

Major, John

Cash, William

Marlow, Antony

Chalker, Mrs Lynda

Mather, Carol

Channon, Rt Hon Paul

Meadowcroft, Michael

Chope, Christopher

Michie, William

Clark, Dr Michael (Rochford)

Mills, Iain (Meriden)

Clarke, Rt Hon K. (Rushcliffe)

Moynihan, Hon C.

Cockeram, Eric

Neale, Gerrard

Cohen, Harry

Nellist, David

Conway, Derek

Neubert, Michael

Coombs, Simon

Page, Sir John (Harrow W)

Cope, John

Patchett, Terry

Couchman, James

Peacock, Mrs Elizabeth

Craigen, J. M.

Powley, John

Cranborne, Viscount

Rhodes James, Robert

Currie, Mrs Edwina

Roberts, Wyn (Conwy)

Davies, Ronald (Caerphilly)

Robinson, Mark (N'port W)

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

Roe, Mrs Marion

Dicks, Terry

Rowe, Andrew

Dorrell, Stephen

Sackville, Hon Thomas

Douglas-Hamilton, Lord J.

Sainsbury, Hon Timothy

Dover, Den

Sayeed, Jonathan

Dunn, Robert

Shelton, William (Streatham)

Durant, Tony

Shepherd, Colin (Hereford)

Eastham, Ken

Silvester, Fred

Eggar, Tim

Skeet, T. H. H.

Evennett, David

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

Fallon, Michael

Smith, Tim (Beaconsfield)

Farr, Sir John

Soames, Hon Nicholas

Favell, Anthony

Soley, Clive

Fenner, Mrs Peggy

Speed, Keith

Fletcher, Alexander

Spence, John

Forsyth, Michael (Stirling)

Spencer, Derek

Franks, Cecil

Spicer, Jim (W Dorset)

Fraser, Peter (Angus East)

Stanbrook, Ivor

Freeman, Roger

Steen, Anthony

Gale, Roger

Stern, Michael

Galley, Roy

Stevens, Lewis (Nuneaton)

Gow, Ian

Stevens, Martin (Fulham)

Gregory, Conal

Stewart, Allan (Eastwood)

Ground, Patrick

Stewart, Andrew (Sherwood)

Grylls, Michael

Stradling Thomas, J.

Hargreaves, Kenneth

Sumberg, David

Harris, David

Terlezki, Stefan

Hawkins, C. (High Peak)

Thomas, Rt Hon Peter

Hawksley, Warren

Thompson, Donald (Calder V)

Hayes, J.

Thorne, Neil (Ilford S)

Hayward, Robert

Thornton, Malcolm

Heathcoat-Amory, David

Thurnham, Peter

Heddle, John

Tracey, Richard

Henderson, Barry

Trippier, David

305

Twinn, Dr Ian

Wilkinson, John

van Straubenzee, Sir W.

Williams, Rt Hon A.

Viggers, Peter

Wolfson, Mark

Walden, George

Wood, Timothy

Wallace, James

Yeo, Tim

Wardle, C. (Bexhill)

Young, Sir George (Acton)

Wareing, Robert

Watson, John

Tellers for the Ayes:

Watts, John

Mr. Tristan Garel-Jones and

Whitfield, John

Mr. Archie Hamilton.

Whitney, Raymond

NOES

Amess, David

Jones, Robert (W Herts)

Fairbairn, Nicholas

Shepherd, Richard (Aldridge)

Forth, Eric

Taylor, Teddy (S'end E)

Fox, Marcus

Wheeler, John

Garrett, W. E.

Griffiths, Peter (Portsm'th N)

Tellers for the Noes:

Harvey, Robert

Mr. David Ashby and

Hawkins, Sir Paul (SW N'folk)

Mr. Patrick Thompson.

Jones, Gwilym (Cardiff N)

Resolved,
That the draft Food Imitations (Safety) Regulations 1985, which were laid before this House on 11th December, be approved.

PETITIONS

  Sub-post offices (Liverpool)
  12.9 am
  Mr. Robert N. Wareing: I have a petition from over 1,000 of my constituents who are seriously affected by the closure or threatened closure of sub-post offices in the city of Liverpool. Their petition reads as follows:
  Wherefore your petitioners pray that your Honourable House

  (i) will accept that the requirement in Liverpool is for a widely distributed network which is accessible and provides a basic range of services through staff who relate well to the many less able and disadvantaged members of the community, particularly the elderly and other recipients of state benefits, who use Post Offices and who are themselves part of the local community;

  (ii) will agree that the need is for a strategy to be developed which looks at the provision and distribution of Post Office facilities in relation to the real needs of the customers in the City, rather than one based purely on the pursuit of efficiency and high technology and of Government imposed financial targets;

  (iii) will request Her Majesty's Secretary of State for Trade and Industry to draw the contents of this humble petition to the attention of the Post Office and to direct the Post Office to prepare for approval by him a revised strategy for the future of the Post Office counters network which has full regard to the issues raised in this humble petition; and

  (iv) requests the Secretary of State to direct the Post Office to cancel all closures proposed or agreed under its existing strategy.

  And your petitioners, as in duty bound, will ever pray etc.
  I hope that the Department of Trade and Industry will take cognisance of what I regard as a serious petition.
  To lie upon the Table.

  Human Embryos
  12.11 am
  Mr. Neil Thorne: I have two petitions, Mr. Deputy Speaker. They are in identical terms. One is from 754 of my constituents, and the other from 39 of my constituents. The petitions are for the protection of the human embryo, and they read as follows:
  The humble petition of the residents of the constituency of Ilford, South showeth that we affirm that the newly fertilised embryo is a real, living individual human being.
  Therefore we welcome the statement in the report of the Committee of Enquiry into Human Fertilisation and Embryology (the Warnock report) that "the status of the embryo is a matter of fundamental principle which should be enshrined in legislation", and its recommendation that the embryo of the human species should be afforded protection in law.
  And therefore oppose all such practices as are recommended in the report which discriminate against the embryo or violate his/her human dignity and right to life.
  Wherefore your petitioners pray that the House of Commons will take immediate steps to enact legislation which forbids any procedure which involves purchase or sale of human embryos, the discarding of human embryos, their use as sources of transplant tissue or as subjects for research or experiment (unless this is done solely for the benefit of the embryo concerned).
  And your petitioners, as in duty bound, will every pray etc.
  The larger petition was sought by Mrs. Julie Silversides of St. Thomas vicarage, Burnside road, Dagenham in my constituency, assisted by Mr. B. K. Tully of 230 Ashburton avenue. The smaller petition was obtained by Mr. Peter Martin of 107A Kinfauns road, Goodmayes. I

  307
  wish to associate myself entirely with the sentiments of the petitions, and I hope that the Government will take due note of the genuine and proper interest in this matter.
  To lie upon the Table.

  Aire Valley Trunk Road
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Durant.]
  12.15 am
  Mr. Marcus Fox: The petitions being out of the way and the aroma of scented erasers having disappeared, perhaps I can turn the attention of the House to a very pressing issue for my constituents — the Bingley to Shipley section of the Airedale route. I am delighted to see my hon. Friend the Minister of State, Department of Transport on the Front Bench. She is in line for winning the record for responding to Adjournment debates. I hope that this will be a bonus for her, in that after she has listened to me she will not only be better informed but will take the right decision.
  May I ask the Minister of State to imagine that she is a resident of Saltaire, a village in my constituency. Not only would she have the good fortune to live there and have me as her Member of Parliament but she would live in a unique environment, thanks to Sir Titus Salt, who in 1851 started to build his mill and a village for his employees. The mill is still producing worsted cloth. It is an historic landmark, a planned settlement of greater scale and complexity than anything which had been attempted before. He moved about 2,000 people away from the hideous 19th century conditions of Bradford — open sewers and disease—to what they thought was a new Jerusalem. And it should still be a new Jerusalem. It is situated three miles from the city of Bradford in a beautiful valley and open countryside. It was a marvel of its day. I am delighted that my hon. Friend the Minister of State, Home Office, is in the House. As my neighbour, he knows all about Saltaire. It attracted foreign dignatories not just from Europe but from further afield. Saltaire was copied in Britain. I mention Port Sunlight and Bournville as examples.
  Today the village is largely intact: the great mill, the church, the institute hospital, the school and the almshouses but, above all, the terraced houses in their hundreds, loved by those who live in them, many of whom now own their houses. They are stone built and most of them are without gardens. They have only a small yard at the rear. Sir Titus deemed that the park and the surrounding countryside were the garden of his village.
  In that context it is important to look at this area. It is no wonder that this is a conservation area that is visited by thousands every year. Our part of Yorkshire is not renowned for attracting tourists. The city of Bradford has managed extremely well by winning one or two awards. It is interesting that the two jewels in Bradford's crown are Saltaire and Haworth, which is part of the Bronte country. It is a haven of peace and tranquillity to so many of my constituents who have no other open space as part of their environment.
  I should tell hon. Members about Roberts Park and its sporting facilities. There are 12 sports clubs, four league cricket teams, two hockey pitches, two indoor sports centres and three football grounds, not to mention tennis courts. The river and canal and all the amenities are an attraction for many. But in this narrow valley there is a continuous fight for space. It is indisputable that the physical form of this valley causes special problems. It contains a river, a canal, a railway, a road and this village as it exists. To talk about any other expansion is

  309
  inconceivable. I know that my hon. Friend the Minister of State is aware that I am not exaggerating. She has visited the area and is on record as saying, "I see this as one of the most difficult road problems in Britain."
  Imagine, therefore, with what joy my constituents greeted the Minister's decision in 1982 to say no to any route through Saltaire, following his inspector's report. That ended 12 years of blight.
  That opinion was reinforced only last year with the opening of a new railway station in April at a cost of £189,000. I think that we even got some European money, but I do not press that too hard. It was wholly in keeping with the area. We even had gas lamps to ensure that it fitted into our conservation area.
  All that was shattered one month later when the Department reopened the whole matter with the present proposals. Everything is now back in the melting pot.
  May I remind my hon. Friend of the results of the last inquiry? I do not need to remind her of the circumstances. The previous inquiry had been abandoned because of disruption. In fact, it was a cause celebre. I remember it as a Member of Parliament. I seem to remember one or two people coming to my advice bureau demanding that I should support them in their disruption, but I told them that I would have no part of it. I said that they should go through the consultation processes, which, of course, we did.
  Robert Chance took on an invidious job as the next inspector. He impressed everyone with his dedication. He walked every foot of the route and concluded, on page 273, paragraph 670:
  "I can do no other than say no all the way from Dowley Gap to Baildon."
  He said that no new route was needed east of Bingley and that the existing choice was adequate from Cottingley Bar—that traffic should be kept on the A650 to Bradford and Leeds or take the B6269 for Bradford west and the motorways.
  There is no doubting his conclusion that the Airedale route should end at Cottingley Bar rather than go through to Baildon. He also confirmed that the claim that new jobs would be created had not been proved and that no substantial benefit of that kind would occur. His words were:
  "would aid neither economic recovery or development in the valley."
  Indeed, the Department accepted that the result would be a
  "limited effect on industrial location and growth."
  In other words, the only purpose of the extension of the Airedale route would be to move traffic quicker—in other words, that any price is worth just that. Well, the car is not God to all of us. It may be to some people, but there is a price that is too high to be paid. There must be a balance between progress and the environment.
  Traffic from Skipton down into Bradford crawls even slower in Bradford than it does on the route down. What is the point in having all the improvements if, at the other end in Bradford, the situation is just as bad?
  The only argument left is that the weight of traffic demands such a measure. What does Mr. Chance's assessor have to say about that? An expert traffic assessor sat with Mr. Chance and they both agreed that the traffic levels did not warrant a new road between Dowley Gap and Baildon. In fact, the assessor said:
  310
  "If the new road on this section—
  east of Bingley—
  "had been the county's responsibility, they would not have been able to justify such a large scheme against other transport priorities."
  Nothing has changed since. Even the Department has conceded that since the last inquiry there is no new evidence of a substantial or material increase in the volume of traffic passing between Bingley and Shipley or, indeed, along the Aire valley route, other than any projected increase already taken into account by the inquiry of 1980–82.
  People say that perhaps to finish the traffic at Cottingley Bar is not the answer, but the assessor showed that it is only at Cottingley Bar that there is any suggestion of overloading. He said that even by current traffic levels there was little congestion by national standards.
  I am not an absentee landlord or absentee Member of Parliament. I live in Bingley, so I am well aware of every part of this route. I speak with feeling. As I drive from Shipley towards Bingley and get to Cottingley Bar I have every reason to turn right, leaving the A650 to continue towards Bradford west and the motorway. That road could take any proposed increase in traffic. The assessor said that the Saltaire roundabout should be given traffic lights which could deal with a greater flow. He had no doubt that the diversion of traffic at that point would help tremendously.
  Councillors in my part of the world are not popular at the moment. Officers of the West Yorkshire metropolitan county opposed the ending of the road at Cottingley Bar on the ground that it conflicted with its policies to move traffic from Manningham and Girlington. They were unable to produce evidence to show that building the road east of Bingley would remove a significant volume of traffic from those areas.
  Only 18 per cent. of the traffic in Toiler lane and 20 per cent. in Manningham lane comes from the Aire valley. As one moves further into Bradford the proportion is even less. Yet that was the main reason for opposing the ending of the route at Cottingley Bar.
  Where is all the pressure coming from? Is it from the Department of Transport or from the West Yorkshire metropolitan county? The latter will not be around for long, fortunately. Is it from the Bradford district council? Surely it cannot want a route that divides a village from its open space or another that would result in the demolition of much needed houses.
  The brown and green routes are unthinkable. We hear about the wonderful proposal that there should be a tunnel under Saltaire. I do not know about the cost, but I know about the upheaval and desecration which cannot be contemplated. The pollution that it would create is a separate issue which I do not have time to develop tonight.
  I do not know what our councils are playing at. At the last inquiry it was argued, in favour of the new road, that the increase in traffic would be 1 per cent. per annum from 1975 onwards. Yet through Manningham, where they claim that they are trying to avoid increased traffic, there has been a I per cent. increase since the inquiry.
  Even their own publications do not help their case. We are not talking about a commuter belt in the most opulent part of Surrey or even opulent parts of Yorkshire or Cheshire. In the last census City Trends shows that car ownership has declined by 10 per cent. in the last 10 years. The area is bottom of the list of areas with households

  311
  which do not have a car. Apparently 49.5 per cent. of households in the area do not have a car. Recent announcements claim that the mileage of private car owners decreased by one third.
  There is only one solution, and it is not the amended yellow route. I am talking about inspector Chance's route 33. He had the right solution. Everyone accepts that it is a local traffic problem. The access and exit points would not he ideal for the bulk of the traffic.
  What happens during school holidays? At peak times there are problems, but there are no problems at times when traffic is not excessive. I do not disagree with the Department's suggestion that round Cottingley Bar there may be flexibility. Recently Mr. Chance said that the Department of Trade and Industry did not suggest his route, and that the last thing he wanted was to leave traffic with the only option of going through the middle of Shipley. The traffic must have a choice of turning left, going straight on on the A650, or of turning right up Cottingley New road.
  I could make many suggestions of ways to improve the traffic flow. Problems are caused only on three major junctions and one roundabout. Much could be done to improve that with a little foresight. The truth is that other road schemes should come first. At the last inquiry an assurance was given that the construction of the Bingley to Baildon section would not be permitted until the Shipley eastern bypass had been approved.
  The Minister's Department would do well to consider the congestion in Bradford. A Bradford inner ring road should be constructed. We should also consider the dualling and upgrading of Valley road and Canal road, and the construction of the Shipley eastern bypass. Furthermore, we should proceed with the remainder of the Airedale trunk route terminating at Cottingley Bar.
  There is a limit to what can be sacrificed to traffic. Our heritage and environment are priceless. The problem with the Bingley to Shipley section is that, given the lie of the land and concentration of housing, it is impossible to build a new road along the valley bottom without totally unacceptable long-lasting environmental and social damage.
  I have received hundreds of letters from my constituents about the matter, among which is one from a constituent who lives at 261 Bingley road, Saltaire. He wrote:
  "As a resident on the existing A650 earning a living driving lorries throughout Bradford and the Aire Valley, I can in no way find any justification for either the expense of the new road or what I regard as the desecration of a most beautiful and unique area."
  12.32 am
  The Minister of State, Department of Transport (Mrs. Lynda Chalker): I am grateful to my hon. Friend the Member for Shipley (Mr. Fox) for the opportunity to discuss the Aire Valley trunk road. I have listened to his speech with great care. I am fully aware of the beauties of Saltaire, as I have visited it. I also know what a difficult valley it would be, especially its eastern end, in which to lay a road.
  Our commitment to the Airedale route has not changed. I look forward to the day when we can make a start on the new road where it is needed. However, we need to improve conditions for many communities along the existing road, because for a long time local people have suffered. We want a safer road for all users and a better route for the traffic with improved access for industry.
  312
  I know that progress has been slow. I well understand some of the impatience expressed during the years. With the public inquiries in 1975 and 1980 and the inquiries into side roads and compulsory purchase orders, which have been held but on which decisions have not yet been announced, the matter has taken its natural course through our public inquiry procedures.
  It is difficult with any valley road to locate it so that it offends no one. Space is limited, and the environment is truly sensitive. That is another reason for the slow progress. In 1982 a firm decision was taken on the road from Kildwick near Skipton to Keighley, and from Keighley to Bingley. I know how keen my hon. Friend the Member for Keighley (Mr. Waller) is that those sections should be built, and I believe that my hon. Friend the Member for Shipley agrees with that. I am glad to repeat the assurance that I gave on 6 May 1983 that the Aire valley road will not end in what is now a car park at Bingley. We must resolve what happens thereafter.
  The key decision, as my hon. Friend said, will be the line of the road to the east of Bingley. May I explain the background to the public consultation that took place in 1984 about the section of the route that rightly concerns not only my hon. Friend the Member for Shipley but my hon. Friend the Minister of State, Home Office—the hon. Member for Pudsey (Mr. Shaw)—who has had to return to his Committee, and many of their constituents. I understand what it must be like for people in Saltaire and neighbouring areas to hear about various ideas and not to know whether they will be pursued. I am only too well aware that, in trying to obtain an acceptable solution, one runs the risk of the various options causing concern to residents in the area. We must end that as soon as we can. Since 1982, we have said that the new road will end at Cottingley Bar and that with the local authorities we shall reconsider ways of solving the traffic problems in Shipley and Manningham. My hon. Friend was right to say that before we can consider the Shipley eastern bypass, we must decide what will happen on the way there from the Aire Valley route.
  What happened—it took some time—was that a joint working party was set up with West Yorkshire metropolitan county council and Bradford metropolitan district council to consider the problems. Surprise, surprise: they discovered that there were no easy solutions. They came up with some alternative routes for the section. I have made it clear all along that I am prepared to consider anything that is fresh and acceptable. That is why we went to a joint exhibition — not without some anxieties, I freely admit. We believed it right to give local people a further opportunity to offer their views on the schemes put forward by the councils.
  Three routes were proposed. The yellow route. which ended at Cottingley Bar, was similar but not identical to that recommended by Inspector Chance following the 1980 inquiry. The working party believed that that was, on the whole, an improvement. It put forward two other routes that passed through the corridor to the north of Saltaire and Shipley, the green one ending at Baildon and the brown one ending at Shipley. They were not the Department's routes; they came from the working party that was seeking a solution. Most importantly, we wished to discover whether anyone had fresh ideas to deal with the problems of this most difficult section. It is important to stress that this consultation does not mean that the 1982

  313
  decision has been set aside. We are trying to find a way of dealing with the traffic once it gets to Cottingley Bar, and I know that my hon. Friend is aware of that.
  We have had a strong public response in the form of completed questionnaires, letters to me personally, and petitions, as a result of our consultation. We have not yet finished collating all the details that have been sent, but we shall do so as quickly as possible. It is clear that many people have deep feelings and that there is much anxiety about the matter. Therefore, we must come to a decision as soon as possible. However, I wish to ensure that all representations are considered. I wish to consider the precise alignment recommended by Inspector Chance before we come to a conclusion on a preferred route beyond Cottingley Bar.
  I remind my hon. Friend of our correspondence about Bradford and Bingley rugby football club, starting on 27 March last year. The club is worried about what happens at Cottingley Bar, because that is where its playing fields are. I have also three times extended the time for the responses to the suggestions. In October last year, west Yorkshire and Bradford councils came forward with a fresh option, the so-called modified green route.
  Many representations have been made about this route, and I am well aware of the concern. I take this opportunity to thank the hundreds of people and organisations who have responded. I hope that my hon. Friend will pass on my thanks to every individual and in particular to the Aire valley preservation society, the Saltaire village society, the Coach road and Lower Baildon residents association and, more recently formed, the sports clubs against the road. All of these bodies have put their views clearly. They have put in a lot of effort, and we now have what we were seeking from consultation—an expression of views and a response from both local authorities and the public.
  I shall now be required to exercise the judgment of Solomon, and I am not in a position to do so at this hour of the night. However, despite the weight of representation, I am determined that we shall announce a decision as soon as possible, and I hope to be able to talk to my hon. Friend and announce a decision as soon as possible. That is my aim and I shall do my best to keep to it.
  Not only should we be ending the uncertainty we need to make progress on the other sections, and so much of that depends on the route east of Bingley. In particular, there is the section to the east of Crossflatts, where a decision on advance works to Bingley is outstanding. In November
  314
  1983 there was a public inquiry, but no announcement will be made on the preferred route east of Bingley, because that is the fair way to go.
  Other Airedale decisions are outstanding. A public inquiry into side roads and compulsory purchase orders has to be sorted out. I shall not anticipate the outcome, but I am anxious to make a tangible beginning. I confirm again our commitment to improving conditions in Airedale, and also to making the right decisions because of the understandable sensitivity of a historic community in Saltaire and the area. I hope that my hon. Friend will accept how much I value the keen interest that he and my hon. Friend the Member for Pudsey have shown in the matter. I am concerned not only about the protection of the environment, but about all the particular interests. I have a great sheaf of letters of cases that hon. Members have raised with me.
  I recognise that the advance works proposed and the works on the main route through Bingley will cause parking problems. Therefore, the concern expressed to my hon. Friend the Member for Shipley by the Bingley chamber of trade is understandable. Obviously, the Department will pay appropriate compensation to owners for loss of land, but Bradford council will have to provide the necessary replacement car parking if any is taken away. We shall continue to discuss the problem if the council and my hon. Friend find that valuable.
  I have mentioned Bradford and Bingley rugby club. It is too early to decide whether it will be affected in any way, but I have noted its views, as I have noted those of Mrs. Sharp of Cottingley Bar, and so many of the others who have written to us. The next step will be to announce the preferred route decision. Only after that can we begin the detailed preparation of the chosen route with the aim of publishing proposals as soon as we can. I cannot say when that will be, but I must emphasise that, whichever route is chosen, people will have another opportunity to comment and, if they wish to, object or propose alternatives.
  I assure my hon. Friend that the many and varied interests that he has so cogently put forward on behalf of his constituents will be taken fully into account in reaching both the decision immediately before us and those that will subsequently follow. I hope that that will help and that we shall come to a decision as soon as we possibly and fairly can.
  Question put and agreed to.
  Adjourned accordingly at sixteen minutes to One 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 Oxford.

Middle East Peace Initiatives
Lord Molloy: 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 efforts they are currently making to seek a just and peaceful solution to the problems of the Middle East.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, we are ready to support constructive moves by the parties directly concerned towards negotiated solutions of the area's problems. Together with our partners in the Ten we intend to remain active on the basis of our well-known balanced approach.
Lord Molloy: My Lords, may I thank the noble Baroness for, and congratulate her on, that reply? Would she not agree that it is now very urgent indeed that Britain throws her weight quite openly behind Iraq in trying to end the appalling situation there? Is she further aware that the admirable endeavours of the British Foreign Secretary to try and guarantee safety for all the lands in the Middle East, Israel and the Arab states, and his remarks that that can only ultimately be achieved when the settlements are given back to their rightful owners, will help enormously in trying to achieve peace?
Baroness Young: My Lords, I agree that there is an urgent need for early progress, and we shall remain active and ready to support initiatives by the parties.
Lord Cledwyn of Penrhos: My Lords, can the noble Baroness say whether she has any information about the latest intentions of the Israeli Government to withdraw Israeli troops to the Litani River? Are Her Majesty's Government in favour of this move? Will she recall the visit of her right honourable and learned friend the Foreign Secretary to the Middle East in October when he said that he would personally do all he could to advance the cause of peace in the area? That is something which we warmly support. Is she able to say whether any initiatives have been taken by him since then?
Baroness Young: My Lords, I understand that the Israeli Government want an early withdrawal from Lebanon and so indeed do the Lebanese; but there is need for agreement between the parties on security arrangements. On the second part of the noble Lord's question, I do not think that I have anything further to add to what I have already said in answer to the original question.
Lord Cledwyn of Penrhos: My Lords, has the noble Baroness any information about the latest intentions of the Israeli Government to withdraw unilaterally to the Litani River in the light of the breakdown of the recent talks?
Baroness Young: Yes, my Lords, the Israeli Government do want an early withdrawal. We hope in fact that we shall achieve success under the military talks now taking place at Naqoura, and where Mr. Brian Urquhart, the United Nations Under-Secretary-General, is visiting the area.
Lord Gladwyn: My Lords, if I understand the position correctly, there are certain indications in the press this morning that the Americans and the Russians might conceivably be getting together to talk about Middle Eastern questions. If that proves to be true, will the Government do everything possible to foster such an initiative which may well be the hope of the future?
Baroness Young: Yes, my Lords. We believe that the United States has a crucial role to play, and we are glad that at the 1984 United Nations General Assembly President Reagan confirmed his proposals of 1st September 1982.
Lord Molloy: My Lords, would the noble Baroness not agree that if the United States of America were to move considerably closer to the admirable viewpoint expressed by the British Foreign Secretary, that too would make a magnificent contribution to easing the situation in the Middle East and the establishment of a just and honourable peace?
Baroness Young: My Lords, I am glad to hear the tribute paid to my right honourable and learned friend the Secretary of State who has done what he can to help a settlement in the Middle East. I confirm that we believe that the United States has a crucial role to play in any settlement.
Lord Mayhew: My Lords, can the noble Baroness confirm that the Government still support the principle of the Venice Declaration—in particular the recognition of Israel by the Arabs—and on the other hand self-determination for the Palestinians on the West Bank, and the participation of the PLO in peace negotiations?
Baroness Young: My Lords, I can confirm that we still support the Venice Declaration; and that was what was implied when I said that we supported a balanced approach to the problem.
Lord Tordoff: My Lords, in reply to my noble friend, the noble Baroness indicated that the Government supported the United States involvement in this matter; but she gave no indication of her views on the involvement of the Soviet Union, which was the subject of part of my noble friend's question.
Baroness Young: My Lords, I think it is recognised that it is crucial that there should be the involvement of the United States in any solution in the Middle East.
Lord Tordoff: My Lords, I am sorry to press the noble Baroness, but the specific question was: what was her view on the involvement of the Soviet Union in that process as well?
Baroness Young: My Lords, the Soviet Union, too, clearly has an interest in peace in the Middle East.
The Earl of Onslow: My Lords, is the subject of this question not so wide and so varied that it would be much more suitable for a debate than for it to be discussed at Question Time, when one is trying to extract information from Her Majesty's Government? It is a much more suitable subject for a 2½ hour debate.
Baroness Young: My Lords, I should like to thank my noble friend for his supplementary question. It is a very wide subject.

NHS: Drug Prescribing
2.44 p.m.
Lord Kilmarnock: My Lords I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will withdraw their proposed limited list for National Health Service prescription drugs, in favour of the recommendation contained in paragraph 24 of the Greenfield Report on Effective Prescribing.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Glenarthur): No, my Lords. The Government are committed to the introduction of a limited list of less important drugs for the National Health Service. A limited list will result in substantial savings to the National Health Service for better patient services which generic substitution would not, and avoids the problems of divided professional responsibilities for patient care which generic substitution can entail.
Lord Kilmarnock: My Lords, that is a disappointing reply. Would the noble Lord not agree that the course which has been chosen by the Government goes completely contrary to recommendation 25 of their own Greenfield Committee which included six representatives of the department in its 14-man membership? Is it not the case that this list has been widely criticised as being both clinically and pharmacologically inept and liable to cause widespread suffering if it is implemented on 1st April? Perhaps more important, is it not the case that there are now indications that most of the interested parties will be prepared to settle for the Greenfield proposals, and in the circumstances will the noble Lord's department not seize the opportunity to get an agreed system of generic substitution which all parties can subscribe to in the interest of patients?
Lord Glenarthur: My Lords, so far as recommendation 25 of the Greenfield Report is concerned, times have moved on since then, as the noble Lord will be aware. Our present proposals are the result of a study
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of the whole subject which has been undertaken in great depth since 1981 in the light of experience not only here, but also in other countries. As a result we have evolved a scheme which not only provides value for money for the taxpayer, but also ensures that effective medicines remain available for doctors to prescribe for their patients under the National Health Service.
Lord Ennals: My Lords, may I put two questions to the Minister? First, bearing in mind the strong condemnation of the Government's proposals by the British Medical Association, the pharmaceutical industry, the pharmacists and those who speak on behalf of the elderly and infirm, what support do the Government have for the proposals that are now before the country and before Parliament?
Secondly, can the Minister say how he squares this? He referred to studies since 1981. In 1981 the Secretary of State for Social Services said that the Government would resist any system of limiting the freedom of doctors to prescribe. He said that there would be no limited lists, no black lists and no compulsory substitution of generics. How does the Minister manage to justify the statement then made by the Secretary of State with the action which is now being discussed?
Lord Glenarthur: My Lords, so far as the second part of the noble Lord's supplementary question is concerned, I think that was made clear in what I said earlier—that times change and move on, and we have been conducting a thorough survey of what happens in this country and what happens abroad. Those facts must be taken into account. Concerning support for our proposals, the noble Lord will be aware that the list put out was a consultative one. There have been many representations made about that list. The Chief Medical Officer in my department has written to all doctors and has received over 650 letters which go into some detail on the sorts of medicines which ought to be included. I should have thought that that was a perfectly sound way to approach the question.
Lord Hunter of Newington: My Lords, will the Minister please tell us whether in future all drugs prescribed in the National Health Service will have to be approved by Ministers, or is it the intention that a final list be arrived at by consultation with the professional people?
Lord Glenarthur: My Lords, Ministers are not themselves experts on drugs, and the noble Lord will be aware that the members of the committee on the safety of medicines are the people who approve drugs—the doctors, the pharmacists and others—and that will be the method which is held to in future.
Lord Chelwood: My Lords, have not some of the criticisms of Her Majesty's Government been premature and greatly exaggerated? Do not the two letters in The Times—one yesterday from the Chief Medical Officer of the Department of Health and Social Security, and one today from the President of the Royal College of Physicians—put this question into a much more sensible perspective?
Lord Glenarthur: Yes, my Lords, I am grateful to my noble friend. There has been much wild exaggeration which has preyed on the minds of many people who have no need to worry. I am grateful to my noble friend for his supplementary question.
The Lord Bishop of Norwich: My Lords, I thank the noble Lord for the assurance he has given. But is the Minister aware that the initial restricted list sent to doctors by the Department of Health and Social Security may adversely affect the quality of life of the aged who are on pensions because at present they receive, as an example, bulking and stool softening medicines, and they get them free? They will probably be most at risk because they can least afford to pay. So under the new arrangements they will be the most disadvantaged if this restricted list is brought in. I assure the Minister before he replies that I have no personal interest in the matter. I eat bran, and what is good enough for rabbits is good enough for prelates.
Lord Glenarthur: My Lords, I am delighted to hear that the right reverend Prelate is so well, and I can assure him that the points he makes are exactly the kind that will be borne in mind by those people such as the Chief Medical Officer who will be drawing up this list.
Lord Molloy: My Lords, does the Minister not agree that the valid points raised by my noble friend Lord Ennals deserve examination in that the BMA and the Royal College of Physicians are appalled and extremely anxious, so much so that the general opinion is that any Government who thought up such a scheme must be ill and sick? Does he not agree that these great organisations should be consulted before anything is passed into legislation?
Lord Glenarthur: My Lords, we have asked the BMA to comment. It has refused to do so. The ball is in its court.
Baroness Masham of Ilton: My Lords, are the Government aware that there is great concern among the severely disabled about limited prescribing? Will the Government look sympathetically at the specialised needs of these people? Is the Minister aware that I have had many letters from doctors and disabled people throughout the country?
Lord Glenarthur: My Lords, I am grateful to the noble Baroness for that. That, again, is the sort of point to be borne in mind by the experts who are looking at it at the moment.
Lord Ennals: My Lords, does not the Minister recognise that the reason why the BMA have not cared to comment is that they are totally opposed to the whole principle on which the Government are now basing a limited list? Does he not understand that?
Lord Glenarthur: My Lords, I understand it: but then I draw the attention of the noble Lord to the remarks of my noble friend behind me who pointed out the letters that had been written in support of our proposals, one of which is from the Royal College of Physicians.
Lord Kilmarnock: My Lords, in relation to the intervention of the noble Lord, Lord Chelwood, is the noble Lord aware that the President of the Royal College of Physicians—and I have the letter here in front of me—specified that one of the important points is that,
"Drugs should be available to meet the full range of desired therapeutic activities"?
That is a quotation from his letter in today's The Times. Is that condition being met by the removal of the whole of the intermediate range of analgesics, so that doctors will have nothing to prescribe for conditions between mild pain and exquisite agony? Is he also aware of the concern that has been expressed about laxatives, particularly so in the case of cancer patients, and would he not agree that he will have to extend his limited list so that, rather than coming out at £100 million, it may come out at something much nearer £50 million? In those circumstances, would it not have been much better to go for Greenfield which would secure the co-operation of all the parties concerned?
Lord Glenarthur: My Lords, the Greenfield Report was published in February 1983. We accepted its recommendation that a limited list should not then be introduced because there was not enough convincing evidence that the potential financial benefits would outweigh the administrative problems in drawing up and maintaining one. Since then, as I have said, we have done more work on the subject and we have learned from our experience, and from the experience of others, that savings are worthwhile. A lot of what the noble Lord has asked concerns matters which will be fully taken into account as the list is discussed—and it is being discussed at the moment—and I dare say that the list that was first issued will not be the same when it comes into effect on 1st April.
Baroness Lane-Fox: My Lords, will my noble friend the Minister bear very sympathetically in mind the repeated needs of paraplegics, polio and cancer sufferers for certain medication drugs to deal with that very unpopular problem of constipation? Intense worry has been expressed to me in letters about the exclusion of Dorbanex from the official list.
Lord Glenarthur: My Lords, I shall certainly draw my noble friend's remarks to the attention of my right honourable friend and I am sure that the Chief Medical Officer is also very well aware of the views which she expresses.

Income Tax: Military Expenditure
2.54 p.m.
Lord Jenkins of Putney: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in the light of their Answer of December 13th (Official Report, col. 423), it would not be a proper exercise of the sovereignty of Parliament to pass legislation designed to make it possible for a taxpayer, subject to safeguards similar to those applied to persons

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seeking exemption from military services on conscientious grounds, to direct that the part of his or her income tax which would normally be devoted to military expenditure be directed instead to a non-military peace-building fund.
The Chancellor of the Duchy of Lancaster and Minister for the Arts (The Earl of Gowrie): No, my Lords.
Lord Jenkins of Putney: My Lords, will the noble Earl reconsider his rather sharp negative to this Question? Is he not aware that it is considered appropriate in the case of persons with conscientious objection to provide special provision so that they do not have to undertake military service? In view of this special provision which is made for persons with conscientious objection in this category, would it not also be reasonable to make a special concession for those who have to pay for the cost of that military service?
The Earl of Gowrie: My Lords, the noble Lord is famous for his sense of humour but I fear that on this occasion he must be indulging it at the public expense. The obligation to pay taxes (as he knows well as a former Minister) is a general one which has no specific conscientious implications in itself in the sense that no part of any individual's taxes can be said to fund or not to fund a particular item of public spending.
Lord Taylor of Gryfe: My Lords, may I ask the Minister whether he is aware that two officials of the religious Society of Friends (Quakers) will appear in the courts next week, being responsible as employers for the staff of Friends House who have withheld tax as suggested in the Question asked? May I ask the Minister whether he will read the evidence which will be presented in the court to see how far the admirable provisions in our constitution for conscientious objection may be taken into account in the framing of our tax laws in the future? I emphasise that I am making no comment on the action that is being taken, but I would ask the Minister to look at this particular case.
The Earl of Gowrie: My Lords, I am happy, as always, to take the noble Lord's advice, and I certainly have no intention of commenting upon a case which may be before the courts. But I would point out to the noble Lord and to the House that there was a recent case before the European Commission of Human Rights which concerned the individual's right to divert a proportion of tax to a peace-building fund, in that particular instance. The Commission said a number of things, but they also said that if an applicant considers the obligation to contribute through taxation to arms procurement an outrage to his or her conscience, he or she may advertise the attitude and thereby try to obtain support for it through the democratic process. That remains the situation.
Lord Harvington: My Lords, if my noble friend the Minister were to give way to this Question, which the questioner seems to desire, where would it end? Would not the League against Cruel Sports and the Support
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ers of the organisation for the protection of cats, and so forth, all claim that on moral grounds they ought to have exemption from income tax?
The Earl of Gowrie: My Lords, I think my noble friend is quite right. The questioner, in the form of the noble Lord, Lord Jenkins of Putney, and I might both come out badly as previous and present Arts Ministers.
Lord Stoddart of Swindon: My Lords, my noble friend Lord Jenkins of Putney would not expect me to follow him down the road of the hypothecation of revenues, but would the Minister not agree that the question that my noble friend has raised reflects the growing abhorrence of people against weapons of mass destruction and genocide, such as Trident? In these circumstances would the Government not be seen in a more favourable light if they abandoned this project, which is now estimated to cost twice the £5,000 million which the Government put forward originally?
The Earl of Gowrie: My Lords, I have seldom heard a supplementary question so far wide of the original Question. I suggest that the noble Lord, with his experience and his contacts, studies the record of the Government which he used to support.
Lord Henderson of Brompton: My Lords, with reference to the text of this Question—and I refer to the Question itself—is it not inappropriate to use the word "building" in conjunction with the word "peace"? Is it not right that one can keep or breach the peace, or offer to make peace, but can one build it?
The Earl of Gowrie: My Lords, I think I must resist making a comment on the noble Lord's supplementary question, but, as one who has worked in your Lordships' House for 15 years, I have during that time, on issues of nomenclature, always taken the advice of the noble Lord who asked the last question. I intend to go on doing so.
Viscount Trenchard: My Lords, would my noble friend agree that that part of Lord Jenkins's taxes or other taxpayers' taxes which goes to maintain deterrence against potential aggressors probably does more, and is more willingly paid by the mass of taxpayers, than almost any other part of taxation, and that those taxes to maintain deterrence are more likely to maintain peace in Europe than are many of the noble Lord's Questions?
The Earl of Gowrie: My Lords, I agree very profoundly and personally as a child of military parents and as someone born at the beginning of the last war who has now reached middle age during a period of peace.
Lord Jenkins of Putney: My Lords, I think the noble Earl will agree that this Question appears to be a little in advance of what noble Lords are at present prepared to agree to. Nevertheless, I think he will accept that, while he and I are agreed about the desirability of the maximum possible expenditure on the arts, on this issue, having regard to that qualification in the Question that there should be safeguards similar to

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those applying to persons seeking exemption from military service, this is a matter which the noble Earl will be required to reconsider at a future date.
The Earl of Gowrie: My Lords, I think that very unlikely. It would surely completely undermine the sovereignty of Parliament, which the noble Lord mentioned in his Question, to allow sections of the community to decide that they did not accept Parliament's decisions on overall public spending.
Lord Leatherland: My Lords, can the Minister tell me whether it is a fact that the armed services are protecting conscientious objectors in the event of war and that therefore their services are worthy of support?
The Earl of Gowrie: My Lords, I am sure that the noble Lord is right.

Youth Custody Sentences
3.1 p.m.
Lord Campbell of Alloway: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether it is the intention to implement the hope expressed by the Lord Chief Justice (Times Law Report, 6th December 1984) that the law relating to sentences of youth custody should be altered to enable them to he suspended in whole or in part.
The Minister of State, Home Office (Lord Elton): My Lords, the Government are examining this question. We have sought the views of a number of interested bodies, and my right honourable friend the Home Secretary is considering the comments that have been received.
Lord Campbell of Alloway: My Lords, I am grateful to my noble friend the Minister for his reply. Might I ask him, pursuing perhaps the same line—I hope so—whether he is aware that the value of this sentencing option has been affirmed by judges and recorders attending the Roehampton judicial seminars in 1983 and 1984; and that again last week, with an attendance of about 100 there was unanimous support for the view of the noble and learned Lord, Lord Lane? Is he also aware that unanimity is not exactly the order of the day at such seminars? Might I ask my noble friend the Minister whether perhaps appropriate amendments could be carried into the Administration of Justice Bill at the Committee stage to give effect to the concern of the judiciary?
Lord Elton: My Lords, I am aware that there is a weight of opinion that favours such a step. I am also aware that there is a weight of opinion against it. The Home Secretary, having taken the views, is now considering where the balance lies. I do not think I can say more than that at this stage; nor do I think I can commit the Government to a legislative move before we have decided in what direction it should be made.
Lord Elwyn-Jones: My Lords, but has not the power to suspend sentences of imprisonment been extremely helpful in a limited number of cases already?
Lord Elton: My Lords, I am so sorry; I missed the beginning of the noble and learned Lord's question.
Lord Elwyn-Jones: My Lords, the noble Lord was no doubt being helpfully interrupted. I was asking whether it is not the case that in a number of cases the suspending of sentences of imprisonment has proved to be very beneficial.
Lord Elton: My Lords, in a number of cases no doubt it has, but we are looking at a particular class of case and my right honourable friend is at present considering the opinions on that class of case which have been put before him.
Lord Wigoder: My Lords, may I ask who has expressed an opinion against it?
Lord Elton: My Lords, I have not seen all the opinions although I think there are over 20 of them at present under review. They are all being considered by my right honourable friend.
Lord Hutchinson of Lullington: My Lords, does the Minister not agree that the criteria which were inserted in the Criminal Justice Act, which govern the circumstances in which custodial sentences can be imposed on young people, are simply not reconcilable with the concept of suspension? Would he not inform the Lord Chief Justice that in the case of a young person, if the mitigation is such that if he were an adult the whole sentence would be properly suspended, then a custodial sentence should not be passed at all? Moreover, if mitigation is such that it should be partially suspended, then the sentence should not be longer than the part which would be justifiably suspended.
Lord Elton: My Lords, I am aware of the view which the noble Lord has so succinctly put before the House, and it is one which is before the Home Secretary at the moment.
Baroness Masham of Ilton: My Lords, may I ask the Minister whether he agrees with me that now that borstal training has been replaced by youth custody, the emphasis is on custody? As many children aged 15 and 16 are being sent to youth custody, would he not agree that the emphasis for children should be more on training, schooling and rehabilitation? Would it not be better to keep them out of custody altogether, if possible?
Lord Elton: My Lords, the principle that young people should be kept out of custody wherever possible is one which we have enshrined in statute in the first section of the Criminal Justice Act recently passed by this House. But the Question I have before me relates to whether or not we should implement a suggestion relating to the suspension of sentences of youth custody. I think my noble friend has strayed a little beyond that.
Baroness Masham of Ilton: My Lords, with respect, that is what I meant to say—that suspended sentences might help to keep these young people out of youth custody, and therefore I support the Question put by the noble Lord, Lord Campbell of Alloway.
Lord Elton: My Lords, it is the delicate business of my right honourable friend to weigh those considerations against the considerations put foward by the noble Lord, Lord Hutchinson of Lullington, and many others.
Lord Mishcon: My Lords, if the noble Lord the Minister cannot give the information asked for by the noble Lord, Lord Wigoder, in regard to who was opposing, can be at least indicate to the House the basis of the reasoning of those who oppose?
Lord Elton: I would have thought not, my Lords, at this point of time, because this is meant to be a Parliamentary Question and not a debate on the subject. My right honourable friend is considering views put before him by different bodies who have given their own reasoning. I do not think that I can adduce the reasoning behind particular points of view in advance of the conclusion of my right honourable friend's considerations.
Lord Mishcon: My Lords, can the noble Lord the Minister at least indicate to the House, so that we can intelligently follow questions and answers, any reason which has been given in the body of opinion which is against? Can be give one reason as an example?
Lord Elton: My Lords, this has already been done, I think more ably than I could, by the noble Lord's noble friend Lord Hutchinson of Lullington.

Business
The Earl of Swinton: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Lucas of Chilworth will, with the leave of the House, repeat a Statement that is to be made in another place on British Aerospace.
It may also be for the convenience of the House if I announce that dinner will be available this evening at the usual time of 7.30.

Insolvency Bill [H.L.]
3.8 p.m.
The Lord Advocate (Lord Cameron of Lochbroom): My Lords, on behalf of my noble friend Lord Lucas of Chilworth, I beg to move that this Bill be now read a second time.
Seventy years have elapsed since the last major Bill on bankruptcy law was introduced and this area of the law has remained largely untouched now for over a century. Much the same can be said in relation to corporate insolvency law. At the same time major changes have taken place in business practice and in society generally; so much so that the insolvency legislation is in need of a major overhaul.
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Amendments to the bankruptcy law in Scotland are being dealt with in a separate Bill—the Bankruptcy (Scotland) Bill—which your Lordships' House has already considered. The provisions relating to corporate insolvency are, broadly speaking, common to England and Wales and Scotland, although again there are entirely separate provisions concerning company receivership. The task of identifying those areas of the law requiring modernisation and amendment was given to the Review Committee on Insolvency Law and Practice chaired by Sir Kenneth Cork. Its report, published in June 1982, represents the most comprehensive study so far undertaken in this area of the law. I am sure that I speak for all your Lordships in offering sincere appreciation of the valuable contribution the committee has made to highlighting the deficiencies of the existing legislation and the ways in which these deficiencies may be set to rights.
Since that report was published wide consultation has taken place, first on the report itself, and subsequently on the basis of the White Paper A Revised Framework for Insolvency Law, published in February last year. Very many helpful comments were received on the Government's proposals from interested bodies and individuals. The outcome of these consultations is the measure we are considering today. It is founded on a broad spread of opinion and includes the majority of the review committee's proposals, either directly or in spirit. I think this underlines the importance of the work undertaken by the review committee chaired by Sir Kenneth Cork.
I am sure your Lordships will wish to know the main purposes of the Insolvency Bill. I shall explain these briefly now before dealing in more detail with the Bill's contents.
The first purpose is to ensure that those who act as insolvency practitioners are fit to do so. The second purpose is to combat the abuse of limited liability by a small minority of persons whose actions undermine the legitimate commercial purpose for which it was established, as well as to encourage directors to take a close interest in the affairs of their companies and to take early action when financial difficulties loom. The third purpose is to clarify the law on receivership and to create a new insolvency mechanism, known as company administration, specifically designed to facilitate company rescue and reorganisation. The fourth purpose is to simplify and reform corporate and personal insolvency procedures to reduce unnecessary involvement of the courts and the insolvency service. This will help the smoother working of insolvency procedures and enable the insolvency service to concentrate on its protective and investigative work.
The Government will be bringing forward some amendments to the Bill during its passage in this House. These will mainly be of a technical nature to improve the insolvency procedures. They will include provision to give effect to the announcement made in another place on 29th November last year that essential utilities should be prevented from ensuring more favourable treatment than other creditors on the insolvency of a customer; that is by threatening to discontinue supply. They will also reflect the usual helpful contributions that I am sure will flow from the professions now that the Bill has been published.

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I now turn to a more detailed explanation of the Bill's main themes. I am sure noble Lords will forgive me if I do not proceed clause by clause. There are, of course, rather too many for that. I shall therefore deal first with the question of insolvency practitioners, professional qualifications and licensing.
The evidence submitted to the Review Committee on Insolvency Law and Practice confirmed the view that the majority of insolvency practitioners carry out their duties in a way which gives no justifiable cause for complaint. But, unfortunately, a minority of practitioners have engaged in questionable activities to the detriment of creditors. It is the Government's view that it is not only desirable but also essential that the public should have confidence in those who handle insolvencies.
At present, with few exceptions, anyone can act as an insolvency practitioner. The review committee recommended that measures should be introduced to ensure that professional standards are observed by all insolvency practitioners and that in future fidelity insurance should be compulsory for all forms of insolvency proceedings. The committee further recommended that transitional arrangements should be made to allow experienced but unqualified practitioners to act.
The Bill adopts these recommendations and provides that a person will not be qualified to act as an insolvency practitioner unless he has a certificate authorising him to act and has provided security for the performance of his functions. In addition, a person will not be qualified to act in a particular case unless he is independent of the company or individual concerned. These provisions will apply also to practitioners who act as interim trustees and permanent trustees within the terms of the Bankruptcy (Scotland) Bill.
The Bill further provides for the Secretary of State to issue a certificate authorising an individual to act as an insolvency practitioner. If the Secretary of State intends to refuse to grant or revoke a certificate, the applicant or holder may have the matter considered by an independent tribunal to be set up under the Bill.
The Bill also provides that the Secretary of State's functions as regards the issuing, renewal and revocation of certificates may be delegated to an appointed body. I should perhaps at this point mention that no final decision has been taken about the level of experience and training which will be required of an applicant for a licence or in respect of those bodies to which the Secretary of State's licensing function will be delegated.
I would also stress that the Bill does not restrict the certification of experienced but unqualified persons to existing insolvency practitioners. It provides for unqualified persons who obtain the necessary practical experience in future to apply for a certificate. It is not intended that these provisions will apply to receivers appointed by a fixed charge holder, but they will apply to administrative receivers as defined in Clause 89 of the Bill and to company administrators appointed under Clause 15.
I now wish to explain to your Lordships the Government's proposals for dealing with abuse of limited liability. Earlier, I made it clear that one of the
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main aims of the Bill is to encourage company directors to take a closer interest in their companies' affairs in order that they may identify and tackle financial problems at an early stage and to penalise them if they fail to do so. The Bill has three new provisions designed to achieve these aims. First, there is the imposition of personal liability for all or part of the debts of a company if a person allows it to trade wrongfully. Secondly, there is the extension of the power of the court to make a declaration of personal liability for a company's debts against a person who takes part in the management of a company when he is disqualified or acts on the instructions of a person he knows to be disqualified. Finally, there is a strengthening of the court's powers to disqualify a person from acting as a director of a company.
This is an area in which the Government's proposals have caused most comment. We have been accused of being either too weak or too draconian; the nature of the accusation of course tends to depend on whether it stems from the creditors' or from the directors' side of the fence. I am sure, therefore, that your Lordships will wish me to go into some detail in explaining the Government's proposals.
The review committee was concerned at the ease with which a person can allow a limited liability company to become insolvent, form a new company and then carry on trading much as before, leaving behind him a trail of unpaid creditors and in the worst cases repeating the process several times—the so-called "phoenix syndrome". To combat abuses of this sort the committee recommended that there should be a new form of civil liability for a company's debts, known as "wrongful trading". Clause 11 of the Bill, therefore, allows the court to declare a director of a company which has gone into insolvent liquidation personally liable for the liabilities of a company if it is satisfied that the company has traded wrongfully. Wrongful trading will occur if before the liquidation a director knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation and he did not take steps that he ought to have taken to minimise the potential loss to the creditors.
I now turn to the question of disqualification of directors and others from acting in that capacity. It was proposed in the White Paper published in February of last year that directors who allowed their insolvent companies to be wound up compulsorily should be automatically disqualified for three years from taking part in the management of a company. Automatic disqualification for directors involved in insolvent compulsory liquidation is designed to help to ensure that directors carefully monitor the financial position of their companies at all times and thereby avoid the need for compulsory liquidation. It is the duty of all directors, non-executive as well as executive, to take timely action to minimise loss when financial difficulties arise or can be foreseen. Where the directors of a company have allowed it to get into such a state that the court has to intervene in its affairs, it is right that their fitness to act as directors should no longer be taken for granted.
One of the Government's major objectives is to encourage directors to take a close interest in their company's affairs and to identify and tackle financial

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problems at an early stage. By taking early action, directors can rehabilitate their company or at least minimise loss to creditors. However, the Government recognise that not all directors involved in a compulsory liquidation have failed to live up to their responsibilities. The Bill therefore provides grounds for relief, so that the truly innocent director is safe.
The Bill provides that on the making of a winding up order the court will be required to make a provisional disqualification order against those appearing to have been directors 28 days before steps were taken to put the company into liquidation, unless the company can only be wound up compulsorily or it was in voluntary liquidation or subject to an administration order when the winding up petition was presented. The provisional disqualification order has no effect for three months after it is made, and then takes effect for a period of three years. During the period of 28 days following the making of the order, the director may apply to the court for annulment of the order on the grounds stated in Clause 7(5). The Government believe these grounds are sufficient to cover the case of directors who innocently find themselves involved in a compulsory liquidation.
As a result, there will have to be changes in the way some directors approach their duties. Existing and prospective directors will have to be careful to familiarise themselves with their companies' financial affairs, and to make arrangements to monitor their progress regularly. Those who come on to the board as part of a rescue operation (sometimes known as "company doctors") and the providers of risk capital are strongly placed to do this. There may be individuals who will have to limit or even reduce their commitments so as to devote sufficient attention to their companies. I am certain that your Lordships would not regard this as unwelcome.
Some have argued that, in order to avoid automatic disqualification and personal liability for wrongful trading. directors will place their companies in voluntary liquidation prematurely. There is no reason why this should happen. Directors who monitor their company's financial affairs closely will identify and tackle problems at an early stage. The board which does this will probably, if the company's operations are viable, be able to avoid liquidation entirely. They will certainly have time to explore options, which could range from a fresh injection of capital to invoking an appropriate insolvency procedure.
I now wish to say something on the Bill's provisions on company rescue procedures. The review committee recommended that more emphasis should be placed on business rescue and reorganisation, and suggested that a new insolvency procedure should be established—the company administration procedure—under which the court may appoint an administrator if it considers that the appointment would promote one of the purposes set out in Clause 15.
A key element in company rescue is that the possibility should exist of giving the company a breathing space, during which plans can be put together to return the company to operation on a sound financial basis, or at least to secure survival of
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parts of the business as going concerns. The absence of this breathing space all too often means the demise of any hope or rehabilitation or reorganisation of companies. The administration procedure therefore provides for a statutory moratorium on all actions and proceedings against a company, including creditors' rights to enforce their security.
An important issue in relation to the new procedure is the use likely to be made of it as opposed to receivership. No clear-cut answer is possible at this stage, but certainly it will be of value where no floating charge exists and no receiver can be appointed to keep a company trading. The Government's expectation is that the procedure will also be of value in circumstances where a large company with a complex organisation encounters severe difficulties but where it is evident that a good deal, if not all of the business, can be saved. Here, the moratorium will provide the breathing space needed to prevent a downward spiral into financial chaos.
I will turn now to the provisions amending the law relating to receivership. The review committee drew attention to two principal areas of weakness in the existing law as it applies in England and Wales. The first was that the nature of a receiver's powers and duties was not clear, and the second concerned his accountability to unsecured creditors. The main thrust of the provisions, therefore, is to remedy deficiencies in these areas. I should point out that in relation to the accountability of receivers some amendment is required to Clauses 42 and 43 of the Bill. They are designed principally to benefit unsecured creditors, and amendments will be introduced to make this clear. For convenience, I will describe these provisions as we intend that they will stand after this clarification.
The Bill will then contain four provisions aimed at meeting the criticism that administrative receivers should be more accountable to unsecured creditors. First, it will provide that unsecured creditors, as well as secured creditors, should be notified of an administrative receiver's appointment. Secondly, it will require the administrative receiver to prepare a report within three months setting out the company's position, his proposed course of action and the prospects for repayment of creditors other than his appointor. Thirdly, it will require the administrative receiver, unless the court otherwise directs, to lay his report before a meeting of unsecured creditors. At this meeting the unsecured creditors will be entitled to appoint a supervisory committee. The committee will be empowered to obtain information from the administrative receiver, and require him to attend before it. Fourthly, the administrative receiver will be obliged to give notice of his resignation to creditors. The debenture holder's power to dismiss the administrative receiver will also be removed and given to the court. This will protect administrative receivers from pressure to commit acts which may be in the debenture holder's interest but which are detrimental to other creditors.
The Bill sets out in Schedule 2 the powers which administrative receivers will be deemed to possess subject to provision to the contrary in debenture documents. It also grants further powers to administrative receivers to facilitate their work. These are to be found in Clauses 37 and 38 and 78 to 81. Clause 37,

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in particular, is designed to enhance the ability of the administrative receiver to rescue businesses rather than selling them on a break-up basis.
Finally, I should like to clarify the position in relation to Scotland. Separate provisions regarding floating charges and receivership exist in Scotland at present, and will continue to exist by virtue of Clauses 462 to 487 of the Companies Bill. Clauses 44 to 51 of this Bill amend the existing Scottish provisions in the light of the new English and Welsh provisions.
I now wish to consider the detailed procedural parts of the Bill relating to the winding up of companies and the insolvency of individuals. It is essential that a modern insolvency code should ensure that the causes of commercial failure are the subject of close inquiry, both in the interests of those who have suffered financially and in the public interest, to help promote a healthy environment in which business may flourish. Much, however, of the detailed procedure underlying these principles is now outdated, and the review committee emphasised the need for the law relating to insolvency to be brought up to date. Many of the recommendations made by the review committee on the detail of insolvency procedures have been accepted, and provisions based upon them are either contained in the Bill or will appear in the rules and regulations which will complement it.
So far as the official receiver is concerned, simplification of procedures and an emphasis on private practitioners taking on the role of liquidator or trustee in more cases are intended to allow him more time to concentrate on his investigative function with a view to the institution of criminal proceedings. In addition, the official receiver still has an important role to play in protecting assets in the early stages of windings up by the court and in bankruptcies.
Various measures are also included with a view to the harmonisation of winding up and bankruptcy proceedings—another of the major themes of the review committee's report. Secondary legislation will have an important role to play in this area and many of the minor and harmonising amendments to procedures will appear in the rules and regulations in due course.
Part III of the Bill, therefore, constitutes a new code, which replaces the Bankruptcy Act 1914, covering both the formal bankruptcy procedures and the legal framework in which voluntary arrangements can be negotiated, which can help debtors avoid the stigma of bankruptcy. The new bankruptcy provisions have been designed to establish a humane but efficient system for dealing with those who cannot pay their debts, with an emphasis on allowing the debtor the opportunity of continuing to make a living, so as to provide for himself and his family and to make a contribution from future income towards the payment of his creditors.
In line with the undertaking which I gave on the Bankruptcy (Scotland) Bill, the Government are currently examining the level of penalties for offences throughout the proposed insolvency legislation.
I am aware that I have dwelt at some length on the contents of this weighty measure. I trust that there will be general agreement as to the urgent need for reform of the insolvency legislation. I hope, therefore, that
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your Lordships will welcome the Government's proposals as a useful and desirable reform of this area of the law. I beg to move.
Moved, That the Bill be now read a second time—(Lord Cameron of Lochbroom.)
3.32 p.m.
Lord Bruce of Donington: My Lords, the House will be grateful to the noble and learned Lord for having taken us briefly through the extremely complex provisions of this Bill, which contains no less than 203 clauses and some nine schedules. For our part on this side of the House we find ourselves in general support of this measure and we shall seek to facilitate its passage.
Of course, there will remain a number of points of difference—differences of principle—which have been aired by a number of interested professional bodies which have helped the Government in the framing of this legislation. I feel that these differences with the Government's approach will consequently not be expressed on party lines but will probably come from the House as a whole, regardless of party. It is therefore to be hoped that the Government will have every sympathy with some of the constructive suggestions and amendments that may he put forward in due course.
I should like to associate myself and my colleagues with the noble and learned Lord's appreciation of the work done by the Insolvency Review Committee, under the chairmanship of Sir Kenneth Cork. It may be well known in this House, and indeed outside it, that Sir Kenneth speaks with very great authority in that he and his brother, Mr. Norman Cork, have for many years conducted a very large professional practice concentrating in some respects on insolvency matters. Therefore, the Cork Report itself is not only a reflection of an intellectual appreciation of what the law is and, indeed, what the law should be, but also a result of long practical experience by most of the distinguished gentlemen who have been members of the Insolvency Review Committee and of the very skilled staff, some of them very senior, who have assisted all the members of the committee.
I should have thought that it might have been better if the Cork Report, as it has come to be called, together with the revised framework of insolvency law in the Government's White Paper, Cmnd. 9175, were to have been the subject of debate in the other place, and here, before the Government proceeded to draft their legislation. The Cork Report became available in June 1982, which is two-and-a-half years ago, and the Government's White Paper, which represented their second thoughts on their earlier, preliminary thoughts, has been available for nearly a year. I should have thought that it would have been better if some parliamentary opinion had been sought on the contents of those two documents before the Government brought forward legislation.
It is true, of course, that the Government have taken counsel of the various professional bodies and other interests and that they have paid some attention to them, even though they may not have been able to accept all the recommendations. However, in our view, that does not replace an initial parliamentary

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debate on the whole principle of the matter, so that the Government would have had the benefit of the opinion of both Houses on the reports before legislation was brought forward.
The result is an extremely complex Bill. I observe somewhat wryly that the Bill has been designed to simplify. I do not know how many of your Lordships have ventured to go through the 203 clauses, but in any way to associate simplicity with them is, I think, possibly a slight over-statement. It will not have escaped the notice of connoisseurs of parliamentary Bills—and all your Lordships are, of course, connoisseurs—that there are no less than 49 references to "the rules", but what the rules are is at the moment mercifully hidden from us. It does not always make for good continuity of thought if, every now and again when the Government draftsmen or their political overseers suddenly come to a difficult point or to something for which they cannot think up an answer to put before parliamentary counsel, they shove into the Bill the words "in accordance with the rules". It would be useful to know—and in Committee we shall probably make more pertinent demands—at every stage where "the rules" are mentioned (and there are some 49 instances, unless my counting late at night has misled me) just exactly what they mean.
Coming to the Bill itself it is, of course, unnecessary for me to follow the ground which has been so adequately covered by the noble and learned Lord, bearing in mind that there will be further explanations in reply to this debate by the noble Lord, Lord Lucas of Chilworth. However, company liquidations and bankruptcies are becoming a matter of very considerable national importance, and it is right that Parliament should consider the legislation and the procedures relating to them.
At the risk of incurring the occasional spark of political displeasure, I am bound to point out that company liquidations and bankruptcies are the one area in the economy which appears to be expanding at the present time, despite the efforts that it is said are being made to revive the economy. In 1981 there were 8,227 company liquidations and in 1984 the figure had risen to 13,647. Bankruptcies were 4,976 in 1981 and last year they were over 6,000. We are in the presence of a considerable problem.
I should like, however, to emphasise one matter in complete agreement with the words that have fallen from the lips of the noble and learned Lord. The vast majority of liquidations and bankruptcies that occur in the United Kingdom are the result of inadvertence, miscalculation or misfortune. The vast majority of companies in the United Kingdom, whether large, medium-sized or small, are conducted by their directors with considerable rectitude. It is not right that the whole body of directors in the United Kingdom, whether of public, private or close companies, small or medium-sized, should be regarded as not to be trusted. As the noble and learned Lord said, it is only in a minority of cases in the United Kingdom that directors behave either fraudulently or recklessly or indulge in outright theft.
Although such cases receive very great publicity—and rightly so—they do not represent the
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whole caucus of directors of limited liability companies in the United Kingdom. It is important to remember that when we come to later stages of the Bill. I am sure that the House will agree that it would be unwise if we were to take restrictive steps in respect of a very small minority indeed which might inhibit people from assuming directorial responsibilities, particularly of medium-sized and small companies.
Your Lordships may recall that in the Financial Times in August last year it was revealed that more than half the businesses set up in 1983 were likely to collapse within the decade. Indeed, the record of failure of new ventures—new ventures which, of course, have been encouraged by the Government, with, I may say, the support of Her Majesty's Opposition—after their initial start is alarmingly high. I would submit to the House that this is not the time to place restrictions upon directors which would inhibit them as non-executive directors in giving aid and assistance to these newly formed companies and indeed to medium-sized companies in difficulty. I think that the role of the non-executive director in many of these smaller companies can be crucial.
I am not referring for the moment to the proposed role of the new administrator, which is referred to at a later stage in the Bill. I am referring to the normal commercial practice of small and medium-sized firms seeking to have on their board directors of experience who can perhaps guide them into some of the fields of commerce, finance, marketing and R & D, as well as financial accounting and otherwise, to the very great benefit of the company concerned. If, for example, directors were to be inhibited by the provisions of this Bill from offering their services, I think that we should be doing the business economy a very great disservice. Therefore, in approaching the Bill as a whole, while taking every step to prosecute the wrongdoer (the person who connives at wrongful trading, fraud or anything else of that kind) and making provision for the sternest punishments for those delinquent directors, including, where necessary, recourse to their private assets, it is important that we make quite sure that we do not take steps which, while achieving that aim—and a very laudable aim it is, too—inhibit the new non-executive directors from functioning.
I have had some experience as a management consultant in advising companies in difficulties in order that they might recover their position, improve their performance and in very many cases avoid going into liquidation. I think that I speak for quite a number who find themselves in that field. They do not want to put themselves in a position where, quite inadvertently, they are subject to a provisional disqualification order against which they may then appeal. That goes contrary to the concept of justice as we understand it, in that a person ought not to have to prove his innocence. The onus should be the other way: his guilt should have to be proved. I have some reservations, therefore, about the automatic disqualification provisions set out in the Bill from Clause 7 onwards. I shall not go into that further now because these are Committee points.
There is, however, one particular point on which I would he open to be persuaded about the onus being left on the director. I have no firm views about this at the moment and have still to consult my colleagues,

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but my view is that, where a receiver, or a liquidator in the case of a voluntary winding-up, discovers, and as a result of his investigations is prepared to swear an affidavit for submission to the court, that the company has not kept books of account properly, the court might feel constrained to issue a disqualification order.
The responsibility for keeping books of account—and by that I mean not the superstructure from the primary books of account which are, of course, the profit and loss account, the balance sheet, the movement of funds, and so on, but the prime books of accounts—was laid on companies, and therefore their directors, by Section 147 of the Companies Act 1948. It was repeated in Section 12 of the Companies Act 1976, and is now enshrined in Section 221 of the new consolidated Act of 1985, requiring that companies keep proper books of account.
There can be no excuse whatsoever for the very simple provisions of the Companies Act, in this respect, not being kept. There can be no excuse for ignorance by any director of the fact that proper books of account have not been kept. I have had a little personal experience in this field by way of post-liquidation investigations. I find that in the overwhelming number of liquidations involving small and medium-sized businesses proper books of account have not been kept. How, therefore, can directors be informed of the state of affairs of their company in order to bring them even within the scope of Clause 7 of the new Bill? It is of course entirely impossible for them to be informed.
I am well aware that the noble and learned Lord, Lord Denning, has rather strong views about the onus of proof on people who are accused of offences. It may well be that the noble and learned Lord, Lord Denning, would disagree with me when I say that in these cases the onus of proof could quite properly lie upon the director to prove that he did not know that proper books of account had not been kept. In my view, this is one of the basic problems that lie behind the failures of many newly-established businesses, small and otherwise—of course, outside the scope of those who deliberately do not keep books anyway.
The number of prosecutions at the instance of successive Governments under Section 147 of the Companies Act 1948, or under Section 12 of the Companies Act 1976, has probably been derisory. It should also be borne in mind that the Government already have powers under the Companies Acts—notably, I think, at Section 323, but I may have the wrong section—and they have a right and an obligation, to bring actions against delinquent directors. These powers have very rarely been used. I am bound to say that the proposal that directors should be automatically disqualified and then, in effect, should have to prove their innocence may have been put in by the Government because they are not willing to enforce their own laws or the laws that are already on the statute book. It may be very costly if they do, but the laws are there to be obeyed. The Government who make the laws (or who do not amend them, if they inherit the position) have a responsibility to enforce them. I suspect that a disinclination to go to the trouble and expense of initiating prosecutions may be—I repeat, may
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be—behind this desire of the Government to shift the onus of proof.
Like many other noble Lords, I am certainly open to arguments and reason on this matter—and, indeed, in our view on this side of the House that is how this Bill should be approached. In my view it should be open to creditors, to liquidators and to receivers to make application to the court for the disqualification of a director, rather than leaving it the other way round. Since applications are a costly matter, the courts ought to be given the power, in all meritorious applications, to make an order for costs in the applicant's favour. If they had that power, they would of course by the same token have the power to order a person making a frivolous application, or an application not well-founded, to hear his own costs for so doing, and, in suitable cases, perhaps even bear the costs of the other side as well. I think this would be a far better way of proceeding, and would put the onus back where I think it ought to be. After all, directors are individuals. Where they are accused of an offence, then they should not be required to prove their innocence; the onus should lie the other way.
I have taken a long time on that particular point because it has attracted a very considerable amount of attention in the press. A number of organisations, such as the CBI, the Institute of Directors, the Law Society, and so on, have all taken a very considerable interest in this matter. I sincerely hope that we may regard the existing clauses as open to review.
Perhaps I ought to say to the noble and learned Lord, if he will excuse my temerity, that when we come to Clause 7 it will be possible to avoid personal disqualification even under the existing provisions of the Bill, as far as I understand them. I am not a lawyer, and I stand open to correction by any noble and learned Lord or any Peer who is a member of the legal profession, but it seems to me, looking at Clause 7, that once an application under Section 223 of the Companies Act has been made—which itself, of course, then becomes, under certain circumstances, an act of bankruptcy—it will be possible for an unscrupulous managing director, when he knows that a Section 223 notice has come in, immediately to call a meeting of members, dispensing with notice of the meeting on the assumption that he can get all the shareholders, so that they can thereupon pass a resolution to go into voluntary liquidation. They could then file that with the registrar, and publish it in the London Gazette. It would of course become a creditor's voluntary liquidation, and in those circumstances would avoid the whole of the compulsory procedure which is set out at Clause 7, and would in fact prevent it happening. That is the way that I read it. The noble Lord may have some correction, or may tell me in due course that I am wrong.
In so far as insolvency practitioners are concerned, I agree with the noble and learned Lord that there have been many cases during the past few years in which those acting in company liquidations have not quite lived up to the standards that are commonplace among the professions. There has very often been connivance between the directors of a company and a related (or, indeed, unrelated) liquidator without any qualifications at all, as a result of which the creditors

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have received a very raw deal altogether, the assets being "flogged off" for very little, often back to a new company founded by the directors of the old company. Therefore, quite rightly the Government have accepted the provisions that were set out in draft by the Insolvency Review Committee. We agree entirely with those provisions. I have, of course, to declare a personal interest in this part of the Bill, since I have acted as an insolvency practitioner and I am, as the House knows, a partner in the firm of Halpern and Woolf, which customarily acts in this field.
I believe, however, that the clauses in this part of the Bill should be amended to bring them more in accordance with the requirements of the Companies Act in relation to the appointment of auditors. As your Lordships are aware, auditors of companies are restricted to members of certain professional bodies. There should be some provision so that the appointment is made following consultation with those bodies together with, in this case, the Law Society and the Insolvency Practitioners Association. This is possibly a matter that can be considered.
In so far as receivers are concerned, I welcome the provisions of the Bill. They do not go all the way with the provisions recommended by the Cork Committee, in spite of the fact that the noble and learned Lord was kind enough to announce four additional amendments, which are quite acceptable, to delineate more closely the responsibility of receivers. There is only one aspect on which I should like to make some observations. It was dealt with by the Cork report. Where there is a floating charge on the assets of a company, unsecured creditors often find that they are left completely in the cold. On the realisation of the assets to meet the requirements of those in whose favour the security is granted, there is little remaining for them. It was recommended by the Cork Committee that a 10 per cent. fund should be set up so that, if necessary, after the realisation of the floating charge on the assets of a company there would be some fund out of which to reimburse the liquidator himself, with something left over for the unsecured creditors.
That brings me to the position of the unsecured creditors themselves. Their position is, of course, bad enough if a receiver is appointed by a debenture holder. Although it is the duty of the receiver to secure the most favourable realisation of assets that he can, not only for the discharge of the debenture itself but also for the benefit of unsecured creditors, it becomes a little difficult for the unsecured creditors. If the unsecured creditors in a company liquidation are to receive a better deal than they get at the moment, it will, I think, be necessary for us to revise Schedule 5 to the Bill, which deals, with the whole question of preferential debts, notably debts due to the Inland Revenue, to local authorities and to others.
Some steps will have to be taken, as they are in the United States, to protect what we shall call for the moment the consumer creditors, who pay deposits for goods that are never received by them. They are not creditors in the ordinary sense of being creditors for goods supplied. They are very often people who apply for goods that they never receive at all. This is an aspect of the Bill that we shall have to deal with a little
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more closely with a view to giving some degree of preference to them, as happens in the United States.
There are many other aspects of the Bill with which I could deal, but I have already spoken for a little too long. All I can say is that we on this side will give the Bill our critical examination. We shall bring forward constructive amendments wherever we consider them necessary. We are hopeful that, in view of the fact that the Second Reading of the Bill and its subsequent processes are taking place in this House, the Government may take a slightly more relaxed attitude towards amendments which they may not like but which can, after all, he debated in another place when it comes to review the activities upon which we, in this House, shall be engaged. We welcome the Bill as a whole. We shall do our very best, in collaboration with noble Lords on all sides of the House, to make it a better Bill where necessary, and to facilitate its passage.

British Aerospace
4.7 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, it may be for the convenience of the House if I now repeat, with the leave of the House, a Statement on British Aerospace which is being made in another place by my right honourable friend the Secretary of State for Trade and Industry. The Statement is as follows:
"With permission, Mr. Speaker, I should like to make a statement about the Government's residual shareholding in British Aerospace plc.
"My right honourable and learned friend the Chief Secretary to the Treasury told the House on 14th March last year that it was the Government's policy to sell minority residual shareholdings in privatised companies as the circumstances of the companies, the prospectus undertakings and market conditions permit. In pursuit of that policy, the Government have now decided to sell our residual shareholding in British Aerospace. Since 1981, when it became the first nationalised industry to be denationalised, British Aerospace has been operating successfully in the private sector. We intend, subject to satisfactory market conditions, to offer for sale all our shares in British Aerospace (48.43 per cent. of the company's issued share capital) in the spring or early summer of this year.
"The company has agreed that, before the sale is made, it will recommend to shareholders a resolution providing for the Government to retain a special share in the company. The purpose of this special share will be to ensure that no change may be made without Government consent to the provisions of the company's articles of association which restrict the foreign ownership of shares in the company and require the directors to be British nationals. When British Aerospace was privatised, the Government said they would retain at least 25 per cent. of the shares in the company so as to be able to block any changes to those articles. This Government shareholding will be rendered unnecessary by the issue of the special share which

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will have the same blocking effect. We will also have the right to nominate a director to the company.
"It is the company's intention to raise new equity capital at the same time as the Government's shares are sold. The British Aerospace chairman, Sir Austin Pearce, is making a statement about this this afternoon. Subject to the approval as necessary of the company's shareholders, it is intended that the offer for sale should take the form of a simultaneous offering of the Government's existing shares and new shares issued by the company."
My Lords, that concludes the Statement.
Lord Bruce of Donington: My Lords, we are indebted to the noble Lord for having repeated the Statement. It is a somewhat surprising one. The 50p shares in British Aerospace were yesterday quoted at £3·68 per share—a drop of 15 points on the day before. One wonders at what price the shares are going to be offered to the public. If they are offered to the public at the same time as a new issue is raised it should be quite clear that the sale will be part of what might be conceived as a slightly watering-down situation.
What has impelled this sudden sale, which at yesterday's quoted price is going to produce only about £92 million? What do the Government want £92 million for at this juncture? Are they getting short of petty cash, or something? What good does it do? What extra impetus to existing businesses in the United Kingdom does this swap of ownership give? What new surge of enterprise does it insert in the British manufacturing economy? Of what conceivable benefit is it, even to the Government themselves, to sell off part of their shareholding in a successful company in respect of which they presumably hope to get dividends? Why the sudden need for £92 million? Is it because the Chancellor of the Exchequer, following the somewhat bizarre announcement of yesterday, is scraping around to get money so that he may at any rate partially honour his promise to reduce taxation? Is that one of the reasons?
Why the desire suddenly to get £92 million? Is it, alternatively, to make up for the money that would have been received by the projected privatisation of British Airways, which has apparently run into difficulties owing to the apparent inability of BA to come to a settlement with the receiver of Laker's? What is the reason? Why the panic? Surely the Government have not been knocked so far off their perch that they need to scrape around in this way. What conceivable financial advantage accrues to the taxpayer as a result of it? What happens to the £92 million? If it is going into research and development aid, or something of that kind, or if it goes into capital projects, all well and good. What do they want it for? As I say, we on this side of the House regard this Statement as an exhibition of minor panic. Why should this be? Perhaps the Government will explain.
4.13 p.m.
Lord Taylor of Gryfe: My Lords, while we on these Benches take a fairly pragmatic view of the question of privatisation and sales of Government assets—we try to view these matters in the light of good housekeeping on the part of the taxpayer—I must say that on these
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terms we share some of the anxieties that have been expressed by the noble Lord, Lord Bruce of Donington. We should like to know why this is being done. Is it really just to finance tax cuts in the next Budget? If that is so, it represents very bad housekeeping, because you are selling assets in a company which has a very successful record under its present régime. I have here the balance sheet of British Aerospace and I notice that last year the profits after taxation had increased to £82 million, as against £23 million in the previous year, and that the earnings per share, on a net basis, had increased to 41·1 pence as against 11·5 pence in the previous year. It does not represent good housekeeping in any company—and we in this House are custodians of the nation's assets—to sell off
I should like to inquire, too, about the point raised by the noble Lord, Lord Bruce of Donington, on the price the Government expect to realise on the shares. I know they cannot give an undertaking today that it will be so-and-so, but if you look at the record of this company you will see that when 50 per cent. of this company was privatised it was floated at 150 pence per share in 1981. Within six months that had gone to 250 pence. It was a good day for the stags. Similarly, in yesterday's Financial Times this company is quoted at 368 pence per share, even in the slightly depressed state of the market at the present time, and its recent nervousness.
If the Government are going to issue these Government shares at the same time as the company is going to issue additional capital an obvious dilution takes place, and I should be interested to know just what the Minister has in mind as to the total amount of money that is going to be realised by this exercise. I notice that they are going to retain the golden share. But the golden shares provision is only to prevent foreign ownership of the company. I wonder how far the golden shares' powers might be exercised in the nation's interests or even on the social obligations of this company. We are now dealing with a company with 80,000 employees, with a very substantial export performance, and half of its business in defence contracts. Is it safe on the part of the nation to float off this company entirely to shareholders who will be concerned exclusively about the return on their invested capital? If the Government would give us the assurances we have sought in this regard it might help us to understand the strategy they have in mind.
4.17 p.m.
Lord Lucas of Chilworth: My Lords, I am grateful to the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Taylor of Gryfe, for their reception of the Statement which I have just repeated. There is no panic in the Government's announcement. We have, as a matter of policy, made it clear that we wish to dispose of secondary interests in privatised companies. Consideration of this matter has been going on for some months, and in the light of speculation on the markets in recent days it was decided to make the Statement today. It is intended that the sale will probably be effected in the late spring or early summer; that is very much dependent upon the market.

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I am not too sure exactly where the noble Lord. Lord Bruce of Donington, got his figures, but my understanding is that before the suspension of shares on the market this morning the British Government's stake in the company was something of the order of £350 million. Further speculation about what the company wishes to do could only have an unsettling effect on the company, and that indeed might have an adverse effect on the extraordinarily successful operation of the company—that success which the noble Lord. Lord Taylor of Gryfe, has emphasised.
In reply to the rather disconnected comments by the noble Lord, Lord Bruce of Donington, in regard to what has been happening in the market in recent days, I can perhaps say that in this respect it is business as usual. We are giving due notice that we are in business as usual. The noble Lord, Lord Taylor of Gryfe, asked about the price. I cannot tell what the price will be, and he acknowledged that. Perhaps I can repeat one piece of the Statement. I quote again:
"the Chief Secretary to the Treasury told the House on 14th March last year that it was the Government's policy to sell minority residual shareholdings in privatised companies as the circumstances of the companies, the prospectus undertakings and market conditions permit".
I do not think that I can go any further in answering the noble Lord, Lord Taylor of Gryfe, on that matter.
The noble Lord asked specifically about the special share, the golden share. That share is specifically to ensure that ownership of the company does not fall into foreign hands. It also maintains the necessity for all the directors to be of British nationality. At the same time it retains the Government's right to nominate a director. With those safeguards, I think that it could be seen that there is no danger of the company not being able to fulfil the very successful role it played even before nationalisation in attending to the defence requirements of this country.
Lord Boyd-Carpenter: My Lords, while welcoming the announcement of a further step towards privatisation, particularly in the light of the great success of this company when predominantly privatised (as was so helpfully brought out by the noble Lord, Lord Taylor of Gryfe), I should like to ask my noble friend a little more about the blocking mechanism or the golden share. Is that a power which can be exercised only in the event of a proposal either to turn the company into a foreign held company or to alter the articles in that respect; or is it a power which, in the discretion of the Government. can be exercised in any circumstances? I should be very grateful if my noble friend would describe the details of the power. Is it a share with voting rights equivalent to all the other shares, or is it some specially restricted blocking mechanism related only to proposals to amend the articles?
Lord Lucas of Chilworth: My Lords, I am grateful to my noble friend Lord Boyd-Carpenter for asking his question because it gives me the opportunity to set down the record. The share does not rank as other shares. It is not intended that the Government will sell their 48·43 per cent. until such time as by resolution of the shareholders the special share is created. In other words, there will be no period at which the
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Government's blocking mechanism will be lost. That blocking mechanism is designed to ensure that no more than 15 per cent. of the entire issued shares of the company may be held by foreigners. In that way the company will be retained by British shareholders. It is also intended by this mechanism that all the directors of the company will be of British nationality. It is only with respect to the articles of association that are concerned with those matters that the blocking mechanism is available to the Government, and the Government will retain the right to use that blocking mechanism if they see fit.
Lord Bruce of Donington: My Lords, will the noble Lord clarify one or two points? As regards the golden share, may we take it that the blocking mechanism would be used in the event of a British company seeking to take over British Aerospace? If so, under what circumstances and under what criteria would the Government consider using it, bearing in mind of course that changes in ownership are quite irrelevant to the performance of the company concerned or indeed its public activities? They are merely changes in ownership; that is all. Will the noble Lord also kindly answer the question put to him by the noble Lord, Lord Taylor of Gryfe, in regard to his suspicion of a dilution of capital taking place on the occasion of the issue of new shares and the sale of the Government's own holding which I should have thought at £3·68 amounts to some £177 million?
Lord Lucas of Chilworth: My Lords, as regards British Aerospace falling into the hands of another company or another body, my understanding is that if that company were English, it would be subjected to the provisions of the Fair Trading Act and it might involve a reference to the Monopolies and Mergers Commission. In so far as it falls under the control of a foreign company, that is where the blocking mechanism would apply. As regards the underlining of Lord Taylor's question, I understand that the chairman of British Aerospace probably released a statement a short while ago in which he said that the company, in seeking to raise further equity on the market, is not intending to expand the equity capital by more than 25 per cent. Of course I think one must accept that the amount of shares that the company offer—and it will be a joint offer with our own as well—is for the commercial consideration of the company. It is a matter of convenience both to the company and, indeed, to the Government that the sale of both those shares and the Government's holding should be at the same time.
Lord Morris: My Lords, I should like to ask my noble friend whether I am right in thinking that the fundamental reason why Her Majesty's Government have decided to sell their minority interest in British Aerospace lies behind the philosophy—with which I happen to agree entirely—that it is not the business of Government to be in business. Furthermore, have Her Majesty's Government considered the measure of protection that is afforded to minority shareholders, which Her Majesty's Government will remain, by virtue of Section 210 of the Companies Act 1948, which is the section designed for the protection of minorities' interests?
Lord Lucas of Chilworth: My Lords, I am grateful to my noble friend Lord Morris for his questions. In general, yes, the decision to dispose of the Government's interests in the company accords with our general philosophy in that matter.
Lord Diamond: My Lords, can the noble Lord explain what is the general philosophy in that matter, other than scraping the barrel to find whatever money they can and continuing the process of selling the family silver in order to pay for the groceries? I can understand no other reason myself. It is not a question of privatisation; it is a question of realisation of shares for cash. It is very simple indeed. Privatisation is totally irrelevant to the announcement that the Government have just made.
Will the noble Lord also say what is the reason why the Government are proposing to reduce their power of control of the situation which they at present possess? At present they have an interest in shares which enables them to control, and, if necessary, prevent, the alteration of any single article. The Government's proposal is that the golden share should enable them to control two articles. Why are the Government giving up control of all the other articles of association?
Lord Lucas of Chilworth: My Lords, the noble Lord, Lord Diamond, has asked a number of questions. First, it is not necessary—as I think my noble friend Lord Boyd-Carpenter spelled out—to control the company by necessarily having 48.43 per cent. of the shares. The general philosophy underlined by my noble friend Lord Morris was, I should have thought, the answer. Instead of saying, "What is the value of privatisation?", one might actually say, "What is the value of keeping a national interest in that company?", which has done so expressly well, as underlined by the noble Lord, Lord Taylor, when he quoted from the company's accounts. There can be no value to us in holding it. The company can he free and can go about its business in a more commercial manner.
There is no question of scraping barrels at all. We do not feel that there is value in the Government continuing to hold 48.43 per cent. of the shares. We can look after those two interests. The so-called blocking mechanism concerning the articles of association, to which the noble Lord, Lord Diamond, referred, is where we think we should hold an interest. That is why we have the special share arrangement with the company.
Lord Morris: My Lords, my natural demurity makes me hesitate to press my noble friend, but he did not answer in any way my question with regard to Section 210 of the Companies Act 1948. I understand the reason why. May I ask whether my noble friend would be good enough to write to me on that matter?
Lord Lucas of Chilworth: My Lords, of course, I shall be happy to expand and write to my noble friend. As is the arrangement in your Lordships' House when a letter is promised to a noble Lord, a copy will also he laid in the Library.

Insolvency Bill [H.L.]
4.31 p.m.
Second Reading debate resumed.
Lord Taylor of Gryfe: My Lords, we now return to the subject of the Insolvency Bill. I apologise to the House for being on my feet longer than I ought to be in one day. Perhaps this may even be just the forerunner to the amount of time we shall devote to this Bill at the Committee stage, because this is a complex Bill. I know of no Bill since the British Telecom Bill on which I have had more professional advice, lobbying and representation. I am indebted to the various professional organisations which have been good enough to give me their views.
Like the noble Lord, Lord Bruce of Donington, I do not regard this as a party Bill. Thankfully, this House will be discharging its responsibilities sensibly as a revising Chamber looking at a piece of legislation in a totally objective way with the purpose of improving it as law. Therefore we welcome the attempt of the Government to deal with the complicated problems which arise in dealing with insolvency procedures.
This has been digested over a number of years. I think it was Edmund Dell as president of the Board of Trade who appointed the Cork Committee to look at insolvency law with a view to modernising the present cumbersome insolvency procedures. I know that we on these Benches, and those on other Benches, have been pressing the Government to do something about this, not simply because of wrongful trading and substantial abuses which are exercised within the present law, but also because since Cork reported in June 1982 there have been 33,000 company liquidations.
As the noble Lord, Lord Bruce of Donington, said, this is a growth industry because the rate of liquidations is still tending to show increases. Therefore it is important that the regime which governs these insolvencies should be well understood and that certain protections should be built in to save depositors, shareholders and creditors from existing abuses.
The House will be happy to hear that my comments at this stage will be limited to a few generalisations because the detail of this Bill will be examined in the course of the Committee stage. In looking at the Bill as an attempt to improve the present law there are one or two deficiencies which I hope will be clarified in the course of Committee stage. One which interests us greatly and on which I have had representations from the Consumers' Association, Justice, and other organisations concerned with consumers, is the so-called protection of depositors, the people who take out hire-purchase agreements with companies who go "bust" and have little protection within the existing provisions.
These are members of the public that I would regard as in a different class from the ordinary trade creditors. The ordinary trade creditor in his dealings with any company where money is lost is able to reclaim VAT, had debt relief, and in any event has a profit element included in the sales price and can write this off against his corporation tax return. It is the consumer, the

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small person, who suffers greatly and who has no adequate protection as a consumer in the legislation that is proposed.
There is also the point that while trade creditors can reclaim VAT bad debt relief in a liquidation, they cannot do this in a receivership. Perhaps we could have some examination of this point. Nor is it clear whether this can be done in a scheme of arrangement or in administration, and perhaps this could be looked at as the Bill proceeds.
There is also the question of preferential rankings. There has been no change in the Government's preferential rights, and indeed there has been an extension whereby the right of set off between Government departments is being used more aggressively in the legislation before us. This is a point that might be seriously looked at.
The question of the disqualification of directors is the subject which has had the greatest amount of publicity and discussion because a lot of people are interested and involved, and many Members of this House probably feel themselves vulnerable to the provisions of disqualification of directors. It has been rightly said by various organisations who have written to me that it is highly desirable in the public interest that some suitable and effective mechanism should be available to deal with directors who fail to conform to acceptable standards and who are not fit to be in control of a company. We subscribe to the view of the Government that it is necessary that that should be done.
However, we are strongly of the view that within the present provisions it will sometimes be extremely difficult to attract people to rescue operations in companies which require assistance and secure support from men of great experience. For example, a man might readily be a director of Imperial Chemical Industries and feel that he has some talent to assist a company which seems to be having a rough time. If he joins the board of that company to assist its revival and the company does not in fact succeed, he could well be vulnerable to losing his directorship of Imperial Chemical Industries. It occurs to me that there will be a reluctance on the part of experienced directors who hold other and prestigious appointments as non-executive directors of companies who might be invited to carry this unusual degree of risk to their other commitments by playing a responsible part in the rescue of companies.
It is an interesting point, and I am sure that this will be discussed at great length. I do not know whether the directors of Dunlop, for example, rather than having received a golden handshake for their exercise might suddenly become liable under the provisions of the Act. I feel that this is an area which requires clarification.
For example, take the director of a family business who feels that he has certain skills in a local community to give to the revival of a particular company in the area for which he just feels a social responsibility. By making his services available to that company, if the company fails, then within the provisions of this legislation there could be a charge that he has been negligent and he could lose his
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directorship of his own family company. I am all in favour of people taking risks in trying to rescue companies and stimulate the economy, but I feel that this provision might be inhibiting.
There is also the question of insolvency courts. Unlike in bankruptcy, where there are special bankruptcy courts, there is no insolvency court which can deal with the specialised nature of insolvency problems. Perhaps we could have some reassurance on that point. There is a real minefield in the area of reservaton of title which requires to be more clearly defined in the legislation. This is another area that might be looked at between now and the Committee stage. The rights of associated companies and directors' loans are sometimes used for voting purposes in a liquidation to the benefit of directors as opposed to the benefit of creditors. This is something else that we must protect in the legislation that we are examining.
I very much welcome the assurances of the noble and learned Lord in taking care of the special provision of Scottish law. I know it is a matter very close to the heart of the noble and learned Lord the Lord Advocate, but there is a feeling in Scotland expressed through the Institute of Chartered Accountants and the Law Society of Scotland that their representations have not been adequately considered. The Scottish Act is a distinct, self-contained code in the areas which it covers. The concern is that the changes that may be made in this Act to bring it into line with the provisions proposed for England and Wales without due consideration of the distinctive features of the substantial and procedural context of law and practice as contained in Scottish law in the 1972 Act are not truly accounted for. I know that this is a matter of deep concern to the noble and learned Lord the Lord Advocate. Perhaps in the process of making subsequent amendments he may further consult the professional bodies in Scotland that I have mentioned with a view to taking account of the Scottish law on this matter.
I do not want to detain the House long because we shall be examining the details of this Bill. We support the desirability of providing that insolvency practitioners will have certain minimum qualifications and that this requirement should apply both in relation to corporate and individual insolvency including acting as a trustee, both interim and permanent, in Scottish sequestration under the Bankruptcy (Scotland) Bill which this House has dealt with recently.
I do not expect an immediate response or reply tonight to some of the points made, but many submissions have been received by all of us who have taken an interest in the Bill. I am impressed by the representations from organisations such as Justice and the Consumers' Association in dealing with the consumer—the neglected element in this whole legislation. I hope that in the Committee stage we will have an opportunity of sensibly amending these provisions.
4.43 p.m.
The Earl of Buckinghamshire: My Lords, it is something of a relief to find a subject, after some eight

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months of listening to your Lordships' debates, on which I may speak with a degree of interest. I should declare self-interest since I am a director of a limited company. In making my maiden speech I ask for the customary courtesy extended by your Lordships.
I wish to make it quite clear that I accept and welcome the main thrusts of this Bill. It has been apparent for many years that the insolvency law has been in need of reform. The need for reform has been brought to our attention most clearly by the Cork Committee findings. I am not sure that Sir Kenneth Cork will approve totally all aspects of this Bill, and many of its omissions, but clearly we all owe a debt of gratitude to the work of that committee.
This Bill seeks to strengthen insolvency procedures and to improve professional standards of directors and insolvency practitioners. I agree with noble Lords' comments with regard to simplification. With over 200 clauses to the Bill it is complex and certainly not simple. As there are over 200 clauses, I wish to confine myself to discussing two aspects of it. These matters have been raised by noble Lords who have preceded me, so I apologise if in the course of my speech I duplicate anything that has already been said.
The two clauses about which I wish to speak are Clause 11, which deals with the concept of wrongful trading, and Clause 7, which deals with the disqualification of directors. In discussing these two clauses it is, I am sure, realised that limited liability has been significantly abused. The major area of abuse has been caused by the Phoenix syndrome, with dishonest directors moving from one company to another, leaving debts which cannot be met. The Office of Fair Trading estimates that over 200,000 people suffer each year by a loss of over £18 million in prepayments. Only today in my car as I drove to the House I heard of another case of a liquidation where over £40,000 was owed to people.
Your Lordships may have reservations about the introduction of a liability based on constructive and subjective knowledge where we are thinking about wrongful trading. This is because there will be much doubt and uncertainty as to the circumstances in which liability can arise. This, as a side effect, may deter those most able to turn a company around, and serve to hasten the demise of a company. It is not good to have any uncertainty in the wording of the Bill.
An argument will be put forward that directors have the availability of appointing an administrator rather than going into voluntary liquidation. I have to ask whether this will assist in turning around companies. Creditworthiness is very important and there must be serious doubts whether other solvent companies will extend credit to a company under an administrator which still operates under the threat of a wind-up.
Detailed consideration will be required on Clause 11 as the penalties for wrongful trading are stringent. The Bill provides for directors to be personally responsible, without limitation of liability, for the debts of the company. Your Lordships may wish to note that, following pressure from the Institute of Directors, the Insolvency Bill repeals that section of the Social Security Act 1975 which has been used to make company directors personally liable for national insurance contributions in a liquidation. We now see it replaced and extended under Clause 11.
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The concept of penalising "wrongful trading" cannot be disputed. The form of words needs to be carefully considered in the framework of this Bill. The benefit of hindsight will be used to the utmost and I doubt whether, in the majority of cases, there is any one moment in time when directors could have concluded that the course they were taking would lead inevitably to insolvency. I am aware that such judgments have been made in the past. Your Lordships may recall the case of Rolls-Royce in the early 1970s when the inspector's report stated that the company was lost from the moment it took the fateful decision to develop the RB.211 engine. Presumably this Bill would catch those Rolls-Royce directors for wrongful trading, but are they the directors with whom we are primarily concerned who would be penalised for a decision relating to commercial risk turning out to be wrong? Your Lordships may consider that the present definition is unfair in certain areas and not strong enough in others to catch delinquent directors with whom we are primary concerned.
I now turn to automatic disqualification of directors under Clause 7. Much comment has been made on this clause. Mr. Alex Fletcher has been reported in the Financial Times as stating that:
"honest and responsible directors have nothing to fear".
I am quite sure that is true. A shadow trade spokesman for the Opposition said that there would be considerable anxiety at the automatic disqualification of directors. He added that this provision may fail to catch the dishonest director and contradict one of the intentions of the Bill by hastening companies into liquidation. I was particularly interested here in the comments made by the noble Lord, Lord Bruce of Donington, on the deterrence aspect of this Bill where company directors of good repute will be unwilling to serve on other companies which may well need their services because of the fear of losing their major directorships.
It is the automatic nature of this disqualification that is the problem. There is a view which says that automatic disqualification is arbitrary, failing to distinguish between those to blame and those to exonerate. One answer is that the innocent, of course, will obtain relief from the court during the three-month period, but side effects may be that directors will resign rather than remain to protect the creditors' interests and, indeed, it may give creditors an opportunity to assert unreasonable pressure under threat of a petition. I am afraid that the good intentions listed here by the noble and learned Lord, Lord Cameron, may be somewhat hopeful in this area of improving the standards of directors.
Alternatives to the measures in this clause have been put forward to the Minister. One of these is that in every winding up, whether voluntary or compulsory, the liquidator would be obliged to report whether or not in his opinion the Secretary of State should seek a disqualification order. The onus would then switch from the need of the director to prove his innocence, at his own considerable cost, to the obligation of the Secretary of State to establish a prima facie case for disqualification. The burden of administration—and I do not think that we should underestimate this—on our courts would switch from the courts to the

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Secretary of State whose powers for this purpose are already in place.
It may be considered that the way this clause is currently drafted will catch only the innocent and leave free those who are most guilty, because of the emphasis placed on compulsory liquidations. Furthermore, I have no doubt that your Lordships will wish to consider carefully whether or not the introduction of the concept of "guilty until found innocent" is a concept that should be lightly introduced into our legal system. In asking this question I am well aware of the convenience of a system which will disqualify dishonest and delinquent directors so easily and assist to remedy the abuse of limited liability. But I am also aware, as the noble Lord, Lord Bruce of Donington, has said, that the Government departments have failed to use the powers that are already in their hands.
I have raised two areas for your Lordships' consideration. There are many others which in due course will be fully debated by your Lordships. But, having had a Scottish connection for some time and following Scottish Lords in this debate, I cannot resist drawing the attention of the House to the concern that is expressed in Scotland with some parts of this Bill. In particular, I think the aspects concerning voluntary wind-ups and court wind-ups need to be closely considered.
In conclusion, may I say that the new remedies for wrongful trading and misapplication of assets will be of benefit in making it possible to bring action against delinquent directors. However, there are weaknesses present in the Bill. Although it is a welcome move to enable the liquidator to apply to the courts for a disqualification order in a voluntary wind-up, your Lordships should note that it is the creditors who will have to pay the costs. Equally, this Bill does not allow for individual creditors to bring action to recover debts; and this I know is something which the Consumers' Association has raised.
Secondly in my concluding areas, it is a widely held belief that in the insolvency profession the present remedies for disqualification exist under the four Companies Acts and the Theft Act 1968, so that civil and criminal liabilities potentially exist for delinquent directors. There are two problems to this. The one which has already been mentioned is the failure of Government departments to bring actions on applications from the Official Receiver's Department. The second problem is that criminal law does not assist in the recovery of debts.
This Bill is extremely important in the business and industrial regeneration that this country requires. It is critical to strike the right balance between encouraging the growth of our business and industrial base through the willingness of directors to take commercial risks and the rights and protection of those who deal in good faith with companies that go into liquidation. Your Lordships may consider that to introduce legislation that could stifle commercial risk taking and deter company directors of integrity from undertaking the vital jobs of rescuing companies who would otherwise go into liquidation could be thought about again. No doubt your Lordships could think of more than one public company presently undergoing such a process.
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Reform that does not catch the fly-by-night directors is equally in need of reconsideration.
I am told that professional bodies such as the Institute of Directors, the Law Society, the Institute of Chartered Accountants, and the Consumers' Association have all expressed reservations on these two clauses. Their viewpoints may be different, but they are all united in the desire to catch those directors who trade with the intent to defraud the public, and it is the means rather than the end which is under discussion. Therefore, my Lords, while I welcome the main parts of this Bill, I have some reservations and I look forward with great interest to listening to the views of your Lordships.
4.56 p.m.
Lord Denning: My Lords, I am sure that all your Lordships will join with me in congratulating the noble Earl on his speech so well and clearly spoken. I, more than twice his age, would say that he is a standing symbol of the work of the hereditary principle. His words today and the research that he has done have contributed much to our knowledge of this Bill. I am sure that during the Committee stage his words will be of the greatest value to your Lordships, and I hope that we shall have the benefit of his help for many years to come.
This Bill is of the first importance. Our law as to bankruptcy is archaic, antiquated, abstruse. I have always shied absolutely clear of it, and I think that most lawyers have, too. They talk about the act of bankruptcy. I do now know myself what it is. You have to look at the statute; and then you do not understand it. You have to have a receiving order and you have to have goodness knows what. Thank goodness we have Mr. Muir Hunter. Queen's Counsel, who has edited the standard book on the subject, Williams on Bankruptcy. He was on Sir Kenneth Cork's committee and they have made a jolly good job of modernising the bankruptcy proceedings for personal individuals, which was completely out of date, the last statute being that of 1914.
Having said that, for the commercial community of this country the provisions dealing with companies and the directors of companies are of the first importance. Although they are tucked away, so to speak, in an abstruse Bill, they will affect the whole of our company law system. Let me remind your Lordships that our company law system of limited liability goes back only about 100 years, to 1862, the year of the first Act. Since that time it has become universal throughout the world that a company has a corporate personality of its own in law different from all the directors or shareholders. It alone is responsible for its debts and obligations. If it cannot pay its debts, it can be wound up. But no one, no creditor, can attack the director who orders the goods or any officer of the company, or go against him in his personal capacity. There is the veil of corporate personality which protects the individual from any personal liability at all. That is the fundamental principle of our company law.
But then you have to reckon with this. Although most directors are efficient and good and look after their businesses, there are some who are dishonest and delinquent. Let me speak plain. Let us see how

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directors are appointed. Take your PLC or public limited company. How are the directors appointed? I do not know whether many shareholders attend annual meetings that appoint directors, but there are usually only a handful there. The new directors are appointed by the outgoing directors, or they are a self-perpetuating oligarchy. Mark you, in most great companies they are very well selected and appointed, but they are a self-perpetuating oligarchy who are appointed largely by themselves and not by the shareholders.
If one takes the private limited company—the one man with his 100 shares and £2 capital paid up—he appoints the directors. He appoints himself, of course, and his wife. He runs that company and of course he has no personal liability. If the company takes orders for goods, as many of them do, it can get money for the orders, pocket the money, and not supply the goods. The poor individual who has paid the money has no recourse. This report draws attention, in paragraph after paragraph, to what is called the phoenix symbol. It is time the community at large knew what that phoenix symbol is.
A man acquires or forms a private company in which he holds a majority of the shares. He himself may be a director—he and his wife and one or two of his friends. What do they do? They incur debts; they milk the assets; and within a year, perhaps, the company goes into voluntary liquidation. A liquidator is appointed and the liquidator proceeds to sell the assets; the liquidator is not necessarily a qualified man at all. A good buyer comes on the scene. The director who has been running that company gets a new company. He buys it "off the shelf- by buying the shares of the company, and he buys the assets of the former company from the liquidator at a giveaway price. So he gets the assets of the first company into the hands of the second company. He changes the name of the second company to be very like the name of the first, so that people get mixed up between the two; and then having got this second company going, he goes through the whole process again. He incurs debts and gets such assets as there are; and he winds up the company. In each case he leaves a trail of creditors behind him.
That is the phoenix symbol—this bird that rises from the ashes of the old; it then expunges itself and another phoenix arises from the ashes, leaving trails of creditors behind. That is the dishonesty which is pointed out in page after page of this great report by Sir Kenneth Cork. Let me pause for a moment to praise that report as I would wish to praise it. It is absolutely first-class, and the most experienced people of the country—lawyers and accountants—have done a marvellous job in pointing out the defects and analysing the difficulties.
Having said that, having exposed these delinquent and dishonest directors, let me say that the report also has regard to the important spirit of enterprise. This company law system which we have has fostered enterprise. People have taken risks and they have done it under the company name. That is quite right, and we must preserve and maintain our company law system because of that spirit of enterprise. Those things would not have been undertaken had they not
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been free of personal liability. Let me emphasise that too, as the report does.
This report, which has been largely accepted by the Government, modernises our law in this way. It ensures that all the people involved—the liquidators, the receivers and the trustees in bankruptcy, and all the people who deal with this complicated subject—are now to be qualified. They are to be qualified as insolvency practitioners and they are to come from the ranks of the people who know about it—the lawyers and the accountants. I have known many of them and a first-rate body they are—qualified insolvency practitioners. They are in future to be the only people to handle these important matters.
In the past they have misunderstood their role. We had a case not long ago where a receiver was appointed for the debenture holder, the debenture holder being a bank which had lent a manufacturing company a lot of money. When it was not repaid they appointed a receiver for the debenture holder. He was selling a factory with a lot of machinery in Gloucestershire or somewhere nearby. He did not advertise the sale properly but only sent out notices to a few people. He advertised the sale and had it held on a cold day in January or February. It turned out to be a very cold day with snow everywhere, and hardly anybody turned up. He said, "Well, I'll sell the best I can". He was not going to postpone the sale at all even though few people were there. The receiver said, "I am not concerned with the creditors; I am only concerned with my bank. I am a receiver for the debenture holder, the bank. I have nothing to do with those creditors". There were one or two cases in the book which supported that view. He sold off the assets at about a quarter of the price they were worth: the bank got what they could and the unsecured creditors got nothing. I am glad to say that in the Court of Appeal we held that the receiver for the debenture holder has not only to consider the debenture holder but to consider the others, too. We hope that we put that right. But that case shows the importance of having qualified practitioners to run our insolvency system, whether it is ordinary bankruptcy or a company winding-up. This is the first recommendation in Sir Kenneth Cork's report. Excellent it is, and it will be maintained in this Bill.
I will deal with another point, which is not controversial. The receiver on a floating charge is a very good system when a company is in difficulty and you do not want to spoil the company; you want the company still to run and to carry on business, perhaps selling off one piece and leaving another piece. That is a very good institution. What this report has said is: do not let us confine receivers to debenture holders; provide for a floating charge. As a general position, have an administrator. If a company is on the verge of going broke, let us have an administrator.
The administrator would be a qualified practitioner. He would come in and would run the business as it ought to be run, perhaps selling off some parts and retaining others. At all events, this is altogether a new system in our law. When a company is in difficulties or on the verge of going broke, let us have an administrator to come in and run it. That is the second new institution in this Bill. I will not go through all the others. Those are the good points.

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But what about the dishonest and delinquent directors? We have had provisions, going back to 1976, to deal with fraudulent trading. In their recommendations Sir Kenneth Cork and his colleagues have brought a new concept—that of wrongful trading—into our company law. They actually went so far as to draft a clause for the legislators to say what wrongful trading is and how it should be dealt with so that when a company is in voluntary liquidation, it can he brought to hook. I do not mind the new clause as it is brought in in Clause 11 of the Bill. That goes most of the way to meet Sir Kenneth Cork's clause. It applies when a company is in insolvent liquidation and when, some time before the commencement of the winding up, the director knew or ought to have concluded,
"that there was no reasonable prospect that the company would avoid going into insolvent liquidation".
In other words, when the director knew or ought to have known that the company was going broke. If he knew or ought to have known it was going broke, then he may be guilty of wrongful trading.
If that is found against the person who knew—not against the innocent ones—then we have this new concept in our law that such a man is to be personally liable. He can no longer bring down the veil of corporate personality and say that it is only the company. If he carried on business when he knew or ought to have known that the company could not pay its debts and could not pay for the goods—if it ordered goods and he knew that it could not pay for them—then he may be personally liable. There will be the discretion of the judge and all sorts of safeguards for the innocent man, but if there is wrongful trading, then he is abusing the company law system and he is abusing the corporate veil. When he abuses it in that way, he should be personally liable.
That is the new wrong of wrongful trading which Sir Kenneth Cork and his committee drew up. It drew up the whole clause. It has been adopted by the Government in this Bill and surely it is right. There may be details to be looked into, but in principle it is right. A director who has been guilty of wrongful trading can be personally liable himself—he cannot put it on to the company—to such an extent that the judge wishes. That is wrongful trading.
Apart from that, some directors have proved themselves so unfit that they ought to be disqualified. I have told your Lordships before that no qualification is needed to become a director. A man can appoint himself, his friends or whoever; but if he behaves badly or wrongly, he can be disqualified. There are provisions in this Bill for disqualification. These too are of the first importance. The director who has wrongfully traded can not only be made personally liable but can he disqualified.
The other important clause is Clause 7. As the committee and the Government point out, when a company goes into compulsory liquidation, when a company lets things go so badly that the court has to intervene to say that this company must be wound up compulsorily—usually there would be something wrong going on on the board, something dishonest, discreditable or whatever it may be—there is provision
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under Clause 7 for automatic disqualification. It is provisional at first—the director can get out of it if he says he had nothing to do with it—but after three months or so, it can be made an automatic disqualification for three years. He cannot serve as a director of any other company for another three years. That is the automatic disqualification clause. There may be some question about the burden of proof but I will not go into that now. It just shows that the other way of dealing with delinquent directors is disqualification. These are the great new remedies brought into our law. There is the personal liability of dishonest directors, or incompetent directors if need be; and there is also automatic disqualification which they can get out of if they show that they have been acting properly. Those are the main provisions, as I would see it, of the Bill.
There is only one further point which surely needs a mention—that is the position of Crown creditors; the income tax people who say, "Oh well, for centuries the Crown has had a preference over anyone else. If anyone goes bankrupt or cannot pay his debts in full, we the Crown can take it for our taxes." They have done it for goodness knows how long. There is no justification for it that I can see except on historical grounds. But they have always done it. I put aside value added tax and things like that which have to be collected for the Government. I refer to ordinary income tax and ordinary rates. Why should the income tax people have preference over the rest of the unsecured creditors? Unsecured creditors have often supplied goods and not been paid. They have often had to try to get judgments to get the monies paid. They are not voluntary creditors at all. They have had contracts. There is no distinction at all in principle.
Sir Kenneth Cork and his colleagues said how ordinary people are outraged that the Crown and the tax people should have this preference over everybody else and get their debts in full before unsecured creditors get anything. I am glad to say that Sir Kenneth Cork and his colleagues were of that view like most ordinary people. But the Government look after themselves. In this Bill they say, "We do not want any of that. Let the Crown keep its taxes". It is not a good or plausible reason. It does not convince me and it does not convince Sir Kenneth Cork and his committee. I should like to see an amendment which would he in accordance with ordinary justice to the effect that Crown debts and other debts all rank together. If it is 10 shillings in the pound, then everybody ought to have it. The Crown should not take one pound while the unsecured creditor has one shilling. They should all be equal.
There are several points in the Bill to be looked into. In conclusion, I would say that Sir Kenneth Cork and his committee have done magnificent work. It is a magnificent report. I should like to see it implemented in full. The Government with their extra White Paper have modified it a little and have not gone all the way, but they have gone far enough. I hope that their new Bill will commend itself to your Lordships, subject to any modifications which are brought up in Committee. I support the Bill.
5.18 p.m.
Lord Aylestone: My Lords, I have only one point to raise on this Bill. It is a small point in relation to the

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wider scope of the Bill, but nevertheless it is an important point affecting some company directors who are involved in companies which fail and become insolvent. It is a point which has already been made in the debate by my noble friend Lord Taylor of Gryfe and others. I think it is worth bearing it in mind for Committee stage, and, from whatever direction the amendment may come, we will certainly look at it very carefully and if necessary support it.
Under Clause 7, the Bill disqualifies a director from holding a directorship in another company, or could do, for as long as three years. There are unquestionably cases of negligence, or even something worse than negligence, where this is undoubtedly right. There are exceptions which the Bill, as drafted, recognises. However, there is a different case, a case on the other side of the coin, that of what I term the specialist director or, if you wish, a doctor/consultant director, who is brought onto the board of a company for a specific purpose. It may be because of his specialist knowledge.
He is invited to join the board because at that stage the company are struggling on the verge of insolvency. He has to look very carefully at the situation before he agrees to accept. One of the problems he has to bear in mind is that if things go wrong it could result in his disqualification as a director of any other company.
May I suggest that one way of considering this problem is by taking a hypothetical case—in fact, I know of one such company and I know some of its directors. The case which I shall treat as hypothetical concerns a company that is very anxious to continue trading and which has diverse interests in engineering, in potteries, and in a number of other areas. It is anxious to continue trading and extremely anxious to retain its labour force as far as is possible. The company certainly has no intentions of going into liquidation unless it is forced to do so.
In this particular hypothetical case the company has decided to invite onto its board a director who is extremely skilled in certain respects: in capital restructuring, in market arrangements, and in many other areas, too. He is invited to join the board. But on considering the invitation he realises that if he accepts and is successful and the board continues then everything in the garden will be lovely and his efforts will have been worth while—but what if he fails? What if the company goes into liquidation?
Having been on the board for rather longer than six months, he would face the possibility—and I will not put it any higher than that—of disqualification from joining any other board for a period of three years. Under the Bill, he could of course apply to the court for annulment of his disqualification, and there is no doubt that his case would receive careful consideration. But that would be a costly procedure. At least, he imagines it would be; and I imagine that, too. Maybe we are both wrong; if so, we shall probably be told. Nevertheless, that course of action was not necessary in a particular case I have in mind.
However, the time limit in the Bill as drafted would be likely to disqualify such a director for a very much longer period of time. This is a Committee point. I believe that the House understands it because it is a point which has been mentioned before. I hope that
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the Minister, when replying, will say something about it. A number of directors would be anxious to help a struggling company, but under such terms they would be nervous and hesitant about doing so; they would not want to join the board of such a company because of the provisions contained in this Bill—although, as I have already said, they are very necessary in many cases.
5.23 p.m.
Lord Milne: My Lords, I echo the congratulations so beautifully expressed by the noble and learned Lord, Lord Denning, on the excellent maiden speech of the noble Earl.
Within the compass of a Second Reading speech it is scarcely possible to do justice to this Bill. I propose therefore to limit my remarks to corporate affairs, of which I have had practical experience on both sides of the fence and in the grey area of company medicine. I find that my views are very close to those expressed by the noble Lord, Lord Bruce of Donington. I agree that the Cork Report is a most remarkable document. Nothing like it has been attempted for years; and the authors are to be congratulated. This report will be essential reading on the subject for many years to come.
Those used to present practice will welcome the many proposed changes in the law, some in detail but some fundamental. There are also some notable discrepancies between the report and the Bill. I imagine that Part I, dealing with the appointment, etc., of practitioners, is unexceptionable. Chapter I of Part II, on the disqualification and liability of directors, is much more controversial, but as it has been discussed, and will be discussed, in detail, I will not elaborate except to repeat that in my view first-time disqualification with or without liability would discourage enterprise, particularly in exposed industries; would freeze the recruitment of experienced non-executive directors; would hit small business rather than large, where directors are more insulated by holding company status and open to the possibility of takeover or rescue; and would punish the majority for the sins of the few.
Further, insolvency may occur through no fault of management, however carefully they may monitor the company's affairs—such as through a prolonged strike. As the Bill is drafted, it seems as though speed rather than equity is the aim, no doubt to avoid the particular abuse which the noble and learned Lord has described as the phoenix.
One defence for the directors—an obvious one—is that the company could pay its debts at the time of the winding up order. In assessing solvency for this purpose under Clause 7(5)(d) contingent liabilities though not, apparently, contingent assets, are to be brought into account. This means that directors ex post facto are to be judged on liabilities, the values of which at the time they could not possibly know, and which may well be unquantifiable and which may turn the balance.
If directors are to suffer these indignities, surely they must be judged on the outcome of the liquidation when contingencies, both plus and minus, can be evaluated and permitted to rank. Admittedly, this may

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take some time where lawsuits or guarantees are involved. As the Bill stands, a board may be stampeded by the threat of large legal claims into making a wrong decision. Subject to the above, if the Government are resolved on disqualification, then that under Clauses 8 or 9, on an application, is less repugnant. Surely, automatic disqualification on a second offence might be a reasonable compromise.
Much has been said about the liability of directors for wrongful trading under Clause 11. If the present law is too tightly drawn, then the wording of the proposed clause seems to me to be unfortunate for what is a perfectly reasonable concept. It will, I am sure, be amended during the passage of the Bill.
On the ranking of creditors, I am sure there will be general disappointment—as voiced by the noble and learned Lord, Lord Denning—that the Government have not accepted the recommendations of the report on preferential creditors or on VAT. While considering preferential claims, the wording of Schedule 5(1) is I think suspect so far as corporation tax is concerned.
Although admittedly it is a very difficult question, neither the committee nor the Bill has tackled the problem of insolvency and liability within groups of companies. I am well aware there are outside considerations, but the matter may arise anyway in certain circumstances through wrongful trading. Where inter-group accounts can be shown to be long-term or of a capital nature there seems to be a strong argument for deferral by statute.
To conclude, I have exposed my own reservations about the Bill. There is much else besides, mostly embracing the recommendations in the report. Subject to those therefore I welcome the Bill.
5.30 p.m.
Lord Hutchinson of Lullington: My Lords, I venture to intervene in this debate not because I am an expert in this highly complex field of the law—and I am delighted to find that my general distaste for this branch of the law has been shared all these years by the noble and learned Lord, Lord Denning—but for two other reasons. First, I am aware of the reservations and disappointments felt by a number of my erstwhile legal colleagues on studying the provisions of the Bill which they, as practitioners, will have to understand and operate. Secondly, I have for long been concerned, along with the ordinary consumer, at the ease with which unscrupulous operators have hitherto been able to make use of the bankruptcy laws to fleece the public. Indeed, I have noted, too, in the criminal courts how difficult it is to obtain a conviction for fraudulent trading as that offence is now defined.
The committee's purpose was to achieve unification, or at least harmonisation, of the various codes governing the law of insolvency. It set out to recommend a system which,
"is simple and easily understood"
and to satisfy reiterated demands,
"that the law be expressed in modem language".
While congratulating the Government on bringing forward so massive a Bill within 2½ years of the
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appearance of this remarkable report, I am bound to express the practitioner's profound disappointment that all the relevant law has not been concentrated into one Bill—which is the case in nearly all the principal commercial countries of Europe, as I understand it—and, further, a Bill which might have set up, as recommended by the committee, an insolvency court with exclusive jurisdiction in all insolvency matters and forming part of the High Court. As it is, the practitioner will have to refer extensively to the provisions of the new Companies Bill and to other statutes such as the Deeds of Arrangement Act 1914. In addition, although the Bill gets rid of the old concept of an act of bankruptcy, it preserves intact the criminal bankruptcy provisions of the 1973 Act which are based on that very concept. These provisions have not been successful in achieving any substantial financial recoveries in the criminal courts for the benefit of victims, and I am extremely sorry that the opportunity to consider their reform has been missed.
Much of the Bill is also found by practitioners to be dense and verbose. It must be clear to all noble Lords that its 194 pages are very far from being "simple and easily understood". Furthermore, as has already been mentioned, the Bill makes remarkably extensive use of remitting matters of substance to be dealt with by subordinate legislation. Schedules 3 and 6 contain no fewer than 52 provisions (I think the noble Lord, Lord Bruce, calculated it as 49) to be included in company and individual insolvency rules. It is impossible for a practitioner to understand the policy behind the Bill without a thorough perusal of a draft of the rules themselves—much as we were unable to assess the provisions of the Police Bill without digesting the contents of the codes.
Hitherto the advisory committee on bankruptcy rules, chaired by a distinguished chancery judge and with a highly expert membership, has had a duty to review the rules and make recommendations to the Lord Chancellor. Now, as I understand it, under Clause 194 that committee is to be stripped of its advisory function and it is the Lord Chancellor who is to initiate rules after no more than consultation with the committee. Surely a broader and better informed rule-making authority is called for in these circumstances rather than a less informed and narrow one.
Like all other speakers, I welcome Part I and the laying down, at last, of professional standards for insolvency practitioners. I also welcome the advent of an administrator and the creation of an administration procedure. It will of course help the rehabilitation of companies which get into trouble and the restoration of their profitability with the keeping in operation of their viable parts, all for the benefit of creditors.
Part II introduces in Clause 11—as has been mentioned by a number of speakers—the concept of wrongful trading. That was suggested by the committee, and in my opinion is very long overdue. As I have already said, the offence of fraudulent trading involves proof of dishonesty and is based on the need to prove that there was no reasonable prospect of debts being paid as they fell due. That is a very difficult concept to establish in the grey area of irresponsibility, over-confidence and stupidity, all of which shade imperceptibly into dishonesty. That area

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was very well touched on, if I may say so, by the noble Earl in his maiden speech which was full of experience and wisdom.
Wrongful trading gives rise only to civil liability. It will encourage directors to consider the financial position of a company at a much earlier stage; but, although it may catch the irresponsible director of the smaller company, it could also push larger companies into liquidation at a much earlier—and sometimes a much too early—stage, impelled by a very natural fear of the possible consequences which may befall their directors.
The committee proposed a well-considered power to be given to apply to the courts for anticipatory relief to cover the short period in which to get a company on its feet; but again this very sensible idea has not been taken up in the Bill. Clause 11—here I venture with trepidation to differ from the noble and learned Lord, Lord Denning—seems to be very obscure and confusing. It is a great pity that the draftsmen have not adopted the clear and simple wording of the draft clause on page 404 of the report, to which the noble and learned Lord referred.
As regards automatic disqualification of directors of wound-up companies, I should have thought that most experienced practitioners would be against compulsory disqualification, and indeed against compulsory penalties in almost all cases; whether it was hanging for sheep stealing, for capital punishment for murder or 12 months' disqualification for driving with an excess of alcohol. These automatic penalties always lead to irrational decisions and questionable procedures. The committee recommended mandatory disqualification only on proof of some delinquent conduct, which surely would be a much wider course to follow. No doubt the provision is directed to the encouragement of voluntary liquidation. Indeed, that is a course which I suppose rogues will now follow. Whether it be in the manner that the noble Lord, Lord Bruce, indicated, it will obviously give rise to this course now being taken by such operators.
Voluntary liquidation with power to apply for a disqualification order is, I know, in the Bill, but I would ask the House whether a liquidator is likely to embark on such an application. He will be concerned with getting in the money and would be unlikely (would he not?) to expend further money and effort on taking that course and making such an application, which would inevitably give rise to a period of dispute.
Finally, there is the plight of the unsecured creditor. The committee makes a point of highlighting the volume of evidence it received which was, in its own words:
"deeply hostile to a law which so often frustrates any fair distribution of uncharged assets to unsecured creditors".
It wanted to ensure that no debt would be accorded priority unless shown positively to be fair and equitable and to command public acceptance.
It recommended—and we have already heard about this from the noble and learned Lord, Lord Denning—that certain Government preferences (tax arrears, rates, PAYE, VAT) should either be abolished or should have the period of the preference shortened. As I understand it, abolition has been incorporated into the insolvency laws of a number of other
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countries. Alas, that has not been reflected in the Bill, and Crown preference has been retained. I was delighted to hear the castigation of that decision which fell from the lips of the noble and learned Lord. The excuse that the Crown is an involuntary creditor as regards tax has no basis at all other than an historical one. Indeed, the committee was at pains to point out that the Crown possesses exceptional remedies for obtaining prompt payment of its debts which are not available to ordinary creditors.
Lastly, in relation to unsecured creditors, they would, I suggest to the House, be put at a disadvantage in this Bill in regard to the appointment of an administrator. If the holder of a floating charge wishes to exercise his right to appoint a receiver, it will not be possible under the provisions of this Bill to appoint an administrator. The result may well be that the receiver, owing an allegiance to the chargee, will wish to realise the assets as quickly as possible, leaving nothing for the unsecured creditor; whereas, if an administrator was appointed, he would want to keep the business going as long as it was possible to assist the unsecured creditor.
Those are the only points about the Bill that I wish to make at this stage. As I say, it is a matter of congratulation for the Government to have produced a Bill in this time, and of course one must welcome the Bill as a whole. But the Cork Committee report was a report of great lucidity and very great brilliance. I do not think that anyone could describe this Bill in those precise words.
5.44 p.m.
Lord Mottistone: My Lords, I should like to add my congratulations to my noble friend Lord Buckinghamshire, who not only made a splendid maiden speech, but also covered so much of the ground that I proposed to cover that it will make it much simpler for me to address your Lordships. I hope very much that we shall not only hear a lot more of him, but perhaps also have his support when it comes to the Committee stage, which I always believe is the greatest fun in any Bill.
Like my noble friend, I should declare an interest, as a director of a very small company. One is of course at once worried by what one reads. In contributing to your Lordships' debate, I, too, have been advised by lots of people, but in the main by the CBI and also by the Institute of Directors. I was hoping very much to succeed my noble friend Lord Caldecote, who asked me to apologise to your Lordships for his having to go away to an appointment which came up earlier than he expected in relation to the debate. He invited me to say what I thought that we had both discussed. I shall do my best on his behalf; but, as your Lordships know, he has great experience in finding funds for small companies and is very well aware of the problems relating to small companies in getting them going and getting people of great competence to serve on their boards, where that is necessary.
I agree in principle with the Bill and in detail with most of its substance. I, too, should like to add my congratulations to Sir Kenneth Cork on his report, which formed the basis of this Bill, or at any rate part of it.

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I recognise the threat of what the noble and learned Lord, Lord Denning, described to us so succinctly as the phoenix company and the directors of that sort of company who are obviously the people whom nobody wishes to succeed. One wholly welcomes any efforts to restrain them within this legislation. However, as many noble Lords have said, there is another side to the picture. My noble and learned friend, Lord Cameron, said—and I hope that I quote him correctly—that the aim of the Bill was to encourage directors to take a closer personal interest in the affairs of a company. That is right, and in so far as it goes, it is wholly to be welcomed. All directors should take a closer personal interest. But the question is whether some features of the Bill do not in fact negate that very good intention. It would seem to me that the key to what needs to be achieved is to encourage good, as well as bad, directors to take a close personal interest in companies, especially those in difficulties.
If one turns to the item that many noble Lords have commented on—the question of automatic disqualification for three years of all directors in a company compulsorily wound up—one cannot help questioning whether, as written at the moment, Clause 7 does not provide a disincentive to join a company that is starting to struggle for the very people whom my noble friend, Lord Caldecote, would wish to put into it. Other noble Lords have said this and there will be amendments to cover it. It is something that my noble friend on the Front Bench, in whose name the Bill is, may like to note.
Questioning of the wording of Clause 7 in its present form has come from all sides of the House. It came from my noble friend Lord Buckinghamshire who is, as it were, fresh to the scene. It came from the Cross-Benches; and I think that we might have some more support from the Cross-Benches at Committee stage. It came from the Alliance Benches, and it came from the Opposition Front Bench. Questioning would also have come from my noble friend Lord Caldecote had he been here. This is not, as has been said, a party political Bill, but in this particular area there is room for making quite certain that there is not a disincentive, either for people to start up companies and take risks—that is, for decent, honest people to do this—or for people to save a company which may be in difficulty.
Of course, if a company is in genuine difficulties, it might result in that company going into voluntary liquidation so as to avoid this particular penalty, rather than the directors making a real effort to turn the business round. That surely is not what my noble friend the Minister wants. It cannot be his intention to encourage companies that are trying to get themselves started to go into voluntary liquidation. This applies particularly now when they are creating employment in the country. Everybody agrees that it is the small companies which are starting up which will get the country moving again along its proper way. Yet this legislation will create a position where people will be more likely, in unnecessary circumstances, to go into voluntary liquidation than they would have been before. That must be wrong. I hope my noble friend will take this point and will therefore be very sympathetic to any amendments that may be put
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before him at a later stage to try to put it right. I shall not labour the point, since other pople have mentioned it.
There is also a problem with the wording of Clause 11 in relation to wrongful trading. That point, too, has been tackled from other sides of the House, but I should like to add my voice to it. As a matter of principle I very much dislike, wherever it appears—in legislation, or elsewhere—the excessive use of the phrase "ought to". I think that much of the trouble in the world today is caused by people saying that so-and-so ought to have done something or other. The fact of the matter is that if so-and-so did not do something or other, he probably had a very good reason—and I am not talking about businesses. It is no good my saying that the noble Lord, Lord Mishcon, ought to make a speech which appeals to me, because he does not want to make a speech which appeals to me. Why should he? He is speaking from another Bench. However, if I was being very self-centried about it, I might think that I would be happier if he did make a speech which appealed to me. I object, and have objected for many years, to the use of the phrase "ought to" because it causes far more trouble in this world than many other little phrases. To find it in legislation, and what is more to find it in legislation in the past tense, where it says, "ought to have concluded", is presumptuous. It is really very presumptuous to assume that people ought to have done something when they in fact did not. So I think we have to alter that part of the proposal regarding wrongful trading.
The next point which I really cannot resist making concerns the preferred creditor status of the Government. On the whole the noble and learned Lord, Lord Denning, was more complimentary about this Bill than the rest of us have been. He did not even really take Clauses 7 and 11 to task. But he came in against the preferred creditor status of the Government. Sir Kenneth Cork has done this. I am not otherwise going to be involved in it, but I have had a brief from the National Farmers' Union and they have said that they think this is disgraceful. The point is, why on earth should the Government, who have lots more money than the small creditors, have any preference over the small creditor? The Government will not go "bust" if they do not receive their £1,000 or £2,000 for PAYE or whatever, whereas the small creditor who does not receive £750 may well go "bust". So it really is jolly unfair of the Government to continue to look after themselves.
As the noble Lord, Lord Hutchinson, has just said, there are other countries—and I understand it is shortly to be the case in France and West Germany and is already largely the case in the United States—where the government is on all fours with other creditors. I think it is quite right that they should be. I shall endeavour to assist any noble Lord who tables an amendment to try to put that right.
I have one other small point before I finish. The Consumers Association have been in touch with me on the telephone about it. They said—and I agree in principle with this—that the Cork Report studied the situation fairly carefully and recommended that there should be special arrangements for small creditors and that certain sums should be set aside from any assets that eventually were available to make sure that the

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small creditors received preferential treatment. In a sense it follows on from what I have just been saying. It seems to me that this is very reasonable because large creditors are either large companies in their own right or are people who have committed their services in a fairly massive way and so they know what they are doing. But the small creditor is not so aware of the penalties that might result if the company suddenly gets into difficulty. So it seems to me that what Sir Kenneth Cork was referring to in that respect was sound. It seems that here is an omission from the Bill which perhaps might well be rectified at an appropriate stage during its passage through this House.
With those main provisos, and taking into account those areas in which I hope we shall persuade the Government to change their mind, I wish to repeat that the Bill as a whole is an excellent one and I have great pleasure in supporting its Second Reading.
Lord Mishcon: My Lords, I—
Noble Lords: Order!
Lord Mishcon: I am so sorry, my Lords.
5.57 p.m.
Lord Meston: My Lords, as your Lordships have all observed, the need for reform is clear. It is also clear, with respect to the noble and learned Lord, Lord Cameron, that it is not a question of simply overhauling the machinery but a question of rebuilding the machinery, as Cork in its undiluted form recommended. Only then can the law deal with the diversity of provisions for corporate and personal insolvency and with the accretion of piecemeal legislation dating back to the last century. If the noble and learned Lord, Lord Denning, finds the present law abstruse, it truly must be. Like him and the noble Lord, Lord Hutchinson, I endeavour to steer clear of it if I can, but I cannot always avoid it.
The Cork Committee described the present state of affairs as in decay and liable to further decay. That echoed the Justice report of 1975, which described the 19th century structure as ill-adapted to the needs of the small debtor and of his creditors, as well as of society generally. That, in turn, echoed the Blagden Committee in 1957, which identified three objectives in this area of the law which I suggest still hold good. They were: first, to penalise and deter the dishonest debtor; secondly, to assist the honest and perhaps unfortunate debtor to rehabilitate himself and his dependants; and, thirdly, to distinguish those two categories for the benefit of the trading community. The Blagden Report suggested that practical experience showed that the law failed badly in all those primary objectives.
The statistics have already been mentioned to your Lordships. Last year was a record year for insolvency. I hesitate to join in criticising the mathematics of the noble Lord, Lord Bruce of Donington, and perhaps it does not matter, but I think he said there were 6,000 bankruptcies last year. I am told that there were 8,000. For example, yesterday 200 companies were listed in the High Court for undefended winding up. That is a typical, if rather light, Monday morning's list in London alone.
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Those statistics are a symptom of the economic state of the country. They are a symptom of the growth of dependence by businesses and by individuals upon credit, at all levels of society. The idea "Never a borrower nor a lender be" has become as outdated as the propositions of Mr. Micawber. A modern-day Micawber would be seeking credit facilities to deal with his temporary cash flow difficulties.
I would also suggest that the statistics are a symptom of the failure of any Government to implement the recommendations of the Payne report in 1969 for a rationalised debt enforcement body and debt counselling service. The fact is that bankruptcy is one of the blunter instruments of debt collection. At one extreme, the unscrupulous creditor can threaten his debtors with the stigma of bankruptcy. At the other extreme, the unscrupulous debtor can use the threat of the proverbial penny in the pound to stave off his creditors. Distinctions have therefore to be drawn. The statistics do not conceal only dishonesty or folly: they conceal also disappointments and frustrated hopes. Not all failures are blameworthy, and not all the blameworthy are criminals, or at least can be proved to be criminal. Indeed, not all of their dependants know what is going on, or benefit at the expense of the bankrupt's creditors.
A cynic has observed that if you go "bust" for £700 you are probably a fool, if you go "bust" for £7,000 you are probably in the dock, and if you go "bust" for £7 million you are probably rescued by the Bank of England. That leads me to suggest that we must consider the less able creditors who themselves can be pushed to the limits of solvency. In practice, I suggest that this must mean setting the level of fees and deposits for small creditors in insolvency proceedings at a reasonable level so that they do not feel that they are risking good money after bad. It is still, the position I think that it is cheaper for a creditor to give his debtor the necessary fee to present his own petition in bankruptcy than to pay the higher fee for presenting a creditor's petition.
Another way of assisting the smaller creditor, as many of your Lordships have observed, is by reducing, without removing, the status of the Crown in its various manifestations as a preferential creditor. If your Lordships look at Schedule 5 to the Bill, you will see that betting and bingo tax come before the butcher and the baker and the innocent consumer. It simply cannot be right. The Crown is untroubled by the payment of fees to commence proceedings. It is able to proceed in London, unlike other creditors, wherever the debtor or those creditors may live and however inconvenient it may be. And, of course, it has the preference to which I have already referred.
Very often the modest trade creditor has only one incentive in proceeding at all, and that is to get value-added tax bad debt relief. It is possible, in my submission, to devise a structure that does not remove the incentive to the powerful creditor and yet does not drive away the smaller creditor and prevent him pursuing his proper remedies. The Cork Committee provided a comprehensive package: this Bill is selective. I would respectfully echo many of your Lordships' remarks that the Cork report was a remarkable report and that its recommendations were clear. I would suggest that there is a heavy burden on

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the Government to justify any departure from the recommendations of the Cork report. I would also agree that the Bill provides far too much for sub-ordinate legislation. Even the Rules Committee, as the noble Lord, Lord Hutchinson, observed, has been demoted and emasculated, if that is the appropriate phrase to use in respect of a Chancery judge.
I agree with some of the criticisms of the wording of the clauses dealing with delinquent directors and wrongful trading. I join in congratulating the noble Earl on his clear and interesting maiden speech in this respect. It is right, I suggest, that there should be an automatic and mandatory disqualification of directors which does not depend upon their criminality, or upon their being involved in more than one liquidation, or upon the Official Receiver taking the initiative. One has to remember that there is a menace to the public not just from the crook but from the technically honest, over-confident entrepreneur who soldiers on in the belief that he can trade his way out of the financial mess into which he has got himself or that somehow or another his ship will come in. He goes on robbing Peter to pay Paul, or, in modern jargon, robbing Nigel to pay Nigel; in other words, paying his national insurance at the expense of value-added tax or his value-added tax at the expense of income tax. I would go further and say that the burden should be on the disqualified director, once disqualified, to show that he is fit to be allowed back into the commercial ring.
The other side of the same coin is the personal liability of directors. It is right that there should be a higher degree of personal liability on those who use corporate vehicles. The original theory, as the noble and learned Lord, Lord Denning, observed, was that companies were independent bodies that could outlive their members. That has been overtaken in practice by the members of companies creating and killing them off with ease, to the detriment of creditors. The separate but similar theory of limited liability of the members of a company as a means of assisting commerce is of no use at all where the company's liability is more limited still. Companies are bought off the shelf for a few hundred pounds and other people's money is too easily removed offshore. Again, I respectfully agree with the noble Lord, Lord Bruce of Donington, that basic book-keeping is often overlooked. One comes across that all too often in practice. To use the vivid expression of one wise judge, "People cling modestly to the corporate veil as if it concealed some closed monastic order, vowed to silence and poverty".
The same principle must also apply to the abuse of the corporate group; in other words, where a holding company hides behind some under-capitalised subsidiary. These problems only add to those of the consumer who falls foul of the unincorporated trader operating behind some uninformative name such as "A and B Builders". The difficulties of the consumer in that respect have become all the more difficult since the repeal of the Registration of Business Names Act.
I turn to a few more parts of the Bill. I welcome the re-casting of Section 42 of the Bankruptcy Act and Section 172 of the Law of Property Act into modern language. It has been very difficult to grapple with them in the past. I welcome Clauses 84 and 153, which
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enable the court to set aside or vary extortionate credit bargains. Those clauses are borrowed from Sections 135 to 139 of the Consumer Credit Act. The problem of course is in the definition of the word "extortionate", because it is not enough to show that a rate of interest is exorbitant. It has to be shown to be grossly exorbitant. A further problem in this Bill is that, unlike the Consumer Credit Act, the burden is not on the creditor to show that his rate of interest is not exorbitant. I look back with some nostalgia to the Moneylenders Act and the presumption against interest in excess of 48 per cent.
Finally, may I turn to a matter which has not been touched on by any of your Lordships; that is, the interaction of matrimony and bankruptcy. I do not suggest that one inevitably leads to the other, or vice versa. In a typical case of course the main asset is the family home. It is needed by the family and by creditors alike. By the law in its present state the creditors almost invariably prevail, however sympathetic the trustee in bankruptcy and however sympathetic the court. The impact of bankruptcy can be devastating on the home and family, and the courts have none of the flexible and powerful powers which they have on divorce. The wife and even small children can be lucky if they get a few months' grace before they have to give up possession. The wife will retrieve only what she can prove to be her strict beneficial interest. Children in these circumstances often suffer a double loss, because if there is a divorce they lose their father and then shortly lose their home, and it can be at a critical time in their education.
The Cork Report, at paragraphs 1114 onwards, in a carefully reasoned and compelling passage, put forward proposals for the postponement in appropriate cases of the creditors' interests to those of the dependants of the debtor. Typically that would be until the children reach their majority or until the wife remarries or cohabits or goes off elsewhere. Of course it has to be an appropriate case. Commercial creditors can bear this postponement. Of course it is without prejudice to the powers of the court to set aside wrongful dispositions to a wife. Of course it should only be a postponement in the interest, and of course interest should accrue. I would suggest it should be encouraged in cases where payments to the creditors can be made out of income in the meanwhile.
It is a great misfortune, I suggest, that the Cork Committee's recommendations in this area have not been adopted in this Bill, and I would urge the Government to look again at those paragraphs of the report to bring this country in line with other common law jurisdictions. To disregard Cork in this area would be to waste a valuable opportunity for important law reform. Subject to those observations, I join in giving a qualified welcome to this Bill and urge that there should be some constructive amendment.
6.13 p.m.
Lord Mishcon: My Lords, I apologise to the noble Lord, Lord Meston, if I somewhat prematurely endeavoured to carry out my task of winding up this debate on behalf of the Benches which I proudly occupy. In winding up I shall do my level best to deliver a speech which will completely satisfy the noble Lord, Lord Mottistone, if for one moment he

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would agree to accept these words from me. He obviously is not so prepared, because he is discussing a very weighty matter with somebody else. I was just telling the noble Lord—and I thought that he would smile back at me—that on this Bill, which has no politics in it, I was endeavouring to make a speech which would wholly satisfy him.
Insolvency is not a very thrilling or amusing subject, and I thought that your Lordships would agree with me if I observed that it would only be somebody like the noble and learned Lord, Lord Denning, who could turn such a dull subject into a matter of complete and absolute pageant. The way in which he illustrates the points that he makes, with such lurid recollections of cases that came before him, in that magnificent and individual style of his, is always a delight to your Lordships.
I must from these Benches—it is the first opportunity anybody has had from these Benches —congratulate the noble Earl, Lord Buckinghamshire, on his very welcome speech.
Perhaps I may try to summarise what we have been discussing this afternoon. It has been a very interesting debate, and like all of your Lordships I want to pay my tribute to the Cork Committee, to the 11 members of it who sat through innumerable sittings, and the three gentlemen who I notice were invited to attend those meetings because of their very special qualifications. We have before us a report of some 460 pages, described by others of your Lordships as a memorable report. As has already been said, your Lordships will want to know with very clear reasoning why and where the recommendations of this committee, which sat for so long and so arduously, and which made its recommendations with very valid logical reasoning and experience behind them, are varied from or not indeed included in any way in this Bill.
The background of the Bill is 100 years of a history of this subject, which has not been looked at by the Legislature with any amount of reforming zeal. After that time, as the noble and learned Lord, Lord Denning, said, we have got to go back to a picture of limited liability in this day and age which is so different from the time when limited liability was first thought of. There were then companies, few in number, where it was thought that it was right and proper that people should venture into trade without a personal liability. But nobody then envisaged the welter, the millions, of limited companies which would grow up and possibly the only object of which was endeavour to evade liability, which was never the object of those who first conceived the idea of limited liability.
And so we at once, in trying to face these problems, looked at the Cork Report with the greatest of interest. We found that the first evil that they thought they had to deal with was the question of the liquidator who was either not worthy of being a liquidator because he was acting in a very dubious capacity, or who did not have the competence to do so, even though there was no evil in his mind. Your Lordships, I know, will have welcomed the suggestion that there should be qualification attached to the job of liquidator. I am hoping, quite obviously, that that qualification will be automatic in regard to the profession to which I have the honour of belonging, and automatic, too, for the recognised bodies of accountants.
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I hope that, in another respect, the qualified surveyor will not be forgotten, because very often in a case of receivership, in particular where it is merely a question of realising property or advising on property, there is no earthly reason why a properly qualified surveyor should not at least be regarded as a proper person to serve as a receiver, and possibly even in some cases as a liquidator.
Then the Cork Committee obviously went on to consider a matter of great concern to the nation. I might almost describe it as involving the "Checkpoint" cases, which have horrified the public and where it is obvious that swindling of the worst possible order has taken place by what have been described as the phoenix companies. I think the committee has done a very thorough job here. I do not know why the Government departed from its recommendations.
I at once turn of course to the problem of the automatic disqualification of directors. Like the noble Lord, Lord Hutchinson, I do not like automatic penalties unless they have to be invoked. I should not necessarily have agreed with him about the drunk-in-charge case, but nevertheless I do want to take up the question of the disqualification of directors.
There are three things wrong, as I see it, with the provisions in this Bill on disqualification. First of all, the Cork Committee dealt with the question of disqualification on a mandatory basis and on a discretionary basis. I shall not take up your Lordships' time in repeating what they have said. However, I invite your Lordships to look at the way in which they dealt with that matter at page 409 of their report. I thought that they did so in a very just way: where certain things had gone dreadfully wrong, that could be proved mandatorily; where there was some doubt about it, the court had to exercise a discretion.
Quite apart from the points that have been raised so eloquently by Members of your Lordships' House as to the discouragement that there might be in certain circumstances—especially to the non-executive director who is very often valued in a company because of his specific experience but who is not required as a rule to take a very active part in the conduct of the company—it really is and must be wrong for someone to be disqualified automatically for a fixed period of three years, regardless of whether or not it is a most serious matter in respect of the conduct of the company's affairs so far as he is concerned, or whether it just borders on the fact of meriting disqualification. There is just a fixed period of three years which cannot be varied.
Quite apart from that, I am trying to envisage the procedure during the period of the three months' suspension whereby a perfectly decent, honourable director tries to get rid of this automatic disqualification. Anyone who knows the justice of our courts will know that every opportunity must be given for an investigation of such a serious matter. The lists in our courts are crowded. How long is such a procedure to take before a man knows whether or not the disqualification is to be lifted? Where is the Government's suggestion—if that is what they have in mind—for some sort of summary, but completely just, procedure? There is nothing about it in the Bill.

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Therefore, if the ordinary court procedures are to be adopted, I venture to think that this cannot be a just way in which to deal with the matter and that Cork is very much better.
Finally, on that point, I cannot for the life of me understand why it is that somebody who is a director of a company that is compulsorily wound up is subject to an automatic disqualification; whereas someone who is a director of a company wound up because of a creditor's voluntary liquidation is not subject to an automatic disqualification. I do not understand it. I can only say that, in the course of some experience professionally without being a specialist in this field at all, I can think of most dreadful cases which have ended up with a creditor's voluntary liquidation. I can also think of some perfectly innocent cases which have ended up for some reason as a compulsory or as a court liquidation. It sometimes happened that although everybody else agreed that there should be a voluntary liquidation, there was a persistent creditor who could not give any reason for it but who said, "I am going for compulsory liquidation. I do not like the look of this board and I do not like the fact that I have lost my money. I am going for a compulsory liquidation". In the old days especially, if I may be learned for a moment, the court would say, "Ex debito justitiae you are entitled to a compulsory order". So much for the question of disqualification.
As regards the question of wrongful trading, I must say that I do not know why the Cork Report's definition of "wrongful trading" has been departed from. I personally prefer it to that which is in the Bill, but that may be a Committee point. However, I do consider that the following point should be raised at Second Reading. Why is it only the liquidator who can apply for this personal liability? The liquidator may for some reason—possibly lack of funds—not want to do it. Why should not an ordinary creditor be able to apply for this, if necessary with the leave of the court, showing a prima facie case, so that it is not used for blackmail purposes?
I should like to move on rapidly to the various points that have arisen in the debate. I must say that there appears to have been expressed—and I believe that this is the view of the noble Lord, Lord Mottistone, with whom, as he has noticed, I agree, and I think it is the view of everybody on the various Benches who has dealt with the question of preferences—some worry about the fact that the Government appear to be clinging on to their present rights in spite of the fact that other countries have decided not to do so. The Cork Report deals with these matters on pages 320 and 321—and again I shall not quote them—in a very reasonable way.
As regards the question of the floating charge, I must quote from page 336 of the report because I think it worthy of appearing at all events in your Lordships' Official Report on the Second Reading of this important Bill. The first case that really decided the question of the separate identity of the individual from the company, to which the noble and learned Lord, Lord Denning, referred, was the famous case of Salomon v. Salomon & Co., in 1897. The great Lord Macnaghten delivered of himself the following words in Salomon v. Salomon & Co., in 1897:
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"I have long thought, and believe some of your Lordships also think, that the ordinary trade creditors of a trading company ought to have a preferential claim on the assets in liquidation in respect of debts incurred within a certain limited time before the winding up. But that is not the law at present. Everybody knows that when there is a winding up debenture holders generally step in and sweep off everything: and a great scandal it is".
If a great scandal it was in 1897, it has not lost its quality of being scandalous in 1984.
The Cork Committee suggested that this fund of 10 per cent. out of the assets realised by the receiver for the debenture holder ought to be there for the unsecured creditors so that the liquidator has something by way of costs in order to pursue whatever remedies he thinks he has (it may be against the receiver himself or generally) and there is something left for the unsecured creditors. The Government were wrong in omitting that recommendation from their Bill.
I must have mercy on your Lordships at this time of the evening and shall therefore rapidly make merely two points and then sit down. The first point I want to make is how correct it is to have endorsed the Cork Committee's recommendation about the administrator procedure and how helpful I hope that that will be in rescuing many worthy companies from disaster.
The second or final point I make is not quite so much in praise of the Government. I do not understand—and I say this deliberately—the penal way in which a director of a company, when it becomes insolvent if it is a compulsory winding up, is treated by the Government in this Bill, and the absolute kid glove method of dealing with individual bankrupts who may be just as guilty in regard to their bankruptcy and cause just as much hardship as any limited liability company can cause. I do not understand this business of the automatic discharge after three years, provided that in the bankruptcy itself there has been no breach by the bankrupt of what he ought to do. Again, along with the Cork Committee, I think that there ought to be the procedure that we have at present of an application for discharge. If the bankrupt does not make it, then the court itself considers the position after five years. Why should there be an automatic release so that once again other people can he owed money which is not paid to them? In many of these cases they are little people and they are subjected to the gravest disadvantages by the behaviour of individuals just as much as they are by companies. In concluding my winding up, of course I say along with others that there is much good in this Bill; it is not so good where the Government have not followed the Cork Report.
6.30 p.m.
Lord Lucas of Chilworth: My Lords, first may I thank all noble Lords who have contributed to this afternoon's debate on the Second Reading of this important Bill? Seldom have I been able to take part in a Second Reading debate which has been so full of accord, if I may put it that way. Neither have I had the opportunity before at a Second Reading of being able to congratulate a maiden speaker, and I congratulate my noble friend Lord Buckinghamshire on his spech to us this afternoon, although I have to tell him here and now that I could not agree with quite a lot of what was contained in that speech.

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We have considered four major themes in the Bill before us. They included the provision first to curb the unprofessional activities of insolvency practitioners by introducing a system requiring all those acting in this capacity to be professionally qualified and/or licensed. Secondly, we have considered curbing the continued abuse of the privilege of limited liability by directors and others, and encouraging directors to take very much earlier action when financial or other difficulties loom in the affairs of a company.
Thirdly, we have discussed placing a greater emphasis on business rescue by introducing the concept of the company administration procedure and by reforming company receivership law. Lastly, we have considered how to simplify and reform both personal and corporate insolvency procedures so that they work more smoothly and reduce some of the demands on the courts and the insolvency service.
We have had a wide-ranging and interesting discussion on the objects of the Bill. Clearly there are a number of areas which we shall have to discuss in much greater detail at a later stage. I would give the noble Lord, Lord Bruce, the assurance he implicitly sought in his opening remarks when I noted down, "Yes. The Government will view quite sympathetically any suggestions that may be advanced for the improvement of this important piece of legislation".
The first of the themes we discussed was that of the insolvency practitioners. The Bill provides that the practitioners will in the future be professionally qualified or licensed by the Secretary of State for Trade and Industry. Questions have been raised about the arrangements for certification of those currently with experience and those who obtain sufficient experience in the future. I have listened carefully to your Lordships' submissions on this point. May I take this opportunity of assuring your Lordships that the requirements proposed will provide adequate arrangements for such persons.
The noble Lord, Lord Bruce, and the noble Lord, Lord Mishcon, both mentioned the classes (if I may put it this way), of persons who may become insolvency practitioners. I am sure that the noble Lord, Lord Bruce, will be aware that discussions are taking place with the accountancy bodies and the Law Society on who should be able to act as a practitioner. There will also be discussions with other interested bodies before any final decision is made. On the specific point that the noble Lord, Lord Mishcon, made with regard to a qualified surveyor acting as a receiver, he will know—and I merely underline it—that they usually act as receivers on behalf of debenture holders holding a fixed charge on real property. They still will be able to do so because insolvency practitioner provisions would not apply to appointments such as that.
I am tempted to spend some little time on this section of the Bill under the heading of disqualification and wrongful trading because this has, perhaps not surprisingly, dominated most of this afternoon's discussions. Again I listened carefully to everything that has been said about the new régime. It is interesting because particularly outside Parliament it has been said with force on both sides that on the one
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hand we are not doing sufficient to curb abuse by directors of limited liability, and on the other hand that we are being too harsh.
In all the conversations and consultations we have had over many months now what we have tried to do is to secure an acceptable balance between these considerations. I believe—and I put it quite sincerely to your Lordships—that the provisions before your Lordships today strike that balance. The Bill avoids imposing on directors a régime which would actively discourage legitimate commercial practice, and yet it strengthens the law to curb serious abuses of limited liability. The noble Lord, Lord Aylestone, recounted a story—and indeed others have done so—about that. I want, if I have the opportunity, to turn specifically to those points a little later on.
What one has to accept is that voluntary liquidation does not necessarily exonerate a bad director. I think the point the noble Lord, Lord Mishcon, made was that all he had to do was go into voluntary liquidation and he let himself off the hook. That is not so, because the concept of wrongful trading then comes in and the receiver, or the liquidator, who then has sufficient grounds to believe that that is what that director took action specifically to avoid can petition the court and that director would get, as it were, his just deserts.
Lord Mishcon: My Lords, I know that the noble Lord will not expect me to interrupt very often, and I promise not to do so. But he is referring to a point that I am supposed to have made which was not the point that I made. The point I made was in the differentiation that he makes between a voluntary and a compulsory liquidation. Why should the director of the voluntary liquidation company be free from these provisions whereas the director of a compulsorily wound up company is subject to them? That was my point.
Lord Lucas of Chilworth: My Lords, I obviously have not expressed myself very well. What I am saying is that a director of a company which goes into voluntary liquidation does not necessarily escape the penalties that the director of a company going into compulsory liquidation, or compulsory wind-up, may face. We may debate this further later; but I hope that on reading what I have said the noble Lord will appreciate the difference.
I do not share the view that has been expressed today on this automatic disqualification. The Bill provides grounds for directors and others to avoid the automatic disqualification. Obviously there will be some shift in emphasis of attention that directors must pay to the fulfilment of their duties. That is more likely to be beneficial than harmful.
We have discussed the business rescue scheme, the third of the Bill's themes concerning the increased emphasis to be given to rescue. The Bill introduces the new insolvency mechanism, the company administration procedure. I was glad that the noble Lord, Lord Mishcon, welcomed this without reservation in the brief remarks that he made this evening, contrary to the comments that my noble friend Lord Buckinghamshire made with regard to this, because he suggested that as soon as an administration manager had been put in, doubts would creep in with

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customers, with suppliers, and so on, as to whether the company was good, and whether the company was able to continue. I am suggesting that for all those people there is a much greater chance of the company continuing rather then either going into voluntary liquidation—in which case there may not be much hope of it continuing—or waiting for a compulsory wind-up, in which case the company has gone. So it is, as it were, a third strand. I believe it will be a very valuable addition. We will be examining later in our consideration of the Bill the procedure for this new strand and I am sure that we shall be able to identify some refinements.
The provisions on company receivership have two aims: primarily to improve receivership as a business rescue mechanism by adding to the administrative receiver's powers, and to improve the administrative receiver's accountability as well as to clarify the extent of his powers and duties.
Finally, the Bill implements a substantial number of the review committee's recommendations in relation to the detailed procedure of insolvency law. Secondary legislation, which will appear in due course, will be a more suitable vehicle for such matters. That will do even more in that direction. Procedures common to both winding up and bankruptcy have been harmonised wherever the intrinsic nature of the codes does not make this impossible to achieve. More than anything else in this context the Bill provides a complete up-to-date legal framework for bankruptcy expressed in modern language which is capable of being understood by the lay person as well as the expert.
I want now to touch on some of the main points of comment this afternoon. The noble Lord, Lord Bruce, spoke about failure to provide a 10 per cent. fund for unsecured creditors. My understanding is that Sir Kenneth Cork commented on his committee's recommendation that he saw that 10 per cent. fund as being more of a fighting fund for the benefit of unsecured creditors rather than a fund for distribution, because if it went in that way there would be little to stop those who can secure their indebtedness from so doing by a fixed charge. So we did not think that idea was so good.
The noble Lord, Lord Taylor of Gryfe, and also the noble Lord, Lord Bruce, spoke about the consumer creditors—the pre-payments. The Government are aware of the concern felt by many people about the treatment, following insolvencies, of these kind of payments. The review committee consider that the provision of credit in this way was not appreciably different from other forms of credit. We agreed with their conclusion that there should be no difference in the position of those making advance payments and other unsecured creditors. The introduction of a much tougher régime of disqualification for delinquent directors, together with greater responsibility for making them personally liable for their companies' debts (particularly through the wrongful trading provisions) will reduce the likelihood that consumers will lose their money in future. Our view that the remedy does not lie in specific legislation is supported by the Director-General of Fair Trading. In his recent discussion paper on the subject he suggested that the
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answer lies probably more in increased public awareness of the risk and wider adoption of voluntary schemes such as that operated by ABTA.
The noble Lord, Lord Aylestone, and other speakers referred to disqualification and relief particularly for what he described as protection for the company doctor—the expert who has gone in to help. I think that there is a misconception here. We shall obviously return to it in Committee. But the relief provisions outlined recognise that there may well be situations when a director is unable to prevent a company going into compulsory liquidation particularly where he has only recently joined the board and the information given to him initially has proved to be inaccurate. The Bill therefore grants relief to those joining the board within three months before the relevant day. It may be argued that to grant relief to those joining the board only three months before that date does not give a person adequate or reasonable time to acquaint himself properly with the company's financial position. But I am sure that this will be dealt with when we discuss the matter in Committee.
It would be wrong to be over-generous and to allow people to take on directorships without having to consider carefully beforehand whether the company's activities are and will continue to be viable. After all, if these people are so-called company doctors, so-called experts, it does not take them very many days of investigation before they join the board to appreciate whether there is an opportunity of rescue or not. They can then make their choice. I do not believe that this will inhibit those who really want to help a company, whether it is in difficulty or not.
I felt that I would leave the remarks of the noble Lord, Lord Taylor of Gryfe, and my noble friend Lord Buckinghamshire with regard to the provision in Scotland, to my noble and learned friend to deal with when we reach that stage during the Committee proceedings. I also add my thanks to the extremely interesting—and I do not wish to be flippant to the noble and learned Lord, Lord Denning—and humorous way in which he gave us his views of the Bill. I was glad to have his endorsement. I took the point of Crown preference made by himself, the noble Lord, Lord Milne, and others. I feel that it would be perhaps better if we left that to the more detailed discussion which will undoubtedly occur.
The noble Lords, Lord Hutchinson and Lord Bruce, raised the subject of what are called the rules. There was some small misconception here on the noble Lord's part. The Insolvency Rules Advisory Committee, which was set up under the Insolvency Act 1976, has recently completed a comprehensive review of the present rules and the new rules using the results of that review as a working base. These will now be produced and duly vetted by the advisory committee to complement the contents of the Bill. The general power of review which is removed from the Committee by Clause 194 of this Bill is therefore now superfluous as, once the new rules are produced via the committee, they are expected to stand without substantial amendment for many years to come. In addition, when those rules are made, they will, in accordance with Clause 87(3) and Clause 184(3), be subject to the scrutiny of Parliament. That is not the case under the present arrangements.

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The noble Lord, Lord Hutchinson, and others also suggested on the point of automatic disqualification and wrongful trading that this was far more likely to push companies into early liquidation. I do not believe that this is so because one of the Government's major objectives in the Bill is to encourage the company director to take a closer interest in the company's affairs and to identify and tackle problems at a much earlier stage. The board which does this will be able to examine a number of options: the very last option would be that of liquidation. I do not think that there would necessarily be the question of pushing them into it.
Perhaps I should conclude by reminding the House that the intention of the Government is to strengthen the body of insolvency law so that insolvency is handled by properly qualified and experienced people. Those who abuse the valuable privilege of limited liability will be detected and will receive their just deserts there. A further aim is to bring this legislation up to date to simplify the associated procedures. Finally, we propose to modify the statutory provisions regarding receivership. We also intend to establish a new insolvency mechanism, company administration, specifically designed to prevent unnecessary loss of viable businesses in whole and in part. Everybody who has spoken has given a welcome to the Bill and it would seem only necessary for me formally to ask that your Lordships give this Bill a second reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Betting, Gaming and Lotteries (Amendment) Bill [H.L.]
6.51 p.m.
Lord Newall: My Lords, I beg to move that this Bill be now read a second time.
This rather modest Bill which I am promoting is designed almost exclusively to assist the present declining fortunes of greyhound racing. The Bill will endeavour to do two things; namely, to deregulate both greyhound and horse racing from the present restrictions on the number of betting days it can be held in the licensing year. Greyhound racing is presently constricted to 130 days and horse racing to 104 days. Greyhound racing also must notify the racing authority 28 days in advance of the month when racing is due to take place and not more than 14 such days can be held in a month. Horse racing does not have this particular restriction. It is also intended to legalise carry-forward pools in greyhound racing on lines similar to those currently operating in horse racing.
The House may remember that in 1980 I was able successfully to promote another Bill for greyhound racing which increased the number of races at race meetings and also increased the number of special betting days. At that time negotiations had not been held with the Home Office concerning these two further points which are now before the House in this Bill. However, consultations have been taking place with the Home Office, and their help is very much appreciated.
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Before I refer to the detailed provisions of the Bill I thought that I should outline to the House the current problems affecting greyhound racing. It is still the second largest spectator sport in the country after soccer, attracting annually some 4½ million patrons. It has an on-course betting turnover of £230 million, but 75 per cent. of this is with the on-course bookmakers, and £600 million is bet off the course.
Greyhound racing must operate as a commercial enterprise because it does not receive any subvention by way of off-course levy, as is the case with horse racing. It is the permitted percentage from the greyhound totalisator, currently fixed at a maximum of 17½ per cent. by order made by the Home Secretary, which, together with profits from admissions and catering, form the main source of revenue to a greyhound operating company.
The fact that the maximum permitted percentage is now so high possibly reflects the inflation which has occurred over the last 16 years, since it was first increased in 1969 from the then 6 per cent. Too high a deduction from the greyhound pools (now 21½ per cent., which includes the 4 per cent. on-course general betting duty) is making betting with the tote unattractive and patrons are turning more and more to the on-course bookmakers, who contribute nothing to the running of the tracks and stadiums. The amount which the bookmakers pay for the right to make their books is limited by statute to merely five times the admission charge for the enclosure in which they operate—a farcical state of affairs which, I am pleased to say, the bookmakers are now beginning to recognise. But until it is changed they are on the pig's back. Perhaps in another parliamentary Session there may be an opportunity, with the consent of the Government, for a further Bill to be introduced to amend Section 18 of the Betting, Gaming and Lotteries Act 1963 by way of an agreed amendment.
I do not know how many noble Lords have gone to the dogs; it is not public knowledge. But before I elaborate on how dog racing can be helped by my Bill, perhaps it is worth touching on the social importance of our sporting events in society. It is common knowledge that opportunities for leisure activities are increasing all the time during the passage of our lives. It must, therefore, be sensible to try to maintain and improve our existing sporting facilities, which have provided entertainment for a large number of spectators for many years. Greyhound racing has suffered adversely from the legalisation of the betting offices in 1961 and, as I have said, it was not given the protection of an off-course levy at that time in the same way as was horse racing.
In addition, greyhound racing was singled out for special taxation from 1948 to 1966, independent of all other betting sports which were not similarly taxed. The pressure on greyhound managements to redevelop their race courses for other purposes, such as supermarkets, is now immense because the current return now being obtained from the promotion of greyhound racing and other associated sports is insufficient for their capital assets.
The Government have done well out of greyhound racing by way of its revenue from taxation, but if this Bill were not to proceed, there can be no doubt that

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greyhound racing would cease as a national spectator sport within two or three years and the Government would lose approximately £8 million per annum. If this Bill is acceptable to Parliament, then the Government can at least be assured that the revenue will by and large be retained.
I shall now turn to the detailed provisions of the Bill. Clause 1(a) removes the present restrictions that carry-forward pools cannot be operated at a greyhound track. All pools must currently be completed by the end of the meeting, and this clause will now remove that prohibition. This is an enabling provision, as the Home Secretary will need to make new regulations to provide for these new pools. It is no different from the jackpot and what goes on in horse racing. Subsection (b) provides that when a pool is carried forward the appropriate deductions for both the allowed percentage and the on-course general betting duty shall be made from the pool before the net units then remaining are transferred to the next meeting.
Subsection (c) is merely a procedural amendment and provides for notification to the accountant who is appointed at each race meeting by the licensing authority whenever the totalisator is being operated. Subsection (d) relates to a further sophistication of the carry-forward pools in that multi-venue pools could be established so that if they are not won at track A, they could be transferred to track B by consent. In that case the totalisator accountants will be the authorising persons in relation to the transferring of the necessary units from track to track. There is no difference from horse racing in this suggestion; it is already happening there.
Broadly speaking, there are three types of pools which the British Greyhound Racing Board have in mind. There are the carry-forward pools, which would be operated at a race course on a single race or a series of races, and, in the event of no winning bets, a pool carried on to other meetings at the same race course until such time as the pool is won; the multi-venue pools, which would be an extension of this, with the idea of carrying forward the pools to another race course on one or more races and on further race courses until the prize was won: and, lastly, inter-track pools, which would be a device to enable racegoers at other tracks to make bets on to the track where the inter-track pool is being operated. If, for example, a punter at Newcastle wished to place a bet on the Greyhound Derby at Wimbledon, he would be able to have his bet transmitted by landline to the tote at the London track. Horse racing has the equivalent already.
In the case of all these carry-forward pools, the appropriate deduction for betting duty and operating expenses would be made and extracted before the pool was passed on to the next meeting. At the next meeting, or at the next racecourse, deductions would only be made on the extra money added to the pool at that meeting. On each occasion the tote accountant, who is appointed by the licensing authority, would certify the net amount of units to be carried forward and the pools would then operate in accordance with the statutory regulations.
I think I should mention that at the present time the Dog Racecourse Totalisator Regulations, which were
928
amended in 1967, provide for a very detailed supervision over the construction and operation of the greyhound totalisator. In addition, an accountant and a skilled mechanic are appointed by the licensing authority, who are able to ensure that at all times the totalisator is operated correctly. It is not intended in any way that these arrangements should be amended in any form, and, indeed, the greyhound racing fraternity wants them to continue. It is very much hoped that carry-forward pools will appeal to patrons in order to bring them back from the betting offices to the tracks—because these pools would be operated only on the course and it would not be possible for off-course betting offices to participate in them. Eventually the 1967 regulations will, it is hoped, be amended to incorporate provisions for these new types of pools, and be related to the use of the computerised technology which is now available. Many of the totalisators currently in operation are out of date and need to be replaced by more modern equipment, which is much easier to obtain and gives more detailed information to the accountants and the management.
Clause 2 is basically a repeal measure in order to achieve the deregulation of the sports of greyhound and horse racing. At the present time it is felt that local managements should have more flexibility to decide when race meetings will take place, having regard to the wishes of their local patrons. For instance, seaside tracks such as Yarmouth and Brighton will be able to race more times in the summer and fewer times in the winter period to suit their local arrangements. The present statutory restrictions prohibiting racing on Sunday, Good Friday and Christmas Day will still operate. Perhaps I should mention also that the Royal Commission on Gambling stated in its final report that, as opportunities for betting were now available universally from licensed betting offices, the case for abandoning restrictions altogether was now a real one, especially as they felt that only a few more meetings would be held because demand would not sustain them.
With regard to horse racing, the amendment now proposed is to remove an outstanding anomaly no longer required, particularly if the Bill is successful for greyhound racing. There is no point in retaining on the statute book a restriction which is not used because, as is well known, horse racing does not take place on a continual basis at any racecourse in Britain. As the House no doubt realises, statutory restrictions governing the operation of greyhound racing were first laid down in the Betting and Lotteries Act 1934 and are still in continuance at the present time, save only where they have been amended by private measures such as this Bill. Greyhound racing is a very well organised and well conducted sport, and it does not incur any difficulties with its spectators such as occur in other activities.
Before ending, perhaps I should stress that Clause 1 is only an enabling provision to allow some flexibility of betting on tracks, to counteract the imbalance in favour of betting in shops. It is hoped to encourage more people on to the tracks, where the whole family can be catered for with good amenities and excellent meals. Horse racing already has these facilities, so why deny them to greyhound racing? The principle is not new, and so the consequences are easily foreseeable.

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Without Clause 1 betting shops will win, greyhound racing will die, and both bookmakers and Government will lose a large slice of revenue. So I hope the House will understand the need to assist greyhound racing. I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read a second time.—(Lord Newall.)
7.5 p.m.
Lord Westbury: My Lords, I should like to congratulate my noble friend Lord Newall on introducing this Bill at such an appropriate time. When many horse racing fixtures have had to be abandoned due to the arctic conditions we are experiencing, the fortunes of the nation's punters are at present resting heavily on greyhound racing.
Speaking on behalf of the Jockey Club, of which I am a member, I wish this Bill a successful and speedy passage. However, for those Members of your Lordships' House who have not had a chance to study the full implications of the Bill, perhaps I should point out that although the Bill includes a provision to remove restrictions on the number of days in which horse racing may take place, it is actually of no great importance to the horse racing industry at this moment. The present restrictions mean that racing can take place on only 104 days in any one year at any one racecourse. As your Lordships will appreciate, the maximum number of fixtures which any one race course holds in a year is about 30—nowhere near the present limit of 104 days.
However, we should always be prudent and look to the future, and there may come a time (not in my lifetime, I hope) when, if we switch from turf to dirt tracks, we might conceivably wish to exceed the current restriction of 104 days. I therefore know that I speak on behalf of the stewards of the Jockey Club in supporting this Bill.
7.7 p.m.
Lord Mancroft: My Lords, I should like to thank my noble friend Lord Newall for the extremely able way in which he has introduced this modest little Bill to your Lordships' House, coming once again to the aid of the greyhound sport, as he did so successfully some four or five years ago. I hope he will meet with equal success tonight. I should also like to thank my noble friend Lord Westbury for his support on behalf of the Jockey Club.
Before I explain to your Lordships why I welcome this Bill, I must of course declare an interest. I am, and have been for the past eight years, the chairman of the British Greyhound Racing Board, in which position I succeeded my noble friend Lord Ward of Witley, who I am glad to see in his place here this evening. This board is the controlling board of the whole of the sport. It represents all branches of the sport. It is democratically elected, and I hope, therefore, that I can be heard to be speaking on behalf of the sport generally.
The noble Lord, Lord Newall, mentioned attendance figures of four-and-a-half million for the last year. It is that which worries me and causes me to tell your Lordships about my worry. I am seriously worried—and my colleagues are, too—concerning the
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future of the whole of this sport. When I first took an interest in it, in the 'fifties when I was first an owner—and, I am happy to say, a successful owner—the attendance was 25 million a year, and now it is four-and-a-half.
If I may, in a moment I shall give your Lordships my thinking as to why that decline has occurred, but I should like to remind your Lordships of what the effect would be if that decline continues, as I fear there is a risk it may, and if the noble Lord's pessimism proves correct, as I fear it also may. First, there will he a loss of jobs in the sport. Secondly, we shall be depriving a large number of decent, ordinary people of their favourite sport. It is, as your Lordships now know, the second spectator sport in the country, after soccer. Unlike soccer, it is a respectable sport. Bottles are not thrown about; grandstands are not pulled down; and you very seldom see a policeman at a greyhound track. The reason, of course, is the very strict standard of stewarding which we insist upon in the sport and which the sport likes to have. Thirdly, of course, there will be an enormous loss of revenue.
The noble Lord's Bill does not ask for any favouritism to be shown to the greyhound sport. It merely asks that we should be treated fairly and on the same level as horse racing and other sports. That is something we have never had. We have never had parity. It has been this financial and fiscal prejudice that has given us so much of our trouble. Let me remind noble Lords of one or two examples.
The noble Lord has said that there is no levy. That was strongly brought home to me at once. When I was chairman of the tote some years ago I represented the tote on the Levy Board. I realised at once what a sharp difference there was financially between the two sports—one with the levy and the other one without it. Then there was the Royal Commission under Lord Rothschild which momentarily went off its head and decided that it considered greyhound racing to he an industry or a trade rather than a sport. With all possible respect to the noble Lord, Lord Westbury—the last thing I would wish to do is to offend him—if he turns his mind (and your Lordships do, too) to the sales that take place in the horse racing world where highly bred thoroughbreds change hands at astronomical figures, he will see that there must be some element of commerce in that. If your Lordships turn to football where slightly less well bred centre forwards also change hands at enormous rates, surely there is an element of commerce in that. To penalise us in the greyhound racing world because we are a trade seems frankly to be ridiculous.
The noble Lord, Lord Newall, has told us about the betting tax. I will not go into that in any detail now because I shall simply lose my temper. It is a very complex matter. Both the Jockey Club and ourselves have of course been many times to the Treasury, which unfortunately has slightly more important matters on its table at the moment, and we shall continue to do so on this matter. I do not want to offend the bookies, with whom I am on friendly terms, because they are represented on my board. They realise too that they are getting far too much of the gravy. They realise that and they realise that if this sport were to go out of business—if that is the right word to use nowadays—they would lose a very large

931
amount of money, quite apart from the spectators losing their sport. So they have attempted to help by occasionally giving us benevolent donations. That is no way to run a sport and it is certainly no way to run a business.
Then there was the Bill which has exactly the same name as the Bill we are discussing this afternoon. It was introduced by Sir Ian Gilmour in another place and is now an Act; so I shall call it the Gilmour Act. This is the Act which makes life much more comfortable in the betting offices. The Home Office in the very near future is going to issue a paper describing exactly what it proposes and what it approves. My Lords, I do not like to say, "I told you so"; but I told you so. And so did the late Lord Wigg in the last speech he made in this House, and as usual it was a very powerful and persuasive speech. He said that the only effect of making betting shops more comfortable would be to take more money off the tracks and put more money into the bookmakers' pockets. That is what is happening now. That is the danger. We have mentioned this to the Treasury.
The last point I must make on this subject is this: what have we done in the sport to put our own house in order? Are we just crying before we are hurt? The promoters and all concerned with the sport have done everything they possibly can to make their sport more attractive, to make the facilities more readily available, to reduce prices and to make the racing of a higher standard. They have done everything they possibly can.
There have been two final straws to break the poor old greyhound's back. The first is television. This sport of ours is primarily an evening sport. Would your Lordships like to come greyhound racing with me this evening? I inquired of the track at Yarmouth two or three days ago whether they were thinking of having any racing as that was the next one on my list. They said that not only were they having no racing but that they could not see out of the window. Your Lordships would rather stay at home, would you not, in front of your televisions watching snooker and watching darts? I mention those two particularly because they are not very great sports but they are highly reasonable sports for the fireside and television. They are very agreeable sports to watch. They have taken a very great deal away from greyhound racing. One has only to look out of this window to see why. Furthermore, a greyhound race is a very difficult thing to televise in itself, if one were thinking of doing that. A game of snooker lasts half an hour; a race around the track at Yarmouth lasts 29½ seconds. It is not very easy to televise.
The next straw that has nearly broken the greyhound's back is the sale of some of the leading greyhound tracks. The noble Lord, Lord Newall, mentioned this. The White City, which is known as the flagship of the greyhound sport, has gone—I always think that that is rather an odd metaphor; if one called the "QE2" the stadium of the Cunard Line one would be in trouble, I think. There is a risk that Harringay may go and that others will go, too. But I believe there is a hope that the GRA, which owns the White City, may build a new track near Wormwood Scrubs.
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The reason for it is obvious—there are not enough people to fill the tracks, for the reasons I have explained. The tracks were built to take 25 million people a year; there are now 4·5 million a year. So people who have to make money for their shareholders out of their tracks naturally look to a more lucrative outlet such as shopping markets. There are good parking facilities nearby and they are in the middle of populated areas. This is merely adding further to our troubles.
The Bill is a simple one. It will come to our aid. The jackpot provisions which the noble Lord has explained to us with some considerable clarity and detail are admittedly a little complicated. There may be i's to be dotted and t's to be crossed, in which case I am quite certain that the noble Lord who answers for the Government will help us do so. The opening times are only reasonable, surely. We have heard the publicans before us many times in this House talking about the ridiculous situation in a holiday resort like Cornwall, where nobody wants a pub opened on a day like this compared with the middle of August when they want the pubs opened for 12 hours a day. The same principle applies to our sport.
Therefore, I commend the Bill strongly to your Lordships as being a help. I hope that it will do a good deal to arrest what I regard as a dangerous decline. I was glad that the noble Lord mentioned the question of Sunday opening. I now speak only for myself, not for the rest of my board. I am opposed to it. I know opinions have been canvassed on this subject throughout the sport. I do not believe that the public will ever stand for betting on a Sunday, on horses or on dogs, as they do in Europe. I do not think so. On that uplifting and high-minded note, I ask your Lordships to support strongly my noble friend's Bill.
7.18 p.m.
Lord Mishcon: My Lords, I feel a sense of privilege in being allowed to participate in such an esoteric debate. I have learnt—and I am grateful for the lesson—from the noble Lord, Lord Newall, who introduced this Bill in such an appealing way, what forward pools are, what multivenue pools are and what intertrack pools are. We are all indebted to the noble Lord, Lord Mancroft, for learning that he is very friendly with bookies, and furthermore for knowing what his evening occupation is in watching television—darts and snooker: I must confess a complete surprise about someone who has such an academic mind and, I should have thought, far more literary tastes in the evening. However, all this I have been introduced to, and I am grateful for it.
If I may concentrate for one moment, seriously, on the provisions of the Bill, greyhound racing has been described as the poor man's sport. I am not quite so sure that it deserves that description now, but apparently the sport is in a parlous state and the recommendations that have been put before us that we should support the Bill seem to be based upon grounds of justice and fairness. And so from these Benches I have personally no objection to this Bill being granted the Second Reading for which the noble Lord asks.
I wonder whether, without any sternness in my voice at all and with some humility, I may turn to the noble Lord, Lord Westbury, only because, if I may say

933
so, he might have created an undesirable precedent, which I am sure he did quite unconsciously. Twice in the course of his admirable speech he addressed the House and said that he was speaking on behalf of the Jockey Club and on behalf of the stewards of the Jockey Club. I would only remind him, with the utmost respect, of the rules of debates of this House. I am reading from page 41 of the Companion:
"When speaking in the House, Lords may indicate that an outside body agrees with the substance of the views that they are expressing: but they speak for themselves and not on behalf of outside interests".
I know that the noble Lord will appreciate that the only reason I raise this point is that I am sure he would be the last person in the world to want to create a precedent by Members of this House thinking that it was in order to speak on behalf of outside interests. With those few remarks, I do not oppose the Second Reading of this Bill.
7.20 p.m.
Lord Elton: My Lords, I have listened with interest and respect to this debate. It has long been very clear that greyhound racing has fallen upon hard times. There was a time when it was a great national spectator sport. Millions attended the meetings up and down the country—25 million, my noble friend Lord Mancroft tells us. As he also reminded us, it is still the second most popular spectator sport in the country, but the number of tracks and the size of the gate have now decreased. One has only to drive out of London on the A40, as I often do, past the wreckage of the White City stadium, to see that it is the sport itself that is now in danger of going to the dogs.
I am not at all surprised, therefore, that the British Greyhound Racing Board and their supporters are looking about them for ways of lessening the difficulties which they face and increasing the attractions of what they have to offer. In my noble friend Lord Newall they have chosen a worthy champion—worthy and well qualified, for he has at least two private Member's Bills to his credit on the statute book.
Lord Newall: Three, my Lords.
Lord Elton: So, my Lords, one might say that my noble friend has both experience and form. And my noble friend Lord Mancroft speaks with considerable and apt authority as chairman of the British Greyhound Racing Board—though not, as the noble Lord, Lord Mishcon, would hasten to assure us, on their behalf.
Your Lordships will know that successive Governments have acted, as this Government now act, on the principle that while people should not be prevented from betting, they should not be stimulated artificially into doing so. I believe this approach is one which the House as a whole would commend because of the difficulties which some individuals who gamble excessively can get into and because of the abuses which may arise when the wrong people are tempted to offer gambling facilities by the prospect of easy pickings. I take the principle of avoiding the artificial stimulation of demand for gambling as a starting point quite deliberately. It is not a principle we seek to apply
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slavishly to preserve provisions which in practice no longer serve any sensible purpose.
The Bill has, as my noble friend points out, two separate purposes, each comprised in a single clause. Perhaps I may take them in the order of the Long Title. The two purposes of the Bill are, first,
"to remove restrictions on the number of days on which horse racing and greyhound racing may take place",
and, secondly,
"to enable pools on dog races to be operated in connection with more than one event and on more than one track".
The first of those purposes is attempted in Clause 2 of the Bill and the Government are perfectly content for the objects of that clause to be achieved.
As my noble friend Lord Newall has said, the restrictions on greyhound racing date from 1934. In those days greyhound racing tracks provided the main opportunity for lawful cash betting in many urban areas. By limiting the number of greyhound race meetings and the number of races at each meeting it was possible to limit the opportunities for cash betting. Since 1960, however, we have seen the spread of cash betting shops into every high street and into many other shopping areas as well.
Few people who want to place a bet have to travel very far to do so. The number of greyhound races still operates as a brake on the amount of greyhound racing permitted and hence on the number of events on which betting is possible. But the ample opportunities most people now already enjoy to place a cash bet if they choose to do so in a betting shop, even with the controls over greyhound racing, mean that those restrictions no longer have the same significance.
I believe it would be generally accepted now that the sport itself should be free to arrange its fixtures as it sees fit, without artificial interference by statute. As my noble friend has indicated, the promoters intend that they should arrange greyhound racing fixtures more flexibly. It is not their desire to increase the number of race meetings drastically. With this in mind we see the logic, if the present restriction is to be changed, for it to be removed altogether, as the Bill proposes.
As my noble friend said in his introduction, the last Royal Commission expressed some sympathy with that view, even though it did not bring the matter to the point of an actual recommendation—chiefly, it would seem, because the representatives of greyhound racing at that time pitched their proposals modestly, asking for an increase in the number of days allowed rather than the removal of the restriction altogether. Now that greyhound racing would like to see the restriction removed, we can find no reason to object on grounds of betting policy and no reason to prefer instead a new, higher limit on the number of betting days. I am strengthened in that view by noting that provision will not be made for racing on Sundays or on Good Friday or Christmas Day.
As regard horse racing, my noble friend explained that the deregulation on the number of greyhound betting days in Clause 2 would at the same time remove an equivalent restriction on horse racing. As we understand it, there is no objection to this from those involved in horse racing, although, as my noble friend Lord Westbury has confirmed, it is unlikely to

935
result in any changes to the horse racing calendar, at least in the foreseeable future. It was extremely helpful to hear my noble friend's remarks in this respect. For those reasons, we see no reason to object to Clause 2 of the Bill.
I said earlier that Clause 2 attempts to achieve the stated purpose. I did so because I believe it suffers from some drafting defects. I am all too aware of the very great difficulty of drafting statutes in a way that satisfies all the requirements of legislation. Our own draftsmen are at present under very considerable pressure, but I am glad to tell my noble friend and the House that the Government are nonetheless ready to give assistance with correcting the drafting of Clause 2, so that the aims as stated are achieved.
I now come to the second stated aim of the Bill and to Clause 1. I must at once tell your Lordships that there is a similar difficulty here, but that it is on a much more formidable scale. It is not, in the words of my noble friend Lord Mancroft, simply a matter of dotting the i's and crossing the t's. Clause 1 proposes to enable the greyhound tote to offer a greater variety of bets. We can see the attraction to greyhound tracks of offering to carry forward pools as my noble friend proposes.
When the restriction barring carry-forward pools was devised the computer technology which makes some of the pools possible now did not exist. But the restriction also reflected the nature of the system of surpervision being applied to betting at greyhound tracks. This is a local system, the most important responsibility of the local authority being to ensure that an accountant is appointed to be on the scene whenever the totalisator is in operation. He represents a safeguard on the security and integrity of local totalisator betting.
The proposal for carry-forward pools therefore goes to the heart of the control on tote betting at greyhound tracks. It envisages bets on races at more than one track or carrying forward money placed in bets to different tracks on different days. We do not suggest that this creates difficulties for the present system of local supervision which are necessarily insuperable. It is possible to imagine arrangements between the accountants at tracks which could, with good will on all sides, offer the same degree of supervision that exists at present. But the fact is that the proposal for carry-forward pools represents a fundamental change in the statutory control, and I am afraid that this has wide implications for the drafting.
I shall give just one example of the kind of difficulty we are up against. Clause 1(a) of the Bill tries to deal with the problem of rendering lawful the operation of a totalisator taking bets from a second track elsewhere in the country. But nowhere in the Bill is there any provision making lawful the placing of a bet at that second track to be included in the totalisator at the first track. For this reason we believe that the bets which are envisaged would remain unlawful under Section 1 of the 1963 Act. The principle that people attending greyhound tracks may bet only on greyhound racing unfolding at that time and at that course runs right through the 1963 Act and is not evident only at the point addressed by Clause 1 of this Bill. That is only
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one example of the sort of difficulties which confront any attempt to bring about this kind of change.
In order to put the Bill into a form which could be commended, we believe a considerable amount of work is necessary. While we sympathise with the purpose behind Clause 1, we do not at present have the spare capacity within the department which could be devoted to assisting the promoters with this task. The Government cannot, therefore, smile on Clause 1 as they are prepared to smile on Clause 2.
We shall certainly reflect on this debate, and I know that my noble friend Lord Newall and his supporters will want to do so, too. This may be a case, although it is not of course for me to press it, of "better half a loaf than no bread". I say this in a spirit of friendliness and with the prospects of the Bill making progress in another place this Session very much in mind. Time for debate and improving the drafting of Clause 1 will unavoidably be very limited. The prudent course on this occasion might well therefore be to concentrate efforts on Clause 2.
I must, of course, restrict myself to talking about the Bill in hand, but I should just mention that I was very interested to hear the suggestion that on another occasion the basis of payments to greyhound tracks by bookmakers, in Section 18 of the 1963 Act, might be the subject of a Bill. If the parties were able to reach agreement on a new basis for payment we would certainly look at that with an open mind.
I hope this explanation of the Government's attitude has been helpful. We can certainly see a case for both proposals in the Bill. For the reasons I have given, however, we feel bound to distinguish between them. Of the two, that in Clause 2, removing the restriction on betting days, seems to us to be the one that is most likely to succeed. I hope my noble friend and his friends, both here and outside Parliament, will take due note of which way the wind is blowing, and will set their sails to catch it.
7.32 p.m.
Lord Newall: My Lords, I am most grateful to all noble Lords who have spoken in this short debate, not least to my noble friend Lord Westbury, who obviously, to my mind, spoke his own opinion and was able to bring in that he had some support from his friends.
My noble friend Lord Mancroft, who also gave great support to the Bill, made many telling points in his own inimitable fashion, pointing out that greyhound racing has many handicaps and labours under penal regulations which are not comparable with those in other sports. I am most grateful to the noble Lord, Lord Mishcon, for the obviously lengthy time he has spent on the Bill, considering he has had nothing else to do for the past few days! His support is extremely welcome.
I come to my noble friend the Minister, who, of course, was quite justified in criticising the drafting of the Bill. Those of us who have been working on the Bill have always been aware that it had some short-comings, and I am sorry that I have not been able to introduce an enabling Bill which is technically perfect. I wonder if anyone ever has. I can only say that I shall be more than happy to co-operate with the Home

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Office and receive any drafting guidance which is offered. There is no doubt that betting and gaming legislation is extremely complex, and if there are some consequential amendments which should be made we shall seek to put that right in Committee.
My noble friend also indicated some concern over the safeguard arrangements for the carry-forward inter-track pools. I am more than satisfied that the arrangements for accounting and administration procedures will be enforced as efficiently and as well as they are currently operated on the greyhound totalisator. The rules are very stringent, and I am not certain why the Minister fears that the money might not be properly accounted for. Perhaps the problem is mainly in the drafting, and I accept that there are some problems. We shall no doubt look at the whole situation in greater detail to see whether we can come up with something which will make the Government understand that we are sincere and do not show any inclination to want half a loaf. We need a whole loaf; otherwise, the Bill is a waste of time.
Without further ado, I can only hope that the Bill does go some way towards restoring the balance in the racing industry, and hope that noble Lords will give it a Second Reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Northern Ireland (Emergency Provisions) Act 1978 (Continuance) (No. 2) Order 1984
7.35 p.m.
The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Lyell)The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Lyell) rose to move, That the draft order laid before the House on 27th November be approved. [4th Report from the Joint Committee.]
The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper.
I am pleased that this evening's debate on the renewal of the Emergency Provisions Act will, among other things, provide your Lordships with the opportunity to discuss the late Sir George Baker's review of the Act. I can assure your Lordships that the Government will take careful note of the views expressed, for this legislation is of crucial importance to the community in Northern Ireland and we are determined to listen to all shades of opinion to ensure that any changes which we introduce are the right ones for all the people of the Province. It is they whom the emergency provisions are designed to protect with the minimum disturbance of conventional procedures and safeguards.
As your Lordships are no doubt aware, the preparation of the report on the Emergency Provisions Act was Sir George's last public duty and it was one that he undertook with great diligence and an acute appreciation of the problems confronting the Province. It is a hard task to strike the correct balance between protecting civil liberties and protecting life and property in a free society which is plagued by terrorism; but this report clearly identifies those issues which the Government and Parliament must consider when examining the provisions of the Act.
However, before I comment further on Sir George's report, I should like to refer more generally to the Government's role in security matters. The Northern Ireland (Emergency Provisions) Act which now requires renewal is the legislative expression of the Government's security policy in Northern Ireland. The Government's aim is the eradication of terrorism and a return to a situation in which the people of Northern Ireland can go about their daily lives free from fear. There are of course relationships between the security problem, the need for political development and the economic situation. Violence brings tragedy to many in the Province; it heightens tension, places a major constraint on political development, and inhibits economic development. In turn the lack of political agreement adds to the instability, and unemployment leads to discontent which terrorists try to exploit. We must make progress on all these fronts but the Government recognise that continued violence represents the most pressing problem.
In such circumstances there is a temptation to look for short cuts to end terrorism; but in a free, open democratic society such as ours terrorism is best countered by the resolute application of the criminal law. We should maintain arrest powers, court procedures and treatment in prison which are as standard as they can practicably be in the face of a terrorist campaign. This means that we should look to the police to charge terrorists and bring them before courts whose independence cannot seriously be questioned, where the rules of evidence apply and where fundamental safeguards for defendants are maintained. To act otherwise would only weaken respect for law and order and help the terrorists to rally support in the Province and elsewhere.
In this context, I should like to make it clear that there can be no question of a policy of summary executions or what is known as "shoot to kill" in Northern Ireland. However, in the violent campaign which faces them the security forces have at times no option but to use force. Faced with terrorists who are likely to be armed, or with dangerous riots, quick decisions have to be taken under intense pressure. But all fatalities are fully investigated and reports go to the independent Director of Public Prosecutions who considers whether the force used was reasonable and whether there are grounds for prosecution. If there is a prosecution, it is right that the same safeguards—in particular the test of proof beyond reasonable doubt—should apply to members of the security forces as they apply to other members of the community.
Responsibility for maintaining public order and enforcing the rule of law in Northern Ireland, within the framework established by the Government and Parliament, lies of course with the RUC, aided where necessary by the Army. The establishment of police primacy is a thoroughly healthy development which the Government mean to maintain.
In order to undertake this task, the RUC has in recent years trebled in size and expanded its capabilities enormously. It is a tribute to the qualities of those in the force that this has been accomplished with the minimum of dislocation. The changes have resulted in the creation of a highly competent, professional and, above all, determined police force. The courage,

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dedication, and, only too often, sacrifice of the men and women who make up that force and its reserve place us greatly in their debt. That is not to say that all officers have responded in exactly the right way to the many difficult situations that they have faced. Policing a divided community is a highly sensitive task, particularly when the police have at the same time to counter a vicious terrorist campaign supported by a sophisticated and insidious propaganda machine. But the record of the RUC shows that the will is there to enforce the law even-handedly and in the interests of the whole community, and I know that the chief constable and police authority are determined to see that the force maintains the highest standards and that its resources are effectively deployed to protect the community as a whole from terrorist attack and public disorder.
Effective policing depends on the establishment of links between the police and the community and on the creation of a fund of trust and good will. The public's support has to be earned, and it can be a slow process. But this is not a one-sided process. The Government and political leaders on both sides of the community must work to remove the obstacles in the way of full-hearted acceptance throughout the community of the RUC as an impartial professional police force.
As I indicated earlier, behind the police stands the Army, since military support is still required by the RUC in certain areas of the Province and in certain operational situations. I am sure that your Lordships will join with me in paying tribute to the Army commanders and individual soldiers for their hard work and courage over the years. An invaluable contribution has been made by the Ulster Defence Regiment which provides front-line military support to the RUC over much of Northern Ireland. There is little doubt that the Government and the people of Northern Ireland will continue to need their services.
I should also like to add a word about the men and women of the Northern Ireland prison service who have faced, with courage and dedication, large-scale protest action within the prisons and attacks on them outside. Finally, our gratitude is also due to the security forces of the Republic of Ireland, who have themselves lost lives in the fight against the common enemy of terrorism. The co-operation between us is crucial in bringing about the defeat of the men of violence, and we must work to make it stronger.
The efforts of the security forces are continuing to show results: 528 individuals were charged with terrorist-type offences in 1984, including 109 with murder or attempted murder; and 8,535 pounds of explosives, 197 weapons and 27,000 rounds of ammunition were recovered.
There has in fact been a marked improvement in the security situation since the early 1970s, and at present the security statistics show a continuing decline in most categories of violence. This offers hope for the future but should not generate complacency. There were still 64 deaths last year in incidents arising from the security situation, including 36 civilians, both Catholics and Protestants; and a further 353 members of the security forces and 513 civilians were injured.
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Improving statistics can bring no comfort to the families and friends of those who died or to the injured. In any event, we know that we are faced with ruthless groups of criminals who continue to have access to recruits, to money, to arms and to explosives. This is shown by the fact that there were a total of 230 shooting incidents and 193 explosions, and that 55 explosive devices were neutralised in 1984. I would therefore be misleading your Lordships if I predicted that the present relatively favourable trend will lead to an end to terrorism in the near future.
As I said at the outset of my remarks, the operations of the security forces against terrorists, and the way that the courts deal with cases of a terrorist nature, have been greatly helped by the various emergency measures contained in the Northern Ireland (Emergency Provisions) Act 1978. The Act confers special powers of arrest, search and seizure on the police and armed forces. It also provides for trial without jury in certain specified classes of serious criminal offences and imposes stricter than normal bail conditions in such cases. It contains a number of other provisions intended to make it possible to bring terrorists to justice through the courts without unduly affecting their rights. The Act further contains provisions which would permit the detention of suspected terrorists without trial, though this power has not been used since 1975 and has not been in force since 1980. The position of successive parliaments and governments has been that these exceptional powers should be continued in force only for so long as necessary. This approach still obtains. Such powers should be available only to the extent that the circumstances render them strictly necessary.
Having studied the security situation in Northern Ireland very carefully, Sir George Baker concluded that there was a continuing need for emergency powers such as those in this Act. The Government agree with him; so indeed does the Standing Advisory Commission on Human Rights, which after long and exhaustive studies of these problems, reached a similar conclusion.
The Government have, however, undertaken a detailed scrutiny of the provisions of the Act in the light of Sir George's report, and in broadly agreeing with both the tone of the report and its conclusions believe that there is some scope for making changes; these would reflect developments in the security situation and strike more precisely the right balance between individual liberties and the need to give the security forces and courts adequate powers to deal with terrorism.
Rather than go through Sir George's many recommendations seriatim, I now propose to set out the Government's views in general terms, so as to assist the debate in your Lordship's House on the issues raised by the report. A number of Sir George's recommendations point in the direction of improving the safeguards for persons suspected of terrorist crimes, while maintaining the effective security measures needed to protect the community. In general, we regard these recommendations sympathetically and propose to implement them, except for a few subsidiary recommendations which we believe would cause undue practical difficulties and be of little benefit. Thus, we are inclined in principle to

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accept Sir George Baker's recommendation of the rationalisation of police arrest powers. The recommendations on the Army arrest powers will, however, need the most careful consideration, taking account of the principles involved and of the practical implications. We are inclined to accept most of Sir George's recommendations for increasing the scope of the Attorney-General's discretion to certify particular offences out of the scheduled, non-jury, mode of trial. The Government do, however, intend to examine more closely the list of offences which Sir George has proposed might be triable by jury in an increased number of cases.
Sir George made a number of other recommendations designed to rationalise the emergency provisions in areas where the practices and operational needs of the security forces and of the courts have moved some way since the Act was last amended. His recommendations on bail and on the admissibility of statements are good examples of this category. In each of these cases, the practice of the courts is somewhat different from that which a superficial reading of Sections 2 and 8 of the Act, respectively, might suggest. Sir George, while endorsing current practice, has made recommendations aimed at bringing the wording of the statute more closely into line with the way in which the intentions of Parliament have been interpreted by the courts. We are not yet wholly satisfied that such cosmetic changes to the law are strictly necessary.
However, one of the most important questions which Sir George raises is whether there is a continuing need for the detention provisions which are still contained, although no longer in force, in the 1978 Act. At present these powers could be brought into effect immediately by order, which would have to be approved within 40 days by resolution of each House. While tempted to repeal, the Government wonder whether it would be prudent to repeal a reserve power, which we certainly hope may never have to be used, but which at least stands on the statute book should there ever be a short-term crisis during a parliamentary recess. A similar power is of course retained in the Republic of Ireland. I should welcome the views of your Lordships on this particular matter.
But if we go further with Sir George's report, we see that a number of his recommendations arise from his concern that delays in the judicial process should be kept to a minimum. The Government share that concern. My right honourable friend the Secretary of State is keeping in close touch with the Attorney-General and my noble and learned friend the Lord Chancellor on this particular matter, and every possible avenue for reducing waiting times is being explored. There is no doubt that the appointment of 11 new silks and an additional county court judge will assist in this direction. However, we have to say that delays can often occur at the request of the accused, in particular when the services of a particular defence counsel are awaited.
Sir George has dealt at length with the use of accomplice evidence. While supporting the use of such evidence, he suggested that efforts be made to reduce the number of defendants to 20 or fewer in trials involving such evidence. There have been very few cases involving more than 20 defendants and,
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although the Government will obviously look very closely at this issue, we are not so far convinced that trying a number of defendants simultaneously affects the standard of justice or causes undue delay. Indeed, longer delays for some accused might result if different batches had to be brought to trial separately.
Sir George further went on to deal with the composition of the court before which scheduled offences are tried. Sir George endorses the present use of a single judge to try cases where there is terrorist involvement. Underlying his conclusion are substantial arguments both of principle, in terms of the workability and standard of justice which might be provided by a multiple judge court, and of resources. But if we are to make progress in reducing delays in the judicial system in Northern Ireland. I am sure your Lordships will agree that it is crucial to make the very best use of the limited judicial resources available to us.
Sir George's arguments point to a policy of continuing with a single judge court operating without a jury in terrorist cases, but I shall listen with great care to whatever your Lordships may wish to say on this. However, I should point out that we cannot see any way in which we could in present circumstances return to jury trials for the worst offences of terrorism in Northern Ireland. I am sure this approach will cause no surprise to your Lordships. However, it does not in any way proclude the possibility of our taking an increased proportion of trials out of the scheduled non-jury procedure by means of the Attorney-General's certificate, to which I referred a few moments ago.
Finally, Sir George dealt at some length with the police complaints procedure. An effective system for handling complaints against the police quickly and fairly is an important safeguard for the citizen and for the police themselves in a community where complaints are often used for propaganda purposes. The reform of the police complaints procedure in England and Wales, by way of the Police and Criminal Evidence Act 1984, provides us with a timely opportunity to consider how best similar changes might be introduced in Northern Ireland, and that we are doing.
The Government look forward to hearing views on all the matters that I have raised this evening in what I hope will be a wide-ranging and comprehensive debate. But the emergency provisions represent important protection against the men of violence who still beset the Province. Of course it is still important that these provisions strike the right balance and that the institutions involved in their application are so designed, administered and staffed that they serve, and, above all, are seen to serve, the genuine interest of all in the Province. I assure your Lordships that we are working to that end. In the meantime, while we decide on the changes to be made to the Emergency Provisions Act it is essential for the people of Northern Ireland that the present powers be renewed. With that in mind I commend this Motion to your Lordships. I beg to move.
Moved, that the draft order laid before the House on 27th November be approved. [4th Report from the Joint Committee.]—(Lord Lyell.)
7.53 p.m.
Lord Underhill: My Lords, first, I should like to thank the noble Lord, Lord Lyell, for the general tone of his introductory speech and also for explaining in some detail some of the Government's thoughts on the Baker Review. Also at the outset I wish to echo what the noble Lord the Minister has said in paying a tribute to all the security forces. I am pleased that he included the prison officers and that he also mentioned the co-operation from the Republic.
Whenever I deal with security matters in Northern Ireland I do so with some sense of humility because I do not live there and therefore do not experience the intense feeling that there must be among both communities. If one needed amplification, it was given in some detail in the New Ireland Forum's report, The Cost of Violence. This report gives details of deaths and injuries in both communities. The amazing fact on the figures here is that the number of deaths in the Catholic community is greater than that in the Protestant community. The report mentions the security costs for both the United Kingdom and the Republic and the costs in economic and social terms.
If I still had any doubts, the depth of feeling and the general problem were made absolutely apparent in the Airlie House conference which I attended last week in the United States, just outside Washington, where all the constitutional parties in Southern and Northern Ireland and in Great Britain were represented. I was pleased that the Northern Ireland Minister, Mr. Christopher Patten, was present throughout and participated in the various discussions.
I stress these points because for the second time the Labour Opposition in the other place voted against the renewal of the emergency provisions. In reply, the Minister in the other place said it was irresponsible to vote against renewal. Why, then, did my friends in the other place oppose, when every constitutional party in the North, in the South, and in Great Britain, (except Sinn Fein) condemn violence to achieve political ends and in general support the need for effective measures of security to control violence? Why, then, oppose?
When, in accordance with the legislation, we have had the opportunity to debate the renewal order every six months it has always provided a chance also to review security operations. Ever since 1979 the Labour Opposition, both in the other place and in this House, have expressed reservations about certain aspects of the emergency provisions, even though we had, until the last occasion, supported the renewal.
In April 1983 the Government announced the appointment of the late Sir George Baker to carry out a review of the provisions. On 13th May that year, 1983, I said I hoped that that would be the last time there would be need to renew the order for the existing emergency provisions and that as a result of the review new legislation would be brought forward.
On the next occasion when we had an order before us, on 13th December 1983, I said that we would await the report of the late Sir George's review with interest. I said:
"I agree completely with the noble Earl"—
That was the noble Earl, Lord Mansfield—
"on the review being conducted by Sir George Baker and that subsequent legislation should keep a balance between what is
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required for security and what is required for civil liberties. There is always a great danger that we forget the struggles that everyone went through to get out democratic rights and popular representations. These can easily be pushed aside in the interests of security".—[Official Report, 13/12/83; col 189.]
Then Sir George's report was published in April 1984. Once again we had the periodic order to renew the provisions before the House on 17th July last year. I repeat what I said then in paying tribute to the late Sir George both for his work on the report and the quality of it, although making clear, as I did then, that we do not necessarily accept all the report's recommendations. The noble Lord, Lord Lyell, said at that time that he hoped that there would be an opportunity to debate Sir George's detailed conclusions. We have not had that opportunity until tonight. And, frankly, this is not the occasion for the sort of detailed debate we should be having. The noble Lord said on 17th July last year, at column 1398, what he said again tonight:
"I can say that the Government are in broad agreement with both the tone of Sir George's report and most of his conclusions and recommendations".
I stated then that I hoped that this would be the last time that we would be asked to renew the order containing the existing provisions.
The other place debated the review for five hours on the day before rising for the Christmas Recess. This preceded its debate to approve the current renewal order. I must refer to the nature of the Opposition amendment because it explains our attitude. The Opposition in the other place proposed an amendment which regretted the Government's delay in responding to the Baker review and which continued:
"and affirms that law and order are best served by methods of law enforcement which are seen to be fair, compassionate and non-discriminatory".
Despite what the noble Lord the Minister says, I do not believe that this is the occasion to go right through the Baker Report and to consider all the recommendations. We would need possibly a five-hour or six-hour debate to do so. But we have been concerned with certain aspects—the alleged abuse of arrest powers, powers of internment and interrogation, trial by Diplock non-jury courts, the use of super-grasses and so on. I was pleased that the noble Lord, Lord Lyell, gave the Government's thinking on quite a number of recommendations, some associated with these points. He will, however, recognise that we shall need to read carefully what he has said before commenting on the Government's reactions. One would have needed to know those reactions before embarking on this debate.
I must stress, as others have done, the terms of reference given to Sir George. The terms of reference began by saying:
"Accepting that temporary emergency powers are necessary to combat sustained terrorist violence …".
He had to work on the basis that such emergency powers are necessary. Obviously, his report was directed to that end. In evidence submitted to Sir George, the National Council for Civil Liberties stressed that the premise of the inquiry should have been: "In what ways, if any, is the ordinary criminal law inadequate? The onus is on those who want these extraordinary powers to demonstrate that they are necessary".

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One finds in evidence submitted by the Cobden Trust that 60 per cent. of a sample of persons held under the emergency legislation were not questioned about any specific offence at all. The comment is made that it appears that they were detained for information gathering. The trust also said that 90 per cent. of the arrests under the emergency powers did not result in charges. These figures are confirmed in the Baker Report. In paragraph 276 Sir George quotes the figure supplied by the RUC that 76 per cent. of persons arrested are released without charge. Sir George added:
"But it is hard to believe that the arrests of all the 76 per cent. are justifiable if the intelligence is as good as it is said to be".
He went on to say that, although afterwards released, detention for 72 hours rather than for 48 hours becomes a focus of discontent.
The Cobden Trust also alleged that 76 per cent. of those who asked to see a solicitor were refused their request and that, of the remainder, none saw a solicitor within 48 hours. The trust also made comments to Sir George on the Diplock court procedure. Reviewing a sample in 1981, it said that 60 per cent. were remanded for more than nine months before sentence and 10 per cent. were remanded for more than 15 months. The Baker review, at paragraph 176, said that the tendency was for numbers in custody for over 46 weeks to rise sharply in some months of 1983. Sir George added:
"There is serious concern that unacceptable delays could develop in 1984 affecting all trials".
The trust added that 40 per cent. of those tried in Diplock courts had no connection whatever with political violence and that of those charged with robberies 87 per cent. had ordinary criminal motives and were not concerned in terrorism. Yet, as the trust says, they were denied right to trial by jury because the offences are not de-scheduled.
The noble Lord the Minister has referred to bail. It is argued, as I do now, that the granting of bail needs to be reviewed. Again, Sir George's report, at paragraph 76, states that, between 1978 and 1982, of 7,133 applications by adults and 333 by juveniles for bail under the emergency provisions, 42·5 per cent. were granted. Of those, only 55 persons absconded. In fact, the Baker Report in Appendix G(4) quotes even more substantial figures. The appendix gives the figures for the years 1973 to 1983 and shows that of 13,000-odd applications, just under 41 per cent. were granted bail. Much other useful information and figures are given in the appendices but because of the time I shall not deal with them this evening.
The Minister referred to the view of the Standing Advisory Commission on Human Rights. The noble Lord said that in broad terms it recognised that the people of Northern Ireland still require special protection and that exceptional measures are still needed. As all noble Lords, I think, know, the advisory commission is an institution set up under Section 20 of the Northern Ireland Constitution Act 1973. It is therefore a bona fide body. Despite its view, the commission has urged acceptance of a number of recommendations arising from the review. I shall refer to some of them.
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It says that there should be a reduction in the number of trials by non-jury Diplock courts. It says that a three-judge collegiate court should deal with the remaining scheduled offences; that restrictions on the use of super-grass evidence should be made if three-judge courts are not established; that there must be a review of the use of force by the security forces; that reasonable suspicion should be required for search and arrest powers; that there should be a code of practice stating the rights of suspects in police custody, and that a Bill of Rights should be introduced for the administration of justice. Those points were made by the commission, despite the fact that it recognised and accepted the view of Sir George that there must be emergency provisions.
The Kilbrandon Committee, of which, as I have made clear, I was a member, stated this in chapter 10 of its report on law enforcement:
"If nationalists are to assist willingly in the task of bringing offenders before the courts, they must respect the courts before which they will appear".
Some noble Lords do not like the use of the expression, "alienation of the minority community". Sufficient evidence was given to the Kilbrandon Committee to justify the word "alienation", and sufficient evidence was given to us at the Airlie House conference, to which I have referred earlier, to justify the use of that word. It is vital that the sense of alienation should be removed. Sir George, in his report, recommended that there should be a new Act.
Viscount Brookeborough: My Lords, may I ask the noble Lord to tell me what "alienation" means in this context?
Lord Underhill: My Lords, my interpretation of "alienation", in the terms given to me, is that a section of the community feel themselves not in tune with the administration of justice, in particular, in the area in which they are living. That is something that must be dispelled.
Sir George Baker recommended that there should be a new Act and that there should be a new title. He made 74 recommendations. That is why I am not dealing with all the 74 recommendations this evening. A number of them were of a negative kind—in other words, he wanted no changes—but he recommended quite a number of positive changes. Of course, we support efforts for law and order and for the suppression of terrorism; but, as the spokesman for the Opposition in the other place said, in a civilised country emergency powers should not outlive the emergency which brought them into being. We do not accept everything that Sir George recommended, but we ask the Government to look at each of the existing emergency provisions. Is the particular provision necessary, over and above normal criminal law? If it is necessary, are there adequate safeguards for civil liberties? We should like to see a new Bill which would enable noble Lords to debate in some detail each proposal of the Government.
There was reference at the end of that speech to comments Members might have on possible joint security action with the Republic. Despite the unfortunate comments after the last summit, I hope there will be discussions. I hope there can be joint

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security activities. But it will be asking too much to urge that the Republic should join in security discussions while being barred from any discussions on the position of political change in Northern Ireland. The fight against violence, the preservation of civil liberties and the working for constitutional change—I must not use the expression "constitutional change"; rather, I should say, the work towards a political settlement—are things which must all go on together.
8.17 p.m.
Lord Hampton: My Lords, I thank the noble Lord, Lord Lyell, for introducing this continuation order, and I also join in his tributes to the security forces. I have listened to the noble Lord, Lord Underhill, with great interest but not with entire agreement. Very relevant to our debate, of course, are the recommendations in the report by Sir George Baker, which he completed shortly before he died. I did not know him personally, but a brief correspondence with him left me with great respect for both his intelligence and his integrity.
The amendment moved by Mr. Peter Archer, for the Labour Opposition in the other place, to which the noble Lord, Lord Underhill, has just referred, easily invites one to support it. It all sounds so very sensible. Who would challenge the assertion that methods of law enforcement should be seen to be fair, compassionate and non-discriminatory? What I find less helpful is the suggestion that the Government have been dilatory in responding to the report of Sir George Baker. It seems to me only reasonable that a new Secretary of State should pause for a moment to consider and also, as he clearly stated, to take note of the views of both Houses of Parliament.
There is no easy answer to questions concerning the enforcement of law and the defeat of terrorism in Northern Ireland, and a rush into ill-considered action could be dangerously counter-productive. Nevertheless, I hope the Government will take careful note of opinions raised in debates in both Houses and will be able to take some positive action. The noble Lord the Minister referred to this, and the noble Lord, Lord Underhill, suggested there might be further debate on the Baker Report. I do not think we can give it proper treatment this evening.
The basic argument for easing the present emergency provisions is that they interfere with personal liberty. I can only repeat my conviction that the extreme of interference comes with loss of life or limb of oneself or of those one knows and loves. Unfortunately, the terrorist threat continues, and we on these Benches have no doubt that this order must once again be passed.
There are, however, a number of questions I should like to put to the Minister. I refer in particular to a number of points raised by the noble Lord and by his right honourable friend the Secretary of State in the other place. First—the noble Lord, Lord Lyell, mentioned this—reference has been made to the Baker recommendation for the rationalisation of police arrest powers. I wonder whether the noble Lord can give any further details as to how it is suggested that these should be implemented. Secondly—and again
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the noble Lord referred to this—Sir George recommends increasing the scope of the Attorney-General's discretion to certify particular offences out of the scheduled non-jury mode of trial. Can the Minister give any further details here? There is no doubt in my mind that jury trial at present is often not going to produce true justice, due to the threat from intimidation, but it would be interesting to know more as to what positive steps could be taken in this field.
Thirdly, I want to quote from the Secretary of State's speech on 20th December, as reported at column 580 of Hansard of the other place. He said:
"Sir George suggests that an amendment to the Act might endorse what is already the well-established practice of the courts, namely, that admissions by accused persons should not be admissible as evidence when there is reason to suppose that they have been extorted by violence or by the threat of violence".
This would indeed be a serious situation, and it does not seem to be happening. But what steps will the Government take to see that justice is done without any possible suggestion of violence, and is seen to be done?
My last question is as to what the Government can and will do to see that delays in the judicial process are kept to the minimum. It appears that there has at times been very considerable delay—months, or even years—between remand and trial, which is tantamount to sentence without conviction. I believe, though, that this is certainly not always the fault of the prosecution. What improvements here can the Government foresee? Can the noble Lord go further? He referred to this point, and I wonder whether he can go further in explanation.
I do not myself think that the situation in Northern Ireland is unrelievedly black, or that we should be despondent if progress in security is only slow. Amid the gloom, I believe there are grounds for hope. At the same time, I repeat: we do not question that this renewal order must be passed today.
8.19 p.m.
Viscount Brookeborough: My Lords, I should like to begin by thanking the noble Lord for his very comprehensive review of the legislation and of Sir George Baker's report. I do not think he would thank me very much if I accepted his challenge to go into the report in detail, because, together with the noble Lord, Lord Underhill, I think we should be here to the very early hours; and certainly I am not very good at dealing with matters in detail. However, he was very rash when he asked us to do so.
I should like to support his tribute to all the security forces and to the prison service, all of whom do a magnificent job under very great danger. The noble Lord asked about the retention of the power of detention within the Act. I am quite sure that it is right still to retain it, even if we do not use it.
The noble Lord, Lord Underhill, made great play of the percentage of people who are arrested under emergency powers and are then not subsequently charged. I think that he is forgetting the fact that during the emergency the IRA have spent considerable time training their activists to resist giving information under interrogation. The percentage demonstrates their success in that teaching.

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The proof of what I am saying is borne out by the fact that many of those who are subsequently found guilty, very often on the evidence of a super-grass, have been found to have been arrested at least once, and some of them many times, before without there being evidence on which they could be convicted.
Every noble Lord except the noble Lord, Lord Underhill, has said that it is vital to approve this order tonight. Coming from Northern Ireland I should like to say that we in Northern Ireland consider it a vital part of the fight against terrorism. It is extremely sad to have to suspend liberties for which we have fought for very many years. It is extremely sad to believe, as I do, that we shall have to continue to renew this order, or something very similar, for many years to come. However, in saying that, I support the noble Lord, Lord Hampton, in the view that all is not dark. There has been an improvement, but I am always very cautious about saying that there has been an improvement. We who live in the area feel and know about the improvement, but we do not like it being shouted from the rooftops. We are aware when things are better.
I should like tonight to record my sadness that a young car thief who drove through a road block, trying to drive over some soldiers, has ended up by being shot dead. That is a tragedy, and it is made more horrific in that the young man was only 17 and has lived nearly all his life—certainly all his conscious life—in times of violence. He has never known peace. That horrific fact should not cloud our judgment on the actions of the soldiers which, on the face of it, were fully justified. Certainly their actions do not justify the most intemperate remarks by the Foreign Minister for the Irish Republic in his condemnation of the UDR. Surely, knowing perfectly well that every action in which somebody is killed is fully inquired into, he should have waited. I hope that the Government will not allow to go unanswered this and other irresponsible and ill-informed verbal bombardments against our institutions in Northern Ireland.
In the past it has seemed to me that the Irish Government have been free to libel our institutions from our courts through to our forces without any public denial and any really straightforward reply. I do not believe that it is right for the Irish Government publicly to attack. If they are members of the Government, they have the diplomatic service through which they may register their protest. I hope that our Government have at least been registering their protest about these intemperate remarks. These attacks really have eroded any goodwill that might have been created in the Unionist population in Ulster by Dr. FitzGerald—and he did create goodwill.
Furthermore—and this is the really critical matter—it is playing right into the hands of the IRA to say that the institutions of the state are not acceptable. How are they not acceptable? The Foreign Minister and other extreme Republican politicians have been talking about the alienation of the nationalist community. Indeed, the noble Lord, Lord Underhill, talked about it. The noble Lord, Lord Fitt, spoke so well on that subject. As the noble Lord said, alienation, in the terms in which it has been used, simply does not exist, and I should like to deny any evidence that was given to the Kilbrandon Committee
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in that respect. I repeat, it does not exist. But to use the term in the way in which the noble Lord, Lord Underhill, used it, there is alienation which is growing and which should be welcomed and that is the alienation, the isolation in West Belfast in particular, of the men of violence from the ordinary Republican citizen.
The best illustration of that occurred just the other day at the funeral of a top IRA active serviceman or officer called McIlvenny. The House will have seen many times colossal crowds at IRA funerals, following the cortege. The television pictures have done so much to enhance the publicity for the IRA. At this particular funeral there were only a very few hundred followers—that is all they could drum up. They had even to hire taxis to fill up the back of the procession. That is the alienation, and it is increasing. The ordinary population keep saying to the men of violence, "Get off our backs". That is a very encouraging feature, and it should be fostered.
It has been a good year for the Army, the Royal Ulster Constabulary, and the UDR. Despite accusations, the attacks and the speeches by the Irish Government and the extreme politicians, the fact of the matter is that in West Belfast there is an increasing number of citizens who accept and welcome the Royal Ulster Constabulary, and nobody who has been there can deny it. Indeed, the noble Lord himself knows that what I am saying is true because he has been all over Northern Ireland, and for that I pay tribute to him.
I should like to turn to a facet of the fight against terrorism which has been sadly neglected. I refer to smuggling, which is the one growth industry in Northern Ireland. In days of yore smuggling used to be a small time industry, with somebody taking a cart of pigs across the Border. That has all changed. It is now a large-scale business, which is wireless controlled and which uses 40-foot containers. This trade which goes across unapproved roads simply cannot exist without the involvement or approval of the IRA. It is called "rent-a-road", and for renting a road a considerable contribution goes into the coffers of the IRA. The Army know all about it. They see the lorries and they stop the lorries, but because it is smuggling they can do nothing but stand and watch. At times convoys of lorries are smuggling electronic goods or whiskey and thereby millions of pounds of VAT and other taxes are lost to the Irish Government—and the Irish Government certainly cannot afford to lose that type of money; they are in a very bad way economically. At other times there is grain coming North, thereby defrauding the EEC.
It must be possible to stop this smuggling. It may be that the Army and the police should be made agents for the Customs authorities, thereby giving them extra power, instead of what the noble Lord was talking about; namely, reducing their powers. It is a major source of funds to the IRA, and it must be stopped. We must leave no avenue unguarded in our fight against terrorism. I welcome this order.
8.28 p.m.
Lord Hylton: My Lords, there is a certain degree of predictability about our remarks on these occasions and I should like to apologise in advance if by any

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chance I sound like a rather old fashioned gramophone record that has got stuck in a groove. I was very glad to hear the noble Lord, Lord Underhill, stressing the seriousness and importance of these occasions. In July I described our debate as a matter of life and death. Today I would just say that emergency law is both a symptom and a cause of many of the troubles and problems of Northern Ireland. It is for those reasons that I protest as strongly as I can against the timing of these debates. Look at the acres of empty Benches. Why do we have to consider these orders at a most unsocial time of day? Why was it that the other place debated Sir George Baker's review on the last sitting day before the Christmas Recess? We deserve answers on these points.
Why is it that we have to take this order after Bills dealing with insolvency and lotteries? Are the Government serious about the whole question? It is now nine months since Sir George Baker reported and his review showed clearly that all was not for the best in the best of all possible worlds. His review proved the existence of many grey areas, and the mere number of his recommendations I believe to be most significant. Can the Government say tonight when we shall be given a chance to have a full debate on this matter? Given that not all of the recommendations of the review require legislation, are the Government determined to make progress? The noble Lord, Lord Lyell, today repeated many of the remarks previously made by the Secretary of State and by his honourable friend Mr. Nicholas Scott on 20th December almost word for word, but can he say tonight when he winds up whether Government thinking has moved forward since December? Have they made some progress in those three weeks? I know there was Christmas in the middle, but we should still like to hear that there has been some progress. We should like to hear when definite proposals are going to be brought forward for those points which require legislation.
I should like to refer to a suggestion which I made in correspondence with Mr. Nicholas Scott in August and September. I suggested that there should be created a permanent review body both for the emergency provisions Act and for the Prevention of Terrorism Act, in so far as they concern Northern Ireland. I suggested that this permanent review body might be composed of a small number of privy counsellors, as being almost the only people capable of receiving the sensitive information that is bound to be involved. Such a permanent review body could produce reports and reviews as often as was required and not once in seven years, if we are lucky, as has unfortunately been the situation in the past. Such a body could examine complaints brought by groups rather than by individuals, for whom we already have an Ombudsman and various other procedures. A review body of this kind could look at issues referred to them by the Government. For instance, such difficult questions as have cropped up over time concerning detention, interrogation, the use of plastic bullets, and prisoners' rights. Had there been a body of this kind in existence when these problems surfaced, we might have been spared a great deal of unnecessary trouble and anxiety, and the IRA and other terrorists might have been denied a great deal of propaganda,
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and some of the points made by the noble Viscount, Lord Brookeborough, might have been met much sooner and much better.
The noble Lord, Lord Lyell, himself referred in the course of his introductory remarks to the matter of killings by the security forces, which are of course always serious and usually lead to a great deal of concern, and sometimes more than concern. If there were a permanent review body of the kind that I have indicated much of this might have been capable of being defused in advance.
I have mentioned in your Lordships' House before now the matter of coroners' inquests and the serious delays which frequently happen before an inquest can even begin. This matter was brought to public attention more sharply than usual by the resignation of the coroner of Armagh in August of last year. One is bound to wonder whether the findings when the coroner's inquest eventually sits in some of these cases are really worth while in any sense at all. I hope that the Government can announce—if not tonight then soon—that some progress is being made on this aspect of things. The noble Lord, Lord Lyell, also touched on the question of police complaints. It is good to know that England and Wales will fairly soon be getting an improved procedure. Northern Ireland deserves one just as much, perhaps more.
Mr. Scott wrote to me again in September saying that the Government hoped that there would be a consultation paper published on this matter before the end of last year. So far as I know, it has not yet appeared. Can the noble Lord say when we may hope to see it? Can the noble Lord also indicate what attitude the Government are taking towards proposals made by the Alliance Party of Northern Ireland? They were first made, I understand, in 1974 and have been made at intervals since and were made with rather more force last year.
From police complaints I move to another most important subject which is that of liaison, good understanding, and good co-operation between the police and the general public in Northern Ireland. This again was mentioned by the noble Lord speaking for the Government. Several times before now I have described in your Lordships' House the successful system which has existed since, I think, 1970 in the City of Derry, where there is a model police and public liaison committee. I have asked before now whether this proven method and system cannot be extended to other cities in Northern Ireland and perhaps even to the whole of the six counties. So far I have had had no satisfactory answer whatsoever on this.
Now may I just touch on a highly technical and complex matter, which concerns the derogation from the European Convention on Human Rights that has been in force for quite a long time. In August of last year the Government—seemingly without much prior announcement or discussion of a public kind—informed the Council of Europe that they were withdrawing their derogation. This is puzzling to a good many people. It is certainly puzzling to such bodies as the Committee on the Administration of Justice and the Standing Advisory Commission on Human Rights in Northern Ireland. It seems to such people that Section 5 of the European Convention and

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probably at least four of its subsections are contravened in one way or another by the emergency provisions Act and the Prevention of Terrorism Act. If the Government can throw any light on this tonight it would be most helpful and I think would remove some of the suspicions.
I should like to conclude by mentioning that for many years now there has been in Northern Ireland a strong desire to see a Bill of Rights enacted. There is some serious thought and study of a voluntary kind being given to this matter at the present time. Any encouragement that the Government can give will of course be most welcome, and it would be of interest to hear their views on this topic and to know to what extent, for instance, they see any possibility of incorporating at least some of the provisions of the European Convention on Human Rights into the general public law of Northern Ireland and then, as the noble Lord, Lord Wade, and the noble and learned Lord, Lord Scarman, and others have suggested, into the general public law of Great Britain.
8.40 p.m.
Lord Lyell: My Lords, we are immensely grateful for the amount of attention and detailed study that has been carried out by all your Lordships who have spoken this evening on a subject which, despite the strictures of the noble Lord, Lord Hylton, has aroused great interest from the spokesmen on Northern Ireland in your Lordships' House. Above all, those of your Lordships who have spoken will agree that the report of Sir George Baker on the emergency provisions Act is extremely difficult and very technical. This has been borne out by the quality of the questions which have been put to the Government this evening and the quality of the debate.
I should like to start by thanking the noble Lord, Lord Underhill, and all of your Lordships who have spoken. Everyone who has spoken has paid tribute to the security forces, the prison officers, the Ulster Defence Regiment, the regular Army, the RUC and the security forces of the Republic. I am sure these tributes will be noted. We are grateful that your Lordships have paid these special tributes.
I will attempt to answer the questions raised by the noble Lord, Lord Underhill. I noticed that he started by mentioning paragraph 276, paragraph 176, paragraph 76 and I wondered what was coming next in the seriatim descending order. I commend him for his diligence and for his full understanding of the layout of Sir George Baker's report.
The first query that the noble Lord, Lord Underhill, asked was the possible constraint imposed by the terms of reference in Sir George Baker's report. I think your Lordships might agree that, despite his terms of reference, Sir George specifically commented on the need for emergency powers in Northern Ireland. In paragraph 32 of the report he said this:
"Unfortunately they remain broadly necessary to curb violence and to bring the guilty criminals to justice".
I shall not be tempted by your Lordships' cries of, "Go on, go on" which your Lordships might think might disprove my case. We agree with that short quote from paragraph 32.
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We took note of the comments of the noble Lord, Lord Underhill, on the Standing Advisory Commission on Human Rights and no doubt they, too, will be pleased that the noble Lord has brought them into the debate.
I turn to one of the queries raised by the noble Lord, Lord Hampton. I am grateful that he gave me notice so that I had some chance to answer his query this evening. He wished to know what is meant by the rationalisation of police arrest powers and whether this could be further improved. I am sure that he would agree that persons in Northern Ireland who are believed by the police to have been involved in terrorist crimes may be arrested under Section 12 of the Prevention of Terrorism (Temporary Provisions) Act 1984, or under Section 11 of the Northern Ireland (Emergency Provisions) Act 1978, or even Section 13 of the Northern Ireland (Emergency Provisions) Act. The noble Lord will agree that Sir George considered that this was potentially confusing. Paragraphs 267 and 268 of this report are particularly relevant here. But these recommendations on police arrest powers are intended to eliminate any overlap between the existing powers and thus they would wish to reduce the scope for any confusion. The Government accept this point in principle, though we do not necessarily go along with Sir George with the details in the recommendation on this point.
The noble Lord also raised this fascinating procedure known as certifying out of the schedule. This confused me during my recess reading and required a certain amount of study and elucidation today to have this clarified in my mind. The emergency provisions Act makes provision for certain terrorist-type offences which are listed in Schedule 4 of the Act—hence they are called scheduled offences—to be treated in a particular way. Anyone who is accused of a scheduled offence may be granted bail only by a High Court judge. Such cases would be tried in Diplock courts and so on. But the Act recognises that certain of the offences listed in the schedule may be committed by non-terrorists. The noble Lord, Lord Underhill, will be pleased about this. It provides that the Attorney-General may issue a certificate in such cases enabling a non-terrorist who has committed certain offences to be tried before a jury in the normal way. Sir George Baker recommended that this discretion should be capable of being exercised in respect of a greater number of offences. The Government believe that there is scope to extend the list of these offences. It is complicated and I hope I have gone some of the way, if not all, to assist the noble Lord, Lord Hampton.
Lord Hylton: My Lords, while the noble Lord is still on that point can he say when the Government hope to begin this process of de-scheduling?
Lord Lyell: My Lords, if the noble Lord will contain himself I shall come to his remarks. I hope to be able to cover that point and others. I would never forget the noble Lord, and will cover his individual questions in the order in which they arose.
The noble Lord, Lord Hampton, next asked about the admissibility of statements. Your Lordships will be aware that Sir George Baker endorsed the courts'

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present interpretion of Section 8 of the emergency provisions Act. It has been demonstrated in one example that the right to disregard any statement will be exercised in the interests of justice. But it is also clear that in practice statements will be disregarded if they are shown to have been obtained by improper pressure, whether or not it came strictly within the terms of Section 8 of the Act. Here the question of admissibility is whether the law should be changed when the courts' interpretation of it is entirely satisfactory. However, I take the noble Lord's point that justice must be seen to be done. I am afraid I am not sure that an amendment to Section 8 of the Act as we have it before us is necessary to achieve that aim. I take note of this matter and will be studying it.
The noble Lord, Lord Hampton, also mentioned the problem of delays between arrest and trial. I am sure he would agree that the Director of Public Prosecutions, the courts and the police continue to cope very well with processing the very large number of cases which involve serious offences. The average time between arrest and trial, as I pointed out in my opening remarks, fluctuates with various factors, not least the rate of arrests. In the first six weeks of 1984 the average waiting time from first remand to trial for terrorist-type offences was down to 43 weeks from 46 weeks in 1983. But the Government will continue to monitor this situation and to ensure the fullest cooperation between the police, the Director of Public Prosecutions and the courts to make the process as rapid as possible. I referred in my opening remarks to the appointment of an extra county court judge and to help to overcome other problems. The Lord Chief Justice recently appointed 11 extra silks.
The noble Viscount, Lord Brookeborough, was very kind to pay tribute to me for travelling around Northern Ireland extensively, and I should like to reciprocate those tributes to everybody in this particular area. I should like to thank him for everything he has done to show me what goes on in all parts, and particularly his homeland, of Northern Ireland. I was interested to note his thoughts on alienation, and was also interested to note that he, too, raised the problem of the time between arrest and sentence. He also drew attention to the proportion of those arrested of those released. I also found his comments on smuggling interesting. I listened to them with considerable interest, and will note them.
The noble Lord, Lord Hylton, had several questions. He asked when there would be a proper debate on Baker. I am sure he will appreciate that this is a matter for your Lordships' House and the usual channels; but nobody could fail to be aware of his desire for what he calls a proper debate. I will pass on his comments to the usual channels. I believe that our discussions this evening has provided an opportunity for a full debate, and the Government will consider very carefully all the points that have been raised.
The noble Lord, Lord Hylton, also asked about the implementation of those recommendations not requiring legislation. We are still engaged in consultation on all the recommendations, and this evening is still part of that process. But the great majority of the recommendations, I have to tell the noble Lord, would require legislation. I assure him
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that the Government will make their conclusions public as soon as we possibly can. The noble Lord also raised the question of the coroners' inquests. I understand that Mr. Curran, who is the Armagh coroner, resigned over apparent inconsistencies in the RUC evidence at the trial of police officers following a fatal shooting incident. These matters are under investigation by a senior officer from a force in England. For that reason, I cannot comment further this evening.
The noble Lord also brought us back as he did in July, to (I think) paragraph 445 of Sir George Baker's report and mentioned the possibility of a permanent review committee which he thought might be composed of Privy Counsellors. I hope I shall be able to vary the menu this evening so that the words are not just the same as last year. I would tell him that the legislation is already subject to review. We have the comprehensive report of Sir George Baker; and Parliament has an opportunity to consider the case for renewing the powers every six months. But other bodies, and in particular the Northern Ireland Standing Advisory Commission on Human Rights, undertake studies of the emergency provisions, and they publish their conclusions.
Individual complaints about the misuse of powers are already fully investigated under the police complaints procedure. Where appropriate, reports go to the independent Director of Public Prosecutions. But I would assure the noble Lord that individuals also have recourse to litigation. In these circumstances, I am afraid that I am not convinced that the establishment of a standing review committee would significantly increase the safeguards which are already available. The noble Lord also asked about the Government's response to the Alliance Party's paper on police complaints. The Government are already giving a great deal of thought to the police complaints procedures and the form which this might take. I stress to the noble Lord that we shall shortly be seeking the views of all interested parties on our proposals.
The noble Lord raised the question of the police liaison committees, and drew attention to that which was already in effect in Derry. We are giving serious consideration to the machinery for public consultation in conjunction with the chief constable and the police authority. This is an issue to which the Government attach great importance. The problem with the existing groups is, that there is insufficient minority community participation; and I am sure the noble Lord will take that to heart.
The noble Lord wondered whether we had information on any new systems for investigating any deaths which had been caused by the security forces. I said in my opening remarks, and I stress again, that every single incident involving the possibility of criminal offences by police officers is investigated fully, and a report goes to the completely independent Director of Public Prosecutions, who can direct that further inquiries be conducted. The Government do not believe that a public inquiry would be the way to conduct investigations in these particular cases, which are subject to the same procedures as those involving other members of the community.
The noble Lord asked a rather technical point, I think he would agree, about derogation from the

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Human Rights Instrument. I think he quoted Articles 5 and 6. He was quite right. It was 22nd August last year when the Government withdrew their notices of derogation from the European Convention for the Protection of Human Rights and Fundamental Freedoms and from the International Covenant on Civil and Political Rights. The decision to withdraw these notices was taken after very careful consideration. We concluded that the emergency powers still necessary to deal with terrorist violence are consistent with both the European Convention and the international covenant. In coming to our decision, we took account of the fact that detention without trial is no longer in force.
The noble Lord also raised the question of a Bill of Rights. Our mind is not closed on this issue, which the noble Lord and your Lordships would accept is very sensitive. But there are important practical, and indeed formidable constitutional, difficulties in introducing a Bill of Rights, whether for Northern Ireland alone or for the United Kingdom as a whole. I am afraid I am yet to be convinced, bearing in mind the extensive safeguards that we have gone through this evening which the report of Sir George Baker spells out to protect human rights in Northern Ireland—and these have been introduced in recent years—that a Bill of Rights really is necessary.
I hope that that covers most if not all of the points that have been raised by your Lordships. I am particularly grateful to the noble Lords, Lord Hylton and Lord Hampton, who were kind enough to warn me of the points they would raise. We have had a particularly detailed and constructive debate on the nature and scope of emergency legislation in Northern Ireland. What is clear from this debate is that your Lordships accept that there continues to be a need for exceptional legislative provisions in Northern Ireland. The Government accept that there is some scope for amending these provisions, but I stress that there is only limited room for manoeuvre in this particular area. Your Lordships would accept that it is very important that any exceptional legislative measures should be kept under review and that only those departures from normal practice which can be entirely justified should he kept in force.
The review of Sir George Baker's report and the debate which your Lordships have had this evening have been major contributions to the public discussion of these issues. Certainly, for my part, I believe that as a result the Government are much better placed to frame legislative proposals for amending the Northern Ireland (Emergency Provisions) Act. Given that, my Lords, I commend the order to the House.
Lord Underhill: My Lords, before the noble Lord sits down, can he give some indication as to whether we are going to have either actual legislation or an indication of the actual legislation the Government will propose before we are asked for another renewal of the order? I ask this bearing in mind that when the noble Lord spoke last July he said that the Government were in agreement with most of Sir George's conclusions and recommendations, and they came to that conclusion within three months. He has repeated that again tonight.
Lord Lyell: My Lords, I cannot go further. I hope that we are making progress on the exceptional issues, but I cannot go further than that. However, if I have any detailed observations after reading everything that has been said this evening, and if I can help the noble Lord, I shall certainly write to him.
On Question, Motion agreed to.
House adjourned at nine o'clock.

  PREVENTION OF TERRORISM ACT: OPERATION
  PREVENTION OF TERRORISM ACT: OPERATION
  SUPER-748: PROPOSED LIAT PURCHASE
  SUPER-748: PROPOSED LIAT PURCHASE
  SSSIs: ORNITHOLOGICAL EVALUATION
  SSSIs: ORNITHOLOGICAL EVALUATION